Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment and in Support of Plaintiffs' Motion for Summary Judgment

    SUPREME COURT OF THE STATE OF NEW YORK 
COUNTY OF QUEENS 

CAMPAIGN TO SAVE OUR PUBLIC HOSPITALS - 
QUEENS COALITION, an unincorporated 
association, by its member WILLIAM 
MALLOY, CAMPAIGN TO SAVE OUR PUBLIC 
HOSPITALS - CONEY ISLAND HOSPITAL 
COALITION, an unincorporated association, INDEX NO. 10763/96 
by its member PHILIP R. METLING, ANNE 
YELLIN, and MARILYN MOSSOP, 

Plaintiffs, 

- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 
CITY OF NEW YORK, NEW YORK CITY HEALTH 
AND HOSPITALS CORPORATION, and NEW 
YORK CITY ECCNOMIC DEVELOPMENT 
CORPORATION, 

Defendants. 

PLAINTIFFS’ MEMORANDUM OF LAW 
IN OPPOSITION TC DEFENDANTS’ MOTION 

FOR SUMMARY JUDGMENT AND 
IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 
  

KENNET] KIMERLING 

PUERTO RICAN LEGAL DEFENSE & 

EDUCATION FUND, INC. 

99 Hudson St., 14th Floor 

New York, N.Y. 10013 

212-219-3360 

ELAINE R. JONES 
Director-Counsel 

MARIANNE L. ENGELMAN LADO 
RACHEL D. GODSIL 
NAACP LEGAL DEFENSE & EDUCATIONAL 
FUND, INC. 
99 Hudson St., 16th Floor 

New York, New York 10013 

212-219-1900 

BARBARA OLSHANSKY 
CENTER FCR CONSTITUTIONAL RIGHTS 
666 Eroadway, 7th Floor 
New York, N.Y. 10012 
212-664-6464 

 



  

SUPREME COURT OF THE STATE OF NEW YORK 
COUNTY OF QUEENS 

CAMPAIGN TO SAVE OUR PUBLIC HOSPITALS - 
QUEENS COALITION, an unincorporated 
association, by its member WILLIAM 
MALLOY, CAMPAIGN TO SAVE OUR PUBLIC 
HOSPITALS - CONEY ISLAND HOSPITAL 
COALITION, an unincorporated association, INDEX NO. 10763/96 
by its member PHILIP R. METLING, ANNE 
YELLIN, and MARILYN MOSSOP, . 

Plaintiffs, 

- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 
City OF NEW YORK, NEW YORK City HEALTH 
AND HOSPITALS CORPORATION, and NEW 
YORK City ECONOMIC DEVELOPMENT 
CORPORATION, 

Defendants. 

PLAINTIFFS’ MEMORANDUM OF LAW 
IN OPPOSITION TO DEFENDANTS’ MOTION 

FOR SUMMARY JUDGMENT AND 
IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 
  

PRELIMINARY STATEMENT 
  

The Uniform Land Use Review Procedure ("ULURP") is the 

procedure for ensuring community, borough, and City Council 

participation in the sale or lease or other disposition of City 

property. New York City Charter § 197-c (McKinney 1995). This 

participation occurs through review by the affected Community 

Boards and Borough Presidents, including public hearings, and 

review and approval first by the City Planning Commission, then the 

City Council, and ultimately the Mayor. This process is an 

extremely important opportunity for a public dialogue surrounding 

 



significant decisions that involve City property. 

ULURP applies to any "[s]ale, lease (other than the lease of 

office space), exchange, or other disposition of the real property 

of the City.” New York City Charter § 197-c. The Queens Hospital 

Center, Elmhurst Hospital Center, and Coney Island Hospital (the 

"target hospitals") are real property of the City; the Mayor plans 

to sublease them to private entities. Therefore, ULURP applies to 

the transactions. Defendants claim that ULURP is not applicable to 

the disposition of the target hospitals because the Health and 

Hospitals Corporation ("HHC"), and not the City, is subleasing the 

target hospitals. Defendants are wrong on both counts. 

Pirst, the Mayor of the Ciry of New York -- not HHC -- hag 

decided to privatize the public hospitals. The Mayor chose to put 

the privatization plan into the hands of the New York City Economic 

Development Corporation ("EDC"). The Mayor decided that the first 

three hospitals to be "sold" are the target hospitals. In a myriad 

of ways, the Mayor and his agents have implemented the Mayor’s plan 

to privatize the public hospitals, all without the consideration or 

consent of HHC. 

The Board of HHC has never voted to privatize the public 

hospitals in general or to dispose of the target hospitals 

specifically. Accordingly, it is the Mayor’s transaction, his 

lease of the target hospitals to a private entity, that is at issue 

in this case. 

Second, ULURP is applicable to a disposition of City property 

by HHC. This conclusion is consistent with the HHC Act, which  



  

plainly intended for there to be review of HHC’s decisions to 

dispose of City property. See HHC Act, Unconsolidated Laws § 

73854(6). Indeed, the Act specifically provides that any 

disposition of real property held by HHC must be approved by the 

Board of Estimate. Id. 

As the defendants note in their memorandum, the HHC Act 

granted the Board of Estimate the power to approve dispositions of 

City property. The defendants then also argue that in so doing, 

the HHC Act incorporated the then-extant City Charter § 384 which 

granted the Board of Estimate power to approve real property 

transactions involving City property. Indeed, City Charter § 384, 

as amended in 1989, now divides the responsibility that formerly 

belonged to the Board of Estimate, granting approval power to the 

Mayor and requiring ULURP review under 197-c. New York City Charter, § 

384 (b) (5). Pursuant to § 384, no City property may be disposed of 

without both approval from the Mayor and without a ULURP review of 

the land use impact of the proposed sale. New York City Charter, 

§ 384 (b) (5). Thus, contrary to defendants’ assertions, not only is 

ULURP review not precluded by the HHC Act, but the terms of the Act 

incorporate the City Charter’s mandate for review. 

Finally, the City Charter also requires defendants to submit 

the Offering Memoranda to affected community boards and borough 

presidents. New York City Charter § 197-b. Defendants admit that 

they did not submit the Offering Memoranda to the Community Boards. 

Defendants’ submission of the Offering Memoranda to the Community 

Advisory Boards is not sufficient to comply with the plain language 

 



  

of § 197-b, which does not allow for "effective conveyance." 

* * * 

Plaintiffs thus oppose defendants’ motion for summary judgment 

on the ground that there are material facts in contention: 

specifically, the parties disagree as to whether the City or RHC ig 

undertaking the disposition of the target hospitals. 

Even 1f this Court should find that HHC is alone undertaking 

to privatize the target hospitals, however, it is clear as a matter 

of law that ULURP applies to a disposition by HHC of City-owned 

property. Therefore, if this court finds summary judgment 

appropriate, plaintiffs move for an order granting summary judgment 

in their favor. 

STATEMENT OF FACTS 
  

The facts underlying these proceedings and the instant motion 

are set out in the accompanying affidavits of David R. Jones and 

Rachel D. Godsil, Esq.’ They are summarized here for the 

convenience of the Court. 

A. The Health and Hospitals Corporation 

The New York State Constitution mandates that the State and 

its political subdivisions provide aid, care, and support for the 

needy and provide for the protection of the health of the 

inhabitants of the State and the City of New York. New York State 

Constitution Article XVII, 88 3 5 4. 

  

! References to the affidavit of David R. Jones, sworn to on 
August 22, 1996, will be referred to hereafter as Jones Aff. and 
references to the affidavit of Rachel D. Godsil, Esqg., sworn to on 
August 23, 1996, will be referred to as Godsil AfE. 

4 

 



  

In order to fulfill this constitutional mandate to provide 

health care for the poor, on May 26, 1969, the New York State 

Legislature enacted the HHC Act, Unconsolidated Laws §§ 7381 et 

seq., establishing the Health and Hospitals Corporation. HHC was 

Created at the request of New York City to provide comprehensive 

physical and mental health care to.the ill and infirm of the City, 

and was specifically charged with ensuring the provision of "high 

quality, dignified" care to "those who can least afford such 

garvices.! 'U.L. § 7382. In order to effect the purposes of the 

Act to provide such care, HHC'’s creation was intended to overcome 

the "myriad of complex and often deleterious constraints" which 

inhibited the provision of care by the City government's operation 

of the municipal hospital system. U.L. § 7382. 

However, many of the powers granted to HHC were constrained, 

and in some instances, subject to direct oversight by the City. 

See U.L. 8% 7385(19); 7386(1){(a), (2) (Dd), «7); 7290(5)-(3). Among 

these were the power to "dispose of by sale, lease or sublease, 

real or personal property including but not limited to a health 

faciliry, or any intevest therein. . . >" y.L. § 7385(5) This 

authority was contingent upon approval by the then-existing New 

York City Board of Estimate. U.L. § 7385(§). 

On July 1, 1970, the City and HHC entered into an agreement 

("Operating Agreement") under which HHC agreed to assume 

responsibility for maintaining and operating the City’s public 

hogplitals. ‘For its part, the City agreed (o lease its hospital 

facilities to HHC for an annual rent of $1, for a term coexistent 

 



  

with the life of HHC. A copy of the Operating Agreement is 

provided as Exhibit 1, annexed to Jones Aff. 

Eleven of the acute care facilities spread over the five 

boroughs included in the Operating Agreement have continued in 

operation since 1970. S$ 12, Jones Aff. Among these eleven 

hospitals, three are targeted for immediate disposition by the 

Mayor as part of his privatization plan: Queens Hospital Center, 

Elmhurst Hospital Center, and Coney Island Hospital Center (the 

"target hospitals"). § 12, Jones Aff. 

The public hospitals, including the target hospitals, provide 

a disproportionate amount of care for those who are indigent or 

uninsured. Private hospitals are just that -- "private." Under 

state law, private hospitals generally may turn away the uninsured 

and underinsured except in cases of emergency. Public Health Law 

§ 2805-b. 

Queens and Elmhurst Hospital Centers are the only public acute 

care facilities in Queens. 9 14, Jones Aff. If they are 

privatized, there will be no facility in Queens that is required 

under state law to provide non-emergent care to the indigent or 

uninsured. Similarly, Coney Island Hospital is the largest 

facility in South Brooklyn, serving a population of 750,000. ¢14, 

Jones Aff. The privatization of this targeted hospital may result 

in the lack of care for many within its catchment area unable to 

afford private care. 

Queens Hospital Center has existing plans for renovation and 

reconstruction. Y 15, Jones Aff. The "gale" of the hospital to a 

 



private entity could affect the future land use of the site, 

specifically having an impact on the plans for and completion of 

those much needed repairs and modernization. 9% 15, Jones Aff. 

B. The Mayor’s Plan to Privatize the Target Hospitals 

It is clear beyond any doubt that the privatization of the 

target hospitals is the Mayor’s plan, and not HHC’s. The HHC Board 

has been ignored in each of the steps leading to the privatization 

of the target hospitals: 

1. The Mayor Launched the Privatization Initiative. 

In 1994, the Mayor embarked upon a privatization initiative 

that included the privatization of public hospitals and related 

facilities. He did not consult with or seek approval from the HHC 

Board as to the issue of privatizing the HHC Hospitals. { 16, 

Jones Aff. 

The Mayor put forward no evidence to HHC that the 

privatization of HHC facilities would save the City or HHC money. 

9 17, Jones Aff. Neither did the Mayor provide evidence that the 

provision of care would be superior. Indeed, HHC hospitals are 

already managed by private medical centers or medical corporations. 

Specifically, Queens Hospital Center and Elmhurst Hospital have 

affiliation contracts with Mount Sinai School of Medicine, and 

Coney Island Hospital has worked in partnership with University 

Group Medical Associates., P.C. ("UGMA"), a medical group that 

employs more than 300 physicians. ¢ 18, Jones Aff. 

From the inception of his extensive privatization program, the 

Mayor has exercised total control over the entire privatization  



  

process. 9 19, Jones Aff. While on some occasions, the Mayor’s 

office, often through Maria Mitchell, the Special Advisor to the 

Mayor for Health Policy and Chairperson of the HHC Board, has 

briefed the HHC Board about City policies and plans, the Mayor has 

never consulted the Board. Indeed, the HHC Board has never voted 

Lo proceed with privatization. $ 19, Jones Aff. 

iy The Mayor Retained EDC to Manage the Sale. 

Again without consulting the HHC Board, in 1994 the Mayor 

determined that the New York City Economic Development Corporation 

should manage the disposition of the target hospitals and retained 

EDC for this purpose. 9 21, Jones Aff. Also in 1994, the Mayor's 

advisors circulated proposals to transfer control of Lincoln, North 

Central Bronx, Elmhurst, and Queens to their respective voluntary 

affiliates and to transform Coney Island into an independent 

voluntary hospital. Y.20, Jones Aff. 

3. Pursuant to its Agreement with the Mayor, EDC Contracted 
with J.P. Morgan to Study the Financial Feasibility of 
Privatization. 

In April of 1994, EDC issued on behalf of New York City a 

Request for Qualifications ("RFQ") from firms qualified to perform 

financial advisory services in connection with "the privatization 

of certain City-owned assets" including "hospitals and related 

medical facilities." A copy of the RFQ is provided as Exhibit 1 

annexed to Godsil Aff. 

In May of 1994, on behalf of New York City, EDC issued a 

Request for Proposals ("RFP") from firms qualified to assist and 

advise EDC with respect to the privatization of "certain City-owned 

 



  

assets" including "hospitals and related medical facilities." A 

copy of the RFP is provided as Exhibit 2 annexed to Godsil Aff. 

In August of 1994, EDC retained J.P. Morgan to "provide 

General Services to the Corporation generally in respect of the 

City’s asset disposition initiative." A copy of the retainer 

agreement is provided as Exhibit 3. annexed to Godsil Aff. Again, 

the Board of HHC was not consulted. 9 23, Jones Aff. 

The J.P. Morgan report was issued in March of 1995. A copy Of 

the J.P. Morgan Report is provided as Exhibit 2, annexed to Jones 

Aff. While the Report concluded that the target hospitals have 

desirable assets which will attract buyers, J.P. Morgan 

specifically did not consider the costs or benefit to the delivery 

of services to the indigent. Exhibit 2, annexed to Jones Aff. 

("The financial benefit to the City of New York, of course, also 

depends upon factors not considered in this analysis, such as 

conditions of sale relating to the indigent, provision of services 

to the City, and the like.") Once again, the HHC Board was not 

given an opportunity to review or authorize the report Or. any 

recommendations in it. The HHC Board only received a copy of the 

repori after it was made public. 9$ 24, Jones Aff. 

4. In February of 1995, Without Consulting the HHC Board, 
the Mayor Announced that the City Would Proceed with the 
Disposition of the Target Hospitals. 

In February of 1995, prior to the issuance of the J.P. Morgan 

Report, the Mayor publicly announced that the City would proceed 

with his plan to privatize the target hospitals. The HHC Board was 

not consulted regarding this decision and did not give its 

 



  

approval. $4 22, Jones Aff. 

Shortly after the issuance of the J.P. Morgan Report, in April 

of 1995, six members of the HHC Board sent a letter to the Mayor 

protesting the privatization process and specifically the Mayor's 

failure to consult with the Board on any issue relating to the sale 

of the hospitals. 9 25, Jones Aff. 

At the HHC Board Meeting held April 27, 1995, Ms. Mitchell, 

announced, "The J.P. Morgan report was a logical first step in a 

multi-tiered process which the City required in order to determine 

whether privatization was in its financial interest, and if it was, 

then to determine how to proceed. The report analyzes the 

financial implications of the City’s ownership of Coney Island, 

Elmhurst, and Queens Hospitals, the anticipated interest by other 

organizations in taking over these facilities, and the financial 

ramifications of transferring those assets. From ‘a strictly 

financial perspective, the report finds that privatization is 

overwhelmingly in the City’s interest." A copy of the April 27, 

Board Minutes is provided as Exhibit 3, annexed to Jones Aff. 

5. The Mayor Established a Schedule for the Disposition of 
the Target Hospitals Without Input from the Board. 

At the July 27, 1995 Board meeting, Ms. Mitchell notified the 

Board of the schedule of the process for the sale or lease of the 

target hospitals. She stated that the City would receive 

indications of interest from potential purchasers and select 

finalists by January 1996, complete due diligence and receive 

binding offers by March 1996, and complete negotiations and 

finalize the sale by June 1996. A copy of the July 27, 1995 Board 

10 

 



  

Minutes are provided as Exhibit 4, annexed to Jones Aff. 

Responding to Board members’ objections that the Board had 

never discussed the issue whether to sell any HHC facilities or the 

Criteria to be employed in deciding which facilities, if any, to 

sell, Ms. Mitchell stated that the Administration had already made 

the decision to proceed with the sale and had already selected the 

three facilities to be sold as well. Id. 

When Board members raised objections to the fact that the 

Board had never had an opportunity to decide whether to dispose of 

the target hospitals, Ms. Mitchell stated that "the intent of the 

Administration to go forward with the sale of those three 

facilities has been clear for sometime and has been discussed 

previously before the Board." Id. 

6. EDC, with the Mayor’s Authority, Retained J.P. Morgan to 
Serve as Financial Advisor for the Privatization of the 
Target Hospitals. 

Ms. Mitchell informed the HHC Board about the selection of 

J.P. Morgan at the July 27, 1995 Board Meeting, stating, "The 

City’s Economic Development Corporation last Friday announced the 

selection of J.P. Morgan as the financial advisor for the sale of 

Coney Island, Elmhurst and Queens Hospitals. . . . The EDC Board 

approved J.P. Morgan and selected them over a group of four other 

firms that had responded to the Request for Proposals. The firms 

were identified from a pool of thirty-six firms that responded to 

EDC regarding the City’s privatization and financing initiatives." 

9 11, Exhibit 4, annexed to Jones Aff. 

On August 1, 1995, on behalf of the City, EDC entered into an 

11 

 



agreement with J.P. Morgan to act as the financial advisor "with 

respect to the sale, transfer, conveyance or other disposition of, 

in one or a series of transactions (which may include or take the 

form of the execution of management contracts or leases in respect 

of) (each, a "Transaction" and, collectively, the "Transactions"), 

Coney Island Hospital, Elmhurst Hospital Center and Queens Hospital 

Center (each, a "Hospital" and, collectively, the "Hospitals"). 

The agreement provides no role for the HHC Board, reserving, 

instead, for EDC the right to accept or reject, in its sole 

discretion, any proposed transaction. A copy of the Supplemental 

Agreement is provided as Exhibit 5, annexed to Jones Aff. 

7. Pursuant to its Arrangements with the Mayor, EDC Issued 
Offering Memoranda for the Privatization of the Target 
Hospitals. 

On October 26, 1995, EDC issued two Offering Memoranda 

prepared by J.P. Morgan for the privatization of the target 

hospitals. ¢ 32, Jones Aff. According to the Memoranda, the 

privatization will be accomplished through long-term leases of the 

facilities to the health care providers. Id. Neither the Offering 

Memoranda, nor any of the terms incorporated in them were submitted 

to the HHC Board for its advice, comment or approval. Id. They 

were distributed to a confidential list of potential purchasers to 

allow them to submit bids on the hospitals. HHC never received 

nor approved the list of bidders. Id. 

EDC has retained counsel to handle the legal aspects of the 

disposition of the target hospitals. $ 34, Jones Aff. The HHC 

Board was never consulted, neither did it approve this decision. 

12  



  

3. The City is a Signator to the Letter of Intent for the 
Sale of Coney Island Hospital. 

On /June 26, 1996, a letter of intent setting forth the 

framework for the sublease of Coney Island Hospital to Primary 

Health Systems, Inc. ("PHS") and PHS-New York, Inc. was signed by 

Peter Powers, First Deputy Mayor of the City of New York, Luis 

Marcos, for HHC, and Steven Volla for both PHS New York and PHS. 

A copy of the Letter of Intent is provided as Exhibit 6, annexed to 

Jones Aff. The HHC Board had not been consulted, nor had it 

approved, the Letter of Intent with PHS New York. { 36, Jones Aff. 

The Letter of Intent raises numerous questions that would fall 

within the purview of the HHC Board regarding the adequacy of 

assurances that there will be continued access of health care for 

the poor. First, the letter of Intent limits PHS-NY's 

responsibility to current limits of expenditure for the provision 

of care to the indigent and indicates that HHC will be responsible 

for the excess. This may pose a serious problem and, again, 

impinges on the jurisdiction of the HHC Board, whose members have 

a duty to evaluate the likely impact of any requirement that HHC 

subsidize PHS-New York on the HHC budget and its delivery of 

services. 

Second, the Letter of Intent fails to specify what the 

guarantee of access to service entails. It is not clear whether it 

includes access to "all services" or "primary care services" or all 

"currently available services," or "services that are medically 

needed or responsive to community needs," for example. 

13 

 



  

Finally, it is not clear whether PHS-New York is guaranteeing 

access within Coney Island Hospital, or whether any services would 

be moved to other locations. Again, the HHC Board was not 

consulted and did not approve the Letter of Intent. 

ARGUMENT 
  

POINT. I 

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT MUST BE DENIED 
BECAUSE THERE ARE MATERIAL FACTS IN DISPUTE 
  

Courts have uniformly held that summary judgment is a drastic 

remedy and should not be granted where there is any doubt as to the 

existence of a material and triable issue of fact. Blatt wv. New 
  

York City Housing Authority, 1223 A.D.2d 591, 506 N.Y.S.24 877 (2nd   

Dep’ 1986); gee also Royal v., Brooklvn Union Gas Co., 122 A.D.2d 
  

132, 504 N.Y.S.2d 519, 520 (2d Dep’t 1986); Great Neck Pennysaver, 
  

inc. v. Catalano, 97 A.D.2d4 395, 467 N.Y.8.2d4 219, 220 (24 Dep’t   

1983). Accordingly, the burden falls squarely upon the proponent 

of a motion for summary judgment to make a prima facie showing of 

entitlement to judgment as a matter of law and to tender sufficient 

evidence to eliminate any material issue of fact from the case. 

Here, . defendants admit that ULURP "is applicable to =a 

disposition by the City of City-owned property. Defendants’ 

argument for summary judgment is based upon its unsupported and 

mistaken allegation either that HHC is carrying out the transaction 

at issue or that HHC’s authority to cast a vote is sufficient to 

shield the City’s actions from ULURP. 

Defendants’ allegations are insufficient to make a prima facie 

showing that the privatization of the target hospitals is not a 

14 

 



  

transaction by the City. Moreover, in the affidavits of David R. 

Jones, an HHC Board Member, and Rachel D. Godsil, Esqg., and the 

attached documentary evidence, plaintiffs have produced abundant 

proof that the City is dominating the transaction and that the HHC 

Board has neither been consulted about neither has it approved any 

of the salient steps in the privatization process. See Javits v. 
  

Slatus, 93 A.D.2d 830, 461 N.Y.S.2d 44, 46 (2d Dep’t 1983) (a party 

opposing a motion for summary judgment must produce evidentiary 

proof in admissible form sufficient to require a trial of material 

questions of fact on which the claim rests). 

As a matter of fact, the Mayor set the parameters for the 

deals, oversaw the solicitation and selection of bidders, set the 

terms for the negotiations, chose the final sublessor for the Coney 

Island Hospital, and negotiated and signed the letter of intent. 

In sum, the City has proposed, initiated, conducted, and controlled 

the "sale" of the target hospitals and has kept the Board of HHC 

entirely out of the process. 

® The Mayor decided to embark upon a privatization 

initiative that included the HHC health facilities 

without consulting or seeking approval from the HHC 

Board. 99 16-18, Jones Aff. 

® The Mayor decided to. retain EDC to .manage the 

privatization without consulting or seeking approval from 

the HHC Board. '$ 21, Jones Aff. 

* EDC with authority from the Mayor, and without 

consultation or approval from HHC, issued a request for 

15 

 



  

qualifications and a request for proposals to obtain a 

financial advisor for the privatization initiative that 

included the hospitals. 994 2-3, Godsil Aff. 

Pursuant to its arrangements with the Mayor, EDC retained 

J.P. Morgan ito conduct ‘a study of the. finsncial 

advantages for the City of privatizing the hospitals 

without consulting or seeking approval from the HHC 

Board... § 21, Jones Aff. 

The Mayor announced his decision to sell the target 

hospitals without consulting or seeking approval from the 

HHC Board. YY 22, Jones Aff. 

EDC retained J.P. Morgan to act as financial advisor for 

the disposition of the target hospitals without 

consulting or seeking approval from the HHC Board. § 27, 

Jones Aff. 

The Mayor announced a schedule for the disposition of the 

hospitals without consulting or seeking approval from the 

BHC Board. YY 28, Jones Aff. 

EDC with authority from the Mayor issued Offering 

Memoranda to a confidential list of potential purchasers 

without consulting or seeking approval from the HHC 

Board. 8 32, Jones Aff. 

A representative of the Mayor and the President of HHC 

signed a letter of intent to sublease Coney Island 

Hospital to PHS-New York without consulting or seeking 

approval from the HHC Board. 9 35, Jones Aff. 

16 

 



* * * 

Courts have long recognized that governmental entities may 

seek to abuse the independence from regulation allowed public 

benefit corporations to shield themselves from laws that rightly 

apply. See, e.g., Collins v. Manhattan & Bronx S.T.0.A., 62 N.Y.24   

371, 465. N.E.24d. 811, 477 N.Y.S$.24 91 (1984) (Civil service 

requirements do not apply to public authorities unless "the only 

purpose of entrusting the function to be performed to an authority 

ls evasion of the constitutional requirement applicable to the 

State and its civil division."). In Collins, the Court recognized 

a line of cases holding that a public benefit corporation may not 

be used to evade civil service requirements "by creating a public 

authority which is completely controlled by the State or a civil 

division." See, e.g., Matter of Conlin v. Aiello, 49 N.Y.24 713, 
  

425 N.Y.S.2d 803, 402 N.E.2d 142 (1980) (emphasis added); Matter of 
  

Westchester County Civ. Serv. Emplovees Assn. V. Cimino, 44 N.Y.2d 
  

985, 408 N.Y.S8.24 501, 380 N.E.24 327 (1973). 

The HHC Act intended for HHC to be a "public benefit 

corporation, independent of the City of New York." Brennan v. 
  

City, 539 N.¥.2d 791, 792 (1983); However, this legal status cannot 

cloak the City’s privatization plan in the guise of an HHC deal. 

The control of this transaction greatly exceeds the "close 

relationship" between the City and HHC intended by the HHC Act. 

Cf. Defendants’ Memorandum at 15. Indeed, the Mayor’s actions have 

stripped HHC of any control over the terms of the disposition of 

its facilities. Accordingly, this transaction is in fact and thus 

17  



  

must be treated by law as a disposition by the City of City-owned 

property and a ULURP review must take place. 

This Court should thus deny the defendants’ motion for summary 

judgment to allow plaintiffs an opportunity for discovery regarding 

the City’s role in the transactions. 

POINT - II 

ULURP IS APPLICABLE TO A DISPOSITION OF CITY PROPERTY BY HHC 
  

Furthermore, ULURP is applicable to dispositions by HHC of 

City-owned property. The City Charter provides in pertinent part: 

§ 197-c. Uniform land use review procedure. a. Except 
as otherwise provided in this charter, applications by 
any person or agency for changes, approvals, contracts, 
consents, permits or authorization thereof, respecting 
the use, development or improvement of real property 
subject to City regulation shall be reviewed pursuant to 
a uniform review procedure in the following categories: 

* * * 

(10) Sale, lease (other than the lease of office space) , 
exchange, or other disposition of the real property of 
the City 

New York City Charter § 197-c (emphasis added). By its very terms, 

ULURP applies to a disposition by any person or agency of City- 

owned property. Thus, ULURP plainly applies to a disposition by 

HHC of City-owned property. 

It 1s indisputable that the target hospitals are City 

property. It is similarly indisputable that the leases 

contemplated in the Mayor’s privatization plan constitute a "lease, 

exchange or other disposition of City property." New York City 

Charter § 197-c. It is also clear that § 197-c applies to the 

disposition of City-owned property regardless of the entity that 

18 

 



  

undertakes the transaction. Accordingly, the transactions at issue 

are subject to ULURP. 

Indeed, under the HHC Act itself ULURP review is required. 

HHC never intended to give HHC unlimited powers to dispose of City 

property or City health facilities;? as defendants concede, the HHC 

Act required approval of the Board of Estimate for HHC to sell or 

lease or otherwise dispose of City property.® Defendants’ 

Memorandum at 18. 

Prior to its dissolution, the Board of Estimate had authority 

under the New York City Charter to consider and approve both the 

business terms of a sale of City-owned property and the land-use 

implications. See generally Tribeca Community Assoc. Inc. et al. 
  

v. New York State Urban Development Corp. et al., Index No.   

20355/92 (April 1, 1993 Sup. Crt. N.Y: Co.) attached hereto. The 

revised City Charter divided the Board of Estimate’s authority over 

the disposition of City-owned property between the Mayor and ULURP: 

the Charter grants the Mayor authority to review and approve the 

  

2 “The Court of Appeals has noted that the State Legislature 
need not exempt public benefit corporations from all regulation. 
See Colling, 62 N.Y.2d at 362, 465 N.E.2d at 812, 477 N.¥Y.5.2d4 at 
92 (a public authority is exempt from civil service requirements 
unless the Legislature so provides). As discussed infra, the HHC 
Act required the approval of the Board. of Estimate prior to =a 
disposition of a City-owned health facility. With the demise of 
the Board of Estimate, that authority has fallen to both the Mayor, 
for review of business terms, and ULURP, for review of land-use 
implications. Accordingly, the HHC Act and ULURP are not 
inconsistent. Rather, the HHC Act, as a result of the change in 
the City Charter, incorporates ULURP. 

2 The Act also requires approval by the New York State 
Department of Health for the disposition of any health facilities. 
Defendants’ Memorandum at 3. 

1° 

 



  

business terms of the disposition and provides for ULURP to ensure 

a review of the land-use impacts of the disposition.* Id. 

Accordingly, the approval by the Board of Estimate required by the 

HHC Act prior to a disposition of City-owned property is now 

divided between the Mayor and ULURP. 

Assuming, as defendants contend, that the HHC Act intended to 

mirror § 384 of the City Charter, the former power of the Board of 

Estimate with respect to the disposition of City land now falls 

both to the Mayor, for the approval of the business terms of a sale 

or lease, and to ULURP, for an assessment of the land use impacts. 

New York City Charter § 384(a) & (b) (5); see generally Tribeca 
  

Community Assoc., supra at 29 (Noting that § 384(a) grants   

authority to the Mayor and § 384 (b) (5) requires ULURP review). 

Defendants contend that HHC is exempt from the provisions of 

ULURP because it is a public benefit corporation created to avoid 

City regulations. Defendants’ Memorandum at 13. However the Court 

of Appeals has construed Municipal Home Rule Law § 10(5) to provide 

that public benefit corporations are exempt only from regulations 

that would interfere with their purpose. See Levy v. City Comm. on 
  

Human Rights, 85 N.Y.2d4 740, 744, 651 N.E.24 1264, 1266, 628   

N.Y.85.24 245, 247 (1995). 

The Court of Appeals has made clear that public benefit 

corporations are created to accomplish certain missions and are 

  

* Pursuant to ULURP, affected Community Boards and Borough 
Presidents have an opportunity to review a proposed plan, and the 
City Planning Commission, then the City Council, and ultimately the 
Mayor must approve any decision. New York City Charter § 197-c. 

20 

 



  

"‘independent and autonomous’" of those requirements that would 

interfere with the accomplishment of the public corporation's 

purpose. Levy, 85 N.Y.2d at 744, 651 N.E.24 at 1266, 628 N.Y.5.2d 

at 247. In Levy, the New York City Commission on Human Rights 

awarded damages to a former employee of the Transit Authority for 

sexual harassment. The Transit .Authority filed an Article 78 

contending that the Commission lacked jurisdiction over the Transit 

Authority -- a public benefit corporation created by state law -- 

under the Home Rule Law section 10(5). The Court of Appeals 

disagreed. The Court held that because the State Division of Human 

Rights limited the powers of the Transit Authority to discriminate 

on the basis of gender, the City Commission’s proscription against 

"sex discrimination cannot be construed as an impairment of the 

Transit Authority’s powers." Levy, 85 N.Y.2d at 746, 651 N.E.2d at 

1267, 628 N.Y.85.24 at 248. 

As 1s stated above, the HHC Act clearly intended for there to 

be City oversight of the disposal of City-owned health facilities. 

See § U.L. 758246). Accordingly, because the HHC Act set 

limitations upon HHC’s ability to dispose of property, and 

specifically provided for review of the land-use effects, ULURP 

review does not interfere with HHC’s purpose and mission. 

* * * 

In sum, defendants are required to submit proposed contracts 

for the disposition of the targeted hospitals for review by 

affected and interested Community Boards, the Borough Presidents of 

Brooklyn and Queens, the Department of City Planning and review and 

21 

 



approval by the New York City Council under the Uniform Land Use 

Review Procedures, City Charter § 197-c. It is clear as a matter 

of law that ULURP applies to a disposition by HHC of City-owned 

property. 

POINT III 

THE DEFENDANTS MUST COMPLY WITH CHARTER § 197-B 
  

In addition to complying with ULURP, defendants are required 

to comply with § 197-b of the City Charter. 

The City Charter provides in pertinent part: 

§ 197-b. Notification of plans and proposals.’ 

b. Coples of (1) all requests for proposals 
and other solicitations of proposals issued by 
Or on behalf of the City, whether or not 
issued by an agency, a local development 
corporation or other entity, and (2) all 
letters of intent executed by or on behalf of 
the City, whether or not executed by an 
agency, a local development corporation or 
other entity, that relate to the private use 
or the disposition of City-owned land, shall 
be conveyed to the community boards where such 
land is located and the office of the borough 
president where such land is located promptly 
after issuance or execution. 

New York City Charter § 197-b. 

Following the issuance of the J.P. Morgan report, EDC entered 

into a further contract with J.P. Morgan to have the latter prepare 

proposals to "sell" the hospitals. These proposals, each called 

"Offering Memorandum," were distributed to a confidential list of 

  

® Section a. of 197-b provides for "Advance notice of all 
preliminary and final plans of public agencies and public benefit 
corporations or of private agencies, entities or developers filed with 
the city." If the privatization plan were in fact a plan of HHC, 
as opposed to the City, it would be subject to 197-b(a). 

22  



  

hospitals. They were not distributed to the affected community 

boards. 

By defendants’ own terms, it is clear that they did not comply 

with § 197-b. The requirements of § 197-b(b) are clear: "all 

requests for proposals and other solicitations of proposals issued 

by or on behalf of the City, whether or not issued by an agency, a 

local development corporation or other entity, and (2) all letters 

of intent executed by or on behalf of the City, whether or not 

executed by an agency, a local development corporation or other 

entity, that relate to the private use or the disposition of City- 

owned land, shall be conveyed to the community boards." New York City Charter 

§ 197b(b) (emphasis added). Defendants admit that they did not 

submit the Offering Memoranda to the Community Boards. Their 

submission of the Offering Memoranda to the Community Advisory 

Boards is not sufficient to comply with § 197-b(b) which requires 

submission to Community Boards, not Community Advisory Boards. The 

plain language of the rule does not provide for "effective 

conveyance." Cf. Defendants’ Memorandum at 22. 

23 

 



  

CONCLUSION 
  

For the foregoing reasons, plaintiffs respectfully request 

that defendants’ motion for summary judgment be denied and, if the 

Court deems summary judgment appropriate, that an order be granted 

in plaintiffs’ favor, together with such other and further relief 

as the Court shall deem just and proper. 

Dated: New York, New York 

August 23, 1996 

RESPECTFULLY SUBMITTED, 

KENNETH KIMERLING 

PUERTO RICAN LEGAL DEFENSE & 

EDUCATION FUND, INC. 

99 Hudson St., 14th Floor 

New York, N.¥. 10013 

212-219-3360 

ELAINE R. JONES 

Director-Counsel 
MARIANNE L. ENGELMAN LADO 
RACHEL D. GODSIL 

NAACP LEGAL DEFENSE & EDUCATIONAL 
FUND, INC. 
99 Hudson St., 16th Floor 

New York, New York 10013 

212-219-1900 

BARBARA OLSHANSKY 

CENTER FOR CONSTITUTIONAL RIGHTS 

666 Broadway, 7th Floor 

New York, N.Y. 10012 

212-664-6464 

ATTORNEYS FOR PLAINTIFFS 

24 

 





  

SUPREME COURT OF THE STATE OF NEW YORK 
CQUNTY OF NEW YORK:PART 52 

TRIBECA COMMUNITY ASSOCIATION, INC., 

WESHINGTON MARKET COMMUNITY PARK, INC. 

JANNA TOWNSEND, NANCY PAGE, JOHN 

PETRARCA and DEBORAH ALLEN, INDEX NO. 22355792 

Petitioners, 

-againct- 

‘NEW YORX STATE URBZM DEVELOPMENT CORP. , 

CITY OF NEW YOPK, HEW YORK a ECOIIOMIC 

DEVELOPMENT CORP., COFFEE, SUGAR & CCCOA 

ReCHRNGE, INC., COMMODITY. EXCHENGE, 110. 

and NEW YORK COTTOI EXCHAENG ikl. 

Respondents. 

Petitioners bring a petition pursuant fo CPLR Article 

78 combined with an action for declaratory judgment. Petitioners 

are Tribeca Community organizations and individuals who live and 

work or own property in Tribeca. They raise twelve chal.iengyges 

(two of which have been withdrawn) to a proposed project 

sponsored by the lew York State Urban Development Corporation 

{UDC), the City of llew York and the New York City Economic 

Development Corporation (EDC), cll of whom are cited as 

respondents, along with “he Coffee, Sugar & Cocoa Exchange, Inc., 

the Commodity Exchange, Inc. and the Naw York Cotton Exchange 

Inc., the occupants of the bullding proposed to be constructed in 

Tribeca. 

Respondent Exchanges and the New York Mercantile 

Exchange (NYMEX) are currently oparating out of their 

headquarters at 4 World Trade Center (4 WIC). By 1984, the space 

 



  

2 

there proved 1nadequate to meet the growth of the commodities 

business. Consequently the Exchanges sought a new site near the 

financial services in lower Manhattan that would provide ample 

cwace for their needs now and in the future and in which up-to- 

technology could be installed. The Exchanges develored a 0 0)
 

cr
 

ts
 

get of criteria to use. as a guide in thelr search. These 

includ=ad two column-£free trading floors of 50,090 square fe=t 

@ach; proximity to the Financial services industry; cost 

efficiency and an early availability, 1.e., in 1994. The search, 

lasting several years, ultimately yielded two possible sites, one 

“vo Uarbor zidzs, New Jersey, Jju=c asress the Hudson River fren 

lower Manhattan, the other 1n Tribeca, known as Site B. The 

Exchanges threatened to leave liews York City for New Jersey. With 

their departure from New York, the Clty would suffer a loss cf 

approximately 11,700 jobs, a diminution of public revenue 

amounting to hundreds of millicrs of dollars, and a severe blow 

to its standing as the world’'c preeminent financial center. In 

response to thee potential dangers, the City, UDC and EDC 

offered the Exchanges the agenciss’ participation in the creation 

of a new headquarter building (4HCZ) in Manhattan in exchange for 

their commitment to remain in law York City for at least 20 

years. Site 5B in the Washingicn Street Urban Renewal Area 

(WSURA) was selected and on Agril 33, 1991, the Exchanges, UDC 

and EDC executed a letter ¢f :i~t=2nt (LOI) memorializing thelr 

plans. As contemplated by the LOI, the HQB was to be 47 stories 

high and include two column-£rc2 trading floors, each of 

 



  

3 

approximately 50,000 square feet in size. At street-level and 

below a 400 space parking garage, commercial space anc & public 

plaza were planned. 

“ Pursuant to the 101, the City, which owns Site 3B, 

would transfer it to UDC for develcpment. Public funds provided 

by UDC and the City through ELC, combined with the Exchanges’ own 

- 

funds would be used to build the HI. EDC would own the ROB bul 

the Exchanges would oversee its corztruction and occupy the 

finished structure under a 99 year ieace with an option to buy, 

pasad on the appraised market valu2 ¢f the land, evercisable 

Jitke 30 years, with the proceeds of the sale to go to the City. 

Since UDC would own the H23, the project would benefit 

from statutory exemptions from tha State and City sales taxes on 

construction materials and possibiy moridage recoraing Laxes as 

well, depending on the nature of the Exchanges’ financing. There 

might also be an exemption from City commercial occupancy taxes. 

Under the terms of the LOI, EDC has agreed to assist the 

Exchanges in seeking a ruling fron the City Department oF 

Finances as to such an exemption, which will depend on the 

structure of the transaction. 

In conformity with the terms of the LOI, the Exchange 

commit themselves to contribute toward the cost of the 

construction of ‘the HQB and is payments of rent and payments in 

lieu of taxes (PILOTS) to EDC. ard they also agree to.stay in 

New York City for at least 20 years. 

 



4 

The Project underwent two separate review processes. 

The land use review was conducted pursuant to UDC Act's project 

approval procedure (N.Y. Unconsolidated Law Section 6260 (c]) and 

the Uniform Land Use Review Procedure (ULURP). The environmental 

review was conducted pursuant to the State Environmental Quality 

Review Act (SEQRA). The initial steps in the UDC Act and SECEA 

proceeding began in August 1991. UDC made a "blight" finding 

pursuant to the UDC Act and accepted a Draft Environment Impact 

Statement (DEIS).” On October 9, 1391-UDC held a public hearing 

and received comments on the DEIS and the proposed general 

nroject plan (GPP). The public comments were incorporated into & 

Final Environmental Impact Statement (FEIS) which UDC directors 

accepted on Deczamber 19, 1991 and circulated for public review. 

On August 14, 1991 the City’s Department of City Planning 

certified the ULURP application as complete and on October 15, 

1991, it was the subject of a public hearing by Community Board 

No. 1. 

NYMEX announced its withdrawal from the project in 

January 1992. As a result, two alternative plans were drawn up, 

one reducing the HQB to 30 stories, the other to 22 stories. A 

technical memorandum was prepared by UDC’'s consultant, Allee, 

King, Rosen and Fleming, P.C., (RKRF) to review environmental and 

land use impacts for each alternative proposal. It found the 

alternative plans resulted in reduced environmental and land use 

impacts.  



5 

The City Planning Commission (CPC) reviewed the 

original plan and the two alternatives. By resolution of January 

21, 1992 the CPC approved the ULURP applications. 

The City Council held a public hearing on the ULURF 

applications on February 28, 1992 and recommended furthar _ 

SURsE ion in the seize of the HOB and of the parking garage. 

cecond technical memorandum was prezared by AKRP, wiilch again 

found further reduction of the size of the Project abated still 

more the potential environmental and land use impacts. UDC 

Directors then determined no further environmental analyses were 

wl The CPC determined no fyrchet environmental or ULURP 

roview was needed. On March 28, 1992 the full City Council 

passed resolutions adopting the SEQRA findings and approved ths 

proposed Project alternatives for the ULURP applications. The 

City Council’s action completed the ULURP process. 

In the meantime the parties were negotiating the 

precise terms of a revised LOI reflecting the reduced HQB. These 

negotiations were completed cn December 1, 1992 as the parties 

herein were submitting and exchanging motion papers. The revised 

LOI of December 1,, 1992 calls for a HQB of ten stories with a 

51,000 square foot trading floor and a commitment by the 

Exchanges to remain in New York City for 30 years, with an 

earlier withdrawal conditionsd upon payments of PILOTs, and a 

minimum of 20 years subject to a penalty of liquidated damages in 

the event of violation. Otherwise,the basic components of the 

Project transactions are not materially changes in the revised  



6 

LOI. The cost of construction is approximated to be S116 million 

with public sector contributions 10 pe $33 million ($27 million 

from UDC, $26 million from the City through EDC) and a subsequent 

322 million from the City ehrough EDC. 

UDC must still take various steps in the statutory 

sroroVal Drocery, Ine Itatnn, hut not limited to, UDC obtaining 

snsrahiv of Site SB from the City and authorization to lease It 

to the Exchanges. Also, the Mayor, oursuant to General Municipezl 

Law 507(2) will have {© hold. a public hearing and approve the 

transfer of Site 5B to UDC. 

Additional facts will be oresented as relevant to sach 

claim raised by petitioners. 

i The Tribeca petitioners vigorously oppose the project. 

They challenge UDC’s blight finding, the EDC's statutory 

authority to participate in the Project, the legality of the City 

and State contributions to the Project, the commercial occupancy 

tax SRenption, and the propriety of the ULURP process because of 

alleged failure to provide notice and a hearing. In addition, 

petitioners challenge various substantive aspects of SEQRA 

compliance. Respondents moved for summary judgment, plaintiffs 

crossmoved for summary judgment. 

The court will now discuss each claim in turn. 

    
Claim 1 "Blight Finding”. 

At their first cause of action, petitioners claim UDC’s 

determination of Site SB as blighted is arbitrary and unsupported 

by substantial evidence in the record. They request a  



  

, 

declaratory judgment annulling the finding and enjoining UDC from 

participating in the Project. 

UDC was created under the New York State Urban 

Development Corporation Act. (McK. Unconsolidated Law, section 

6251, see section 8254). Pursuant to section 6250, UDC is not 

enpolered to undertake the acquisition, construction, 

reconstruction, rehabilita-ion of a project unless It finds 

"that the area in vhich the project 1s to be 
located 1s a substanclard or unsanltary ares, 

or is 1n danger of becoming a substandard or 

unsanitary area and terds to impair or arrest 

the sound growth and development of the 

municipality”, {Bec ich 62860 (cC)il). 

In 1961 the City made a finding that the Washington 

Street Urban Renewal Area (WSURA), the former site of the 

Washington Produce Market, was "clighted” and subject to an urban 

renewal plan which remains in efZect until the year 2381. Sinc. 

then a thriving, vibrant, busy Tribeca has blossomed 1n the area, 

which includes, among others, the Independence Plaza apartments, 

P.S. 234, Manhattan Community Ccllege, The College of Insurance 

and office buildings for Shearcon-Lehman and Irving Trust Co. 

The City was involved in the development of every parcel in the 

WSURA, which now has only two remaining undeveloped parcels 

within it, Sites 5B and 5C. Site S8 1s comprised of two acres 

(90,500 square feet) just rath cf the financial district. IL 1s 

bounded by Greenwich, West, Warren and Murray Streets. At 

present the Site 1s vacant except for two surface parking lors. 

It is subject to a variety of land-use controls which makes the 

 



  

8 

Site difficult to develop and 1t 1s consequently under-utilized. 

It generates no property tax revenue for the City. 

Defendants view the site as rectangular, plaintiffs as 

hexagonal. IlMaps, diagrams and illustrations submitted to the 

court support defendants deccripticon, although the shape of the 

~ 

Site could also be described a3 a rectangls gone wrong. The 

question of the Site's chape aside, the dispute betwesn the 

parties 1s the legal conclusion tc ba drawn from the otherwise 

undisputed facts. 

Section 6253 of Unccnzolid=sited Laws defines 

“sur standard or unsanitary area” ru kha "interchangeable with a 

slum, blightened or deteriorctecd ci deteriorating area, or an 

area which has a blighting irfiuence on the surrounding area, 

whether residential, non-residsntial, commercial, industrial 

" Case law has now universally endorsed “the liberal 

rather than literal definiticn of « "blighted" area. Yonkers 

Community Development Agency v. Movris, 37 NY2d 478 (1975), 
  

Appeal dismissed, 423 U.S. 18.5, 5 8.Cr. 440. Petitioners rely 

on this same case to bring this court's attention to the 

admonition that "Courts are re« riir-d tc be more than rubber 

stamps in the determinaticn ¢: *!1> ¢xistence of substandard 

conditions in urban renewal c~nd~mnation cases.” The court's 

comment in Yonkers was direct ! »t an agency's conclusory finding 

0 of blight without any support:::J cvidence whatever. The Yonkers 

court went on to cite a varie!y of factors to be considered in 

 



  

S 

making a blight determination, one of which was "improper land 

Petitioners argue that the present under-utilizaticn of 

the Site for surface parking, the confusion and overlap of 

various land-use ont TolE and the failure to develop. it for tha 

last 30 YyEars are conditions that the City has inflicted upnn 

itself. In making this argument, however, petitilionsre ars 

acknowledging the very conditions uron which UDC based the blight 

finding. Under-utilizaticn may legally be found to ccnctitute 

“improper land use.” Jo & Wo Realty Corp. V. City of New Vork, 
  

N2I4/2248 (ist Dept. 138%0). 

UDC argues, with undeniable logic, that as a renewal 

project moves forward, at some point an area designated &s 

blighted will near a state of substantial completion, leaving, as 

here, only a few remaining lots to be developed within 1t. Site 

S83 and SC are the two remaining underdeveloped lots in the WSUZA, 

and as to them the blight finding still obtains until 2001. 

In reviewing a determination of blight, the role of tha 

court is not to Seuro the exercise of power legislatively granted 

in the city agencies, but merely to review whether there is a 

rational basis for their decision. Kaskel v. Impelliterrci, 30s 
  

NY 73 (1953)... Indeed, under the law of the Kaskel that case, the 

standard to be applied is whether an agency made its finding 

"corruptly or irrationally or baselessly.” 

The term "blighted area" conjures up dramatic and 

desperate pictures of cities in ruin. As used in the statute, 

 



  

10 

however, an area so designated need not conform to such dire 

conditions. Decisional law has put its own gloss on the term. 

If a2 lot is under-utilized it is land improperly used and may 

properly be designated "blighted”. "30 § Wo Pealty Corp. Vv. City 
  

of Now York, upra. Tn furtherance of the aims of urban rcnav.al 
  

projects, GML 520 directs that the Urban Renewal Law "chall Le 

construed liberally.” 

cite 5B 1s under-utilized. Furthermore, it lies within 

an area designated as blighted, which designation remains in 

force until 2001. UDC’s finding of blight Was therefore properly 

Accordingly, petitioners’ first claim 1s dismissed. 

Claim 2 (Also denominated la) 

FC's Participation is icra vires 
  

Petitioners allege New York City Economic Development 

Corporation (EDC) has exceeded the statutory powers granted to it 

under Not-For-Profit Corporat ion Law (MPCL) section 1411 and that 

as & consequence EDC's participation in the Project 1s 

unauthorized and ultra vires. They request a judgment so 

declaring and enjoining EDC from participating in the Project and 

respondent City from making paYISnTS to EDC for expenditure on 

the Project. 

EDC is a local development corporation incorporated 

under NCPL. Section 1411 provides that it shall have the 

following powers: 

"+o construct, acquire, rehabilitate and 

improve for use by others industrial or 

 



  

11 

manufacturing plants in the territory in 
which its operations are principally to be 

conducted, , .." 

Section 162 of NCPL is the definition section. It is silent as 

to the term: “industrial”. Both sides, therefore, regdrc Lo other 

sources to substantiate their respective interpretation of 

"industrial’. 

In patitioners’ opinion, the terms "incdusirial” and 

*manufacturing” do not include the "commercial" actlviiles of the 

Commodities Exchanges." This view leads to petitioners’ 

conclusion that EDC's participation in the Project i3 therefore 

a ierapiian andl ultra vives, In support. of their contention 

they distinguish EDC's powers from the broader powers assigned to 

UDC under Unconsolidated Lews Section 6255, which under Secticn 

5Z253(0){) defines "industriu.' és including "business or grher 

industrial or commercial purposes.” They derive additional 

support from the amended statutory definition of "industrial 

plant”, "manufacturing plant" and "project" set forth in section 

1801 of Public Authorities Law whereln all three definitions 

exclude commercial office buildings. "Project" explicitly 

excludes "a mercantile or service establishment selling goods or 

services directly to the general public." Petitioners’ aim 1s to 

illustrate that the legislatura’s understanding of "industrial” 

.and "commercial" 1s as separate and distinct activities and thus 

differentiated in legislative enactments. 

Respondents cite Black's Law Dictionary {5th Bc. 1973), 

which defines "industry" as "any department or branch of art, 

 



  

12 

occupation or business conducted as a means of livelihood ol for 

profit; SIBec ia liv, one which employs rich labor and capital and 

1s a distinct branch of trade.” Other lexicographic authorities 

are cited by respondents, all paralleling the same meaning of tins 

  
term. Respondents also rely on case law. People v. Helly, 2535 

NV 304 (1931) defined industry in the context of the Greater wav 

York Charter as "that branch of trede employing capital and 

labor.” "In State sz rel Lage City vv. LZuoanclie, ‘381. N.B.2d 1¢85 
  

(Ohio 1991), also cited by respui.2Zsnts, the court allowed that 

the pascage of time and changed c.caumstances warranted a 

Levis hvuig vi the terms "commerce and "ingdustry”.. Like 

Lespondents here, the court turn:zd to lericographers. It adopted 

Black's Law Dictionary’'s definiticu of “commerce” as "the 

exchange of goods, production, <r property of any kind,” aid -Liiw 

American Heritage Dictlonary’'s cd=finlition of "industry" as "the 

commercial production and sale of goods and services.” 

Petitioners object toc the abova-cited case because they 

involve judicial interpretation in the absence of specific 

legislative definitions of the tarm. But the absence of specific 

legislative definitions of tha term "industrial" and what meaning 

to ascribe to it 1s precisely ='.z issue confronting this court. 

It is, therefore, entirely agr:coriate to seek judicial guidance 

from other courts confronting trh2 legislative failure to define 

the same term. 

In Town of Ovster Bay +. Forte, 219 NYS2d 456 (Sup. Ct. 
  

Nassau Co., 1961), the court fcuni that the "operation of a 

 



13 

bowling alley mav constitute a commercial Or business enterprise, 

but it 1s not an industrial or manufacturing plant." Petitioners 

offer the case to support 8a narrow definition ¢f "industrial". 

However, that same court went on to state that a bowling alley 

"is a structure wherein people assemble for recreational 

activity, and not for the purpose v2at ing, manufacturing, 

assembling or finishing products or goods." In other words, the 

cCuULT did no more than properly unti:ld the definition of 

trial by refusing to encompacs within its meaning an 

‘*y which would have dictcrtcd the sense of the word bevond 

The court did, nhowevar, make a distinction 

bev. =2n commercial c¢r business cnriarprise and industrial or 

manufacturing plant. But the ca-== 13 over 20 years old. As 

Zupancic supra, teaches, changing time and circumstance require 
  

an updating of "industrial" to conform to current reality, usage 

and meaning. 

The search for the prec meaning to assign to 

"industrial" must be undertaken Ww! the context of the 

statutory scheme in furtherance oI its purpose. The purpose of 

EDC are set forth in section !:!:{.~; cf NFCL. Among its stated 

aims are "relieving and reduc:i::u: unemployment, promoting and 

providing for additional and imum employment, bettering and 

‘maintaining job opportunities.” Ti.2 purpose of the Project here 

at issue 1s to prevent the fli.it from New York City of the 

Exchanges and with them the thciuza:;.ds of employees who works in 

them, as well as the loss of erpioyment of thousands of workers  



14 

who find employment 1n businesses generated by the Exchanges. 

The Project undeniably furthers the goals of the statute. 

Elack’'s Law Dictionary (4th Ed. 

tlils court, offers the same definition for "industry" 

cited by respondents above, and !lekster’cs !linth Collegiate 

Dictionary (189€C) gives among its definitions "svstematic labor 

especially for some useful purpcse or the creation cf something 

of value." Thus the term "industrial" is commonly accepted to 

include the commercial activities of the Exchanges, and even the 

leatslaturna iftgelf, in connecticn with UDC (Unconsol. Law 

0<d:2(06)[(L]}) «weilnes "industrial project” £2 include "business or 

otlier industrial or commercial purposes It therefore 

violates neither the language nor the statute to encomgczass 

commercial undertakings under section 1411 of NPCL. 

Much can hang by a word, as this case 1llustrates. 

Notwithstanding petitioners’ contention, the word "industrial” 

does not bar EDC's participation in the Project, it does not 

render 1t ultra vires. Accordingly, EDC is statutorily empowered 

to proceed with the Project under section 1411. 

Respondents’ motion for summary judgment to dismiss 

petitioners’s second cause of action is granted. 

CLAIMS 3 AND 4 - UNCONSTITUTIONAL GIFTS BY NYC AND NYS 

Petitioners state at paragraph SO of the complaint that 

the City will make a $55 million "capital contribution” to the 

Project and at paragraph 86 that the State, through UDC, will 

make a "capital contribution” of $45 million to the Project.  



15 

They allege that these contributions are in violation of Article 

VIII Section 1 and Article VII Section 8 of the state 

constitution. 

Article VIII Section 1 prohibits the City from making a 

Sift or loan of ‘any money or property” "to ori in ald of any 

individual, or private corporation or association or private 

undestaking 0." Article VII Section 8 provides: 

"The money of the state shall not be given or 

loaned to or in aid of any private 
corporation or association, or private 

undertaking; nor shall the credit of the 

ctate be given or loaned to or in aid of any 

ariddsydue) Or public or ‘private corporation 
ui” association, or private undertaking 

Petitioners ask for declaratory and injunctive relief 

To annul the urban renewal project. Alternatively they ask that 

summary Judgment be denied pending discovery because the 

transaction documents are not finalized. 

The Letter of Intent (LOI) of April 30, 1991, upon 

which petitioners rest their third and fourth causes of action, 

has been revised by the LOI of December 1, 1992. The essential 

components of the transaction are unchanged in the revised LOI. 

The site and the construction thereon will be leased to the 

Exchanges pursuant to three leases for a term of 99 years each. 

UDC and the City will contribute $27 million and $26 million 

‘respectively as initial funds and the City will make a capital 

contribution to the Project in the amount of $22 million for 

construction costs. Thus the total contribution by the public 

sector will be $75 million. The Exchanges are to contribute no  



  

16 

less than $53 million. After 30 years, the Exchanges will have 

the right to purchase the Site for a price equal to the then fair 

market value (FMV) of the land so leased. Annual base rent fcr 

the land 1s 10% of the FMV of such land, with slight increases 

after 10 and 15 years. here are slight variations of rent fcr 

the Trading Fortion, the Office Portion and Member Firm Space é&ndi 

the Retall and Parking Portion. There are some very significant 

rent abatements as well. The Exchanges will be making payments 

i: lieu of taxes (PILOTS). Moreover, the Exchanges undertake to 

meAav in Mew York Livy for 30 years, dhisse the PILOTS are raid in 

cerita: iP m=irnimym commitment 1s 20 years sublect to 

.w4uldated damages in the event of violations. 

The LOI as revised provides sufficient information Icor 

’ lad 
~ a determination of the issue presented. Accordingly, glaintiz 

alternative application for denial of summary judgment pending 

discovery and final transaction documents 1s unwarranted. 

It is undeniable that the Exchanges derive substantial 

penefits from the transaction outlined in the LOI. The question 

for the court is whether these benefits constitute a gift in 

violation of the constitutional ban. 

Before proceeding further, a word must be said in 

connection with respondents’ insistence that the monies to be 

+ expended in this Project aie not public funds because UDC and eDC 

are not funded from revenues derived through taxation. Since all 

New York State and New York City funds, from whatever source 

derived, belong to the Citizenry of the City and State, 1t 1s of 

 



  

17 

no significance that the money expended in this Project does not 

derive from taxes. The cocnstitution’s prohibition against gifts 

and loans by the City and State 1s not limited to loans and gifts 

made solely from tax revenues. 

The aim of Che Troject 1s the creation of a publicly- 

acemed commodity ev.chaiige with ctate-of-the-art facilities. The 

moving force which propelled the public sector respondents to 

undertake with the Exchanges the present Project was the prospect 

of the EXchanges removing thems=ives to the New Jersey shore of 

the iTnsimgn, The threat of their removel from New York City 

cmaseh wie COLLern that thousands ¢f jocks, hundreds of millions 

ur dollars in direct tax revenue and billions of dollars 1n 

annual gross city product would be lost. Gf equal concern was 

the blow to New York City’s standing as a vreeminent 

international financial trading center. Courtesy Sandwich Shop, 
  

inc. v. port of Authoriry, 12 N72d 379 ({(1963) dealt with the 
  

creation of the World Trade Canter, the current home of the. 

Exchanges. The court recognized the historic importance of 

establishing the World Trade Center as a "gathering together of 

dll business relating to worid trade that 1s supposed to be the 

great convenience held out to those who use American ports and 

which is supposed to attract trade with a resultant stimulus to 

the economic well-being of the Fort of New York . . "+ It 

acknowledged that keeping New Ycrk City a financial and 

commercial center of the world was a proper concern of 

government. The same purpose 1s here being fostered by the 

 



  

13 

Project. Indeed the same commodity exchanges here involved were 

the subject of the Courtesy case. 
  

It 1s therefore nct disputed that the crn2ndlitures made 

by the City and UDC are for a public purpose. The point to 

consider 1s whether in fulfilling a public purpose, UDC, EDC and 

the City pursuant to the LOI have made a glft of public money to 

the Exchanges in contravsniicn ¢f the constitutional ban. On 

this issue decisional law mrovidcsz the answer. 

Grand Realtv Co. v. City of White Plains, 510 NYS 2d 
  

1172 {(BD2d 1986), cited by petitioners, lllustrate an action may 

—w we wignti fo chalienge a S2le va municipality and {hat where 

the consideration exchanged 13 "grossly dicproportionate to fair 

market value the transaction may contribute a gift by a 

municipality. The Appellate vLivizion reversed the court balou 

which had granted a motion to dismiss the complaint. The case is 

silent as to the merits of the action and does not otherwise much 

advance petitioners’ cause because case law has firmly 

established the . scope of judicial review in actions challenging 

governmental expenditure for lcaitimate public purposes. 

In Toccti v. Mayor, ri: nf City of New York, 73 Hun. 48, 
  

25 NYS 1089 (AD 1st Dept. 153%), wiich involved the reclaiming by 

New York City of parts of Fourt: Avenue from railroad companies 

for public use, the court stact::., 

“"[W]e have nothing tc do with the question 

whether the legislature directed the City to 
pay a high or low price for the privilege 

which it acquired, or iiade an improvident 

bargain therefor, if their value is of such a 

 



  

13 

character that an absolute. gift cannot be 
inferred." {at pp. 1094), 

AS to whether the value acquired by the City was worth what the 

city. had paid for it, the court commented, "Into this inquiry we 

cannot encer.” 

tv of New York, 205 NY 110° et
 

-
 

3 m p
t
 

“U
 

[9S
 

0)
 

—
 

T
r
 

<2 VD
 

Q 3 1)
 

t
e
 

  

(1812) involved City contracts Lor the coiistruction of a subway 

in Bobhattan and Brooklyn. The court found that the preferential 

parTenis and compensations made to the companies in exchange for 

Cel Bmevi.o.. cL cating tha micipdllveomed lines were in 

ww. OF A city purpose and thus constitutional. As in the 

--.i:l vase, plaintiff in Admiral claimed the City was paying 

tiie privately-owned company 2n excessive sum of money. The court 

veSpwiied, 

"That may be so. I do not pretend to know. 
But even if it should be belleved that it is, 
that consideration is not within our 
Jurisdiction, , .° The city requiras this in 
the public interest. .PFor this and other 
considerations, the company exacts the 
gayment in question. It may prove so large 
ads to the very profitable, but no one claims 
that in agreeing to it the public officials 
are acting in bad faith or that the 
transaction is a pretense and a fraud, and 
that being so, we have no power to interfere 
with it." 

The complaint here does not allege bad faith, 

sihRisconduct, fraud or collusion on the part of the public sector 

respondents. Only the financial aspects of the transaction are 

challenged. 

Plaintiff in Murphy v. Erie county, 28 NY2d 80 (1971) 
  

challenged a project to construct an ast rodome and its management 

 



  

29 

iy a private party as lessee under a 4€ year lease. Plaintiff 

Jid not challenge that 1t was for a publilc purpose, but 

maintained that the county had converted the stadium into A 

’ g henefit hy virtue of granting i rivate uze for a private party 

Lo the private party a £48 vear lease or Z0¢ year managemait 

contract. The court found “ht the nublic purpose Of they esodiv: 

was not thereby diminishea or converted to a private benefit. 

"Uare the private benefit 1s ‘incidental to the conceded public 

purpose of the stadium.” The court went on, "Anh. incidental 

~ri-qte hanrfit ig not enough fo invalidate a project which has 

LwiTlle (PLLRArY object a public purzose. ....1t follows 

nat the lease here . . . may not be construed as a ‘loan’ or a 

'Qglft of county property in aid of any private corporation: or 

association or. . ., prohibited by Artizie VIII SeclLich i Oliciu. 

State Constitution.” Once again the court refused to examine Che 

"wisdom of the plan adepted by the county” as being a matter 

outside the scope of judicial review. 

The Court of Appealz has consistently held to this 

view. 

"Courts are required to zsxercice a large 
measure of restraint when considering highly 

intricate and imaginative schemes for public 

financing or for public expenditures designed 
to be in the public. interest. Some may be 
highly controversial. But when a court 

reviews such a decision, it must operate on 

the rule that it may not substitute its ! 
judgment for that of the body which made the 
decision. Judges, however much they might 

disagree with the wisdom of the act under 

review, are not free to invalidate 1t on that 

ground.“ : 

 



  

Eye) Doran C0, V, Trust for Cultural Rasourrses of Citv of New 
  

cummarising the zoove auchorities, once it is 

determingd that & project serves o public interast, then unless 

pad faith, <O0llugion or fraud 15 charged, the financlal Carma 

daolving. pdoplic Financing of rojocts Are not within tho oat pl 

elf ciudiciclireviaew, Tne henafifts yYhat gaoccrue to the private 

"iid public nurpose and thoy may 

nol Le consirued as oifts or loans of tho City or State in 

L. Serves Oo legitimate public purpose, ()
 Lawas LNG COC 

Lorre 1s no doubt the ilxchanges have struck a favorable bargain 

with the City and State in return for their commitment to remain 

30 years more in cur Clty. [he private benefits accruing tv the 

Broehanges must, however, be redarcded as incidental to the public 

purpose of Lhe Project... Plaintiffs argue that the threat the 

Eichenges will emigrate to New Jersey i3 now groundless and, in 

any a2vent, cffice space in lowar Manhattan exists elsewhere then 

Onn Bite 3B. No proof has besn tendered to show that the 

Lxchanges, .in the absance of Lhe Project, would not relocate to 

New Jersey. As to alternativs gites in New York City, the issue 

is considered below. It 1s nct pertinent to whether the project 

fosters a public interest or whether the transaction constitute a 

constitutionally prohibited gift. In the absence of any showing 

of bad faith, fraud or collusion, our inquiry may go no further. 

 



  

22 

Therefore, in accordance with the above, summary 

judgement 1s granted to responcsiits and against petitioners oh the 

third and fourth causes of-acti~n, 

CLATI 35 - COMMERCIAL OCCUPANCY TX EBXENPTION 
  

4 Detitioners allege that Lue Anvil 392, 13991 Latter of 

Intent (LOI) providses that FDC will seek from the Department cf 

PFinancs of dofendaunt Clityre private ruling or opinion that the 

tenanis of the Headquarter Duildina and exchange offices will be 

aempt from the commercial occuna.aiy tax and that such a Lax 

ly rem Taymiop oda iny violation of Ticlo1l, chapter 7 of —
 

Pienaar s dv bike 4 voto fToRL The rr ewiYork, Sections 11-701 13) 

which imposes a commercial occusincy tax on all tenants, 

including lessees, sublecssees, licensees and concessionailres. 

Petitioners request a -.icclaratory judgment to ernJoli 

defendant City from granting thes proposed exemption to the 

Lxchanges, the Development Entity crany occupant of the Building. 

11-702(a) (1) of the arove cited statute provides that 

the tax be calculated as a p=rc2ntage of the rent paid for any 

premises IN the city "occupied, uscd or intended to be occupled cr 

used for the purpose of carrviiii ci. or exercising any trade, 

business, profession, vocatio:r ¢r commercial activity 

{Section 11-701{5}). 
< 

a 

The Letter of Intern: xt praragraph 9c states "PDC", 

predecessor to EDC 

"will work with the Exchanges to obtain from 
the Department of Financ=> of the City a 

private letter ruling (or other opinion) as 
to the availability of a total exclusion from 

 



  

23 

City Commerc 

for conside 

Livy Pu Lids 

ds 
ne arn 

the New Yorl 

Cccupancy Tax 

the tenants under 

Lease tc tha la the 

rel 

i)
 

amet inn 

Lorcos 

Erchanges’ obligations are not frigna 

receive a 'rnling or opinion. horo 

ruling be favorable to them, nerely 

Defendants oppose the 

Ql of standing of challenge tha t i 

and second, that the claim is nz 

Standing 
  

Petitioners Page, to.i ro 

of action pursuant to Gener=z) 

provides standing to taxpayer: 

$1 an amount equal to at least 

a illegal municipal act or to pisront 

property or funds. The amendesi 

alleges at paragraph 7, 8 and ¢ :!... 

and Allen are each owners of Progai 

change 

ect, 

riish 

above claim on 

car 

1al cent and 

raion pravabhles hy 

Facility 
rsunder, 

evant part: 

dig 
respect 

" = 

w= provision 

(i
) 

that he NO requirement 

d= 

at there be a ruling. 

two grounds, lack 

empt ion now or in the future, 

for adjudication. 

a and Allen bring this cause 

FEL) Law, Section 51, which 

cwn real property assessed in 

to bring suit to prevent any 

waste or injury to municipal 

ified complaint and petition 

hee 

t Petrarca plaintiffs Page, 

ty in the City of New York 

 



  

1t!i An assessment in excess of 310423. Petitioners hiecre assert 

thal respondents’ action in agreeing to a commercial occupancy 

ax coewytion is woth illegal and A waste of nmunicir=sl proparty 

  

Iii Barn wv. Slilorca, 72 ry 2d 353 (1588) the Court cf rpoesls heid 

ching i action may be mainteoilngd under Gill Saction 35) Against 

CRALZon: achingzon behalf Cf any county in this Sets £5 paved 

sy Lileral c2ficial act Or to prevent vaste of mmicinal 

poorly orotunds, with she proviso that the illegal official ect 

counnlained of is such as {oc wumperil the public interesis rr ls 

wie vg werk public iRJury or produce some public 

mirchief" (at pp. 271). Accordingly, if petitioners can. 

suksctantl ate their claim of ill=zgal acts within the sccpe of [arn 

sbbs she hava nEandine ba lnping Shs SITE T2013 teas) 
  

«ct complained of is that EDC agread to an exempticn to tne 

conimercial occupancy tax. This, however, is not the cass. ELC 

meraly agreed to "work with the Exchange” to obtain a ruling cn 

the availability of such a tax exemption. The Department of 

Finance will wrestle with this decision, not EDC. The raquegst 

for a ruling, standing alone, 1s not sufficient to make out a 

case for an illegal act. Nor can the request without an 

affirmative ruling by the Department of Finance give ground for = 

‘claim of waste of public funds or public property. . Petitioners’ 

position is bottomed on its mistaken premise that an affirmative 

ruling is inevitable and, moreover, that in the absence of such a 

ruling the Exchanges are free to withdraw from the Project. 

 



acquire standing undzsr 

Faction 51 whe gvDensrtneat of Fi ce hag mode itg 

8 Commedia l onTupIney Lad ssempiion applicat 

blic funds ie g.oouncizss 

foradijucicontin... 

Jed 5 pl les yi 

wa wichdrawvn. 

ciaims chould 

Petition ali: 

2: 31C2 from thie City to 
23 Dy ‘nter alia, section 

CHE we alc DEY Lavi of thn 

, Pertaining to disposition 

  

dd) requires, inter alia, that at 
YS Prior to the public hearing or 
of defendant City held to 

‘the Cisposition of the urban renewal 
, @ notice of th2 proposed disposition 

1l be ‘published in a i Hd of general 
ES The notices must include, inva 
8ila; "...the price or ay to be paid by 
such sponsor for such Droparcy and 211 other 
essential terms and concditicns of such sale, 
lease or other Gizoc sition " 

  

( 
ta 

B
I
B
 

B
G
 

m 

f, defendant City 
conforming to the 

requirements of sectic 7{d) prior to the 
City Council's public nearing and approval of 
the disposition of Site 53 to UDC. 

The March 26, 1992, resolution approving 
disposition of the Site pursuant to section 
507 is therefore contrary to law and 
arbitrary.  



Piaintiffs, t for a2 Jjudament 
annulling the March . resolution and 

enjoining dazfendant igs ing any further 

steps {on PLUoCen nbn the ciect unless ari 

until theireguirca nut lice, ublic nearing aud 

conforwil yy with seo lion 587." 

‘he court hes tAalian the trouble to get 

MANO CEL 

Pation, RITAS0 I EIT TI on i LH 3 from The assumption 

approved the dispositica 

Fy tt wa wit BE pe Ld CN C30 

(a3{13) the City Charter, 

council is responsible for review and approva 

dispositions of Cilty-owned r=al estate. The Councili’'s review 1s 

limited Co the land-use impacts and implications of the proposed 

(Charter 384(5}]), s £inal unless disapproved Ly 

within five days the Mayor's disapprcval 1s noc 

overridden by a subsequent twax-thirds vote of the City Council 

4197-cdi{sl). The Council's t * Charter 

requires 1t to give notice under GIL 527(d) of land use impacts 

or implications of the propucszi disposition. This, the Council 

failed to do and its resolution is therefore void and must be 

1lifiecd by this court. 

In short, petitioners are arguing both that the 

Council's action effectuated a disposition of the Site without 

the requisite 507(d) notice, and even if.only a land-use impact  



  

cvigsw of Lhe proporsd dizsys 

, 1857, (uw BAM notice as 3¢ 

wirovid:.i 

: NI Yory Sir Lan 

ray opplieclaon fue the nels 

GER nd Wh SL Lh i SRE ee Se 

crate 280 Cid Eel 

Ui vartliewr procaine a JULUS TY) 

rh Ter gga rhe iw des aie 

mili lig Tat 

TIC i at Wo LEE RR 

vas uiibevaliaunger “anv iont 

197-0 toaulres thet “rplicant 

e@view 5 

es 

Twelve categories 

ec) 

cl{al{ld) 

(for exam 

"sale, lease 

space) exchange, 

real property of lh
 S

E 

Obviously a ULURP 

not efiectuate a sale, leasc 

property. Petitioners 

that 

resolution and that it triggete! 

  

ion shall bo 

(@
 

\ 
AE 

| —~r tL 

} 

ae 

(other 

fm 

2ll of which require ULise 

requires such a revi 

such a disposition did oc 

id ~— 

0
 

IE
 

<. 

ie -Y 

on March 

TOIT Ne 

CR EE Rd l.on 

TEL Teal entiong J Ye arn 1% 

=T-witoouirgs thoeiunifgrm land 

iey Covncit recoliulion of 

Iv orf vRig VLURP profess 

SUES SL ns LS le and from CHL 

SCC ICoreaV D Fak Ln rin 

approvals, 

Tier eul 

walopnent. Or 

rransrry:. cubject fo city 
wed pursuant to a 

in the following 

mroning, changes ‘in. cily maps, 
e 1 s=2ction 197- 

of office 
tion ofthe =

 
Wn
 

 
(
 

~andated by 197-c(a 

[3 har disposition of City 

and mistakenly asserting se Yup 

*y virrue:iof the March 26, 1982 

! = notice requirement of



  

Ho ZoTdd) nul ice ocans LE 

felrtion AX7~C{el}) 

ret it iene. bev. | 

Gall sect 3 ; 

ET go. - SE JPL vf IRE 
CR TOE A ie E02 1, ili Gi, X kn 

a ta as 2 te dw a. is ul. 
Them bhai at tact untion ol aay) 

(1) The neice my voor 

all other essanclal 

such sale, lease cr 

be included in ths 

agency pursuant to 

2) such zalie, leazo ( 
approved by o 

hearing no less thn 
o £ publication 

Section 567{(2){(c) (1) spercific- 

a newspaper of general cir: 

disposition of city-owned pr.’ 

which petitioners rely, thuz 

business terms and conditior: 

in accordance with 5¢7(2)(c) 1° 
’ 

The term "governing i 
ww 

a)
 

vee 
SS Si 5 

Cid end eligible 

anilvipal Law. Going cone step 

Gdlepogision ig final, evon withuus 

cid not disapprove ic {se 

Ff cne urban ranswal 

C100 designated 

{Cc){l) providsc 

oooh paid. and 

and .conaitions of 

dispnsition shall 
wiblished hy The 

thar dispositicn be 
Jan basy after. 8a public 
i days of the 

re 

i1otice 1s to be published in 

least ten days prior to tia 

faction S07(2)(ad¥(1), upon 

rez the publication of the 

disposition of real propsrty 

whcee approval is required 

for the disposition, 1s defined ::1 cection 502(1) of the Urban 

 



  

sensual Law, VIC was roca ly anvrrier to reflect tha changes 

wei io SET bop, - wv - sm da "- Fan Taw ice -— gr UE — ee ein te - te . t= PS - ice BE J where lene aoverniheNn a LEENA ING Frond ananonenis to tre Tir 

- ' — wy PY - » «oo by ERE ~ -.- - v Fe - Jd 

Vo HTH / Drouvo. RA a £1 ha 11 } 20 [he ENR 9 aha CHE . 

- nr is -~iye 2 igi ie v9 , . ; v Earl, tends en orien 

ifs ie LR iY mde 3 = weit TiS LEY lenaNe ngs PLLC One I OI aR 20) Ln 
“ye c-, ee Faw prions Rid cael Si ph i Slee? Kh. UT mri Sha rep fr auntingan aly! shell 

- ; 3 ~ - . 
fa Citl \ - ! i - hs "VO Da 

- .- bi) -— 4 -— 

ide $, ARE RB 5 ~~ Lod 1. FE Ns L - 

. rg - ) - — EI > - 

bed 58 TE LA Lr> wn Fe CEA wera? ! a — ’ - Tf - i wd 

Fa FO | - .'w na” I - wile - - ~ 3 

Woah oT aw FER I REL EAE ol) 

Tera Bak - - HE : = = ACHE p, it £5 in y : 

ar EE RN TC Ras q 4 is} LT ~ Sila - PN Ia cys Vie ~- 
Eph ate hata ig da wo lone PRS De at ie BER ity ORD RES PREG dk, 

V Fs . \ oT 1 rm Tne ge 
| 5 oR ERA TR oh Sed Lie 33 SF Cr siglo Vw % 

GY ~~ + 14 ks or PRN 2 22% - 
oir rin nS Havor Lo sian vy diarou-bion of v2 Gia 

INCA syne vy i provicss . 
FREE ER A -— - n Ao wd 

1097 Ee Ei i es a dpe ie: Ty ie 7d det is s PE, AY 
No A PL oe r= 74 or tne 4. Ta » RE SOL, 

- - 1 - = - : - Lo, da ta RTE ~ ce ~ Yao met i ansmivsmaimel ays pobbosvieyte ns ont arvsuad of 

n 2XCept with the anproval of the mayor and & 
cvided by law Uiiless such vewer ic 
ovagted in anotior agency.” 

"Any 8spplicarion for the sales, iedee | 

exchange or other disposition of ragl 
PrCcperty of the city shall bs subject to 

review and approval nuiguant to (Saction i°97- 

: Cc and 197-cl), Such ravigcw shall be limited 

- . to the land use .imrect and liwmlications sf 

the proposed transzction.” 

; Tous, under section '38i{a) of the Charter, it is 

Mayor who approves the cale oi leaze or other dispositicn of 

City-owned real property, and under 197-c it ies the ZJity Council 

waich reviews land-use impacts of applications for such 

transactions, and undar 197-d the City Council must also review 

mociifications submitted by the City planning commission of 

 



  

30 

matters coming under 197-¢ and other matters not here at issue. 

In short, the City Council makes land use determinations, the 

Mayor approves the business terms of the sale or lease by the 

City. 

This allocation cf responsibility is discussed in 

detail in the legislative history supporting the recent amencnsnt 

~% 

to the definition of "governing body" in URL Section 502(1i). 

Memorandum of the Legislative Fepresentative of the City of New 

York in support of the bill, enactad as Chapter 562 of the Laws 

of 1930, noted this Adivisicn -Z respofisibilirty under the charvser 

as follows: 

of As of July 1, 1999, the City Council will 
exercise substantial powers with respect to 

land use review under the Uniform Land Use 

Review Procedure of the Charter. See Charter 

Sertions 197-d, 1152(d). The City Council 

will have automatic land use review 
jurisdiction over some land use matters 

(e.g., zoning amendments), and will have 

discretionary authority to review certain 
other matters (e.g., most acquisitions or 

dispositions of real property). See Charter 
Section 197-d. In cartain instances, ths 

affected Borough Pr=ssident may trigger an 

appeal of a land use matter from the City 

Planning Commission to the City Council. Id. 

2. As of July 1, 1950, the Mayor will succeed to 

the power of the Board of Estimate respecting 
approval of the business terms and conditions 

of the acquisitions and dispositions of real 
property. See Charter sections 384, 

1802(6)(3), 1152(d):. Approvals will be made 

following a public nearing.” 

Reviewing the implication of the new meaning of 

"governing body” in the Urban Renewal Law, the Memorandum 

explains, 

"Under this definition, the City Council 

would substitute for the Board of Estimate 

 



  

31 

with regard to approval by Urban Renewal 

Plans under Section 505 of the General 

Municipal Law, ccnsistent with the power of 

land use review conferred upon the Council 

under section 197-d of the amended Charter. 

The Mayor would approve the business terms 

and the conditions of dispositions made 
oo 4 pursuant to an Urban Renewal Flan under 

section 5927 of the General Municipal Law, 

consistent with the powers conferred upon tha 

Mayor 1n this area under Section 284 and 

1802(8)Y{J) of the Charter. 

After this lengthy analysis, 1t should be clsar that 

entitled "Disposition of Property”; section 127-c of the Charter 

desis with ULURP, Accordincly, tha notice provision under 

S5@7(2)Y iad) (1l) 1s 1lnarposite to 187-cC. Furthermore, the City 

Council does not have authoritv to approve the terms and 

conditions of sales, leases or other dispositions, which are the 

subject Of the notice requirad by 507(2)(d). Inshore. ths 

notice requirement 1s not relevant to the City Council action 

here at 1ssue. 

Respondents acknowledge that Resolution 417 of the City 

Council did in fact cite two bases for its approval: Section 167- 

d of the charfer and Section 307 of the GML. They concede ths 

reference to section 507 was in error and inadvertent. The srrcr 
* 

however 1s immaterial since Resolution 417 is limited to land us (bh
 

review pursuant to ULURP and, in any event, approval of the 

disposition of the land from the City to UDC is a power reserved 

to the Mayor. 

 



  

32 

Lastly, as a final coup de grace, no 5@7(2)(d) notice 

is required at all as a matter of law. Where, as here, the 

disposition in question is to UDC for the purposes of the WSURA 

Urban Renewal Plan, the notice requirement 1s superseded by the 

UDC Act, NY Unconsolidated L. section 6264(l1). The statutes 

states in relevant part, 

"Notwithstanding anything to the contrary 
contained in article fifteen or article 
fifteen-A of the general municipal law or any 
general, special or local law applicable to 
the sale of real property by a municipality 
or an urban renewal agency, a municipality or 
an urban renewal agency may, in addition to 
employing any other lawful method of 

utilizing or disposing of any real property 
owned by such municipality or urban renewal 

agency . . . sell, lease for a term not 

exceeding ninety-nine years, or otherwise 

dispose of any real property . . .to the 
corporation (1.e. UDC) for the effectuation 
of any of the purpos2s cf an urban renewal 
program, without public auction, or sealed 

bids or public notice” (emphasis added). 
  

Notwithstanding Section 6264(1), respondents have bound 

themselves to 28ar the Mayer's approval and the requisite notice. 

will then be published. 

For all the reasons stated aktove, petitioners’ eighth 

cause of action 1s dismissed. 

CLAIMS 9 THROUGH 12 SEQRA 

The last four causes of action allege violations of the 

State Environmental Quality Review Act (SEQRA) in that the final 

environmental impact statement (FEIS) did not include 

(1) alternative sites for the Project (Claim 9) 

(2) an analysis of street-level wind currents (Claim 10) 

 



  

33 

{3) a study of the cumulative impact of the Project, the 
Route 9-A project and the Battery Park City North 

Project (Claim 11). . 

The twelfth and final claim alleges that the modifications to the 

proposals made in January and Fsbruary 1992 are significant and 

therefore require further review under ULURP and SEQRA. 

Backaround history of the oroject 
  

In 1977 the Exchanges consolidated thelr trading 

activities into a Joint facility at thelr location in Four World 

Trade Center (4WTC), but by 1S€4 the physical space there could 

no longer accommodate their needs. The crowded quarters hampered 

their day-to-day operations as well as their potential for futurs 

growth. They looked about for a larger site. In preparaticn cf 

the search they prepared a set cof criteria setting forth the 

requirements the new locaticn wouid have to meet to 

accommodate their operation now and in the future. These 

included substantially larger column-£free space for the trading 

floor, interstitial floors for communications and mechanical 

equipment, SCcessIbITILY £0 SUCPOr- srace for trading activitiss 

and adjacent space for the Exchanges and member firms; proximity 

to. the financial services industry in lower Manhattan; costs 

commensurate with keeping the Sxchange competitive with exchanges 

worldwide; and availability by 1964. 

| After searching for saver vzars, the Exchanges found 

that only two cites would meet their criteria; Site SB in the 

Washington Street Urban Renewal! Ar=a (WSURA) and Harborside in 

New Jersey, Just across the Hudson Eiver from lower Manhattan. 

 



  

34 

New York and New Jersey engaged in a wooing contest to win the 

favor of the Exchanges, each offering inducements, New York to 

keep the Exchanges oo their historic home, New Jersey to lure 

them to its shore. EDC (then the New York City Public 

Development Corporaticn), New York State and New York City 

offered financial incentives and public action in connection with 

Site SB. These were finally accepted in December 1990 when a 

majority of the membership of each Exchange voted to ratify the 

recommendation of the Board of Directors of the Exchanges. UCC, 

the City and the Exchanges then formalized thelr understanding in 

a letter of intent (LOI) executed April 30, 19S1. 

UDC has the principal responsibility for carrying out 

the Project. As the lead agency 1t was its responsibility to 

undertake an environmental review in accordance with the 

requirements of SEQRA. UDC retained Alee, King Rosen & Fleming, 

Inc. (AKRF), a consulting firm, to assist in the preparation cf 

the FEIS and related environmental evaluations. 

The draft environmental impact statement (DEIS) a two- 

“volume document, designed primarily to identify and assess the 

environmental impacts of the proposed headquarter tullding ({HQB) , 

contained technical information, together with maps, 

illustrations and diagrams. , It was developed over a period of 

| months ending in the summer of 1991. On August 4, 1991 UDC 

reviewed and accepted the DEI prepared by AKRF. It was filed 

with the State and City agencies and copies were circulated to 

interested members of the public. Public hearings on the general 

 



  

33 

project plan (GPP) and the DEIS were held by UDC on October §, 

1991; by Community Board No. 1 on October 19, 1591; by the 

Manhattan Borough President on October 24, 1991; and by the Nsw 

York City Planning Commission (CFC) on December 4, 1991. Loc 

voluntarily extended the period for submitting written comments 

cn the DEIS and its GFP until December 4 so that any submissicns 

tc and comments made at the CFC’s public hearing held on that 

date could be considered and addressed in the FEIS. The comments 

were considered by UDC, EDC and the Exchanges. Thelr responses 

to the comments were included as part of the FEIS. All changes 

from the DEIS are marked in the text of the FEIS, which includes 

additional new information and additional mitigation measures and 

amplifications of certain discussions. UDC’'s Directors reviewed 

the FEIS and accepted it on December 19, 1951. It was filad and 

circulated. The FEIS 1s composed of two principal volumes and a 

third which includes Appendices A through I. It exceeds 1200 

page. 

Since UDC’s acceptance of the FEIS, NYMEX has withdrawn 

from the Project. With 1ts departure the space reguiremencs of 

the Project were reduced to apprcximately 50,000 square feet of 

trading-£floor space. The Project was therefore downsized anc the 

HQB is now only ten stories in height. ' A revised LOI to reflect 

the withdrawal of NYMEX was executed on December 1, 1992, after 

litigation had commenced. 

 



36 

SEQRA 

SEQRA was enacted in 1975 and codified in Environmental 

Conservation Law (EC 8-0101-8-0117) and supplemented by rules and 

regulations. The intent of the legislature was that 

"all agencies conduct their affairs with an 
awareness that they are stewards of the air, 
water, land and living resources, and that 

they have an obligation to protect the 

environment for the use and enjoyment of this 

and all future generations." (BEC3-0193(8]), 

{SNYCRR 617.1{2]). 

Social, economic and environmental factors are to be considered 

together by every agency in reaching decisions on proposed 

activities which affect the environment and human and community 

resources. (8-0103[7]). Moreover, an agency may not carry out 

or approve a project before making an explicit finding that "io 

the maximum extent practicable, adverse environmental effects 

revealed in the environmental impact statement process will de 

minimized or avoided." (8-0109(8]); 6 NYCRR 619.9(c)(2)(11]). 

Procedural requirements of SEQRA are set out in 8-0109 

(4-8); substantive requirements in 8-0109(2); 6 NYCRR 817.13(f}): 

which lists general categories of information that must be 

analyzed in an EIS. 

Standard of Judicial Review 
  

Challenges .to the SEQRA process are judicially reviewed 

by the standards applicable to administrative proceedings 

generally under CPLR Article 78. Jackson V. New York State Urban 
  

Development, 67 NY2d 400 (1986). The standard is whether the 
  

agency's determination was made in accordance with lawful 

procedure and whether substantively, the determination was  



  

37 

affected by an error of law or was arbitrary and capricious or an 

abuse of discretion. In assessing an agency’s compliance with 

the substantive mandates cf SEQRA, the role of the court is tc 

"review the record to determine whether the agency took a ‘hard 

look’ at them, and made a ‘reasoned elaboraticn’ of the basis for 

  

its detsrmination."” Jacksen supca; Akpan v. Koch, 75 NY24 551 

(19%Q@). An agency’s "substantive allegations under SEQRA must bs 

viewed in light of a rule of reason.” (Jackson, supra). The 
  

extent to which particular environmental factors are to be 

considered varies according to the circumstances and nature of 

particular proposals. Agencies have considerable latitude 

evaluating alternative measurss. Jackson, supra, Akpan, suprs, . 
  

"Nothing in the law requires an agency to reach a particular 

result on any 1ssue, or permits the courts to second-guess the 

agency’s choice, which can be annulled only if arbitrary, 

capricious or unsupported by substantial evidence." Jackson, 

supra; Aldrich v. Pattiscn, 197 AD2d 258 (2nd Dept. 1985). 
  

CLAIM S - ALTERNATIVE SITSS 
  

In paragraphs 130 and 133 of the amended complaint 

petitioners state that ULC refused tc discuss reasonable 

alternative proposals for development of Site SB for recreaticna. 

uses; that they refused to discuss the alternative of locating 

the Project to either Site © in Battery Park City, which 1s 

larger than Site 5B,, or to an expanded space at WTC. 

In paragraph 54 of their cross-motion for summary 

judgment, petitioners concede that respondents did examine 

 



  

38 

alternative locations for the project "at the outset”, but failed 

to do so in January 1992 after the programmatic requirements 

calling for at least 100,000 square feet cf trading flocr space 

"were no longer valid.” 

The statutory and regulatory guidelines pertaining to 

the substantive contents of an environmental impact statement 

(EIS) require that it include an analysis of rszasonable 

altarnatives to the proposed action (EC 8-0109(4]). 

The FEIS evaluated a range of alternatives, which 

included (1) a no-build alternative; (2) an approved urban 

renewal plan alternative, (3) development ci the Exchanges 

Project on Site 5B and a residential tower cn Site 5C, (4) 

construction of the Project with a community facility on Site 3C, 

(6) the Project with a reduced parking alternative (FEIS, Vol. I 

at Part III). Site 5C is a smaller parcel than site 5B to which 

it 1s adjacent. 

Petitioners maintain that cnly cne alternative, the 

alternative ee to build the Froject at all, leaves Site 5B free 

of the construction of the Projact. In petitioners opinion, the 

study of the other alternatives is a "charade" and a "sham." 

The mission of the puslic sector respondents was to 

achieve the Project objectives. In pursuit of those objectives 

they were not required to study alternative uses of the site 

proposed for the Project if the alternative uses would not 

  

achieve the goals of the missicn. Shellabarger v. Onondaga 

County Water Authority, 105 AD2d 1134 (4th Dept. 1984). The 
  

 



  

39 

proposition is self-evident. What is incumbent upcn respondents 

is to demonstrate that it had taken a "hard look" at alternative 

sites for this project. This court must determine whether 

respondents’ conclusion that no other reasonable altsrnative site 

for the Project existed is a conclusion reached within the rule 

of r=ason, after taking the requisite hard look at cther possible 

A) Battery Park City Site E (a/k/a 25/286) 

The site 1s located immediately ncrth of the World 

Financial Center and is slightly larger than Site SB and is 

vasane. Site E 1s encumbered with two restrictive covenants 

which operate in favor of three private parties, American 

Express, Merrill Lynch, and Olympia & York, tenants of the World 

Financal Center. One covenant limits the use cf Site E to 

residential or hotel use until December 31, 1993; the second 

restrictive covenant is a view easement which places a height 

limitation of 14@ feet on construction on the site until the year 

2002. 

Petitioners submit a letter from the president of the 

Battery Park City Authority (BPCA) (Exh. J to crossmotion fc 

summary judgment) dated July 3,. 199@ describing a study conducted 

at the ceguest of UDC in connection with the possibility of 

‘locating the Project on Site E. A memorancum (undated and 

unsigned) from the BPCA files, which 1s apparently part of the 

study conducted, is joined to the letter as an exhibit. 

Petitioners offer the exhibit ostensibly tc demonstrate that BPCA 

 



  

40 

could accommodate, and were prepared to "quickly evaluate” 

modifications to, the proposed project. 

A few extracts of the memorandum will be instructive at 

this point, but they tend to lend support to respondents’ —-- 

position that the site was unavailable, rather than to 

petitioner's position to the contrary. 

"{Wlhile these two sites could accommodate 

the area requirement of Comex, there are 

major problems having primarily to do with 

the potential economic returns to New York 

from these sites 

Battery Park City Authority might one day 
welcome the prospect of an important tenant 

like Comex coming to the World Financial 

Center, however their proposed facility as 

currently designed would not work within the 

context of our Master Plan, and the financial 

package agreed to by the City, if transferred 

to Sites 25 and 25b, would cause a loss in 

revenue to the City of S1,045,000,000 over 

the next 25 years according to our current 

estimate i 

The memorandum further on discusses the legal 

restrictions on Site E. 

"The Declaration of Restrictions prevents 

Battery Park City Authority from developing 

sites 25 and 26 with anything other than 

residential or hotel uses until 1994. In 

1986 the Authority attempted to amend the 

Large Scale Commercial Development Plan to 

include Sites 25 and 26 in such a way that 

would permit commercial development of these : 

sites. American Express forced the Authority - 

to drop these plans.” 
< 

Petitioners argue that the effect of the use easement 

merely postpones construction of the project to January 1994, 

which delay would not significantly slow down the Project. 

Moreover, since there is only a short lifespan remaining to the 

 



  

41 

use easement, American Express, Merrill Lvnch, and Olympia and 

York might now be willing to sell a waiver of their easement 

rights. As to the view easement, it affects only buildings 

taller than 14@ feet above the curb. Under the revised LOI cf 

December 1, 1992, the ocffice tower 1s now onlv ten stories high 

and, therefore, would not exceed the view restriction. In shert, 

neither covenant 1s an impediment to relocating the Project tc 

Site E. 

To these arguments respondents countar that preliminary 

inquiries exploring Site E as a potential Project site were made. 

Reactions to the inquiries convinced them that a negotiated 

arrangement to obtain access to Site E was not practicable 

because the private parties could not be fcrced to negotiate the 

sale of their rights. UDC also considered but dismissed the 

possibility of condemning the rights protected by the restrictive 

covenants because such a hostile approach would likely involve 

long dslay and costs. Rezoning was ccnsidered but applications 

for zoning map amendments require the cooperation of the propertyv 

owner - here BPCA - which could not provide support to the effort 

until 1994, in view of the restrictive covenants. Faced with the 

covenants, the risk and delay attendant to a hostile effort to 

acquires those rights, and the. time and expense entailed in the 

change of use process, UDC made the determination that Site E 

could not be available within the time frame of the Project 

planned for 1994. They estimated the projected delay, with new 

 



  

42 

SEQRA and ULURP implementation of the Project would run until 

1998. 

In Horn v. International Business Machines Corp., 110 
  

AD2d 87 (2nd Dept 1985) the EIS had identified and rejectad sites 

based, inter alia, on inappropriate zoning, a restriction 
  

ana iBaous to the restrictive covenant that precludes commercial 

development on Site E. The Hern court held that the 

inappropriate zoning was a sufficient basis for the lead agency 

to conclude that alternative sites ware not "reasonable" and need 

not be analyzed in an EIS. 

Petitioners deem that the true reason for UDC’s 

rejection of Site E was the prciactsd loss of revenue to the City 

described in the BPCA memorandum atove. They claim this 

information was withheld from them, and moreover, that i is not 

a sound basis for rejecting the site. Notwithstanding 

petitioners’ deprecatory stance regarding such economic 

consideration, it is a factor wcrthy cf consideration. While it 

is not an environmental factor i: 15 a realistic, necessary 

consideration and a factor to te weighed even under SEQRA (see 8- 

@103({7]), one which the court in Concerned Citizens Agairst 
  

Crossagate v. Flacke, 89 AD2d 73S (3c Dept 1982), aff'd 5& NY2ad 
  

919 (1983) recognized as vali?. It upheld the eliminaticn of 

alternative sites from consicdera:.cn tased on the business 

judgment of the developer. Ncr 1s it forgotten that it is 

petitioners themselves who assert a claim for waste of public 

funds in connection with the Projec:. 

 



  

43 

This court 1s satisfied that tne UDC took a hard look 

at Site E as a possible site and prorerly found it to be an 

unreasonable alternative. 

B) 4 World Trade Canter 
  

The Port Authority (PA), owners of 4WTC, offered to 

expand and improve the space availabla to the Exchange at their 

Assistant Director and on ©
 

ct
 

rT
 

{))
 present home. On October 12, 199 

October 15, 1590, the Bxecutive Director of the PA each wrote to 

the Exchange to demonstrate the readiness of the WIC to 

accommodate the needs of the Exchange. They proposed three 

trading floors of 30,000 square feet sach, plus expanded office 

space and other amenities. The Exchanges were not interested, 

preferring "newly constructed and unicuely designed facilities” 

to enable them to compete effectively as an industry in today's 

market.” (See letter of Amy L. Benenson, Vice President, Finance 

and Development of Commodities Exchange Center, Inc., dated 

October 30, 1990, Exh O annexed to petitioners’ crossmotion). It 

must be remembered that it was the very inadequacy of the spatial 

arrangement of 4WTIC that impelled ths Exchanges to look for new 

headquarters and led finally ts ths Frojasct. Since the exchange 

of the October 1990 letters, evénts have taken their course and 

NYMEX has withdrawn from the Frcject. The space requirement 

originally envisioned is now resducad, but cne need has remained 

constant: a trading floor of a minimum 52,200 square feet, free 

of columns. The 30,000 square feet trading floor space offered 

 



44% 

by the PA falls quite short of the Exchanges’ need. In short, 

4WTC cannot satisfy the Project’s requirements. 

Petitioners concede the alternatives were discussed &t 

the public hearing at the initial stages. They object, hcwevar, 

to their not being fully discussed in the FEIS. Though tne 

alternative sites are included in the FEIS, it 1s certainly crue 

that they are not discussed in detail. 

ECL 8-0109(2)(9) requires that alternative locations ce 

analyzed. The regulations, at NYCRR 617.14(f)(s), amplify the 

requirement stating that the body of all drafts and FEISs shal. 

at least contain "a description and evaluation of reasonable 

alternatives to the action which would achieve the same or 

similar objectives". The key word 1s "reasonable". 

The programmatic requirements of the Exchange sst cut 

three essential criteria: (1) expansive open space for the 

trading floor; (2) a timely completion date; (3) proximity tc 

lower Manhattan. Site SB, Site E and 4WIC all meet the tRirz 

criterion. Site E could provide the needed space. Morecver,tne 

view easement no longer constitutes an obstacle to the ten-tory 

HOB. However, the covenant restricting use would still have C3 

be surmounded. Efforts to overcome this obstacle, through the 

purchase of the rights, rezoning aprlications or condemnaicn, 

would result in delay, and even if finally successful, ths full 

implementation of SEQRA and ULURP processes would have tc be 

undertaken anew. The Project would thereby be substantially 

retarded. Thus Site E falls to meet the second criterion. 4WTC  



45 

cannot provide the necessary space. It does not meet the first 

cri 

UDC’s determination that the alternative locations were not 

viaple sites for the Project was made after a hard look at Site E 

and 4WTIC and was well within the rule of reason. SEQRA and its 

cemplementary rsgulations do not require an analysis in the FEIS 

of alternative sites that are not reasonaple. The FEIS is 

therefore not legally deficient for failing to discuss in detail 

Sites E and 4WTIC. 

Petitioners’ ninth claim is dismissed. 

Claim 190 WIND IMPACT ANALYSIS 
  

Petitioners allege UDC violated SEQRA by refusing to 

study the Project’s effect on street-level wind currents in the 

area surrounding the Project; that UDC’s failure to do so was 

arbitrary and contrary to ECL 8-0105(6), 8-0199(2), 6 NYCRR 

617.2(1) anc 517.14(f). 

Petitioners request a judgment declaring the DEIS be 

set aside as null and void because of facial insufficiency. 

The DEIS did not identity the wind impact of the 

Project as a significant environmental issue requiring analytical 

study in depth. During the DEIS comment period petitioners 

ralsed the issue, which in its full text 1s as follows: 

"According to reports from members of the 
community, channeling of west wind along east 
west streets frequently make walking along 
these streets very difficult. The DEIS does 
not mention this problem, nor does it address 
the impact of the Exchanges Project on 
street-level winds. The issue should be 

addressed in the FEISS."  



46 

The FEIS (Vol. I, VIII 59-60) responded that 

"Pedestrian level wind analysis are not routinely included in New 

York City . . . environmental review” and based on recent studies 

conducted of wind conditions at Battery Park City (BPC), the FEIS 

finds that "wind flows would be similar to those occurring at 

many locations along the river and throughout the city.” The 

FEIS concludes that an extensive wind study would be a needless 

expense with no corresponding benefit. 

The FEIS response 1s unsatisfactory to petitioners. 

The community members of Tribeca are particularly concerned about 

the safety of their children. P.S. 234, located on Murray 

Street, lies across the street just east of the proposed site of 

the Exchanges Project. Community organizations, petitioners 

nigre thy ideta ined a consultant to review the DEIS on their behalf. 

Lloyd L. Schulman, a meteorologist with 18 years experience in 

analyzing wind flows over buildings, conducted a site inspection 

on December 7, 1992. The conclusion of the Schulman report is 

that "theres likely to be an increase in pedestrian level wind 

speed on Warren and Murray Streets for westerly wind directions 

as a result of the construction of the proposed Commodities 

Exchange. However, 1in order to quantify these impacts, a site 

specific wind tunnel analysis must be performed. " 

Petitioners acknowledge (see reply memorandum of law) 

SEQRA does not require the EIS to identify any specific 

environmental concern. They do not argue that a wind study is 

required in all DEISs. Rather, they argue that given the  



  

47 

particular location of the site, the "bulk of the proposed 

building” and the "sensitive adjacent use”, wind impact is a 

potential problem requiring analysis. As they understand it, 

their comment during the DEIS review process was a request for a 

site-specific study. As evidence that wind impact analysis ars 

common in DEISs, petitioners have submitted coples of four DEISs 

cre2pared in connection with other proposals. 

The Riverside South Development analysis of wind 

studies was prepared in April 1592. Its findings were based cn 

"studies of wind aerodynamics around large buildings, as well as 

on previous Trump City wind tunnel testing of existing and 

proposed public open space along the Hudson River." Its 

conclusion was that there would be "no significant effect on 

pedestrian-level winds in the new river front park." 

The Brighton by-the-sea study of December 198% was 

based on "published data on wind characteristics around isolated 

high rise slab buildings” which reflected their "best estimates 

of wind effects” that could be expected in the proposed central 

open space of the project. 

The 506 E. 76th Street study of March 1990 was based 

"on published data on wind characteristics around buildings” and 

the consultant’s "experience with similar pedestrian wind 

‘assessment performed for other projects in New York City." 

The Downtown Buffalc Sports Complex study of April 1986 

was based on "a 1:400 scale model of the proposed development” 

 



  

48 

and the surrounding area was tested in the consultant’s wind 

tunnel facilities. 

Of the four wind studies submitted, three base their 

assessment on previously published data of general studies on 

wind Re iOCYRARLTS or on Luar projects. One study relied on the 

Cranb City study, as did respondents herein. Only the 506 E. 

76th Street analysis undertook a& site-specific study. The other 

studies are in the nature of being generic. 

UDC opposes the tenth cause of action initially on the 

ground petitioners have failed to exhaust their administrative 

remedies. UDC claims petitioners may not now raise an issue they 

failed to raise during the environmental review period. UDC 

contends that the full text of the written comment was a mere six 

lines out of a record thousands of pages long, that a "single 

passing reference to wine effects out of hundreds of comments 

made on the Project can hardly be construed to have put UDC on 

notice that petitioners considered this to be an important 

issue." Morgover, UDC argues, the Schulman affidavit should have 

‘been submitted as a comment on the DEIS, not as a sur reply 1n 

litigation. 

In applying the doctrine of exhaustion of 

administrative remedies, courts have refused to review a 

determination on environmental matters based upon evidence or 

arguments or documentary or other evidence not sregedtid during 

the proceeding before the lead agency. It is particularly 

important to allow the administrative agency possessing the . 

 



  

49 

raquisite expertise to exercise its judgment and authority. Thus 

the court in Aldrich v. Pattison, supra, stated that "an 
  

application for administrative review of the substance of a FEIS 

should be based upon evidence refuting the analysis and 

conclusions contained therein which the lead agency had an 

opportunity to consider in the first instance." 

UDC’s assertion that petitioners did not raise the wind 

impact 1ssue during the envircnmental review process of the DEIS 

is not well taken. The quantitative weight of the issue raised, 

whether six lines or sixty, might perhaps be relevant to the 

scope of attention and depth of analysis it warrants in response, 

but as long as the issue was raised in the review process before 

the agency, petitioners are not barred from asserting their claim 

in an Article 78 petition on the ground they failed to exhaust 

their administrative remedies. The Schulman report, on the other 

hand, should have been submitted as a comment on the DEIS, not 

presented for the first time in litigation. The Schulman site 

inspection took place December 7, 1592, nearly a year after the 

DEIS review period. His report should have been prepared earlier 

and been presented before the agency for its evaluation. It 

should therefore be barred by the doctrine of exhaustion of 

administrative remedies. The court in Aldrich, supra, after a 
  

lengthy discussion of the doctrine, nonetheless, included in 1its 

judicial review a number of issues which had not been raised 

before the agency. This court will do likewise and consider the 

Schulman affidavit. 

 



  

50 

In further opposition to petitioners’ claim, UDC points 

out that the Trump City study examined wind impacts on Battery 

Park City (BPC). BPC 1s not far from Site 5B and it closer to 

the Hudson River than Site 5B. The Trump City wind study 

revealed that wind conditions in the project are typical of the 

New York City waterfront and that Dedest ran’ level wind within 

BPC did not inhibit the use of open spaces to the public. In his 

affidavit, Stephen S. Rosen, senior vice-president of AKRF, the 

consulting firm primarily responsible for the EIS, states that 

"the proposed project will increase wind flows around the 

building. However these wind flows would be similar to those 

occurring at many locations along the river and throughout the 

city." AKRF concluded that additional studies were unnecessary 

since they would merely duplicate studies made in the Trump City 

DEIS. Accordingly,, The FEIS does not provide a site-specific 

analysis or a detailed discussion of the wind issue. 

The question for the court to resolve 1s whether UDC’'s 

conclusion that the wind impact of the Project is not a 

significant environmental factor was based on a "hard look" at 

the issue. 

ECL 8-0109(2) requires the EIS to include a "detailed 

statement” of those factors which will have a "significant” 

effect on the environment, but it also directs that it "should 

deal with specific environmental impacts which can be reasonably 

anticipated.” Therefore, it "should not contain more detail than 

is appropriate considering the nature and magnitude of the 

 



  

La 

51 

proposed action and the significance of its potential impacts.” 

It is now well established that in reviewing an agency's 

decisions with respect to SEQRA requirements, i: 1s not the role 

of the cour: to substitute its judgment for that of the agency”. 

Rather, it 1s "to assure that the agency itself has satisfied 

SEQRA procedurally and substantively.” Jackson Vv. New York Stace 
  

Urban Development Cora., 67 NY2d 400 (1985). Morsover, the "hard 
  

look" standard, first announced in H.O.M.E.S. Vv. New York State 
  

Urpan Development Corp., 69 AD2d 222, "does not authorize the 
  

court to conduct a detailed de novo analysis of every 

environmental impact of, or alternative to, a proposed project 

which was included in, or omitted from a FEIS."” See also Jackson 

  
and Aldrich, supra, Coalition Against Lincoln W. v. City of New 

York, 94 AD2d 483, aff'd 60 NY2d 805. "The Agency’s compliance 

with its substantive SEQRA obligations 1s governed by a rule of 

reason and the extent to which particular environmental factors 

are considered varies in accordance with the circumstances and 

nature of particular proposals”. Akpan Vv. Koch, 75. NY 759. 
  

Here, petitioners’ consultant speaks of the "likely" 

effects of the Project’s wind impact. Respondent's consultant, 

on the other hand, relies on the Trump City wind analysis at the 

nearby, more exposed BPC to conclude that the Project would not 

have a significant environmental impact. In short, we have two 

views presented, each supporting a different result. SEQRA, 

however, allows the lead agency "considerable latitude” 1in 

evaluating environmental impacts to reach a determination 

 



  

52 

concerning a proposed project. UDC should be accorded such 

latitude in adopting the findings of its expert rather than the 

contrary opinion tardily advanced by petitioners’ expert in 

litigation. 

Petitioners have not succeeded in convincing the court 

that by raising the wind impact issue they did anything more than 

place an obligation on UDC to take a hard look at the question. 

This UDC did and made a reasoned determination based on the BPC 

DEIS that there would be no significant street-level wind impact 

as a result of the Exchanges Project. Accordingly, a detailed 

site-specific analysis of the issue in the FEIS was not required 

by SEQRA. 

Petitioners’ tenth claim is dismissed. 

Claim 11 - CUMULATIVE IMPACT ANALYSIS 
  

Petitioners allege UDC failed to analyze the cumulative 

environmental impact on Tribeca of the Project in combination 

with two other "related"projects, in violation of SEQRA 8- 

2109(2), 6 NYCRR 617.11(a)(10 and 11) and 617.11(b). They 

request a declaratory judgment annulling the resolutions of 

respondents City and UDC based upon the deficient EIS and 

enjoining them from taking further steps With respect to the 

Project until a proper EIS pursuant to SEQRA 1s, prepared. 

There is currently a proposed plan fcr the 

reconfiguration of Route 9A, also known as West Street. The 

proposed modifications to that plan are not final. If approved, 

 



53 

the project 1s estimated to be completed in the late 199Q@°'s. 

Route SA 1s the western-most boundary of the Exchange Project. 

The other project 1s in Battery Park City North (BFCN), 

which includes Stuyvesant High School. The FEIS for BPCN, as 

amended by a supplemental EIS, was completed in January 1987. It 

indicates tne project will result in an increase of vehicular 

traffic and carbon monoxide emissions and overcrowding of the 

Chamber Street subway stations. BPCN is west of Route 93, lying 

Just across 1i:. 

Petitioners are concerned about carbon monoxide 

concentrations, increased noise level, air pollution, pedestrian 

and traffic congestion as well as the capacity of Newton Creek 

Sewage plant to absorb increased sewage. AKRF prepared the EISs 

for the Route 9A and BPCN projects and the Project here at issue. 

Thus, petitioners reasonably conclude, AKRF has at its disposal 

all the necessary environmental data for all three projects to 

prepare a cumulative impact statement. Petitioners made a 

request for such a study in a letter dated February 21, 1991 from 

‘Anne Compoccia, chairperson of Community Board No. 1 to Robin 

Flelschnan, Project Manager, Commodities Exchange Project of UDC. 

Respondents oppose this cause of action because 

petitioners failed to timely raise the issue during the 

administrative environmental review process. Consistent with the 

position taken with respect to respondents’ assertion ot the 

doctrine of exhaustion of administrative remedies against the  



54 

Schulman report in the fourth claim, the court will review on the 

‘merits petitioner’s present claim. 

| There 1s no SEQRA requirement to consider the 

cumulative impact of unrelated projects. It 1s within the lead 

agency’s discretion to prepare such a report, but it is not 

mandatory. 6 NYCRR 617.15(a)(l), see Alpan v. Koch, 75 NY S&1, 
  

574 (1990); Mattzsr of Save thhe Pine Bush v. Citv of Albanv, 70 
  

N¥Y2d 193, 205. Petitioners claim the projects are related, but 

cffer no basis for the conclusion. Presumably it is the 

geographic proximity of the three projects which give rise to 

thelr assertion. 

Both sides refer the court to Long Island Pine Barrens 

Society Inc. v. Planning Board of the Town of Brookhaven, 
  

  

N¥Y2d ____, decided November 24, 19922. The case involved a 

120,000 acre area whose sole natural source of drinking water was 

its groundwater resevolr. At issue were some 224 discrete 

proposed development projects scattered throughout the Central 

Pine Barrens area. Petitioners there sought to invalidate the 

SOPrOvVals given and to enjoin respondent from taking further 

action because no consideration had been given to the cumulative 

impact of the projects. In the prior Pine Barrens proceedings, 

the trial court had ruled that the municipal respondents were not 

obligated to consider the cumulative impact of all pending 

projects within the region. The Appellate Division reversed, 

concluding that by virtue of thelr presence in a legislatively 

protected area, the 224 projects at issue were significantly  



53 

"related" and therefore, fell within the mandatory cumulative 

impact rule of 6 NYCRR 617.11(a)(l1l). 

The Court of Appeals reversed. It held 

"The existence of a broadly conceived policy 
regarding land use in a particular locale is 
simply not a significant unifying ground for 
tying together otherwise unrelated projects 
together and requiring them to be considered 

in tandem as "related" propecsals pursuant to 
6 NYCRR Section 617.11(a)(ll) and (b)." 

Petitioner’‘s r=ly on the following passage from the 
decision: ; 

"One criterion for the ‘significant effect’ 
determination is the existence of ‘two or 
more related actions . . . none of which has 

a significant effect . . . but when 
considered cumulatively would meet one or 

more of the regulatory ‘significant effect 

criteria’ (6: NYCRR 817.11(a){11). For 
purpose of determining whether an action 

meets any of those regulatory criteria, the 
lead agency must consider reasonably related 
long-term, short-term and cumulative effects, 
including other simultaneous or subsequent 

actions which are (1) included in any long- 

range plan of which the action under 
consideration is a part; (2) likely to ke 

undertaken as a result thereof; or (3) 
dependent thereon. Id. 617.11(b)" (Emphasis 

provided by Barrens Court). 

  

The Court, however, went on to say "In all other circumstances, 

Core LUerasen of the cumulative effects of projects other than 

the one immediately proposed is permissible but not mandatory.” 

Given the commanding rationale for finding the projects 

‘related in Pine Barrens, which that court nonetheless rejected, 
  

it is amply clear that geographic proximity alone of 

contemporaneous and later projects is not a sufficient basis for 

finding them "related". They must be "integrally related” to  



  

56 

other development projects in the same geographic area. Akpan v. 
  

Koch, supra. And to determine whether they are integrally 
  

. - 

related, NYCRR 617.11 (a and b) and Pine Barrens set out the 
  

elements that must be met. The simultaneous or subsequent NE a 

projects must (1) be included in any long range plan of which the 

project at issue 1s a part, (2) likely to be undertaken as a 

r2sult of or (3) dependent on the project at issue. 

Nothing in the record or submitted by petitioners 

demonstrates that either the Route 9A reconfiguration project or 

the BPCN project is included in any long range plan of which the 

Exchanges Project is a part, or 1s likely to be undertaken as a 

result of, or 1s dependent upon, the Exchanges Project. 

Accordingly, a cumulative impact analysis of the three projects 

baron together is permissive but not required. 

Nonetheless, UDC did consider a number of cumulative 

effects, including the impact on air quality and traffic 

conditions of the Route 9A project in Tribeca. The aim of the: 

Route 9A proposal is to alleviate traffic congestion. The FEIS 

assessment of traffic impact does not take into account the Route 

SA project results, which at present are speculative. UDC, pt 

therefore, predicts that the FEIS assessment of traffic impacts 

attributable to the Exchanges Project is, 1f anything, in view of 

the anticipated improvements after completion of Route 9A, 

overestimated. 

As to the sewage problem, the FEIS reports that the 

Department of Environmental Conservation is at present 

 



  

58 

ULURD 

The uniform land use review procedure (ULURP) began on 

August 14, 1991, when the ULURP applications were certified as 

complete by the New York City Department of City Planning. 

Community 3card 1 held a public hearing on the Project 

on Cctober 13, 1951 and recommended that the Project not be 

approved. The Borough President held a public hearing on Cctobker 

24, 1991 and issued a conditional recommendation that the Project 

be approved. : 

The City Planning Commission (CEC) held a public 

hearing on the ULURP applications on December 4, 1591. Before 

the CPC acted on the application, NYMEX announced its intention 

to withdraw from the Project. The Project sponsors accordingly 

presentsd to the CPC two alternative proposals, the first based 

on NYMEX remaining in the Project, "the Five Exchange Building”, 

calling for a headquarters of 30 rather than 47 stories, the 

second based on NYMEX withdrawing, "The Four Exchange Building” 

calling for a headquarters of 22 stories, with the parking garage 

reduced from 400 to 299 parking spaces and the two 50,000 square 

feet trading floors reduced to a single 51,000 square foot floor. 

AKRP prepared a technical memqrandum on January 20, 1992 for each 

of the reduced alternatives. The analysis found that the 

modifications to each option would not have any significant 

adverse environmental or land use impacts, but would in fact 

reduce them. The analysis was submitted to the CPC, which voted 

to approve the Project under either alternative by three 

 



  

59 

resolutions, each dated January 21,1992. One resolution approved 

the disposition of the City-owned site 5B to UDC for its proposed 

land use, a second resolution approved amendments to the Urban 

Renewal Plan for the WSURA to facilitate development of the 

Project on site 5B and to limit the development potential on Site 

SC. The third resclution approved the special permit for the 

parking garage. 

| On February 28, 1952, the City Council held a public 

hearing on the ULURP application. On March 5, 1992 the Land Use 

Subcommittee cn Permits, Dispositions and Concessions and the 

full Land Use Committee of the Council approved both alternatives 

for the Project, with certain additional modifications. The 

modifications included the further reduction of the Five Exchange 

Building from the 30 stories approved by the CPC to a maximum of 

22 stories and the reduction of the parking garage from 400 to 

299 spaces. The Four Exchange Building was reduced from 299 to 

264 square spaces. The trading floor in both remained unchanged 

at 51,000 square feet. Pursuant to ULURP, the application was 

then forwarded to the CPC for a determination whether the 

sosgoged modifications were within the scope of the prior 

approval or required additional environmental or land use 

approval. (NYC Charter 197-d(d]). z 

-— 

An evaluation of each of the reduced alternatives as 

recommended by the Land Use Committee of the City Council was 

prepared by AKRF on March 16, 1992. The analysis once again 

indicated that the additional reductions in each alternative 

 



  

60 

building would further minimize potential environmental and land 

use impacts of the Project. UDC accepted these findings on March 

19, 1992. The CPC, after reviewing the proposed modifications to 

each of the two project alternatives, found on March 24, 1992 

that no additional environmental study or land use review under 

ULURP was necessary. Thereafter, the City Council, by resolution 

dated March 26, 1992, approved the modified Project alternatives 

for each of three ULURP actions. 

Several related sections of the New York City Charter 

and CPC regulation provide that only significant modifications 
  

trigger the need for further hearings or a repetition of the 

ULURP process. We must now enter into that regulatory labyrinth. 

Section 197-d(d) 1s the controlling section of the City 

Charter, not 197-c¢ as claimed by petitioner. It directs that 

before the City Council may approve with modifications a prior 

CPC approval of a ULURP application, it must allow the CPC an 

opportunity to review the proposed modifications and determine 

whether they are "of such significance that additional review 

pursuant to (197-C) 1s required.” The criteria to be applied by 

CPC are set forth in section 2.06(h)(5) of the CPC regulations 

"The Commission shail receive from the City 
Council . . . the text of any proposed 

modification of the Commission’s prior 

approval of an action . . .(T)he commission 

shall determine (upon receipt) 

(1) 1in consultation with the office of 
Environmental Coordination and lead agency, 
whether the modification may result in any 
adverse environmental impacts which were not 

previously addressed; and 

 



  

61 

(11) Whether the modification requires the 
initiation of a new ULURP application. The 
Commission shall consider whether the 
proposed modification 

(A) increases the height, bulk, envelope or 

floor area of any building or buildings, 
decreases open space, or alters conditions or 
major elements of a site plan in actions 
which require the approval or limitation of 

these elements; 

(B) increases the lot or geographic area to 
be coverad by the action; 

(C) makes necessary additional waivers, 
permits, approvals, authorizations or 
certifications under sections of the zoning 
resolution, or other laws or regulations not 
previously acted upon in the application; or 

(D) adds new regulations or deletes or 
reduces existing regulations or zoning 
restrictions that were not part of the 
subject matter of the earlier hearings at the 
community board or Commission. 

The regulation goes on to provide that if "The Commission has 

determined that an additional review is necessary, it shall so 

report to the Council.” 

Unlike the Council, the CPC, pursuant to Section 2- 

06(c) of the CPC regulations, may make a significant modification 

‘subject to the requirement that it hold a hearing on the proposed 

modification. However, and relevant to our purpose, under the 

same section, no hearing at all is required when the Commission 

. makes a minor modification of an application. 

To summarize, the CPC regulations and the City Charter 

impose the following procedure: when a modification proposed at . 

the CPC level is found by the Commission to be minor, no 

additional CPC hearing 1s necessary; when a modification 1s 

 



  

62 

proposed at the Council level 1t must be reviewed for 

significance by the CPC; and where the Council-initiated 

modification 1s found to be mincr by the CPC, no further ULURP 

review is necessary. 

CPC Secticn 2-26(h) plainly shows that decreasing the 
  

size of a bullding is not a factor which requires an additional 

nearing when proposed bv the CPC or a repetition of the ULURP 

process when proposed bv the Council. 

Here, the CPC held a public hearing on the original 

application on December 4, 1991, but before it could act on it 

NYMEX announced its intention to withdraw from the Project. In 

January 1992 UDC therefore submitted to the CPC two alternative 

proposals, the "Five Exchange Building” and the "Four Exchange 

Building”, each a reduced version of the original proposal. The 

CPC voted to approve the applications on January 21, 1992. 

The City Council held a public hearing on the three 

applications on February 28, 1992 and thereafter additional - 

modifications were proposed by the Council’s Land Use Ccmmittee, 

which recommended further downsizing. The reduced alternatives 

were analyzed by AKRF, accepted by UDC and reviewed by CPC which 

determined that the further downsizing did not require additional 

environmental or land use review. On March 26, 1992 the City 

Council voted to approve the modification Project alternatives. 

The first modifications were initiated at the CPC 

level, the second at the Council level. In either situation it 

1s the CPC which makes the determination whether the 

 



  

63 

modifications are significant. The CPC finding that both sets of 

modifications, which reduced the size of the Project, were not 

significant, judged by the criteria of Section 2.86(h)(5) is s 

entirely reasonable. To have determined otherwise under the | -- 

regulatory guidelines would have been illogical, not to say 

irrational. Having found that the modificaticns were minor, 

neither a hearing nor a renewal of the ULURP process was 

required. 

Petitioners relying on Plotnick v. City of New York, 
  

148 AD2d 721 (2nd Dept. 1989) claim the modifications have 

"altered the essential nature of the project”. The court there 

found that changing a project providing housing for homeless 

families to one providing housing for homeless singles was "a 

major modification which altered the essential nature of the 

project,” one with significant differences in lmpact on the 

community in whose midst it would be placed. The issue before 

the Plotnick adit was the vot ing procedure implications for the 

approval of the project by members of the Board of Estimate. 

The court cannot agree with the proposition advanced by 

the petitioners. Nothing but the physical dimensions of the . 1 

project have been altered. Its nature and purpose remain | 

identical as from the start. Moreover, the Plotnick case 

involved a regulatory scheme for project approval that has since 

been changed by amendments to the City Charter in 1989.. Here 

the CPC rules and City Charter were properly adhered to. 

 



  

64 

SEQRA 

Under 6 NYCRR 618.8(g)(1) a supplemental environmental 

impact statement (SEIS) may be necessary where changes to a 

project result in significant adverse impacts. 

Petitioners contend the original proposal was for an 

"Industry Centar" for all Exchanges, which 1s now "wholly 

atered” by the changes in the Project. 

The fact that a project has undergone changes does not 

in itself mean the changes will have any significant adverse 

environmental impact. Indeed, petitioners nowhere claim the 

modifications will adversely affect the environment. 

The mecdifications here at issue were evaluated by AKRF 

for their environmental impacts on, among others, community 

facilities and services, population and housing characteristics, 

traffic and transportation, air quality and noise (See AKRF 

technical memorandum of 1/20/92 and 3/16/92). The evaluations 

concluded that the Project modifications resulted in reduced or 

unaltered environmental effects. 

UDC took the requisite "hard look" at the proposed 

changes and gave a reasoned elaboration for its conclusion that 

they would not result in adverse environmental effects. 

Therefore there 1s no SEQRA obligation to prepare a SEIS. 

Petitioners’ twelfth claim is dismissed. 

CONCLUSION 
  

The court has reviewed with care the pleadings, motion 

papers and voluminous documents submitted by the parties. This 

 



65 

litigation has been strenuously argued and defended. The court 

is not unsympathetic to the Tribeca petitioners’ aversion to the 

prospect of further commercial activity in thelr neighborhood and 

+s attendant increase in traffic congestion, noises and 

pedestrian population. Nor 1s the court indifferent to the 

importance of maintaining the reputation and prestige of our city 

as an international hub of worldwide trade and commerce or of 

keeping job opportunities secure for New Yorkers. The court's 

sympathy is not, of course, the litmus test by which to gauge the 

issues raised in the petition and complaint. The law guides the 

outcome. For the reasons discussed in this decision, the law 

requires that the petition and complaint be dismissed in its 

entirety, and the court does so accordingly. 

This constitutes the decision and order of the court. 

Dated: April | , 1993 PAD. Lt prnniri 

ROBERT D. LIPPMANN, J.S.C.