Friday, October 20, 2006

The ESDC acknowledges some costs, Times offers some skepticism, story downplayed

More than a day after the Empire State Development Corporation released a sketchy fiscal impact analysis for the Atlantic Yards project, the agency offered some backup calculations--which do allow for nearly $500 million in costs, but still fail to fully account for all costs, including housing subsidies.

The New York Times, in an article headlined Study Shows Data for Claim of Atlantic Yards’ Benefits, offered the agency's explanation:
Because it is hard to determine how many residential tenants of the project would be new to New York, the analysis excludes them as a source of new revenue, as well as the cost for possible increases in municipal services they might require.

Unmentioned by the Times is that the Independent Budget Office and Forest City Ratner's own consultant, Andrew Zimbalist, tried to calculate such costs. The Times did point out that the ESDC had done an about-face after Chairman Charles Gargano had told Channel 13 that the document wouldn't be released.

The Times added:
Perhaps more significantly, the study also excludes public subsidies for the project’s planned 2,250 units of housing priced below market rates. Those subsidies are still under negotiation, but could substantially increase the public cost of the project.

Indeed, if the subsidies for the units amount to $100,000 each--less than the $107,000 figure mentioned by Deputy Mayor Dan Doctoroff regarding the prservation of middle-income (as opposed to more expensive low-income) affordable housing--the total would be $225 million. So we might estimate a number significantly higher than $225 million, unless it's cheaper to produce the range of affordable housing promised for Atlantic Yards than to preserve middle-income Stuyvesant Town and Peter Cooper Village. The city says it would cost $54,000 for new middle-income rentals in Queens.

Note, however, that this story appears on p. 4 of the Metro Section and the bland headline doesn't portray the skimpiness of the ESDC claim. By contrast, a rumored six to eight percent reduction in the project's size was the newspaper's lead story on Sept. 5.

Brennan unconvinced

Assemblyman Jim Brennan, who had asked for the document as well as other financial disclosure, called it "a skeleton projection of state and local tax revenue." The Times reported:
We don’t how much money the arena’s going to make,” Mr. Brennan said. “We don’t know how much the private rental housing is going to make. We don’t know how much the luxury housing and commercial property will make. Therefore, we do not know whether the arena or the affordable housing are independently economically viable. If they are, or if they only need minimal subsidy, then there is no rationale for the size.”

What's missing

I asked ESDC spokeswoman Jessica Copen why some costs were missing. She responded:
We did not estimate the increase costs in municipal services (sanitation, traffic, transportation, cops, schools, water, etc). These are certainly costs, but we have not used estimates for these in any of our impact analyses.

You need to understand that this is our model and may vary from other economic benefit analyses. We use this model consistently to evaluate all our projects. No one model is perfect or all inclusive.


More ESDC data

Shortly after I got the document on Wednesday, I queried Copen for more details, which were provided at 6 pm Thursday. Therefore my first post called it a fiscal benefit analysis, since the document released didn't acknowledge any costs. Neil deMause, in the Village Voice's Power Plays blog, under the headline Secrets of the Ratner Plan Revealed! (Not), also pointed to the omission of costs.

How did the agency reach a $1.4 billion net revenue calculation? Copen responded by citing both the document released as well as other ESDC documents. (This data was released to the Times yesterday, as well.) Some $845.5 million includes the fiscal benefits of operations and construction activity for New York City and the Metropolitan Transportation Authority. The $1.1 billion is net revenue to the city and state from the General Project plan. Total: $1.9 billion.

Fiscal cost for the project for NYC + NYS:

NYS sales tax exemption $20.0 million
NYC sales tax exemption $20.0 million
MTA sales tax exemption $ 1.9 million

NYS mortgage recording tax exemption $ 17.8 million
NYC mortgage recording tax exemption $181.4 million

Bond Financing
NYS $138.3 million
NYC $113.5 million

Total NYS $176.1 million
Total NYC $316.7 million

Total: nearly $493 million (a figure cited in July by the Bond Buyer)

Subtract that from $1.9 billion and you get $1.4 billion. However, as noted, that leaves out all sorts of costs for schools, sanitation, and public safety--not to mention other subsidies.

Does this leave out $200 million in direct subsidies from the city and state, as I had earlier suspected? No. Copen explained that "the bond financing of $251.8 million includes the direct cost of $200 million as the bond principal. The rest is interest payments and taxes foregone. All count as fiscal cost to NYS and NYC."

Bonds? "The $200 million will go into the project as a cash contribution--however, the State and City may issue bonds to come up with the funds," Copen added.

The Council of Brooklyn Neighborhoods analysis, for example, cited the non-competitive bid for the railyard rights, "extraordinary infrastructure costs,” public utility relocation, and affordable housing subsidies, among other things.

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