Wednesday, June 24, 2009

Noticing New York Discloses What MTA Chairman H. Dale Hemmerdinger Has in His Closet

(Click on image to enlarge)

(This post has been updated as of June 25, 2009 at 12:30 P.M.)

Yesterday we promised to disclose today what MTA Chairman H. Dale Hemmerdinger has in his closet and today we will do so. It may have seemed a little bit personal, which is exactly what we intended. When we made our promise we wanted to remind the MTA board members who were about to vote today that the exercise of their fiduciary duty in their role as members of the MTA board is not something that can be compartmentalized and separated from personal honor and integrity.

(Since we posted this article yesterday, Atlantic Yards Report posted a comprehensive account of the MTA board meeting: Thursday, June 25, 2009, MTA approves deal 10-2 despite warnings from Brennan, Straphangers, RPA; DDDB offer disdained; see video of testimony and board justifications. References in this post to that more recent Atlantic Yards Report post are updates.)

Resplendently Not So Resplendent

We have no doubt that all the evidence is resplendently stark that the bailout for Forest City Ratner approved* by the MTA board was a wired deal. We think that you would have to be a pretty dim bulb for that not to be clearly apparent. As such, we believe that members of the MTA board voting affirmatively today for all the additional giveaways to Forest City Ratner (the dim bulbs among them excluded) violated their fiduciary duty. This was pointed out by many of the public addressing the board before its vote today, including Assemblyman Jim Brennan, who spoke first and reminded the MTA members that they were lowering the price for the sale of the MTA property without first obtaining an appraisal.

(* We were among those commenting- twice- on the New York Times article linked to.)

MTA Approved More That $180 Million in Giveaways For Ratner (Including a Low-cost Very Long-term Option!)

The price the MTA is requiring Forest City Ratner to pay for the property it happens to want right now for the arena was lowered by more than $180 million. Ratner will not have to provide the greater capacity railyard the MTA wanted and until just weeks ago. That extra capacity is important for flexibility as the city grows. The new deal permanently precludes such flexibility for the MTA to expand when the city grows and, as one board member pointed out, the alterative of buying more land later in a growing city will be a highly expensive proposition. The MTA is also now going to forego another $80 million (hence the previously mentioned $180 million figure): It will only charge Forest City Ratner for the land Ratner presently wants for its immediate goal, which is the arena. The MTA is, in fact, charging a proportionately diminished amount at that. With respect to the rest of the property, the MTA is simply giving Forest City Ratner a low-cost very long-term option to continue its monopoly on the potential development of a big hunk of some really good Brooklyn real estate. Though this will forestall alternative development by others and contribute to blight, Forest City Ratner is not really obligated to do anything with the option it may never use. (Forest City Ratner being financially weak, there is the possibility it will simply go under. Unless bailed out yet again?)

The above described sweeteners do not end the list of what the MTA members approved for Ratner today.

No Other Alterative Developers?

Not only did the MTA provide Forest City Ratner with these freebies (there was no corresponding quid pro quo where Ratner agreed to give something back in exchange) without getting the appraisal to which Assemblyman Brennan referred (or planning ever to do so in the future), the MTA did so without testing the market for alternative developers interested in the site. In fact, when today Develop Don’t Destroy Brooklyn actually offered to pay the $120 million for the MTA property (vs. the Ratner $20 million and lesser capacity railyard proposal) the board did not even mention or discuss the DDDB offer before it voted.

Would alternative developers be interested in paying more for the MTA railyard property than Forest City Ratner? The MTA would like to say that such would not be the case. But they never put the supposition to the test and approached no one else. ESDC and the MTA are also promoting certain expedient fictions (like the idea that Atlantic Yards will be built within ten years rather than multiple decades) in order to avoid legal problems. The idea that there would not be any other interested alternative developers if the MTA ever inquired is one of those fictions important for the board’s breach of fiduciary duty not to be more blatantly obvious.

Would alternative developers (other than DDDB) be interested in paying more for the MTA railyard property than Forest City Ratner? We strongly believe such eager developers are actually out there champing at the bit. This we believe is a bigger story we will have to return to at another time.

Chairman Hemmerdinger Unchairs to Leave the Room

The Atlantic Yards Report account of the meeting includes the following description of the Chairman Hemmerdinger/board reaction to the DDDB offer presented by Mr. Goldstein:

MTA Chairman Dale Hemmerdinger had a sour look on his face. No one on the board seemed to looking directly at Goldstein.
In very short order after Mr. Goldstein spoke Chairman Hemmerdinger left the room leaving the chairing of the meeting to another board member. Presumably, Chairman Hemmerdinger left to make a call to whomever was coordinating and orchestrating for the governor (or mayor). The moment was reminiscent of one that occurred on Monday at the MTA Finance Committee meeting when (at 1:20 P.M.), just after the Atlantic Yards portion of the meeting, Chairman Hemmerdinger Chairman Hemmerdinger and Gary Dellaverson, the MTA’’s Chief Financial Officer (who “negotiated” the Ratner deal and presented it at the meeting arose on tandem and jointly left the room while meeting was still in progress. On Monday, Chairman Hemmerdinger returned after about 10 minutes and Mr. Dellaverson did not. Chairman Hemmerdinger subsequently returned for the rest of the Wednesday meeting as well.

Atlantic Yards Report noted that how when one board member spoke against the deal in the meeting “the mustachioed Gary Dellaverson, the MTA’s Chief Financial Officer, looks tense” in the YouTube video supplied on the AYR site. Chairman Hemmerdinger began the meeting directing the MTA members as follows: “Look Comfortable. Cameras are on.”

Def Jam

When Candace Carponter, Counsel for DDDB, addressed the MTA members today (before the DDB offer or the vote) she offered them this definition of fiduciary duty:

"Fiduciary relationships have often been described as 'special relationships,' for good reason. Generally, '[a] fiduciary relationship is a situation where one person reposes special trust in another or where a special duty exists on the part of one person to protect the interests of another.'"
One non-voting member of the MTA (Norman Brown) said that he found it patronizing to have to be told exactly how fiduciary duty is defined though this is something that even attorneys will look up when they intend to carefully advise a client.

Hemmerdinger Goes Off Track To Suggest Approving The Ratner Giveaways for the Wrong Reason (One Inconsistent With MTA’s Fiduciary Duty)

Atlantic Yards Report’s account makes an interesting point on how Hemmerdinger, apparently at a loss for good reasons to recommend approval of the giveaways wound up suggesting that they be approved for reason inconsistent with the ground upon which the MTA needed to base its actions and for reasons which were probably not even supported anywhere in the record:

“ . . . . no deal is ever perfect,” Hemmerdinger said. “You get what you can when you can. And I think, in this economy, jobs and an arena in Brooklyn is a public good.”

In essence, his argument had gone off the rails, the MTA was supposed to vote only in its own interests.

(MTA Chairman H. Dale Hemmerdinger)

Hemmerdinger’s Closet: A Tie

We wrote yesterday about how we do not believe the politically colored events of today can be separated from other things personal and professional. What does Chairman Hemmerdinger have in his closet? Chairman Hemmerdinger is a human being much like ourselves. It so happens that he owns one of our favorite neckties (see the image above). On Monday, when were we were at the MTA waiting to make our statement to the MTA’s finance committee, Chairman Hemmerdinger approached us to comment appreciatively on our necktie and inform us he had the same one at home . . . presumably in his closet. We think of it as an urban design tie (it has on it a print of a New York map) and we think it ought to be worn by people who care about the city.

Spirit of Civitas

Ironically, the tie is by “Civitas.” (It is available through Josh Bach, also in hues of blue.) What does “Civitas” mean? There is a group in New York named Civitas that attends to urban design issues (within the boundaries of Community Boards 8 and 11 on the East Side of upper Manhattan). This is what they provide in terms of what “Civitas” means (emphasis supplied):

In 1981, when CIVITAS was founded, August Heckscher, its first chair, hearkened back to the Roman Republic to find a name that would express the spirit of the new community organization. The name chosen, "CIVITAS," referred to that quality of a citizen that made him deeply involved in the life and fate of his city. Such has been the guiding spirit for CIVITAS ever since.
Scale and Community Participation

Ironically, Civitas has concerned itself with things similar to what generates so much concern with respect to Atlantic Yards, though only in its own area of the city: for instance, the scale of new unwanted towers. Civitas has also complained about the way communities attempting to participate in planning their own neighborhoods are ignored. Here from Atlantic Yards Report:

Genie Rice of Civitas said that there has been community planning, but 197-A plans produced by Community Boards are “totally ignored.”
Perhaps Civitas will be concerned with what is happening at Atlantic Yards since Atlantic Yards is now draining the coffers of the MTA even further. After all, every citizen cares about funds for mass transit.


“Civitas” derives originally from the term used to describe Roman citizenship. We will think of it in terms of the qualities of civility and duty to your fellow citizens required for civilized communities to work. We do not believe that the actions of the MTA board today can be considered consistent with those qualities or civil obligations.

Sacrificial Pattern

Here is another irony: The thing that makes our Civitas necktie wonderful is the street grid pattern it displays. The street grid is something we revere and something also celebrated by Jane Jacobs, who called for short blocks and frequent streets. She was opposed to superblocks and their resulting elimination of streets from the grid, exactly what is being proposed for Atlantic Yards. (Elimination of the grid is being proposed so that developer can go even further in squeezing buildings of unprecedented density into the brownstone neighborhood.)

Our necktie would be a lot less interesting if the New York streets on it were eliminated. Similarly, Brooklyn will become a much more desultory and less interesting place if Atlantic Yards is built. It would ruin the “fabric” of the city both figuratively and literally.

Keeping It In The Closet

We may have things in common with Mr. Hemmerdinger, but we think that in making his decisions today and leading the board through its mistakes Mr. Hemmerdinger was driven by ties other than what we have in common. We also think that what was done today was so egregious that we don’t expect this MTA debacle to be over. In other words, don’t expect that everything has been put away and will stay in the closet.

06/25/'09 UPDATE: This morning, Atlantic Yards Report today provided a report of yesterday’s board meeting that concluded with the following:

(A reader points out the Hemmerdinger was sued less than a month ago, according to Crain's, by "partners in one of his buildings [who] allege he illegally drained $2.2 million from funds set aside to run the property in order to create a crisis and buy them out.")
The Crain’s story says that the plaintiff’s in the lawsuit “against Mr. Hemmerdinger and his son, Damon” include “two half-brothers of Mr. Hemmerdinger.” Just for the record, that “reader” wasn’t us: We weren’t up on our reading of Crain’s and hadn’t come across its story. Any coincidence between what Crain’s reported and what we wrote on Tuesday, June 23rd must be ascribed either to coincidence or a healthy sixth sense. On Tuesday we wrote in relation to Mr. Hemmerdinger’s real estate and other activities:

As one can see, there are in these activities a great many situations where Mr. Hemmerdinger has significant fiduciary duties and other responsibilities wherein others need to put faith and trust in him. Inevitably, these are all connected just as even our honesty in dealing with our families also relates to such things.

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