Asked About Taking a Promised Hard Look at Atlantic Yards Before Issuing Arena Bonds Does Paterson Understand AY?

(Image above from Atlantic Yards Report video of press conference.)

Governor Paterson was asked questions today about the hard look his administration said it would take at Atlantic Yards. Questions came from Norman Oder of Atlantic Yards Report (see, Saturday, December 19, 2009, Hail Mary or silver bullet: Perkins, raising questions of fraud in arena bond sale, asks Paterson to put Atlantic Yards on hold) and Noticing New York was able to ask our own question at the same brief press conference.

At a critical time the governor probably still needs to get up to speed on Atlantic Yards.

Our question to the governor and his response were as follows:

NNY: Governor, you are trying to close a budget gap and the MTA is trying to close a budget gap. You said that you will take a serious, hard look at the Atlantic Yards project. That project is perhaps $2-3 billion in public subsidies and it’s calculated by the city Independent Budget Office to be a $220 million net loss to the public, that’s the net loss not te cost. Don’t you think that perhaps taking that serious look should happen before bonds are issued for the arena?

Paterson: The bonds were issued for the arena. There are a number of projects that probably add up to tens of billions of dollars that we could take off the table if we were trying to save cash. The whole premise of these sort of public-private arrangements is to create jobs and bring revenues back into the state. So, if you take a snapshot in time it is a loss. If you take a snapshot in time funding the educational system is a loss, but the revenues that you generate from the workforce in the years to come far outweigh the investment that you make.

Note that our question relates to our criticism this week about how the MTA is wasting its resources by giving them away without bid to the Atlantic Yards mega-project. (For more analysis of the numbers see: Friday, December 18, 2009, Big Picture Questions: Does MTA Chairman Jay Walder Comprehend Atlantic Yards Link to MTA Cutbacks.)

Bonds Not Issued

The governor’s statement that the bonds have been issued is not correct. Goldman Sachs has found buyers for the bonds but the bonds are not currently scheduled to be “issued” until this Wednesday, December 23rd, and that date could be postponed if the governor and his counsel decide they need time to think about whether they should be issued at all. This is a very important distinction for the governor to understand since he had just finished answering questions from Mr. Oder about the serious likelihood that the bonds, if issued, would be illegal.

If the bonds were unwisely issued it would involve a much messier unwinding of the transaction. When he initiated his answer by stating that the bonds “were issued” for the arena the governor might have meant to communicate that an issuance might foreclose some of his options. We can’t say whether this is what he meant because he flew off before there was time for follow-up. What is important is that it is critical for the governor to act before any issuance precludes his best options.

Can the Public Snap Out of $220 Million Net Loss?

The governor’s belief that the $220 million net loss calculated by the NYC Independent Budget Office could be erased with the passage of time ignores how that net loss was calculated. The loss to the public is permanent since it was calculated with the passage of time taken into account. In fact, as we commented recently, given the loss to the public that the arena would represent if it is ever built, the next step that could readily make sense is to consider benefitting the public by immediately tearing it down.

Capital Projects to Which the Governor Should Have Been Comparing Atlantic Yards

We thought it was interesting that the governor compared Atlantic Yards to "the education system" rather than to another comparable capital spending project when he was looking for a comparable expense. It was a strange reach. There are plenty of other projects that could be built that would not be a net loss. Why not let those projects generate jobs and revenues “in the years to come” that “far outweigh the investment that you make.” In terms of possible comparisons, the real question is whether anyone can think of a project worse for the public than Atlantic Yards? We think not. We are having an open competition on this, we keep asking, and so far no one has identified even a close second for the title of worst New York boondoggle.

Questions About Whether BALDC Arena Bonds Would Be Legal

The questions being raised about whether the BALDC bonds would be legal are related to the fact that the Empire State Development Corporation (ESDC) is trying to sidestep requirements like Public Authority Review Board approval and review by the state comptroller Thomas DiNapoli. Its sidestepping involves using the ghostly “co-administered" Job Development Authority (JDA) to do something the legislature never granted authority for it or JDA to do. To this end, JDA is being asked to create still another entity, a local development corporation, the Brooklyn Arena Local Development Corporation, that would somehow be able to do what neither ESDC nor JDA have authority to do. We have previously criticized the hellbent and desperate sloppiness with which the issuance of these bonds has been pursued.

We also note how JDA barely seems to exist at all. Several days ago we called the only telephone number we could obtain for JDA, which is ESDC’s telephone number, and asked for a JDA press representative. It took some time before it was acknowledged that we had reached the right number for that purpose but they could not identify a representative. They informed us they would have to call back with that information, something which has never happened. We think there are basic questions about whether JDA is doing the essential things a corporation would need to be doing in order to truly exist and conduct business. Those questions are not easy to address without an available press representative. Further, Atlantic Yards Report did an excellent article about how there is none of the normal basic transparency you ought to expect from a New York public authority to indicate that JDA is conducting business properly. (See: Thursday, December 17, 2009, Due diligence on the BALDC leads down a rabbit hole, while other state agencies are more transparent than ESDC/JDA/BALDC.)

For more analysis of the legal questions being raised by with respect to the issuance see: Perkins Pounces on PILOT Problem, Sees "Spectre of Fraud" With Atlantic Yards Arena Bonds, 12.19.09.

No Authority to Create Local Development Corporation (Like BALDC) to Fund Arena

Having looked at JDA’s statutory authority, which is something of an unattended relic, it seems clear to us that JDA was created for entirely different purposes and programs and that JDA has no authority create an entity like BALDC for the purposes of the proposed arena bond issuance. In fact, it seems quite the opposite: such actions are proscribed. Further, it looks to us as if the actions now being undertaken are potentially likely to put some of the public officials involved, including the governor's counsel, Peter Kiernan, in some serious legal jeopardy.

JDA has the power to create local development corporations (LDCs) but only for very specific limited purposes. Under Article 14 of the Not-For-Profit Corporation, pertaining to “Special Not-for-profit Corporations” JDA is authorized to create LDCs that construct, acquire, rehabilitate and improve for use by others “industrial or manufacturing plants,” and the statute says “but not for any other purposes.” Since an arena can’t be considered an industrial or manufacturing plant, that sounds like a pretty clear instruction not to do an arena. Furthermore, the way in which the statute is written clearly recognizes that without the specific finding it includes that “public officers” (like the governor’s counsel) forming an LDC for other purposes would not be performing a governmental function consistent with their duties as public officers. Normally, there are significant problems when public officials are involved with private corporations as these LDCs are. So JDA (and public officers) can create and LDC for the purpose of promoting “industrial or manufacturing plants” but not an arena. We add this to the other legal problems identified with respect to the BALDC arena bonds.

Addendum: (Posted December 21, 2009) Here from Atlantic Yards Report coverage of this post is video of our exchange with Governor Paterson.

Big Picture Questions: Does MTA Chairman Jay Walder Comprehend Atlantic Yards Link to MTA Cutbacks?

Wednesday morning we were among those who addressed the Metropolitan Transportation Authority meeting just before its board approved, in the words of the New York Times, “a punishing slate of service cuts on Wednesday that would amount to the most significant erosion of New York City’s transit system since its recovery from the ruinous days of the 1980s.” (See: M.T.A. Approves Big Service Cuts in Mass Transit, by Michael M. Grynbaum, December 16, 2009.)

Were We Really Heard by the MTA’s Chair?

Our message was that the MTA’s giveaways to the proposed Atlantic Yards Forest City Ratner mega-monopoly are probably the most prominent example of why the MTA is was having to vote to implement these cutbacks. After we and the rest of the public spoke, MTA Chairman and Chief Executive Jay Walder made a statement that sounded uncannily as if he had listened to and taken to heart what we and others said that morning about the drain on the budget due to Atlantic Yards. Maybe it sounded that way until you remember how politicians and political appointees with an idée fixe about the Transaction Fixée (The Wired Deal) can mouth all the words of good, responsible government without meaning any of them.

Reasons MTA Deficit Is Attributable to and More than Covered by Public Expenditures on Atlantic Yards

Diverting financial resources into Atlantic Yards is making the MTA budget cuts necessary in a number of ways.

1. Wasteful Mind Set. First, the support for Atlantic Yards establishes a strange mind set for wasting public dollars. As we pointed out, the arena for which state agencies now propose to issue bonds will be a net loss to the public. The NYC Independent Budget Office has conservatively calculated that net loss at $220 million dollars. With changing events the exact figure for the public’s net loss could be tweaked a little bit but is apparently growing. The portion of the taxpayer-supported bonds that were initially supposed to be issued to finance the arena are in a slightly lower amount than originally projected, which will reduce the figure somewhat, but New York City is mysteriously suddenly ponying up another $31 million dollars which increases the net loss. Further, it turns out that an additional $400 million in tax-exempt bonds were secretly authorized in violation of the state’s open meeting law. Unless that issuance is prevented it will really drive up the net loss to the public, to about $620 million. We are not talking about how much the project will cost the public; we are only talking about the net loss it will be after much greater public expenditures that will, all told, come to $2-$3 billion. That the arena will be a net loss to the public is not the same thing as saying that, once built it would be profitable for the public to tear it down again but it is pretty close to that. In this case the arena is likely to be such a drain that it might well be worthwhile to do so.

2. Hundreds of Millions Lost to MTA. Atlantic Yards represents the MTA disposing of assets and opportunities worth hundreds of millions of dollars that could be used to close its budget gap.

3. State Budget Cuts to the MTA. The emergence of the MTA’s deficit in recent weeks is partly because of $143 million in state cuts. The state (in addition to what the MTA is spending on Atlantic Yards) is misdirecting far more than this $143 million state cutback amount into Atlantic Yards.

4. City Funds Not Available. The MTA is making the argument that part of what it is cutting back, free Metrocards for New York City highschool students, are expenses that the MTA should not bear and that others should bear instead. The city (which mysteriously just came up with another $31 million for Atlantic Yards) easily has more than enough money that it is misapplying to Atlantic Yards to make this debate academic if those funds were properly redirected. Among other things, the city is forgoing a huge amount in real property taxes on the arena and is putting in more than a hundred million additional dollars into the project in direct expenditures.

Others Making the Same Point About Atlantic Yards

We were not alone in pointing out that the MTA’s deficit could not be looked at without looking at Atlantic Yards as a cause. Lucy Koteen made similar point and many signs were being held in the audience of attendees saying things like: “To the MTA: Ratner’s Got Your Money.” City Council Member Tish James spoke, making much the same point and issued a press release to this effect as well (See: December 16, 2009, Tish James Press Release: Save student Metrocard program, crucial service, and MTA jobs — Cancel the Atlantic Yards sweetheart deal for Forest City Ratner!) From that press release:

"Cancel the sweetheart deal for Forest City Ratner," said Council Member James. "Forest City Ratner should pay the $100 million owed now for the purchase of the Vanderbilt Yards. I also question why Forest City Ratner is not being made to pay the millions of dollars owed for the naming-rights deal upfront? And, had the MTA accepted a higher bidder, they would have received their funds upfront and their current budgetary gap could have been cut almost in half."

Noticing New York’s Big Picture Points on Wednesday

Wednesday morning we only had two minutes to speak. We did our best to make some of our above stated points succinctly and so say a bit more in addition.

We started out by telling the MTA board that they didn’t “get the big picture” and to assist them in getting that big picture we brought some BIG posters which we held up as we spoke. See the picture below (click to enlarge).
MTA’s Sidestepping of Bids (One Story for the Press with Another for the Courts)

We also focused on the way that the MTA didn’t obtain bids from Forest City Ratner before it gave away its property. It didn’t obtain a meaningful bid in the very first instance and this summer when presented with another meaningful opportunity and every reason to do so the MTA again sidestepped getting any bid.

We pointed out that the last time we had been in the room the MTA had made a point of having its representatives tell the waiting press outside that it was not getting bids to compete with Ratner because there were no other potential bidders. We pointed out that it was clear from the record of its own board meeting that it had not even considered doing so.

They really couldn’t get any other bids?, we asked. We pointed out that Willets Point just got 29 responses to its Request for Qualifications from developers and that Coney Island just attracted 50 interested bidders. We told the board that members it was clear that the reason they didn’t even try to get other bids was that they were treating Atlantic Yards as rigged deal, the point of which was to give a handout out to FRC.

What were MTA representatives telling the press last June about how they couldn’t find other bidders to compete against Ratner? Here is a WNYC radio report from Monday June 22, 2009 after the MTA’s Finance Committee meeting:

The developer for the Atlantic Yards project has scaled back its offer for an MTA rail yard in Brooklyn. Instead of paying 100 million dollars at closing, Forest City Ratner would give the MTA just 20 million dollars up front, then pay the rest in installments, with interest, over the next 22 years. MTA chief financial officer Gary Dellaverson says the MTA should take the offer because it would be risky to find a new buyer.

DELLAVERSON: I have no idea when it would be more propitious than now to engage in a second transaction on this property.

The replacement rail yard that Forest City Ratner would build for the MTA would also cost less, with 25 percent less capacity than the original design. The full MTA board could vote on the new offer when it meets this Wednesday.

Here, two days later is another WNYC report (available on line) where Mayor Bloomberg’s representative on the board. Jeff Kay, makes essentially the same misrepresentation that there were no other bidders available. The report also notes that the MTA rejected a better offer it unexpectedly received from Develop Don’t Destroy Brooklyn:

The MTA board overwhelmingly approved a new deal for the Atlantic Yards development in Brooklyn by a 10 to 2 vote.

REPORTER: Some board members expressed regret that they were accepting less cash up front and a less valuable rail yard than originally proposed in 2005. But Jeff Kay, who represents Mayor Bloomberg on the board, said it was better than nothing.

KAY: There is no other market, no one else has come forward with a credible proposal at this time.

REPORTER: At the last minute, opponents of the Atlantic Yards project offered to pay $120 million over a period of 12 years for the rail yards. Developer Bruce Ratner is paying $100 million over 21 years under the new deal.

Board members did not appear to take the counter-offer seriously and the board chairman refused to comment when asked about it.

(See: News: MTA Approves New Deal for Atlantic Yards, WNYC Newsroom, June 24, 2009.)

The MTA couldn’t find interested bidders to bid against Ratner? The developers we know are interested.

The MTA was subsequently sued by community groups and elected representatives for not seeking other bids in violation of the Public Authorities Accountability Act. Interestingly, when the MTA went to court to defend themselves, being unable to find other bidders for the site was not exactly the story they told to the court. The story they told they told the court was more about how the MTA, the city and the state had gotten so deeply involved in pushing subsidies to Forest City Ratner without a contract that bidding the property out to other bidders would put the public in jeopardy (rather than, as would more truthfully be the case, putting the financially weak Forest City Ratner in jeopardy). From Atlantic Yards Report:

Forest City Ratner had begun significant work on the Vanderbilt Yard under a license agreement. The city and state had contributed well over $200 million in subsidies, part of a $305 million direct allotment. And FCR had bought most but not all of the land needed for the project.

The MTA said that a new appraisal would not only have "seriously jeopardized" its efforts to maximize its return regarding the disposition of Vanderbilt Yard property rights, but also the costs associated with track relocation and platform construction.

But the latter is because FCR was already working on it.

As Forest City said in legal papers, "ESDC and FCRC already have achieved substantial progress in implementing the Project, and the public would not be served by opening the Project to new bidding."

(See: Wednesday, December 09, 2009, As challenge to MTA deal awaits a judge, did Forest City Ratner really have the MTA over a barrel, or was it the other way around?)

Forest City Ratner’s rights have now been restructured to give it an option to do only as much of the megadevelopment as it ultimately decides it wants to. That restructuring is, of course, absolutely inconsistent with the idea that other developers can’t replace Ratner.

So there’s one story for the public and the press, another for the courts. Finally there is real story that is really true and the real story is that it is a rigged deal. Nevertheless, in the first legal go ‘round on the litigation about the bidding, the court (sort of) bought the MTA’s version of events. (See: Thursday, December 17, 2009, Judge, deferring to MTA version of the case, dismisses lawsuit challenging revision of Vanderbilt Yard deal.) That is because whatever stories public officials tell, courts have been deferring to them and thereby promoting rigged deals and government misconduct.

The same thing was true in the eminent domain abuse case brought against the Atlantic Yards project. The public authorities involved told the public one story (Atlantic Yards was an “economic development” project) and told the courts another (that it was ostensibly to remove “blight”) while the real truth was again something quite different, that a wired no-bid deal was being handed to Ratner to eliminating the competition from other developers in his back yard.

MTA Can Stop the Atlantic Yards Deal and Get Back on Track

We told the MTA that this was a deal that they could easily stop and that they could thereby recoup for proper use the hundreds of millions of dollars in misdirected moneys. All it would take is for the MTA to settle the lawsuit brought against it by the coalition of community groups and elected representatives and then properly bid out its property to multiple developers.

Investigation Needed

We told the MTA that this matter needs to be investigated and told them we were asking Attorney General Andrew Cuomo and State Comptroller Thomas DiNapoli to do so. (See: Sunday, December 13, 2009, To Attorney General Andrew Cuomo and State Comptroller Thomas DiNapoli: Investigate and Halt Issuance of Arena Bonds.)

More of the Big Picture

We said more, which we will get back to. Had we had more time we also would have said that the MTA cutbacks must be looked at in terms of big-picture city development policy.

These cutbacks to lower income neighborhoods are equivalent to a form of affordable housing cutback. Here we are cutting back on transportation to areas where there is affordable housing (and where perhaps more could be built). At the same time we are diverting MTA revenues into the net-loss-to the-public Nets arena and luxury housing developments like Hudson Yards and Atlantic Yards. Atlantic Yards represents an unfair transfer of wealth to an already wealthy developer at the expense of those less privileged. (See: Tuesday, December 15, 2009, Russianoff on MTA land sales: "they decided that it was a higher value to help the mayor and the governor".)

MTA Chairman Walder’s Statement: Uncannily As If He Heard Us
Here is what Chairman Walder said after listening to what the public speakers had to say. See if it doesn’t sound exactly like the ideas we have been expressing. (We were able to compile what Chairman Walder said from several NY1 reports and the New York Times. Eventually his entire statement should be available when the MTA posts its video archive of the meeting on its site.)

Can we really say that the money that is sent to the MTA, all the taxpayer money that comes to the MTA is well spent? Are we in a position to be able to say that? Because if we are going to be in an environment where we are talking about truly painful things, in which we are doing things that hurt people’s lives and well-being then we need to be able to say that and, unfortunately, I’m not sure that we can.

* *

In the two months that I’ve been here, it’s apparent to me that we don’t operate in a way that ensures that every taxpayer dollar that we receive is being used as effectively as possible . . .

We need to rethink every aspect of our operation. We need to permanently reduce the cost of what we are doing. In short, we need to take the place apart. Now I know that this is hard, but in the economic time this is what businesses all across the state are doing. They can’t afford to fail when they do and I don’t think we can afford to fail when we do it.

Why We Fear Chairman Walder Wasn’t Really Listening: Dysfunctional New York

As we said, Chairman Walder’s remarks sound like a heartening recognition of what we were saying. The reason why we fear it means nothing more than political theater is because our politicians are very adept at mouthing the right words about good government while doing exactly the opposite. And in fact, this is one of the points we made Wednesday morning at the MTA board meeting, holding up our poster with the heading “Dysfunctional New York.” (We have made this point before in more detail):

• May 20th: Bloomberg said he was turning off the spigot for Atlantic Yards. May 27th: It was revealed that Bloomberg and his representatives on the MTA board were giving Forest City Ratner an Atlantic Yards package worth more than $180 million in additional no-bid subsidies from the MTA. Last Week: Bloomberg was saying to the press, "I don't know why anybody is surprised at what is happening to the MTA," . . . "It's a piggy bank that keeps getting raided.”

• Last week Governor Paterson was telling us that the state had only $3 million in cash on hand and that the legislature needed to act because dire, drastic cuts were in store. How can Governor Paterson expect legislators to take him seriously about legislative branch-controlled spending when he has refused to do anything about Atlantic Yards, which is the premier example of executive branch-controlled pork barrel spending.

Therefore, why shouldn’t we expect the same thing from Chairman Walder, the saying of one thing while meaning something else entirely.

In Dysfunctional New York Others Also Ignore the Obvious Facts
In dysfunctional New York, Chairman Walder is not the only one with deceptive rhetoric we need to navigate around to make sense of the world. City Council Speaker Christine Quinn was present at the MTA board meeting to speak out against the cuts. Unfortunately Speaker Quinn was not present this summer to protest the MTA’s giveaways to Forest City Ratner. It was to be expected: She rarely challenges Bloomberg or his giveaways to the real estate industry. Ms. Quinn has never taken the opportunity to criticize Atlantic Yards and she has frequently supported the kind of eminent domain abuse occurring in connection with the Atlantic Yards mega-monopoly, the Columbia expansion taking over West Harlem and the wholesale eviction of the Willets Point neighborhood.

Similarly, the Working Families Party, closely connected* with ACORN, has been sending out e-mails urging protest of the MTA cuts. (Sample quote: “Even Ebenezer Scrooge would cringe. But the real problem isn't just the MTA - it's Albany.”) But the WFP hasn’t taken a position against Atlantic Yards despite its drain on the city, state and MTA budgets. Everyone believes the reason that WPF hasn’t is that the perpetually self-interested ACORN has essentially been bought and paid for by Forest City Ratner.

(*See the multi-part City Hall “All in the Family” series: Part 1, Part2, Part3, Part 4. and Part 5.)

Of course, we can always hope Chairman Walder will live up to his words to “rethink every aspect” of the MTA’s “operation” “take the place apart” and make sure that “that the money that is sent to the MTA, all the taxpayer money that comes to the MTA is well spent” so that “every taxpayer dollar that we receive is being used as effectively as possible.”

Mr. Walder is yet another of the public officials who have the power and responsibility to kill Atlantic Yards. Let’s see if one of those public officials takes that responsibility seriously and acts accordingly.

ADDENDUM: (Added December 19, 2009) We can’t resist adding this one new link to our post. The MTA says it couldn’t get any other bids? And the economic downturn was a factor? Here via Atlantic Yards Report by way of City Hall News are hot-off-the-presses quotes from City Hall News Seth Pinsky, president of the New York City Economic Development Corporation (NYC EDC) (emphasis supplied):

. . . in recent months, we at the New York City Economic Development Corporation have become aware of a secondary benefit of our new-found market position. Specifically, we have begun to see a rise in the number of bids—and bidders—chasing the $2.5 billion in capital projects that we plan to manage over the next five years. . . . . this is also great news for taxpayers, because increased competition for bids almost always means better rates for the public. Over the long run this will result in projects completed more quickly and more efficiently.

(For more, see: Saturday, December 19, 2009, NYC EDC's Pinsky: "increased competition for bids almost always means better rates for the public".)

One more thing about Mr. Pinsky’s insights: We told the MTA board exactly that back in June reprising of our comments before ESDC.

To Attorney General Andrew Cuomo and State Comptroller Thomas DiNapoli: Investigate and Halt Issuance of Arena Bonds

The following an open letter from Noticing New York to Attorney General Andrew Cuomo and State Comptroller Thomas DiNapoli calling for an investigation and halt to the proposed issuance of ESDC’s Brooklyn Local Development Corporation PILOT Revenue Bonds for Forest City Ratner’s proposed Nets basketball arena.

* * * *
December 13, 2009

Hon. Andrew M. Cuomo
Attorney General
Office of the Attorney General
of the State of New of New York
120 Broadway
New York, New York 10271-0002

Hon. Thomas P. DiNapoli
New York State Comptroller
New York State Office of the Comptroller
633 Third Avenue
New York, NY 10017


Re: New York State Public Authority Bonds Being Rushed to Market Without Proper, Adequate and Required Assessment, Disclosure and Approval of Risks (Empire State Development Corporation’s Proposed Financing of Nets Arena Via the Issuance of Its Subsidiary Corporation’s “Brooklyn Local Development Corporation PILOT Revenue Bonds, Barclay’s Center Project”)

Dear Attorney General Cuomo and Comptroller DiNapoli:

As you each have jurisdiction, capacity and, we respectfully submit, the duty to act in this area, we are writing to bring to your attention the fact that New York State public authority bonds are being rushed into the tax-exempt bond market without the required assessment, disclosure and approval of the risks associated with their issuance which in this case is substantial. The sale is being rushed to market (while a number of lawsuits are pending that ought to affect the issuance) in order to benefit Forest City Ratner hoping to meet a December 31, 2009 IRS deadline to obtain a tax-exempt status for which that private developer’s project would otherwise not qualify. (The goal is to avoid the provision of the IRS code enacted by Senator Moynihan that prohibits tax-exempt financing of private sports arenas and stadiums.) The risks being ignored in the process put the public, the state and the investors potentially buying these bonds in significant jeopardy.

We ask that you use your powers to investigate this issuance and, in the meantime, to order it halted as not being in compliance with minimum state requirements.

Here are just some of the things you need to know and about which you can readily learn more when you investigate:

1. Bonds Issued by Subsidiary Public Authority: (More than One Tranche). More than one series of bonds are being issued by the Brooklyn Arena Local Development Corp. a subsidiary public authority created by the Empire State Development Corporation as an instrument to bring this financing to market. The issuance of different series of bonds is being used in order to stratify the unacceptable risks of the transaction. The tax-exempt bonds would be paid with “PILOTS” diverting taxpayer revenues for the developer’s benefit.

2. Inadequate Assessment of Risk by the Rating Agencies. More than one series of bonds are being issued. Moody’s Investors Service and Standard & Poor’s (December 1, 2009) gave the senior bonds (i.e. the most credit worthy of the bonds being issued) respectively Baa3 and BBB-minus which means that these best-of-the-lot bonds being issued were given the very lowest investment-grade ratings possible, ratings just a notch above junk. However, the evidence is that these ratings do not reflect a proper assessment of actual risk. (Fitch did not rate these bonds.) Among other things:

a. Moody’s Cash Flow Review Mistake: Starting With 225 Annual Arena Events vs. 200. The Moody's review on the bonds was based upon a supposition that there would be 225 arena events per year while the evidence is that to assume even 200 arena events would be aggressive and inconsistent with the information that the developer itself has been able to promulgate. (There is no evidence of an independent market study or realistic recognition of the arena's competition with three or perhaps four regional arenas. - The consultant hired to do a market analysis made clear that “information provided to us by others was not audited or verified, and was assumed to be correct.” The “others” would be FCR.) When asked to address the significant 11% error in assessing the cash flow Moody’s was unable to respond.

b. Arena Completion Date Unrealistic. It is unrealistic to project that the arena will be completed by April or even June 2012, thus prolonging the duration of bond payments without any projected revenues.

c. Bonds Involve Provisions For Junior Bonds to Default: Atypical Absence of Cross-Default and Redemption. The bonds include provisions where the junior bonds can default, in which case a Russian billionaire, Mikhail Prokhorov, will be in litigation to take over the arena from the developer. The junior bonds are junk bonds quite likely to default. Mr. Prokohrov’s involvement in this transaction is as yet apparently unapproved by any public agency involved. In other words a background check and review have not been done. There is no provision for cross-default, acceleration or redemption in such an event. Given this atypical provision for a litigious transfer of the project we are at a loss to explain why the ratings for these bonds have not, accordingly, been reduced several notches. We do not believe these kinds of litigious difficulties were envisioned or similarly foreshadowed when bonds were issued for the new Yankees and Mets stadiums. The bonds for those baseball stadiums also deserve a respectively higher rating than these new proposed arena bonds given the proven track records of those teams in New York City. The New Jersey Nets have absolutely no track record. Forbes is reporting that the Nets are distributing 5200 free tickets a game, which is more than one-quarter of the house. Additionally, ratings for the Yankees and Mets stadium bonds were given before the national fiscal crisis. We understand that attendance for those teams has not been as good as was projected.

d. Risk of State Agency Non-Compliance With Public Authorities Accountability Act. One Significant risk to the transaction is that the half of the land required for the transaction (the half the developer is not attempting to take through eminent domain) will not be obtainable because of a violation of the Public Authorities Accountability Act. Despite the fact that these bonds are being issued by a state public authority and that this will pose a significant risk to any buyers of these bonds the assessment of the question of whether there was a state agency violation of this law is not being offered by state officials but by the developer. The Preliminary Offering Statement seeks to assure the buyers of the bonds with the private developer’s self-interested assessment that the developer: “believes that the MTA complied with all applicable legal requirements and expects that the [defendants] will prevail in this proceeding.” We also note that this assessment is not in the form of a legal opinion.

e. Errors in Offering Statement. The Preliminary Official Statement Being used to market the bonds contains other inconsistencies and inaccuracies that go to the question of how many arena events will be generating cash flow for the bonds and the basis for ratings. (See next section.)

In assessing the reliability of the ratings agencies we point out that in a front page story the New York Times offered this assessment of the current state of affairs: “. . for now, and for the foreseeable future, the market for ratings is sure to look uncannily similar to the one that helped usher in the crisis: three rivals, all of them paid by issuers, bestriding the market.” (See: Debt Raters Avoid Overhaul After Crisis, By David Segal, December 08, 2009.)

3. Inaccuracies in the Preliminary Official Statement (POS) relating to number of possible events in the arena.

a. Non-Profit Arena Events for Community Go Missing. The Preliminary Official Statement (POS) being used to sell the bonds says that each year NO MORE THAN TEN EVENTS (“not to exceed ten (10) events”) shall be held in the arena for the public and community groups at the FULL COST of normal events in the arena (“which access shall be on the same terms, including cost, as the Arena is generally made available to other Persons for use”). Inconsistently, the developer has already promised the public that there will be AT LEAST TEN EVENTS which will be at a LOWER COST to the public with the developer forgoing profit on the minimum ten events. (Alternately: “a minimum of 10 events would be made available for use by community groups at a reasonable cost (generally the cost of operation) with any net proceeds to the sponsor from these events to be donated to not-for-profit organizations” and “at least ten (10) events per year, at a reasonable rate, with net proceeds from such events to be used to support non-profit community organizations.”) In other words, that subtracts out a minimum of at least another ten events a year from the 220 projected profit-making events.

b. Misrepresentation on Possible Hockey Team. The POS claims that simply by retrofitting the arena with “ice-making abilities” the arena can house a NHL hockey team and thus bring it the revenue associated with that team. This representation offers absurd hope for mitigating risk because the evidence clearly shows that the arena is physically too small to include a hockey rink. This is highly material because if a hockey team plays in an arena, the team plays a minimum of 43 home games per year and as many as 55.

4. Bonds Far Riskier than Transaction Approved by the State Public Authorities Control Board (PACB). (As furnished to and consented to by the State Comptroller’s Office.) The bonds being issued are far riskier and for a very different transaction than was approved by the State Public Authorities Control Board (PACB). As required by the governing state legislation that original transaction was also sent to, commented upon and the approval determination was consented to by the State Comptroller’s Office. The new transaction which has not been approved by the PACB also lacks that statutorily required comptroller review, input and consent. The new transaction is much riskier and different from what was approved because:

a. The arena (supposed to generate income) is 20% smaller. The PACB (and the ESDC board) approved a transaction that involved the financing of an 850,000 square foot arena, not the 20% smaller 675,000 square foot arena that developer Forest City Ratner currently plans to build.

b. The arena (needing to be paid for with generated income) is substantially more costly. At the time the PACB issued an approval, the arena was projected to cost $637.2 million, only a fraction of the $1.1 billion (including infrastructure) it is currently projected to cost according to the recent disclosures of the Preliminary Offering Statement. $1.1 billion represents an increase of 73% over $637.2 million.

c. The arena is less functional. The smaller arena will be less functional. The diminished functionality means among other things that, as noted above, the arena will not (as would previously have been possible) be able to host an NHL hockey team with 43-55 arena events per year.

d. Larger Atlantic Yards financing now a decades-long option for the developer. The larger Atlantic Yards megadevelopment as part of which the arena financing was approved has also changed very substantially (and is much more undefined than ever). It is now a muti-decade option on multi-acre mega-monopoly on the part of the developer that will involve subjecting the community to years of unnecessary developer-created blight as parts of the community are torn down and once-thriving alternative development is stymied.

5. No ESDC Board Approval for Smaller Arena. Not only has the PACB not approved the far riskier and different transaction being brought to the bond market; the ESDC board members have also not acted to approve the financing of the new smaller arena that Forest City Ratner proposes to build.

6. PACB Approval (and Comptroller Review and Consent) and Public Policy of Requiring Public Benefit: $220 Million Net Loss. While it may be argued whether the PACB and the Comptroller take into account the generation of public benefit and public policy issues when they conduct their review of proposed project financings, it should be noted that the transaction now getting underway involves no benefit to the public, whereas the transaction that was previously brought to the PACB and the Comptroller’s office for approval did. The New York City Independent Budget Office has reviewed the new arena financing transaction being brought to market and concluded that it will represent a $220 million net loss to the public ($39.5 million in direct losses and $180.5 million in opportunity losses). That is not the total cost to the public: That is the current project net loss; the project will cost much more.

7. Secret Approval of Additional $400 million in Bonds For Arena That Will Substantivally Increase Total Net Loss to the Public. On September 17th the public authorities issuing these bonds secretively and in violation of the New York State open meetings and sunshine laws approved the groundwork to issue another $400 million in tax-exempt infrastructure bonds, the proceeds of which can be turned over to the developer to reimburse it for its costs of building the arena, thus significantly boosting the net loss to the public of this transaction. Those additional bonds have also not been approved by the PACB or the comptroller. Absent a recission of these actions by the public authorities there can be no assurance that the public is not about to be saddled with these extra undisclosed costs.

8. Bonds Negative Effect on Credit of the State. Though the taxpayer-backed bonds are technically non-recourse to the state for additional funds in the event of a default, the state is still in jeopardy due to their riskiness. Though there is no state guarantee of the bonds, state public authority officials have not ruled out the possibility that the state would rescue the bonds in the event of their default. One possible backdoor method being set up to effect such rescue is the secretly approved issuance (at taxpayer expense) of the additional $400 million in bonds described in the above paragraph. Even if the state were not to rescue the bonds, the PACB was created to review and approve the issuance of all bonds, including such non-recourse or limited-recourse bonds issued by state authorities because the negative effect of default on the state and all other state issuers is recognized.

9. Public Authorities Out of Control? We believe that you each independently have authority to step in to halt these transactions and investigate them. To say that such is not the case would be to say that our public authorities are extraordinarily out of control.

It is not the purpose of this letter to criticize your fellow politicians and public officials, but it is important to note that the issuance of these bonds is being played out against an Alice-in-Wonderland denial to the public of realities, fiscal and others, by holders of public office who should be exercising their oversight to restrain the abuses in these transactions:

1. Denial of Responsibility by Mayor Bloomberg. Bloomberg has denied the financial facts of excessive subsidy for Ratner Atlantic Yards mega-monology with incredible assertions both preceding and following his actions. On Wednesday, May 20th Bloomberg publicly said that the Atlantic Yards project would receive no more subsidy. On May 29th it was revealed that a deal was in the works to give millions more, what turned out to be a package worth more than $180 million in additional no-bid subsidies to Ratner. These subsidies facilitated by the mayor (which can still be halted) are being given to Ratner via handouts from the MTA’s board, approved by the mayor’s representatives. Just this week, commenting on the MTA’s lack of funds (the $200 million shortfall in its 2009 budget), Bloomberg, as if he himself was not responsible, said: "I don't know why anybody is surprised at what is happening to the MTA," . . . "It's a piggy bank that keeps getting raided.”

2. Denial by Governor Paterson. As of last Wednesday, Governor Paterson announced that New York State, with only $3 million of cash on hand, is running out of money. He has been urging legislators to find ways to cut back on state spending and speaking about the dire cutbacks that he will be forced to make without the legislature taking action. Yet how can Governor Paterson expect legislators to take him seriously about legislative branch-controlled spending when he has refused to do anything about Atlantic Yards, which is the premier example of executive branch-controlled pork barrel spending. Upon her recent departure from the state housing finance agencies, Housing Finance Agency CEO Priscilla Almodovar commented caustically about the cronyism of housing approved by the Pataki administration. There can be no better example of such Pataki administration cronyism than its attempted no-bid award of a huge mega-monoply on Brooklyn development to Forest City Ratner.

Necessary Investigation of Eminent Domain Abuses. Finally we must also raise with you the background of eminent domain abuse by state and city officials about which the state Attorney General’s office has initiated investigations respecting conduct relating to Willets Point. The situation with respect to Willets Point involving misconduct by city officials is not an isolated incident. (We are aware of news reports that the Bloomberg administration has been resisting subpoenas from the Attorney General’s office by countering with political threats.) It is tip of a much larger iceberg. As you found, your investigation into Willets Point quickly expanded into investigating activities of the Brooklyn Downtown Partnership, which brings it very close to Atlantic Yards itself. (You should probably also be looking at Coney Island as well.)

The recent decision in the Kaur case respecting the abuse of eminent domain by Columbia University makes this clear how far the abuse of eminent domain by government officials extends. We borrow the language of lawyer, legal scholar, and eminent domain expert Gideon Kanner summarizing his assessment of what happened in Kaur:

. . . in the Kaur case, the New York Appellate Division did examine the unseemly facts underlying the decision to condemn and found them to give rise to a miasma of favoritism, conflict of interest, procedural mistreatment of the condemnees, and deliberate blighting of the area.

The cast of characters in the Kaur case (substituting Forest City Ratner for Columbia University) is virtually identical. The facts of abuse are very much the same, in some respects even worse. They need to be investigated. Senator Perkins has written a letter to Governor Paterson asking for a state moratorium on the use of eminent domain in which he offers his opinion that the “actions on the part of the ESDC are part of an insidious form of discrimination and civil rights violations that must not stand.”

We suggest that investigation needs to start now, not in six months or a year from now. We suggest that your investigation should also extend to how in the case of Atlantic Yards public officials have coordinated such abuses of eminent domain with other illegal acts such as the non-compliance of the MTA with the Public Authorities Accountability Act. The investigation should commence before New York is subjected to a wasteland such as was left in New London, Connecticut in the aftermath of the Kelo decision and before these rushed-to-market bonds default.

From this brief list of problems it should be evident that the skimping on due diligence and normal procedures in service of the private developer's deadline poses great risk to the State, the public and the potential buyers of these bonds. Once again, we believe investigation by each of your offices will find serious problems and wrongdoing in the financing process such that an immediate halt to this unapproved financing transaction is warranted.


Sincerely,


Michael D. D. White

The Craftily Negative Promise Offered For Bonds Being Sold For Nets Arena: It’s Not “Assumed” Islanders Hockey Team Is Coming to Basketball Arena

This post has been updated to include additional analysis. We first posted with all the pictures. The pictures spoke so well for themselves we wanted to get them up without delay. (Click on any image to enlarge.)

In a marketing analysis commissioned by Forest City Ratner that has been made part of the Barclays Center Arena Preliminary Official Statement prepared by Goldman Sachs to market bonds for Forest City Ratner’s Nets arena bonds it says:

For purposes of this analysis, it has not been assumed that the New York Islanders would relocate to the Barclays Center.

(See: Friday, December 04, 2009, Market analysis (commissioned by Ratner) suggests arena would have no trouble attracting events, might even host hockey.)

This we-mentioned-but-we-can't-promise language is official statement language intended to keep people off the hook legally, but it does serve to introduce a definite (positive) possibility that, “Gee, just maybe, the Islanders will relocate to the Barclay’s Center.” In fact, this sentence follows another rather silly sentence that makes it sound like it would be fairly easy for the Islanders to relocate to the basketball arena:

If built as planned, the arena would need to be retrofitted to accommodate the ice-making abilities the NHL requires for its franchises.

"Ice-making abilities the NHL requires of its franchises"? Sounds so official! And so simple! But silly: Like you wouldn't expect a hockey team to play on ice? But is it just as simple as putting in some ice as this language suggests?

We think that disguises the bigger issue of bringing in the Islanders; whether the arena is actually large enough to do so.

Fitting Examination of the Suspect Promise in the Ratner/Goldman Bond Sale Document

Would a hockey rink fit? We think schematics posted by Atlantic Yards Report today probably answer that question in the negative. Evaluate the information and images we have to offer on this score. When you’re done you may also conclude that statements put into Goldman’s Preliminary Official Statement to help market the bonds are a joke (as well as misleading).

First, let's compare. How big is a basketball court in yards? An NBA basketball court is 94 feet x 50 feet. (31.33 yards x 16.67 yards) How big is a hockey rink? More than twice as long and 70% wider. The official size of a hockey rink is 200 ft long and 85 ft wide. (It is also surrounded by "boards" made of wood or fiberglass which will be not less than 40" high, and no higher than 48" above the ice surface. “Any variations from any of the foregoing dimensions shall require official authorization by the League.”
At the outset of this post we had a composite of images from Wikipedia that shows the comparative sizes of a basketball court and a hockey rink which we repeat above.

Below is the schematic of the proposed Forest City Ratner basketball arena.
Click on the image to the right if you'd like to see the larger version of the above image made available by Atlantic Yards Report today (Monday, December 07, 2009, Comparing the Gehry arena outline/orientation with its successor, thanks to an Ellerbe Becket interior design) click on the smaller image on the side.

Below is the schematic of the proposed Forest City Ratner basketball arena with the comparative basketball court and hockey arena overlaid with the basketball court in the center.
Below is the schematic of the proposed Forest City Ratner basketball arena with the comparative basketball court and hockey arena overlaid with the hockey rink in the center.
Below is the schematic of the proposed Forest City Ratner basketball arena with alternate overlays of the comparative basketball court and hockey arena overlaid that may help to envision more clearly how much is lost in terms of seating and also, apparently, functional access to the arena.

Consistent With Previous No Hockey Assessment

Previously, Atlantic Yards Report wrote that “inside sources” said that the redesigned arena would not accommodate hockey. This received public focus and became an embarrassment for Brooklyn Borough President Marty Markowitz when he subsequently made remarks that assumed the smaller redesigned arena would still accommodate the Islanders hockey team. (See: Thursday, June 04, 2009, Guess what: the Brooklyn arena, accommodating Ratner's short-term goal, would be too small to fit in hockey and Thursday, October 08, 2009, From hoops to hockey? Markowitz, contemplating Islanders' move to Brooklyn, disregards the planned arena's limitations.)

Why Mentioning Hockey Team as Real Possibility Is Material to sale of Bonds (& Moody’s Sizable Mistake)

We doubt that resurrecting a possible promise that the Islanders could come to the arena was put into the Forest City Ratner/Goldman Sachs Preliminary Offering Statement to assuage Marty Markowitz’s embarrassment. The reason why the question of whether the Islanders could actually relocate to the arena is very material to the sale of the bonds (and to the bonds needing a new PACB approval that the state Comptroller should scrutinize) is because the cash flow projections for the arena are apparently weak because so few events can be projected to be held in the arena. There will be only a projected 200 events a year in the arena. Related to this is the fact that somehow Moody’s Investor’s Service seems to have made a sizable 11% cash flow mistake in the analysis of how many events there will be. One has to wonder how that happened. It most certainly involves the human intermediaries highlighting facts in their communications. (See: Wednesday, December 02, 2009, Ratings agency Moody's, asked why it assumes 225 events a year at the AY arena, won't discuss it.)

It could help reassure Moody’s that their mistake was perhaps less significant if hockey were actually a real possibility for the arena. National Hockey League teams play at least 82 games a year in the regular season and including playoffs they play at least 4 four more games, with 110 games being the maximum number of games played including both playoffs and the regular season. That means that if a hockey team plays in an arena, the team plays a minimum of 43 home games per year and as many as 55. But if a hockey team can’t play in the arena those numbers are big potential numbers to subtract from alongside the 200 to 224/225 events Moody’s was looking at.

Hockey, Bond Risk and Loose Ends

We previously wrote about how the fact that a hockey team apparently can’t play in the Nets basketball arena involves a material increase in risk. That was when we were writing about the sloppiness and extraordinary number of loose ends that plague the proposed issuance of these bonds. (See: Wednesday, October 28, 2009, So Many Unchecked Approval Boxes: Why Any Sensible Bond Buyer Should Probably Steer Clear of Buying Atlantic Yards Nets Arena Bonds and November 1, 2009, ESDC’s Bond Buyer Happy Talk About Restructuring and Refunding Arena Bonds.) More recently, others, like Neil deMause of Field of Schemes, have commented on how close to the financial edge this transaction is. (See: As Atlantic Yards Gets Pricier, How Much Red Ink Can Ratner Absorb? By Neil deMause in Atlantic Yards, Friday, Dec. 4 2009.)

We were writing in part about the risk to the bondholders of a transaction slapped together at the last minute but we were also writing about how that extra risk means that this is a far riskier and very different transaction from the one the Public Authorities Control Board approved. For instance, the PACB (and the ESDC board) approved a transaction that involved the financing of an 850,000 square foot arena, not the 20% smaller 675,000 square foot arena that developer Forest City Ratner currently plans to build. (See: Saturday, October 03, 2009, Did the ESDC board members know they were approving a 675,000 sf arena?) And at the time the PACB issued an approval the arena, at $637.2 million, was projected to cost only a fraction of the $1.1 billion (including infrastructure) it is now projected to cost according to the recent disclosures of the Preliminary Offering Statement.

This means that the PACB needs to be re-reviewing the transaction to consider whether it should still give its approval to a transaction that now involves such an escalated risk. Develop Don’t Destroy Brooklyn has written to the state comptroller pointing out that the comptroller has concurrent responsibilities in this area that it would be dangerous for him to shirk. (See: Paterson, Silver, Sampson Must Vote on Atlantic Yards Financing, For Immediate Release: November 19, 2009) So far the comptroller has not stepped in to alter the transaction's path toward debacle. It will be telling if nothing is done and the bonds default.

We have previously noted that fictions about the Atlantic Yards mega-project have been continually foisted on the public with a Ratner-comes-first mentality. Those fictions have been tolerated by our public officials and sometimes collaborated in by them. We have therefore wondered what kind of transaction will be foisted upon the buyers of the Ratner arena bonds. (See:Wednesday, November 25, 2009, Picturing What Could Have Been Said If Public Officials Accepted Public Comment at the Atlantic Yards Bond Approval Meeting and see also Tuesday, December 1, 2009, Unfair Substitution of Fiction For Fact in the Atlantic Yards Dialogue.)

What Is the Purpose the Craftily Negative Promise of Not "Assuming" the Islanders Hockey Team Will Come to Basketball Arena?

Why does the Forest City Ratner/Goldman Sachs Preliminary Official Statement say that bringing a hockey team to the arena is as simple as installing ice-making equipment? Is that representation true? Or is it pure hockey-sales hokum?

Looking again at the schematics, it looks as if the only possible way to get a hockey rink into the arena would be to raise the floor of the hockey rink many feet up in a bowl-shaped seating area. The good news is that would leave plenty of room for the “ice-making abilities” (equipment) underneath. But wouldn’t this also eliminate or block most of the functional access to the arena? Wouldn’t it eliminate a huge percentage of the seating in what is already very small arena? (East/West it looks like approximately 50% of the seating rows about 26 out of 52 rows of seats drawn in the Ellerbe Beckett schematic would be lost.) How possible is it really to have a second level ice floor raised so many feet above the main floor?

So, readers give us your thoughts: Was this crafty negative promise in the bond sale documents accurate information intended to carefully convey the situation as it actually is? Is the main hurdle to bringing in a hockey team truly just the practical impediment of investing in some “ice-making abilities” as represented or is this a cold-blooded snow job? Maybe this is just an easy-to-identify example of the Ratner/Goldman team trying to use every trick in their book to get these bonds sold and, if it is, what other tricks have they got in their playbook? With Moody’s apparently already having made one big mistake, it doesn’t look as if the rating agencies will be reliable assessors of risk on this one. Time will tell: We’ll see what the Ratner/Goldman team manage to get away with. Or maybe they won’t.

Unfair Substitution of Fiction For Fact in the Atlantic Yards Dialogue

A prevailing hallmark of the promotion for Forest City Ratner’s proposed Atlantic Yards Brooklyn real estate mega-monopoly is the extremely unfair way that fiction has been routinely substituted for and intermingled with what are theoretically the actual facts. Not only have the fictions enlisted to support this abusive eminent domain taking been patently false factwise; they have for the most part not even been believable.

Things That Are Not True About Atlantic Yards

One supreme work of fiction in the mix has been the AKRF “blight” study. With high-end condominiums recently developed and built within and immediately outside of the megadevelopment’s footprint it is clear that there was no blight. Another unfortunate way that the intrusion of fiction has been amplified is that for the Court of Appeals decision its official “record” of non-facts was closed as of late 2006 by which choice the court ignored all sorts of conspicuous subsequent events that contradicted the fictions on the record.

Here is a list of other significant fictions that Forest City Ratner and the state officials servicing that firm have unfairly intruded into the public discussion. The list is not exhaustive. To make it so would be a difficult challenge.

● That the Ratner mega-monopoly is a public project

● That public officials working on the megadevelopment are looking out for the public interest

● That project will provide public benefit. (The truth: The basketball arena, the only identified portion of the mega-project about which anything is yet known will be at least $220 million net loss to the public and the rest of the project can readily be projected to be a net loss as well, since the mega-monopoly status conferred upon the developer decimates the public’s ability to subsequently negotiate for public benefit. Newly released information that state agencies were covertly planning the issuance of an additional $400 million in tax-exempt bonds means that the calculated net losses to the public could be driven even more deeply into the red if that now disavowed plan is reactivated.)

● That the megadevelopment is NOT driven primarily with an intent to benefit the developer (at the public’s expense).

● That the project will provide a significant amount affordable housing and is well designed to do so

● That the mega-project design involving the shutting down of streets and avenues in order to gift them over to the developer is a good design

● That it won’t almost certainly be decades (perhaps 3 to 4) before the mega-development replaces the swath of neighborhood it is tearing down. (The truth: There are likely to be vast parking lots for decades.)

● That there is reasonable assurance about what the developer will ultimately build or is committed to actually provide

● That politicians like Bloomberg who have promised not to give the mega-project more subsidy won’t surreptitiously keep slipping the project more subsidy nonetheless

● That Forest City Ratner has ownership and control of much more land than it actually has such as such the property it tried to take through collusive action from Henry Weinstein

● That there is crime in the area of the site anywhere other than in developer’s own shopping malls

● That there are no other developers who could develop portions of the site interested in competing with Forest City Ratner

● That Atlantic Yards is somehow different from comparable situations like that the one in New London, Connecticut, where after years of litigation and a perhaps more than a hundred million dollars to bulldoze a taxpaying neighborhood (all blessed as part of the “well considered plan” that was the subject of the U.S. Supreme Court’s infamous Kelo eminent domain opinion), Pfizer, the private entity that was the central reason for the destructive takings is abandoning the cleared site

● That it wasn’t clear that the public in modern-day terms and with a modern understanding of the issues wanted the state constitutional protection against eminent domain abuse to remain intact

● That there can’t be any constitutional protection afforded against eminent domain abuse in New York State because when interpreting such fundamental Bill-of-Rights protections the judiciary must defer to the legislative and executive branches which, according to the New York Times recent editorial assessment, is up for sale on a “pay to play” basis with few or “no limits.” According to the Times:

. . . big money rules in Albany. Big business, big unions, and any wealthy individual or interest group can buy access, block reforms, and sometimes even write their own laws.

(See: Editorial: It’s All About the Money, published: November 29, 2009)

In other words, these Bill-of-Rights protections for the individuals aren’t even getting erased from the state constitution (and the federal constitution) by courtesy of a majority vote of the community (which would be unobtainable); they can be bought and paid for, plain and simple, by anyone with access and a big campaign check.

Are any of the above-listed fictions believable? Not if you are paying attention to New York politics or have even an ounce of skepticism in your body. Are any of the above actually true? No, none these promulgated fictions are the least bit true.

How Unfair? Bruce Says “Supersize Me!”?

How unfair is it to mix facts with fictions when engaging in the public debate? Consider this story we’d like to tell about an exchange between an New York State official and a lawyer that conveys how entirely unfettered eminent domain abuse will now be in New York.. . . . . It is amazing what can come out, at a meeting open to the public, when state officials and those they hobnob with carelessly chat, thinking they will not be overheard or stand too close to an open microphone or a running recording device.

As you may know, last week we were at the offices of the Empire State Development Corporation for the meeting of the BALDC subsidiary agency the ESDC controls. BALDC is being used as a tool by ESDC to issue tax-exempt bonds for ESDC’s financing of the Atlantic Yards basketball arena. Last Tuesday the BALDC board of directors met to authorize issuance of tax-exempt arena basketball bonds. (See: Wednesday, November 25, 2009, Picturing What Could Have Been Said If Public Officials Accepted Public Comment at the Atlantic Yards Bond Approval Meeting.) The same day the Court of Appeals, the state’s highest court, released its opinion that eminent domain can be abused to create the Ratner mega-project. Naturally, the decision was something to talk about.

To start, some necessary background: First, let us remind you that we have pointed out how the purpose of Atlantic Yards is to give developer/subsidy-collector Forest City Ratner an unprecedented monopoly on a swath of Brooklyn real estate that eliminates the otherwise burgeoning competition in their own back yard. Next, you need to know this: In the reception area of its One MetroTech Center headquarters Forest City Ratner displays a full wall-sized live camera projection of the Atlantic Yards site. It has been pursuing a bidless acquisition of the site since at least June of 2003. From time to time the angle from which the site is viewed in the reception area changes, but whatever the shift in angle the displayed land that Ratner covets is the same.

Hard as it is to believe, it is absolutely true that Ratner displays the property in his office reception area. Of course, the land displayed isn’t owned by the Ratner organization, but it nevertheless is displayed in their reception area, the way other real estate firms would display their actually conquered assets. If you doubt us ask: Those who go up to visit Ratner know this. (We could cynically observe that Ratner ought to also mount on the wall as trophies a few counted-upon politicians, Mayor Bloomberg and Governor Paterson included. He can brazenly expect to get his land only if he considers them in his pocket. It will probably serve, however, simply to mount as wall plaques the myriad news stories of how readily Bloomberg and Paterson have capitulated in the facilitation of extra giveaways for the mega-project.)

The above background now provided, here for your discerning evaluation is this account of an exchange after last Tuesday’s court ruling. (FYI: People on the inside of these transactions can be inclined to regard the behavior of others on the inside with a certain amused casualness.) Here’s the exchange:

So he says to [Bruce] Ratner, “I guess with today’s Court of Appeals decision you finally get all that land* you’ve been projecting on your reception area’s wall.” Ratner doesn’t miss a beat: “Actually, with this Court of Appeals decision I’m going to have to get a bigger wall!”

(* This is technically incorrect. The Court of Appeals decision applied only to the half of the land needed for the arena that Ratner is seeking to acquire via eminent domain. Another half of the land needed for the arena is coming from the MTA and there is an entirely separate lawsuit brought by legislators and community groups to block any transfer of it to Ratner since he never bid for it and the land was never appraised as required under the provisions of the Public Authorities Accountability Act that were specifically intended to prevent such favored transactions. Further, other aspects of the eminent domain litigation are still in court, while another suit is being brought to reinstate claims based on the new, now substantially changed facts respecting Ratner’s attempted taking of the property.)

What’s Truly Most Unfair?

Is it believable that Ratner made this statement about needing to “get a bigger wall”? Yes, it is absolutely believable. This is the same man who (in what was apparently intended to be a puffy PR interview piece with Crain’s during the pendency of the Court of Appeals decision) said that the public didn’t have a right to know what the project he might build might consist of: “Why should people get to see plans?" he said. "This isn't a public project.” (See: Tuesday, November 17, 2009, Be Careful What (Change of Law) You Ask For; You Might NOT Get It: Atlantic Yards and 1967's Rejected NYS Constitutional Amendment.)

It is therefore absolutely believable that Ratner said he needed to “get a bigger wall” but is it really true that he said it? We can only guess. We haven’t bothered to contact the Ratner office to inquire. (We’ll leave it to others to confirm what statements Mr. Ratner might actually have made about his wall after the ruling, or those he will admit to.) We suspect that it would be rather awkward for Ratner to talk about his wall-of-desire in such conversations. Ratner is also likely to have trouble denying that he has actually made remarks like those in the exchange related. But whether or not Ratner actually said he needed to “get a bigger wall” the fact of the matter is that with last week’s Court of Appeals decision Mr. Ratner probably is speculating on the further enlargement of his holdings through eminent domain. And even if he didn’t actually say that he needs to “get a bigger wall” we wonder which is really more unfair; for people to start believing that he said it when he didn’t or that his company has been involved in interjecting into the public debate the far more multitudinous falsehoods that it regularly provides?

Is it actually true that Ratner said he needed to “get a bigger wall”? Perhaps we can helpfully analogize to the words cleverly used by lawyers defending the findings of “blight” on Ratner’s behalf to describe the non-existent blight of properties they wanted to seize. They said that properties "were found to have indicia of blight" because they had (here’s the indirect language they used) “one or more blight characteristics.” (See: Thursday, October 15, 2009, At eminent domain oral argument, judges skeptical of both sides; court spends more time on process, low-rent housing issue than AY as sweetheart deal.) Applying this formulation to Ratner’s saying that he needed to “get a bigger wall”: It has the characteristics of truth or what can be referred to as “one or more truth characteristics.”