Lessons from the Community’s Atlantic Yards Win

On July 13, New York Supreme Court Justice Marcy Friedman for the communities surrounding the Atlantic Yards project over the Empire State Development Corporation (ESDC) and Forest City Ratner Companies (FCRC). Among other things, the court found that ESDC’s failure to analyze the effects of extending construction of Atlantic Yards from 10 to 25 years meant its approval of the 2009 Modified General Project Plan (MGPP) lacked a rational basis. Justice Friedman ordered ESDC to prepare a supplemental environmental impact statement (SEIS) and reconsider the modified plan after its new impacts have been assessed. Although the Friedman decision did not receive detailed press coverage, community members can find in it important lessons for the future of advocacy on Atlantic Yards.

First, some background on the suit. In the spring of 2009, FCRC demanded concessions from the ESDC and the MTA before moving forward with Atlantic Yards. Most significant among the concessions was the relaxation of the project build schedule from 10 years to 25 years. The revised plan was unveiled in June of 2009. Community concern about the impacts of the protracted build out, as well as the delay in public benefits of affordable housing and jobs, led all of the City and State elected officials from districts bordering the project to request ESDC prepare an SEIS. The ESDC refused to do so, and approved the MGPP based upon the environmental impact statement issued prior to the Atlantic Yards’ original approval in 2006. (It has been widely speculated the ESDC did so in order to enable FCRC to close financing before a deadline that would have made it impossible for the developer to issue tax-exempt bonds to pay for arena construction.)

In November 2009, a group of community organizations from the coalition BrooklynSpeaks filed suit challenging the ESDC’s approval of the MGPP. (I am a board member of the Prospect Heights Neighborhood Development Council, a plaintiff in the BrooklynSpeaks suit.) Although the final agreement between ESDC and FCRC had not been signed, the documents which had been released with the MGPP suggested ESDC intended to allow FCRC 25 years or more to complete Atlantic Yards. The Atlantic Yards master closing took place in December 2009.

The first hearing in the suit was held on January 19, 2010. The stakes were huge: a ruling in favor of the community petitioners would invalidate the MGPP, preventing FCRC’s access to the bond proceeds held in escrow and effectively stopping construction. Lawyers from the ESDC maintained that remedies in the master agreements would ensure the project was completed “on schedule,” although the ESDC had not yet released the master development agreements to the public. When it did so one week later, the documents showed that ESDC had agreed that FCRC would be required to build only the first phase of Atlantic Yards in 10 years. The developer was allowed up to 25 years to build the second phase of the project, with no significant remedies for non-performance. The BrooklynSpeaks petitioners asked that the new information be considered by the court, but the request was refused. In March of 2009, the court ruled in favor of ESDC and FCRC.

The BrooklynSpeaks groups filed a motion to reopen the case on the basis of the information contained in the development agreements. To their surprise, the court agreed to hear the motion in June 2010. However, by that time, the escrow period for the Barclays Center arena financing had expired, and construction was already underway.

In an initial surprising victory for the community, Justice Friedman ruled in November 2010 that the rationale for ESDC’s approval of the MGPP without a supplemental impact study was not clear given the extended amount of time it agreed to allow FCRC to complete Atlantic Yards. The court ordered ESDC to submit findings explaining its actions. The community petitioners immediately motioned for a stay of construction, and a hearing on the motion was set for December 2010. However, a few days before the hearing, ESDC submitted its response to the court order, thus making BrooklynSpeaks’ request for a stay moot.

The arguments in ESDC’s response were brazen and incredible. Whereas in January 2010, the agency’s attorneys had argued that the master development agreement (MDA) was definitive with respect to remedies to guarantee completion of the project on schedule, its December 2010 response argued in effect that specific performance terms of the MDA were irrelevant. The response further asserted, without study or backup, that the additional 15 years of construction would actually be better for the surrounding community’s qualify of life than if the project had been completed on the original 10 year schedule.

In January 2011, the BrooklynSpeaks organizations filed papers in the suit challenging the ESDC’s response. The groups would later submit affidavits from experts in urban planning, sustainable development and public/private partnerships in support of their challenge. At a March 15, 2011 hearing, BrooklynSpeaks’ attorney Al Butzel noted that the technical analysis contained in ESDC’s response to November court order was submitted anonymously, with no way to judge the qualifications of its authors. Justice Friedman then asked ESDC attorney Phillip Karmel who had written it. He couldn’t answer.

In her July 13 decision, Justice Friedman cited the lack of support in the “hastily prepared” tech memo for ESDC’s finding that extending Atlantic Yards’ construction from 10 to 25 years would not result in additional adverse impact to the surrounding community as evidence that its decision to approve the 2009 MGPP without an SEIS lacked a rational basis. Although she ordered ESDC to prepare an SEIS, the judge nevertheless declined to order a stay of construction.

Besides depriving FCRC of the ability to claim that it has enjoyed an unbroken record of success in court against the community, what can residents of Prospect Heights and the other surrounding neighborhoods take away from ESDC’s approval of the 2009 MGPP and the outcome of this suit? Here are three important lessons:

ESDC is willing to risk breaking the law when it helps FCRC. ESDC had previously shown itself willing to exploit New York State’s regressive eminent domain laws to transfer private property to FCRC. The Friedman decision shows that the agency is also willing to violate State environmental laws when doing so is economically beneficial to FCRC. Furthermore, the experience of this lawsuit shows that ESDC has no compunction about obfuscating in court to conceal what it knows when the facts are. This is a truly chilling realization when one considers that ESDC has sole formal responsibility for Atlantic Yards oversight.

The courts aren’t a substitute for responsible project governance. Consider this: One night while walking home, you are robbed at gunpoint by a perpetrator who steals your wallet. A week later, the individual responsible is arrested. At his trial, the judge tells him not to do it again, orders him to return the few pennies that are left from the money he found in your wallet, and then releases him after returning his pistol. Will you feel safe the next evening walking home?

Justice Friedman’s decision left ESDC with the responsibility of correcting its prior error in not preparing an SEIS, even though her previous decisions in the case had excoriated the agency for lack of transparency it is review, and for not informing the court of key facts during trial. Although her decision to order an SEIS specifically referenced the extended use for surface parking of the block bounded by Dean Street, Vanderbilt Avenue, Pacific Street and Carlton Avenue as requiring additional study, Justice Friedman declined to order stay of construction of the lot. This situation illustrates the constraints under which the courts operate when judging the actions of State agencies. Although it may seem hard to believe under the court’s logic for ordering an SEIS that a stay was not also issued, in fact it is rare that the agency’s decision not to perform an SEIS would be overruled in the first place. As further examples of the deference shown by State courts to agencies, remember that the court refused to allow the community to submit the development agreement into the record of the initial proceeding; that it waited until after the bond escrow window had closed before hearing reargument based on the agreement, and that it accepted the ESDC’s response to the November 2010 order prima facie as sufficient to defer issuing a stay of construction.

Tough talk in written decisions notwithstanding, the communities surrounding the Atlantic Yards footprint should expect that courts will continue to be reluctant to order stays or other penalties that would have significant financial consequences for FCRC. This doesn’t mean that future litigation won’t be necessary; it simply means that litigation isn’t enough to undo the damage caused by negligent oversight on the part of ESDC. We need a solution that promotes good decision-making on Atlantic Yards up front.

The collective judgment of our local elected officials should be sought and respected on major project decisions. Unlike other large ESDC projects, Atlantic Yards does not now have a dedicated subsidiary with a board including outside directors to give balance to decision-making. Instead, the agency in effect delegates its authority to FCRC. Local legislators unanimously requested ESDC to perform an SEIS before approving the MGPP in September 2009, but with no formal input into project review, the ESDC ignored those requests for the benefit of FCRC. The Friedman decision not only vindicates the actions of our elected officials, but also illustrates the benefit of including them in formal decision-making, as heeding their call for an SEIS would have prevented ESDC from breaking the law in approving the MGPP, and saved the agency the need to obfuscate during the subsequent legal action.

The lessons of the latest Atlantic Yards suit reinforce the urgent need for reform of project oversight. With the massive traffic, security and quality of life impacts coming with the opening of the Barclays Center in September 2012, and the indefinite delay of public benefits under the current project agreements, a dedicated oversight body that includes representation from our local elected officials appears to be the only way Atlantic Yards will be made accountable to the public.

Justice Friedman’s decision couldn’t come at a more opportune time. In June, the State Assembly passed a bill sponsored by Assemblyman Hakeem Jeffries that requires ESDC to create a subsidiary for oversight of the Atlantic Yards project, in spite of lobbying by FCRC in opposition to the measure. A similar bill sponsored by State Senator Velmanette Montgomery is pending in the Senate, and its leadership should prioritize its passage in the extended legislative session to get the bill in front of Governor Cuomo while the community’s victory is still fresh.

In the meantime, scrutiny of ESDC’s actions in 2009 should not end with this case. The Assembly Committee on Corporations, Authorities and Commissions is now chaired by Assemblyman Jim Brennan, who previously joined the BrooklynSpeaks groups as a plaintiff in the suit. Hearings by the Corporations Committee investigating the 2009 actions of ESDC and its later conduct during the litigation could only better inform the dialog on reform of Atlantic Yards oversight.

Justice Friedman's July 13 decision is the most significant legal victory in the community's fight for meaningful participation in the Atlantic Yards project. In conjunction with accountable project oversight, the SEIS and revised project plan which ESDC has been ordered to produce represent an opportunity to reduce Atlantic Yards' impact to surrounding neighborhoods and accelerate promised public benefits. Our communities and their elected representatives have never had a better reason to keep up the fight.