Atlantic Yards

In the summer of 2002, Forest City Ratner Companies (FCRC), one of the largest publicly-traded real estate companies in the US, developed a plan to build on a 22-acre site at the intersection of Atlantic and Flatbush Avenues in Brooklyn. The site is directly across the street from FCRC’s other large Brooklyn developments: Atlantic Center and Metrotech. More than 8 acres at the center of the site are the Vanderbilt Rail Yards, a property owned by the Metropolitan Transportation Authority (MTA).

In early 2003, the MTA stated the rail yards were to be sold to FCRC. However, in September of 2003, the MTA retracted its statement and issued a Request for Proposal (RFP) for potential buyers that required the submission of 20-year profit and loss projections. FCRC offered a $50 million bid for the land and no profit and loss projections, while real estate competitor Extell offered $150 million and submitted the required profit and loss projections. Despite the FCRC’s omission of the required projections and lower bid, FCRC won the RFP (for a final sale price of $100 million, which was formally announced in February of 2005, but then altered again in June 2009 – see below).

In December of 2003, Mayor Bloomberg, FCRC, and the Empire State Development Corporation (ESDC) publicly announced FCRC’s plans to develop the Brooklyn site. Although a Memorandum of Understanding officially established FCRC’s plans for the Atlantic Yards in February of 2005, the sale of the Vanderbilt Rail Yards to FCRC for $100 million was not announced by the MTA until September 2005.

FCRC’s 2005 presentation to the City Council unveiled a Frank Gehry-designed development plan that included 8-acres of public open space, 16 towers with more than 1 million square feet for residential, commercial, and hotel space, and an 18,000 square-feet sports arena to house the New Jersey Nets franchise (which FCRC’s CEO Bruce Ratner had acquired in 2004).

Commercial space would include 230,000 square feet of new retail and 600,000 square feet of offices, primarily in the 511-feet gateway tower nicknamed Miss Brooklyn. Residential space would include more than 1,500 condo units and 4,500 rental units. FCRC stated that the Atlantic Yards project would bring 15,000 construction jobs and 6,000 office jobs to the area.

Supporters of the project hailed the plan as a boon to much-needed local jobs, affordable housing, tax revenue, and economic development to the neighborhood and Borough. As part of the Community Benefits Agreement (CBA) negotiated with the community, including the Association of Community Organizations for Reform Now (ACORN) and Brooklyn United for Innovative Local Development (BUILD), FCRC promised that 50% of the total rental units would be designated as affordable or middle income.

The CBA also included promises to ensure community use of the arena and delegate 30% of construction to contractors run by minorities or women. According to a 2004 report by Smith College Professor of Economics Andrew Zimbalist, even though New York State and City was slated to make direct contributions to the development totaling $449.34 million, the net fiscal impact of FCRC’s plan would produce an $812.7 million overall benefit.

However, a counter-report issued soon after by urban planner Jung Kim and Columbia University Professor of Anthropology, Gustav Peebles, found that FCRC’s plan for Atlantic Yards would result in a net loss of $506 million.

Opponents see the plan is an ill-conceived, out-of-scale proposal that will waste taxpayer dollars for a privately-owned project, bring few benefits to the area, swamp adjoining neighborhoods with traffic, and displace existing residents and businesses. As initially planned, the Atlantic Yards project would have constituted the largest development by one developer in New York City history, as well as the densest housing tract in the country.

In early 2005, a coalition of public officials, planners and architects, community boards, residents, and local businesses – led by City Council Member Leticia James (WF-Brooklyn), architect Marshall Brown, and State Senator Velmanette Montgomery (D-Brooklyn) – formed the Atlantic Yards Development Workshop.

The Workshop produced designs for an alternative plan called the UNITY Project that includes lower buildings and more community green space. Several community coalitions coalesced to protest FCRC’s plans, and the non-profit group, Develop Don’t Destroy Brooklyn (DDDB), led by Daniel Goldstein, has emerged as the principal opponent to FCRC’s plans.

DDDB has organized protest rallies and filed lawsuits against Ratner’s Atlantic Yards, primarily geared towards blocking FCRC from absorbing private property taken through the government’s eminent domain powers. FCRC already owns 86% of the required property and has promised to implement a tenant relocation program for those displaced. Some tenants, however, continue to hold out.

Filed in late 2006 as Goldstein v. Pataki, Goldstein and other property owners sued New York State officials, New York City officials, and Forest City Ratner, claiming an improper use of eminent domain under the United States Constitution and New York State law. Specifically, Goldstein claimed that the transfer of private property to FCRC is not a “public use,” as envisioned by the 5th Amendment to the Constitution, and thus could not be sustained as a valid exercise of eminent domain.

After a District Court dismissed Goldstein’s complaint for failing to state a plausible set of facts that would constitute a justifiable claim, the plaintiffs appealed. In February of 2008, the 2nd Circuit Court of the US Court of Appeals affirmed the decision of the District Court, thereby closing the avenue for relief under the 5th Amendment.

The Second Circuit reasoned that the Supreme Court precedent demands that to state a viable challenge to an exercise of eminent domain, the question is not whether the development plan will fulfill the government objectives of the plan, but whether the state could reasonably believe that it will. Goldstein and the other plaintiffs then petitioned the US Supreme Court to hear the case. The Supreme Court denied certiorari in June 2008, which left the Second Circuit’s disposition of the case as the final word on Goldstein’s federal takings claims.

Thereafter, the Goldstein plaintiffs filed a petition in New York State Court (Goldstein et al. v. Empire State Development Corporation) to prevent the State from effectuating condemnation on their properties. In late 2009, the New York State Court ruled in favor of the State of New York. This lawsuit took a different approach from the original complaint, which had primarily relied on federal Constitutional claims.

This suit relies on the New York State Constitution, which also provides protection against certain government takings, as well as requiring that certain procedures be met before those takings can occur. In addition to the usual “public use” arguments found in many eminent domain suits, the plaintiffs alleged that the Atlantic Yards’ use of eminent domain violated the state constitution by using public money to underwrite urban renewal projects without restricting the occupancy of the development to low-income individuals.

In May 2009, the court ruled in favor of the State of New York, finding that the condemnation does not violate the Public Use clause of the New York Constitution and that the term ” ‘project,’ as used in Section 6, encompasses only low-rent housing projects receiving State aid, and that the low-income housing restriction contained in the constitutional text is thus inapplicable to Atlantic Yards.”

Despite Ratner’s efforts, the credit crisis and faltering economy have resulted in a scaling-down of the original Atlantic Yards plan. In March 2008, FCRC officially acknowledged that Atlantic Yards will likely start as two modest residential towers and an arena, though the developer promised to deliver other components of the plan by 2018. The Nets report that they will be playing their 2011-2012 season in the new arena- which is expected to take 28 months to complete.

In the absence of a written agreement guaranteeing a specific number of affordable units and a timeline governing construction, housing advocates worry that the updated scaled-down plan, which is absent 11 towers, marks the end of affordable housing.

To complicate the matter further, a shortfall in federal subsidies available for affordable housing construction could jeopardize affordable housing provisions in Atlantic Yards regardless of FCRC’s commitments. Community advocates also worry that the planned green spaces will not be provided and instead vacant, uncared-for lots will dominate the area. FCRC has already knocked down 28 of the 53 buildings slated for demolition. With construction stalled, local residents have expressed concern that these vacant lots invite a criminal element and have made the neighborhood more dangerous.

In late May 2009, the City’s Independent Budget Office (IBO) recalculated a cost-benefit analysis it had conducted in 2005. While the 2005 report determined that Atlantic Yards would bring the City a $500 million benefit over 30 years, the IBO’s revised estimation calculated that Atlantic Yards could result in a $65 million loss over 30 years (with the addition of a $100 million subsidy to FCRC in 2007).

In early June of 2009, FCRC officially announced that Frank Gehry was being dropped from the project entirely, and that neither the master plan, nor towers, nor arena will be his work. The developer suggested that replacing Gehry’s arena with a more conventional design by Ellerbe Becket was a necessary step to reduce costs on the arena from $950 to $772 million. Critics, including architectural critics and DDDB, charged that Gehry’s removal demonstrates a betrayal of public trust in that it eliminates key qualities of the plan which had garnered public and official support in the first place.

In June 2009, the MTA Board voted to approve a revised payment plan for FCRC to buy the Vanderbilt Rail Yards. Under the new deal, FCRC will pay the MTA $20 million up front and $80 million over 21 years – instead of the original deal of $100 million up front. The revised deal also reduces FCRC’s commitment of $345 million to $250 million for construction of a new rail yard for the Long Island Rail Road. Construction on the rail yard began in 2010.

Barclays Bank, which already made a deal with FCRC to name the Nets’ arena “Barclays Center” for $400 million over 20 years, made a first-of-its-kind deal with the MTA for naming rights to the Atlantic and Pacific Avenues Station. In late June of 2009, Barclays agreed to pay the MTA $200,000 per year for 20 years. Though the deal is a huge boon to the fiscal problems of the MTA, critics continue to express concern that Barclays Bank, which is accused of being linked to the Holocaust and the Slave Trade, should not have its name on anything in Brooklyn.

In late September 2009, Russian tycoon Mikhail Prokhorov offered to purchase 80% of the Nets franchise and invest over $200 million in the project. The deal must now be approved by the NBA; construction on the arena began in 2010.

In November 2009, the New York State Court of Appeals ruled 6 to 1 that the state could exercise eminent domain in taking private property for economic development projects like Atlantic Yards. The Court of Appeals upheld the claim that the site was indeed blighted, thereby validating the use of the eminent domain to take over the 22-acre development. Developer Bruce Ratner considered this a victory for his development, maintaining that the Court of Appeals sees Atlantic Yards as a benefit for New York City.

In the same month, opponents of Atlantic Yards filed another lawsuit in the State Supreme Court in Manhattan. The recent suit challenges ESDC’s approval in September 2009 of a modified plan for the project. The plaintiffs, which include several community groups and elected officials, claim the plan was approved without sufficient study of its impacts, including an extended construction schedule. This is one of two remaining lawsuits Develop Don’t Destroy has pending.

In December 2009, the court declined to hear DDDB et al. v. ESDC et al., an attempt to annul the Final Environmental Impact Statement (FEIS) for Atlantic Yards and therefore overturn approval of the project. Petitioners claimed that since the FCRC plans had changed so drastically since the FEIS was approved, a new EIS process is warranted. FCRC plans had been scaled down in response to both community opposition and rising costs.

The height of Gehry’s towering Miss Brooklyn was reduced by more than 100 feet in part to appease concerns that the building would dwarf the famed Williamsburg Savings Bank building across the street. Miss Brooklyn, renamed B1, was also completely redesigned and relegated to office use only, likely due to funding constraints derived from the absence of an anchor tenant for the building. Also, the estimated cost of the new Nets Arena rose from the $400 million 2003 estimate to $950 million, in part due to the addition of a bulletproof glass façade (in case of a terrorist attack).

With costs continually rising, FCRC acknowledged that the Gehry design would have to be scaled back. Despite these changes and uncertainties for the future design of Atlantic Yards, the NY State Supreme Court ruled against the plaintiffs and in favor of the ESDC.

Ongoing court battles and difficulties in securing financing are causing significant barriers to the launch of the project. In March 2010, Judge Abraham G. Gerges, of the New York State Supreme Court, dismissed a claim by local residents attempting to block the condemnation. This decision paved the way for Forest City Ratner to condemn 14 houses on the property. The last landowner vacated his property in April 2010.