Today Minnesota Public Radio presents the fourth in its series on the role of the courts in a changing Society. The series is sponsored in part by the Minnesota bar foundation and the Nash Foundation. Today's program looks at one particular lawsuit would successfully challenged the Cedar Riverside housing project in central Minneapolis. The Court's decision in this case shows us how the National Environmental Policy Act sometimes works the case gives a rare Glimpse at how tax laws and government money attempt to supply inner city housing and the final result shows how intense Community organizing can drastically change the profile of a large urban area.Hear ye hear ye, this federal court of the District of Minnesota is now in session judge miles W Lord presiding on today's docket is the case of Cedar Riverside environmental defense fund versus Cedar Riverside Associates and the Department of Housing and Urban Development. Please be a dear and conduct yourselves with proper respect for the law in about 1960 zero tax clients, and I was considered by some to be a real estate genius in real estate in the university area to improve the housing supply for appreciation then to some extent for a tax shelter opportunities.And look at this property. We recognize that development would have to take place there someday because of the condition of the buildings and we thought it might in 1961 first piece of property in the university area less than 10 years later his network of business associations. Began one of the largest private Urban housing developments in the country by then. They owned almost the entire West Bank area of Minneapolis. They won the support of the city government and the Housing and Redevelopment Authority and the Consortium had attracted an increasing number of wealthy investors. Wanted to secure a tax shelter. Others in Cedar Riverside toWork on land assembly programs as well. Most of these we subsequently acquired or bought out but during the Mid sixties there was substantial. Land acquisition in the area land Acquisitions that timer primarily directed towards keeping the area and tag for a larger scale development. There had been conversation and encouragement of high-density construction and Cedar Riverside since 1950. And it was assumed that whatever would happen in Cedar Riverside would involve high density construction some work at during this massive planning and land assembly. Heller and his associates block that most Community residents supported the project for Cedar Riverside area Council. Where are included as a basic part of a City Planning Commission report in August of 1967 and subsequently be kind of came basic to the cities urban renewal plan for Cedar Riverside which was adopted in the fall of 1968. However, the presumption of Community Support turned out to be woefully wrong Mary Lang of the cedar-riverside project area Committee in Italy in 68 when the public hearings were held on every renewal project Augsburg was very obvious. They were like four hundred residents there and there wasn't a resident speaking in support of the project and although they continue the deliberations later at the city council. We weren't the citizenry was not given a chance to speak in opposition to the project until after midnight that night and I was sort of the city council had regardless of all the testimony opposing the project going ahead with it because of other kinds of Interest they were basically arguing that they needed a stronger tax base and there. It was to develop very very high-density housing project in this area regardless of whether it met other kinds of Criterion terms of the kind of housing that needed to be developed in the metro area. First are approached. I think was tempted in all the men in campaign in 1969, which we lost and in 1970 then some of us got together we form what was called the cedar Riverside Community Union. It was the first attempt that we made you really structure some kind of organization in the neighborhood to Opposed the AmerenUE applying the early 1969. We formed Cedar Riverside Associates Cedar Riverside properties and Affiliated entities. and brought in outside investor capital and also acquired some of the land and sea to Riverside that have been sub assembled by others. At that point we saw ourselves as possibly developing some of the land under the provisions the urban renewal program, which called for high-density housing. We formed our organizations. anticipating return to investors and they form of appreciation and cash flow and not so much the form of tax shelter. It appeared as we went on however that there were more initial returns and they form a tax shelter and a bit appreciation cash flow would be deferred sometime in the future president was one of the first opposed to Heller's plants from the time that it became clear that cedar-riverside Associates was contemplating contemplating the kind of very large-scale development, which eventually got Newtown recognition. It was very widespread and virtually unanimous opposition to that development scheme in the neighborhood and that opposition took out a variety of approaches prior to the filing of the environment lawsuit sell. First of all, the lots of did come out of a context of neighborhood struggle against the development. most people in neighborhood perceived as inimical to their interest and also it was clear that the lawsuit came out of a out of a kind of movement that was happening in the city and around the country the whole people trying to redirect the ways in which Housing and Redevelopment projects were being carried out so that they those projects better met their interest rather the interests of planners politicians bankers and and so on and we saw it definitely winning this particular lawsuit because of the kinds of issues that were involved as a way of furthering those efforts. In other words. We saw this lawsuit is a kind of precedent that could be used as a very useful tool in a wide variety of other situation in February 1970. We were encouraged to apply for federal assistance being the first recognized a new town in town by Hud a pre-application was I accepted in the summer of 1970 and our application was formally approved in June of 1971. Construction was timed. somewhat in regard to the Newtown in town approvals in as much as the substance that new town in town program he is talking about was brand new legislation. It would Supply federal assistance for large-scale housing development in the inner city and the vision of Cedar Riverside Associates would certainly large-scale he's private developers propose to build a high-rise high-density Community for over thirty thousand people on about 83 Acres of Midtown Minneapolis land but Central Desert Construction plan was massive Federal subsidies the new town in town legislation gave them the subsidy they were looking for through this new town program Cedar Riverside Associates received a 24 million dollar loan guarantee from the Department of Housing and Urban Development HUD. However, just about the time these High Finance Arrangements were being negotiated between Minneapolis and Washington Congress in 1969 passed the National Environmental Policy Act. The ACT is called an EPA or Nipa Congress passed the act in reaction to the sudden realization. Civilization was gradually strangling itself with unchecked consumption and waste of the world's resources. Nipa went beyond the Clean Air and Clean Water Act. It focused attention on population growth high-density organization industrial expansion and resource exploitation. Yak said the government is the trustee of the environment for future generations to maximize recycling of depletable resources and to attain the widest range of beneficial uses of the environment without undesirable or unintended consequences to those in need of a mandated that all federal agencies must scrutinize the impact the oven alternatives to any major action, they might take which significantly affect the quality of the human environment the requirement for the scrutiny develop into federal policy before any such a thing could be taken and environmental impact statement had to be written. As the name implies the environmental impact statements called eiss are supposed to fully investigate describe and weigh all adverse human environmental effects of the government spending a tissue in addition all possible alternatives to the proposed project must be similarly scrutinized and describe. Well that may sound logical and simple. It's actually quite complicated Nipa is a short piece of legislation. It is written in Broad and vague language the Clean Air and Clean Water Act by contrast are long and specific the lack of clarity in the National Environmental Policy Act necessitates constant interpretation by the court a great deal of the environmental litigation of the last six years has centered on environmental impact statements, especially important have been the issues of when any is is required and what it must contain. It was Annie is that became the focus of litigation concerning the massive housing development in the Cedar Riverside area of Minneapolis and which provides part of the focus of this program. The demands of nipah paralleled many of the objections raised by Cedar Riverside residents to the project taking over their Community. It didn't take long for them to find out that HUD had not prepared an adequate. He is before it began to underwrite that development with a 24 million dollar loan guarantee. So in 1973 some residents organized the Cedar Riverside environmental defense fund sometimes called credit for shark Reddit join with other local groups and residents and went to court their suit was filed in front of federal district. Judge Myles Lord in December 1973. There were many defendants. But the main ones were the Minneapolis Housing and Redevelopment Authority and the private developer developer is a network of business associations controlled by an entity called Cedar Riverside Associates or cra. By the time does Court action was filed stage. One of the new development had already been completed. The first of 10 plant stages stage one is three buildings containing 1299 dwelling unit with housing for as many as 2600 residence. Once they got into court the defendants readily agreed then an environmental impact statement on the entire 20-year can stage project was legally required that task fell on HUD. And in the meantime the developers voluntarily suspended for the construction that was in March 1970 for 11 months and a quarter of a million dollars later and impact statement was released that study by had concluded that the project is designed was good that on balance the detrimental human environmental effects of this high-rise high-density project. We're out way by the housing and financial benefits which would result but the Cedar Riverside environmental defense fund wasn't satisfied. Its routinized Huddy is and decided it wasn't adequate that. It didn't fulfill all the requirements of the law. So the defense fund went back to court and filed another challenge. We're not legally challenging whether or not the CRA project was a good idea. That was one of their motive certainly one which will discuss later their legal challenges at this point where that the HUD administrator had made many serious mistakes in the preparation of the Eis and that HUD had begun to study with such Prejudice in favor of the development, but it was unable to fulfill the Law's requirements for an objective review and balancing of the projects environmental costs. This promise to be especially complicated and controversial litigation. So judge Laura appointed former municipal judge Edward Parker to act as a special master in the case of special Master is a temporary assistant to a judge judge Parker admits that he was initially predisposed against the planets in this case. I might say when I first came into the matter I thought it quite possible that I might end up granting summary judgment for the defendants from what I read the newspapers. As a general as a citizen of generally it didn't sound to me like there was much of a that the plane is probably had a very Solid Ground. It sounded like a group of people who are just as satisfied and disagreed with the judgments. So I thought it likely that the that the summary judgment might have to be granted. Well after I got into them, I realized that it certainly was not a case for summary judgment and it became quickly apparent that there was a genuine lawsuit here, but there was some real issues about whether or not they had in fact face. The issues in the way dictated by the statute and the case law has been developing so quickly pursuant to that new Statue are motions where one side tries to get the other kicked out of court before the litigation even begins. Its a claim that the merits of the case are. So obviously in their favor that the judge should dismiss the other side and not waste everybody's time and money with further proceedings. Eventually Judge Parker decided not only that the plaintiff has had Solid Ground upon which could bring a legal challenge but also that they were correct in their claim that the Eis was inadequate supporting that conclusion. He wrote an 86 page opinion which in turn convince judge Lord as well. The result was that judge Lord order the preparation of a new environmental impact statement before the development could continue the developers and Hut strongly oppose that decision and appealed most of the findings of fact and conclusions of law which make up the decision. Later, we'll look at some of the unusual results of that appeal. But first we'll look at judge Lords decision to see some of the complicated legal issues involved. The entire decision is too long to discuss completely in this program. It will look at just two of Lourdes findings those findings concern first something called open space in the project and second the financial feasibility of the project itself the findings illustrate how the National Environmental Policy Act Works procedure like to assure that all relevant factors are considered before an important decision is made as the word implies procedural matters deal with the mechanics of how the Eis is prepared in written rather than with the substance of its conclusion procedural questions would be did the Eis authors talk to all the right people. Did they consider all the important data do they represent an adequate record of all their work so that later on someone else could read what they did in order to figure out if any errors were made. If one or more such procedural errors has uncovered the question then arises whether they are important enough for a judge. To reverse a major decision of a federal administrator, these minut administrative matters are the kinds of things lawyers. Love to fly Speck and play games with here's what happened with the open space plan for the Cedar Riverside development. Open Spaces crickets on a summer night Open Spaces the playground during recess But in the City by definition you can have only a limited amount of open space. Air hammers buses buildings crowds concrete sometimes they threatened to eliminate open space altogether. Congestion, of course is unavoidable what it doesn't have to be complete the inner-city ideally contains a healthy portion of open space the Twin Cities probably have more than any comprable metropolitan area in the country. We have lots of parks playgrounds Boulevard and single family homes with yards keeping that quality became a major concern with the Cedar Riverside development view of the plan to house 30,000 people on 83 acres of land hugs guidelines include open space and its definition of environmental considerations. So the issue had to be scrutinized in the Eis but hide itself did not study the open space plan rather it deferred to a study made by the city which had been written after Consulting many people including some of the plaintiffs in the lawsuit Steve Parliament has been a Westbank Community organizer for years when he's got small. Concrete cement sand boxes with sharp edges running all around them and then elaborate wooden structures in the middle. That's not the kind of play area for children when the rest of the area is designed entirely and cement. There's a there's a forest in the middle of the plaza, which is a cement sculpture area that received the states share of open space money and they're calling it open spacer bunch of poles cement poles there that are supposed to look like trees and they're calling that open space. There's there's a difference between real usable recreational open space, which is not available and Technical acreage which runs along the boulevards mostly that they're counting is open space in this project and usable up in space which is a playground that sort of thing. You Don't Know What You Got Till It's Gone all the trees Those were the substance of concerns of the residents, but in court the plaintiff didn't just attack specific conclusions of the Eis writers. They also pointed out inadequacies in the way. The decision was made John Herman attorney for the environmental defense fund argue to procedural objection. He argued that the draft version of the environmental impact statement the version of pain which commentary must be sought before any final conclusions are we didn't even discuss the issue of open space then later the out open space plan of the city was appended to the finally is and constituted in effect the only discussion of open space there and there were a few generalize statements that it was an adequate response and that open space was a Purely local concern. However, that doesn't respond to the requirement of nipah itself for circulation and comment to agencies with expertise and example of the lack of circulation. So Department of interior's comments on the draft that they were incapable of saying anything about open space because the IRS doesn't discuss it and of course the comprehensive open space plan was not circulated to them as a drafty is so consequently they were unable to respond and make comments on it also pointed out that there were factual errors the party comprehensive open space plan had park for the rest of the year is had some nine hundred units of housing because I'm such procedural and factual problem. He argued that those people who had substantial disagreements with conclusions in the finally is people such as his client's we're not giving a chance to air their complaints that kind of substantiv concerned about open space, which should have been evaluated in the Eis. Probably would have been raised by comments. I know it would have been raised by the comments of our open space expert because he indicated these concerns in his own testimony was not available to hide was never evaluated and saw the general consideration of open space in the he is was procedurally inadequate. He is an assistant United States Attorney who worked on the trial for the Department of Housing and Urban Development the outlines the government's response on this issue. If I'm correct. It wasn't one city agency, but I I group of 19 entities which were involved in the development of the open space plan. These groups included not only HUD and Cedar Riverside Associates for the City of Minneapolis, the Housing Authority Consultants, the University of Minnesota, the Metropolitan Council and various other groups, including the plaintiffs themselves, so the city of Riverside environmental of the party movie. Cedar Riverside pack and knee provides for 30 day. After the final environmental impact statement is released for interested individuals or groups to make further comment and during that 30 days. No comment concerning the open space plan was made by the plaintiffs in the suit. It was a close call what special Master Parker agreed with the Play-Dohs with a comprehensive open space plan has developed by Hud for the Cedar Riverside development was inadequate. They adopted the Minneapolis standards, generally. And those standards are developed for a city. That's no peculiarly. Well situated with the lakes and all the open space that we haven't and the foresight of course of the park planners of long ago who who maintained so much of the land here for public purposes and for open space, but see Riverside is a typical of the City of Minneapolis. It's more like an area of Philadelphia or Detroit or New York. With several freeways surrounding it virtually and the only natural open. Are you being the river? It really do it to apply those standards which are necessarily or which are are it's a practical matter of Fairly loose which were developed for a city that already has such an abundance of it seems to me to be short-sighted and the courts deal with a traditional Urban environment issue the issue of how much open space will exist in an inner city development in this case other common Urban environment issues such as carbon monoxide levels were dealt with similarly, but this case is most interesting because of the way it dealt with another issue one which is less traditionally environmental the issue of the Project's finances where the development money came from and how it affected the profile of the entire project. money financing economics you cannot mix is important in this development because with the involvement of Hud the project became a joint venture of government and private capital. The Cedar Riverside project was first and foremost. I finance. But what does that have to do with the environment or an environmental impact statement? Obviously dollars and sense questions are not directly environmental questions. But at a certain point project finances have a great deal to do with how a development finally look and therefore with how that development ultimately affect the human environment environmental impact statements must investigate all possible alternatives to and ramifications of a proposed project courts have interpreted this require very strict light and Alternatives must be looked at even though the federal agency involved hasn't the ability to implement them. This requirement serves two purposes first. So the federal administrator involved make sure who's the course of action which provides the best balance between project benefits and human cost and second so that everyone making decisions can understand the full effects of any proposed Federal action. In this case, the environmental defense fund argued that HUD did not fully scrutinize financial and construction alternatives to the project Alternatives, which would have provided a better cost-benefit balance in the end. Rather they claim exempt Lee rubber-stamp plans already made by Cedar Riverside Associates since a particular financing designed was Central to those plans and to the final cost benefit balancing the issue of finances became an important part of this litigation this issue raises many complex question will briefly look at just four of them. First to what extent if at all does the Environmental Policy Act Envision consideration of project finances? Second did the financing structure permit only high-rise high-density Construction. Third did hugs involvement in the project make realistic other less controversial development plans. And forth did the delay of the project caused by this lawsuit put such a burden on the developers that no matter what the final legal resolution. The original project had been totally frustrated if not driven into bankruptcy. The first and perhaps the biggest hurdle the court had to confront was to what extent economic feasibility factors are even relevant and environmental litigation Mel dickstein argued the issue on behalf of the Department of Housing and Urban Development regardless of what the the economic considerations were a concern when we talkin about the National Environmental Policy Act is with the result of the decision. Now the decision may have been based in part on economic considerations, but that's not our concern. Play upon one another but when we talkin about the environmental concerns, we're talkin about the effect of the project again upon the air upon the Water upon the Flora and Fauna of the area and and the sewage disposal in and these types of concerns and we not talking about whether or not the project is economically feasible and might affect that feasible bility heads on the project is it was finally plan the attorney for the plaintiffs disagrees in the testimony at the trial Richard Brown who runs environmental programs for High made it very clear that economic factors did have to be considered when they were so substantial as to affect the type of project that could be built and the feasibility of different Alternatives. He made clear that economic certainly bounded the range of reasonable Alternatives. Just a couple more things that are relevant year one is The Hot Zone regulations on the content of impact statements clearly requires the considered major economic changes when they significantly affect the feasibility of different Alternatives or result in changes resulting the feasibility of changes in the project that have environmental effects and at least two other circuits the first and the second have already decided cases, which in many respects are analogous to cedar-riverside and requiring some Amount of consideration of Ralph example in the language of the first circuit why lesser aggregation of housing on this particular site would be uneconomic Ed Parker wrote the Court's decision on this issue. In this case. He agreed with the plaintiff's this leads to the second question to what extent did the financing structure predetermine what the development finally look like early Keith Heller acknowledge that high-rise high-density construction had been agreed to in 1968 and that the financing mechanism was designed for use as a tax shelter later on. He emphasized these reasons for the project design mandate for A high-density development in Cedar Riverside as a result of institutional demand. and the need for I having a realistically mixed population of so are they already did not becoming University oriented ghetto? Density does not seem to always yield maximum land values and one can find. Often times higher profit profitability in a rapid development of low-density then of a long-term development with high density. This would have been the case and Cedar Riverside. We think nothing but the high-density requirements where to substantial be overlooked if there was not provision for hey, hi. amount of University Housing in Cedar Riverside that can walk to the university or to the other institutions in the area of the parking problem would be compounded the circulation problem would be compounded and Cedar Riverside within better consist entirely of parking lots for the people committing the I know it seems to me that that image is largely been created by public relations people can of the Westbank Tenants Union may have had good intentions from the start. I think there's very little doubt that none of the investors are interested in anything except obtaining some some very lucrative tax benefits and that When you come right down to it, they're nothing but real estate speculators tax shelters are based on depreciation of buildings. Land itself doesn't appreciate for tax purposes. So you have to build it in order to maximize the tax benefits. You have to build as much as possible on a given amount of land and I think all of the parties wound up admitting after months and months of I was studying that there was no way out of the situation that that dumb cedar-riverside Associates financial needs in terms of tax shelter and being able to pay for the Norman Conquest prevented the project from going ahead and the only way to deal at the only only thing that can possibly happen. Would be either that the whole project would go bust and the developers would be down the tubes and hug would sell off the land for as much as they could get or and this is I soon when everybody hope from the start with ham and some public agency or Netherwood pumping enormous amount of public funds into the project to keep it going the government did pump money into the project. In fact, it was Hud's 24 million dollar loan guarantee, which created the need for a project environmental impact statement in the first place that made it a major federal action which significantly affected the human environment within the meaning of nipah and it was the project he is which in turn gave these planets a handle for their lawsuit will get back to that item in the moment first. We want to outline the financial structure which is being discussed off setting of real estate losses against other income is important to someone in a high tax bracket and the tax mechanism for real estate investment, which people are talking about here is a classic tax loophole one would come Was retained in the 1976 tax reform act and its early years the cost of a real estate development substantially exceed its income expenses for land purchase construction taxes interest and depreciation on the buildings are very high this last item depreciation is most important for tax benefit purposes. Most other items are cash-out place which must be paid for by invested or borrowed Capital but a significant portion of the original real estate developers Los is depreciation, which isn't a cash loss at all. It's merely an accounting mechanism which reflects the fact that the building eventually wears out. With this type of investment. However, the tax laws permit what's known as accelerated depreciation that's where deductions which would otherwise be taken in the future over the life of the building our telescope into the earlier years of the project there for project income in early years is small compared to this deduction. So that attacks loss is created this of course is not a loss at all. It's merely an accounting mechanism. Whereby future depreciation of the investment itself is reflected on the tax books as a current expense it is this tax loss which is the core of the tax shelter investment process these losses then show up on the investors tax returns as dollar-for-dollar deductions from taxable income. Now, these investors are people in the high tax brackets in the 50 to 70% range. So for every dollar of artificial loss which they get from the project their taxes are reduced 50 to 70 cents the artificial loss in effect shelters other income it eliminates the tax liability for income earned else. Theoretically the government gets this money back in the later years of the project but these high bracket taxpayers have an effect been given an interest-free non-recourse loan without collateral for the intervening years. And in later years, their income is generally taxed at favorable capital gains rate, which is 1/2 the tax rate. They normally pay on their income the effects of this tax shelter are multiplied many times over by the fact that the project is leveraged. That means that the project is paid for mostly with borrowed funds. The Investor's themselves may put up only 10 to 15% of the total cost Banks or insurance companies provide the rest with the government guaranteeing the loan and often paying most of the interest. However, even though the investors have only paid 10 to 15% of the project cause they are not limited to tend your 15% of the depreciation deduction. They get it all so the amount of their other income which is sheltered from taxes is similarly multiplied. There are other even more esoteric aspects of subsidy and tax advantage which characterize this type of project we've outlined three of the major aspect accelerated depreciation leverage and capital gains tax shelter mechanism. When applied to a low-income housing project can turn an otherwise unattractive 4% before tax return into a 40% return for an investor in the highest tax bracket. It is precisely this tax shelter quality, which motivates investors in projects such as Cedar Riverside Associates investors bought into the Cedar Riverside project at $25,000 per unit and many people put in well over $100,000. But if all this outlines the tax shelter motivation, it does not explain why CRA was so friendly committed to high-rise rather than low rise construction that is explained by another peculiarity of the depreciation. Law's the law permits depreciation of the cost of the building but not the cost of the land. So the greater the Portion of the investment dollar spent on the building the greater proportion of the investment which can be depreciated there for deducting from other income for tax purposes. Let's say you have a million dollars to invest if you build low rise apartments you may spend half of the million on the lamp. So you'll have only the other half million which may be deducted over the years as depreciation. But if you build high-rise you spend a smaller percentage of your investment on buying the land, for example, you invest 10% of the $1000000 that leaves $900,000 which may be depreciated $900,000 of deductions, which doesn't require cash blowout play, but which is deductible from investors taxable income. Normally this favorable disparity can be engineered even with low rise construction, but CRA had very high land assembly cost. So in order to retain the necessary land Building cost ratio, they had to put more building on the more expensive land which meant they had to build high-rises with the massive government subsidy. Switch CRA was getting in various formed low-rise housing might still have been feasible or if not for the fact that the entire project was designed for use as a tax shelter do in comparison such tax loopholes considerations are more important than long run gain on the investment by investing in a project such as cedar-riverside a person in effect buys a tax shelter. Let me tell you how it will be. Cuz all the text, Mom. 5% I don't take it. This is an incomplete outline of the entire financing structure for CRA. But it does highlight one important fact in this litigation the project financing mechanism itself at a great deal to do with the high-rise high-density nature of the development Congress plan. The tax laws to encourage investment in housing and CRA. Merely utilize those laws to take maximum advantage of them. So she already had build an organization directed toward high-rise high density construction. Then Along Comes the Department of Housing and Urban Development with a truckload of money. This leads to the next question in spite of Cra-Z initial preference for high-rise. Did Hud's participation now make alternative construction methods financially feasible that question is answered by Wayne Popham the attorney in this lawsuit for cedar-riverside company's Financial depending upon the amount of public subsidy. This is the point Judge Parker was making a few minutes earlier as soon as substantial direct government subsidy is involved lesser density Alternatives become realistic even with a tax-sheltered financing structure in turn the increased visibility of lower rise construction. Alternatives affects the very Benefit analysis of them demanded in the environmental impact statement in this case the plaintiff said claim that the Eis ignore the feasibility and desirability of lesser density Alternatives and that the cost-benefit analysis of such Alternatives was necessarily an adequate the trouble for hot was that they had stepped into this project because it was a large high-rise high-density development HUD involvement came right on the heels of brand new legislation called a new town in town program, which was designed for exactly this kind of project and would some people think was written precisely with cedar-riverside Associates in mind one of the Prime movers of CRA before his death was Henry McKnight. He had already been deeply involved with the rural New Town project in Jonathan and he was anxious to see similar programs in the inner-city. He also had close relations with people in the Department of Housing and Urban Development many people speculate that it was his influence which made such subsidies available for urban areas right at the time when CRA was looking for government bunnies. For whatever reason it is a fact that at that time I had was actively promoting the same project upon which it was later to write an environmental impact statement. He's hella recounts how friendly HUD was yours back there. Been a number of Administrators the new communities program already H administrator was kind of a different point of view. quite some of that the original Bill Nickerson point of view was he was a program that we're going to make work and it was a case of inviting the developers back to his office to Have them tell him how it could work and his in instructing his staff to proceed and doing things along lines, which would Implement something. Unfortunately Heller said that enthusiasm has not remained consistent overtime. And even though in this case it was decided that the Eis was written with undue enthusiasm for the CRA project. The fact remains that governmental goals do change over time. The National Environmental Policy Act is precisely an example of such change Neva was passed by Congress right at the time that CRA was beginning to rely on government subsidy. Nipa is a statement of governmental goals and was designed to affect the decision-making of all government agencies, including Hut the legislative purpose for the ACT included substantiv goals in addition to the procedural kinds of items. We've been highlighting. Well this kind of new criteria for administrative decision making was just with Congress wanted it can make things uncomfortable for a developer who's project was essentially Glenn before the full impact of me but was realized Don Jacobson vice president of Cedar Riverside Associates developed 20 or financing had his first stage of development underway was applying for his second stage of housing is first phase of commercial and was geared up to accomplish this program and found out that his public financing was frozen on a federal funds and in turn was challenged legally on an environmental matter was also he was confronted with a changing policy in his local government friends, but whatever the consideration the court decided that had had made a decision without objectively considering all the Alternatives is Judge Parker and Lord point out Uggs Financial involvement had merely affirmed previously made decisions were as according to Nipa. It should have opened up objective scrutiny of specific. alternatives to the project development It seemed to me that the scales were weighed in on one side. If you if you don't consider all Salient evidence, but you see the whole plan taken together shows. Just how much thought went into. It federal district judge miles Lord credibility gap and jam it into that one project. Going as high as possible leaving as little Park land or playground door opener as a recreation areas as possible. We see the motor for that to be that the price of the land was too hard. Once it was decided that somebody wanted to build on there and they drew a plan the whole environmental impact statement was drawn to accommodate that purpose. They had for environment. They projected only a few Children and Youth expected a lot of young singles and young marriage in there. Didn't even look at biology to see that young people have babies. Then the top they got variances from the city so that the top eight or ten floors of those buildings are without fire protection except in the Halls. There's no sprinkler systems. They paid no attention to the fact that little children should have a little park or some green area to run in. In order to handle the Investments of the various people who wanted to put money in there and get a tax shelter out of it. They didn't want to go public by way of condemnation of the land. So they went buying land piece-by-piece said giving out their plans earlier and as a consequence, they ended up bidding against themselves lawyers would go and other private investors would go leapfrogging ahead of them buying up land knowing that later cedar-riverside would have to have it the deeper. They got in more deer was the price of the land they got the price of the land so high that it was impossible to build on land that expensive. To build any housing units testimony in this lawsuit was taken on dozens of Law and fact questions. We've looked at a couple on the open space plan and a few more about the financial structure of the project Witnesses and lawyers in the suit also talked to the adequacy of firelance around the buildings projected carbon monoxide levels the social and psychological effects of high-rise living how many children were anticipated Congressional intent in passing Nipa and much much more the clerk of court keeps a list of all of the Motions affidavits and court orders filed in such cases for this lawsuit. The list is 10 pages long and contains 167 entries. It was a long complicated arduous case in the end judge Lord decided that HUD had made so many mistakes and preparing the Eis and had not objectively considered its decision that hugs final determination to proceed was quote arbitrary and capricious on quote. He said that it gave insufficient way to environmental values and it provided such an inadequate. Benefit analysis that an impartial Outsider would not be able to look at the Eis and properly understand the project after making that decision the court gave the litigants time to work out some compromise solution to the Dilemma facing the cork. They could not go in March of 1975 the court ordered CRA to stop building until an adequate. He is was written construction it already ended much earlier this order merely formalize the stalemate needless to say both HUD and CRA were dissatisfied with the decision and appealed it to the 8th Circuit Court of Appeals wrote a 70-page appeal brief in which they took my new tissue with many of the factual conclusions and legal determinations of the cork a couple of those have been discussed in this program Cedar Riverside Associates. However, handled the appeal quite differently for their appeal CRA attorneys merely Incorporated by reference the entire brief written by the government. In other words. They said whatever they said that goes for me too then in their own brief they presented on One question for the Appellate Court to consider quote did the district court her and not considering the individual plaintiffs intentions to use this suit to delay the project and thereby financially destroyed the developer in order to acquire control over the development of the area on quote Wayne pop up the attorney for the developer of the plaintiffs have made public statements on a number of occasions that one of their objectives was to delay the project and caused the bankruptcy of the cedar-riverside companies leaving that in the process of doing this they would gain control over what future development would occur in Cedar Riverside. It's the position of our clients that Congress did not intend in Nipa to permit environmental laws to be used for these kinds of purposes federal district judge miles Lord. I think it if you go on the Siri, That even the environmentalist those who are for the birds and the bees have a selfish motive. that selfish motive may just be to breathe clear air or to have some acreage to walk around or just to have an existence value to know even while they might be in the city that some place there is a place that's nicer because they built it the Court's job is not to look at who's going to make a buck on it, but does The project meet the requirements of Napa have they considered all aspects of it has the administrator. This issue is part of the fourth Financial question. We raised earlier did the delay caused by this lawsuit Drive the project into Financial ruin. Is this an abusive the courts and of our environmental laws some say yes, cuz I'm saying no, but certainly this possibility raises the question of whether the cedar-riverside lawsuit caused the ruin of the financial developers. The fact is that CRA is in deep financial trouble because of loan defaults by the Developers for 2 years has had to pick up the cost of interest payments approximating $20,000 per day John Herman the attorney for the plaintiff strongly asserts that it was not the lawsuit Switchfoot CRA in this position before the case even went to trial. The default on the new community Note II you have again before the case went to trial the default of the affiliate of cedar-riverside that runs stage 1 on their FHA mortgage guarantees and that project that part of the project was never involved in the litigation whatsoever. And then finally you have a whole series of Hud memorandums and consult reports also all of them occurring before the case went to trial and all indicating the impossibility of the project proceeding regardless of its shape at the kind of land cost that were ascribed to add in-law new community financing plan and the large loans had made originally to get the project started. I think it's simply a case of crass real estate speculation, which probably would have come to light anyhow, but may have come to light before they got to build the second stage because of the lawsuit. We ask Keith Heller one of the people most familiar with the financial problems of cra. Whether it was the lawsuit which has caused all their financial difficulties environmental situation and possibly in re-examining the entire project is originally planned over the last 10 years the plans of the university for development on the Westbank to change somewhat and it is likely that they projected demand figures and cedar-riverside as of 1965. I do not exist. The present time in planning a development one should keep in mind that there is Need for flexibility for changing plans. they conomic downturn and they 1972 to 1974. And the tremendous increase of construction cost and they increase interest rates during that time. Probably gave additional reasons to take a further look yet. The plans we have made in other words, even those who stand to lose the most money on this deal hesitate to blame all their troubles on the lawsuit. But there is one more important aspect of this problem Alan Freedman teachers land use planning at the University of Minnesota law school. He sees the cedar-riverside controversy as more than environmentalist versus developers is really the the interest of people especially poor people haven't got it and getting new housing. That's so long as we rely on private developers even with government assistance, but basically private developers as the primary source of new housing to stop them or slow them down means going to be available and I have a lot of trouble with I sort of paternalistic social science perspective coming in and saying we want to protect the people who are going to live in these houses from getting into a lousy situation. I wish the prospective residents would have a great deal more role in the in the decision-making process. Let's find out what they want. I think there's at least a plausible assumption that many people people who are living in really shity housing would rather have housing even imperfect then wait then tolerate the delays associated with this environmental review what it comes down to it for me is that I don't think we can afford to worry about subtle environmental problems until we've solved the hard physical problem with provision of housing on an equal basis, then we can get more sophisticated worry about the environment. But it's somewhat ironic to tell people who are living in New York or Detroit or Baltimore or Cleveland or any of the other riding down towns in the country that you're going to have to slow down in your demand for housing while we make sure we were going to preserve the environment around us. I don't find it very credible from the perspective of the the choice Le Center City resident and that is all exacerbated by the the fact that in our society economic deprivation tanks the car light with race and it just ends up by reinforcing the the perspective of racism these types of legal problems can be all those Cedar Riverside Associates is basically in it for the money. The fact remains that their project is designed would contain more low-income housing than in most of the rest of the state combined judge Ward, however claims that the interest of these third parties was not ignored in his diss. rather he implies the interest of decent housing where Paramount I can't see what kind of a family of small children you're going to raise 14 stories up or 15 stories up in a building that doesn't have adequate fire protection with no green grass to play on no decent neighborhood to live in these were instant slums as I see them and there's no justification in this day and age for using federal funds to build slums. That's just a taste of the many complex legal issues involved in this washer miles Lord made some unique decisions in the case and the defendants thought there was a good chance that he would be reversed. So extensive arguments were made to the 8th Circuit Court of Appeals in St. Louis, but during the appeal a rather unusual legal maneuver took place, the plaintiff's move that the case be declared moved a legal question is moot when facts surrounding the controversy had so changed since it was first raised that the question is purely academic no matter how the court decided it could not affect the rights of the litigants in the case. The Court decides that the whole controversy is over. So it washes his hands of the affair by vacating whatever findings and orders may be in effect concerning the litigants in most litigation the party which loses at the district court level watch the What Court to declare the questions that weighs a loser gets an adverse decision vacated without risking another adverse decision on a touchy legal issue. Usually the winner doesn't want the action dismissed the winners usually want their victories to be a firm butt in this cedar-riverside case. It was the winners the planet who wanted the controversy declared mote. They sided the fact that cedar-riverside Associates and its Affiliated entity in stage one had been in default on loan since June 1975. They cited evidence of changed Intentions by Hut in the housing project. They pointed out that the Minneapolis city council local housing authority and Community groups at all combined in opposition to the planets originally conceived. In fact HUD was about to foreclose on the whole project and the fight was brewing between some locals and the FEDS over density Lab final density will now fall between 2000 and 5000 dwelling unit far below the 12500 units originally planned and the planets were fearful of losing their Victory on a PL. Miles Lord is an environmentalist and several judges at the 8th circuit or not. So they moved at the questions that issue be declared moved the defendants thought they'd win at the 8th circuit. They wanted to win and didn't even want to participate in the discussion on Lucas. In fact the district court chastise HUD for its striking arrogance in refusing to provide information on the issue. I felt the decision imposed impossible guidelines on the writing of environmental impact statements hold argued that they could still build 12500 units if they wanted to so the case was still alive the developers solve indication that the eighth circuit as being their best defense against foreclosure foreclosure could have the effect of dissolving all the tax benefits those far accrued. So they've indicated a willingness to proceed with the project and argued that the questions that issue we're still alive because the exact same questions would be relevant no matter how dense the final development was and no matter who the developer was. In fact the decision does Touch of fun questions basic to how Decisions are made about the profile of the metropolitan area environmentalist developers investors politicians Community organizers government bureaucrats labor unions residence and academics have all taken an active interest in the controversy. But the 8th Circuit Court of Appeals table the issue on August 31 1977. It declared the case moved it pointed out that even though nothing could be done without hugs approval neither could anything be done without the city council's approval in other words HUD and the city council had to work it out between them the court hinted that if the city council was to reverse its position again, the whole thing could pick up where it's been left. Of course not to decide is to decide the court washed its hands of the matter in affect the court decided that the decision about what happens in the Cedar Riverside area of Minneapolis should be made in the community. As this program was prepared there still existed in uncertain balance of power within that community. No matter what happens. I will have to put out tons of money to make up for the huge land acquisition cost the mayor and the city council are in the midst of an election Community groups want to plan and run the project the developers want to avoid bankruptcy. The metropolitan area needs good cheap housing workers want jobs and the city needs a tax base. Although the case is officially moved the controversy is still alive. And so the lower court decision remains alive As One Federal judge's opinion of how some of the legal aspects of the controversy should be resolved the role of the courts in a changing Society remain significant, even when the controversy is officially being decided elsewhere. And for the present Minneapolis has another major development project still in limbo. Today's program was produced and engineered by Bill funds for this pilot series were provided by the Nash foundation and the Minnesota bar Foundation would like to thank law professor Jake on for his advice. I'm Dan Olson Trivia Crack sky scrape away Where you make us laugh? Where do you make us cry? Where is Wenham to live? We're changing the date today. YouTube