Atlantic Yards Takes the Court

Steven Wishnia Dec 11, 2009

Downtown Brooklyn may still see the Atlantic Yards sports arena and housing project sprout up, but the recession is more likely to kill it than the lawsuits filed by opponents.

On Dec. 1, the State Court of Appeals refused to review a lower-court decision denying a challenge to Atlantic Yards on several grounds related to the project’s environmental impact statement. That ruling came one week after the court’s 6-1 decision on Nov. 24 that the state could use eminent domain to seize property for Atlantic Yards in the “public interest.”

Develop Don’t Destroy Brooklyn and other groups have filed five major lawsuits trying to halt Atlantic Yards. Three have been lost. The other two, the most recent, are still pending.

In the eminent-domain case, the plaintiffs argued that it was illegal for the government to seize property because it would be taken for the private gain of the developer, Forest City Ratner, rather than for public use. The suit also contended that evicting people from homes on the site to clear it for the project would violate the state constitution, as the new buildings constructed would not be exclusively for low-income residents.

Chief Judge Jonathan Lippman, writing the majority opinion, rejected both of those claims. “It is indisputable that the removal of urban blight is a proper, and, indeed, constitutionally sanctioned, predicate for the exercise of the power of eminent domain,” he held.

The suit also questioned the Empire State Development Corporation’s designation of the area as blighted, “substandard and insanitary” — a prerequisite for its redevelopment to be considered a public purpose.

Judge Lippman had somewhat more sympathy for that claim. “It may be that the bar has now been set too low — that what will now pass as ‘blight,’ as that expression has come to be understood and used by political appointees to public corporations relying upon studies paid for by developers, should not be permitted to constitute a predicate for the invasion of property rights and the razing of homes and businesses,” he wrote.

But ultimately, he concluded, economic underdevelopment and stagnation could legitimately qualify as “blight.” Whether that could justify the use of eminent domain, he ruled, “is a matter for the Legislature, not the courts.”

In dissent, Judge Robert S. Smith wrote that building offices and apartments for a private developer to rent was not a public purpose, and that “blight” meant a danger to public health and safety, not that “property may be condemned and turned over to a private developer every time a state agency thinks that doing so would improve the neighborhood.”

The eminent domain issue may still be unresolved. On Dec. 3, the state’s mid-level court, the Appellate Division in Manhattan, ruled that Columbia University could not use eminent domain to claim property in West Harlem for its Manhattanville development. The court said the neighborhood was wrongly defined as blighted.

Forest City Ratner still has to sell bonds to finance the project by end of the year in order to keep its tax exemption for them. On Dec. 1, the two major credit-rating services listed $500 million in tax-exempt bonds for the proposed arena as “investment grade” — but just barely. Moody’s Investor Services rated them as Baa3 and Standard and Poor’s as BBB -. Both ratings — the same given to bonds for the new Yankee Stadium and the Mets’ Citi Field — are the lowest a bond can get without being considered junk.

The arena, planned to open in 2012 as the new home for the New Jersey Nets, is expected to cost between $800 million and $1 billion. The rest of the funds would come from lower-obligation debt, Ratner’s own money, and city and state subsidies. The Bloomberg administration has also agreed to let the owners pay off the debt instead of property taxes.

Moody’s and Standard and Poor’s questioned whether the demand for luxury seats at Nets games — the team opened the season with a National Basketball Association record losing streak — would be enough to make the deal profitable. Many luxury seats at the new Yankee Stadium went empty this year, despite a club that won the World Series.

This article was excerpted from a longer version published by Tenant/Inquilino.

For more information, read the First Person account from Daniel Goldstein: “Standing Up to Eminent Theft” in this issue of The Indypendent. 

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