Friday, December 15, 2006

Stepford editorialists repeat the $5.6 billion lie

Call them the Stepford editorialists, quoting the same new, unverifiable, and outlandish Atlantic Yards statistic, undoubtedly supplied by developer Forest City Ratner: $5.6 billion in new tax revenue.

The Daily News, in a 12/10/06 editorial:
The benefits of the Atlantic Yards are manifest, among them 2,500 apartments geared for the middle and working classes, $5.6 billion in tax revenues over the next 30 years, 15,000 construction jobs, a couple of thousand permanent jobs and a great entertainment venue for Brooklyn. It's a win-win-win.

The Post, in a 12/14/06 editorial:
Imagine: a $4 billion shot in the arm for Brooklyn - bringing 22,000 new jobs over the next decade, another 5,000 permanent jobs and $5.6 billion in tax revenues over 30 years.

Assemblyman Steven Cymbrowitz, in a 12/14/06 op-ed in the Courier-Life chain:
Atlantic Yards will be a huge tax revenue generator providing New York City and New York State with over $5.6 billion in much needed new tax income over the next 30 years, and creating a net positive fiscal impact of more then $1.3 billion.

(Emphases added)

Contrast and antecedent

It's too bad none of those editorialists noticed the Empire State Development Corporation's (ESDC) figure of $944 million, which is drastically lower than the numbers used in the Daily News and Post, and even a good deal lower than the figure Cymbrowitz chose.

The ESDC number represents represents a loss of $456 million, a nearly one-third drop from the agency's previous, and much-challenged, estimate.

I assume the $5.6 billion figure is modified slightly from the Forest City Ratner statistic I dissected in a March article called The $6 billion lie. (Indeed, the Atlantic Yards web site still claims $6 billion in new tax revenues, but it has not been adjusted for the 8% reduction in the project's scale.)

The $6 billion figure comes from a 2005 analysis for the developer by sports economist Andrew Zimbalist, who wrote:
Under the General Project Plan, the total estimated increment to city and state tax revenues from the project comes to $6.02 billion over thirty years, or a present value of $2.13 billion.

Dissecting the lie

I detailed several reasons why the $6 billion figure wasn't credible, and they apply as well to the $5.6 billion lie. But here are the most important ones.

1) The $5.6 billion figure represents the 30-year aggregate of projected revenues. However, the standard way to present such numbers is net present value, or today's value of future payments, with an interest rate applied. Net present value is significantly lower. All other fiscal impact analyses of this project use present value.

2) The $5.6 billion figure ignores costs. In fact, a literal reading of Cymbrowitz's op-ed suggests that the project bringing in $5.6 billion with a net positive fiscal impact $1.3 billion would have $4.3 billion in costs.

Rather, I suspect that the $1.3 billion represents the net revenues in present value (about $2 billion) minus the costs, again in present value. It's completely unclear how it was calculated. Did the developer adjust the number from Zimbalist's study? From the ESDC's original calculations?

3) Neither Zimbalist nor the ESDC have come close to fully accounting for the subsidies and public costs behind the project.

Bad timing

As noted, the Daily News, Post, and Courier-Life have published numbers directly contradicted by the ESDC, which calculated $944 million, a number which still doesn't account for costs.

Affordable housing doubled?

Cymbrowitz, loyally following the Forest City Ratner narrative, calls Atlantic Yards an affordable housing project, even though most of the affordable housing would not be built until the second phase, which could be stalled indefinitely.

And he also somehow doubles the number of affordable rentals, from 2250 to 4500:
New York City is facing a serious shortage of affordable housing. As more and more developments, in just about every community of the city, offer luxury—unaffordable to most New Yorkers—units, the situation is beginning to approach a crisis level....
Brooklyn is fortunate to have the opportunity of adding 4,500 rent-stabilized rental apartments that will be dedicated to low, moderate and middle income families.

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