Thursday, June 01, 2006

From the $6B lie to the $1.5B deception? Stuckey revises rhetoric on economic projections

In an article posted today in the Amsterdam News, headlined Atlantic Yards, and sticks and stones, Forest City Ratner's Jim Stuckey seems to have revised the official rhetoric on economic projections:
“The opposition fails to give a complete picture. Our project will give more affordable housing than any single project in the state of New York. After you take out the costs, the city and state will earn $1.5 billion. You have to invest money to make money,”

This represents a shift in tactic from the $6 billion lie. Note that Forest City Ratner, on its web site and in its brochure, has been saying that the project would bring $6 billion in total revenues to the city and state, based on dubious estimates from paid consultant Andrew Zimbalist. If you subtract $1-$2 billion in costs, the net revenue would be over $4 billion.

But maybe Stuckey realizes how outlandish that is, because the $6 billion represents cumulative numbers over 30 years, while economists generally use the "present value," which would be the value of the money in hand now. (It's somewhat like comparing the value of a loan you get to the cumulative cost of the payments over 30 years.)

So Stuckey seems to be using Zimbalist's $2 billon present value figure, then subtracting a half-million dollars in costs to get $1.5 billion. That's more responsible on two counts: he's both using present value and acknowleding costs. (Had FCR been acknowleding costs, they never could have used the $6 billion figure.)

But it's still outlandish, because the costs projected by Forest City , as I've detailed, are significantly below those estimated by the Independent Budget Office. And the most significant chunk of new revenues come from estimates of income tax paid by new residents--and, as James Parrott of the Fiscal Policy Institute told me, "I don't know of any serious cost-benefit analyses of mixed-used economic development projects that count the taxes of residents."

In other words, you can't do that.

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