Monday, July 6, 2009

Wylde Ideas, Making For a Wrong Partnership

On Tuesday, June 30, 2009, Atlantic Yards Report ran a piece, taking a cue from our Noticing New York testimony on Atlantic Yards at the June 22 Metropolitan Transportation Authority (MTA) Finance Committee meeting, criticizing the recent evolutions of the Partnership for New York City’s postion on Atlantic Yards as it was represented in the testimony of the Partnership’s president, President Kathryn Wylde. (See: The Partnership for New York City's evolving (and misleading) support for Atlantic Yards.)

Wylde Idea That Atlantic Yards Resembles What Partnership Previously Supported

Ms. Wylde testified first at the MTA meeting, immediately before us. As we arrived first, signed up first, were called first and then were suddenly asked to wait while Ms. Wylde preceded us with her statement, it seemed to us she had somehow been jumped to the front of the line. (See: Monday, June 22, 2009, More on Planning in Advance to Bail Out Forest City Ratner Upon the Inevitable Arrival of an Economic Downturn.) We suspect that the way Ms. Wylde was jumped ahead probably relates to: 1.) the Partnership being viewed as important and influential, and 2.) the expectation that the Partnership was going to testify in favor of Atlantic Yards. (By coincidence, we also wound up testifying immediately after Ms. Wylde the next day at the Empire State Development Corporation’s meeting, which was about the same Atlantic Yards giveaways to Forest City Ratner.)

You can find transcripts with accompanying video clips of Ms. Wylde’s testimony and ours in the Atlantic Yards Report article.

At the MTA Finance Committee meeting Ms. Wylde testified (emphasis supplied):

It's a project that we have supported for a number of years. We consider this to be an important step, particularly now, in a faltering economy and with the credit crisis, the fact that we have some key projects that can move forward, particularly across the five boroughs at this point in time, is more important than ever.
We testified:

You notice the economy has changed. In a situation like this, this is the time we look to get better deals from the developers and contractors that we deal with. It's something that Forest City Ratner is reportedly doing with its own contractors. We hope you are aware that other state and local governments are finding ways to get more for their money when dealing with developers in this economy. And yet, we are proposing a bailout for a financially weak developer, a deal that is in every way worse for the public and in every way better for the developer.

A project of less value under the rubric of value engineering. Less money from the developer for the MTA in its time of financial need. Less will be done by the developer up front. And the delivery of public benefit is being postponed. So much has changed... Kathy Wylde says she's been supporting this project from the beginning. Not this project, I'm sorry. But one thing has not changed. The idea that, no matter how much about this project changed, it still needs to be voted for, because this is a wired deal.
Where Stands the Partnership on Bait and Switch? A Wylde Guess?

Later that day, we again addressed Ms. Wylde’s presentation of the Partnership’s support for Atlantic Yards as something continuous and longstanding, writing:

. . . her testimony that the partnership had “always supported” the Atlantic Yards project now being considered by the MTA was hokum because that would involve a blatant disregard for the slew of changes now being foisted on the public by means of the ongoing bait and switch. The Partnership always supported the Atlantic Yards project now before the MTA? Seriously, that makes it sound rather like the Partnership was in cahoots with and a part of the bait and switch from the beginning. We won’t accuse the Partnership of that but we do think that highly paid professionals should have seen all this coming from the outset. Nor do we think that the Partnership should have supported the original Atlantic Yards: The partnership is supposed to support what is good for New York, not what is destructive of it.
(Monday, June 22, 2009, More on Planning in Advance to Bail Out Forest City Ratner Upon the Inevitable Arrival of an Economic Downturn.)

Parrying Pecks With Pickled Partnership Paragraphs

The Atlantic Yards Report that focused on Ms. Wylde’s testimony used prior testimony of Ms. Wylde for the Partnership in 2006 and MarySol Rodriguez of the Partnership in 2004 to show that the principal reasons the Partnership had previously expressed to support the megadevelopment no longer existed. To wit, the following have all fallen by the wayside:

1. Frank Gehry's signature buildings
2. Its being a business district anchor for the Downtown Brooklyn
3. Overpromised jobs-Probably phantoms from the beginning
4. Housing that will not now be built
5. Economic benefit from the Nets arena- It is now clear there won’t be any
6. Presuming Ratner would give the community a fair shake. A remarkable fantasy.
Really About Wylde Giveaways

Kathy Wylde was therefore testifying in favor a substantially altered, substantially different megaproject lacking all of what were formerly identified as the principal benefits. Not only this but, given what was actually before the MTA and ESDC boards for action, Ms. Wylde was essentially testifying not so much in favor of the vestigially remaining aspects of the altered project as she was speaking in favor of approving a list of giveaways to Forest City Ratner with no corresponding or justifying quid pro quos in return:

1. An item of a $100 million value: Excusing FCR from the obligation to construct a railyard with as much capacity as the MTA was clear only weeks ago that it needed for flexible future growth and expansion.
2. Deferring the MTA’s collection of $80 million from FCR. The MTA not get this money in its critical time of financial need. Further, given the way that ESDC and MTA concessions confer future negotiating leverage to Ratner, there is a substantial likelihood that those deferred funds will ultimately be uncollected funds. FCR does not had a good record of honoring its promises. The firm is also financially weak.
3. “The MTA went so far as to relieve Ratner of obligations to build anything other than the arena and extended to Ratner a low-cost, very long-term option on developing the rest of- the bulk of- the site. That is a blight-inducing (not blight-preventing) decision on the MTA’s part.”
4. For virtually no cost FCR was given the right to name two Brooklyn subway stations and the additional right to have subway maps and schedules altered to reflect this. FCR should be able to resell this right at a substantial premium to Barclays Bank. It is difficult to value this gift exactly (a 2009 Super Bowl ad costs $3 million) but the rights given, lasting for 20 years could be calculated to have a present value of approximately $185 million.
(See: Friday, June 26, 2009, Deciphering Words of a (Campaigning) Bloomberg on Atlantic Yards: “Enough Already” Means, “Bruce, We Have Another $180 Million Plus To Give You! and Sunday, June 28, 2009, Naming a Problem: The MTA Gives Ratner the Right to Name Brooklyn Subway Stations “Barclays”.)

Words to the Wylde

We talked with Kathy Wylde immediately after we both testified. We must say that we could not help feeling angry. We told Ms. Wylde that we really didn’t think that Partnership should be supporting Atlantic Yards. In theory, the Partnership is supposed to be supporting what is good for New York. We said that we did not think that there was anything proposed for New York right now that would be more destructive to the city.

Wyldely Wrong Before: Noticing New York Addresses Wylde on Eminent Domain

This is not the first time we have disagreed with Kathy Wylde. Obviously, this time we were prescient in preparing our testimony in advance to directly address something Ms. Wylde would thereupon say that we think is absolutely wrong. Ms. Wylde said that the current economic downturn is a time for Forest City Ratner to get more from the public and the public less from Forest City Ratner. We took the contrary view. We said that, just as other state and local governments are doing, this is a time when we can easily negotiate a better deal.

The last time we took issue with Ms. Wylde’s thinking we had prepared testimony that would directly contradict something Ms. Wylde would shortly thereafter say. It was on the subject of eminent domain. This came up in our report on our delivery of our Noticing new York testimony at Senator Perkins’ September 17, 2008 hearing on eminent domain. (See: Saturday, September 20, 2008, Contrivance in the service of creating blight, real blight- Listen again- REAL blight.) Writing about the hearing we said:

Although no one in favor of eminent domain testified at the hearing, the other side [favoring domain] fought back with two op-ed pieces in the Daily News, one by Kathy Wylde, president of the Partnership for New York City, We need eminent domain to keep New York City growing, September 18th 2008, the other by Errol Louis, the Daily News columnist who frequently writes pieces promoting Atlantic Yards: The right way to fight blight, September 18th 2008. Louis mentions “Melrose Commons” as an example of the benefits of eminent domain. Coincidentally, there was testimony at the Perkins hearing by attorney Michael Rikon with respect to Melrose Commons related litigation: Rikon testified that more than a decade has passed and condemnees still await their full condemnation awards.

Wylde writes:

It is not as though these property owners are being left empty-handed. Far from it. Those trying to redevelop the property are required by law to offer them "fair market" rates for their land - and often bend over backward to go further, seeking to negotiate the best possible deal above and beyond that obligation. But in some cases, the holdouts refuse nonetheless.
This is naive, trite and just plain false. It sounds as if Ms. Wylde received, with much less skepticism, the same PR spiel I got from a Columbia/ESDC transaction attorney who approached me when I exited the ESDC eminent domain hearing held earlier this month. I wrote about our exchange in my account of my ESDC testimony. I also referred to it in my testimony Wednesday as I refuted the incorrect notions he and Ms. Wylde are promoting.

As Ms. Wylde has a position with an organization that is supposed to be promoting good development practices, I find it a second great lapse that she does not appreciate that eminent domain abuse does NOT promote economic development. It does the opposite. Eminent domain abuse misdirects economic resources, thereby dragging down the economy. The games of playing up ersatz blight and the way it halts, sometimes for decades, real ongoing development hurt everyone. I refer everybody again to statistics furnished by the Institute of Justice on this point, that eminent domain does not provide economic benefits, (op-ed piece, An Unnecessary Abuse, authored by Dick Carpenter, director of Strategic Research for the Institute for Justice, (January 15, 2008) and to the Wall Street Journal editorial Eminent Reality, January 30, 2008, wherein the Journal warns about the record of government putting its “hamfist” on the scales to promote projects that cannot proceed “without government interference” and in favor of the “most grandly conceived plans” which “are also often those most likely to fail.”

To my mind Wylde is wrong on both sides of the insufficiently considered “cost benefit” analysis she offers. If we are agreed that, as she suggests, “New York is facing some tough economic times” certainly now is not the time to drag things down further with eminent domain abuse and no-bid handouts to the likes of Bruce Ratner.
Noticing New York Testimony on Adequate Eminent Domain Compensation at 2008 Perkins Hearing

Our actual testimony at the Perkins hearing included the following, which directly contradicted Ms. Wylde’s assertion in her op-ed piece that those being condemned were being adequately compensated.

2. Private sector-driven condemnations are an abuse, but the abuse would be a lot less enticing to abusers if those whose property is condemned were fully compensated, including for all the transaction costs that are forced upon them. I am providing, as an attachment, testimony I gave at the recent ESDC hearing about Columbia’s use of eminent domain. Leaving the hearing I was approached by an attorney involved in the Columbia transactions who averred that condemnation is not an issue because the condemned are fully recompensed. Since he is wrong about this I wanted to address it here. Since the federal and state constitutions require “just”compensation, this matter, not yet addressed by the U.S. Supreme Court, goes to the heart of what is equitable, especially when one private owner is being burdened to benefit another.

Why so many condemned businesses don’t continue should be looked at. Here are just some of the ways that condemnees are not adequately compensated. There is no compensation for a business’s good will or its advantageously negotiated (cheap) leases. The following transaction costs are not generally reimbursed: brokerage and lawyer fees to acquire new property, costs of changing employees or changing arrangements with employees, skittishness and lost business opportunities such as contracts and leases due to condemnation-caused uncertainty, defense lawyers and expert fees if it is judicially determined that the pre-litigation offer was higher, all sorts of extra internal administration costs. There is inadequate or incomplete compensation for: fixtures and investments which become worthless because the value was tied to the particular property, and interest (only 6-9%) on money that is not awarded until perhaps a decade later because of litigation. There is no compensation for the losses caused by eminent domain uncertainty such as investments made misanticipating a condemnation that doesn’t happen, or doesn’t happen when expected, investments that are not made optimally because of uncertainty, or investments not made because of illiquidity or not knowing when the balance of the condemnation award money will materialize.
Wylde Coincidence: Work on Housing Across the Street from Atlantic Yards Project
(Project- the low scale one on right- next to proposed Atlantic Yards that Kathy Wylde worked on with us when government had different ideas for the area. Nothing was torn down to build this.)

Over the years Ms. Wylde and I worked on many of the same projects. (Before Ms. Wylde was made president of the Partnership for New York City she headed its housing development subsidiary, the New York City Housing Partnership Development Corporation.) Ironically, those projects included the development of housing you can find right across the street from the proposed Atlantic Yards footprint, housing that is strikingly different in scale from what is being proposed for Atlantic Yards.

The housing across the street that Ms. Wylde and I both worked on is representative of what government previously thought was appropriate to build in the Vanderbilt Yards area. That was just a few short years ago, not much more than a decade. At the time we, personally, thought greater density would have been appropriate, but nothing anywhere near the scale and density of Atlantic Yards.

(Buildings in footprint of proposed Atlantic Yards- bigger ones on right- that would be torn down to build much bigger Atlantic Yards.)

When Business and the Public Through Government Meet: What Makes for Good Partnerships

The bottom line is that there are public/private partnerships that work and public/private partnerships that are impossible to make work. Atlantic Yards is an example of the latter because with its one- way street of monopolistic benefits for Forest City Ratner it is a “partnership” structured to give all the negotiating leverage to Ratner. Any organization such as the Partnership for New York City with a mission “to enhance the economy of the five boroughs” and which “focuses on research, policy formulation” ought to know the difference. The public/private partnerships that work are the ones where government largesse is the most limited, where there is the fairest and most general distribution of benefits and the most natural and least artificial economics. Those partnerships should be the ones where businesses are expected to be viable, prosperous and healthy on their own and where deals are not driven by isolated special interests that funneling public resources to themselves alone, something that becomes especially obvious when, as in the case of Atlantic Yards, an open-bid process is side-stepped and circumvented.

We would like to think that when the New York Partnership was formed by David Rockefeller in 1979/1980 it was intended to be an organization with higher aspirations than standing up for Ratners’s excesses. The partnership ultimately merged into the much longer-existing New York Chamber of Commerce and Industry with which it was affiliated but are we to expect our chambers of commerce to be so abject and obtuse when it comes to recognizing and recommending good public policy?

Back To “Bidness”

It was amazing that the Partnership supported Atlantic Yards in the first place, when the megadevelopment had not been subject to any proper and legitimate bid process. How much more amazing is it that the partnership supports the new iteration of the project now when it has become an even worse and more developer-oriented project that it ever was before? The Partnership supports it when, so altered, it should be going back for bid and reappraisal of its design. And how can the Partnership blithely be supporting, however you calculate their total amount, the hundreds of millions in giveaways to Ratner with nothing going to the public in return?

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