Monday, November 19, 2007

Lessons not-so-new from the Newark arena: cost overruns, plan changes, and yet-unmet promises

The new Prudential Center arena in Newark has gotten high marks from those attending concerts and hockey games so far. As the first new arena in the New York area in more than a quarter-century, it offers state-of-the-art amenities—but likely will be surpassed if/when the Barclays Center arena, designed by Frank Gehry, is built as part of the Atlantic Yards project.

The larger story of the Prudential Center, however, may have some sobering if unsurprising lessons for Brooklynites. The arena cost the city more than expected, so far contains fewer neighborhood-friendly features than originally promised, and has yet to be accompanied by the development it was expected to catalyze.

The rendering from the official web site (above) looking west contrasts with the current view (right), given that the adjacent park and office building are some time away.

The Brooklyn parallels

Some parallels in Brooklyn are already evident. The price tag for the Atlantic Yards arena has already risen from $435 million to $555.3 million to $637.2 million, and the city and state contribution on top of that has risen from $200 million to $305 million. The city’s Independent Budget Office, which once calculated a modest gain for the city in new arena tax revenues, now acknowledges that may not occur.

Open space on the arena roof, which when announced in 2003 drew praise from New York Times architecture critic Herbert Muschamp, was deemed a security risk and made the private enclave of residents in the four buildings ringing the arena. And the development attached to the arena—the 16 towers of Atlantic Yards—would not necessarily emerge on schedule but depend on the developer Forest City Ratner’s calculations.

A one-third increase?

The Newark Star-Ledger, in a 10/15/07 front-page article headlined Additional projects boost overall tab for Newark arena: Road, pedestrian and park work hike the cost to a half-billion, concluded that the arena project would cost more than half a billion dollars overall, one-third more than the announced $375 million for construction costs of the building. By that logic, factoring in the cost of the site improvements, the Atlantic Yards arena might be more than $900 million in public and private (though tax-advantaged) funding.

(Photo from New York Times)

When announced three years ago, the Prudential Center was to cost $310 million. The New Jersey Devils put up $156 million. Newark, desperate for a big downtown project, put in about $220 million, not from taxpayers but funds from the Port Authority of New York and New Jersey, received in settlement of claims that Newark was cheated out of rent from its airport and seaport.

Not everyone was in favor of subsidies. A 5/25/04 Star-Ledger editorial, headlined Let Newarkers decide, suggested that city residents vote:
If, as the mayor says, the arena is a surefire winner and a catalyst for billions in private development, the Devils and other private investors should be eager to build the arena themselves and reap all those profits. Then Newark could use its $210 million to foster development around the arena and the rest of downtown with plenty left to revitalize the neighborhoods, create jobs and more.

Newark was paying for actual construction, along with infrastructure and land costs. New York City and State would be paying only for the latter at the Brooklyn arena—but the cost, even before construction, would be nearly as large as the entire payout in Newark.

Beyond that $375 million, however, the Star-Ledger calculated more than $125 million in related costs, including property acquisition, street improvements, and parks and walkways around the arena. The money quote came from Augusto Amador, the city councilmember from the East Ward, home to the arena, who said, "It didn't take a rocket scientist to understand there was a lot of work to be done adjacent to the arena that the city was responsible for."

(In Brooklyn, the $305 million already pledged would go to such ancillary projects.)

Changing claims

The Star-Ledger noted that Richard Monteilh, the city’s business administrator under previous Mayor Sharpe James, had claimed that the original $310 million would cover ancillary costs. But the newspaper pointed to at least $55 million more in projects from the start.

Some of those improvements have yet to arrive, such as a pedestrian bridge over Route 21 and Triangle Park, which will help connect the arena to the nearby Penn Station.
(Graphic from Star-Ledger. Click to enlarge.)

Then again, Monteilh argued that street improvements in general were necessary to help Newark thrive.

Police, sanitation, and more

Last year, Paul Fader, a former chief counsel to acting Gov. Richard Codey, observed that additional costs, including "signing, extra policing, trash removal, and liability issues," had not been calculated, according to the newspaper.

The Star-Ledger interviewed the ubiquitous sports economist Andrew Zimbalist, who said, "It's in the interest of arena or stadium proponents to make it look as cheap as possible…. I think the evidence out there is you don't get an economic benefit. That's a big question mark. The benefit comes in the form of social and cultural enjoyment, and cohesion."

Zimbalist, hired by Forest City Ratner to do an analysis, has said that Atlantic Yards is different, because the arena would capture revenues from New Jersey, and because of the attached mixed-use development. However, Zimbalist contradicted his own scholarship by downplaying costs regarding Atlantic Yards, assuming additional police costs to be “negligible” and asserting that additional infrastructure costs were “unlikely.”

Newark Mayor Cory Booker, who once called the arena ''a bad political deal” (according to a 5/12/06 Times article headlined An Arena, And Hope, Takes Shape In Newark) has had to embrace a project that already on the way. He told the Star-Ledger that “hidden costs,” such as sanitation and police, should have been considered. He said the city may assign ticket surcharges.

Longstanding hopes

Newark has sought an arena for more than three decades, according to the Star-Ledger. In 1975, a time of continued suburbanization, a Newark-commissioned study for a downtown arena was rejected by the state, leading to the arena at the Meadowlands. In 1997 Mayor James and state Sen. Codey asked, without success, that the New Jersey Sports and Exposition Authority move the Nets to Newark.
(Photo from New York Times)

In 1998, retired Wall Streeter Raymond Chambers organized a consortium to buy the Nets, aimng to build an arena in downtown Newark. In November 1998, Newark began the process to condemn 40 acres downtown—only to be met by lawsuits from homeowners and also Jerome Gottesman of Edison Parking, who had the largest holdings in the planned site.

In March 1999, Chambers and others revealed plans for both an arena and a soccer stadium (since ditched) plus $100 million in commercial development near the crossroads of Broad and Market streets. Not everyone agreed; the New Jersey Sports and Exposition Authority, operator of the Meadowlands, suggested a new arena in East Rutherford and then-Devils owner John McMullen suggested one in Hoboken.

In January 2000, Newark suggested a slightly different location, closer to Penn Station (site of photo above) and connected by an enclosed walkway. However, before the lawsuits proceeded, Newark gave up its plan; Edison Parking suggested the arena should be near Broad and Market. Eventually a plan emerged, in which a significant amount of arena land was achieved by swapping land with Edison Parking, allowing for other development nearby.

On 2/9/04, the city unveiled a new downtown redevelopment plan that included an official pledge by the New Jersey Devils to come to a new arena by the start of the 2007 season. That has been fulfilled, but most other elements of the new Downtown Core Redevelopment District, within walking distance of Newark Penn Station, are some years away, if at all.

It was to include up to 4 million square feet of office space; 500,000 square feet of new retail and family entertainment attractions; a full-service hotel with at least 300 rooms, “an arena component;” a new board of education and city municipal building; and new parking garages to accommodate 3500 cars.

In the city’s press release, heralding the arena was Newark-born entertainer Queen Latifah, as was the fish-out-of-water photo (above) of Mayor Sharpe James, an embodiment of the Newark black political machine (his followers characterized rival Booker as not black enough), wearing a hockey uniform.

The project was expected to create more than 13,500 permanent new jobs, plus thousands of construction jobs, as well as a $670 million return to the city over 30 years. The fuzziness of the numbers, however, was compounded, by a city fact sheet that claimed “[o]wnership of Arena at end of 30 years, estimated to be in worth of excess of $500 million.” Such a sum is questionable, given that arenas generally become obsolete.

Facing away from the crossroads

Star-Ledger art critic Dan Bischoff, in a 10/22/07 essay headlined An arena for TV fans, pointed out how the arena has yet to connect to Broad Street, a major (and downmarket) shopping street a block west:
While there are plans to take a row of mostly empty buildings facing directly onto Broad Street and turn them into an annex of commercial and community spaces, right now the arena turns the road between these structures and itself into an alley facing a long, blank metal wall topped by a vast brick curtain wall. Community space originally planned for the southwest corner (near the practice hockey rink facing Mulberry) was scrapped in favor of an indoor employee parking garage.

Indeed, columnist Paul Mulshine, in a 10/21/07 essay headlined Newark to become a 'burb?, observed:
Perhaps that's why the new Prudential Center faces away from Broad Street. The glamorous fa├žade with the four-story-high TV screen faces not Newark but Manhattan. Meanwhile the view from the Broad Street side of the arena is of the back of the parking garage.

The rationale was that the arena needed to compel commuters, many wary of the rundown city, who regularly use the train station facing the TV screen.

And what about the rest?

In a 10/11/07 Star-Ledger blog column headlined Pru Center: Hope and hazard, Diane Sterner observed:
The mayor must also remember, and continue to remind the stakeholders, that Newark was promised more than just a sports arena, imposing as that structure may be. The original proposal also included hotels, restaurants, retail stores, residential buildings and streetscape amenities, aimed at turning the downtown into a safe, lively 24-hour hub. Is that still going to happen?

Indeed, in a 10/8/07 article headlined Arena in Washington, D.C., means out with the old, in with the new, the Star-Ledger explained why the vacant lots around the Prudential Center might look different—eventually:
Newark is using its own carrot and stick approach: Property owners involved in complex land swaps with the city in a four-block zone around Prudential Center have five years to build residences, offices or retail complexes. They were put on the clock, under the threat of losing their land to eminent domain.

The zone to the south along Mulberry Street, however, is in limbo after a separate mostly residential redevelopment project was stymied by a court as a violation of eminent domain.
(The Mulberry Street building pictured is just north of that zone.)

The DC example

Sterner noted:
The Prudential Center is being compared to the Verizon Center in Washington, D.C. and how that sports arena has become a factor in its area's revival. But the Verizon Center's advent had some key advantages that the Prudential Center does not. The Verizon Center did not go up alone, but capitalized on and reinforced a redevelopment that was already under way, and it was slotted into an already viable, if unfancy, commercial area.

The Empire State Development Corporation has also compared Brooklyn to Washington, suggesting that the Verizon Center example shows how an arena can thrive in a mixed-use area. (Search on "Verizon" in the Response to Comments chapter of the Final Environmental Impact Statement.)

I’ll look at that another time, but for now consider the difference between Brooklyn, and Washington, and Newark: the Atlantic Yards site—heck, the MTA’s Vanderbilt Yard—is the last remaining site near a crucial Brooklyn crossroads, a “great piece of real estate” (to quote Chuck Ratner), not the longer shot that is the Prudential Center, and even more of a sure thing than the Verizon Center example.

(Map of planned streetscape improvements from the Newark Downtown District.)

The Star-Ledger sent reporters to other cities with sports facilities and came back with some interesting examples. In a 10/7/07 article headlined A Minnesota success story sparks hope for Newark's rising star, the timeline was seven years:
``My job is to bring 3 million people into Newark each year," said Devils owner Jeff Vanderbeek, whose team helped pay for and will run the arena. "If I can do that, with all the resources Newark has to offer, the rest will take care of itself. In seven years, you won't know this city."

St. Paul Ward 2 Councilman David Thune, who represents the area including the Xcel Center, warned against overexpectations:
"Cities ought to look at these arenas not as a single answer, but enhancing things they already planned on investing in," Thune said. "It's just one piece of the puzzle."

Indeed, there are only a few bars and restaurants open near the Prudential Center, in part because the arena comes with its own facilities and also because—unlike in Brooklyn—there is neither an attached residential development nor an immediately adjacent residential neighborhood.

In a 10/1/07 article headlined Businesses wait patiently for arena's hungry fans: Bar and restaurant owners gamble on big revival for quiet corner of downtown, the Star-Ledger quoted a city official as suggesting a two-year timeline:
"It's premature to see stores sprouting up in tremendous numbers, but once the arena arrives, we'll see additional openings occur," said Stefan Pryor, deputy mayor for economic development for Newark.

By 2009, he predicted the neighborhood would drastically change, including new residential buildings, a new hotel and possibly new offices.

A 6/19/07 Times article headlined Owners Push New Arena, But Residents Fear Change, explored the delicate issue of whether “Newark's largely poor and minority population” would benefit from the arena. The Devils worked out a mini-Community Benefits Agreement agreeing to hire locals for permanent jobs, and to provide some 5000 free tickets a season for local kids, plus $250,000 for youth sports and recreation.

The Times reported some progress:
Two hockey-themed taverns have opened in recent months, Hell's Kitchen and the Arena Bar, and a third, the Devil's Advocate, is under renovation in a nearby building used as a residence by Seton Hall students... A hotel is slated to be built on Mulberry Street across from the arena's main entrance, but ground is not expected to be broken until well after the arena opens.

Indeed, Hell’s Kitchen (right) is actually not so close—it’s across McCarter Highway in the already thriving Ironbound district, known for its Portuguese and Brazilian population.

An 11/4/07 New York Times article (in the Sunday New Jersey section) headlined Newark Arena’s Economic Impact Unclear reported on the skepticism and the hope. Two hotel deals are on the way, and the city will change zoning to ease conversions of commercial buildings into apartment.

The city has money for streetscape improvements and loans to small businesses, and expects "one small development — a restaurant and six apartments" open near the arena next year.

Newark, clearly, has taken a risk, but it also has had to make significant investments to transform a moribund downtown that for decades has mostly closed by nightfall.

Did Brooklyn need one arena mega-project to catalyze a revival? Could a rezoning have spurred development over the Vanderbilt Yard? And if the arena is built, would the rest of the Atlantic Yards project be built in the announced ten years or would interim surface parking persist?

There's nothing to keep Forest City Ratner from proceeding on a timetable that fits with their needs. In other words, despite the design for four (mostly residential) towers to wrap the arena, it's possible Brooklyn might have an arena bordered by some unfinished buildings and empty lots for quite a while.

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