Sunday, August 31, 2014

Atlantic Yards, Pacific Park, and the Culture of Cheating (links)

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.

Wednesday, August 27, 2014

As state is poised to give Fresh Direct subsidies, project relies on funds from immigrant investors under dubious EB-5 program; pitch in China was misleading

This isn't about Atlantic Yards/Pacific Park, or even a similar megaproject, but the EB-5 angle is too glaring to ignore.

Update: the subsidies were approved unanimously. Nearly everyone making public comment offered support of the project, while one representative of South Bronx Unite asked the board to take more time and acknowledge the health impacts. No one mentioned EB-5, though it's obviously crucial to the project.


At a board meeting (webcast) this morning starting at 9:30, Empire State Development, the state economic development agency, is set to approve what the agenda describes as:
A. Bronx (New York City Region – Bronx County) – Fresh Direct Capital – Urban and Community Development Program – Urban and Community Project Development Assistance (Capital Grant) – and Metropolitan Economic Revitalization Fund (Capital Loan) – Findings and Determinations Pursuant to Sections 5(4), 16-d and 10(g) of the Act; Authorization to Adopt the Proposed General Project Plan; Authorization to Make a Loan and a Grant and to Take Related Actions; Determination on No Significant Effect on the Environment
From ESD Board Materials; go to p. 51
In other words, ESD is about to give Fresh Direct a $9 million grant and a $1 million loan to move/expand from Long Island City to the South Bronx.

That's on top of $10.5 million from the New York City Industrial Development Authority and $1 million from the New York State Department of Transportation and $5 million in New Markets Tax Credit Equity.

Add $15 million from the investment fund Brightwood Capital, $40 million in the company itself, and a whopping $84,168,000 in an EB-5 loan.

Unmentioned are previous promises (which may have been adjusted) of $18.9 million in state Excelsior tax credits; $4 million in state energy grants and incentives; up to $1 million in vouchers for the purchase of electric vehicles; about $74 million in city sales tax exemptions, mortgage recording tax deferral, and real estate tax exemptions; $4.9 million in city energy benefits; $1 million capital grant from Bronx Overall Economic Development Corporation; and a $3 million loan and $500,000 capital grant from the Borough President

Pitching Fresh Direct to Chinese investors
Let's put aside the strangeness of the city and state subsidizing a cross-borough move based on a perceived threat from New Jersey, an unlikely base for a delivery service that needs quick access to Manhattan.

Or that Fresh Direct is moving after having gotten subsidies to stay in Queens through 2025.

Or that neighbors (see South Bronx Unite) pose some heavy concerns about the project's environmental impacts, and that if the promised job total is not reached, there's no "clawback provision" to recover subsidies. (See Good Jobs New York timeline.)

Looking at EB-5: total funding

The really strange thing is the reliance, according to ESD Board Materials (p, 51ff.), on the EB-5 immigrant investor program, in which foreign millionaires, mostly from China, park $500,000 in a purportedly job-creating investment, get green cards for themselves and their families, and later get their money back. (In this case, they're getting a relatively high--for EB-5--rate of 4.5%.)

The pitch in China, translated
The developer gets cheap capital. The public is supposed to get 10 jobs for each investor.

According to promotional material supplied almost surely by the New York City Regional Center, the private investment pool set up to market EB-5 investments (and reap fees), the project would not be $166 million in total, but $208 million.

Looking at EB-5: percentage of funding

That's not the only misleading part. EB-5 funding is said to make up just 40% of the project, rather than more than 50%.

And Fresh Direct is said to be providing the rest of the funds, which is clearly not true.

In fact, the "government support" is key in reassuring potential investors that the project is solid.

Looking at EB-5: projected funding doubled in less than a year

Also particularly strange is, as of last December, when the project was up for Bronx Economic Development Corporation funding via the New York Empowerment Zone Corporation, the EB-5 funding was only supposed to be $40 million. See graphic below.

That's a huge jump in eight months or so.

Looking at EB-5: the jobs

As noted in the graphic above, 170 investors contributing $85 million--or, apparently, 168 contributing $84 million--must create about 1,700 jobs.  And the EB-5 project, according to an economist's report--not a head count--is said to create 2,145 jobs.

However, the New York City Economic Development Corporation has said the new project would retain nearly 2,000 existing jobs, create almost 1,000 new jobs, and create about 684 construction jobs.

Pitching Fresh Direct to Chinese investors
So, even under this optimistic scenario, there would be less than 1,700 new jobs.

However, we must consider an extraordinarily generous feature of the EB-5 program (see overall analysis in Fortune), one which makes the program especially attractive to developers and entrepreneurs, since, as long as they go through the hoops of the EB-5 project, they can profit by selling public property (visas) they should not own.

No wonder, according to the Wall Street Journal, the annual quota for visas is subscribed. (No, despite the caption in the article, EB-5 funds did not help build the Barclays Center.)

Job creation for the immigrant investors is calculated based on the value of the entire project, not their investment. So the job calculations should be based on the entire $166 million project. (Or, if they're based on the purported $208 million project, they're completely bogus.)

Another twist: different state programs have different job requirements. In order to retain state tax credits, Fresh Direct must create 946 new jobs. But ESD's grant and loan merely require retention of 1,949 jobs through 2025, according to the graphic below, from board materials.

Tuesday, August 26, 2014

My essay from Next City: "After 11 Years of Controversy, Atlantic Yards Becomes Pacific Park Brooklyn"

See: After 11 Years of Controversy, Atlantic Yards Becomes Pacific Park Brooklyn, from the online magazine Next City.

It distills several of the arguments I've been making about the name change.

PHNDC forum tomorrow for candidates vying to fill Millman's Assembly seat, Adams's Senate seat

52nd Assembly District
This year, two legislative seats representing parts of Prospect Heights are open, given the retirement of Assemblymember Joan Millman and the ascension of state Senator Eric Adams to the Borough Presidency.

So, tomorrow night, Wednesday, August 27, the Prospect Heights Neighborhood Development Council (PHNDC) will host a moderated discussion with candidates running for office in Brooklyn’s 52nd Assembly District and 20th State Senate District

52nd Assembly—Doug Biviano, Pete Sikora and Jo Anne Simon
20th State Senate—Rubain Dorancy, Jesse Hamilton and Guillermo Philpotts
Moderator—Janet Babin of WNYC

When: Wednesday, August 27, 7:30PM

Where: Duryea Presbyterian Church, 362 Sterling Place (corner of Underhill Avenue) [Map]
The Democratic primary election is Tuesday, September 9.
20th Senate District

Community members may submit questions for the panels using Google Moderator. All questions will be reviewed and compiled by the forum organizers prior to the event.

Links to coverage

Here's a past state Senate debate and analysis of those backing Dorancy and Hamilton.

Here's last night's Assembly debate and a summary of that debate.

Here's past coverage of the race, focusing on Simon and Sikora, and a recent account of Biviano's success in getting in the debate last night.

Monday, August 25, 2014

From Forest City's latest investor presentation: Atlantic Yards becomes Pacific Park (gif), office space still ignored

First, a gif chronicling the morphing of the Atlantic Yards plan to Pacific Park, according to slides from Forest City Enterprises investor presentations December 2013, February 2014, and August 2014.

Note how only in the latest slide, announcing Pacific Park Brooklyn, highlights "8 acres of landscaped open space." That open space became much more important with the name change.

(Also note how the outlines of all the towers are irregular, unlike in the site plan released with the Pacific Park rebranding.)
Atlantic Yards to Pacific Park Brooklyn on Make A Gif

From the latest  Investor Presentation

The below slides are from the August 2014 Investor Presentation, as disclosed to the SEC.

Note that the project plan, as in previous iterations, does not mention the promised office space, source of the largest share of projected full-time jobs.

Brooklyn is a big part of Forest City Enterprises' business.

The Barclays Center is now the "anchor of our Pacific Park Brooklyn mixed-use project."

There's no mention of the fact that B2 has been delayed a year and was supposed to open in December 2014. Or that the next towers in the project would be built via conventional means.

"I guess we all just have to adjust": music critic, once no fan of arena, celebrates Arcade Fire show

In Metro 8/24/14, Gina Angelotti, who moved to Prospect Heights in approximately 2005, wrote Arcade Fire concert review, Barclays Center, Brooklyn, Aug. 22.

The lead to this review, I have to say, is exactly what developer Bruce Ratner and former Borough President Marty Markowitz were hoping for, an acknowledgment that what happens inside the Barclays Center erases previous opposition:
Moving Past the Feeling (Or, A personal account why I was — and still am — so moved by Arcade Fire)
When I moved to Prospect Heights, Brooklyn nearly a decade ago, I soon became aware that I was living in the epicenter of gentrification and development in the borough. I moved into a neighborhood that would rapidly change faces and fa├žades, and I was by default among those thousands causing it, even though like many of its longtime residents, I also begrudged the idea of a sports arena breaking ground just blocks from my new apartment, on the corner where my new favorite dive bar stood. At the time, I wanted to live in “old Brooklyn,” a city that I’d constructed in my imagination naively based on television series like “The Cosby Show” and that looked very different form the one I landed in after abandoning the Florida suburbs. Somehow it didn’t matter then; I still optimistically clung to my ideals. And my soundtrack to that dying world that I was looking at through fresh eyes was an album thematically about growing up and that I listened to relentlessly, aptly called “Funeral.” I was the child that the Arcade Fire described in verse, holding my mistake up.
Nine years have passed — my first roommates have all escaped New York, the dive bar was demolished and I can no longer visualize what it once was that the Barclays Center arena replaced — but two things haven’t changed; I still call Prospect Heights home and I still tear up (with bittersweet longing for a lost time? With awe at how far I’ve come?) when I listen to Arcade Fire. I never thought that I would be beaming with joy while mouthing the lyrics to “Neighborhood #1″ — a song about the march of time — inside an arena I’d once opposed being built in my neighborhood, nor did I imagine myself among those filling the cold space between our energized bodies and the arena’s high ceiling with the wordless yet loaded chorus of “Wake Up.” I guess we all just have to adjust.
And, of course, forget.

That's not a surprising phenomenon. But there may be other ways to refract Arcade Fire and Prospect Heights nostalgia.

Sunday, August 24, 2014

Post: court papers indicate that indicted lobbyist Lowe admits fraud; consultant had ties to Forest City, though not part of charges

The New York Post reported 8/2014, Ex-Sampson aide admits to swiping $100K from officials
Indicted state Sen. John Sampson has been thrown under the bus to the feds by a former top aide who is also in big trouble with the law, new court papers reveal.
Melvin Lowe admitted during confidential meetings with prosecutors that he defrauded the Democratic Senatorial Campaign Committee out of $100,000 – and gave $75,000 of the money to “Senator #1,” the filing says. A source said “Senator #1” is Lowe’s ex-boss, Sampson (D-Brooklyn), who is fighting charges that he, himself, also committed fraud and tax crimes.
Lowe has admitted that he failed to file tax returns for 2010 to 2012, despite earning $923,000. His trial is September 2.

As I wrote in July, 2010, DSCC consultant Lowe, connected to Sampson and Ratner (and Boyland's challenge to Montgomery), racks up the bucks. City Hall News broke the news that "Largely Unknown DSCC Consultant Cleared $300k In Last Year."

Here's brief coverage from 8/31/09 about Lowe's DSCC hiring, his role in Forest City's Ridge Hill project, and a report (which I never corroborated) of consulting work regarding Atlantic Yards.

When the charges surfaced

Last October, I wrote Former Forest City Ratner lobbyist Melvin Lowe, Sampson crony, charged with corruption.

None of the charges involved Forest City or any other developer. But it continued a remarkable string of corruption charges regarding people with ties to Forest City, including Carl Kruger, Sandy Annabi, Richard Lipsky, and William Rapfogel, as well as Sampson.

Lowe was mentioned, though not called as a witness, during the 2012 Yonkers corruption trial. "Are you familiar with a company known as Westchester Invaders?" asked William Aronwald, defense attorney for Annabi, the former Council Member who flipped her vote to benefit Forest City's Ridge Hill project and was later convicted.

"Isn't it true Forest City Ratner made a contribution of $10,000 to Westchester Invaders at Council Member [Patricia] McDow's or [FCR lobbyist] Melvin Lowe's request?"

"I can't recall," replied former Forest City governmental affairs EVP Bruce Bender.

As I wrote, Westchester Invaders is a drum and bugle corps that McDow has saluted, but I couldn't find corroborating evidence of a Forest City Ratner contribution. Then again, it would not be out of line with company practices in Brooklyn.

Saturday, August 23, 2014

Bruce Ratner again gives to AG Schneiderman campaign and Kings County Democrats

From the latest round of campaign finance filings, we learn that Atlantic Yards developer Bruce Ratner contributed $5,000 in July--as did his wife, Dr. Pamela Lipkin--to the re-election campaign for Attorney General Eric Schneiderman,

Those $5,000 sums are larger than most of Schneiderman's many recent contributions, but smaller than dozens of even larger ones.

Ratner also gave $5,000 to the Kings County Democratic Party (aka Kings County Democratic County Committee) in June.

In 2012, Ratner gave $10,000 to Schneiderman and $4,000 to Kings Democrats. In 2010, he gave $12,500 to Schneiderman.

I don't think we can connect Ratner's contributions to Schneiderman's inaction on some Atlantic Yards-related items, such as the debts of BUILD or the Downtown Brooklyn Partnership's reported lobbying. But, as we know, contributors are more likely to get their calls returned and/or attention paid to their issues.

Friday, August 22, 2014

Video touts "how the community won accountability" for Atlantic Yards affordable housing, acknowledges need to make future units more affordable

At event: Comp. Scott Stringer and Council
Member Laurie Cumbo, via NYC Politics
On the eve of the celebration for "Brooklyn's win in the fight for affordable housing at Atlantic Yards," held last night by BrooklynSpeaks and the Fifth Avenue Committee, BrooklynSpeaks released a video, below, described in a tweet as "How the community won accountability for #affordableHousing at #AtlanticYards, and what's next."

However, as I explained in a long article yesterday for BKLYNR, the affordable housing in the next two towers diverges significantly from previous promises and from the configuration--at least in income bands--in the first tower.

As I wrote last week, FAC and BrooklynSpeaks can celebrate success, notably the new 2025 deadline and penalties for delays in the housing.

But even if the actual affordability was outside the scope of negotiations--secret negotiations, the results announced as a fait accompli--it's both off-key and misleading to proclaim triumph without caveats.

So the video, which does acknowledge a few caveats, is worth a close look at the framing. The issue of affordability is downplayed--though addressed more squarely than previously--and the need for future change is acknowledged.

Framing the issue

As noted below, Gib Veconi of BrooklynSpeaks says in the video, "Nearly a third of the next 590 affordable apartments to be built at Atlantic Yards, will be offered to residents earning 60% of AMI [Area Median Income] or less." That's approximately the average income in Brooklyn.

"That obviously leaves an opportunity for deeper affordability through changes in city subsidy policy for the next 1480 units to come," states Veconi. 

That's one way of putting it. Another way would be to say "through adherence to the original promise," in which affordable units are not skewed toward the upper middle-income band.

After all, once ground for the first Atlantic Yards  tower was announced, BrooklynSpeaks and other civic groups "expressed outrage over Forest City Ratner Companies’ (FCRC) intention to use New York City Housing Development Corporation bonds to subsidize apartments too small for working families, and too expensive for the majority of Brooklynites."

Yes, the skewing in the first tower toward smaller units has been remedied in the next two towers. And the press release did focus on the fact that the two-bedroom affordable units were skewed toward the upper middle-income band.

But the same general criticism--that the units are "too expensive for the majority of Brooklynites" and skewed (in all unit sizes) to the upper middle-income band--surely applies to the next two towers, since half the units would go to a cohort paying $1,967 for a studio, $2,470 a one-bedroom, $2,972 for a two-bedroom, and $3,430 for a three-bedroom.

The video

Leading off

The video begins with the Rev. Clinton Miller of Brown Memorial Baptist Church talking about the importance of affordable housing, and resident Benita Clark expressing a common, if very general, understanding: "I was really excited because they said they were going to have affordable apartments."

The professional--professional-sounding narrator explains that contracts signed after the 2009 re-approval allowed delay until 2035, though the project was long supposed to take ten years.

"Until now, the Atlantic Yards project has really been the worst of both worlds," says Michelle de la Uz of the Fifth Avenue committee. "We've had a multi-billion dollar project that has really fueled speculation, gentrification, and displacement. At the same time, the affordable housing that was supposed to mitigate those gentrification and displacement pressures has been delayed."

Each year affordable housing units are delayed, fewer African-American residents will be eligible to receive community preference in the lottery, the narrator explains, and attorneys elaborate on the concept of "disparate impact."

"After we completed our legal research, we met separately with Forest City Ratner and Empire State Development," states Veconi. "They concluded that it was preferable to agree to accelerate affordable housing than to risk the potential of a civil rights lawsuit."

Unmentioned is the pressure on Forest City to get the pending deal done to sell 70% of the project going forward to the Chinese government-owned Greenland Group, and the increasing attractiveness of Brooklyn real estate, as well as the benefit to the pending partnership of producing affordable housing that would get higher rents.

The reasons to celebrate

Though the new timetable doesn't mean the housing is ten "ten years ahead of the current schedule"--as framed in a TV clip in the video--Marjona Jones of the Brown Community Development Corporation says, more accurately, "it does give us access to affordable housing sooner."

de la Uz notes that the promises are now part of a government agreement, not a side agreement, and that liquidated damages will be deposited in the New York City Housing Trust Fund, which serves low-income families (see page 2 of this letter).

Getting to affordability

At about 7:25 of a video lasting 10:40, the narrator addresses affordability, noting that federal AMI is far higher than Brooklyn income.

After Veconi's quotes, de la Uz points to the importance of the timetable, because federal AMI increases three times faster than local AMI. (I'm not sure about that, because HUD AMI was actually dialed back for 2014.)

The narrator says the agreement did not address affordability, as the lawsuit did not have a basis to challenge city subsidy policy.

Well, that's a question mark. It may not have been part of the lawsuit, but they didn't have to give the agreement their blessing. They had some leverage. Without a peek inside the negotiations--remember, Public Advocate Letitia James said, "To negotiate this deal behind my back is totally unacceptable"--we can't be certain.

Going forward, learning lessons

de la Uz states, "There really is an ongoing need for advocacy to make the affordable units at Atlantic Yards affordable to Brooklyn's families."

That's a question for the yet-to-be established Atlantic Yards Community Development Corporation. But the groups involved, by downplaying or ignoring the levels of affordability as they announced the settlement, already missed an opportunity.

The narrator notes that rezonings, even with affordable housing, tend to accelerate gentrification, so "the accountability of such projects must be insured so promised affordable housing is delivered on a timely basis to meet the needs of populations threatened with displacement."

"The Atlantic Yards settlement represents the culmination of seven years of advocacy by community groups and local elected officials to achieve accountability at a major development project," states Veconi.

"I think it's very important for people to realize the extent that the groups and the individual plaintiffs were willing to go to to demand that they were heard, by the developer and by our elected officials," Jones says.

"This is really critical, because more and more affordable housing is expected to be provided by public-private partnerships," Veconi continues. "We have to show that the community can fight for accountability to hold developers to hold developers to the promises they make."

As noted, they haven't done that regarding affordability in the next towers.

Renee Mintz, a resident of Community District 3, says, generally, "I feel really good about being a part of this, because what it says to me is that anybody can get together and make sure that their story is told and that the people are heard."

Developers and government have an obligation to help mitigate the effects of gentrification and displacement in the communities in which projects are allowed to develop," the narrator concludes. "Although continued vigilance will still be required, the Atlantic Yards settlement shows that coalitions of civic organizations, affordable housing advocates and elected officials who are strategic and stay the course can be successful in impacting public policy, and in ensuring accountability."

Only at the end is there mention of Greenland buying a stake in Atlantic Yards, and the renaming of the project to Pacific Park.