By SUZANNE SATALINE, MATTHEW FUTTERMAN and CHRISTINA S.N. LEWIS
New York's highest court ruled that it is lawful for the state to seize private land for use by private developers, clearing a hurdle for a new basketball arena and marking a victory for local governments hoping to spur development.
Associated Press
A New York Court ruled Tuesday that the state can seize property for the proposed Atlantic Yards development in Brooklyn, shown above in 2008.
Tuesday's 6-1 ruling by the New York State Court of Appeals allows the contentious $4.9 billion, 22-acre Atlantic Yards project in Brooklyn to proceed. The project, being developed by Forest City Ratner Cos., could eventually include office towers and apartments as well as an arena for the NBA's New Jersey Nets.
The decision is a blow to private-property owners who have argued that they are defenseless in protecting their ownership rights once a government deems their land necessary for eminent domain, or the "public good." But it boosts developers and government entities in New York that have sought to boost local economies by offering incentives for private developers.
The court's decision echoes one handed down by the U.S. Supreme Court in 2005, when the justices found it was constitutional for a New London, Conn., economic-development corporation to seize private homes and businesses to build a research campus for Pfizer Inc. That decision, Kelo v. City of New London, Conn., set off a firestorm of protest, prompting many lawmakers around the country to amend laws to prevent governments from seizing private land in some cases. New York, however, didn't change its constitution.
In Tuesday's decision, the New York appeals-court judges ruled that the constitution allows the state entity to seize the downtown Brooklyn land to improve blighted conditions. The land owners had argued that the area was a stable neighborhood, and wasn't blighted.
Stephen Moore discusses why he is opposed to the state of New York seizing private land for a basketball arena.
But the court ruled that if the definition of blight is to be changed in New York, it would be a matter for the legislature, not the courts.
The lone dissenter in the case, Judge Robert S. Smith, wrote: "It might be possible to debate whether a sports stadium open to the public is a 'public use' in the traditional sense, but the renting of commercial and residential space by a private developer clearly is not."
The ruling ends the constitutional challenges to the project. All have failed, including a case brought in federal court. Three legal challenges remain in state court, including one that contests the state's finding of blight and its environmental review of the land, said Matthew Brinckerhoff, the lawyer for a client who continues to live in a condominium on the site. "We lost and we're disappointed, but they don't have these properties and until they do the fight isn't over," he said.
The New York State Urban Development Corp. said in a statement: "With this major hurdle overcome, we can now move forward with development."
MaryAnne Gilmartin, executive vice president of Forest City Ratner, said, "We're pleased and excited to be heading toward the closing."
Still, the project's future remains in question. At $900 million, the arena, to be called the Barclays Center, would be among the most expensive ever built. Already, the scope of the entire Atlantic Yards project has narrowed for the near term in the face of the poor economy. Over the next five years, Forest City Ratner is planning to go forward with construction of the arena and as many as three rental-apartment buildings, the developer says. The rest of the project, including "Miss Brooklyn," the signature tower designed by Frank Gehry, is on hold due to market conditions.
Associated PressMatthew Brinckerhoff, left, the plaintiff's lead attorney, speaks Tuesday in front of Freddie's Bar in Brooklyn, one of the businesses affected by a New York court decision on eminent domain.
The Ratner companies have tentatively secured an investment-grade rating for the roughly $600 million of bonds needed to finance the arena's construction, according to a statement released Tuesday by the state development corporation.
The Atlantic Yards project must issue its bonds and start construction by Dec. 31 to comply with a previous court ruling that limited the ability of privately owned sports teams to qualify for tax-exempt bonds to pay for arenas from which they will derive the bulk of the financial benefits.
Without the tax-exempt status, bankers working on the project say it won't move forward because the bond debt would be too expensive. The state corporation says it will issue the bonds by mid-December.
In addition, the developer still will need to issue $150 million of taxable bonds, which are less likely to prove attractive for investors in this market.
Bruce Ratner, chairman and chief executive of Forest City Ratner, also must close his deal to sell a stake in the team to Russian billionaire Mikhail Prokhorov. Mr. Prokhorov offered to buy an 80% stake in the Nets for $200 million, and a 45% stake in the arena. The ownership deal awaits approval from at least 75% of National Basketball Association franchise owners.
Write to Suzanne Sataline at suzanne.sataline@wsj.com, Matthew Futterman at matthew.futterman@wsj.com and Christina S.N. Lewis at christina.lewis@wsj.com
Printed in The Wall Street Journal, page A3
Looks like the nets will get their stadium over private property owners objections.
