Tuesday, December 21, 2010

In timetable case, petitioners say ESDC's "illegal" actions shouldn't be rewarded; FCR argues against stay, but, if granted, bond should be $100M

In the courtroom argument tomorrow over the request in a stay in Atlantic Yards construction and a re-evaluation of potential project impacts over 25 years, the battle seems to be this:
Can charges of bad procedure and dereliction of duty overcome the facts of an official document in hand and ongoing construction--construction that developer Forest City Ratner thinks requires a $100 million (well-nigh impossible for community groups) to pause?
The hearing will be at noon in Manhattan Supreme Court before state Supreme Court Justice Marcy Friedman, at 60 Centre Street, IAS MOTION Part 57, Room 335.

Friedman made a preliminary ruling November 9 that the Empire State Development Corporation (ESDC) make "findings on the impact of the Development Agreement and of the renegotiated MTA agreement on its continued use of a 10 year build-out for the Project, and on whether a Supplemental Environmental Impact Statement [SEIS] is required or warranted."

(The Development Agreement, which has a 25-year deadline, was released in January, months after the ten-year date was approved in the Modified General Project Plan, or MGPP, in September 2009.)

The ESDC responded with a flurry of arguments, notably that the arena is already well in progress, and that the 25-year outside date for project construction was long ago disclosed. On December 16, it issued findings that an SEIS is not necessary.

The findings were criticized by the BrooklynSpeaks coalition as obfuscatory and evasive. The meeting, according to an attorney for Develop Don't Destroy Brooklyn (DDDB), included an illegal executive session and denied the public the opportunity to comment on the findings.

Given that judges are supposed to defer to administrative agencies, the petitioners face a high bar--though one they're trying forcefully to overcome.

Arguing for a stay

In a legal affirmation (below) filed December 17, DDDB attorney Jeff Baker argues for a stay, blaming the ESDC:
Taken as a whole, the project has proceeded since March 2010, due largely in reliance on this Court's March 2010 decision that was procured by misleading the Court about the nature of the Development Agreement. Yesterday's action by ESDC should not be considered as a legitimate effort to comply with the Court's November 9th Decision, but as a cynical attempt to continue to defy the reality that the project will take far longer than ever before recognized and that the delay will inevitably result in new significant environmental impacts that must be considered through an SEIS.
He offers evidence for the charge that "ESDC has rushed to a predetermined outcome to support the prior determination and was committed to avoid an SEIS," including a violation of the open meetings law.

The issue of "commercially reasonable"

Both ESDC and FCRC "are engaging in significant revisionist history," says Baker, arguing that ESDC was always aware of a 25-year project time frame.

He points to the issue, as I suggested, of whether the Development Agreement's mention of "commercially reasonable efforts" has any meaning.:
In fact, as this Court made very clear in its November 9th decision, both ESDC and FCRC consistently argued that the provision for 25-year leases as an insignificant element and that a requirement in the Development Agreement to use commercially reasonable measures was the controlling language. The Court, however, found that in reality, that language was meaningless. Respondents continue to deny that reality.
He notes that, given that the ESDC documents were received only a day before the reply was due, "we may wish to supplement the argument" at the hearing.

DDDB leads a coalition of numerous civic groups in a lawsuit that was combined with a similar lawsuit filed by BrooklynSpeaks, representing civic groups, individuals, and local elected officials. While DDDB has led or filed several lawsuits, for many in the latter group, it is the first lawsuit.

ESDC schedule said to be bogus

In this case, DDDB signs on to the BrooklynSpeaks arguments. The attorney for the latter, Al Butzel says in an affirmation (below) that there are two primary matters: the impact of 25 years of construction, and "the justification for ESDC's ostrich-like approach to that issue, and its assertion, in the face of market and other realities, that the Project would be completed in 10 years, thus limiting the period of construction impacts to that same period."

Butzel says any suggestion that an elongated construction schedule was analyzed is bogus:
Suffice it to say that there was never any analysis of construction impacts over the course of 25 years, and such analysis as there was of a 15-year buildout was so general as to be meaningless, asserting simply that any impacts identified in the 2006 FEIS would be "prolonged." Unaddressed were the consequences of continuous construction over many years on the health of adjoining neighborhoods or the impacts of retaining a huge surface parking lot for 10 or 12 years, rather than replacing it with underground parking after two years, as the original General Project Plan had required.
Now, according to the Development Agreement, the parking lot can last for 12 years, and remain in use as other buildings are built.

Butzel suggests potential mitigations, such as use of public open space, should be examined before further work, including demolition, should be permitted on Block 1129.

(Given how far along the case and project have gone, no one's making the argument that might have been made several years ago, that a site chosen because of transit access shouldn't have any parking to begin with.)

He critiques the fiction "that there was any likelihood that the huge Atlantic Yards Project could be completed in 10 years," citing the collapse of the real estate market, and ongoing negotiations that accepted a 25-year term.

Deference to the agency?

Aiming to nudge Friedman to not simply defer to the administrative agency, Butzel criticizes the ESDC's claim that judicial review of agency actions should be limited to the record before the agency.

This, he says, should apply only "if the agency had no reason at the time to believe anything else"--otherwise "it would reward agencies for closing their eyes to readily available information that ran contrary to what they wanted to do."

He observes:
The fact that on oral argument, ESDC represented the MDA [Master Development Agreement] as the basic enforcement mechanism for timely construction without revealing the 12-year completion date for Phase 1, the 15-year start date for platform construction or the virtually unenforceable 25-year completion date for Phase II simply serves to underscore the magnitude of the withholding.

...ESDC cannot have it both ways: either the MGPP approval was based on faulty information regarding the build-out of the Project or the MDA went beyond the authorizations given by the Board when it approved the MGPP. Whatever the case, at least one of the actions was illegal.
And, he states, while ESDC acknowledged the 25-year term, it "suppressed the further critical terms that identified specific start and completion dates."

What it meant

Had the ESDC not withheld the documents, he argues, "the Court would have been in a position to make the decision it did on November 9 before the Arena bond proceeds were released from escrow," and thus ESDC and FCR "should not be permitted to profit from their own derelictions."

Also, even if Forest City Ratner can claims disruption and damage, that doesn't justify condoning illegal action:
There is a very substantial public interest in requiring government agencies to conform their actions to what the law requires. In this case, ESDC not only shirked its responsibility to consider the impacts of up to 25 years of construction of a project lying adjacent to several residential neighborhoods--it compounded that failure by suppressing information that should have been provided openly to the Court. In this sense, the balancing of equities and public interest clearly favor the Petitioners.
While courts have neglected to stop some large projects because they were nearly complete or issues of public necessity, in several cases, injunctions have been granted under federal environmental law, he says.

Adds Butzel:
Moreover, these case in which injunctions were granted were situations involving purely public projects, as contrasted to Atlantic Yards, which, though wrapped in ESDC's gauze, is clearly a private development project proposed and being implemented by a private for-profit developer.
As for the justifications, he notes that workers are often displaced when injunctions are issued:
and while New York City may be enthusiastic about capturing the Nets from New Jersey, the franchise remains and will remain a private entity. In this and most other respects, the principal interest that the Respondents seek to forward in their opposition to injunctive relief is private--to allow FCRC to continue to build despite the Court's finding that ESDC did not comply with SEQRA.
He suggests the option of staying everything but the arena, under the argument that most of what's been spent has been invested in the arena. In court, however, the petitioners will have to respond to the argument by FCR and the ESDC that the project--including a parking lot connected to the arena--has many connected parts.

The FCR response

Before the DDDB and BrooklynSpeaks documents were filed, Forest City Ratner, via a filing by attorney Jeffrey Braun (below), responded forcefully.

Braun in his affirmation charges that petitioners are "trying to kill a major public-private project." Butzel, responding, says that even if it were relevant (which it's not), that's wrong, given that the BrooklynSpeaks petitioners tried for four years without any headway to engage the ESDC.

While the petitioners suggest that bond proceeds could not have been disbursed without Friedman's earlier ruling in March agreeing that the timetable was valid--a ruling since reargued--Braun disagrees. That should be another argument in court.

Arena under way

Citing an affidavit by Forest City Ratner executive MaryAnne Gilmartin, Braun says construction of the arena, the associated railyard and other mass transit improvements is "so far along that an injunction would be improper," citing the court's observation in March that "substantial public and private expenditures had already been made and the Project was already well underway."

He argues that it would be pure speculation that Friedman, having had the Development Agreement for her earlier ruling, might have stopped the project; rather, the court could have remanded the matter to ESDC or find a violation but not enjoin work.

The surface parking lot

Braun dismisses criticisms of the surface parking lot:
However, the possibility that Block 1129 may be used as a parking lot beyond 2019 does not constitute imminent and irreparable harm in comparison to the indefinite prolongation of the block's currently desolate state.
In court, expect the petitioners to argue about the impact of traffic and use of the parking lot over a far longer period than disclosed.

Too late?

None of the ongoing work can be viewed independently from work elsewhere on the Project site, Braun says, because all of the work is essential to the arena's completion or its operation, or both. He cites a denial of injunction in a case challenging Yankee stadium.

There are 120 workers on the site and ultimately will be 600, which he doesn't mention is far fewer than originally predicted. Numerous contractors have incurred contractual obligations.

Excavation for the arena is at least 75% complete, and more than 50% of the foundation work for the arena also has been completed.

So, FCR opposes an injunction, but if granted, petitioners should file "an adequate injunction bond."--at least $100 million. Unmentioned is that such a sum would be impossible to raise.

Appeal requested

ESDC and FCR have not only complied with Friedman's ruling, they also take a separate, second legal tack: they request for leave to appeal, given the "novel and untested" approach, using "post-determination transaction documents to impeach the 'build year' assumptions that were used for the environmental review."

Braun points out that such a tactic is already being used in another case. (It's the case challenging the New Domino development in Williamsburg, also filed by Baker.)

Some revisionist history

Gilmartin's affidavit contains this assertion:
Full-time construction activities at the site commenced in 2007 and have continued since then, with limited interruptions, in the face of multiple additional unsuccessful attempts by DDDB to obtain injunctive relief from the Supreme Court and the Appellate Division.
The "limited interruptions" were not so limited, and imposed at least in significant part by the economy.

More reasons against a stay

An injunction isn't necessary, Gilmartin says, because concerns expressed by court "relate exclusively to elements of the Project that are not scheduled to be built for several years."

It's all or nothing, she says--that an injunction that stops even a single aspect of construction "would have a ripple effect that materially delays numerous components of the Project."

For example, she says, an injunction would make it significantly more difficult to obtain financing for the first residential building, expected to include approximately 200 affordable housing units.

Developer commitment

She asserts:
From the Project's inception, throughout the long public review process and despite the multiplicity of litigations, FCRC has consistently demonstrated its commitment to the Project. FCRC has continued to invest more and more resources in the Project.
Unmentioned, for example, is the effort to get green card-seeking millionaires to invest their resources in the project.

At the master closing, she says, FCRC refinanced its loans and paid down $8 million in principal on its prior indebtedness. Now, unmentioned, it's aiming for another refinancing.

FCR costs

Gilmartin says FCR has spent more than $200 million on Block 1129, including acquisition and other costs, which "makes the site a very expensive parking lot, and dramatically increases FCRC's incentive to redevelop this block for a higher use."

Since July 1, 2010, when ESDC obtained vacant possession of last of Phase 1, FCR has incurred between $22-24 million a month, which should increase to $34-35 million per month beginning December.

At least $7.5 million will be incurred whether or not construction work is in progress.

Effect of arena delay

Timing, she says, is crucial: if the arena is not in operation by 11/1/12, the parties to numerous suite licensing and sponsorship agreements will be entitled to rescind their agreements.

That's not likely; the history of the project has been renegotiation. Still, it should be noted that the arena completion date has been pushed back a month, to August 2012.

Reply Affirmation of Jeffrey S Baker 12/17/10

Exhibits A to C for Reply Affirmation of Jeffrey S Baker 12/17/10

Al Butzel Reply Affirmation 12/17/10

Braun Notice of Cross Motion Affirmation &Affidavit

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