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

The Brooklyn Paper
Share on TwitterTweet
Share on Facebook

Don’t miss our updates:

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.

Updated 5:11 pm, July 9, 2018
Today’s news:
Share on TwitterTweet
Share on Facebook

Don’t miss our updates:

Reasonable discourse

eric from brooklyn says:
One thing missing in this article was the elephant in the room at the oral arguments.

The fact that the state paid the developer to eradicate the "slums" and turn them into vacant lots prior to condemnation/eminent domain takings so that it woud not be a "slum" clearance project subject to Article 18, section 6 of the state’s Constitution should be all the red flag the justices need to kick this back to the esdc for a do-over.

If they don't, time to get new guardians of the public interest.
Feb. 23, 2009, 10:02 pm
al pankin from downtown says:
the public benefit is very obivous, the project will clean up an revitalize an area that has been blighted for over sixty years,
since when is making money is a crime in this country, business is not a hobby. these nine holdouts or whatever they are holding up the clean up of this blighted area, it's long over due.
Feb. 24, 2009, 7:52 am
eric from brooklyn says:
making money is fine.

having state officials give you untold(really, untold) riches at the expense of others rights not so fine. especially when development can be done without trouncing on those rights.

and for what its worth, given that newswalk was rehabbed into expensive condos and curiously cut out of the footprint, one of the nine lives in a building rehabbed before all this, the tip-top/pecters bread place was planned to be a hotel and the odd shaped storage buildings across the railyards were planned to be a hotel...

i'd say the only blight was that rich people didnt live there(and thus 18.6 of the state constitution to protect them specifically from this type of shenanigans) and the fact that the state(or lirr) neglected to beautify their yard and the city didnt clean the streets.

i have avoided doing the math(too many years since college) but id bet that 80% of the "blight" was the railyard and the potentially doomed pacific street. looks like governmental neglect, not a hopeless area.

and, if ratner wants to make the state true owners lets see the books of similar places ike madison square garden. and give true ownership to the city, not this dollar a year b.s. because atner nis doing brooklyn a favor.

back of envelope(i.e. first stab) analysis:

20,000 seat arena
1/2 full on the average
$40 dollar ticket price on the average
200 events oer year on the average

20,000x.5x40x200=80,000,000 per year

if 1/2 goes to costs thats $40 million per year.
add in $20 million from barclays makes it $60 million per year.

add in $5 of concessions for each patron thats $5 million more.

add in luxury suite income(somemone help me here) of $10 million per year makes it $75 million a year PROFIT

times 30 years is $2.25 Billion dollars.

that doesnt even include the apartments.

what is the promise now? 7000 apartments?

average sales price is $700psf.

average size is 700 sqf.

$7000*700*700= 3.43 billion.

i am not a a developer, but say 20% is profit thats $700 million.

that tops out at $4 billion dollars profit in a no bid contract. god i hope the judges see through this.

all because ratner worked for the city years ago and built a wonderful set of connections.

Feb. 24, 2009, 8:48 am
eric from brooklyn says:
thats 3 billion, not 4 billion.

its early yet. need caffeine.
Feb. 24, 2009, 9:36 am
Pat from Bay Ridge says:
I guess "blight" is whatever the city says it is, or more specifically, land which the city thinks isn't generating enough taxes. Filling the developer's pockets with tax dollars is incidental.

In other words, be careful what you claim is "blight"--your land might be next.
Feb. 24, 2009, 9:47 am
sid from Boerum Hill says:
One should remember that a justice questions at oral argument doesn't indicate how they actually will vote. He may have made up his mind on the timeliness issue and didn't want to hear it any more.

Eric your back of the envelope calculations are wrong. You leave out little things like income taxes and the cost of the lost value of the money you put up or if you have loaned it the cost of interest. If I had a billion dollars and put it in municipal bonds at 5% interest I would have made a billion dollars in 20 years and had to pay no taxes.
Feb. 24, 2009, 12:53 pm
eric from brooklyn says:
no one said the numbers were perfect. the swag was 1/2 the gross goes to things like property taxes(pilots), taxes, etc.

i also left out income streams like parking.

dont be foolish in thinking that much in income taxes will be paid.

the boro, city and state are in the process of being snookered.

and so what if its back in taxes. just more bloated bureacracy.

it boils down to ratner had a track record of raising debt. the public didnt have to be involved(directly).

the recession was/is a game changer. he cant even put the bridge back in place.

and yes, the justices my have made up their mind. that wouldnt say a lot for the justices now would it.
Feb. 24, 2009, 1:02 pm
Tim Geoghegan from Cobble Hill says:
This project has never made sense from its initial pro forma (now wholly unrealistic) and should join Bloomberg's Westside stadium in the dustbin of history. Only Bruce Ratner and his cronies (e.g. Borough President Markowitz) were going to benefit from this travesty.

The fact that public opinion was ignored and that the state was willing to dump millions of taxpayer dollars in order to enrich a millionaire is a fitting end for the past decade of greed and avarice.

ESDC: shut this project down.
Feb. 24, 2009, 4:28 pm
Queen of the Click from Bay Ridge says:

We've seen nothing pan out from the Atlantic Yards other than our politicians selling out Brooklyn and developers passing the buck to our politicians. There is no benefit to the neighborhood or to Brooklynites. Promising housing and jobs was just a ploy.

Our political leaders have loaded their offices with employees, yet none of them figured out that we were going into this recession. And now that we are in a recession, none of them have rethought the plans for the Atlantic Yards. The bailout money should not be going into this project. The money should be put into our schools where it's needed. Kids didn't cause the problems in our economy and they shouldn't have suffer because of corporate America.
Feb. 24, 2009, 9:05 pm
judah from bed-stuy says:
What about the jobs? Jobs!.... Jobs!...
Jobs!..... The majority of those oppose of this have no alternative. What's the alternative. Jobs.... Jobs.... Jobs!
Feb. 25, 2009, 4:59 pm
sid from Boerum Hill says:
The case has been decided 4-0 for the much for the Judge's questioning.

New York, NY— Petitioners—26 community organizations led by Develop Don’t Destroy Brooklyn—will be headed to the highest court in the state, the Court of Appeals, after a four judge Appellate Division panel ruled for the Empire State Development Corporation (ESDC) on their challenge to the environmental review and blight designation for developer Forest City Ratner’s floundering Atlantic Yards proposal in Brooklyn. (The court’s ruling is here.)

quick justice means they made up their minds before the Oral argument and nothing they heard changed their minds.
Feb. 26, 2009, 4:41 pm
sam from downtown says:
you're incorrect Sid. you are talking about two different cases.

the case this article is about, is not the one just decided.
Feb. 27, 2009, 6:37 pm
sid from boerum, hill says:
Thanks Sam I made a boo boo...
Feb. 28, 2009, 11:50 pm

Comments closed.

First name
Last name
Your neighborhood
Email address
Daytime phone

Your letter must be signed and include all of the information requested above. (Only your name and neighborhood are published with the letter.) Letters should be as brief as possible; while they may discuss any topic of interest to our readers, priority will be given to letters that relate to stories covered by The Brooklyn Paper.

Letters will be edited at the sole discretion of the editor, may be published in whole or part in any media, and upon publication become the property of The Brooklyn Paper. The earlier in the week you send your letter, the better.

Keep it local!

Stay in touch with your community. Subscribe to our free newsletter: