To be fair to Walter O’Malley, Flatbush was on its way to becoming a ghetto, and Robert Moses didn’t want to give him permission for a new stadium anyway. Moses later saw his grave error, and approved a stadium at the Worlds Fair site in Flushing Meadows, now home to the only REAL New York team!
You’re exactly right. The New York City government assumed that it, rather than the Dodgers’ owners, held the perogative for management of the team’s future.