Lawsuit asks Ratner: So, how much profit will you make on Atlantic Yards?

Lawsuit asks Ratner: So, how much profit will you make on Atlantic Yards?
The Brooklyn Paper / Julie Rosenberg

A lawsuit against the Atlantic Yards mega-project now hinges on whether the state agency that approved the project can back up its claim that the development is a benefit to the public even if the agency never actually determined the profit that private developer Bruce Ratner is expected to reap.

In Monday’s oral arguments in a case brought by nine residential and commercial owners and tenants who are facing forced eviction to make room for Ratner’s 22-acre project, plaintiff’s lawyer Matthew Brinckerhoff repeatedly argued that the state never examined whether Ratner’s profit was so large that the promised public benefit of the basketball, office and residential development is merely “incidental.”

Justice Robert Spolzino of the Appellate Division appeared sympathetic to Brinckerhoff’s argument, asking ESDC lawyers several times to explain how the agency determined that the project has what they called an “overwhelming” public benefit if the ESDC had not also measured the private benefit to Ratner.

At one point, he interrupted ESDC lawyer Charles Webb, who was trying to make the state’s central argument, namely that the plaintiff’s filed their case too late.

“Sorry, but can you address [plaintiff’s] point that ESDC never articulated a balancing of private versus public benefit?” Spolzino asked.

Webb responded that there is no requirement for the agency to know how much the private entity would benefit. He added that the public benefits of the project — a basketball arena, 2,250 units of taxpayer-subsidized below-market-rate housing, open space and the elimination of “blight” — were so apparent that they did not need to be balanced against Ratner’s expected profits.

“So your argument is that they don’t have to” investigate Ratner’s riches, Spolzino asked, sounding a bit frustrated.

After the 30-minute hearing, Brinckerhoff said he was pleased that Spolzino homed in on the public versus private benefit question.

“The ESDC never quantified in any way what Ratner’s private benefit is, so there’s no way for the public to compare the private benefit and the public benefit,” he said. “Ratner and the ESDC have zealously guarded this information because they didn’t want the public to know about a deal that makes Ratner billions.”

The plaintiffs’ case also hinges on Brinckerhoff’s reading of the state Constitution. In Monday’s arguments, he reiterated his contention that Article 18, section 6 of the state’s Constitution requires that “the occupancy of any such project shall be restricted to persons of low income” if state funds are allocated.

In Ratner’s case, hundreds of millions of direct state and city infrastucture funds, plus hundreds of millions of indirect tax subsidies, are being doled out by the public.

“As soon as ESDC put state money into the project…it was required to comply with 18–6,” he said, reminding the court’s four-judge panel that Atlantic Yards is slated to include several thousand units of luxury housing.

To bolster his case, Brinckerhoff cited a 1951 case, Denihan vs. O’Dwyer, in which the state’s highest court overruled a city decision to turn over a large piece of land to an insurance company to build a parking lot that would be partly covered by a park.

“There was a deal struck, but the Court of Appeals held that the private benefit to the insurance company was dominant and the more minor public benefit [of the park] was subordinate and incidental,” Brinckerhoff said.

ESDC lawyer Philip Karmel retorted that the “persons of low income” clause in the state Constitution only referred to low-income housing projects, not all projects that get state money.

“If Section 6 applies to any project with a housing component, then the state would be able to address blighted conditions only with low-income housing,” he said. “An arena and new infrastructure for the Long Island Rail Road are perfectly reasonable [uses] of state funding,” under the state Constitution.

An ESDC spokesman referred The Brooklyn Paper to a Ratner-commissioned report that became public in 2006. But that report, prepared by KPMG, has been widely criticized because it relied only on data provided by Ratner. Indeed, The report states that KPMG “has not independently verified the data.”

In any event, the report was not cited by ESDC lawyers on Monday when asked by the justices of the Appellate Division about ESDC’s efforts to ascertain Ratner’s expected profit.

UPDATED AT 8:42 PM: Story was altered after a response from the Empire State Development Corporation.