Friday, September 30, 2011

Could the Atlantic Yards Monopoly Be Even Less Regulated Than It Is? Why A Mega-Monopoly Continuation Isn’t Workable

Just how unregulated can the Forest City Ratner Atlantic Yards mega-monopoly be? Probably more unregulated than anyone can possibly imagine. Anyone, except perhaps the developer/subsidy collector himself, Bruce Ratner, who seems always to be able to envision the next steps to which his firm’s lack of accountability can be taken, and then implement it.

The signals being sent by Governor Andrew Cuomo indicate that Ratner’s fondest wishes for no effective regulation will be accommodated. One such signal is the appointment of mega-project booster Joe Chan for a top-ranking job at the Empire State Development (Corp.), the agency that theoretically supervises and regulates the megadevelopment. (See: Wednesday, September 14, 2011, Post: Atlantic Yards booster Joe Chan to leave Downtown Brooklyn Partnership for ESDC and Downtown Brooklyn economic development czar stepping down for state job, September 14, 2011, by Rich Calder)

The fact Atlantic Yards will be so blatantly unregulated should make clear to those considering the matter that seeking to regulate a continuing Ratner monopoly of vast size is not a solution. What is really needed is for the unjust and unjustifiable Ratner mega-monopoly to be broken up.

The Vice of of a Versa: A Monopoly That Turns The Tables to Regulate the Government

Earlier this month Noticing New York commented that rather than being a regulated monopoly the Atlantic Yards mega-development has turned the tables and, instead, regulates the government that we might suppose existed to regulate it:
The Forest City Ratner monopoly hasn’t consented to be regulated by the government in exchange for its special [monopoly] status. For all intents and purposes it is the reverse. The government doesn’t regulate Forest City Ratner; instead Forest City Ratner has been regulating the government. To the extent that Forest City Ratner’s real estate industry development activities ought to have been subject to time-tested and carefully evolved regulations normally applicable to other participants in the industry, like zoning and review processes such as the City Charter’s ULURP (“Uniform Land Use Review Procedure”) or SEQRA (the “State Environmental Review Act”), Forest City Ratner used its political capturing of the state’s Urban Development Corporation (aka and dba: “The Empire State Development Corporation”) in order regulate government and effectively avoid any meaningful application of these or similar restraints as well as the public protection that was thereby intended.

Similarly, when IRS regulations said that interest on bonds issued for the Forest City Ratner arena (now the Ratner/Prokhorov “Barclays” arena) would be subject to income tax, New York officials swooped into action to lobby for a special loophole exempting interest on Forest City Ratner’s bonds from the taxes that regulations would have required anyone else to pay. When in 2007 the state legislature planned to enact across-the-board reform of the city's 421a property tax incentive program applicable to the building of new apartment buildings, a special treatment loophole was created to excuse the Atlantic Yards mega-project from supplying affordable housing on the same terms required for any other project.

The list of accommodations to specially excuse the mega-monopoly from all sorts of regulatory and procedural requirements is too extensive to attempt to list them all here. Another escape from regulatory safeguards worth mentioning is how the MTA in connection with the land it was furnishing the developer managed to confer extra benefit and a lowered cost on the project by not complying with provisions of relatively new public authority reform legislation intended to prevent abusive favoritism.

Even the rerouting and redesign of the surface traffic all around the busiest, most populous areas of the Borough of Brooklyn have been turned over and put in the hands of the private sector monopoly, being done by a consultant hired by and working for the private developer. (See: Thursday, June 16, 2011, Sovereign Immunity, Reconfiguration of Brooklyn’s Traffic And The Peculiar Verisimilitude of Government Functions When Forest City Ratner Takes Over.)
(See: Wednesday, September 7, 2011, The New York Times Takes an Editorial Position on the Subject of Encouraging Competition and It’s Inconsistent With Its Position on Atlantic Yards. Note added 10/03/'11: Atlantic Yards Report pointed out that, as originally written, this critique didn't include, “the state's unwillingness to crack down on blatant and continuing violations by trucks drivers of of site and city regulations.” Here is another link in that respect.)

Sense and Tradition When It Comes To Monopoly Regulation

It makes sense that this Forest City Ratner mega-monopoly ought to be meaningfully regulated, because the government is paying with subsidy for so much of what is being developed, a proposed $2 to $3 billion, probably coming in at a figure at the higher end of that spectrum. It also makes sense to regulate because it is a vast monopoly and there is an American tradition of constraining monopolies that includes regulating them if those monopolies are permitted at all.
How vast is the Ratner monopoly? If you look at the maps above you will see that Ratner has more than 50 acres of some of the highest density real estate in Brooklyn sitting astride an important series of stops on the Borough's key subway lines. The Atlantic Yards plan, while nominally involving only 22 acres, actually serves to give Ratner ownership of 30 contiguous acres. For more details you can read: Saturday, November 21, 2009, Mapping Out Forest City Ratner’s Monopolistic Strategy of Subsidy Collection and Thursday, January 7, 2010, An Updated Map of Forest City Ratner’s 50+ Acre Prime Brooklyn Real Estate Mega-Monopoly. The community is having to figure out how to refer to a landscape where everything is Ratner owned: Ratnerville? Ratner Heights?


(For more on the story that goes along with the above Ratnerville image click here.)

The supremely odd thing is how the Ratner monopoly attained its vastness. When the government doesn’t regulate monopolies it normally steps in to break them up. In the case of the Ratner mega-monopoly it was the reverse: The government stepped in to create it. Were it not for the assistance the state ESD provided, conferring upon Ratner the power to abuse eminent domain, the Ratner mega-monopoly could never have come into existence. A second odd reversal is manifest: The U.S. Supreme Court had never ruled that the creation of a monopoly is an acceptable purpose for which eminent domain may be used; it has ruled, however, that eminent domain may be used to break up real estate monopolies. The case was Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984)*.

(* “Regulating oligopoly and the evils associated with it is a classic exercise of a State's [eminent domain] police powers. . . . The Hawaii Legislature enacted its Land Reform Act not to benefit a particular class of identifiable individuals but to attack certain perceived evils of concentrated property ownership in Hawaii - a legitimate public purpose.” And in footnote 5: “After the American Revolution, the colonists in several States took steps to eradicate the feudal incidents with which large proprietors had encumbered land in the Colonies.”- emphasis supplied)

So in theory while government could use eminent domain to break up Ratner's real estate monopoly, there is nothing in terms of United States precedent that says eminent domain can be used the way it was to create such a monopoly.

As pointed out in the above Noticing New York article earlier this month, once upon a time the price in America for being allowed to exist as a monopoly was to consent to be regulated. I used as an example the permission that was given to the Bell telephone company, the incipient AT&T, via the Kingsbury Commitment of 1913, which was appropriate because I was pointing out the philosophical inconsistency in the anti-monopoly stance that the New York Times editorial page was taking in opposing “AT&T’s $39 billion attempt to buy the nation’s fourth-largest carrier, T-Mobile” while at the same time the Times has supported the Atlantic Yards monopoly.

The Times, mind you, was not saying that an expanding AT&T monopoly should be allowed and then regulated; it was flat out opposing the monopolistic “anticompetitive threat” that would result from AT&T acquisition and absorption of T-Mobile.

No More Mr. Nice Monopoly?

In explaining what happened with AT&T and the 1913 Kingsbury Commitment I quoted extensively from Columbia Law professor Tim Wu’s excellent book “The Master Switch: The Rise and Fall of Information Empires” that beginning with the telegraph and telephone companies and then bringing us up through the advent of the Internet, is about the cycle and repeated pattern of information and communication empires and how they tend toward monopoly. I did this to compare and contrast the initial good intentions and public service commitment of the newly regulated early phone company with the Forest City Ratner monopoly empire in Brooklyn.

Because Forest City is so consistently and so preeminently focused on its own self-interest over that of the community,* it is very far away from being either a benign or benevolent entity. Hence the need for regulation. But the way that Wu gives credit to the early phone company for its good and public spirited intentions, particularly as embodied in the personage of key founder Theodore N. Vail, the regulation consented to by the early phone company to protect the public seems almost superfluously unnecessary. (Right: Image of Vail in 1913 from Wikipedia)

(* Even to the extent that Ratner felt it necessary to create a fictitious set of AstroTurf community groups on its payroll to “represent” - i.e. misrepresent- the community interest rather than engage in real dialogue with the community about its interests. Malcolm Gladwell, a staff writer at the New Yorker, provided some of the most recent thoughts available on Ratner’s self-interested behavior.)

An Out-of-Bounds Monopoly: Republic Sacrifice

The Forest City Ratner mega-monopoly is all the more pernicious in that it involves real estate, an industry for which it was not previously thought there was a reason to create monopolies, and also for the fact that the very extensive Atlantic Yards monopoly involves granting Ratner (with free and below-cost donations of property from New York city and the MTA) a monopoly over what is property that properly should be an inalienable part of the public realm, part of the “res publicae” or “res publica” (from which derives our word “republic”) that under Roman Law were inalienably public property, held in common, that no person could privately own.

Kenyon College and Harvard University Professor Lewis Hyde in his book “Common as Air: Revolution, Art, and Ownership” describes “res publicae” this way:
Things such as roads and harbors, bridges and ports, that belong to the public and are open to them by operation of law

* * * *

. . . in a commercial culture, city streets are republic property . . .
Notwithstanding that “res publicae” is supposed to include public parks and all the roads and streets the public needs to travel for purposes of public commerce, Atlantic Yards involves giving over all of the park space, plus the private roads, avenues and sidewalks that were previously owned by the public to the dominion or Ratner’s private monopoly ownership.

(For a discussion of the subject of “res publicae” a footnote in Hyde’s book recommends reading: Romans, Roads, and Romantic Creators: Traditions of Public Property in the Information Age, by Carol M. Rose, in Duke Law’s Law and Contemporary Problems. In his acknowledgments Hyde notes that in the course of writing his book he was invited to become a fellow at the Berkman Center for Internet and Society at the Harvard Law School where he learned his law and was given research assistance.)

Monopolies Bestowed By Government & Revolt

That is about as far as we took the subject of the relationship between monopolies and government in the last Noticing New York post to which we have been referring, but it is not altogether that simple. Yes, there has been an American tradition of government constraining monopolies. That tradition involves the constraints of not permitting them at all, examples being the Sherman Antitrust Act of 1890, and the Clayton Antitrust Act of 1914, or constraining them through regulation as was done with the phone company pursuant to the Kingsbury Commitment. The tradition of government constraint of monopoly power in America even goes back to the framing of the Constitution as we shall see in a moment. But there have also been traditions of other sorts between governments and monopolies.

During the reign of Queen Elizabeth I (November 17, 1558 to March 24, 1603- image above) the Queen regularly granted lucrative monopolies to those she favored. The Earl of Essex was granted the monopoly on sweet wines throughout the realm. When he fell out of favor, he lost his monopoly. She granted monopolies for iron, coal, oil, vinegar, saltpeter, lead, starch, yarn, skins, leather, and glass, the result being that these, according to historian Lord Thomas Babington Macaulay, “could only be bought at exorbitant prices.” (This quote from Macaulay appears in Hyde's “Common as Air: Revolution, Art, and Ownership”)

According to Macaulay:
At length in the reign of Queen Elizabeth the power of creating monopolies began to be grossly abused ; and, as soon as it began to be grossly abused, it began to be questioned. The Queen wisely declined a confrontation with the House fo Commons backed by the whole nation. She frankly acknowledged the reason for the complaint: She cancelled the patents [monopolies] which had excited the public clamours; and her people delighted by this concession, and the gracious manner in which it had ben made, did not require from her an express renunciation of the disputed prerogative [to grant monopolies].
This is not to say that disputation of the prerogative didn’t unfold with more history involving her successor monarchs.

Monopoly and Revolt in Colonial India

Lest one think that the British practice of government granting and enforcing monopolies is all part of the far distant past it ought to be remembered that the Mahatma Gandhi-led salt march (Salt Satyagraha) that was an important part of the Indian independence movement was a march in opposition to the British salt monopoly in colonial India. Did you see director Richard Attenborough’s 1982 film “Gandhi”? The monopoly was used to prevent the Indian people from gathering the salt they could otherwise cheaply produce for themselves.

Monopoly in Colonial America When Revolution Arrived

In the colonial times of our own American Revolution of 1776 monopolies, though they may not have been banished before the revolution, were not well regarded. Adam Smith’s “Wealth of Nations” first published on the 9th of March, 1776, uses the words “monopoly” or “monopolies” over 200 times. As favorably disposed as he was to the benefits of a free market (his famous “invisible hand” being regarded as virtually sacrosanct in the U.S.) none of Smith’s references to monopolies are complimentary. There are those who say that Smith’s furious opposition to the monopolies helped fuel his writing of the book. And given that he was opposed to monopolies it is not surprising to observe that Smith abhorred their being assisted or brought into effect through government.

I am indebted to the Lewis Hyde “Common as Air” book (referred to above) for pointing out that when adoption of the U. S. Constitution was being negotiated and Thomas Jefferson famously wanted, as an essential safety measure, to include a bill of rights he wanted that bill of rights to include a provision restraining monopolies. Noticing New York previously covered the topic of what the Founding Fathers would think of Atlantic Yards: They wouldn’t like it. (See: Tuesday, November 10, 2009, Judicial Review of Atlantic Yards Corruption: Laws Should Not Be A "Dead Letter").

In that 2009 Noticing New York piece examining such sources as the “Federalist Papers” we reviewed the debate about including a bill of rights and whether the enumeration of things it might include (protections against the abuse of eminent domain being amount them) needed to be express or could just be assumed to be protected. From modern day experience we know that those unwilling to make assumptions about protections were almost certainly right given that, even with the Bill of Rights (and also the new York State Constitution) containing protection against eminent domain abuse the courts deferring to legislatures have not enforced the protections. Thus we witnessed the eminent domain abuse used to produce the Ratner Atlantic Yards monopoly on the premise that legislation, or even legislatively authorized agencies, could override these constitutional provisions. And in this regard, we noted that the Founding Fathers, believing in separation of powers and judicial independence, would have been appalled by this kind of blank-check judicial deference because, in the words of Alexander Hamilton: “Laws are a dead letter without courts to expound and define their true meaning and operation.”

(Alexander Hamilton above)

The article did address the subject of Founding Father antipathy to monopoly, including the John Adams quote:
Property monopolized or in the possession of a few is a curse to mankind
(John Adams above)

Restriction Against Monopolies As A Fundamental Entitlement

But that article did not note that in correspondence between Thomas Jefferson and James Madison about the need to add a bill of rights to the Constitution, apparently both were of a mind that it would be good if the enumerated protections included “restrictions on monopolies.”

(Jefferson above)

According to Jefferson, in some of this correspondence (emphasis added):
A bill of rights is what is what the people are entitled to against every government on earth, general or particular, and what no government should refuse, or rest on inference. . . .

. . . . [it should provide] clearly and without aid of sophisms for freedom of religion, freedom of the press, protections against standing armies, restriction against monopolies, the eternal and unremitting force fo habeas corpus laws, and trial by jury in all matters of fact triable by the laws of the land and not by the law of nations.
Madison (side) had similar thoughts (though he did go on to consider the benefit of the monopolies of patent and copyright, presumably for limited periods of time):
With regard to Monopolies they are justly classed among the greatest nuisances in Government.
Judicial Override of Principles Vis-à-vis Atlantic Yards

If the Constitution had actually eventually included “restrictions on monopolies” would the government-assisted Ratner monopoly have been permitted? Madison expressed to Jefferson his suspicion that an enumeration of rights “however strongly marked on paper” would simply be overridden if there wasn’t sentiment on the part of the public majority* to continue honoring them. It is conceivable that one more Bill of Rights provision saying that Atlantic Yards constitutes an unprincipled wrong would have prevented it, but perhaps that provision would have been just as easily ignored by the courts as they ignored the state agency override of federal and state constitutional provisions against eminent domain abuse.

(* Notwithstanding the state agency override of the constitutional provisions against eminent domain abuse acquiesced to by the courts, Atlantic Yards does not have the support of any public majority, as evidenced by the non-attendance at the Nets naming event by any elected officials other than Brooklyn Borough President Marty Markowitz.)

Effective Regulation of Monopolies vs. Collusion With Government Regulators

So there is the government tradition of government awarding monopolies to favored individuals like the numerous monopolies awarded by Queen Elizabeth I when she was `grossly abusing’ her royal prerogatives . . . or the Bloomberg and ESDC’s handout to Ratner of his mega-monopoly. There is also the opposing tradition of restricting monopolies as was envisioned by Jefferson and as underlies the idea of breaking up monopolies and the Sherman and Clayton antitrust laws. “Restrictions on monopolies” may also be said to include effective regulation of monopolies when it it is thought to be necessary to consent to their existence at all. And then there is one more tradition of relationship between government and monopolies: Of all of the traditions it is the most insidious.

The most insidious relationship between government and monopolies is the relationship that looks like regulation to constrain the monopolies but is really the reverse. It is when government regulators are “captured” by the industries they regulate and under cover of “regulation” help the regulated monopoly maintain or enhance that monopoly.

Lessons From “The Master Switch”

Tim Wu in “The Master Switch” credited Theodore Vail for his earnest consent to be regulated for the public good. He also has stories in the book about the effective use of antitrust law to break up monopolies such as the early Edison Trust and later the Hollywood studio system monopoly. The Edison Trust that monopolized the early movie industry dictated that all movies had to be of a short (Nickelodeon) length and that none of them should have stars. Pursuant to a 1948 U.S. Supreme Court decision the vertically integrated studio system (production+distribution+exhibition) was broken up, which Wu argues made possible such films as "The Godfather."

Nevertheless, much of Professor Wu’s book is about how regulators often colluded with (or were bamboozled by) the monopolies they were regulating to help them maintain or strengthen their monopolies. Wu describes the various ways in which this was to the public’s detriment.

Wu describes how a regulated radio industry held back the technological development of both television and FM radio because those new technologies threatened to displace the existing AM radio monopolies and their business model. Despite being a regulated “common carrier” that was supposed to provide equal access to all, the phone company used the pre-existing monopoly it had on the use of high-quality long distance phone lines to get a piece of the action in controlling of the radio waves. Wu describes how the culture of these emerging industries might have developed differently and in a more natural and organic fashion had these controls not been so tightly exerted. At one point Wu's thinking and analogies even take him to some mentions of Jane Jacobs urban development parallels (pages 200 and 297).

Monopolies and the Critique of Central Planning: Paging Jane Jacobs

The advantages of “central planning” are often proffered as a rationale for endorsing the existence of monopolies but Wu, invoking other well-known thinkers, critiques the disadvantages of monopolistic “central planning” : “no such planner could ever hope to have all the relevant facts. . to arrive at an adequately informed or right decision.” Wu notes that Jane Jacobs was one of a new era of both conservative and liberal thinkers (Friedrich Hayek, “The Road to Serfdom” and Leopold Kohr who inspired the small-is-beautiful movement are similarly mentioned) who were “rediscovering a love for organic, disorganized systems.” He quotes Kohr: “Whenever something is wrong, something is too big.” Wu notes that Jacob’s work revealed how:
Olympian planners like Robert Moses [upon whose development paradigms Ratner’s Atlantic Yards design is closely modeled] were going wrong. There was no understanding, let alone regard, for the organic logic of the city’s neighborhoods,* a logic discernible only on foot.

(* a few lines later: “neighborhoods like New York’s Soho and West Village, which had developed organically for centuries” and like Prospect Heights vis-à-vis Ratner, were threatened with destruction by Moses plans.)
In a later summing-up on these points Wu writes:
The twenty-first century begins with no such predilection for central order. In our times Jane Jacobs is the starting point for urban design, Hayek’s critique of central planning is broadly accepted, and even governments with a notable affinity for socialist values tout the benefits if competition, rejecting those of monopoly.
He then goes on to describe how with competition in today's technological world “inventive spirit” is translated into commerce “virtually overnight, creating major players with astonishing speed, where once it took years of patient chess moves to become one. .”

The Atlantic Yards megadevelopment exemplifies virtually every complaint Jacobs had about central planners like Moses. (See: Tuesday, November 11, 2008, Jane Jacobs Atlantic Yards Report Card.) Among other things Jacobs didn’t like were monopolies.

Jane Jacobs: Regulation of Monopolies vs. Dealing With the Real Harm From Monopolies

(Jane Jacobs image from Wikipedia)

Here is Jane Jacobs in her 1984 book “Cities and the Wealth of Nations” (note the reference back to Adam Smith) sounding like she is completing the thoughts of Professor Wu in his 2010 book, telling us that the real harm monopolies inflict is not something that can be regulated away (p.227):
Monopolies gratuitously harm cities and suppress what their economies are capable of achieving. The usual objection to monopolies is that they charge extortionate prices and make unconscionable profits by cornering a market, From this it follows that monopolies can be rendered harmless if their prices or profits are regulated. If, at the same time , a case can be made for economies of scale by protecting monopolies from competition, they can be thought of as beneficial. But extortionate prices, harmful though they certainly are, are the least of the disadvantages of monopolies, for monopolies forestall alternative methods, products, services. This often becomes most obvious when monopolies are broken.
For more of this kind of thinking you can read what Jacobs says about how company towns are not conducive to the promotion of urban economic growth in her 1969 book The Economies of Cities (pages 37, 89, 97-98, 102, 127, 143-144, 231).

How The Phone Company Got To Be Big in Texas: Using Regulation To Quash Competition

In one of his most chilling descriptions of how “regulators” can team up with the regulated to further the unfair advantages of those building monopolies. Wu describes how in Rick Perry’s Texas (in 2003 George W. Bush had already moved on to the White House) “with a hundred registered lobbyists working in Austin- - as opposed to the 181 members of the [Texas] legislature” Southwestern Bell Company and the legislature came up with a scheme of laws and regulations to freeze out SBC’s competitors. This aided in the reintegration and reestablishment of the once broken up phone company as a monopoly that is much the equivalent of what it had been before (except that in the interregnum there had been a revolution where everyone in America got more sophisticated phones, modems and the Internet).

The Secrets of Out-of-Control Monopolies Un-revealed

One frightening thing mentioned in Professor’s Wu’s book (and I am not sure mention of it can be found anywhere else) is that at the same time that phone company was assisting President Bush to violate federal law pursuant to a secret executive order by assisting the National Security Administration in the warrantless monitoring of telephone and Internet communications on a vast scale even now not full disclosed, the phone company's pending plans to reintegrate its monopoly were under review by the very same Bush administration. The full extent of exactly what may have happened has not been investigated and may never get adequate attention because in July of 2008 Congress passed a law granting AT&T and Verizon full retroactive immunity for any violation of the laws against spying on Americans.

Wu’s book is full of more interesting things to know about the phone company and what monopoly behavior may get you (or not get you), including:
• How the phone company had invented an answering machine that used magnetic recording tape in 1934 but kept the discovery secret out of paranoia that the invention would disrupt its business model. (Conventional wisdom is that America was introduced to magnetic tape recording machines after capturing and analyzing “magnetophon” machines the Germans were using to support their propaganda promulgation with multiple broadcasts from different time zones), and

• How extension of the Manhattan Project into “more sophisticated weapons” and other national security assignments was subcontracted out to the AT&T company because all the nation’s technological eggs were in that one monopoly’s basket. (Like the premise the government itself can't develop the platforms and infrastructure for the Hudson or Vanderbilt railyard sites?)
If only the telephone company had told the Defense Department about magnetic recording tape before they discovered the secret by capturing the German machines! Jame Coburn starred in a 1967 satire “The President’s Analyst” involving all sorts of secret CIA type activity. I thought the film was impossibly over the top when it reveled that behind all the double-crosses going on the (pre-breakup) phone company was the real villain implementing a secret plot. Now, reading Professor Wu’s book I have been forced to wonder whether the screenwriter knew a lot more about Washington and the phone company than I ever could have imagined back then.

Message From Governor Cuomo: Full Speed Ahead on Regulatory Agency Capture

If we have gone a little far afield at this point it has mainly been to stress the point that monopolies that are supposed to be “regulated” are frequently not that at all. Frequently, as can be seen with Atlantic Yards, the monopolies are the ones in charge, the ones running the show.

Were the Ratner Atlantic Yards mega-monopoly to continue there would be a desperate need for it to be regulated. But that seems hopeless. To be effectively regulated Governor Cuomo would have to appoint to the “regulating” Empire State Development agency (once “Corp.”) public officials with a true regulatory mind set. It is fair to bet that the appointment of Joe Chan to ESD does not represent such an approach. Instead, Chan has always been an unquestioning, reflexive supporter of Ratner’s vision of a full-blown unregulated what-Ratner-wants-is-what-Ratner-gets venture. The community, particularly the entity Brooklyn Speaks, has been crying out for greater regulatory control and accountability. Chan’s appointment seems like a clear signal from Cuomo that it is not going to be delivered. It appears to be a clear signal from Cuomo that he condones Ratner’s capture of the “regulating” ESD agency.

How much more unregulated could the Atlantic Yards mega-monopoly be? It seems that we are headed in a direction that will show us.

What does this permissive Cuomo attitude toward regulatory agency capture bode for the future of hydrofracking in New York State?

The Message of “I’m Sorry I Can’t let You See The Boss Right Now” While A Monopoly Runs the Show

Monday night’s tightly-controlled, invitation-only appearance of Empire State Development CEO Kenneth Adams before a selected group of Brooklynites is also an example of what to expect. (See: Tuesday, September 27, 2011, Genial ESD CEO Adams meets with community members, gets praised for showing up, says state solidly supports Forest City, opposes governance entity, admits he has much to learn.) It is an example of how the principal role of State Officials is to run interference and provide a insulating layer of separation between the entity actually responsible and in charge (Forest City Rather) and the community itself. In essence, ESD and its state officials are like the high-priced secretary who, with impeccable manners, brushes you off by telling you that her boss is not in but she will be sure to communicate to him everything you want him to know and she is sure it will be “looked into.”

On Monday night Adams (as Atlantic Yards Report noted) may have “deflected” questions with anecdotes including one about how when Adams phoned his parents about his appointment to ESD his father screamed “ESDC, that’s the agency that doesn’t listen to the people.” It’s a cute anecdote and the father’s statement conveys the sense of frustration one gets when the high-priced and polite secretary keeps you distanced from her boss, but a better description of ESD would be “the agency that politely PRETENDS to listen to you so that Forest City Ratner doesn’t have to show up, perhaps get yelled at and faced with questions they prefer not to answer.”

The fact that Mr. Adams got kudos for simply showing up demonstrates the extremely low bar to be met when state officials are performing this secretarial keep-away-the-riff-raff function. (Remember that at the root of the word “secretary” is “secret.”) We refer you to the Atlantic Yards Report post for a full dissection of what transpired during the evening, but showing up uninformed about the project (and alternatives to it), saying that you will check out available information, not letting your attending staff supply available information is all part of a running interference game. Once in a while, if you are lucky in this game, a senior state official will in a public appearance let slip out accurate information of substantial importance, such as when former ESD CEO Marisa Lago said that the megadevelopment would be taking “decades” to build (like the 40+ year Roosevelt Island development) rather than the advertised timetable, and which remark was later hanging out bizarrely while Forest City Ratner and ESD lawyers jointly tried to convince a state judge that the projected 10-year time frame of the environmental impact was nevertheless accurate.

If the game begins to wear thin after a little while it doesn’t really matter because in all likelihood there will, soon enough, be a new set of state officials running interference, while behind the door, still in charge, Forest City Ratner will still be Forest City Ratner.

Time to Take the Mega-Monopoly Away

It doesn’t really matter that Adams took the position that there was no need for the creation of a new state entity to oversee the monopoly. The fight for a new governance entity is almost certainly the wrong fight. Brooklynites could win the battle for the creation of such a new entity and still lose the war when, inevitably, the huge Forest City Ratner monopoly captures the new entity just as surely as ESD has been subjugated. Those who want to struggle to refine the megadevelopment’s regulation have their eye on the wrong ball.

Better to ask the question City Council Member Tish James asked Adams Monday night: “Isn’t it time to take the project away?” (Adams, of course, responded that it wasn’t. Some answers he knows without having to consult the retinue of expert staff accompanying him.)

This Noticing New York essay has spent a great deal of time to drive home two critical points. Maybe you think that in doing so we have hammered the nail well below the surface of the wood.

The first point is that monopolies are not good things. Having been generally disliked since at least the 1600s that point seems simple enough and it is one that has long been generally agreed upon even if these days people do not routinely keep in the forefront of their minds all the reasons why monopolies are bad.

The second point is more elusive and one that the general populace, thinking things to be different, may be less mindful of: That attempting to mitigate the harm of monopolies by government regulation is a treacherous proposition inclined to backfire. One negative result to be prepared for when you attempt to regulate monopolies is discovering that your government representatives no longer work for the public, that they are working instead on behalf of the very monopoly they were supposed to regulate.

Together these two things suggest one common sense approach when you confront a monopoly: Dismantle it whenever you can, whenever you have the opportunity.

That is what should be called for in the case of Atlantic Yards.

A Press Release From BrooklynSpeaks and Develop Don't Destroy Brooklyn Calling For What?

The joint press release from BrooklynSpeaks and Develop Don't Destroy Brooklyn (the first ever joint press release from the two organizations) concludes focusing on four bullet points. Cryptic and timidly expressed they fall short of the eloquence of a clarion call to action. Of the four, the third (see below) is the most important in terms of what should be done with the project and exactly what we have been talking about here. The second, with some translation, could also embody some key precepts:
• Build first on currently developable parcels, deferring the costly Vanderbilt Yards platform.

• Develop affordable housing in the manner and context of recent successes nearby.

• Open the development to additional teams in order to distribute the investment, the risk and the total work effort.

• Bring the community and its elected representatives to the table so we can all work together and win.
Does the third of those points, “open the development to additional teams,” with its ensuing etc eteras mean anything other than dismantle the Ratner mega-monopoly? Wouldn’t it be more courageous, frank and evocative of principle to simply say “dismantle the Ratner mega-monopoly and bid it out properly to multiple developers”?

(Above left: The recently built 10-story Atlantic Terrace project. Above right: The 50 to 60 story density at which Ratner wants his mega-monopoly acres across the street built.)

As for the second point, “Develop affordable housing in the manner and context of recent successes nearby,” that is possible code for a number of requests: Give us back our Ratner-seized streets and sidewalks (our res publicae) and build at a more natural and more neighborly contextual density like the successful affordable housing in the10-story Atlantic Terrace project recently built across the street by the Fifth Avenue Committee. Further, what ought also to be implicit in this, and probably is intended to be, is that the subsidies granted to the project should be no more lavish for the acres owned by any Atlantic Yards owner than for the acres just across the street. Lastly, isn’t this a call for preservation of the existing buildings within the footprint that can be preserved and adaptively reused?

All of the above translation with respect to the second point may also be thought of as a response to monopoly because it requests the undoing of the Ratner monopoly override of standard laws, regulations and conventions. Here is a suggestion: Address a number of these matters simultaneously by saying that public funds should not be used to subsidize the mega-project’s excessive density and call for a per-acre limitation on subsidies (that excludes seized streets and sidewalks from the acreage calculation) that should not exceed what developers of normal density projects ordinarily get. This would help take the profit and the wind out of the sails of the Ratner’s eminent domain abuse monopoly.

The fourth point about working with “the community and its elected representatives” would be ho-hum in the nondebatability of its sentiment except for the exceptional shut-out that has, with ESD’s assistance, prevailed to date.

That leaves the mysterious and perhaps questionable strategy behind the bullet point oddly chosen as the lead-off to all the points. What strategy is behind calling for the deferral of building on the Vanderbilt Yards until after other construction? A hope that, given time, Ratner will default and lose the sweetheart deal where the MTA gave this land away to him for less than its value? That deferral afford the possibility that the MTA would get the new rebuilt railyards it originally wanted and probably needs rather than the diminished yards Ratner wants to furnish? That deferral of building on the “costly” platform would deprive Ratner of his arguments for absurd density? That Ratner should have to replace, last-out-first-in style, the buildings like the Ward Bakery building that he destroyed to pressure and deprive the community of alternative to his monopoly project? Build first that which can be built most quickly especially if it is at a normal density?

Noticing New York concurs with Atlantic Yards Report that the open railyards might be considered, on a relative scale, the most “blighting” of the mega-projects acres. Certainly, if there was any blight at all before Ratner’s blighting demolitions it would only have been the railyards.

Whatever the reason and thinking behind this particular bullet point it is too confusing for it to be the lead demand.

A More Clarion Call?

Here are suggested bullet points that would have served better:
• Dismantle the Ratner mega-monopoly and bid the land out properly to multiple developers (and don’t use eminent domain except to reclaim land from Ratner).

• Do not publicly subsidize extreme density or the seizure public streets and sidewalks: Instead, give the public back its streets and sidewalks (and add more to make connections over the railyards) and place a fair per acre limit on subsidies (that excludes the acreage of Ratner-seized streets and sidewalks) that will not exceed per acre what developers of normal density projects ordinarily get.

• Listen to the community and its elected representatives who have already offered you their U.N.I.T.Y. to let you know what they want.

• Build first on vacant acres preserving to the extent practicable the existing buildings within the footprint for adaptive reuse.
A Crippling Offer to Don Ratner’s `Spiritual' Robes

The bullet points of the press release are crippled by another serious flaw, the sentence that introduces them. In the style of a meek Obama pre-shrunk offer of compromise it begins: “Without altering the intent or spirit of the Atlantic Yards project” and then goes on to say, “ESDC should now consider pragmatic changes that will foster success and accelerate its benefits.”

Pragmatism is one thing, but: “Without altering the intent or spirit of the Atlantic Yards project”? That is what this article has been about from start to finish: The “intent or spirit of the Atlantic Yards project” has from its very get-go been that of a monopoly, a MEGA-monopoly. It’s in its DNA and that is precisely what needs to be altered. To ignore that point is to undermine important points made elsewhere in the press release: “The project’s present path won’t lead us there [to a “healthy development”] . . . . it is the project plan itself that is the constraint.”

Escaping Constraint

The `project plan' is indeed the `constraint' that stands in the way of healthy development in the neighborhood precisely because it is entirely designed as a Ratner blueprint for monopoly.

If it was agreed that BrooklynSpeaks and Develop Don't Destroy Brooklyn were to get absolutely everything on their mildly expressed bullet-pointed wish list except for a breakup of Ratner's monopoly, the booby prize would be that it could only be delivered by some form of regulation . . . and the regulating state official might be Joe Chan unless the community managed to win another resultant fight.

The answer, the only answer, is to break up Ratner’s mega-monopoly. Those who think the answer is to more effectively and meaningfully “regulate” Ratner’s monopoly are wrong. This is not 1913 when phone company president Vail was amenable to constraints to provide public benefit. Times have changed. The regulated have changed and the regulators have changed. You cannot expect to regulate a mega-monopoly like Ratner’s with politicians like Bloomberg and Cuomo in office. And you would still need an independent judiciary to enforce the law. Whereas once Professor Wu might have surmised that regulation of the 1913 phone company was tantamount to being ineffectual because it was superfluous to the good intentions of phone company president Theodore Vail, regulation of the Ratner mega-monopoly is, per se, going to be ineffectual for another reason: Because Ratner, running the show, will simply shrug off any meaningful restraints that the misguided struggle to impose.

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