Matter of City of New York (Fifth Amended Brooklyn Ctr. Urban Renewal Area, Phase 2)
Annotate this CaseDecided on October 11, 2013
Supreme Court, Kings County
In the Matter of the Application of the City of New York, relative to acquiring title in fee simple to real property needed for the FIFTH AMENDED BROOKLYN CENTER URBAN RENEWAL AREA, PHASE 2 Within an area bounded by Fulton Street, Duffield Street, Willoughby Street, and Albee Square, and a second area bounded by Lafayette Avenue, Rockwell Place, Fulton Street, and Ashland Place, both of which areas are located in the Borough of Brooklyn, City and State of New York.
ULTRA EQUITIES, CO. (Block 146, Lot 29)[Damage Parcel 12], YOUN GU BANG (Block 146 Lot 16)[Damage Parcel 10], THE RUTH L. GOLDMAN IRREVOCABLE TRUST (Block 146 Lot 17)[Damage Parcel 11], and EMAN REALTY CORP. (Block 146 Lots 34, 35, 36)[Damage Parcels 13, 14, 15], Claimants, - -
against
THE CITY OF NEW YORK, Condemnor.
33132/2008
Attorney for the City -
Michael A. Cardozo Corporation Counsel of City of New York
100 Church Street
New York, New York 10007
(212) 356-2668
Fred Kolikoff, Esq.
Attorney for Claimant Youn Gu Bang and The Ruth L. Goldman Irrevocable Trust -
Goldstein, Rikon & Rikon, P.C.
80 Pine Street
New York, New York 10005 (212) 422-4000
Michael Rikon, Esq.
Attorney for Claimant Ultra Equities, Co.
Kramer Levin Naftalis & Frankel, LLP.
1177 Avenue of the Americas
New York, New York 10036
(212) 715-9100
James G. Greilsheimer, Esq. / Cynthia Lovinger Siderman, Esq.
Attorney for Claimant Eman Realty Corp.
Alan J. Firestone, Esq.
32 Court Street
Brooklyn, New York 11201
(718) 522-5800
Wayne P. Saitta, J.
The Court held a joint framed issue hearing to determine what zoning should be applied to the damage parcels listed in the above caption, for the purpose of determining the value of those parcels on the date they were acquired by the CITY through eminent domain. The parcels were owned by four claimants, ULTRA EQUITIES, CO., YOUN GU BANG, THE RUTH L. GOLDMAN IRREVOCABLE TRUST, and EMAN REALTY CORP., who agreed with the Condemnor CITY OF NEW YORK to try the issue jointly. The hearing was held on March 4, 5, and 6, of 2013.
The Claimants' properties were vested by the CITY OF NEW YORK in connection with the Fifth Amended Brooklyn Central Urban Renewal Area plan on January 27 2009. The properties were taken to create a public open space, that would encompass the north half of the Block 146, which is bounded by Willoughby Street, Albee Square (Gold Street), Fulton Mall and Duffield Street, which would be known as Willoughby Square. The plan also included developing an underground parking garage under the site.
On the date of vesting, the properties were zoned C6-4.5, which permits development of a floor area ratio (FAR) of 12. The properties had formerly been zoned as C6-1, which allows development of an FAR of 6. The properties were rezoned in 2004 at the same time the Brooklyn Central Urban Renewal Area was amended to include creation of an open space and underground parking facility on the northern half of block 146.
This issue before the Court is whether the rezoning of the properties to C6-4.5 was part of the project for which the properties were taken, and therefore should not be considered in valuing the property pursuant to the project influence or Miller rule.
In valuing a property for condemnation purposes the property should be neither enhanced or diminished by the impact of the project on the value of the property. US v Miller, 317 US 369, 63 S. Ct. 276 (1943).
In its decision in US v Reynolds, 397 US 14, 90 S.Ct .803 (1970) the Supreme Court elaborated on the rationale of the Miller, rule explaining that:
[*2]
"The Court early recognized that the market value' of property condemned can be affected, adversely or favorably, by the imminence of the very public project that makes the condemnation necessary. And it was perceived that to permit compensation to be either reduced or increased because of an alteration in market value attributable to the project itself would not lead to the just compensation' that the Constitution requires. On the other hand, the development of a public project may also lead to enhancement in the market value of neighboring land that is not covered by the project itself. And if that land is later condemned, whether for an extension of the existing project or for some other public purpose, the general rule of just compensation requires that such enhancement in value be wholly taken into account, since fair market value is generally to be determined with due consideration of all available economic uses of the property at the time of the taking" Id at 16-17
The first question that must be considered in deciding whether the rezoning of the subject properties falls within the project influence rule is, what constitutes the project in this case.
Claimants contend that the project is only the creation of Willoughby Square, a half block of public open space with an underground parking garage. Claimants contend that the rezoning of the surrounding blocks was not part of the Willoughby Square project, but a generic area wide rezoning. Claimants contend that it was not necessary to rezone the subject properties in order to create the Willoughby Square public open space or build the parking garage, and that the creation of Willoughby Square was not necessary to the rezoning. Claimants also assert that not valuing their properties based on the zoning in place at the time of vesting would constitute a denial of equal protection.
The CITY argues that the project includes not only Willoughby Square but also the entire rezoning of the blocks surrounding Willoughby Square, as well as the amendments the text of the zoning resolution, the amendments to the Brooklyn Central Urban Renewal area, and the special permits approved for various parking facilities. The CITY argues that all of these actions were related and were part of a comprehensive plan that was aimed as stimulating private development of large office buildings in downtown Brooklyn.
Testimony of Michael Kwartler
Michael Kwartler, an urban planner retained by Claimants, testified that the project in this case is Willoughby Square, the planned public open space and underground parking garage on the northern half of Block 146.
He stated in his report, that the Downtown Brooklyn Development Plan and the physical improvements that are included in the plan are independent projects. He makes a distinction between the plan, which proposes several specific developments, and the developments themselves.
He stated in his report, that the Downtown Brooklyn Development Plan, (also referred to as "the Downtown Brooklyn Plan"), included the following developments or projects: Willoughby Square, Jay Street Plaza, special permits for four parking facilities, the expansion of the boundaries of the Downtown Brooklyn Urban Renewal Area, street [*3]demappings, street widenings, amendments to the MetroTech Urban Renewal Plan, modification of the MetroTech special permit, and amendments to the Atlantic Terminal Urban Renewal plan.
He described a plan as a wish list that contains elements which may or may not be realized, as opposed to a project which he characterized as something that is actually being done or constructed. He noted that each of the projects that are part of a plan, have their own trajectory and time frame.
He stated that the zoning changes helped enable the plan, but the plan is not integral to the zoning. He noted that the rezoning remains even if elements of the plan are never realized. He also pointed out that the even though the purpose of the rezoning was to encourage private developers to construct large office buildings, the rezoning did not require that office buildings be built in the rezoned area. In fact, hotels rather than office buildings were constructed on the sites adjacent to Willoughby Square.
He testified that the subject properties remained rezoned C6-4.5 even though office buildings were not constructed adjacent to Willoughby Square. Kwartler also pointed out that the rezoning would remain if the City had never taken the subject properties for Willoughby Square and in that case, the owners would have been able to build to an FAR of 12.
He testified that the rezoning of the subject properties was not necessary in order to develop Willoughby Square. He stated that the rezoning to C6-4.5 does not create a public open space, but that it is the acquisition of the properties by the CITY and the changes to the Urban Renewal plan that effectuates the creation of the public open space. Further, the rezoning was not necessary for the development of the underground parking garage which requires a special permit in both the old C6-1 district and the rezoned C6-4.5 district.
Kwartler stated that he believed that the actual purpose of rezoning the subject properties was to increase the amount of floor area allowed to be developed on the site, so that the right to develop this additional floor area could be sold to the owners of adjoining lots. He pointed out that if the site of Willoughby Square had been mapped as a park then it would not have any developable floor area to sell.
Kwartler also testified that the development of Willoughby Square was not necessary for the rezoning of the surrounding area to C6-4.5, or for the development of office space which the rezoning was designed to encourage. He stated that the open space was not needed as mitigation for the increased density which would result from the rezoning, because the area already had sufficient open space. He characterized Willoughby Square as an amenity rather than a mitigation.
Testimony of Winston Von Engel
Winston Von Engel, Deputy Director of the Brooklyn Office of the New York City Department of City Planning, testified on behalf of the CITY. Von Engel was involved in developing the Downtown Brooklyn Plan. He stated that the rezoning of the subject properties was part of the comprehensive plan that included the creation of Willoughby Square. He stated also that all of the other actions that were listed as related actions in the application for the rezoning of the subject properties approved by the City Planning Commission on May 10 2004 (Application C 040171 ZMK), were part of the Downtown [*4]Brooklyn Plan. He asserted that the related actions complemented and depended on each other to achieve the goals of the plan.
Von Engel testified that absent the creation of Willoughby Square, the surrounding area would not have been rezoned because City Planning believed that public open space was necessary to spur the large scale office development that they were attempting to encourage. He added that it would not have been appropriate from an urban planning perspective to rezone the subject properties to C6-4.5, without the other related actions that were part of the plan.
Von Engel testified that two previous plans for the area, MetroTech and the First Special Downtown Brooklyn District, demonstrated the need for open space to encourage development. He stated that MetroTech, which included an open space, was successful. He stated that First Special Downtown Brooklyn District, which did not include any increases in density, did not generate the density of development that they were aiming for.
The purpose of the Willoughby Square public open space was to be a corporate address or "place maker" that, together with the underground parking facility, would induce private developers to construct large scale office buildings around the square.
Von Engel testified that Willoughby Square was designated as public open space rather than mapped as a park so that the Economic Development Corporation could design the space to address corporate needs. If it had been mapped as a park , it would have been under the jurisdiction of the New York City Parks Department and would have been designed to address residential needs.
Von Engel denied that the purpose of rezoning Willoughby Square area was to create additional developable floor area that could be sold by the CITY. He stated that no development rights from the site had been sold, but he did not know whether any would be sold in the future.
Von Engel agreed with Kwartler that it was not the rezoning that created Willoughby Square, but the acquisition of the sites by the CITY and the amendments to the Urban Renewal Plan which restricted the CITY to developing the area as public open space. Von Engel also agreed with Kwartler that the rezoning did not require that offices be developed in the rezoned area.
However, Von Engel disagreed that Willoughby Square by itself constituted the project. He stated that the difference between a project and a plan was a matter of semantics. He disputed Kwartler's characterization of the rezoning as simply a generic zoning, noting that it was passed together with other land use actions including the zoning text amendments, the amendments to the Urban Renewal Plan, City Map changes and the special permits for parking facilities.
Von Engel pointed out in his report that as part of the Downtown Brooklyn Plan the Urban Renewal Plan was amended to include design controls that would require that the buildings fronting Willoughby Square have ground floor retail and a uniform base height of 85 feet.
Von Engel conceded that the public open space and parking garage could be developed on Willoughby Square under the original zoning, without any rezoning.
He stated that the Willoughby Square site was rezoned because it was part of the larger area being rezoned to C6-4.5 He testified that the rezoning of the area comprising [*5]Willoughby Square was inconsequential because it was to be used for public open space.
Von Engel also testified that a triangular area bounded by Gold Street, Willoughby Street and Flatbush Avenue Extension had originally been designated for public open space and slated to be rezoned to C6-4.5. However, the area was cut out of the rezoning when the CITY decided not to create an open public space on that land.
ANALYSIS
The Supreme Court in Miller articulated its holding in terms of excluding the influence of a "project" for which a property is taken, in determining valuation. However, the term project can have different meanings in the different contexts.
New York State Eminent Domain Procedure Law defines a "Public Project" as "any program or project for which the acquisition of property may be required for a public use, benefit or purpose." EDPL §103(G)The term "program" is not a defined term and is somewhat elastic. However, there are certain characteristics of a program, as the term is commonly used, which can be read into the definition in EDPL §103(G). The use of the term "any program" to define a "public project" indicates that a project can include a series of related actions as opposed to being limited to a single distinct action or development. Also, the term program can encompass series of planned actions where not all of the included actions may be realized. Lastly, it also includes more than physical buildings or structures.
Given the rationale of the project influence rule, a comprehensive land use plan can be considered a "program" within the meaning of the definition of "public project".The intent of the project influence rule is ensure that a condemned property is valued as if the project never occurred. It seeks to factor out any increase or diminution in the value of the property caused by the project. It is consistent with the intent of the rule that where a plan consists of several different governmental actions that are related and integral to the plan, the influence of all of those actions taken to develop or realize the plan should be excluded from valuing the property.
The Appellate Division Second Department, has applied the Miller rule to exclude the effect of zoning overides on the value a property taken through eminent domain where the override and the taking were both part of a comprehensive plan. Matter of Queens West Dev. Corp., 289 AD2d 335, 734 NYS2d 208 (2nd Dept 2001). The plan in Queens West involved a physical master plan that included specific physical controls for all of the property within the plan, rather than a rezoning that allows for a range of development within general bulk use restrictions, as is the case here. However, this difference does not require a different result herein as the relevant holding is that where an action, such as a zoning override, is part of a comprehensive plan, then the impact of the entire plan on the value of the subject property falls within the scope of the Miller rule.
Similarly in City of New York v Zahav LLC, 106 AD3d 418, 963 NYS2d 866 (1st Dept 2013) , the Court held that the claimants' property should not be valued as if it had been rezoned "because the rezoning was a necessary and integrated element of a comprehensive plan to redevelop the area as a high density, transit oriented mixed-use expansion of the Midtown Central Business District , and the rezoning of properties in the area to a higher zoning designation would not have occurred but for the project. " Id [*6]at 418-19.
In Zahav LLC the subject properties were excluded from the rezoning and the claimants sought to have them valued as if they had been rezoned. However, the underlying principle is that the project influence rule includes the influence of interrelated actions that are part of a comprehensive plan, pursuant to which a property is condemned.
In this case the CITY rezoned the subject properties, as part of the Brooklyn Downtown Plan, which is a comprehensive plan. The rezoning of the subject properties was part of a larger rezoning of the surrounding blocks. The City Planning Commission approved the rezoning of the area bounded by Willoughby Street, Flatbush Ave Extension, and Fulton Street to C6-4.5 as part of a zoning map application, (C 040171 ZMK) on May 10 2004 . As part of the same application the Commission also approved zoning changes the various others areas in Downtown Brooklyn.
Application C 040171 ZMK listed 21 other related items that were being considered by the Commission concurrently with the zoning map application. These included the Fifth Amendment to the Brooklyn Urban Renewal Plan (C 040173 HUK ), the designation of properties in the Brooklyn Urban Renewal Plan (N 040176 HGK), and an application for a special permit for a public parking garage on the Willoughby Square site (C 040181 ZSK).
The Fifth Amendment to the Brooklyn Urban Renewal Plan designated the subject properties to be acquired by the City for the purpose of creating a public open space and underground parking garage on the northern half or Block 146, to be known as Willoughby Square. The application to approve the Fifth Amendment to the Urban Renewal Plan was also approved by the City Planning Commission on May 10, 2004, and listed the rezoning (C 040171 ZMK), as well as the designation of properties in the Brooklyn Urban Renewal Plan (N 040176 HGK), and the special permit for a public parking garage on the Willoughby Square site (C 040181 ZSK) as related actions.
Each of the separate actions by themselves were not sufficient to achieve the goal of the plan, which was to encourage the development of large office buildings. The separate actions were designed to reinforce each other and together provide sufficient incentive to private developers to build large office buildings in the area.
Claimants point out that, unlike the situation in the Queens West case, the zoning in this case was generic, in that it increased the allowable density but did not require that office towers be built. The CITY did not amend the Urban Renewal Plan to require that the rezoned area or even the sites bordering Willoughby Square be developed as offices. As it turned out, hotels rather than office buildings were built around Willoughby Square.
However, the fact that the CITY chose to encourage private development of offices, rather than requiring offices does not mean that the rezoning, the acquisition of Willoughby Square, and the other related actions were not all part of a comprehensive plan. It only means that the CITY believed, mistakenly as it turned out, that the incentives created by the related actions would be enough to induce developers to build large office buildings.
It is also true that rezoning either the subject properties or the larger area was not necessary in order to create Willoughby Square, and that the creation of Willoughby [*7]Square was not necessary to the rezoning.
It was not necessary to rezone the subject properties in order to develop the public open space. Even if the CITY did not want to map the area as a park, in order to have more design flexibility, it could have left the sites zoned as C6-1 and still have developed them as a public open space. Similarly, the CITY had to approve a special permit for a parking garage whether the sites were rezoned or not.
The rezoning of the subject properties was not necessary to create Willoughby Square which was done by the more targeted actions of amending the urban renewal plan and granting a special permit. Also, Willoughby Square could have been developed even if the larger surrounding area had not been rezoned.
However, that fact that the rezoning was not necessary to develop Willoughby Square does not mean that the rezoning and Willoughby Square were not part of the same project.
While it is theoretically and legally possible for the CITY to have developed Willoughby Square without rezoning either the subject properties or the larger surrounding area, there would have been no point to do so. The evidence established that the City would not have condemned the subject properties to create the Willoughby Square without the rezoning and the other related actions.
Claimants assert that because it was not necessary to rezone the subject properties to create Willoughby Square, the CITY's actual purpose for rezoning them was to create development rights on the properties that the CITY could sell after acquiring them.
The CITY denies this, but the explanation offered by their expert, Von Engel, that the CITY included the subject properties in the rezoning because it was inconsequential whether or not they were rezoned, lacks credibility. Such explanation is also at odds with how the CITY dealt with similar situations.
Originally as part of the plan, the triangular area bounded by Gold Street, Willoughby Street and Flatbush Avenue Extension had been designated for public open space and slated to be rezoned to C6-4.5. However, when the City decided not to use that land for public open space, it was removed from the rezoning of the surrounding area. Clearly, there was a conscious decision on the part of the CITY to upzone that area when it was going to be used for public open space and then consciously remove it from the rezoning when it was no longer to be used as an public open space.
Similar to rezoning the subject properties, the only effect of upzoning the Gold/Willoughby/Flatbush triangle when it was slated for open space, would have been to create developable floor area that could have been transferred to an adjoining site.
In a case involving condemnation of property for an interior boulevard and a park as part of the Hudson Yards project, the CITY took the position that it does not rezone parcels intended to be used as parks. In the Hudson Yards case the trial court found,
"The City established that it follows a policy not to rezone land to be used as public parks or streets, as it would serve no purpose. There was no reason to rezone the property taken for the boulevard and park upward from M1-5 as the intended use would have made it exempt from zoning." (internal citations omitted) Matter of City of New York (No. 7 Subway Extension) 33 Misc 3d 1202(A), 938 NYS2d 225 (Su. Ct NY Co. 2011)
While Hudson Yards involved property to be used as parks, and the subject properties here were taken to be used as public open space, the policy would be equally applicable because it served no purpose to rezone the subject properties in order to use them as public open space.
The only logical explanation offered at trial as to why the CITY included the Willoughby Square properties in the rezoning, was Kwartler's contention that the CITY wanted to create additional development rights that it could sell to adjoining property owners. The only result of rezoning the subject properties was to increase the developable floor area of the sites.
However, even if the CITY did rezone the subject properties for the purpose of creating additional developable floor area, that would not require a different result.
If the CITY had rezoned the subject properties it intended to acquire, in order to create air rights it could sell to owners of adjoining properties, this would evidence that the rezoning and the condemnation were part of the same project. While the CITY would profit financially from the creation of the increase in density, it would do so by selling the development rights to properties it was upzoning in order to encourage development. The upzoning would help create a market for the development rights the CITY would sell.
While there is serious question whether it would be a proper use of either the zoning power or power of eminent domain to upzone property that the CITY intends to condemn in order to sell the newly created developable floor area, this question is not before the Court.
The propriety of the CITY's exercise of its zoning power and eminent domain would have had to have been challenged directly and can not be attacked collaterally in this proceeding. This proceeding is only to determine the amount of compensation to which the owners of the subject properties are entitled. In this joint hearing, the Court is only called upon to decide if valuing the subject properties as rezoned is barred by the project influence rule.
Lastly, valuing the Claimants' property based on the prior zoning, rather than the rezoning, would not constitute a denial of equal protection. While generally a property owner is entitled to have his property valued at its highest and best use at the time of taking, the Miller rule carves out an exception where there is an increase in value is a result of the project or plan for which the property was condemned.
There was no evidence presented that there were any other rezoned parcels which the CITY valued, for condemnation purposes, based on the higher C6-4.5 district.
Nor is this a case, where the CITY left the subject properties out of a larger rezoning because it intended to acquire them. Also, it is not a situation where the CITY refused to approve plans submitted by the owners, as in, In re Inwood Park Addition, 230 AD 41, 243 NYS 63 (1st Dept, 1930), St. Morris Associates v McMorran, 35 AD2d 997, 318 NYS2d 121 (2nd Dept., 1970), Winepol v Town of Hempstead, 59 Misc 2d 768, 300 NYS2d 197 (Sup. Ct. Nassau, 1969), cited by Claimants.
The Court finds that the acquisition of the subject properties to develop Willoughby Square, and the rezoning of the subject properties and the larger area [*8]around Willoughby Square were part of a comprehensive plan, together with the other related actions listed in the rezoning application (c) 040171 ZMK). As such, valuing the subject properties based on the rezoning is barred by the project influence rule, and the subject properties must be valued based on the prior zoning of C6-1.
Dated: Brooklyn New York
October 11, 2013
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