Wednesday, July 18, 2012

Noticing New York's Hearing Testimony Re New York City Housing Development Corporation's Subsidization of Ratner's Atlantic Yards Mega-Monopoly

(Above, a collection of government officials, present to listen to testimony, just before the HDC hearing.)

The New York City Housing Development Corporation held an important hearing today on its proposed very substantial subsidization of Forest City Ratner's Atlantic Yards mega-monopoly. Here is Noticing New York's testimony.

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July 18, 2012

New York City Housing Development Corporation
110 William Street
New York, NY 10038

Re: HDC’s proposed issuance of up to $91.96 Million in tax-exempt bonds to (plus award of accompanying additional subsidy) to fund Building 2 (461 Dean Street in Brooklyn) of Forest City Ratner’s proposed no-bid, eminent domain-abusing Atlantic Yards mega-monopoly

Dear New York City Housing Development Corporation,

The following is Noticing New York’s testimony respecting the proposed issuance of tax-exempt bonds for the above mega-monopoly.

Here are changes that should be made to the federal law under which tax-exempt bonds are permitted to be issued:
No issuance of tax-empt bonds should be permitted for a project that has been brought about by the abuse of eminent domain. The U.S. Supreme Court’s Kelo decision is one of the most unpopular of all its recent decisions (perhaps even ranking above the Citizens United decision). A huge preponderance of the American public strong disagree with it. States around the nation have passed enactments to circumscribe its implications. Even so, there are agencies like this one who would consider using federal taxpayer subsidies to finance such abuse. And the developer-driven abuse that occurred with respect to Atlantic Yards exceeds and was not even likely to have been permitted under Kelo. Unfortunately, the court did not take up the case to rule directly on this. Even as a local matter New Yorkers do not favor such abuse. In 1967 there was an attempt to amend the New York State Constitution to permit eminent domain-abusing projects like Atlantic Yards. The voters rejected it and the New York’s Constitution was never altered to make such a change.

No bond proceeds should be permitted to fund projects that were not subject to competitive bid. Projects which are not the subject of competitive bid waste public funds and subsidy, breed crony capitalism and destroy democracy.

Tax-exempt bonds should not be permitted to fund government creation or building up of private monopolies. Monopolies stultify development. They are antithetical to it because true development must partake of a diverse, richly dynamic environment of interacting elements and competitive testing of the best adaptations. Monopolies suppress development opportunities. Furthermore, in the words of Jane Jacobs: “Monopolies established by cronyism and strong-arm methods, along with pervasive extortion and corruption, falsify actual costs” [shall we note they falsify benefits as well?] Enterprises “prefer eliminating competition to competing with . . prices, quality and service.” Tax-exempt bonds are supposed to be issued by “development” agencies to foster development, not suppress it. Government officials shouldn’t replace economic ecosystems with a single privileged crony.
Why should all this be law? Because if these were provisions of federal law tax-empt bonds could not be issued for this project.

These provisions are not yet specifically part of the federal law. What is part of the federal law is that before this agency issues any tax-empt bonds it has to have this hearing so that politicians and legislators, being informed, will be forced to take accountability for doing anything as ill-advised as I have just suggested should be prohibited. If stupid things are then done despite cautions received at a hearing the laws governing the issuance of tax-exempt bonds may then be changed.

I request that HDC inform all legislators and politicians receiving a record of this hearing or inquiring about it that these recommendations were made at this hearing and that HDC further inform them that it is my recommendation any changes to the federal law enacting such restrictions should include provisions making them retroactive, by which I mean that any bonds issued ignoring the principles of these recommendations will retroactively reduce the amount of available tax-empt bond cap available to New York City and New York State. If HDC is going to use its tax-empt bond cap frivolously for a bad project the just and proper result is to take that bond cap away.

Public Agencies and Government Suing Barclays. The building for which HDC is considering issuing tax-exempt bonds will share walls and infrastructure with the Ratner/Prokhorov arena now promoting the name “Barclays.” HDC likely has cause to sue Barclays Bank over its LIBOR rate manipulation scandal. Baltimore and other municipalities in the nation are already suing Barclays. The MTA, another agency involved in the financing of this same Atlantic Yards project coordinating with HDC, has publicly stated that its legal counsel is looking at the Barclays scandal and that it will vigorously pursue “all available legal actions” to protect the MTA. HDC has been unresponsive to my inquiries about whether HDC is similarly looking at suing Barclays. My understanding is that the Barclays matter is under investigation by the State Attorney General. I presume that any presentation to the HDC board about financing this project will include in-depth information about all the possible lawsuits against Barclays that may or will be brought by HDC and other agencies. I believe that the public is also entitled to an outline of what gets described to the HDC board in this regard.

Lack of a Valid Environmental Impact Statement. The Atlantic Yards project is a project for which there is no valid Environmental Impact Statement. That has been judicially determined. This is bad not just because a proper environmental review has never been done: It is bad because the reason it hasn’t been done is that a proper review was sidestepped by fraudulent subterfuge by the developer in connection with which now-chastised government officials colluded. Whether or not there is a legal nicety by which HDC may reason this building can be financed without a proper environmental review it would not be appropriate to do so.

Character of the Developer and Prospective Project Owners. HDC needs to do its “bad apples” review of whether this developer (and prospective property owner) is suitable for the special privilege of receiving HDC financing and subsidy. Forest City Ratner is at the hub of many spokes in a wheel of indictments and various forms of bad conduct. There was the Forest City Ratner Ridge Hill prosecution, Senator Kruger’s prosecution, the recent State Attorney General Investigation resulting in a settlement concerning illegal New York City lobbying activity in connection with development that should have also have included the substantially similar activities in this vein respecting Atlantic Yards. It is not necessary for there to be an indictment or conviction of a developer for an agency to conclude that a developer is an unworthy and untrustworthy recipient of agency subsidy. A pattern of bad conduct and bad behavior and unsavory colleagues is entirely sufficient. And, Forest City Ratner’s pattern of broken promises and subterfuges is also enough.

Mikhail Prokhorov and Chinese Millionaire Investors, Prospective Owners. When HDC does its “bad apple” character reviews it will also have to look at the other prospective owners under the documents. That includes looking at the activities and conduct of Russian oligarch Mikhail Prokhorov and there are also nearly 500 Chinese millionaires expecting to get green cards by virtue of Ratner’s laughable manipulation of the federal EB-5 immigration program. This project has been put up as security for those Chinese millionaires. Thus they can become owners of the project without further HDC approval, or if HDC thinks it has a right to approve them first then those millionaires don’t have the security interest they believe Ratner promised them. The likelihood of such a foreclosure of the Chinese security interest is all the more likely given what may flow from Ratner’s recent loss of the environmental lawsuit: a required consideration of taking the Atlantic Yards mega-monopoly away from Ratner to break it up amongst multiple developers.

HDC Discretion To Reject This Project. The reason this hearing is being held is because the HDC board has discretion which it is supposed to exercise. That discretion should be exercised to reject this project. Approval of this project should not be treated as a forgone conclusion. If the board has any fears that it lacks discretion to turn down this project that feeling that its options have been constrained would highlight significantly the very reasons the cord with this developer should be cut.

HDC Has Already Financed a Forest City Ratner Project. Some HDC board members may reason that they cannot now turn down this project because HDC financed a Ratner project once in the past. Not so. In fact, the bad behavior developer engaged in respecting the HDC-financed building, now known as 8 Spruce Street, should be grounds for HDC to turn down this project. In two blackmailing episodes the developer engaged in behavior that should have chagrined HDC. It blackmailed the local community board for additional subsidy and it also stopped construction on the building, blackmailing the construction unions. Both of these incidents, particularly the latter, should have been considered threats to HDC as well. For HDC to proceed with an approval of this financing after that behavior would constitute HDC’s endorsement of such blackmailing techniques, techniques which are actually typical of the developer and facilitated by its continuing monopoly on development which government, including HDC, should now act to end.

Modular Construction As Broken Jobs Promise To The Unions. There is a possibility of this building’s modular construction, pushing the technological envelope. If not risky, the broken promises to the construction unions this represents are emblematic of how the Forest City Ratner dishonestly ignores commitments respecting its mega-project. Ratner was planning its double-cross of the unions even as he was sharing the stage at the arena opening with union representatives he was praising for their support. I am not arguing that the Ratner promise to the unions is one that needs to be honored. The unions when they supported this project did not look out for the interests of the community and consequently supported an out-of-scale project of very poor design that was detrimental to the community in many ways. Still this promise-breaking should be noted as part of an overall pattern of promises never intended to be kept even as they are made.

This Project Is Immoral. Financing this project is immoral. This project is immoral because tax-exempt bonds and subsidies should not be used to reward, buttress and facilitate eminent domain abuse, crony capitalism, government-sponsored monopoly building and grossly out-of-scale development. But that is not the whole of it.

HDC is comprised of government officials who are supposed to be acting as guardians of the public trust. This hearing is required with that notion in mind. Government officials cannot act to protect the public, they actually lose the ability to do so, if they don’t have bargaining power. Government officials won’t have any bargaining power unless the Ratner monopoly is broken up. The design of this project as a monopoly (and we will remember all the project design came entirely from Ratner) is intended to thwart public agency bargaining power. HDC’s approval of this project would buy into that construct of an intentionally emasculated government by furthering Ratner’s monopoly when HDC has discretion to reject it instead.

HDC should reject this project and allow it to fail. The Atlantic Yards development can and should be taken away from the developer and broken up and distributed among multiple developers. That way the public and agencies like HDC acting as guardians can have some bargaining power and influence over the project as it is developed. That way the community's better UNITY plan (which calls for multiple developers) can be implement and respected.

Assemblyman Hakeem Jeffries has described Atlantic Yards as being presented to the community as a “field of dreams” with the reality delivered being a “graveyard of broken promises.” It isn’t really important which local politician we ascribe such an insight to because they all see it. What is important is to realize that the entire mega-project is fabricated on a foundation of false promises from which Ratner blithely and routinely expects to escape accountability and there can be no reasonable expectation of enforcing delivery of any true benefits from Ratner while Ratner still has the upper hand in a monopoly situation. HDC should have learned a microcosmic version of this lesson in connection with the Spruce Street project.

Scarce Subsidy Delivered to Ratner Is Misdirected. Delivery of scarce-resource subsidy to Forest City Ratner for out-of-scale development hogs and misdirects subsidy that could and should be better used elsewhere, including smaller developers and not-for-profits with a better chance of it benefitting minority developers.

HDC needs to pay attention to the unhappy saga of abuse. None of us has amnesia about Ratner’s misdeeds and we are not about to get it.

They say that Atlantic Yards meant development?

Well, it’s just not so. . .

And it’s so NOT just.
It meant: Tearing down new construction and valuable historic buildings the community planned to preserve, leaving vacant lots for decades, halting the economic activity construction because it was competing with Ratner in his own backyard.

They say that Atlantic Yards meant good government? Good procedures, protections for the community, considered carefully weighed decisions. Good government?

Well, it’s just not so. . .

And it’s so NOT just.
It meant falsifying findings to declare this area was blighted. (Even Senator Schumer, a supporter of this project, said that this area, close to his home, where he bicycled, was not blighted,) This project was about illegally giving a mega-development monopoly to Bruce Ratner, over 50 acres of Brooklyn, 30 of them contiguous acres around Atlantic Yards. This was about corrupt courts and agencies rigging the delivery of a wish list of special benefits to a politically-connected developer.

They say that Atlantic Yards meant creating an affordable housing environment?

Well, it’s just not so. . .

And it’s so NOT just.
It meant tearing down housing that was truly affordable to the neediest, luxury condos, and housing the market was providing for anyway, setting up a Ratner sink-hole to beg for housing subsidies- preventing those subsidies from being used elsewhere and where most needed, Ratner only giving back the minimum that those federal (and local) subsidies always require, not a jot or a tittle more, and it means vacant lots.

They say that Atlantic Yards meant jobs and employment?

Well, it’s just not so. . .

And it’s so NOT just.
It meant evicting businesses that were providing jobs, fake Ratner “jobs” programs- Deceptions where people even worked for free, strung along by false hope, sidestepping the creation of jobs with cheap, possibly dangerous modular construction, fluffed-up incredibly inaccurate jobs figures, minority and community job promises not meant to be monitored.

They say that Atlantic Yards meant public investment.

Well, it’s just not so. . .

And it’s so NOT just.
It meant a net negative loss to the public of hundreds of millions of dollars, public subsidies of $2 to $3 billion dollars, including diverted taxes that won’t be paid and will go instead to pay for things like the Ratner/Prokhorov private arena. It means property given to Ratner lying fallow and vacant and off the tax rolls.

They say that Atlantic Yards meant providing what the community wanted and community empowerment.

Well, it’s just not so. . .

And it’s so NOT just.
It meant fake community organizations, secretly paid for by Ratner, fake community benefit agreements intended as eye-wash and diversions designed to be unenforceable. It meant a developer’s efforts to divide and bamboozle the community, to incapacitate its leadership and strip its people of their power.
I could go on. Ratner was going to create good design and green space? No, it meant super density spot-zoned for Ratner’s special benefit, an arena tightly crammed in amongst brownstones, the seizing and privatizing of public streets, sidewalks and avenues, project-design bait-and switches with (largely theoretical) “green spaces” being ditched in the process.

I could go on, and on, etc. The question is whether HDC will go on with a inexcusable endorsement of this destruction and betrayal?


Michael D. D. White

PS: Video of a portion of this testimony (below) is available here on YouTube.

Note: This post was updated as of 7/19/2010 to include additional supporting hyperlinks.

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