Opinion
110133/2004.
November 15, 2004.
The petitioner's application for an order setting aside the resolution of the New York City Board of Standards and Appeals, pursuant to Article 78 of the CPLR, is hereby denied.
Petitioner William Israel's Farm Cooperative ("Petitioner") brings the instant Article 78 petition against the City of New York Board of Standards and Appeals ("BSA") and Tri-Beach Holdings, LLC ("Tri-Beach"), seeking an order annulling, vacating, and setting aside the Resolution, dated June 8, 2004, of the BSA for Calender Number 377-03-BZ, ("Resolution"), or, in the alternative, remanding the matter back to the BSA for further hearings and review. The petitioner seeks relief on the grounds that the BSA prematurely terminated the proceeding and that its determination was arbitrary and capricious and not supported by adequate evidence.
Petitioner names Tribeach as a respondent in the action and the decision of this court will have a direct effect on Tribeach's plans for developing the site. However, no relief is sought by petitioner against Tribeach. As such, Tribeach is merely an interested party in this action.
Facts
The site in question is located at 25 Bond Street, New York, New York. It is a rectangular shaped parcel with 100 feet of frontage on the south side of the street, a lot depth of 114.5 feet, and a total area of 11,416 square feet. Currently, a two story, 30 foot high parking garage occupies the land. The use does not conform to the existing zoning regulations for the area. It was constructed before the area was designated an M1-5B zoning district and has been "grandfathered" in.
The site is situated in an M1-5B zoning district. New York City Zoning Resolution (ZR) § 42-00 provides that Use Groups 3 through 18 are permitted in an M1-5B zoning district. These groups include Community Facilities (Groups 3 and 4), Retail and Commercial (Groups 5 through 11), Recreational (Groups 12-15), General Services (Groups 16), and Manufacturing (Groups 17-18). (ZR § 42-00). New residential development in M1-5B areas is prohibited with the exception of joint living-working quarters for artists. (ZR § 41-11). "Joint living-work quarters for artists" are rooms in otherwise non-residential buildings that artists may use as both households and workplaces. (ZR § 12-10). Public parking garages are not permitted as of right in M1-5B zoning districts. (ZR § 32-17[C]).
Petitioner is a cooperative apartment corporation that owns a building located at 21 Bond Street, near the site in question. The building at 21 Bond Street is made up of joint living-work quarters for artists and is occupied by five families. Respondent Tribeach is the fee-owner of the site located at 25 Bond Street. Respondent BSA is a New York City governmental agency, established pursuant to the New York City Charter. (NYC Charter §§ 659 et seq.). The BSA has jurisdiction over applications for variances to the zoning resolution. (NYC Charter § 666[5]).
The premises was acquired by respondent Tribeach in 2003. On November 5, 2003, Tribeach filed an application with BSA for a variance of the following sections of the Zoning Resolution, ZR §§ 32-17, 42-00, 42-14, and 43-12. The application sought approval for construction of a 10 story building containing 26 residential apartments, retail space on the ground floor, a public parking garage in the cellar, and a floor area ratio ("FAR") of 5.78. None of these uses is allowed as of right in an M1-5B zone. In its review of Tribeach's application, the BSA accepted voluminous submissions from Tribeach and various parties opposed to the application, including petitioner. The BSA also heard extensive oral testimony at public hearings held on February 24, 2004, March 30, 2004, and April 20, 2004. In response to concerns raised both by the BSA and other parties, Tribeach twice revised its application. In its final form, the variance application proposed an eight story building with 23 apartment units and 48 parking spaces. The FAR had been reduced to 5.0, obviating the need for a variance of ZR § 43-12. Significant reductions were also made to bulk of the building. On June 8, 2004, the BSA handed down its determination, granting zoning variances for Tribeach in accordance with its modified building plan. Petitioner then filed the instant Article 78 proceeding.
ZR § 32-17 prohibits public parking garages in M1-5B zoning districts; ZR § 42-00 prohibits residential units in M1-5B zoning districts; ZR § 42-14 prohibits certain retail uses in M1-5B zoning districts; and ZR § 43-12 prohibits FARs above 5.0 in M1-5B zoning districts.
Analysis I
The court will first consider the petitioner's claim that the BSA's determination was arbitrary and capricious, an abuse of discretion, and amounted to a failure to perform a duty enjoined upon it by law.
Before granting a zoning variance, ZR § 72-21 requires that the BSA make five findings about the site in question:
(a) that there are unique physical conditions, including irregularity, narrowness or shallowness of lot size or shape, or exceptional topographical or other physical conditions peculiar to and inherent in the particular "zoning lot"; and that, as a result of such unique physical conditions, practical difficulties or unnecessary hardship arise in complying strictly with the "use" or "bulk" provisions of the Resolution; and that the alleged practical difficulties or unnecessary hardship are not due to circumstances created generally by the strict application of such provisions in the neighborhood or district in which the "zoning lot" is located;
(b) that because of such physical conditions there is no reasonable possibility that the "development" of the "zoning lot" in strict conformity with the provisions of this Resolution will bring a reasonable return, and that the grant of a variance is therefore necessary to enable the owner to realize a reasonable return from such "zoning lot"; this finding shall not be required for the granting of a variance to a non-profit organization;
(c) that the variance, if granted, will not alter the essential character of the neighborhood or district in which the "zoning lot" is located; will not substantially impair the appropriate use or development of adjacent property; and will not be detrimental to the public welfare;
(d) that the practical difficulties or unnecessary hardship claimed as a ground for a variance have not been created by the owner or by a predecessor in title; however where all other required findings are made, the purchase of a "zoning lot" subject to the restrictions sought to be varied shall not itself constitute a self-created hardship; and
(e) that within the intent and purposes of this Resolution the variance, if granted, is the minimum variance necessary to afford relief; and to this end, the Board may permit a lesser variance than that applied for.
If any one of these findings is not met, the BSA may not grant the variance.
A local zoning board is given wide discretion in determining whether to grant variances. ( Ifrah v. Utschig 98 NY2d 304, 308). The court's review of a zoning board determination is limited in scope to whether that determination was illegal, arbitrary or an abuse of discretion. ( Id.) The board's determination shall be upheld if it has a rational basis and is supported by substantial evidence. ( Id.) Therefore, the question before the court is whether there is a rational basis to support each finding in ZR § 72-21. The court will consider each question in turn.
1. ZR § 72-21(a). "Uniqueness"
The BSA found that the lot possessed physical conditions that would create practical difficulties and unnecessary hardships if strict compliance with zoning regulations were required. BSA found three factors combined to create the practical difficulties. First, the BSA noted that the existing usage, the parking garage, is an underdeveloped, nonconforming use and cannot be readily converted into a conforming use without great expense. Secondly, the BSA found that demolition of the garage could likewise not occur without great expense, due to structural features. Thirdly, the BSA found that the lot was of a small size, too small to support a floor plate desirable for a conforming use. The board concluded that because of these three factors, unique to the premises, developing the lot in conformity with zoning regulations would present practical difficulties.
The record contains evidence sufficient to support the BSA's conclusion on this point. Tribeach submitted a letter from an engineer discussing the difficulty associated with both demolishing the existing structure and converting or expanding it. (R. 174-177). The size and location of the lot is well detailed in the architectural plans submitted with the original application. (R. 619-639). A use map details existing uses of sites around the area. (R. 40). From this information, the BSA had sufficient grounds to conclude that the requirements of ZR § 72-21(a) (uniqueness of the lot) were met.
Petitioner's arguments do not refute this claim. Petitioner argues that the uniqueness finding has not been met because BSA never inquired whether the continued use or expansion of the existing parking garage would avoid unnecessary hardship and practical difficulties. This argument ignores the specific language of ZR § 72-21(a), which requires a showing of practical difficulty or unnecessary hardship from strict compliance with the zoning regulation. As the garage is not a conforming use, the BSA acted rationally in disregarding this argument.
Petitioner's remaining arguments on this point are not persuasive.
2. ZR § 72-21(b) "Reasonable Return"
Based upon numerous detailed submissions from Tribeach's financial expert, the BSA concluded a reasonable rate of return could not be had from a conforming use, due to the unique physical characteristics of the site. In the original economic analysis report, Tribeach's financial expert demonstrated that developing the site with a conforming office space use would yield a return of 0.28%, an amount insufficient to justify investment. (R. 137) Alternatively, the development proposed in the application would yield a return of 3.58%. (Id). A supplemental analysis of the modified plan for which the BSA finally granted the variance indicated the rate of return on that plan would be 4.35%. (R. 725). In response to an inquiry from the BSA, the financial expert also indicated why development of a conforming hotel use on the site would be unfeasible. (R. 616). Based on the evidence provided by Tribeach's expert, it appears that there was a rational basis for the BSA's determination that a conforming use at the site would not give Tribeach a reasonable rate of return.
Petitioner argues that the BSA's determination is flawed because it fails to consider whether the parking garage will yield a reasonable rate of return. Once again, this argument ignores the language of ZR § 72-21(b), which requires that it be demonstrated that a reasonable rate of return cannot be had from a conforming use. As the parking garage is not a conforming use, its yield is not relevant to reasonable return determination.
Even though the board is not required to consider the yield from the parking garage, the record contains sufficient evidence to support the determination that the return from the parking garage would not be reasonable. At the request of the BSA, Tribeach's financial expert determined the yield on investment from the garage based on an average of comparable asking rates for monthly parking spaces in the area. (R. 536). This average rate was $325 per month. (Id). Using this rate, the expert determined that the parking garage would yield a 2.74% rate of return, an amount too low to justify investment. (Id). Moreover, in a subsequent submission, the financial expert revised the monthly rate of return to reflect average actual income, not asking rates. (R. 725-726). The expert found that the average actual monthly income for parking spaces in the area was only $187. (Id). As evidence in the record shows that public parking facilities in the area operate at only 50% to 75% of their total capacity, (R. 673) the average income for a parking space would be considerably lower than the average asking rate per space. The expert did not recalculate the rate of return based on this revised figure. However, it is readily apparent that the return would be considerably lower than previously calculated, as the revised rate is a little more than half the rate Tribeach's expert used in its original analysis.
Petitioner argues that the revised rate grossly understates parking incomes in the area, citing its own submission to the BSA. (R. 749-760). In that submission, petitioner notes that several parking garages in the area charge approximately $300 to $400 per month for a parking space. ( Id). However, petitioner confuses the asking rate for a parking space and the actual income from that space. It would be more reasonable for the BSA, in considering the reasonableness of the yield from the garage, to use a figure linked to the actual income for a parking space, and not merely the asking price.
Petitioner also argues that inadequate consideration was given to the rate of return from a hotel on the site. In making the reasonable return determination, the BSA is not required to consider the return for every permissible use. ( West Village Tenants Association v. New York City Board of Standards and Appeals, 302 AD2d 230, 231 [1st Dept. 2003]). Rather, it need only consider those conforming uses likely to yield the highest return. Tribeach's expert submitted an explanation as to why a hotel was not considered for the site. (R. 616). Although it did not conduct a full economic analysis for the hotel, its explanation was sufficient for the BSA to conclude that a hotel use would not be feasible, much less yield a rate of return comparable to that of an office use. That the BSA did not consider a detailed economic analysis for a hotel use does not render its decision on this matter arbitrary or capricious.
Petitioner also argues that Tribeach's expert overstated the existing mortgage and that no explanation was ever given for the discrepancy. This is inaccurate. Tribeach's expert offered a submission in response to petitioner's inquiry at the March 30, 2004 public hearing on this matter. (R. 615-617), which explains why the economic analysis report uses a mortgage principal amount different from the amount existing on the building.
In short, none of petitioner's arguments demonstrate that the BSA's determination concerning the ZR § 72-21(b) is irrational, arbitrary, or capricious.
3. ZR § 72-21(c) "Essential Character"
In its resolution, the BSA noted that there were many other mixed use and residential buildings in the area and that, based on its site visit, the proposed building, as modified, would be compatible with the buildings and uses in the surrounding area. Relevant evidence in the record supports this conclusion. The approved architectural plans depict the proposed building, as well as neighboring buildings on the block. (R. 619-639). The pattern of use map and radius map detail the property uses in the area. (R. 40-41). Significantly, they show that many buildings in the area contain both residential and commercial uses. As such, the BSA concluded that the proposed building would not alter the character of the surrounding neighborhood.
Petitioner argues that the BSA's "essential character" determination was flawed because the BSA failed to conduct the proper analysis provided in the City Environmental Quality Review Technical Manual (CEQR) concerning the environmental impact of increased traffic in the area that the development may cause. CEQR § 2-500 et seq. requires the BSA to make an inquiry into whether the proposed construction would have a significant environmental impact. However, CEQR § 2-520 provides that certain types of impacts have quantitative thresholds that must be met before any impact can be considered significant. With regard to traffic and parking, CEQR § 3O-200 notes that lower level density developments may not necessitate any analysis of the impact on street and roadway conditions, or parking facilities. Table 3O-1 lays out threshold values for different types of uses in different areas. If the proposed use does not meet the applicable threshold value, CEQR § 3O-200 provides that no further analysis is needed. For proposed commercial uses in Manhattan south of 60th Street, the threshold value is 30,000 square feet. For residential uses in that area, the threshold value is 240 residential units. Therefore, if a new residential use has less than 240 residential units, or a new commercial use has an area of less than 30,000 square feet, the CEQR does not consider their impact significant.
In Tribeach's environmental assessment statement, their environmental expert conducted a cumulative review of both Tribeach's proposal and another mixed use proposed construction in the same area. (R. 416). Tribeach's environmental expert noted that, combined, the projects represented 95 residential units and 8,134 square feet of commercial development. (Id). The environmental expert concluded that since neither use met the threshold level, the project's impact would not be significant and no further analysis was needed. The BSA accepted this analysis.
Petitioner claims that BSA should not have accepted this analysis. Petitioner argues that the threshold levels laid out in Table 3O-1 apply only to single use developments. As this use is a mixed use, petitioner argues, the threshold values do not apply and an impact analysis must be performed for each proposed use . This argument is not convincing, as petitioner cites no precedent to support its reading of the CEQR. Moreover, Tribeach's expert applied combined figures for Tribeach's use and another development in the area. Those combined residential and combined commercial figures each fell well below half their respective threshold values. Consequently, regardless of whether a more in-depth analysis is required, it seems unlikely that Tribeach's project will have a significant impact on traffic patterns in the area. As such, BSA's determination on this point is rational.
Petitioner also argues that the BSA failed to consider the impact on the area from the loss of the parking spaces provided by the garage. The petitioner contends that the BSA should have conducted an analysis in conformance with the CEQR to determine the impact. This argument is likewise unconvincing. The petitioner does not state which specific provision of the CEQR requires the BSA to conduct such an analysis. The CEQR does state, however, that,
[f]or proposed actions within the Manhattan Central Business District (CBD) (the area south of 61st Street), the inability of the proposed action or the surrounding area to accommodate projected future parking demands would generally be considered a parking shortfall, but is not deemed to be a significant impact.
(CEQR § 3O-420.) Therefore, regardless of whether analysis is required, the CEQR does not consider a parking shortfall in the area to be a significant impact.
Petitioner's remaining arguments on this matter are unpersuasive.
4. ZR § 72-21(d) "Self-Created Hardship"
The BSA found that, as the parking garage was legal when it was constructed and only later became a nonconforming use, Tribeach did not create the hardship. (R. 3). The BSA determined that the hardship was a result of the size of the lot and the presence of the nonconforming garage. The record reflects that the garage was constructed before the Zoning Resolution was enacted and well before Tribeach purchased the site. As Tribeach neither constructed the garage, nor caused the lot to be of a small size, it was rational for the BSA to conclude that Tribeach did not create the hardship that is the basis of its application.
Petitioner argues that the hardship is self created because the site contains a profitable existing use, the parking garage. Since the garage is there and offers a reasonable return, petitioner argues that no hardship presently exists on the site. The hardship will only arise, petitioner argues, when Tribeach demolishes or converts the garage. This argument is similar to the arguments petitioner raised against both the unique physical feature finding and the reasonable rate of return finding. It fails here for the same reasons it failed above. As ZR § 72-21(a) clearly states, the practical difficulties or unnecessary hardships in question must arise from developing or converting the site to a conforming use. Whether or not Tribeach could maintain the existing garage without hardship is irrelevant, because the garage itself is a nonconforming use. The garage must be removed or renovated to comply with the zoning resolution. That the BSA failed to consider whether Tribeach could have avoided hardship by maintaining the garage does not in any way render its determination irrational.
Petitioner also argues that the hardship was self created because Tribeach bought the property with knowledge of the restrictions on its use. This argument ignores the express language of ZR § 72-21(d), which provides that "where all other required findings are made, the purchase of a zoning lot' subject to the restrictions sought to be varied shall not itself constitute a self-created hardship". As the BSA determined that all the other elements of ZR § 72-21 had been met, Tribeach's prior knowledge of the existing restrictions is irrelevant.
5. ZR § 72-21(e) "Minimum Variance"
Here, the BSA concluded that the variance was indeed the minimum necessary to provide Tribeach with relief. The BSA based this determination on the grounds that Tribeach had significantly reduced the scope of the initial proposed construction by reducing the height and number of units in the building and withdrawing entirely the FAR variance request. (R. 531-533). The BSA had before it substantial information regarding potential returns from as of right uses (R. 127-173, 616) and the anticipated rate of return from the proposed project (R. 724-726). Moreover, while the proposed construction is nonconforming, many other buildings in the area also combine commercial and residential uses. (R. 40). Therefore it appears that the BSA, in drawing on its own expertise and the evidence before, it, made a rational determination on this matter.
Petitioner argues that the BSA should have considered expanding the existing garage because such an expansion, by its nature, would have required a lesser variance than Tribeach's proposed new construction. This argument is not convincing, as petitioner does not explain why one use requires less of a variance than another. Petitioner merely states that the expansion of an existing use always requires a lesser variance than a new construction, without stating the basis of such conclusion. However, when choosing between two nonconforming uses, there is no preference for an existing nonconforming use over a new construction. The Court of Appeals has addressed nonconforming uses such as the existing parking garage, noting that, although "courts and municipal legislators have adopted a grudging tolerance of such uses . . . [t]he law nevertheless generally views nonconforming uses as detrimental to a zoning scheme, and the overriding public policy in New York State and elsewhere is aimed at their reasonable restriction and elimination. . ." ( Toys "R" Us v. Silva, 89 NY2d 411, 417[internal citations omitted]). Hence, although the garage use is legal because of its grandfathered status, it is only grudgingly tolerated and is as objectionable to the Zoning Resolution as the new construction of a nonconforming use. As such, it cannot be said that the variance that allows its expansion will be necessarily lesser in degree than the variance that allows the proposed mixed use.
The petitioner also argues that the BSA has failed to show that the variance is the minimal necessary to provide relief because it made no determination that the residential use alone, without the parking garage, would not provide sufficient relief. This argument is unconvincing as well. Once again, petitioner simply states that a nonconforming single use variance is always of a lesser degree then a nonconforming mixed use variance, but offers nothing to support that conclusion. Moreover, petitioner offers no evidence that would demonstrate that a single variance for a residential use would have a lesser impact on the area than the proposed mixed use.
In sum, the record contains sufficient evidence to conclude that the BSA's determination on this matter was rational. None of the arguments raised by petitioner indicate otherwise.
II
We now turn to petitioner's claim that the BSA prematurely closed the hearing. Petitioner alleges that the BSA's decision to close hearings on the matter on April 20, 2004 was surprising, based on unresolved issues in the record. Petitioner alleges that, at the time of the April 20th hearing, Tribeach had not revised its financial analysis to reflect modifications to the original proposal and the BSA had unresolved concerns regarding the impact of the destruction of the parking garage. Petitioner also states that numerous members of the community planned on testifying at subsequent hearings concerning the loss of the garage.
The BSA shall determine when to close hearings. (2 RCNY § 1-01.1[l]). Moreover, the BSA may keep the record open for additional submissions after the hearing is closed ( id) as it did here. Nothing in the record indicates that further testimony was necessary. Tribeach's financial expert submitted revised financial determinations to reflect the modified construction. (R. 724-738). Petitioner submitted a response to these findings. (R. 749-760) Petitioner also submitted letters from area residents expressing concern over the new construction. (R. 761-785). Finally, the record does not reflect that the BSA had concerns that had not been resolved regarding parking. (R. 682-719). As all the outstanding issues had been addressed, the BSA properly closed the hearing.
Petitioner's remaining arguments on this point are unpersuasive. Accordingly, it is
ADJUDGED that the petition is denied and the proceeding is dismissed.
The Clerk shall enter judgment accordingly.
This constitutes the decision and judgment of the Court. Dated: November 15, 2004