Business & Residents Alliance v. Jackson, Docket No. 04-4493-CV.

• Decision Date: 22 November 2005
• Docket Number: Docket No. 04-4493-CV.
• Citation: 430 F.3d 584
• Parties: BUSINESS AND RESIDENTS ALLIANCE OF EAST HARLEM, an unincorporated association, Raymond Plumey, P.C., John Kozler, Irene Smith, and Pasquale Palmieri, Plaintiffs-Appellants, Gloria Quinones, Thomas Donovan, and Charles Iulo, Plaintiffs, v. Alphonso JACKSON,<SMALL><SUP>1</SUP></SMALL> in his official capacity as Secretary of the United States Department of Housing and Urban Development, Michael O. Leavitt,<SMALL><SUP>2</SUP></SMALL> in his official capacity as Secretary of the United States Department of Health and Human Services, Upper Manhattan Empowerment Zone Corporation, New York Empowerment Zone Corporation, and Tiago Holdings, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

430 F.3d 584

BUSINESS AND RESIDENTS ALLIANCE OF EAST HARLEM, an unincorporated association, Raymond Plumey, P.C., John Kozler, Irene Smith, and Pasquale Palmieri, Plaintiffs-Appellants Gloria Quinones, Thomas Donovan, and Charles Iulo, Plaintiffs, v. Alphonso JACKSON,¹ in his official capacity as Secretary of the United States Department of Housing and Urban Development, Michael O. Leavitt,² in his official capacity as Secretary of the United States Department of Health and Human Services, Upper Manhattan Empowerment Zone Corporation, New York Empowerment Zone Corporation, and Tiago Holdings, LLC, Defendants-Appellees.

Docket No. 04-4493-CV.

United States Court of Appeals, Second Circuit.

Argued: September 27, 2005.

Decided: November 22, 2005.

Kevin J. Farrelly, Law Offices of Kevin J. Farrelly, New York, NY, for Plaintiffs-Appellants.

Lawrence H. Fogelman, Assistant United States Attorney for the Southern District of New York for David N. Kelley, United States Attorney (Sara L. Shudofsky, Assistant United States Attorney, of counsel), New York, NY, for Defendants-Appellees Alphonso Jackson and Michael O. Leavitt.

O. Peter Sherwood, Manatt, Phelps & Phillips, LLP, New York, NY, for Defendants-Appellees Upper Manhattan Empowerment Zone Development Corporation and New York Empowerment Zone Corporation.

Karen Binder, Wachtel & Masyr, LLP (Jesse Masyr, of counsel), New York, NY, for Defendant-Appellee Tiago Holdings, LLC.

Before: CALABRESI, KATZMANN, and B.D. PARKER, Circuit Judges.

KATZMANN, Circuit Judge.

The New York City Empowerment Zone was created pursuant to a Congressional act and was awarded $100 million in federal block grants to foster the revitalization of economically distressed areas. This case raises an issue of first impression: whether the Zone's subsequent use of those federal funds in connection with individual projects triggers the historic preservation review process set forth in Section 106 of the National Historic Preservation Act, 16 U.S.C. § 470f. The plaintiffs argue that it does, and therefore contend that construction of the East River Plaza project, a planned East Harlem retail shopping complex to which the Zone has allocated $5 million from the previously-awarded federal block grants, cannot go forward until a Section 106 review of the project is conducted. We hold that because all approval and funding decisions as to the East River Plaza project are made at the state and local level, Section 106 — which is triggered only when a federal agency has jurisdiction or licensing authority over the project at issue — is inapplicable here. We therefore affirm the district court's grant of summary judgment to the defendants.

I.

A.

1. The New York City Empowerment Zone: Statutory and Administrative Background

In the Omnibus Budget Reconciliation Act of 1993 ("OMBRA"), Pub.L. No. 103-66, 107 Stat. 312 (1993), Congress provided for the creation of empowerment zones and enterprise communities to promote the "[r]evitalization of economically distressed areas through expanded business and employment opportunities." H.R.Rep. No. 103-111, at 791 (1993), as reprinted in 1993 U.S.C.C.A.N. 378, 1021. As part of the OMBRA, Congress authorized the United States Department of Housing and Urban Development ("HUD") to designate up to six urban empowerment zones that would each receive various tax incentives as well as up to $100 million in federal block grant funds from the United States Department of Health and Human Services ("HHS") to stimulate economic and social renewal. Pub.L. No. 103-66 § 13761; 42 U.S.C. § 1397f; 60 Fed.Reg. 3034-01, at 3034. Congress further provided that local governments could nominate areas for empowerment zone status, and required any application for an empowerment zone to include a "strategic plan" that

(A) describes the coordinated economic, human, community, and physical development plan and related activities proposed for the nominated area,

(B) describes the process by which the affected community is a full partner in the process of developing and implementing the plan and the extent to which local institutions and organizations have contributed to the planning process,

(C) identifies the amount of State, local, and private resources that will be available in the nominated area and the private/public partnerships to be used, which may include participation by, and cooperation with, universities, medical centers, and other private and public entities,

(D) identifies the funding requested under any Federal program in support of the proposed economic, human, community, and physical development and related activities,

(E) identifies baselines, methods, and benchmarks for measuring the success of carrying out the strategic plan, including the extent to which poor persons and families will be empowered to become economically self-sufficient, and

(F) does not include any action to assist any establishment in relocating from one area outside the nominated area to the nominated area, except that assistance for the expansion of an existing business entity through the establishment of a new branch, affiliate, or subsidiary is permitted if —

(i) the establishment of the new branch, affiliate, or subsidiary will not result in a decrease in employment in the area of original location or in any other area where the existing business entity conducts business operations, and

(ii) there is no reason to believe that the new branch, affiliate or subsidiary is being established with the intention of closing down the operations of the existing business entity in the area of its original location or in any other area where the existing business entity conducts business operation[s].

26 U.S.C. § 1391(f)(2).

Pursuant to this application process, HUD designated the New York City Empowerment Zone — an area comprising certain sections of Upper Manhattan and the South Bronx — as one of the six initial urban empowerment zones. HHS, in turn, proceeded to make two $50 million grants, one in 1994 and one in 1995, to the New York City Empowerment Zone. These grants were issued to entities that subsequently became known as the Empire State Development Corporation ("ESDC"), a New York State agency. The $100 million remains in an HHS "draw-down" account, from which ESDC can withdraw funds without advising HHS of the specific purpose for which the funds will be used. New York State and New York City also each pledged an additional $100 million to the New York City Empowerment Zone, to be paid over a ten-year period. Thus, the Zone ended up with a total investment pool of $300 million, drawn equally from the federal, state, and city governments.

Several local entities were created to manage the operation and funding of the Zone. The ESDC created the New York Empowerment Zone Corporation ("NYEZC"), which is charged with reviewing and monitoring the empowerment zone program. New York State holds 51% of the stock of NYEZC, and New York City holds the other 49%. In addition, the residents of Upper Manhattan created the Upper Manhattan Empowerment Zone Development Corporation ("UMEZDC") to develop initiatives for, and administer funds to, their portion of the Zone. The Bronx Overall Economic Development Corporation ("BOEDC") was similarly created for the South Bronx. Representatives from UMEZDC and BOEDC sit on the board of directors of the NYEZC, along with state and city representatives. In addition, an HUD representative participated as a non-voting director of the NYEZC until 2002, at which point HUD discontinued its participation.

Two memoranda serve to document and clarify the relationships among the various entities described above. First, a Memorandum of Agreement among HUD, New York State, and New York City provides that the State and City shall submit semi-annual reports and annual narrative summaries to HUD regarding actions taken in accordance with the strategic plan for the New York City Empowerment Zone, and that HUD shall make periodic findings on the continuing eligibility and validity of the designation of the Zone. It further provides that HUD may revoke the "empowerment zone" designation if it is determined that the Zone has (1) modified the boundaries of the area; (2) failed to make progress in achieving the benchmarks and goals of the Strategic Plan; or (3) not complied substantially with the goals of the Strategic Plan. This de-designation provision closely tracks the statutory language of 26 U.S.C. § 1391, which provides that designation of an empowerment zone can be revoked by HUD upon a determination that the state or local government "(A) has modified the boundaries of the area, or (B) is not complying substantially with, or fails to make progress in achieving the benchmarks set forth in, the strategic plan." 26 U.S.C. § 1391(d)(2).

Second, a Memorandum of Understanding among New York State, New York City, the ESDC, NYEZC, UMEZDC, BOEDC, the Bronx Borough President, and the United States Representatives for the 15th and 16th Congressional Districts provides that the local entities — namely, UMEZDC and BOEDC — will select and develop project proposals for their respective regions of the Zone, and will then submit these proposals to NYEZC for approval. It further provides that when such projects are approved to receive Zone funding, ESDC is responsible for disbursing the appropriate federal block grant funds and the New York State-provided funds to NYEZC, and that the New York City Department of Business Services is responsible for disbursing the appropriate city funds to the NYEZC. NYEZC is then, in turn, to disburse such funds to UMEZDC or BOEDC, as applicable.

2. The East River Plaza project

In 1996, defendant-appellee Tiago Holdings, LLC ("Tiago"), a real estate developer, proposed a large shopping center development project — to be known as East River Plaza — in East Harlem, a neighborhood that falls within the boundaries of the New York City Empowerment...