Wednesday, September 05, 2007

The Observer on AY delays and possible increased public costs

In the New York Observer this week, in an article headlined Atlantic Yards: The Suspense Builds, Matthew Schuerman reports that, while Forest City Ratner spokespeople claim the project is on schedule for as 2009 arena opening--despite being way behind stated schedules--they wouldn't answer follow-up questions.

(Meanwhile, Develop Don't Destroy Brooklyn wouldn't reveal the size of its war chest, though it plans to appeal an adverse eminent domain ruling--the case is pending before a federal appellate court--to the U.S. Supreme Court.)

Schuerman observes that the delays suggest some contradictions, costing the developer millions but also supporting claims of blight, arresting and reversing the slow gentrification on the blocks adjacent to the Metropolitan Transportation Authority's Vanderbilt Yard.

Public costs rising?

So what’s the total "extraordinary infrastructure costs", Assemblyman Richard Brodsky asked Empire State Development Corporation Chairman Charles Gargano last December, a reference to a line in the 2/18/05 Memorandum of Understanding that said that “the Public Parties will consider making additional contributions for extraordinary infrastructure costs related to the mixed-use development on the Project Site (excluding the Arena Building Site).”

Brodsky never really got an answer.

Schuerman's article, though it doesn't reference Brodsky, offers a follow-up:
Forest City is planning to spend $4.2 billion on Atlantic Yards, with some $305 million pledged from the city and state so far. A little noticed clause in the project plan approved by the state last year states that “additional fundings shall be made … provided that at no time will the costs reimbursed to [Forest City] by the city and state, in the aggregate, exceed 50 percent of the total costs. …”

The state and city would, however, have to agree to increase their contributions to the project. Mr. Cockfield, the spokesman for ESDC, said, “As far as the state goes we don’t contemplate reimbursing any more than $100 million for infrastructure.”


Closer look

In greater detail, that clause in the Atlantic Yards General Project Plan (see p. 7 of this PDF), states: Additional Fundings shall be made taking into account amounts spent by FCRC

I'm not sure it's accurate to say that the developer is spending $4 billion--though it sure would be helpful to get the Empire State Development Corporation to explain the verbiage it approved.

While the project would cost some $4 billion, the developer's own funds, and the funds assembled from equity investors, might be half that.

If you add the direct contributions of the city and state, and the government-assisted bonds for the arena and the affordable housing, that means more than half the $4 billion cost (which is higher, if you add financing) of the project would come from public and [updated] public-assisted sources.
(Click to enlarge)

That would leave less than $2 billion to be raised privately, with a smaller amount expended by the developer. So half of that unspecified sum--certainly more than the $305 million already pledged--could be reimbursed by the government, according to my reading of the General Project Plan.

Either way, it certainly protects Forest City Ratner's own investment.

No comments:

Post a Comment