Just to be clear, Mr. Carrion

I am all for the White House having an Office of Urban Affairs. But the Director, Adolfo Carrion, shouldn't be boasting about his CBAs in his official bio. It explains that during his tenure as Bronx Borough President, "Almost no project passed muster without a Community Benefits Agreement." What it doesn't explain is that the Gateway Center and Yankee Stadium CBAs didn't really involve the community, making them less like real CBAs and more like backroom political deals. It doesn't mention that the Gateway Center CBA doesn't provide for specific performance as a remedy, but only liquidated damages, or that the Yankee Stadium CBA is very likely unenforceable for lack of consideration. Nor does it mention all of the shenanigans that have gone on with the Yankee Stadium CBA, like the year and half long delay in distributing funding under the CBA, the lawsuit filed by the community fund's former lawyer and administrator alleging mismanagement of the fund, the indictment of a city council member on extortion and money laundering charges related to a procurement contract connected to the CBA, or the fact that parks promised to be built on the site of the old Yankee Stadium still haven't materialized.

It's problems like these that have contributed to the poor reputation of New York City CBAs and created precedent for developers to co-opt the CBA negotiating process. The CBAs that Carrion helped to draft and finalize also figure among the catalysts for City Comptroller John Liu's recent decision to form a task force on CBA best practices and reforms. The White House simply shouldn't be representing these agreements up as an example of good urban policy, even if only impliedly.

Did you say "slush fund"?

City Council member Larry Seabrook was indicted earlier this week for money laundering, extortion, and fraud, and the indictment revealed that he got a subcontract for Yankee Stadium awarded to a Bronx boiler manufacturer not on the original bidder list. (The New York Times called the manufacturer a "close associate" of his). Under pressure to work with local businesses, the manufacturer was awarded the job even though its bid was $13,000 higher than the low bid. Allegedly, Seabrook then got the manufacturer to pay him $50,000--with most of the payments going to shady community organizations that he controlled. Seabrook, who never disclosed his relationship to those community groups, also used them to funnel hundreds of thousands of dollars in City Council discretionary funds to himself and his family.

City Comptroller John Liu is now pressing for changes to the development approval process. Liu called the New York City CBAs an "embarrassment," and said that standards need to be created to regulate these deals:

From Atlantic Yards to Yankee Stadium to the Columbia University expansion, the public has seen a string of broken promises to communities and questionable involvement by some government officials. Furthermore, an additional layer of unpredictability confronts developers when they engage in private negotiations over benefits associated with their projects. In fact, studies have singled out New York City's community benefit agreements as examples of what not to do.

He's setting up a task force to propose best practices, and he's also going to look at the standards for Industrial Development Agencies, which, in New York, exist mainly to channel subsidies to developers. As Liu explains, individual projects are often worthwhile and deserving of public funds, but a clear process is needed to define priorities for the distribution of scarce subsidies.

The Atlantic Yards Report points out the Seabrook scandal raises questions about the Atlantic Yards CBA:

Most of the signatories of the AY Community Benefits Agreement did not exist before the project arose, and all are funded by the developer, Forest City Ratner's MaryAnne Gilmartin finally acknowledged last July. . . .

One of the CBA signatories, ACORN, got a $1.5 million loan/bailout from the developer. Another, the "dubious nonprofit" Brooklyn Endeavor Experience, has spent most of its funding on pest management at its building, First Atlantic Terminal, even though "such tasks are not really part of BEE's mandate". Meanwhile, Darryl Greene, the subject of an intense controversy regarding a deal for a video casino, also has ties to the CBA. "An RFP for an Independent Compliance Monitor was issued by Greene's Darman Group in March 2007, nearly three years ago, but no such position was ever announced."

New York City has had trouble with development amenities for a long time, so the problems with the Atlantic Yards, Yankee Stadium, and Columbia CBAs are in some ways unsurprising. A 1988 report from the Association of the Bar of the City of New York recommended doing away with CBA-type deals:

While at first blush it appears useful to require developers to meet community needs by providing amenities of various sorts in return for project approvals, in a city chronically short of funds for public purposes, the practice of requiring them to build amenities unrelated to needs created by their project has undesirable consequences for government and should be discontinued.

Requirements to provide amenities unrelated to project needs at bottom constitute taxes, which are not levied evenhandedly on the basis of neutral principles but are required from developers on a case by case basis. These ad hoc requirements cast government in an unjust and therefor untenable role.

Such a practice also tends to undercut the decision making process. Government decision makers can be induced to approve projects in order to obtain amenities unrelated to the project's needs, rather than from an examination of projects solely on their merits. The use of such amenities thus tends to have a distorting effect of decision making.

They also distort the city's priorities and capital planning. While such amenities unrelated to project needs seem attractive to meet such needs are those for senior citizen housing, parks and libraries in some communities, these may or may not be the city's greatest priorities. Priorities should be worked out carefully on a city-wide basis, not ad hoc on a community basis. Capital planning should also not be ad hoc.

Short term considerations should not overwhelm sound principles, particularly in New York City, which has spent years since the fiscal crisis in eliminating past practices that represented an accumulation of such gimmicks.

The requirement of building unrelated amenities also can make the city less attractive for developers. They thus can interfere with long term objectives of promoting rational development in the city.

While developers perhaps can adjust, the practice threatens to corrode the integrity of city government and its zoning and land use laws. That price is too high for any of the advantages claimed.

Good luck Mr. Liu.

Some New York City news

Bronx Borough President Ruben Diaz, Jr. last week received an extension [see correction below] for submitting his recommendation concerning the approval of the Kingsbridge Armory redevelopment so that he can give Related Cos. time to accept a draft CBA. The proposed agreement was drafted by the Kingsbridge Armory Redevelopment Alliance, Diaz, Community Board 7, and local elected officials.

Update and correction 08-27-09: The news that Diaz was granted an extension was not completely accurate. While he does have a de facto extension, Diaz is apparently "being considered non-compliant for not making a recommendation by the land review process' built-in Tuesday, August 25 deadline." Although the influence of community boards and borough presidents during the ULURP process is sometimes described as practically nonexistant (see here, calling ULURP a "horse and pony show"), Diaz is confident that the planning commission will take his opinion into account if no CBA is signed by the real deadline, September, 9. The Bronx News Network has also learned that the CBA includes a living wage requirement, which may throw a wrench in the CBA's gears, as Related Cos. has stated flat out that it will not agree to increased wages

In the first democratic party debates for New York City Comptroller, the candidates weighed in on the Yankee Stadium CBA-like agreement. Melinda Katz raised concerns about the enforceability of CBAs and suggested that the city should develop a standardized method for reviewing stadium developments. David Weprin declared that he would use the Comptroller's audit powers to hold the Yankees and the New York City Economic Development Corp. to the commitments made in the CBA. John Liu also promised to review the Yankee Stadium CBA "intensively," and David Yassky explained that he would pursue fewer large scale developments and seek to use the city's economic development programs to provide the types of amenities that communities in each of the five boroughs need, such as parks and schools.

Some links

The news out of Seattle is that the Dearborn Street project has been canceled due to the economy. This means that the CBA won't go through either, but Puget Sound Sage affirms that "the CBA represents a groundbreaking model for making development accountable to community stakeholders."

On the east coast, there's also been a lot of talk about the new Yankee Stadium, including questions about the jobs being created, the replacement parks that are supposed to built, the economic prospects for all the new high-priced seats, and the odd "home run wind." Check out the Good Jobs First Clawback Blog for more.

Thursday's CBA news.

• Organizers in Pacoima finalized a CBA for a new shopping center. The CBA has a good local hiring program and also prohibits the developer from renting space to check cashing companies. The project itself will benefit the community by improving what's now a brownfield, and by bringing jobs and new retail to the city. See Kerry Cavanaugh, Mayor Saw Potential in Costco, Pacoima Pairing, The Daily News of Los Angeles, Jul. 28, 2008. For an update on the project, see this January 2009 press release from the Los Angeles Community Redevelopment Agency.
  
• In Richmond, the city council hasn't wasted any time getting the CBA fund committee set up--they appointed themselves.
• And the Yankees Stadium Community Benefits fund, although it was delayed it getting set up, has finally given out some major grants. The New York Daily News reports that they gave out $261,000 to 15 grant recipients yesterday.
  

Atlantic Yards & Yankee Stadium face difficulties with tax-exempt financing

A few years ago, New York City started using tax exempt bonds in an "aggressively creative way" to provide cheap financing for large economic development projects. But that might change under proposed IRS rules, which, if adopted, will apply to bonds issued after February 2007. State and city officials are trying to prevent the rule change, or, failing that, obtain waivers for the Yankees, the Mets, and the Atlantic Yards arena.

Both the Yankees and the Mets have relied extensively on the tax exempt bonds in financing their new stadiums, and they're lobbying to ensure that they'll be exempted from the new rules, if passed. This is especially important for the Yankees, as the team has expressed a need for additional financing. (The picture to the right shows the new Yankee Stadium, on the right, next to the old one. Photo by Mary Alteffer from the AP.)

The story is slightly different for the Atlantic Yards arena, however. The developer, Forest City Ratner Cos., has long been planning on using the tax exempt bonds to finance the $950 million facility (not to mention the rest of the project), but no bonds have actually been issued for the project. Although Bruce Ratner has admitted that the rule change is going to be an obstacle for the development, he remains optimistic and claims that constriction could begin in the fall. (The photo shows part of the project footprint, including the MTA's Vanderbilt Yards, looking north west toward Atlantic Ave and Flatbush. Photo by Chang W. Lee for the Times.)

The Times paints a more pessimistic picture of the project's future:

The Internal Revenue Service initially approved the use of the bonds for the ballparks, but quickly issued a proposal in 2006 to tighten the rules governing the use of tax-exempt bonds so that it would be more difficult, and perhaps impossible, for this kind of financing to be used again by profitable, private enterprises like professional sports teams.

Now state and city officials say the proposed rules are jeopardizing what is planned to be the city's next big sports palace: the $950 million Barclays Center, an 18,000-seat basketball arena for the Nets that is the centerpiece of the huge residential and commercial complex in Brooklyn known as Atlantic Yards.
...
The $4 billion Atlantic Yards project already faces delays because of litigation, a sluggish economy, the lack of commercial tenants and the reluctance of lenders to finance large real estate developments.
...
When the project was approved in December 2006, Mr. Ratner optimistically indicated that its first phase — the arena, an office tower, a retail complex and three residential buildings — would be completed by 2010. But under a financing agreement completed nine months later, he was given 12 years to complete the first phase.
The economic picture has changed significantly. This year, Mr. Ratner acknowledged that he would not begin construction of the office tower, once known as Miss Brooklyn, until he had an anchor tenant, which could take years.
...
Real estate executives say that if Mr. Ratner cannot get tax-exempt financing for the arena, it will make the project significantly harder.

For more on this story, see the New York Times article and the Atlantic Yards Report posting.

News of the financing problems only adds to the list of delays facing the Atlantic Yards project. As I've mentioned before, communities considering CBAs need to be aware of the vagaries of the development process, since, in many cases, the community won't benefit until the project is well on its way to completion.

Into the cookie jar... another criticism of CBAs

Last week's Crain's New York Business ran an opinion piece on CBAs written by Alair Townsend, who called them "zoning for sale" and "government sanctioned extortion." Ms. Townsend cited the Yankees Stadium and Columbia deals as illustrating that CBAs have "little to do with adverse impacts but are instead designed to grease the approval process. Groups use rezoning proposals as leverage to extract whatever they can--jobs at specified wages, cash, housing, and neighborhood facilities." She also stated that it's "blatantly untrue" that CBAs are private deals.

There is some truth to Ms. Townsend's criticism that the Yankees Stadium and Columbia CBAs were not "private matters," as local officials were extensively involved in each case (especially the Yankees deal, where the local officials signed a CBA without any community groups, although that's another story). However, just because public officials take cognizance of a developer's commitment to work with the communities that a project will impact or facilitate that type of cooperation does not prove that a CBA amounts to extortion. This is especially true where developments are supported by significant public subsidies, as in the case of Yankees Stadium. Ms. Townsend also failed to comment on the Atlantic Yards CBA, which was a mostly private deal not involving public officials and which can hardly be called extortion (although it can certainly be faulted for other reasons, especially its reliance on "astroturf" community groups)--not to mention the dozens of other CBAs from outside of New York State that have been well received by the public, the government and developers alike.

Ms. Townsend's article is available here, but a subscription is required.

More on Yankee Stadium

Matthew Shuerman of the New York Observer, who's been covering CBAs for quite some time, has an audio piece on WNYC about Yankee Stadium. He talks to residents about the project and the CBA, and to Michael Drezin, the Bronx's lawyer and spokesman. Drezin was responsible for the delays in distributing money from the CBA's community fund because he "mistakenly told the IRS that it would be a nonprofit organization." The application was denied because the fund should have been described as a private foundation. Like any good lawyer, Drezin blamed this oversight on his accountant. Shuerman also speaks with Bettina Damiani from GoodJobsNY in the piece. She cogently points out that the community should have been involved in this CBA from the beginning.

Yankees CBA update

The Yankees have received a lot of attention because of delays in distributing funding under the CBA, but it seems that they have finally worked everything out. A spokesman for the community fund said yesterday that Bronx little league teams and and the City University of New York (CUNY) will be the first recipients of funding. Students from the Bronx will receive a preference in applying for the $50,000 CUNY scholarship. It's not clear yet, however, which little league teams will receive funding and how much they will receive.

The spokesman also denied claims that the distribution of funds under the CBA has been delayed. He attributed the problems to getting charitable tax status and finding suitable candidates for the fund's committee. The fact remains, however, that it's taken nearly two years for this funding mechanism to be implemented. Construction has been ongoing for much of that time as well, meaning that the benefits promised in the CBA have not coincided with many of the impacts of the development on its surrounding area. Quite a few people have characterized this as delay, even if the fund's spokesperson won't.

Now that the fund is up and running, I have a question: how is the community being involved in funding decisions? The community wasn't really included in negotiating the CBA, so is the fund going to be distributed in the same way, without real community input?

For more information on the recent funding decisions, see this article in the Bronx Beat. For the photo, thank jpchan.

Yankees update

Just a few weeks ago the New York Times reported that the money the Yankees were supposed to supply for a community benefits fund had been languishing in escrow for nearly a year and a half. 

Today, the New York Daily News reported that things have not gotten any better. Apparently, a dispute arose at a meeting between several Bronx officials and the Yankees President, Randy Levine, when he couldn't supply them with information about how many local residents had been hired or why the money for the CBA fund hadn't been distributed. Levine told the local officials to ask Bronx Borough President Adolfo Carrion, who played a significant role in brokering the CBA, about these problems. Carrion didn't attend the meeting, however, nor did any of the other local officials who signed the CBA.

A Yankees spokesperson did state that the team had met its 25% local hiring goal. The "construction advisory committee" that the CBA called for to monitor compliance has apparently never met, however. 

Yankee Stadium CBA

The Yankee Stadium CBA, completed in 2006, has faced stiff criticism. The agreement, to begin with, was made between the Yankees, the Bronx Borough President and the Bronx Delegation of the New York City Council; it was not negotiated or signed by any community groups. On this basis alone it arguably should not be called a CBA. One of the agreement’s most controversial provisions is the trust fund that it created to be administered by “an individual of prominence” through distributions to local nonprofit groups. Because the fund’s trustee will be appointed by the same elected officials responsible for the CBA, it has been referred to as a “slush fund” by critics who fear that funding will be not be distributed impartially. The Yankee Stadium CBA has also been criticized by community members (see here, for example) due to the fact that the development will eliminate more than twenty acres of parks, leaving the city to pay for their replacement in addition to the subsidies already being given to the project.

These concerns have proven to be somewhat warranted. In January 2008, nearly seventeen months after construction began, the New York Times reported that none of the money set aside by the Yankees had been distributed. Apparently, the funding has been held up because the advisory panel that is responsible for administering the fund has yet to choose a chairman, register as a charity or select any grant recipients. The Yankees have indicated that their obligations were fulfilled by depositing the money into escrow and that the club is not responsible for the delay, and since no community groups signed the agreement, none exist that would have standing to bring an enforcement action. As a practical result, this has meant that the only people who could move the funding along are the four elected officials who signed the agreement and who, apparently, have not been very proactive about seeing to its implementation. Other elected officials are frustrated with the situation and have “complained that they are in the dark” about the CBA. Indeed, the names of people chosen to serve on the fund’s advisory panel have not been released, save for one member who has been credited with making political donations to one of the elected officials responsible for the agreement. All of this goes to show that negotiating a CBA may be only the first of many battles in ensuring that community benefits are actually received. But the Yankee Stadium CBA, despite its weaknesses, should not be totally discounted yet. The Yankees have promised that the community will receive all of the money pledged to it, and it may just boil down to a waiting game for the moment.

Good Jobs New York has produced a detailed report critical of the Yankee Stadium deal. They explain that:

To seize public parklands, win rapid permitting, and land massive taxpayer subsidies for their new stadium in the South Bronx, the New York Yankees hired numerous former public officials and benefited from the actions of a few current elected officials to play insider baseball, shutting out Bronx residents and New York City taxpayers.

More information from Good Jobs New York is available here, and text of the CBA is posted here.