Monday, June 22, 2009

ESDC asks for eminent domain appeal to be dismissed or heard ASAP, says delays put AY "slum clearance" project in jeopardy

Further delays in resolving the Atlantic Yards state eminent domain lawsuit would put the project's future in jeopardy, the Empire State Development Corporation (ESDC) argues in court papers, calling for the final appeal to be dismissed or, if accepted, heard in early September so tax-exempt bonds could be issued by the end of the year.

When the case was dismissed in mid-May by the Appellate Division, where it originated, Forest City Ratner CEO Bruce Ratner told the Daily News, "This is really the last hurdle that we have." In an official statement, he was a bit more ambiguous, saying, "We are ready to get started.”

Not quite, apparently.

And the tightening timetable is why the ESDC and the Metropolitan Transportation Authority are expected this week to approve revisions to the AY plan and the Vanderbilt Yard deal.

Legal fictions

Also, the language in the ESDC's legal submission maintains the legal fiction that the project would be as described in the December 2006 documentation submitted to the court, that, "once constructed," the project: "will eliminate long-standing blighted conditions" and include 16 towers with 2250 affordable units.

However, there's no timetable for the project as a whole and ESDC CEO Marisa Lago acknowledged in April that the project could take "decades"--essentially a prescription for maintaining and exacerbating the blighted conditions the AY is supposed to resolve.

The ESDC letter also claims that the AY project involves "slum clearance," a legal synonym for blight removal that, looked at literally, has no connection to reality.

Appeal filed

On June 15, I reported that the nine plaintiffs in the state eminent domain case have filed their Notice of Appeal to the Court of Appeals, asserting that "this appeal is taken as of right... because the judgment directly involves the construction of the New York Constitution and presents multiple substantial constitutional questions."

That's not necessarily so, as plaintiffs' attorney Matthew Brinckerhoff acknowledged, and the ESDC disagrees vociferously, arguing--as I describe below--that the appeal should be dismissed.

What's next? "According to the rules," Brinckerhoff said, 'the next step is for the court to notify the parties that either (1) they are reviewing the case to determine whether the court's jurisdiction has been properly invoked, which typically requires letters from both sides on the issue within 10 days of receiving notice, followed by either a notice that the appeal will be heard in the normal course or a dismissal for lack of mandatory jurisdiction, or (2) that the appeal will proceed in the normal course which would also entail a schedule for briefing and argument."

ESDC response

In a letter filed June 15, ESDC attorney Philip Karmel states:
We write to request that the Court exercise its authority pursuant to §500.10 of its rules to dismiss the appeal on the ground that it fails to raise a substantial constitutional question. In the alternative, we request an expedited briefing schedule, pursuant to §500.17 (b), of the Court's rules, so that the appeal is argued no later than September 9, 2009 (the date of the court's first session in September). Our request for expedited review is based on the statutory directive that a proceeding brought under Section 207 of the EDPL "be heard and determined... as expeditiously as possible and with lawful preference over other matters..."

The ESDC requested that the Court review the appeal pursuant to rule 500.10 Examination of Subject Matter Jurisdiction and dismiss it. The Court would solicit comments in letter form from all parties, whereupon the Court would either dismiss the appeal or notify the parties "that the appeal shall proceed either under the review process described in section 500.11 of this Part or in the normal course, with or without oral argument."

This is a narrower process than the appellants seek. This rule involves appeals selected on the basis of narrow legal questions and are subject to a limited scope of review.

Within 25 days after the date of the clerk of the Court's letter initiating the alternative review procedure, the appellant would file a brief. The respondent would have 20 days to respond in a brief. A reply from appellants is not permitted unless authorized by the Court upon request of the appellant.

ESDC rationale

The ESDC asserts that the project rationale is the same:
Once constructed, the Atlantic Yards Project will eliminate long-standing blighted conditions on a 22-acre project site with the construction of a professional sports arena, 16 other buildings providing commercial space and thousands of new housing units, including 2250 affordable units, a new subway entrance, an improved Long Island Rail Road yard and the creation of eight acres of publicly accessible open space. Both the State and City of New York have deemed the Atlantic Yards Projects [sic] to serve important public purposes; indeed, each government's legislative body has appropriate $100 million in funding, much of which has already been spent on Project construction and site preparation. However, because of this litigation, which has been pending in federal or state court for almost three years, the acquisition of the site has been delayed, halting project construction--notwithstanding the fact that every court has found petitioners' claims (and the overlapping claims of other litigants) to be meritless.

Note that a total of $305 million has been appropriated, with $100 million from New York City going to reimburse Forest City Ratner for purchases of land--presumably a cost subsumed under the broad topic of "site preparation."

The letter complains that the petitioners skirted the rules by going to federal court rather than state court, then, when the federal case was dismissed, waited six months rather than the 30 days set forth in the Eminent Domain Procedure Law (EDPL) to file a state case.

After that case was dismissed, petitioners, "in line with their previous delay tactics," according to Karmel, waited 30 days to file the notice of appeal, despite the immediate announcement that they would appeal. (Don't litigants typically use deadlines to their advantage?)

Reason for speed

The ESDC argues for a speedy resolution:
First, this case has dragged on for years... Almost three years have passed since ESDC issued its determination and findings, and those findings remain under the cloud of this litigation. As a result, ESDC has been unable to acquire the necessary property, and the project is stalled.

Second, the inordinate delay occasioned by petitioners' failure to follow statutory procedures is putting the future of the Atlantic Yards Project in jeopardy. ESDC's General Project Plan... specifically anticipated that the arena--the first project building--to be constructed--would be financed by tax-exempt bonds. Under
governing IRS regulations, the deadline for issuance of these bonds is December 31, 2009... and the bonds must be marketed before they can be sold. Given the realities of the bond markets and the current economic climate, the continuing pendency of the this litigation will likely adversely affect the pricing and marketability of any tax-exempt financing that is concluded. It is imperative that this litigation be resolved well prior to the end of this calendar year.

Costs and benefits

Also, the ESDC argues:
Third, the State and the City have contributed $200 million toward this Project, most of which has already been spent. The public benefits of these significant public expenditures cannot be realized until the arena and Project facilities are constructed.

It's an open question as to whether those expenditures would result in public benefits; the New York City Independent Budget Office projects that the arena would be a money-loser for the city, and neither the city nor the state have done a full cost-benefit analysis.

Constitutional argument #1: slum clearance

The first constitutional question raised by the petitioners is whether the public use requirement in the state Constitution "imposes a more stringent standard for takings" than does the federal Constitution, a question not yet considered by any state court. 

The ESDC responds:
[N]otwithstanding any asserted difference between State and federal takings law, it is well settled under both New York and federal law that slum clearance is a valid public purpose for the exercise of eminent domain.

Slum clearance? Forest City Enterprises CEO Chuck Ratner calls it "a great piece of real estate."

Not only would the AY project eliminate blight--a sufficient public purpose unto itself--it would accomplish "numerous other valid public purposes," as noted in the Appellate Division decision, Karmel writes. 

That decision cited:
creating an arena publicly accessible open space, affordable housing, improvements to public transit, and new job opportunities... The petitioners' argument that some of these public benefits may never actually be realized is conclusory and speculative.

Isn't the argument becoming less speculative now?

Constitutional argument #2: cost-benefit analysis

The second constitutional question raised by the petitioners is whether the state Constitution's public use requirement can be satisfied when the condemning authority does not examine whether the public benefit "is not incidental or pretextual in comparison with benefits to particular, favored private entities." 

The ESDC responds: 
To our knowledge, no condemning authority... has ever included this type of information in the EDPL record. In fact, this Court's opinion in Yonkers Community Dev. Agency v. Morris expressly held that once the land at issue is found to be blighted, no further inquiry is required."

The ESDC adds that the case cited by the petitioners, Aspen Creek Estates, Ltd. v. Brookhaven is not on point because it concerned eminent domain for economic development rather than for removal of blight.

That may be so, but it's curious that the ESDC in legal papers claimed that it had examined the quantity of private benefit, though it cited a document that didn't perform such a measure. In court, the ESDC lawyer said it wasn't necessary, and the court agreed.

Constitutional argument #3: low-income housing

The third constitutional question raised by the petitioners is whether the project violates a clause of the state Constitution which requires that subsidies for reconstruction of blighted areas must be restricted to "persons of low income."

The ESDC responds that this claim was never mentioned in federal court, and that it would "hamstring the State's ability to advance important capital projects across the State and is utterly meritless, for the reasons explained in the Appellate Division decision."

If this is "utterly meritless"--and it probably is--then are the other elements of the appeal with some merit?

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