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

(MTA Chairman H. Dale Hemmerdinger)

Tomorrow Noticing New York will disclose something about what MTA Chairman H. Dale Hemmerdinger has in his closet.

Preparatory to that, a few things first. Yesterday we spent the greater portion of our day at the MTA in order to be present and also testify when the MTA’s Finance Committee heard new information about Atlantic Yards. (See: Tuesday, June 23, 2009, Thoughts on the MTA’s Finance Committee Meeting Wherein Atlantic Yards Was Considered as an “Information Item” and Monday, June 22, 2009, More on Planning in Advance to Bail Out Forest City Ratner Upon the Inevitable Arrival of an Economic Downturn.)

One thing we concerned ourselves with in our testimony and about which we have recently written is the board members’ obligation to respect and live by their fiduciary duty when they vote on Atlantic Yards. (See: Monday, June 22, 2009, Plus Ça Change, (The More Things Change,) Plus Une Chose En Particulier Ne Change Pas: La Transaction Fixée (The Wired Deal)! )

We think that we ought to observe that this is not an abstract concept that is divorced from the other things that happen in life. Just because someone is a board member of a public agency doesn’t mean that this “fiduciary duty” becomes a fiction that can somehow be supplanted by political realty. A fiduciary duty is a real legal obligation and related to the other things one does in life.

We are aware that board members of public agencies are real people who have real private and professional lives and that in those lives there are also responsibilities and obligations and even other fiduciary duties they must observe in other contexts. This may extend to such things as the fiduciary duty to properly administer a relative’s trust or estate and, for instance, we note that Mr. Hemmerdinger, to quote just from what is available on the MTA’s website:

. . . . is president and director of The Hemmerdinger Corporation, a commercial and residential real estate ownership and development company based in New York City.

He also serves as president of Atco Properties & Management, Inc. and Atco Properties Services Corporation and is chairman of Atlas Real Estate Funds, Inc. He is also a board member of Valley National Bank.

Mr. Hemmerdinger is active in civic and business affairs in the New York region and is a trustee and secretary/treasurer of the NYC Police Foundation, a partner in the Partnership for New York City, and trustee and chairman emeritus of the Citizens Budget Commission. He serves as executive vice president of the Realty Foundation of New York, is a member of the Real Estate Board of New York, and is a former commissioner of the City of New York Conciliation and Appeals Board.

He is a 1967 graduate of New York University, where he also did graduate work, and is a trustee of the university, where he is on the budget/finance, alumni relations, library, and executive committees.

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. You can’t have a breach of trust in one area of your life and not expect repercussions in another area. When it comes to such things one should not expect that expect failure to observe duties and responsibilities and maintain trust can be isolated by cognitive dissonance. Even legally, breaches may well wind up being very much connected.

That is all we will say for now. And we say because we hope that tomorrow the members of the MTA board will remember that they have a fiduciary duty to uphold. We hope they know that failure to uphold these responsibilities cannot be a discrete and separate thing.

And for tomorrow we also offer the promise that we will disclose something about what MTA Chairman H. Dale Hemmerdinger has in his closet.

Thoughts on the MTA’s Finance Committee Meeting Wherein Atlantic Yards Was Considered as an “Information Item”

There is much to tell about the Monday morning meeting of the MTA's Finance Committee where a new bailout edition of Atlantic Yards was the subject.

Best Account of MTA Finance Committee Meeting

As usual, if you want the best account of what happened at the MTA’s Finance Committee meeting on Monday wherein Atlantic Yards Was Considered as an “Information Item” you should go to Atlantic Yards Report. (See: Monday, June 22, 2009, MTA deal revealed: $20M down, 22 years to pay the rest; smaller yard may save FCR $100 million; some skeptical about rush.)

Noticing New York’s Testimony

If you want to know what we testified, it is true that we essentially reprised our post from early that morning about how all the changes swirling around and through what was theoretically once was “Atlantic Yards” have melted all other pretext away. Only one obvious fact remains. Atlantic Yards is being done not for reasons of merit. It is being done only because it is a “wired deal” where merit is irrelevant. (Our morning’s post was: Monday, June 22, 2009, Plus Ça Change, (The More Things Change,) Plus Une Chose En Particulier Ne Change Pas: La Transaction Fixée (The Wired Deal)!) We handed in our post as written testimony.

Emphasis of Noticing New York’s Oral Testimony

We did, however, adjust our oral testimony to make sure we led with something that was in direct opposition to the nonsense being peddled to sell the Forest City Ratner bailout. We pointed out that in an economic downturn the ability to negotiate a better deal should be in the public's favor, not the developer's. For more about this and our thoughts on the testimony of Kathryn Wylde of the Partnership for New York City, Joseph Chan of the Downtown Brooklyn Partnership see: Monday, June 22, 2009, More on Planning in Advance to Bail out Forest City Ratner Upon the Inevitable Arrival of an Economic Downturn.

Purpose of this Post: Supplemental Thoughts

This post is to offer our thoughts supplemental to all of the above.

Deal Sprung on the Committee is an “Information Item” Only

The Finance Committee was considering the revamping of the degenerating Atlantic Yards as only an "information item" because the committee members were only just seeing the item for the first time. As they had no time to absorb the information they were not being asked to actually vote on the item. That was small comfort because in two days time (on Wednesday) they would be asked to vote as part of the full board, apparently skipping a committee approval. This also presupposes that the ESDC would approve the very complex deal only a day later without making any changes. Such swiftness is, of course, indicative of the wired nature of the deal.

Transportation, Job One at the MTA, Suffers a Blow

As Atlantic Yards Report reported about MTA Chief Financial Officer Gary Dellaverson's stated priorities:

"Our interests are transportation first, financial second," Dellaverson said, implying that development over the railyard--and the removal of the blight the open railyard has been said to cause--comes third on the list.

Notwithstanding, it seemed clear that the most important news is that MTA’s ability to provide transportation will suffer.

The concessions to accommodate Forest City Ratner involve significantly diminishing the capacity of the railyard and doing so in a way that allows little or absolutely no flexibility to ever expand it again later despite the fact that the city is growing and such flexibility is valuable and highly desirable.

It was noted by Board member Andrew Albert only “a couple of weeks” prior thereto MTA Acting Executive Director Helena Williams had been “pretty clear about needing 9 tracks versus 7 tracks.” We had to wonder about the fact that Helena Williams was not at the meeting. Representations were made in her absence that she was now “completely comfortable” with the downsizing and lack of future flexibility the Ratner concessions would involve.

In her absence most of the information was being supplied by Mr. Dellaverson. It was interesting how Dellaverson had to be chased with successive rounds of questions to give a straight answer about the fact that the deal being proposed for Ratner would mean not only a railyard with less capacity but one that would also lock in the MTA, permanently preventing the possibility of further expansion in the future because once the yards were platformed over and supported by immovable pillars between the tracks no further change would be possible. Prior to actually admitting this, Dellaverson's evasions were described politely by a female board member trying to get a straight answer as "a lovely way with the English language."

Dellaverson finally responded that if the question was about possible expansion for a "more robust" railyard that, after the platform was built it would be a "real pain in the ass to enlarge." That apparently was not exactly accurate because further discussions indicated that it would actually be virtually impossible to enlarge the yard after that.

One board member commented how valuable MTA normally considered yards that provided capacity and flexibility for future growth.

The Blow to the MTA's Job One in Quantified Terms (For Starters)

From Atlantic Yards Report:

The new railyard would be valued at $147 million, while MTA Chief Financial Officer Gary Dellaverson said the previous iteration was worth $240-$250 million.

In just one blow, a quantifiable hundred million sweetening of the deal for Ratner. Of course that is just one of the sweeteners proposed as part of the "renegotiation" constituting the Ratner bailout. The value of other sweeteners need to be added to it.

A Board Member’s Outrage at a Last Minute “Railroading” Rush

One board member complained about the outrage of being rushed at the last minute on a complex deal. Here from the Times:

“It is one month shy of four years since the board accepted Forest City Ratner, and this committee is being given less than 48 hours to understand a complex transaction,” complained Doreen M. Frasca, who has raised concerns recently about the M.T.A.’s financing decisions. “I think that’s pretty outrageous,” she added.

(See: June 22, 2009, Developer Seeks to Defer Payments on Atlantic Yards Site, by Michael M. Grynbaum.)

Mr. Dellaverson was clear that the board members were being rushed because of the schedule the Forest City Ratner bond deal for the arena needed to meet. This is not to say that the last-minute rush was not manufactured. As board member Frasca had already pointed out, Forest City Ratner could have moved to go forward on this a long time ago. That being so obvious, we think the facts point to a conscious effort to short-change the board of the time needed to properly evaluate and think about the transaction.

Absence of An Actual Deal With Ratner

Politicians should also pay attention to the board's question and Dellaverson answer about whether the MTA was "contractually obligated" with respect to the “deal” with Forest City Ratner. Several times the “deal” was referred to by Dellaverson as "never papered over." Mr. Dellaverson’s answer on whether the MTA was contractually obligated: "Of Course not!"

So if politicians ever wondered how easy it would have been or is for the MTA to walk away from this deal, the answer is that it is no problem at all.

In fact, Mr. Dellaverson indicated that there were some aspects of the original deal he was not even sure he remembered and would only know about if he dug up notes he hasn't looked at recently.

Switching to Another (Perhaps More Solvent) Developer

Mr. Dellaverson was also asked by a board member about switching to another contractor. He was given the example of what would be possible if Extell (the developer that has previously offered the MTA more money than Forest City Ratner) came forward to indicate a current interest. He seemed to view that as an interesting but academic proposition. He noted that Extell had not approached the MTA. It was clear from what he was saying that the MTA had not bothered to contact Extell or anyone else. The MTA has thereby intentionally kept the idea of another contractor entirely theoretical.

Afterwards on WNYC there was a report where the MTA (Mr. Dellaverson?) was saying that the reason to accommodate Ratner was the MTA’s inability to find a replacement contractor.

Of course, it would be unlikely that Extell would come forward uninvited at this point. When last we heard from Extell with respect to bidding on the Atlantic Yards site, Gary Barnett, the president of Extell was invoking images of Casablanca with his references to being "shocked— shocked" not to have gotten the original bid when they outbid Forest City Ratner. (See: Thursday, December 27, 2007, Clear enough? Misreading the Extell interview regarding Atlantic Yards.)

It is, in fact, unlikely that any alternative contractor will bother to darken the MTA’s doorstep until the MTA sends out the signal that Ratner’s deal is no longer specially wired. Obviously, that is not the message now being telegraphed.

Multiple (Six) Development Parcels

One thing that has interesting implications in terms of bidding is the MTA’s division of its portion (40%) of the overall Atlantic Yards site into six development parcels. Here from Atlantic Yards Report:

Dellaverson said the MTA divides the rest of the railyard into six development parcels, as six buildings have been projected to be built. A parcel purchase price would be assigned based on the total payment for the "Air Rights Parcel" and the proportional density assigned to each of the six segements.

Regular payments of the total purchase price would be allotted proportionally to each development parcel, with that parcel conveyed to ESDC or FCR only when the proportional price was met.

We have always advocated dividing the site up into separate parcels so there could be separate developers and more bids. It seems the MTA is proposing to do the division without using the opportunity bid the property. (The six parcels may allow FCR more flexibility, especially of it runs into a financial fix where it is struggling not to go under). Ironically, later in the afternoon on an entirely separate matter the committee was reviewing recommendations about breaking propsective large MTA contracts into smaller bundles as a matter of principle in order to have more effective bidding.

Pricing of the First Parcel (the Arena Parcel) For Ratner

Dellaverson was noninformative when asked about how the first parcel being transferred to Ratner for the arena had been priced. Apparently it had been priced through the art of negotiation. Dellaverson said it had not been priced by the MTA based on calculations of the value of what could be built upon it. (We can’t imagine that Forest City Ratner ignored paying attention to this.) Dellaverson said that the MTA value of the land could not be set because the ESDC was doing the zoning override. This would seem to have some odd implications and, looking at the staff summary, we are not sure it is accurate.

MTA to Set Precedent By Selling Naming Rights to Subway: First Step in Commencement of a New Program?

Here from Atlantic Yards Report:

Also, in what represents the first MTA naming rights deal for a subway station, FCR would pay $200,000 a year over 20 years to have the name Barclays Center added to the various stations that make up the Atlantic Avenue/Pacific Street complex.

There were no comparables for that deal in New York, but Dellaverson said MTA staff did look at naming-rights arrangements in other cities.

We find this fascinating. If this is appropriate the MTA could sell off the entire subway system at $200,000 a year per station. Columbus Circle will now be the Columbus Circle/AOL Time Warner Station. Oops- - No AOL anymore, just Time Warner then. Grand Central could be Grand Central/Pan Am Station. Oops- - No Pan Am anymore, Met Life then. Given all the turmoil in the financial world, will Barclays be around for “20 years”? Maybe so. If they have been around long enough to have been involved in the slave trade maybe it can be argued they will be around for a few more years.

(Note: This post will be updated, including correction of typos.)

More on Planning in Advance to Bail Out Forest City Ratner Upon the Inevitable Arrival of an Economic Downturn

Norman Oder pointed out in his Atlantic Yards Report that “Forest City Ratner started renegotiating the deal before the economic downturn” and, just this morning, he linked back to our last Noticing New York post to point to our observation that, given Atlantic Yards’ multi-decade time frame, its encounter with economic downturn was inevitable. (See: Monday, June 22, 2009, Why an economic downturn should have been factored into AY plans.)

We are now happy to add one more reason why the economic downturn should always have been factored into Atlantic Yards plans from the beginning.

We spent the greater portion of our day today at the MTA, sitting through its committee meetings in order to be there when the MTA’s Finance Committee heard new information about Atlantic Yards. And we even testified. Mr. Oder noted that we “reprised” our “post about how it was a `wired deal.’” Indeed we did and we led with something that was in direct opposition to the nonsensical notion that was being peddled as a reason to revamp the degenerating project, that the `deal’ with Forest City Ratner should be renegotiated in the developer’s favor because of the economic downturn. Au contraire (to stick with our recent theme of speaking French), in an economic downturn the ability to negotiate a better deal should be in the public's favor, not the developer's! (See: Thursday, April 16, 2009, The Great Recession: A Stimulus to Get Our City Back to “Bidness?” and Monday, June 1, 2009, Negotiating With Your Contractor: The Atlantic Yards As Kitchen Renovation Metaphor.)

We testified right after Kathy Wylde of the Partnership for New York City, so we were able in our testimony to say that 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.

(BTW: Not that we have hard feelings about it but Kathy spoke before us because somehow she jumped the line. We signed in first and were called up first and then somehow the MTA staff switched over to Kathy instead. Can’t guess what that was all about.)

While Kathy preceded us, Joseph Chan of the Downtown Brooklyn Partnership spoke after us so we didn’t have a chance to testify about what he said but this is where planning in advance for economic downturns comes up again. We’ll comment here instead. Most of the eloquence from those speaking about the project came from the project’s opponents (yes, we are partial to their point of view), but Mr. Chan and Ms. Wylde have their jobs because they are expected to be able to be reasonably persuasive. They were, in fact, the best of the lot in terms of speaking in favor of the project even if what they said was dry, canned and bit divorced from actual appreciation for the real saga and true flavor of things.

Mr. Chan said that he actually thought that the new switched Atlantic Yards would be good for Downtown Brooklyn (of which Atlantic Yards is not a part, though it is within walking distance). Please do some more homework, Mr. Chan: Even the original Atlantic Yards would have been destructive and a net negative.

Mr. Chan also spoke specifically and favorably about Forest City Ratner as a developer and in doing so he made this claim; that Forest City Ratner is the right developer to hand a project over to at any time in the real estate cycle, in good times and in times of economic downturn! Good sales pitch, but if Forest City Ratner is specially suited to working on projects during economic downturns (and should be even be awarded a large-scale monopoly with that in mind) why then was the very purpose of the scheduled MTA and ESDC meetings to bail them out financially because of the unforseen economic downturn?

Plus Ça Change, (The More Things Change,) Plus Une Chose En Particulier Ne Change Pas: La Transaction Fixée (The Wired Deal)!

At Senator Bill Perkins’ Senate hearing on Atlantic Yards on Friday, May 29, 2009, Assemblyman Hakeem Jeffries questioned whether the MTA and its board members would be acting in accordance with their fiduciary duty to the public if, as the MTA is discussing doing, the MTA and its board act to bail out the financially ailing Forest City Ratner, the proposed developer of the proposed Atlantic Yards project.

What’s Contemplated in Terms of Bailing Out The Developer

In terms of bailout, the MTA is talking about:

1. Letting the developer construct a project of significantly lesser public value under rubric of "value engineering" (translated, that means, among other things, constructing a train yard with 7 tracks rather than 9 or the original 10, delivering a project of much lesser quality, and with less “green space”).

2. Giving the MTA’s property to the developer (property for which the developer did not bid in the first place) for a considerably smaller payment despite this currently being a time of financial need for the MTA. (We are now talking in terms of the pathetically paltry. See Atlantic Yards Report “What could $20 million buy?” series.)

3. Less will be done by the developer up front, and

4. Postponing, even further, the borrower’s obligation to deliver the ostensible benefits of the project. For instance, one housing tower that would be front-loaded with luxury units while others will be postponed.

Further, this proposed bailout is being pushed at a time when we are learning that the project will not, in fact, deliver the de minimus ostensible benefits it was once supposed it would. At least the arena, and probably for a very long time the entire project, will NOT be a net economic positive for New York City according to the reckoning of the City Independent Budget Office. Even when the boosters of the project (the government officials working for the development agencies) were telling the questionable version of the story, which they apparently hoped would sell the project, they said that the completed project would provide the benefits they calculated only upon the passage of 30 years. By current projections it may take 30 years before the project is even complete. Does that mean the “benefits” take sixty years to fully materialize? It seems fair to ask.

Fiduciary Duty Reminder

Not long after the Perkins hearing, Assemblyman Brodsky, who chairs the state Assembly Committee on Corporations, Authorities, and Commissions, followed up on Assemblyman Jeffries' question about the board members’ fiduciary duty to the public. He “warned . . . that, if the Metropolitan Transportation Authority (MTA) board accepts `less money’ for the property destined for the Brooklyn arena, it would “be a violation of the fiduciary duty”--their obligation to act with the highest standard of care. (See: Monday, June 08, 2009, Brodsky: MTA board’s acceptance of Ratner’s lesser offer for railyard would violate its fiduciary duty.)

Time Ushers in Changes (Et Non . . .)

We think the board members of the MTA and ESDC are now in a pretty good fix if they want to vote for Atlantic Yards but want to claim they are not violating their fiduciary duties. This is because time has done a remarkable job of melting away all aspects of Atlantic Yards, leaving nothing but one sinewy strand that won’t dissolve, one single cord that represents Atlantic Yards, its core essence. What is that core essence? It is Atlantic Yards as the wired deal, the mega-boondoggle, designed to serve no one but a single connected developer.

Pardon Our French (For a Change)

What can be a more instructive to learn about this exercise in civic malfeasance than to look, on one hand, at all that has changed, and, on the other, at the very little that has not changed, going back to when the original project approvals were rammed through with a concerted effort to shun a proper public vetting. Hence the title of this article. The French say that “the more things change, the more they stay the same.” (“Plus ça change, plus c'est la même chose.”) But in the case of Atlantic Yards, it seems as if just about everything does change and only one thing does not. We had thought, originally, to title this: “Plus ça change, (The more things change,) plus c'est la même chose particulier- Le Deal (Transaction) Wired!” but we will, instead use what we understand to be the better French and say: “Plus Ça Change, (The More Things Change,) Plus Une Chose En Particulier Ne Change Pas: La Transaction Fixée (The Wired Deal)!” No matter, the facts are perfectly plain in any language no matter the precision of our syntax.

What’s Changed? For Starters, the Economy

We have already written about how the changes in the economy should mean that now is the very time when the public should be expecting a much better deal from any developer it is dealing with. (As opposed to the significantly worse one now proposed for Atlantic Yards.) As we have written, other state and local governments are finding that public funds go a lot further and can buy a lot more considering the downtown in the economy. Furthermore, it is reported that Forest City Ratner is taking advantage of the downturn to get a much better deal from the contractors it is dealing with. (See: Thursday, April 16, 2009, The Great Recession: A Stimulus to Get Our City Back to “Bidness?” and Monday, June 1, 2009, Negotiating With Your Contractor: The Atlantic Yards As Kitchen Renovation Metaphor.)

If anyone tells you that a downturn in the economy is a reason the public should get a worse deal and the developer a better one (See: Friday, June 19, 2009, Keep your eye on the ball: FCR began renegotiating this deal well before the economic downturn), don’t believe them.

What Else Has Changed? Almost Everyone Else in the Cast of Characters, But. . .

It was startling to read the other day a No Land Grab accounting that summed up all of the individual players, public officials included, that have come and gone since the original Atlantic Yards mega-boondoggle was unveiled on the public stage. (See: June 6, 2009, More Disarray for the ESDC: Chairwoman Marisa Lago Quits.) Not only is Starchitect Frank Gehry now gone but Governors: George Pataki and Eliot Spitzer have departed, the latter rather ignominiously (including the way he acquitted himself on Atlantic Yards). It looks as if Governor Paterson is also likely to depart the Atlantic Yards scene sans any distinction unless he exercises his ability (and we would say clear duty) to let Atlantic Yards die the death it so richly deserves.

No Land Grab goes on with its listing, Assemblymember: Roger Green has departed, ESDC Heads Charles Gargano, Patrick Foye, Avi Schick, and Marisa Lago are all listed as departing. No Land Grab’s summing up was before the even more recent reports that ESDC Chairman Bob Wilmers, resigned from his post. (See: Thursday, June 11, 2009, Even more turmoil at ESDC: the Chairman resigns, and a Republican businessman from Rochester will be in charge.) No Land Grab reminds us that MTA heads Peter Kalikow, Katherine Lapp and Eliot Sander also have all departed. From the Forest City Ratner team there were these exits (in addition to Gehry) listed by No Land Grab: Jim Stuckey, Loren Riegelhaupt, Randall Toure. No Land Grab mentions that any key players missing was unintended. We would have added to this list the departure of landscape architect Laurie Olin. Concluding the list are departures from the “Team Nets”: Kenyon Martin, Jason Kidd, Richard Jefferson.

Changed Politics

The politics of Atlantic Yards have also changed. Once there were a few politicians who were sufficiently hornswoggled (or thought others were) to support the project in some (perhaps lukewarm) fashion. More recently, the project hasn’t found that kind of support. (See: City Council candidates don't support AY project, May 08, 2009, May 7, 2009, City Council Races (33rd and 39th CDs): Candidates’ Positions on Development and Effective Action They Would Take to Stop Atlantic Yards and Friday, June 19, 2009, Brennan, other elected officials urge MTA to delay June 24 vote, say hasty decision may hurt transit system.) The only kind of support it now gets is by Marty Markowitz or by the stealth of politicians like Bloomberg and Paterson who seem to prefer not to mention the project when they can avoid doing so.

Political support fell out from under the mega-boondoggle before the recent set of proposed changes that would make the megadevelopment so much worse, before the most recently released information concerning the calculations about the ways in which, for instance, the arena will be a net loss to the public.

IRS Position on Tax Exemption Changed

Even the financing permissible under applicable IRS regulations has changed. The contemplated financing of the Atlantic Yards Nets arena (about the only thing proposed to proceed in the near future) by the peculiar mechanism of “R-TIFC Bonds” (pronounced "Artifice-PILOT"- or "Return Total Intercepted For Costs-Payment In Lieu Of Taxes") is something that the IRS would not now permit for any project of this sort. It is a testament to exactly what we are talking about: Atlantic Yards as a “wired deal,” that somehow this very substantially changed deal may be “grandfathered” under an IRS regulation to allow this single project to issue Artifice-PILOT bonds that probably should always have been illegal. Procuring the IRS ruling involved New York public officials coordinating with the developer in making misrepresentations to the IRS when the IRS ruling was requested. (See: Tuesday, May 19, 2009, Looking back at that IRS letter: did ESDC stretch the truth about the project timetable? and Monday, July 21, 2008, Asking feds not to approve tax-exempt bonds for AY arena, DDDB criticizes city/state letter) Those public officials were likely already inured to the making of misrepresentations to the IRS based on prior similar conduct. See: Wednesday, October 1, 2008, Safety in the Numbers You Pull out of a Hat.)

In the Sea of Change What Doesn’t Change?

It is scary to think that with all that has changed, the economy, the design of the project, the architect and landscape architect, the project’s measurable public benefit (actually its total lack of actual measurable benefit), the politicians, the transaction technicians, only one thing durably remains- The designation of a developer who is on the receiving end of a humongous boondoggle. This fits with the theories of the conspiratorialists who tell us that politicians are just irrelevant intermediaries and that power truly resides in a plutocratic class of businessmen who get to tell politicians what to do. We don’t subscribe to such theories, but we are hard pressed to refute these ideas when confronted by scenarios like what we see playing out now with Atlantic Yards.

The Developer Hasn’t Changed? Let Us Offer a Correction

Actually, it is misleading to say in unequivocal terms that the developer hasn’t changed. The developer is nominally the same developer, but much has changed about the developer. What is different is that the developer is now teetering financially. Forest City Ratner’s credit is in the toilet and we have been watching, wondering whether they will go under entirely. (See: Tuesday, March 17, 2009, Three months later, Morningstar again says Forest City Enterprises stock is worthless.) The developer is certainly not now the kind of strong credit-worthy developer you would rationally contemplate choosing if you were going to hand out a monopoly for the development of a vast swath of the nation’s largest city.

Putting it more frankly, this is exactly the kind of situation where, because of the changes with the developer, public officials ought to be looking for ways to terminate the transaction with the developer.

Contemporaneous Beekman Problems

We found it interesting that, contemporaneously with Morningstar once more calling Forest City Ratner’s stock worthless, the developer stopped construction on its Beekman Tower in lower Manhattan. (See: Downtown Housing Complex May Downsize, by Matthew Schuerman, March 19, 2009.) The official story was that Forest City Ratner wanted to take advantage of the downturn in the economy to negotiate a better deal with its contractors. (You know, that better deal they don’t want to share with New York taxpayers when they do Atlantic Yards as we talked about earlier in this post.)

Musing on Forest City Ratner and Material Adverse Change

The fact is that Forest City Ratner reportedly did get that better deal on the Beekman (See: Savings on Labor Allow Work on Residential Skyscraper to Resume, by Charles V. Bagli, May 28, 2009.) but we were still wondering whether that was the real reason and the only reason that construction on the Beekman stopped when it did. In order for the Beekman to proceed, more bonds needed to be issued for the project. Those bonds could only be issued if they were backed by the bank providing its credit for the transaction. Might the bank have been reluctant at that point to further back FCR’s poor credit? In addition, the commercial real estate market in New York was way down so the value of the Beekman as an asset was probably unattractive additional security. It may not even be good for FCR’s balance sheet. (See: Manhattan real estate in freefall, by Edward Harrison on 22 February 2009.) So was the bank asserting its rights to withhold additional credit to the Ratner organization under the “material adverse change” clause, which the bank ought to have had in the documents whereby it would have been entitled to withhold the extension of credit for the issuance of additional bonds?

Abyss Dancing?

Forest City Ratner is still teetering but we noticed some strange coincidences as FCR danced near the abyss trying to scrounge up capital. Morningstar, (which had once called Forest City Enterprises stock worthless) on Thursday 05/14/09 raised the stocks fair value to $5.50 synchronously with the FCR’s filing of the Form 10-K filed after normal business hours (5:31pm) Wednesday 05/13/09 with the Securities and Exchange Corporation that set forth additional BAD news, and synchronously with FCR’s announcement that it was going to be selling more stock. (See: Thursday, May 14, 2009, Forest City Ratner mints money with new shares, stock declines only 16% coupled with Friday, May 15, 2009, Forest City warns SEC of potential new delays, new costs, and failure to meet (tax-exempt bond?) deadlines.)

Does it make sense for Morningstar to raise the value of the stock when additional bad news undermining the value of the FCR stock was coming out? Did Morningstar, in fact, know about the bad news that was going to come out almost contemporaneously with their upgrade action? We can imagine the dance that must have gone along with these events with someone at FCR probably doing some Morningstar hand-holding to steer things the way they wanted for the important date they would announce the sale of their stock.

We want to observe a coincidence of timing with respect to the following: On the Friday following the above described Wednesday/Thursday events, the Second Department ruled in favor of Forest City Ratner with respect to one of the pending lawsuits against the project. (See: Friday, May 15, 2009, Eminent domain case is dismissed unanimously; appeal in this and EIS case remain as last legal hurdles.) All we can say is, we found this very interesting.

Here is another thing we note. It was just days after FCR’s stock sale to infuse capital that the announcement was made (see above) that construction would resume at the Beekman.

Apparently at least $20 million of the stock being offered to infuse capital into FRC was bought by members of the Ratner family. That has us wondering too. (See: Wednesday, June 10, 2009, What should $20 million buy? How much walking-around money do FCE family members have?)

None of this dancing is likely to be sufficient, without more, to bring back Forest City Ratner from the abyss. Forest City Ratner wants the Atlantic Yards and it wants it on terms, in addition, where New York taxpayers bail it out.

A Change That Maybe Isn’t a Change: Was the FCR “Bait-and Switch to a Bailout” Contemplated From the Beginning?

Atlantic Yards was always designed as a meal ticket for Forest City Ratner paid for by New York taxpayers. We have always observed that the project looks less like urban design than like the perfectly designed sponge to collect the maximum possible public subsidy. Now people are waking up and they are commenting that they see now that there has been a “bait and switch.” (See: Sunday, June 21, 2009, DDDB breaks down the "bait and switch"; New York magazine critic seems to agree.) But the thing about this bait and is that the switch was always built in and part of the project from the outset.

The first thing to realize is that Atlantic Yards was never designed to deliver benefits to the public. That is one reason there was never any legitimate bid and a reason the site is not being built by multiple developers. The next thing is to realize just what was contemplated from the beginning. One can try to blame the proposed Forest City Ratner’s bailout on the economic downturn in the economy but that is not how it actually works.

To quote former ESDC head Marisa Lago, had we all along been speaking with what Ms. Lago has now dubbed “realism” (as opposed to the played-up “bait” version we got promoting the project) we would have admitted from the very beginning that the mega-monopoly being given to Ratner was such an enormously huge one, (Ms. Lago’s term: “transformational project”) that it would be a multi-decade project of perhaps 30 or even 40 years duration. (See: Wednesday, April 15, 2009, Permission to Speak Frankly: How We Know More and Less From Breakfast Interviews With Marisa Lago.) That means that the mega-development could never have been done in a single real estate cycle so encountering the “downturn” was virtually inevitable. So many years being involved also make it extremely questionable how much of the project 80-year-old Frank Gehry would ever have been around to design and supervise. Some bemoan Gehry’s loss: We don’t (his projects leak), but we do recognize how with Gehry’s departure it as been announced that what Forest City Ratner wants to deliver something truly “low-rent.”

What should be recognized is something we have been complaining about from the start: It is a completely backwards process to select the developer first, give them an exclusive monopoly over a swath of city and then negotiate the transaction with that anointed developer after the fact. Proceeding backwards deprives the public of any opportunity to exercise negotiating leverage and, as such, it must be presumed that just as a the downturn was foreseeable as virtually inevitable, the proposal for this bailout was foreseen and always intended.

In the End, For All To See

There is, however, a significant impediment to the inevitability of this proposed Forest City Ratner bailout going forward at public expense, a legal one at that. It has now become glaringly obvious that the proposed bailout shortchanges the public on each and every count. Any MTA and ESDC board member who votes to approve a bailout now will be casting a vote that is conspicuously a violation of their public trust. (No, voting as `instructed’ by the Governor is certainly not an acceptable excuse.) Each director’s vote involves an inescapably stark proposition since there is obviously one and only thing that stands unchanged by time: It is clear that a vote to approve “Atlantic Yards” means a vote to approve a deal for one sole remaining reason . . . because it is wired.

Répétez-vous après moi, s'il vous plaît: Plus Ça Change, (The More Things Change,) Plus Une Chose En Particulier Ne Change Pas: La Transaction Fixée (The Wired Deal)!

Still No Comment from Speaker Quinn or Any Other of 18 City Council Members Who Put Dock Street Through Committee Last Week

The amazing thing, or the absolutely not so amazing thing (depending upon how you look at this), is that none of the 18 City Council members responsible for approving the Dock Street in committee last week have yet been willing to comment on the School Construction Authority smoking gun e-mails respecting that project. Council members Gioia and Yassky had called for a halt to the project’s approval on the basis of those e-mails which apparently have no acceptable explanation other than that the School Construction Authority, coordinating with the upper ranks of the Bloomberg administration, were improperly manipulating and making false statements to get the project approved. The e-mails also point to a misdirection of public resources to that same end, putting a school where it would not be best to put it.

As noted in our last post on the subject, Noticing New York contacted the office of Speaker Quinn who whipped votes to get the project through for the Bloomberg administration and we contacted each and every Council member who voted in favor of the project last week in City Council committees and asked them for their comment on the School Construction Authority e-mails. So far we have no comment from any of them.

As we said, we would think that if Ms. Quinn is going to whip votes in favor of the Dock Street project she ought to have at least a comment on the smoking gun e-mails that have been in the press about the mayoral level manipulations to get the project approved and give the public less than the benefits it deserves. We also think that if any City Council committee member is going to vote in favor of the project and not to block it as Councilmen Gioia and Yassky said was essential, they should have a comment on these smoking gun e-mails.

Names and Votes of City Council Committee Members: (Again, Those Voting for Project Have Had No Comment)

Here are the votes of the two committees that voted on Dock Street on Thursday. City Council members on the Land Use committee who are also on the Zoning and Franchise committee are indicated in italics. (Everyone on the latter is on the former.) For extra good measure, we have bolded the names of any of Council members who also was among the 29 members who voted to extend the mayor’s term limits.

LAND USE COMMITTEE (17-4):

Tony Avella: no
Charles Barron: no
Eric Gioia: no
John Liu: no

Maria Baez: yes
Maria Arroyo: yes
Leroy Comrie: yes
Elizabeth Crowley: yes
Inez Dickens: yes
Simcha Felder: yes
Daniel Garodnick: yes
Sara Gonzalez: yes
Vincent Ignizio: yes
Robert Jackson: yes
Melinda Katz: yes
Jessica Lappin: yes
Annabel Palma: yes
Joel Rivera: yes
Larry Seabrook: yes
Helen Sears: yes
Albert Vann: yes

ZONING AND FRANCHISES SUBCOMMITTEE (6-2):

Tony Avella: no
Eric Gioa: no

Simcha Felder: yes
Robert Jackson: yes
Melinda Katz: yes
Joel Rivera: yes
Larry Seabrook: yes
Helen Sears: yes

We have some off-the-record and not-for-attribution comment from the offices we contacted that at least some of the Council members who voted for the project under Speaker Quinn’s direction did not feel Speaker Quinn was allowing them the freedom to vote their conscience and side, as would be expected, with Mr. Yassky, the local Council member in whose district the project is. There is also apparently some distress and thinking on the part of Council members who’s votes were whipped that Speaker Quinn would whip votes for the project and then not be willing to comment on the School Construction Authority e-mails.

See our prior posts for the statements of Council members Gioia, Yassky and Avella, all of whom oppose the project.

Prior Posts:

Sunday, June 7, 2009
A Lamda Night: City Political Candidates and Development (Focusing on Atlantic Yards and Dock Street)


Wednesday, June 3, 2009
What’s Up At Dock Street, Really?

A Lambda Night: City Political Candidates and Development (Focusing on Atlantic Yards and Dock Street)

(John C. Liu at back, candidate for comptroller listening to presntation of David Yassky, candidate for comptroler.)

This will fill in interstitially to our prior coverage about the positions on development (with Atlantic Yards getting a particularly deserved focus) of candidates running for city office and it will also provide a quick update about the activities of those currently in city office concerning the Walentas Dock Street project in DUMBO. We take the candidate endorsement meeting of Lambda Independent Democrats (LID) last Thursday night as the opportunity to do so.

Development and Urban Design Themes: Portents of Woe

The real estate development and urban design themes that come to the fore are familiar: Politicians spearheaded by the Bloomberg administration are engaging in unconscionable manipulations, and when manipulations do not work are riding roughshod to deprive communities of a say about what would be best for them. The question of term limits comes up and it must be asked, based on increasing evidence, how utterly disastrous a likely third term for the unchecked power of the Bloomberg administration will be. It portends to be disastrous for the livability of New York City’s urban design in ways we have not even begun to stretch our imaginations around.

Our Prior Coverage on Lack of Support for Atlantic Yards (Before AY Got Even Worse)

Here are links that will take you to the three-part series we initiated with concerning the City Council Races for the 33rd and 39th Council Districts:

City Council candidates don't support AY project, May 08, 2009 09:20AM

May 7, 2009, City
Council Races (33rd and 39th CDs): Candidates’ Positions on Development and
Effective Action They Would Take to Stop Atlantic Yards

As we noted in those articles all the 15 candidates we wrote about were in substantial opposition to Atlantic Yards, (wanting to take it back to the drawing board). And this was before all the very recent events which certainly substantially increase the reasons for discarding the project and starting over.

On some of the recent events see our own: Monday, June 1, 2009, Negotiating With Your Contractor: The Atlantic Yards As Kitchen Renovation Metaphor and Friday, May 29, 2009, Today’s State Senate Hearings on Atlantic Yards and Noticing New York Testimony and Atlantic Yards Report’s Friday, June 05, 2009, Gehry's design was impossible, so dropping him wasn't just cost; what do MAS and RPA say now?

We promised future focus on the races for city-wide offices; this will also serve as a jumpstart on that.

Twenty Candidates Speak

Twenty candidates running for various offices, City Council seats, Civil Court Judge and City Comptroller spoke. Development issue came up a lot, particularly Atlantic Yards. (Lambda has previously resolved that it is against Atlantic Yards even though there was an apparent effort by developer Forest City Ratner to woo support by promising gay and lesbian activists a community center in a Downtown Brooklyn building owned by the developer. They were apparently NOT co-opted. (See: Saturday, October 27, 2007, The LID vote on AY.)

It should not be surprising that Atlantic Yards, as indicated in our previous posts, was the subject of what is by now almost axiomatic attack by the candidates. Other development got the usual reactions too; candidates speaking about why the Gowanus Canal should be cleaned up by a federal superfunding approach was a favorite topic. The new kid on the development block, Dock Street, got attention because there were two dismaying City Council committee votes earlier in the day that approved it. (More on Dock Street further on.)

Bob Zuckerman was endorsed by Lambda for the 39th Council District which means that Lambda endorsed an openly gay candidate. Mr. Zuskerman’s presentation focused a fair amount on development and mentioned Atlantic Yards. (When asked about jobs remarked (beginning with a tone of careful scepticism): “One thing I should say, that I didn’t mention before, there is proposal in Brooklyn that the developers `say’ is going to bring these jobs. And I just want to say here categorically that I have always been, will continue to be, and am currently against the Atlantic Yard project.” We also noted that Josh Skaller, another candidate for the 39th and a strong opponent of Atlantic Yards received especially warm applause and that Brad Lander, also running for the 39th who has spoken eloquently against Atlantic Yards spoke with his usual eloquence hitting again upon development issue and how community participation is essential to ensuring the quality of New York neighborhoods but this time he forgot to specifically mention his opposition to Atlantic Yards.

Two Candidates For Comptroller and Three Topics: Atlantic Yards, Dock Street and Term Limits

The most interesting part of the evening were the speeches, (following one after the other) of Council Members John Liu and David Yassky, each running for the postion of Comptroller. This was where the topics of Atlantic Yards, Dock Street and term limits all came together fascinatingly.

Mr. Liu on Atlantic Yards

Here is Council Member John Liu, who is running for Comptroller, speaking on Atlantic Yards for a considerable portion of his allotted 10 minutes:

So some of the issues that Lambda has taken on that would not ordinarily be considered an LGBT [lesbian, gay, bisexual and trangender] issue would be the whole idea of the development of Atlantic Yards. This is a development that promised the world for everybody in Brooklyn when it was first proposed. It was going to be a gargantuan. It was going to be a monstrosity. It was going to take people’s homes away. But, in return, so many jobs would be created, so many new housing units, so many economic opportunities. . And yet so many years have passed by and we still see very little, very little, even as people have lost their homes.

This is an issue that I am happy so see so many of the members of Lambda take a hold of. It is an issue, and I will be very honest, this was not something that ever came before the City Council, and so as a council member dealing with lots of development, anti-development issues in my neck of the woods, I had not paid very much close attention to this. But, of course, over the past several weeks I have been given a very quick tutorial by the likes of, you know, Lucy and Dan [i. e. Atlantic Yards opponents, the “Dan” being Daniel Goldstein] and a number of other people and so I am going to take a very serious look at this.

And the first question has to be how come it wasn’t even before the City Council at all? Why did it not go through a ULURP process? Those are questions that we have to begin with and then we have to understand what it is that has been promised and what actually has materialized? And what actually at this point has even a promise or possibility of materializing?

Those are questions that I would look at if I was elected Comptroller. I will still look at them as a member of City Council, especially when they are talking about deferring (which in our book means “cancelling”) payments to the MTA that just imposed a fare hike on all of us and is claiming extreme poverty. These are issues that don’t make sense. This is casting more doubt and question on even the viability of something like Atlantic Yards.

(On the whole these are excellent and important remarks, but we would also offer to tutor Mr. Liu more on how the original plan offered little real value. See our Jane Jacobs Report Card.)

Mr. Liu on Term Limits

Mr. Liu then made his pitch for support depicting distinctions he saw between himself and his opponent, City Council member (for the 33rd) David Yassky who was, by the end of Liu’s remarks, also in the room, and with whom Liu has a mutually acknowledged good relationship. One of the distinctions Mr. Liu spent time on was the way he had fought against the way in which Mayor Bloomberg overrode the public’s imposition of term limits. Mr. Liu said that he was actually, personally, against term limits but that he was a minority in this regard because the “vast majority of New Yorkers” put the term limits restriction “on the books.” Mr, Liu said he had therefore taken the position that if it had to be changed, it should have been done by returning to the voters for another referendum. (He was roundly applauded on this, some of the most pronounced applause that occurred during the evening.)

Mr. Liu on Development

Respecting real estate development, Mr. Liu also spoke of his participation in his own Queens community to secure several down-zonings to preserve the community and keep it intact:

The American dream was not made of situations where you have more and more and more development and crowding in more and more people and yet the very ideal of the American dream that people were coming to the neighborhood for, were coming to New York for gets lost on people.

Mr. Yassky on Dock Street (With Kudos to Mr. Liu)

Councilman Yassky spoke next. The camaraderie of his relationship with Mr. Liu was immediately in evidence as he led with his remarks by extending thanks to Mr. Liu for his City Council committee vote that day against the Dock Street project, a fight Mr. Yassky has been leading: (The proposed project is in Yassky’s district.) Mr. Yassky got loud applause when he referred Liu’s vote to “block the atrocious idea for a 17 story tower next to the Brooklyn Bridge.” A stony silence followed when Mr. Yassky went on to reveal that the effort to block the project in committee had, in fact, failed. The project is up for a vote of the full City Council on Wednesday and right now, quite appallingly, the odds are that it will be approved.

Mr. Yassky on Atlantic Yards (and the Real Estate Industry)

Like Mr. Liu, Mr. Yassky similarly featured discussion of real estate development and Atlantic Yards in his remarks. He spoke about having some success in a coordinated fight against the mayor’s effort to get 421-a real estate tax breaks for luxury housing. (Those tax breaks have hurt city revenues in the current downturn and accentuated problems we are experiencing because Bloomberg did not save for a rainy day.) Mr. Yassky talked about when he fought the previous speaker of the council (on a garbage-handling plan) he had to pay the price for his opposition when his “member items got cut and budget got cut.” After referring to the real estate industry and its lobby as the “toughest most entrenched industry in this town” Mr. Yassky turned his attention to Atlantic Yards. He had arrived late enough so that he had not heard, and was unaware of, Mr. Liu’s expression of opposition on Atlantic Yards. In his presentation Mr. Yassky said that he had been against Atlantic Yards from the beginning and said:

I am the one who pointed out that Ratner has taken $40 million of your tax dollars. You know he is still sitting on $40 million of your tax money even though he hasn’t done anything on that project. And we should get hat money back. saying that he had been against it from the beginning

(We ought to mention that total taxpayer-funded subsidies going to Ratner will be in the billions.)

You can read a more fine-point analysis of Mr. Yassky’s position on Atlantic Yards in our earlier piece on the subject. (See: Wednesday, May 6, 2009, City Council Races (33rd and 39th CDs): Candidates’ Positions on Development and Effective Action They Would Take to Stop Atlantic Yards (Part II).) Plus we can introduce some additional nuance to what we provided before. Mr. Yassky stated to us at a bloggers’ breakfast on May 19, 2009 that he has been in favor of the proposed Nets arena at the Atlantic Yards site but that (like John Heyer, candidate for the 39th CD) he is opposed to the public financing of that arena.

The opposition of Yassky and Heyer to public taxpayer financing of the arena (with real property tax intercepts and tax exempt bonds like those for Yankee Stadium or the Mets Citifield) constitutes what is, as a practical matter, opposition to the plan for the arena. It should also be noted that when, at that May 19th breakfast Yassky noted his previous support for the design for the arena had not degenerated into its current airplane hanger/plant shed look which eliminates the purportedly beneficial and once highly touted “urban room” and the opportunity to use the space for hockey games. (Heyer’s statement of conditional support for the arena sans public financing was also before the arena degenerated and went sans these original purported benefits.)

The last nuance to note: Not everyone agrees that Yassky was always, from the beginning, as opposed to Atlantic Yards as he represents. However, we have said before, that we welcome everyone to the cause, including latecomers. (We feel we were also late.) With the poor mainstream press coverage Atlantic Yards has received, there is plenty of reason people have not always been promptly aware of Atlantic Yards’ stupendous flaws.

Yassky’s Defense on His Term Limits Vote

Of course, Yassky had to defend his vote to extend term limits. He noted that he had “no doubt that the bulk of the opinion in this room is against the elimination of term limits.” He argued that he was consistent in that he thought that term limits was a bad policy no matter who was proposing it, or for or against it, or would benefit politically from it. This was essentially the same case another City Council candidate, Lew Fidler, (CD 46) made earlier during the evening (after getting hissed about his vote). (Fidler, very strong on LGBT issues, got Lambda’s endorsement.)
Mulling Principles Applicable to Term Limits Vote

We think that Liu’s postion on term limits (essentially our own) makes sense while the Yassky and Fidler postion is disingenuous. Even if you have/had a principled opposition to City Council term limits the following come into play:

1. Term limits can apply to the mayor (the executive) without applying to the City Council just the way they do in the federal system.

2. The voter’s imposition of the requirement through referendum should not have been overridden, without referendum, especially by the mayor’s secretly hatched scheme unveiled at the last minute.

3. It was unfair to change term limits in the middle of an ongoing campaign. The mayor and his insiders availed themselves of advance knowledge of the imminent change. His opposition could not.

4. There is a principle (the “Harry Truman rule”) that term limit rules should not be made to apply during the terms of incumbents to the very people who are changing the rules that will apply to themselves.

There is, of course, more, (for instance, the way the vote was manipulated in a very short space of time); but this post is not intended to be all about that term limit fiasco. We should, however, look to what the elimination of term limits has meant as it applies to the power of the wealthy Mr. Bloomberg. We can see that with what is happening with the Dock Street project.

Term Limits and Lambda Comptroller Endorsement

At the end of the evening Lambda voted to endorse Mr. Liu over Mr. Yassky. From what we understand, Mr. Yassky’s vote on term limits is likely to have factored heavily in Lambda’s decision. That, plus the fact that there was feeling that Mr. Yassky could have been more strenuously opposed to Atlantic Yards, especially earlier on, and been more reliable on certain other development issues. His support for a City Council override of the landmarking of Williamsburg’s waterfront Cass Gilbert-designed Austin, Nichols Co. warehouse has stuck with Mr. Yassky as a famous black mark. (In the end, economics saved the warehouse from the desecration it was facing.) Lastly, the endorsemnt Liu received from the Stonewall club likley had an influence.

This was the second evening Mr. Yassky and Mr. Liu appeared before Lambda to seek their endorsement. No decision on the endorsement had been made the first time, indicating the decision was not easy. Both Mr. Yassky and Mr. Liu have qualifications to be a good comptroller. Mr. Liu is an actuary which would give him insight into the pension fund management aspects. Mr. Yassky started in the City Budget Office and has recently undertaken the task of organizing and making accessible on his website critical budget data information, something which should be taken even further in the future.

Cost of the Term Limits Vote- Back To Dock Street

Mr. Yassky’s vote to extend the mayor’s term limits may have ultimately cost him the Lambda endorsement. It may have cost him and the city something more, the City Council vote on the Dock Street project which in that day’s committee votes was very lopsidedly against Mr. Yassky’s effort to block the project. The vote in the larger land use committee was 17 to 4 in favor of approving the project. (Mr. Yassky, not on either committee, could not vote.) This lopsidedness certainly disrespected Mr. Yassky, given that City Council members traditionally give a very high degree of deference to the wishes of the City Council person in whose district a project is located. The lopsided vote is very likely strong testament to the way that the mayor’s power has grown as people recognize that, given his wealth and control of resources (including those he controls as an incumbent) there seems to be virtually no means to marshal opposition to him in the mayoral race. That now seems to be translating into a perceived lack of practical means to oppose Mr. Bloomberg and the real estate industry he champions in virtually every contest.

Principled City Council Votes?

We perceive a shift. Normally, when a City Council member’s wishes with respect to a project are disregarded by other City Council members it should be for reasons of principle. Opposition to eminent domain abuse is an example, but sometimes not even that principled opposition is forthcoming: A number of City Council members expressed principled opposition to eminent domain abuse but still voted in favor of that abuse in the case of the Columbia University expansion and the destruction of Willets Point because they were respecting the wishes and votes of the Council members from those districts whose votes had ultimately been bought by the Bloomberg administration. A few City Council members voted against those plans on principle. In the case of the Dock Street project, the lopsided alignment against local Councilman Yassky was not based on principle: Quite the opposite.

And Principle Would Dictate on Dock Street. . .

Principle would dictate that almost any City Council would vote to block the project. Blocking it is in the interest of the larger city and world community by preserving the iconic views of a world and national heritage monument. The developers have tried to characterize opposition as just being about a bunch of wealthy DUMBO residents trying to preserve their own apartment views, but this is not why Pulitzer Prize and National Book Award winning, historian David McCullough has testified against the project or written a two-page article against it in Newsweek. More important, as Councilman Eric Gioia has said, the project should be blocked because an ongoing FOIL investigation shows that the Bloomberg administration engaged in behind-the-scenes manipulations with the School Construction Authority to put a school into the project to get it approved despite the community’s prior disapproval. By definition, those manipulations which were so clearly focused on benefitting the developer and indifferent to the public, virtually guarantee that the project will not properly serve the public and that truly deserving alternatives will be ignored.

Tish James on Dock Street

Dock Street was briefly defended at the Lambda meeting by City Council member Tish James (a Lambda member before she became a public official) who was seeking endorsement in her race. James, a stalwart and leading opponent of Atlantic Yards (as well as many other projects like the Columbia University expansion) has taken a very uncharacteristic position on Dock Street which she probably knows is unprincipled. We have said that the project’s developers, the Walentases, are much better than most developers in the city and they are providing Ms. James with support, but they should not be developing this project and the backroom deal involving the bundling of a school into the project is absolutely unacceptable. Here is Ms. James that night:

I do support the Dock Street project. I support the Dock Street project, one, because it brings affordable housing ( There’s a crisis in affordable housing. In fact, there is not enough affordable housing in DUMBO.), and two, because it will bring middle school for the district that I represent and for surrounding community. And I am confident that there will be a middle school and affordable housing because it will be included in a legal document that the speaker of the City of New York (who came out in support of it yesterday) will be drafting. So I am confident that we will get those public benefits so that is why I support it.

Her next sentence was a quick segue to mention her opposition to Atlantic Yards. For a principled stance on Dock Street Ms. James should, in fact, have been making some comparative notes about Atlantic Yards. First and foremost she should have acknowledged that Dock Street was a project where, consistent with the Bloomberg administration’s manipulations and the extraordinary flow of campaign funds, the fix was in a long time ago. Speaker Christine Quinn “ came out in support of it yesterday”? Then why was everyone else, including Borough President Markowitz, acknowledging that the fix was in long before that?

Speaker Christine Quinn “came out in support of it yesterday”? Then why was she, ahead of time, whipping so many votes for the project to get the lopsided committee votes that came out at the exact same time. Affordable housing is assured by a document that Speaker Quinn “will be drafting”? Why isn’t that document already drafted and in evidence given that the fix was in so long ago?

For the word “drafting” we, in this context, read the word “negotiating” as in Speaker Quinn will be “negotiating” the legal document that specifies what will be provided in terms of “a middle school and affordable housing.”

Who negotiates and gets to sign and enforce these legal documents, sometimes referred to as “public benefits agreements” is in itself an interesting topic that affords a lot of food for thought. Is one to presume, for instance, that Speaker Quinn gets these responsibilities in this context because she took the largest campaign contributions from the developer? (See below.) Or because she whipped all the votes to provide the benefits to the developer?

Surely, after her experience with Atlantic Yards, Ms. James recognizes manipulations and false promises and reprehensible conduct to override a community’s wishes? Surely she knows to suspect when public resources are improperly diverted into a developer’s project to create a bundling of “benefit” that presents false choices to the community?

Overall, her remarks were brief. Ms. James probably knew that among other things she could coast on her well-known opposition to Atlantic Yards. Yes, her candidacy was endorsed.

(Medhanie Estiphanos, candidate for the 35th CD running agsinst Ms. James.)

Jo Anne Simon on Dock Street

Jo Anne Simon, candidate for the 33rd City Council District, when asked about Dock Street during her presentation, emphatically said that she would have voted against the project. She said that one of the things she had made a point of in her testimony at several levels of review was that the space in the project was not going to be big enough for a properly functioning middle school as the Bloomberg administration was promising, “so it really is a deal that is not destined to be what people have been promised, and that to me is extraordinarily troubling.” Ms. Simon was also endorsed by Lamba that night for the 33rd Council District.

The DUMBO Neighborhood Association on Dock Street and Top Bloomberg Officials Implicated

After the City Council committees voted, the DUMBO Neighborhood Alliance put out a press release (Land-Use Committee Votes to ‘Sell’ Brooklyn Bridge As Evidence of Impropriety between Developer Two Trees, School Construction Authority and Mayoral Aides Mounts) that noted that the e-mails being investigated showed that the School Construction Authority’s manipulative bundling of the school into the project involved the highest members of the Bloomberg administration. Here is some of what that press release says (emphasis supplied):

. . . those who are rushing to vote rather than investigate, will have their reputation and political careers painted with the outcome. While the City Council members may not have been direct players in impropriety, they are casting votes with the full knowledge that serious and potentially criminal evidence is mounting and in need of investigation. Rather than protect the public interest by calling for a halt to Dock Street pending an investigation, they are rushing forward to curry political favors and perhaps further contributions from our city’s worst pay-to-play developers. This will not escape the long-memory of the voting public on upcoming election days.”

* * * *

What is emerging today is that the potential impropriety extends its way into the highest level of the New York City Mayor’s Office. According to the chain of emails obtained via FOIL, both Gregorio Mayers, Senior Policy Advisor to Mayor Bloomberg, and Nnenna Lynch, Senior Policy to Deputy Mayor Robert Lieber, had direct email communication with the lobbyist, attorney and Two Trees head Jed Walentas regarding the project. Emails can be obtained directly from DNA by calling 917-742-6072.

It has also recently surfaced via The New York Times that developer Two Trees has spent approximately $400,000 lobbying the elected official in City Council and other important government agencies. The two City Council members yielding the most power over the development, Land Use Committee Chairwoman Melinda R. Katz and Council Speaker Christine C. Quinn, have received at least $74,250 in campaign donations from the developer according to The New York Times article, perhaps coloring their objectivity on the proposed structure. According to The New York Times, “Katz, who is running for city comptroller, has received major financial support from the real estate industry, whose interests she oversees on the Land Use Committee… And Mr. Walentas and his father, David (the principals of Two Trees), were on the finance committee for a Katz fund-raiser in June.”

Robert Lieber, the deputy mayor who replaced Daniel Doctoroff, comes up in other contexts. He is being sued by those seeking to prevent the proposed destruction of Willets Point. If Coney Island ceases to exist as an amusement area, being sold off to developers for other uses, it will be very much at his hands and the people working for him. Working on the Hudson Yards project he has said it will take decades (“Projects Whose Names None Dare Speak”).

Does Ms. Quinn Have So Much As a Comment on Smoking Gun E-Mails?

We would think that if Ms. Quinn is going to whip votes in favor of the Dock Street project she ought to have a comment on the smoking gun e-mails that have been in the press about the mayoral level manipulations to get the project approved and give the public less than the benefits it deserves. We also think that if any City Council committee member is going to vote in favor of the project and not to block it as Councilmen Gioia and Yassky said was essential, they should have a comment on these smoking gun e-mails.

We called Speaker Quinn’s office for her comment on the e-mails. She has supplied no comment. Did she whip votes and come out in favor of the project without having an opinion on these e-mails? Despite the huge amount of attention they received in the press? That, obviously, would have been an irresponsible thing to do.

Names and Votes of City Council Committee Members: Again, Any Comment?

Here are the votes of the two committees that voted on Dock Street on Thursday. City Council members on the Land Use committee who are also on the Zoning and Franchise committee are indicated in italics. (Everyone on the latter is on the former.) For extra good measure, we have bolded the names of any of Council members who also was among the 29 members who voted to extend the mayor’s term limits. We are particularly dismayed by the Dock Street votes of certain Council Members who ought otherwise to have particularly bright futures, Jessica Lapin and Daniel Garodnick among them.

LAND USE COMMITTEE (17-4):

Tony Avella: no
Charles Barron: no
Eric Gioia: no
John Liu: no

Maria Baez: yes
Maria Arroyo: yes
Leroy Comrie: yes
Elizabeth Crowley: yes
Inez Dickens: yes
Simcha Felder: yes
Daniel Garodnick: yes
Sara Gonzalez: yes
Vincent Ignizio: yes
Robert Jackson: yes
Melinda Katz: yes
Jessica Lappin: yes
Annabel Palma: yes
Joel Rivera: yes
Larry Seabrook: yes
Helen Sears: yes
Albert Vann: yes

ZONING AND FRANCHISES SUBCOMMITTEE (6-2):

Tony Avella: no
Eric Gioa: no

Simcha Felder: yes
Robert Jackson: yes
Melinda Katz: yes
Joel Rivera: yes
Larry Seabrook: yes
Helen Sears: yes

We called up every one of the City Council members who voted on these committees to ask for their comment on the School Construction Authority e-mails. So far we have not received any comment from any member who voted in favor of the project. We will let you know if we do. Mr. Gioia obviously has made known his view that the project needed to be blocked unless adequate answers were forthcoming. Mr. Avella had already issued a press release that included the following Avella remarks:

“It is absolutely disgraceful that this project was able to pass through the committee process with relative ease despite the massive outpouring of community opposition. This development will undoubtably destroy the panoramic view of the Brooklyn bridge, which is not only a City treasure, nut a national one as well. The votes only further demonstrate that the real estate industry truly controls the land use process in the City of New York,” stated Avella.

“Recent reports in many of the City’s daily newspapers have only heightened my concerns that there may be a connection between campaign contributions by the real estate industry and the voting decisions of individual Council Members. The mere appearance of impropriety in or legislative body is shameful. These activities must be investigated and stopped before we jeopardize our democracy,” concluded Avella.

At the Lambda meeting we had a chance to personally thank Mr. Liu for his vote to block the project. Is it possible that we will never hear any comment from any of the City Council members who will willing to be whipped by Speaker Quinn into voting for this project despite the Bloomberg administration’s manipulations at the expense of public benefit?

Not Listening to Communities and Circumvention of Process

Yes, it is troubling that part of the story is that the Dock Street developer was buying the City Council approval of an unacceptable project with $74,250 in campaign contributions to Quinn and Katz, plus $400.000 in lobbying expenditures. But what is more frightening is the way that, with the demise of term limits, the growing, unchecked power of Mayor Bloomberg means that communities and their representation are now going to be irrelevant when the Bloomberg sells off more of New York City’s public realm, slating it for destruction. As candidate and Councilman John Liu said, rasing much the same concerns about Atlantic Yards: “And the first question has to be how come it wasn’t even before the City Council at all? Why did it not go through a ULURP process? Those are questions that we have to begin with. .” And the next question is, whatever the process: Is anyone going to listen?

How Much of the City Can Bloomberg Sell Off? And How Fast?

What is also clear from both the Dock Street project and the degenerating Atlantic Yards project is that the administration does not support projects, they support developers “ad hominem” and the projects get supported by manipulation irrespective of their merit, and, particularly in the case of Atlantic Yards, no matter to what level they degenerate.

In the next couple of weeks the city will be making major decisions ranging from:

1. Selling off a portion of the Greenwich Village Historic District (to subsidize St. Vincent’s)- Tuesday at the Landmark’s Preservation Commission.

2. Selling off most of the Coney Island amusement district- City Planning Commission- June 17th. (A Don't Shrink Coney! Rally will be held in the City Hall Steps Wednesday June 10, 1 p.m.- Show up 12:30 p.m. to allow time to go through security.- A parade will follw.)

3. The City Economic Development Corporation has announced condemnation proceedings against Willets Point business and property owners while Article 78 challenge is still pending in court. (This is from a media advisory from Councilman Tony Avella.) EDC has also decided to do this before negotiating with property owners and after telling many of them that negotiations will not start for more than a year.- There will be a press conference and rally in opposition Monday, June 8th at 1:30pm at the Shea Gas Station 127-48 Northern Blvd, Willets Point, Queens.

4. Giving additional substantial additional benefits to Forest City Ratner for the degenerating Atlantic Yards, including giving it more of the MTA’s assets without a proper quid pro quo.- June 24 at both the MTA and the ESDC in synchronized meetings. (Does that sound like the fix is in?)- There will ba a Community meeting on Atlantic Yards, June 9- 7 PM at Lafayette Avenue Church. 85 South Oxford Street, Ft. Greene

5. Sacrificing the iconocism of the Brooklyn Bridge for Dock Street- Next Wednesday, June 10th at the City Council.

The list is not complete and, for instance, does not include the likelihood that the mayor’s wishes will again be accommodated by diverting more public authority money into the risky financing of a private developer’s towers at the World Trade Center site (against the advice of the New York Times). If the Bloomberg administration can accomplish the sale of so much of the city is just a few weeks, think what it will be able to do unimpeded and unchecked with an entire third term. And just remember that while Bloomberg administration destroys, it does NOT build. It rightfully failed on the West Side Stadium but there is also Moynihan Station, the World Trade Center redevelopment site and the very slow pace of work at Queens West.

The Role Paterson Does Not Fulfill as Governor

We have one final thought which is to note that it is not just and always about the Bloomberg administration. It is also sometimes about Governor David Paterson. Paterson is not fulfilling his role and responsibility as governor. Further, by not taking a principled stance to deal with the corruption of Atlantic Yards, Paterson is also not doing his duty as a loyal Democrat.

We recognize that Governor Paterson has no say about what is happening with respect to the Dock Street project. That is happening entirely at the city level. But the Governor could at any time make a principled move and pull the plug on the incredible Atlantic Yards mega-boondoggle. By doing so he would ensure that Bloomberg is confronted squarely and that the issue of inappropriate development is politically engaged. Flushing out Bloomberg would almost certainly lead to a much more respectable showing by the Democrats who are trying to get traction in politically opposing Bloomberg despite his extraordinary wealth and vastly disproportionate resources. It could perhaps lead to a Democratic win. Right now, by playing along with Bloomberg, Paterson is enfeebling of the Democratic party in New York City. Might one counter that the vast majority of City Council seats will continue to be held by Democrats? Perhaps, but what good is it if we have a million City Council members who are Democrats if none of them can do anything for their communities and all the power is held by a single Republican? A single Republican who also happens (shall we say by coincidence?) to have become the richest New Yorker while in the office of mayor.

In the Bible the question is asked: “For what shall it profit a man, if he shall gain the whole world, and lose his own soul?” (Alternately, “lose his life.”) Sticking to politics, we would ask: What does it profit a party to populate the City Council with an overwhelming majority but to have no power and no principles? And as a voter one might then ask, what use do we have for such Democrats?