Atlantic Yards opponents may have lost another battle in their war with Forest City Ratner as the state’s highest court ruled against them today in a case challenging the use of eminent domain for the massive arena-and-condos project in Brooklyn. But with barely a month left to issue tax-exempt bonds on which the SHoP- and Ellerbe Becket-designed arena rely, the opponents’ knock-down, dragged-out legal strategy may have won the war.

Also this morning, a special bond authority created by the Empire State Development Corporation took a further step in the project, authorizing roughly $825 million in bonds for the project. There had been some question as to how the Brooklyn Arena Local Development Corportation would proceed if the decision went against the state, but without that happening, the bonds were unanimously issued by the six-person board with little fanfare, though the meeting did help shed light on the bonding process and its prospects in the month ahead.

The court case went much the same way as many of the opponent’s challenges at the federal and state levels over the past three years: The majority, in this 6-1 decision [PDF] written by Chief Judge Jonathan Lippman, took issue with the process but ultimately found that it was not the court’s place to overrule the state legislature.

"It may be that the bar has now been set too low," Lippman wrote, "that what will now pass as ‘blight,’ as that expression has come to be understood and used by political appointees to public corporations relying upon studies paid for by developers, should not be permitted to constitute a predicate for the invasion of property rights and the razing of homes and businesses. But any such limitation upon the sovereign power of eminent domain as it has come to be defined in the urban renewal context is a matter for the Legislature, not the courts."

But in his dissenting opinion, Judge Robert Smith argued that it was the state that had overstepped its bounds, and it was the place of the courts to step in here and correct it. “The whole point of the public use limitation is to prevent takings even when a state agency deems them desirable,” Smith wrote. “To let the agency itself determine when the public use requirement is satisfied is to make the agency a judge in its own cause. I think that it is we who should perform the role of judges, and that we should do so by deciding that the proposed taking in this case is not for public use.”

Bruce Ratner said the decision was an affirmation of the project’s importance, as well as insisting on his intention to complete not only to the arena but the 15 apartment towers and one office building that make up the $4.9 million project. “Once again the courts have made it clear that this project represents a significant public benefit for the people of Brooklyn and the entire City,” Ratner said in a statement. “Our commitment to the entire project is as strong today as when we started six years ago.”

Ratner has said he will break ground on the first residential tower within six months of beginning work on the arena, which is expected to be completed by the start of the 2012 basketball season, when the New Jersey Nets will move in. There are currently no designs for those towers, which, like the rest of the project, were once the work of Frank Gehry.

The court’s decision clears the way for the state to begin condemnation proceedings on the remaining 15 percent of properties currently not under Ratner’s control. Warner Johnston, a spokesperson for the state development agency, said condemnations would begin in the middle of next month, having already been approved by the agency earlier this year. (Daniel Goldstein, head of Develop Don’t Destroy Brooklyn and the project’s most visible opponent, has already been served with papers from the state that value his apartment at $510,000, $80,000 less than he paid for it in 2003.)

Also coming in mid-December is the sale of the bonds. At today’s meeting, Goldman Sachs managing partner Greg Carey, who is handling the bond sale for Ratner, said he expects the deal to be completed by the week of December 7, and no later than Tuesday, December 15. The bonds have yet to be rated, but Johnston said the state expects to receive investment grade ratings.

The last time such bonds were issued, for the Yankees and Mets to cover their new stadiums—which were structured similarly to the Ratner’s bonds during a better market and for a less contentious projects—both received junk ratings. That said, the bonds still sold. Both projects also had cost overruns that required additional tax-exempt bonds to be issued, but with the IRS deadline set for the end of the year, the Atlantic Yards would no longer have access to such financing. Asked about this, Johnston replied, “We will cross that bridge when we come to it.”

Forest City Ratner declined to comment on the issues facing its bonds, but Carey expressed great confidence in his ability to sell them before the IRS clock runs out. At the same time, he did acknowledge that there might be difficulty insuring the bonds, which would drive up their cost. There were also some questions raised about the exact cost of the bonds, which were authorized in excess of the cost of the project because the price could yet grow by the time the bonds are actually sold.

Frederick Sheehan, a former director at John Hancock who has written widely about municipal bonds, acknowledged that they continue to sell better than the market would indicate, though the window for such investments may be closing. “Specific municipal bond sales that I would think have run out of buyers are still able to sell,” he wrote in an email. “Though I’d try to sell them immediately.”

The other major issue still confronting the project is the same that has held it up for so long—additional litigation. Last month, Develop Don’t Destroy Brooklyn and transit advocates filed a suit against the MTA for undervaluing the rail yards in their sale to Ratner, along with a suit from community groups. Then, last Thursday, the group Brooklyn Speaks and a handful of local politicians filed a suit challenging changes the state made to the project plan but did not appropriately approve back in June. This suit is seen as especially significant because Brooklyn Speaks has long sought to work with Ratner and the state to create a better project, not to end it, but that détente has now ended.

For all its symbolism, Brooklyn Speaks’ suit, along with the other two, may have come too late. Ratner and the state insist this litigaton will not stall construction, as their predecessors had. “With this last hurdle, and yes, there are other lawsuits, but we can now move forward on condemnation and construction,” Johnston said. (Whether the suits impact the sale of the bonds, as was acknowledged by the board at today’s meeting, remains to be seen.)

Goldstein insists there will still be ample opportunity to halt the project, including through a new lawsuit his group announced today that challenges the lack of review for the latest changes to the project, and he said he would seek an injunction against construction and the use of eminent domain if need be. He also called on Governor David Paterson to step in—a frequent refrain—though that remains unlikely, as the governor has never taken a position on the project.

Goldstein also raised the specter of New London, Connecticut, where Pfizer recently announced it was pulling out of the project at the heart of the now infamous Kelo case, and leaving acres of vacant, condemned property in its wake. “What occurred in New London, that’s what we think will happen here,” Goldstein said. “We’ll be stuck with an arena and a 20-acre parking lot for a very long time.”