Tuesday, December 05, 2006

Arena economic benefits? ESDC ignores countervailing evidence

The comments in the Atlantic Yards Final Environmental Impact Statement are not necessarily met with complete candor.

So let's take a close look at a particular response from the Empire State Development Corporation. The response obscures the strong evidence that the proposed Brooklyn arena likely would generate significantly fewer revenues than projected.

Brooklyn resident Kate Galassi commented:
The economic benefits from the arena are based on the assumption that the arena will be hosting events 224 days a year. [Economist Andrew] Zimbalist’s report estimates this number assuming the closing of the Continental Airlines Arena and no new arena in Newark. If these assumptions do not hold true, then the estimated benefits of the arena will be substantially reduced.

The ESDC responded:
The analysis reflects the expected programming of the arena. If there were fewer events and lower attendance at the arena, fiscal benefits associated with the arena (sales tax on tickets, parking, and concessions) would be lower than those reported in the EIS. If the number of events and attendees were higher, the fiscal benefits would be higher... Andrew Zimbalist’s report on the economic benefits of the proposed project was not prepared for ESDC and is not included, relied upon, or referenced in the DEIS.

The point, however, is the number of expected events, and the source of that number. The ESDC (apparently) and Zimbalist used the same source: Forest City Ratner.

FEIS estimate

According to Chapter 4 of the FEIS, Socioeconomic Conditions:
The proposed arena would represent a new economic activity in the study area. It is currently anticipated that the arena would host approximately 225 events per year, with over 60 percent of those events (approximately 140 events) occurring in the evenings.

IBO numbers

The city's Independent Budget Office, in a September 2005 report, came up with a different figure, also quoting the developer:
In addition to the Nets’ 41 regular season games, preseason games and potential playoff games, FCRC expects that more than 150 other general admission events would be held at the new arena, including 40 concerts, 35 other sports events such as high school basketball games, and about 80 family-style entertainment shows.

Now maybe this number excludes some community events that could bring the number up to 225, but they likely would produce little revenue.

Zimbalist's assumptions

The key passage in Zimbalist's 2005 report:
Many of the numbers used in this report concerning Nets attendance, ticket prices, construction costs and other items come from projections done by or for the Nets. I have discussed these estimates with the Nets and they seem reasonable to me. The Nets project that the arena will not host an NHL team and that it will host 226 events during the year (assuming the eventual closing of CAA, no new arena in Newark, no NHL and no minor league hockey events at the Atlantic Yards arena.) The Nets project out three scenarios over time based on aggressive, moderate and conservative assumptions. I use the estimates from their moderate scenario.
(Emphasis added)

As Gustav Peebles and Jung Kim pointed out in their June 2004 critical analysis of Zimbalist's report:
The problem with this scenario is that it allows no place for the New Jersey Devils to play ice hockey... His analysis also fails to account for inter-arena competition for non-sports events.

Indeed, CAA, or Continental Airlines Arena, may close. But a new Newark Arena is already under construction and is expected to open next year, two years ahead of the Atlantic Yards arena (under the best-case scenario).

So the ESDC's response to Galassi should have provided a different number for "the expected programming of the arena."

Footnote: in his original (2004) report, Zimbalist attributed the projections more accurately to Forest City Ratner rather than the Nets.

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