Friday, July 13, 2007

Did Forest City once want a free ride for arena-related infrastructure & condemnation?

(Updated 7/14) On Tuesday, I reported how the state warned that the public tab for Atlantic Yards would likely be more than the public pledge of $200 million--and that the tab would almost surely rise, as it has.

There's some more back story. When the project was initially proposed, developer Forest City Ratner apparently expected public entities to pay for all the costs of infrastructure and condemnation, rather than set a ceiling.

According to a presentation (3.2 MB PDF) to the Empire State Development Corporation dated 9/29/03, two-and-a-half months before the 12/10/03 official unveiling of Atlantic Yards, the developer projected infrastructure and condemnation costs of only $133 million.

By June 2004, as I reported, the price tag had risen to $221 million, which already eclipsed the $200 million that was to be pledged in a Memorandum of Understanding (MOU) signed in February 2005. And that set the stage for an additional city pledge of $105 million.

Implication

The implication of the earlier document, as the headline on the page below shows, was that the public parties would pay for all the condemnation and infrastructure costs.

And how might Forest City Ratner have tried to justify getting the public to reimburse a corporation for property it acquired in order to build an arena? Rising taxes.

According to the developer's calculations, also from that 9/29/03 presentation, the city and state would take in $86 million more in new taxes than the arena would generate in wage taxes alone. (See graphic. For some reason, other taxes, such as sales taxes, were not calculated.)

By contrast, the city's Independent Budget Office (IBO), which examined the arena--but not the entire Atlantic Yards project--in a report issued in September 2005, calculated that the fiscal surplus to the city, state, and Metropolitan Transportation Authority would be $107 million. IBO calculated revenues from both arena construction and arena operations.

Then again, the IBO's analysis was "based on the terms of the MOU," which did not at that time contemplate an extra $105 million contribution from the city, bringing the direct public subsidy to $305 million. Now, as I've calculated, the IBO would have trouble concluding that the arena "is likely to generate a modest net positive fiscal surplus for the city, state, and MTA."

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