Development - NY Times - Developer trick: Understate economic risks

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Published in the New York Times, Friday, August 11, 2006

Catskill Resort Proposal Is Criticized by Comptroller,
Who Says Developer Understated Risks

By LISA W. FODERARO

A proposal for a 1,960-acre resort in the Catskills, which has worried environmentalists and elected officials, came under fire from the New York State comptroller yesterday in a report that said the developer understated both the project’s environmental impact and its economic risks.

The project, known as Belleayre Resort at Catskill Park, consists of two luxury hotels, two golf courses and hundreds of units of housing in the midst of New York City’s watershed about 125 miles north of Manhattan. The proposal is wending its way through the state’s environmental review process.

Last fall, an administrative law judge for the state’s Department of Environmental Conservation decided that 12 issues required further study after two years of hearings and a 6,720-page environmental impact statement. The process is on hold as the developer, Crossroads Ventures, appeals the decision.

The report from the comptroller, Alan G. Hevesi, said the developer’s economic analysis was based on faulty assumptions about profitability and comparable developments.

In a statement with the report, the comptroller’s office said that the developer had overstated the income the project would need in order to be profitable. “In this case,” the report said, “an analysis that overstates required income artificially supports a larger-scale project.”

The report also highlighted the project’s potential risk to the environment, specifically the New York City watershed. The water in the Catskill reservoirs is so pure that the city has an exemption from federal laws requiring drinking water to be filtered. But the Environmental Protection Agency is reviewing that status. If the city loses the exemption, it could be forced to build a $9 billion filtration plant.

“The Belleayre project ignores this filtration avoidance determination,” the report said, “and threatens to expose the city to huge additional capital expenses at a time when the costs of maintaining and repairing the existing water supply system are becoming more burdensome.”

A spokesman for Crossroads Ventures criticized the report, saying that Mr. Hevesi had not sought comment from the company. “We’re disappointed that we weren’t contacted directly by the comptroller’s office where we could have addressed many of these issues,” said Paul Rakov, vice president for public affairs at Crossroads Ventures, in Shandaken, N.Y.

Alan J. Steinberg, the E.P.A.’s regional administrator, recently sent a letter to members of New York City’s Congressional delegation, reiterating his concerns about the Belleayre project. Mr. Steinberg wrote that the agency supported changes to the proposal to eliminate development from the more environmentally fragile eastern portion of the property, an idea advocated by Representative Maurice Hinchey, who represents the area.

Eric A. Goldstein, a senior lawyer for the Natural Resources Defense Council, called the E.P.A. letter and the comptroller’s report “a major one-two blow to this project in anything like its current state.”

But in a phone interview on Thursday, Mr. Steinberg said that he had since been contacted by the developer, who indicated that it was putting together a new proposal that would reduce the impact of development on the eastern site. Mr. Rakov, of Crossroads Ventures, confirmed that the company was scaling back the development. The E.P.A.’s support of the project is considered critical because the agency holds the key to the city’s filtration exemption.

“Before I would be willing to consider such a proposal, I would have to consider its impact on turbidity,” Mr. Steinberg said.

Link to online story. And a link to Hevesi's report: "Belleayre Proposal Understates Environmental Impacts and Economic Risks"


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