Wednesday, October 31, 2007

Scholarship vs. a study for Ratner: the contradictions of Professor Zimbalist

Andrew Zimbalist is one of the country's leading sports economists, but his performance is far less credible when it comes to paid work for Forest City Ratner, where he seems to be contradicting himself.

As a benchmark, consider an excerpt (below) from the essay "Sports, Jobs, and Taxes: The Real Connection," which he co-authored with Roger G. Noll.

The chapter is part of Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums (full text!), the 1997 collection of essays Noll and Zimbalist edited.

Zimbalist and Noll wrote that "promotional studies" often introduce faulty assumptions, such as that "a stadium does not impose additional, security, infrastructural, or environmental costs on the city."
(Emphasis added)

Zimbalist on AY

But consider Estimated Fiscal Impact of the Atlantic Yards Project on the New York City and New York State Treasuries, the updated June 2005 report Zimbalist did (with no peer review) as a paid consultant for Forest City Ratner.

He asserts his work is credible:
Supporters of sports facilities invariably have produced reports from hired guns that claim handsome economic benefits. In my view, these reports are performed with a faulty methodology and make unrealistic assumptions.

But consider this passage:
FCRC has made an initial estimate of the city’s operating expenses at Atlantic Yards. Based on conversations with former budget officials, FCRC concludes that the increment in fire and police budgets would be negligible.
(Emphasis added)

However, the New York City Independent Budget Office (IBO), in its September 2005 Fiscal Brief, estimated annual police overtime costs of $1.7 million for 45 Nets games and suggested additional costs for other events.

Maybe that's not too much in terms of the overall budget, but the willingness to ignore such numbers is, according to Zimbalist the scholar, a hallmark of "promotional" budgets.

An independent expert?

I've commented that Zimbalist didn't even put the statement in his own words and wondered if he believed it. The AtlanticYards.com web site describes Zimbalist as "an independent expert." In this case, the evidence suggests his expertise was compromised by a lack of independence.

In May 2004, Forest City Ratner executive Jim Stuckey told (p. 122-23) the City Council that the developer was not responsible for the study:
It is actually Andy Zimbalist’s report. And I should make that clear because we retained Professor Zimbalist because we wanted somebody who historically have [sic] been against doing arenas and stadium [sic], because it was our view that we wanted to get the honest answers about this project. Not that we wanted to just hire a consultant who would sweep something under a rug, or who would just give us the answer that they expected us to hear....
So let’s just start with that from the beginning. It is really not our report, it is Professor Zimbalist’s report.
[Errors in the transcript are probably those of the transcriber.]

Stuckey’s claim, however, was undermined by Zimbalist’s acknowledgment that he relied on information supplied by the developer:
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 FCRC. I have discussed these estimates with FCRC and they seem reasonable to me.

Did the numbers about security costs seem reasonable? How could Zimbalist write a "promotional report" when he knows better? It's brutally weird.

"Unlikely" speculations

Zimbalist wrote in his report:
Although the MOU [Memorandum of Understanding] refers to the possibility of additional optional contributions from the city and state, it seems unlikely that such payments would be made and, in any case, it would be entirely speculative to assign a dollar figure to them.
(Emphasis added)

Why did Zimbalist speculate that it "seems unlikely" that additional payments would be made?

Well, the city has already more than doubled its contribution without even addressing the optional "extraordinary infrastructure" payments contemplated by the MOU.

Given that increase in the spending announced in the MOU, it now "seems unlikely" that additional payments would not be made. Zimbalist appears to have embraced the "unrealistic assumptions" he criticizes in others' studies.

Audit AY? Probably not this comptroller

An article published Friday on the front of the New York Times Metro section, headlined City Wasted Millions on Bronx Golf Project, Audit Says, reported:
The city’s Department of Parks and Recreation paid nearly $6 million more than it should have to a company that was supposed to develop a Bronx golf course, and lost out on millions more because of poor management of the project, according to an audit released yesterday.

The parks department disputed the findings in the audit, by the city’s comptroller, William C. Thompson Jr. [right], and said it contained many factual errors.


Vs. AY costs

The audit stated that "the City overpaid the concessionaire almost $6 million and lost more than $3 million in revenue from forgone license fees." There's more, but let's call it $9 million in losses.

Much bigger costs out there are also worthy of scrutiny. The cost to the city for policing the new Atlantic Yards arena would pose significant new costs not acknowledged by the developer and ignored--as with other public costs--by the Empire State Development Corporation.

But those are projections, too early for an audit.

Big news?

Still, why might a story of relatively small losses get such prominent play while the Times for weeks passed on the story that the city had more than doubled its contribution to Atlantic Yards? (Here's the Times's belated follow-up.)

Maybe it was that the comptroller issued a report. Conventions of journalism often lead news outlets to limit themselves to official sources. It's tougher for reporters to draw their own conclusions.

The comptroller's responsibility

The comptroller's job description notes:
The mission of the office is to ensure the financial health of New York City by advising the Mayor, the City Council, and the public of the City's financial condition. The Comptroller also makes recommendations on City programs and operations, fiscal policies, and financial transactions.

While the Independent Budget Office has done its own reasonably detailed (though still incomplete) cost-benefit study of Atlantic Yards, the question remains: would Thompson ever audit Atlantic Yards expenditures to advise the public "of the City's financial condition"?

It's too early for an audit, most likely, but Thompson isn't exactly in a position to scrutinize Atlantic Yards carefully. He has already signed on as a project supporter.

His cheerleading letter, citing jobs and revenues without acknowledging costs, appears as part of a document filed in the challenge to the Atlantic Yards environmental review. (Click to enlarge.) Did campaign contributions to Thompson from friends and relatives of Bruce Ratner play a part?

Thompson is a likely mayoral candidate and is well connected to various political machines, as the Village Voice has pointed out. Is Atlantic Yards even on his radar beyond a potential ribbon-cutting opportunity?

Tuesday, October 30, 2007

The due diligence of BP candidate Bill de Blasio, or the (AY) end justifies the means

City Council Member Bill de Blasio is now a candidate for Brooklyn Borough President in 2009, and some of his worthy goals pose an essential tension between affordable housing and neighborhood scale, a balance he bypassed in supporting Atlantic Yards.

(Photo from City Hall News)

His statement might leave the impression that he's fighting overdevelopment: I'm running for Brooklyn Borough President to strengthen and protect Brooklyn neighborhoods.

As Borough President, no one will fight harder to make Brooklyn more affordable for working families, stop out of control and irresponsible development, protect our environment and improve the quality of life in every neighborhood.


Then again, an email message he sent yesterday emphasized the first part of that second sentence:
My first priority as Borough President will be to keep Brooklyn affordable by building and preserving affordable housing.

As de Blasio well knows, increased density is often the trade-off for affordable housing, and a major tension in Brooklyn is between figuring out where the location and scale of density turns into "irresponsible development."

He has proven quite ready to protest market-rate development in Brooklyn that is out of scale, but has not offered the same resistance to Atlantic Yards, where the departure from scale is even greater, because it includes affordable housing.

In an interview with the Brooklyn Eagle, he emphasized a 50-foot height limit in Carroll Gardens, saying "to suddenly drop large buildings in like [a proposed building] really tears up the fabric of the community." Yes, Atlantic Yards would be at the northern edge of Prospect Heights, but, as the rendering above shows, it would dramatically change the fabric of the community, with a 272-foot tower right next to four-story buildings.

Due diligence?

Indeed, when it comes to Atlantic Yards, de Blasio remains ill-informed, relying on the progressive allies he trusts to vouch for the project as a whole, but failing to keep up with crucial changes in the project or to take a close look at some controversial aspects.

He’s willing to offer peripheral criticism but not to challenge the project’s fundamentals, given his belief in the “essential truth” of the project.

Probably a closer look at many public officials would turn up similar contradictions. And the press—well, most of the mainstream press—has done too little to point out the flaws in the Atlantic Yards Community Benefits Agreement, the decline in promised jobs and tax revenue, and the real contours of the affordable housing deal.

Meeting the bloggers

To his credit, de Blasio is willing to talk freely. He and his staff began two months ago to hold monthly on-the-record meetings with invited bloggers. Part of it was to spread the word through nontraditional media, which fill in several gaps in Brooklyn and his district. And clearly the term-limited de Blasio was anticipating his next step, beyond the 39th District, which extends into Borough Park, Carroll Gardens, Cobble Hill, Gowanus, Kensington, Park Slope, and Windsor Terrace.

So I and five other bloggers met with de Blasio, who was accompanied by three staffers, at the Tea Lounge on Seventh Avenue in Park Slope on September 26. One curious Brooklynite listened in and asked some tough questions. Two of the bloggers were generally critical, even a bit suspicious of de Blasio, as the comments on Brownstoner show, but Ethan of Green Brooklyn had general praise for the Council Member’s willingness to push styrofoam and e-waste legislation and to support the Brooklyn Greenway.

Downzoning, upzoning, affordable housing

On paper, de Blasio may seem like a policy wonk; he’s got an undergrad degree in urban studies and a graduate degree from the Columbia University School of International and Public Affairs. But he's more of a political animal, perhaps best known for managing Hillary Clinton’s successful Senate campaign. He challenged Christine Quinn in the race for City Council speaker.

A former staffer at the federal Department of Housing and Urban Development, he described himself as “extremely focused on affordable housing.” As Chair of the Council’s General Welfare Committee, he deals with issues like hunger, child abuse, homelessness, education, and the environment.

But the discussion with bloggers quickly turned to development and de Blasio, who’s allied with residents fighting out-of-scale development in Carroll Gardens, quickly declared that “current zoning is much too permissive.” While he supports a rezoning in the Gowanus area to add density, he also wants a downzoning to protect residential blocks west of Bond Street.

He said he’d like to see 50-60% affordable housing at Public Place, the ten-acre city-owned brownfield at Smith Street that could supply a lot of units.

Gentrification

The city’s land use policy, he pointed out, developed in a time of economic decline. “You know, ‘Please invest here, we’ll give tax breaks. Please build housing’… And the world is now turned on its head. It’s not all bad… [but] we have too much development.”

He continued: “Gentrification is a complex topic. There is an argument that gentrification is helping speed the clean-up of the Gowanus Canal. And I also think that, as we look at all these development issues, we have to understand that, if we want a diverse Brooklyn, if we believe in that as a value, and if you accept that gentrification is like a tidal wave upon us, then this is part of what motivates me, in terms of these rezonings and other actions that help with some affordable housing... There will be conflict and coming debate between folks who are open to some height and density and folks who aren’t, and I will respect the people who are not.”

A question of degree

That seemed a little simplistic. A zoning bonus is a standard tool used nationally to achieve affordable housing, but de Blasio's formulation suggested that the choice was upzoning versus stasis, rather than the a question of degree. “I will support a certain level of height and density, because it’s the only way to get affordability,” he said. “If we don’t provide for affordability, we might as well lock up the neighborhood and throw away the key. It’s going to be one demographic, and it’s going to be an upper middle-income demographic.”

“I’m one of these people—the first time we bought in this neighborhood was 1998,” he said of his family, which includes his wife, Chirlane McCray, and two children. "If it were today, we could not afford to live in this neighborhood… The market right now is in such a state that there’s no place for working people and middle-income people unless the government steps in to facilitate it. And that’s my whole argument…”

Indeed, de Blasio touched on a major flashpoint. The question is: who decides, and how?

Whose rules?

So, how to sort out the rules for height and density? “There’s all sorts of eye of the beholder dynamics,” he replied. For Public Place, the subway trestle “creates a context that in my opinion allows for more height.” How much? “Up to 12 to 14 stories… I am comfortable with that… again I only feel comfortable with that if we’re going to downzone residential areas.”

“On the broader role," he continued, "New York City, thank god, has a very extensive public process around any substantial development that requires city action." [Atlantic Yards instead went through state review.]

"Public Place is city owned. Much of the Gowanus area would [go through] a rezoning, so all of that goes through that public review. I think, in that review process, you end up striking a balance. City Planning has come out with what I think is an unusually good proposal, unlike four years ago, when we were doing the rezoning of this immediate area.”

Fourth Avenue failure

De Blasio was pointing to the city’s failure to include an affordable housing requirement when rezoning the area around Fourth Avenue at the western edge of Park Slope. “We used to give away the value in a rezoning, which is ludicrous," he said, offering an important criticism of the Bloomberg administration.

"Literally, four years ago, City Planning denied that affordable housing was a valid planning criterion. I had this argument with [Deputy Mayor] Dan Doctoroff personally, and [City Planning Commission Chair] Amanda Burden. They literally said affordable housing is not a City Planning consideration. That has changed night and day, to be fair.”

(Rendering of the new Argyle from the New York Post.)

There are social costs, he pointed out, to the unfettered market: “What happens when you start forcing your working class farther out,” as in Paris? “We’re not comfortable providing housing for working-class people.”

He supports both affordability and integration by class, noting that, from a purely economic standpoint, affordable housing should be concentrated in neighborhoods where it costs less to build. His goal is more costly, "and that requires a certain amount of height.”

A later rezoning of the South Slope, he noted, did offer a zoning bonus. “And now going forward with Gowanus, I think we have to ensure affordability in the mix,” he said. “If we just make everything the height it is now, there will be no affordable housing. That has to be a decision on what the balance point is.”

What’s affordable

The visiting Brooklynite pointed out that some affordable housing is “laughable,” with those earning $80,000 (gross) paying $2000 a month. (That’s exactly 30%, the federal guidelines.)

De Blasio acknowledged, “There’s a huge debate about what constitutes affordable, both in terms of what family income should be the cut-off point and what rent level people can actually afford.” (Well, there might be a debate about whether people can better afford 30% of net rather than gross income, but the policy won’t change.)

He continued, not unreasonably, “This is what I believe in: a tiered approach, whenever humanly possible, spread them out between the lowest income folks, which is families under $20,000, up to some level of moderate- or middle-income. Some people would cut it off at $60,000; some people would cut it off at $80,000. I don’t have a final number."

He acknowledged the tension between maximizing the number of units—which implies lower subsidies for more expensive units—and maximizing the spread of income levels.

As chair of the Council’s General Welfare Committee, he’d prefer to focus on the poorest New Yorkers, he said, but as a representative of his district, seeing families priced out, "then it’s perfectly legitimate to get up to 60 [thousand] or 70 [thousand] or more because it’s a tragic situation. School teacher plus bus driver is, what, $80,000?” (Probably more, with some seniority.)

AY exception

Should those earning six figures get subsidized housing?

“Definitely below six figures,” he responded. “Absolutely below six figures. Over eighty [thousand] I don’t think is what I’m thinking about, although there may be some exceptions.”

(Borough President Marty Markowitz, testifying in at a May 2004 City Council hearing, set a cap at $80,000. Then again, housing costs have risen considerably since then.)

Indeed, I pointed out, 900 of 2250 Atlantic Yards units would be designated for four-person households with incomes over $80,000. (Actually, I erred; they would be for those over $70,900.)

De Blasio responded, “The point is, as I said, I don’t have a definitive final, but I do feel—I also appreciate where Atlantic Yards has the income spread, which is one of the few places where that’s happening. The tiered approach, and also the sheer number of units: over 3000 units.”

(That number depends on the 600 to 1000 for-sale affordable units cited in the Affordable Housing Memorandum of Understanding which were not part of the General Project Plan approved by the Empire State Development Corporation.)

Given that the area around the site has been rapidly gentrifying, without "a formulaic approach to affordable housing" the development would have been all market-rate. (Actually, a rezoning as well as the revision of the 421-a subsidy also would bring affordable housing.) "And the number of units in Atlantic Yards, plus the tiered approach, make it worthwhile. I also believe in the idea of job creation for local residents and particularly union scale.”

In other words, start with the result.

Actually, Forest City Ratner’s initial mantra was jobs and tax revenue, not just housing, and de Blasio dutifully signed a 2005 letter to the Metropolitan Transportation Authority citing a panoply of benefits, some of them clear exaggerations, such as about construction jobs or tax revenues.

(From a packet of letters sent by Forest City Ratner to the MTA, as attached to an affidavit (p. 21) in defense of the lawsuit challenging the Atlantic Yards environmental review. Click to enlarge.)

AY to shrink?

De Blasio thinks that, despite his support, the project is "too tall... and I think it can and will be smaller. But less density means fewer units. “You and I both know you need a certain amount of height and density to get to affordability," he responded. "I think there’s more give. There has been give before…. I think there’s more give to be had. I think there’s a lot of esthetics that can change, without question. And I think the infrastructure answers have not been given.”

(Indeed, in April he said a plan was needed to deal with traffic congestion: “Until we have all that, it’s crazy to move ahead with any demolition.”)

Process issues

How could he justify the state’s override of zoning, allowing the project to proceed according to the developer’s template, as opposed to the more consultative city process he described earlier.

“I believe in the city process,” he responded. “Obviously, this wasn’t city land, and state law is preeminent…” (Well, that’s debatable.)

Blaming FCR

“In retrospect,” he added, “I don’t think anyone expected Forest City Ratner to be so untransparent.”

This is where he sounded way out of touch. The developer has produced at least six disingenuous political brochures, launched the Brooklyn Standard “publication,” and required those selling property to sign gag orders (right).

“I still believe the goals are valid,” he said, “but, in terms of your question, the city process is superior. And I think that this is a cautionary tale that we should try and use that process everywhere essentially where there’s a major development.”

Indeed, PlaNYC 2030 suggests far more consultative processes for developing projects over railyards.

Adding transparency

De Blasio expressed some optimism: “I don’t think the ballgame’s over. I think there are plenty of chances to gain more transparency.”

How? “Take the demolitions as an example. I think the demolitions were handled horribly…. There should’ve been a very extensive public discussion of what had to happen and why… how it was going to work, how citizens could relate to the process if there were problems…. I am encouraged that the state is stepping in, with the ombudsman and things like that, but we have to see that work in process.”

“I just think, in terms of the elements of the project, Forest City Ratner would be better served to engage the public discussion, to welcome people in, including opponents,” he said, in what sounded like an endorsement of the BrooklynSpeaks coalition’s proposal for a new governance structure.

Essential value, essential truth

Then de Blasio got to his bottom line: “I still believe in the essential value of the project… Since Day One, I’ve said, I believe in the project in large measure because of the Community Benefits Agreement,” or CBA.

The CBA, actually, wasn’t formally announced until more than 18 months after the project debuted. I asked if he was familiar with the CBA being negotiated regarding the Columbia University expansion, which involves the local Community Board and has generated scorn from the chair of the CB chair regarding Atlantic Yards. He said no.

Later, I asked if he was familiar with criticisms posed by Good Jobs New York, a union-friendly (as is de Blasio) group which pointed out how the Atlantic Yards CBA differed significantly from those negotiated elsewhere. Nope.

He returned to the issue of housing. “Atlantic Yards, even with some of its problems, would be a much higher percentage of non-market [housing] than anything we’ve seen previously,” he said.
That may be mostly true--actually, the nonprofit Fifth Avenue Committee's Atlantic Terrace project across Atlantic Avenue would have a much higher percentage of affordable housing--but the percentage of subsidized housing is high in part because the project is so big, with the zoning override.

(Affordability depends on a mix of things, including available subsidies and the income mix. Half of Atlantic Terrace would be affordable at 80% of Area Median Income, while 900 AY units would be at 30-50% of Area Median Income.)

City politics

De Blaiso described himself as “pretty consistently independent,” noting memberships in the Central Brooklyn Independent Democrats, the Independent Neighborhood Democrats, and the Lambda Independent Democrats. (He's way connected to unions, as well and his wife works, as do some other connected Democrats, in the office of Comptroller William Thompson.)

As for County Chair Vito Lopez, whose support for Quinn was crucial to her election, “I respect his housing work immensely, we obviously did not see eye to eye on the speaker’s race.”

De Blasio suggested that the Bloomberg administration places too much emphasis on the free market in building housing. He suggested that there’s much more consensus in the city, on issues like education. “Here’s the question: will [housing policy] be a central issue in the mayoral race?”

Increased accountability

Given the wars in his district, notably the South Slope, over development, de Blasio sees a role for community activism in fostering greater accountability.

He noted that a 15- to 20-story building could rise at a site on the corner of Court and Union streets: “I think bluntly, through community organizing tactics, we can stop that.”

(Photo from Brownstoner.)

“I believe there are instances when you can negotiate a better outcome with the developer” since they depend on some form of government aid, he said. Presumably, the time is over for Atlantic Yards, though.

Bob Guskind of the Gowanus Lounge asked de Blasio for his recommendations about strengthening oversight. They include more Department of Buildings (DOB) inspectors; stronger legal rights of action for community groups to step in; the licensing contractors; and increased reliance on citizen evidence, such as videotaping, for DOB investigations.

421-a tax break

We got to the issue of the 421-a carve-out for Atlantic Yards. When Atlantic Yards was proposed, all buildings were to receive an as-of-right tax break. The City Council’s 2006 reform, however, would’ve allowed only buildings that included on-site affordable housing to get the tax break, leaving perhaps four Atlantic Yards condo-only towers without the tax break. An “Atlantic Yards carve-out” worth some $300 million was proposed in the state revision; after generating some headlines, it was scaled back, for a benefit of “only” $150-$200 million.

On the one hand, Forest City Ratner was getting no more than it originally expected. On the other, it would now get special treatment, since this project alone in the so-called “exclusion zone” would get the the tax break without on-site affordable housing.

De Blasio said, “Where we stood before the 421-legislation, before December, that to me in terms of Atlantic Yards, was a viable plan. My understanding is that’s where we ended up and, if that’s the case, then I’m comfortable with it. What I saw originally appeared to be a step back from that. I think the final legislation resolved that.”

“Anyone who supports the project, including some level of subsidy for the project, has to own up to the fact that what we are saying is, we want the affordable housing units, we want the jobs, and we’re willing to do a certain amount governmentally to get that. That is not limitless," he said. "Anyone who opposes it, and I respect why people oppose this project, and they say, ‘Well, there should be no subsidies for the project,’ I’m saying, no, there’s an acceptable level of subsidies for the numbers of units that we get, and we have to get them."

Again, de Blasio was setting up a bit of a straw man; while some people may oppose all subsidies, critics of the carve-out were merely highlighting special treatment.

How does he feel about a tax break without on-site affordable housing? “The total number of units, and the way they’re aligned on the project, is still consistent with the original vision,” he said.

Not exactly. The original vision, announced in December 2003, was four office towers wrapped around the arena; some 18 months later, after the affordable housing deal was signed, most of that proposed space was converted to condos.

“You’re still talking about this very central site, this high-value site in the middle of Brooklyn,” he said, making his larger point. “The rental affordability is right there, on site. Would I rather have every building thoroughly mixed affordable and market? Yes, and I do think it’s the model in most cases…”

Disputed numbers

I asked de Blasio what the “original vision” was, in his eyes. His numbers were a bit off: “3000-3500 units. 2200 rentals. 1000+ homeownership…. You could still get as high as 3450, as I understand it.”

I pointed out that the 2250 subsidized rentals were in the Empire State Development Corporation’s General Project Plan, but the additional 600 to 1000 for-sale affordable units had not been governmentally approved.

He said he thought the December approval of Atlantic Yards by the Public Authorities Control Board “locked in the affordable home ownership piece at the 600 to 1000 level. That’s my understanding.”

I said that it was in the CBA but not the approval documents.

“I would love to go back and check my facts and challenge you on it,” he said.

Two days later, I sent de Blasio’s spokesperson links to the Memorandum of Understanding (p. 4) and then documents considered by the PACB, pointing out that Exhibit D, which consists of ESDC documents, does not address the homeownership issue. I didn’t get a response.

Essential truth

De Blasio's position was developed after “I talked consistently with people who I believe are good advisors on affordable housing.” (I read that as ACORN and unions.)

As for revenues projected for the project, “I did accept, with KPMG, that they were not making up the numbers.” Fair enough, but the numbers in the letter he signed came from Forest City Ratner consultant Andrew Zimbalist, not the KPMG report commissioned by the ESDC more than a year later.

“I’m always willing to be educated, and I think it’s a complex project, but the essential truth of the project, the numbers, and the CBA, I don’t think have changed.” (Actually, the number of projected office jobs has dropped dramatically, and, while the number of promised affordable units remains the same, it's not a 50/50 housing agreement and more units have been targeted to better-off households. Updated: The CBA also applies to construction jobs for local residents, which was his main reference.)

“I still think there can be changes made, but if [critics] don’t believe in a larger project that results in the affordability and local jobs, I part company with them.”

I pointed to the City Council’s recent decision to limit building heights on the Upper West Side. Of course the railyard site can support more density, but who decides and at what level?

“The state of New York went through its process," he responded. "The city obviously is a participant in different ways because of subsidies. In retrospect, there should have been a fuller process. On the other hand, there are objective factors there, like we talked about earlier with the trestle. The Williamsburgh Bank Building is one of the objective realities of that site.”

The Williamsburgh Savings Bank, indeed, is 512 feet, and the flagship Miss Brooklyn, once planned at 620 feet, would be one foot shorter. However, it would be three times as bulky. The 310-foot Atlantic Terminal Site 4B public housing tower has 252,500 square feet, smaller than any projected Atlantic Yards tower. Atlantic Terrace across the street would be ten stories.

Going forward

De Blasio would rather not look back. “But I’m actually a lot more interested in how we manage it from this point. I want to see the CBA enforced. I think the project can then be improved upon additionally. Again, I have not met anyone who opposes this project who is doing it for reasons of ill will... Additionally, for the folks who live nearby, it’s perfectly fair self-interest to be concerned about it."

"Construction is going to be very difficult, no matter what…there’s room to substantially improve the public transportation… if affordability is created as projected it will have a huge impact on who can live in Brooklyn going forward…. We need some consistent creation of jobs for working class people and this will obviously be providing it in the construction phase and beyond. I think there are lot of reasons why it makes sense, but where I’m focused, and where I find a lot of common ground even with opponents, is trying to manage it properly from this point on.”

Jobs and accountability

I put him on the spot for a bit, pointing out that his letter to the MTA promised 6000 permanent jobs in Atlantic Yards office. Did he know the current number?

“I don’t know of a difference,” he said. I pointed to the reduction in planned office space, leaving room for perhaps 1340 office jobs.

I asked if he’d seen the Independent Budget Office report on Atlantic Yards. He said he wasn’t familiar enough with it to answer. So it didn’t make any sense to bring up the likelihood that the arena, as per the IBO’s calculations, might now be a money-loser for the city.

He asked me if anyone had tried to do a cost-benefit analysis. I said there had been a couple (notably by the IBO), none complete, and the Empire State Development Corporation projected only revenues, not costs.

Looking ahead

As of now, de Blasio has a good shot at the Borough Presidency, among three term-limited Council Members. Candidate Charles Barron, from East New York (and an opponent of Atlantic Yards), "unapologetically" declared he'd take care of black Brooklyn first, a statement hardly aimed at unity.

Potential candidate Dominic Recchia, of Coney Island, has strong ties to southern Brooklyn. De Blasio may have a wider net, with ties to labor, to ACORN, and to Italian, Jewish, black and Caribbean communities--his wife is black and he supported Yvette Clarke in her narrowly successful race for the 11th District.

Yes, de Blasio knows politics, and he knows a good deal about some of the central issues facing the borough. On Atlantic Yards, however, he supported the result without applying some of the scrutiny he has offered elsewhere.

Monday, October 29, 2007

Are city housing projects really for sale? Nah, but it's time to "unlock value"

A New York Daily News “exclusive” last Wednesday raised the specter of a sell-off of city housing projects, spurring a furious round of commentary on Brownstoner and Curbed. However, the article, headlined Feds eye New York building sale at housing projects, overhyped a thread in a wide-ranging discussion, and didn't sufficiently stress that city officials have other tactics in mind.

The article began:
New York’s top federal housing official said on Tuesday the city's cash-strapped Housing Authority should consider selling buildings in expensive neighborhoods to create more apartments elsewhere. "It may displace some people, and that is a concern," Sean Moss, the regional administrator for the federal Housing and Urban Development Department, said at a forum on the Housing Authority's future.
"That is not necessarily a bad thing if you can create more housing with that," Moss said. "Instead of having 300 units [in a project], maybe there is a way to increase that if they are able to ... sell those assets so that you can create more housing." Moss' frank comments prompted shocked murmurs among the dozens of housing advocates at the forum, organized by the New School's Center for New York City Affairs.

The newspaper added that Gregory Floyd, who represents many unionized Housing Authority workers, expressed dismay about the idea, and pointed out—as discussed at the forum—that, while housing authorities in other cities have aggressively replaced buildings, “New York's projects have been well managed in the past and provided solid middle-class housing for decades.” (Well, maybe working-class housing.)

Another look

The discussion at the forum, A ROOF OVER OUR HEADS: How Will New York Save Its Public Housing?, which involved a variety of experts and opinions, was a lot more nuanced.

It began with moderator Errol Louis of the Daily News suggesting that, “if things worked perfectly, this would be a public hearing organized by government.” (Louis is out front among the city's press in covering public housing--here's a 7/29/07 column headlined A crisis hits home--in contrast with his frothing Atlantic Yards coverage.)

The structural gap in funding the city’s public housing is about $200 million, a little under ten percent of the operating budget, and has accumulated since the late 1990s, according to Douglas Apple, General Manager, New York City Housing Authority (NYCHA). The budget has suffered because of lowered federal funding levels and the strains to provide for units that are not part of the federal system. He acknowledged that “conditions are not as good as they were a decade ago.” (The agency just cut 73 management jobs, the Daily News reported.)

Public housing has changed significantly, pointed out Joseph Shuldiner, head of the City of Yonkers Municipal Housing Authority and former General Manager of NYCHA and a former federal Housing and Urban Development (HUD) official. It began simply as a nonprofit real estate venture to house the less well-off, then, in the 1960s and 1970s, grew to encompass a larger social mission.

Now the pendulum is swinging back, as Congress tightens HUD’s budget. “We’re going back to a real estate model,” HUD’s Moss said, in which the feds want local housing authorities to better control costs and emulate the private sector. (Here’s a good summary of that history.) Apple noted that this came in concert with discussions of welfare reform.

What to pay

Nicholas Dagen Bloom, a history professor and author of the forthcoming, Public Housing That Worked: New York in the Twentieth Century, noted that rental costs were once not connected to what tenants could afford to pay—and now that’s history. (Rent is at most 30% of the monthly adjusted gross income, while it was once 25 percent of net income. Income limits are 80% of the area median income, or $56,700 for a family of four.)

But public housing in New York has always housed working people, not just the dependent poor, thus bringing a base of public support and respect absent in some other communities. (Louis spent some of his early years in public housing, as did fellow panelist Rosie Mendez, a New York City Council Member and chair of the Council's Public Housing subcommittee; Louis said he’d recommended that NYCHA create “an alumni association.”)

In the 1980s, NYCHA wound up housing many of the neediest, including the homeless. Shuldiner said that the city emptied welfare hotels, moving people to public housing. At the same time, with rents going up, before the gentrification boom, those in public housing with rising incomes could get a better deal in the private market. (Times have changed.)

From 1989 to 2006, the rent structure was unchanged, NYCHA said last year, while there was a 53% increase in rents for rent-stabilized apartments. Beyond the 30% limit, there's also a "ceiling" or maximum rent, based on apartment size--before the rent increase last year, the 13% of households at the highest incomes paid, on average, only 15% or less of their incomes for rent.

Agnes Rivera, a resident of Wagner Houses in East Harlem and leader of Community Voices Heard, said that too many people think “we are thieves, drug dealers, and we keep our homes really nasty.” That’s not the case, she said, offering a Jacobsian observation: “I know everyone in my community—do you know yours?”

Losing public housing?

Floyd raised concerns about “an indirect plan to do away with public housing,” citing potential for development in prime neighborhoods, like the Amsterdam Houses near Lincoln Center, and suggesting that underfunding would start the process.

Mendez said that “we need to fund public housing to keep it affordable” and has proposed that the city stop charging NYCHA for certain services. Aixa Alemán-Díaz, Senior Legislative Assistant, Office of Congress Member Nydia M. Velázquez, noted that a bill would provide federal support for the 21,000 units (of 178,466 apartments) built by the city and state.

Louis wondered if HUD would make any exceptions for New York City, given the contrast between its system and those in other cities. Moss didn't seem to bend, saying that “these solutions are hard, in the short term, but if we don’t make changes now, it’ll be worse as we go down the road.” Around the country, he said, more housing may be created if you “create partnerships, syndicate or sell those assets.”

There were, indeed, murmurs from the crowd, and Louis observed, “You may have touched a third rail.”

Unlocking value?

Union leader Floyd was skeptical. “This is New York City. Once a developer gets his hand on a piece of property, agreements aren’t kept.”

Louis, playing provocateur, pointed out that other housing projects, like those in Fort Greene, are also near thriving development zones: “Isn’t there an absurdity,” he said, not to be “tapping the value”?

NYCHA's Apple jumped in. Citing his experience living in a mixed-income community, he said that keeping Amsterdam Houses, Fort Greene, and projects in the Lower East Side “is part of what makes New York great.”

That said, he agreed that “there are things we can do to unlock some of the value” in the land the city owns. Mixed-income housing—up to $120,000 a year--is built on three parking lots that are part of NYCHA land in Chelsea. “Those folks are going to find ways to look at their neighbors and interact.”

Julia Vitullo-Martin, Senior Fellow, Manhattan Institute, and Director, Center for Rethinking Development, said, “It’s really incumbent on NYCHA to face the future,” which is “not the recent past.” Even a new Democratic president would not offer substantial support for public housing, she said. (Louis, in a 6/28/07 column headlined Public housing's fiscal roof is caving in, argues for increased support from the city (which has a $4 billion surplus), the state, and the feds.)

“NYCHA has phenomenal properties and extraordinary untapped wealth,” she said. (Here’s a 2004 column in which she expanded on the ideas. And here's an article from the Manhattan Institute's City Journal that suggests tearing down public housing in prime beachfront land like Coney Island and relocating residents to new housing built elsewhere by developeres.)

“I’d like to see NYCHA look at projects that are not that good,” Vitullo-Martin said, and consider the example of the renovation of the (private) Parkchester development in the Bronx and the privatization of troubled properties in Atlanta. (Here’s a more critical view.) Those displaced who want to stay in public housing could be relocated, she said.

Cautions and partial measures

Bloom offered a caution. “Is it worth throwing out what has taken 75 years,” he asked, suggesting that the significant redevelopment costs of apartments and buildings be compared to the budget gap.

Selling land to fix the operating budget is “wrong,” said Shuldiner, because it doesn’t address structural problems. He said he agreed that value could be tapped, but selling Amsterdam Houses is not “a systematic fix.” He stressed that public housing in other cities, especially those buildings already demolished, was “much worse… because it was federal policy to make public housing the place of last resort.”

Mendez noted that, originally, much public housing was built on land that no one wanted—the waterfront or the Lower East Side. “It was community residents who stabilized the Lower East Side.”

It echoed arguments made regarding other development controversies; do people who helped anchor a community before property values went up have a stake beyond their formal property rights? What happens to institutions like churches and community groups when neighborhoods change?

Apple agreed that public housing in cities like Atlanta and Chicago was not part of the fabric of the community. Though he wouldn't criticize demolitions there, he said, “I would suggest that here, our challenge is different: save public housing and also unlock some of that value.”

Bloom suggested that the addition of retail facilities in public housing superblocks would not only “create a more attractive landscape” but bring new revenue and enhance safety. (Vitullo-Martin recently wrote about this issue. Historically the feds didn't support it, but everyone's a Jacobsian now.)

Apple mentioned how “ceiling rent’ was raised in the past two years. He also cited another example: the redevelopment of a rundown 12-acre site in Staten Island, Markham Gardens, which was quietly closed a few years ago, into a mixed-income project.

However, he said, NYCHA doesn’t have that much deteriorated property; it can sell some air rights to raise money, given that there's a hunger for market-rate development around the city. “Next to the Fort Greene houses, this developer, my God—“

The Oro,” Louis interjected, identifying the new luxury project.

“I couldn’t believe it,” Apple continued.

The city didn't sell air rights for that project, but Apple's point seemed to be that, if religious institutions and other nonprofits can make some money from value untapped until the housing boom, why not NYCHA? That's one variation of "the real estate model."

Sunday, October 28, 2007

The Times's Public Editor publishes (sort of) an AY letter

Two weeks ago, New York Times Public Editor Clark Hoyt wrote a tough column about Deborah Solomon's heavily massaged "Questions For" Q&A column in the New York Times Magazine, headlining his critique "Questions and Answers, in No Particular Order.”

My letter was among 20 letters published online yesterday:
You paint a dismaying portrait of the care with which the Times Magazine’s “Questions For” column is produced.

Add to the criticisms the failure of the questioner Deborah Solomon or the Magazine’s editors to disclose, in a June 26, 2005, interview with Bruce Ratner, the Atlantic Yards developer and New Jersey Nets principal owner, that Mr. Ratner’s company was a development partner of The New York Times Company in building its new headquarters.


[The interview was headlined Stadium, Anyone?, though an arena is not a stadium.]

Byron Calame, the public editor at the time, chastised The Times in his Web journal for the failure to disclose such ties, but no letter or disclosure was ever printed.

Norman Oder
Brooklyn, Oct. 15, 2007

The writer writes the Atlantic Yards Report, a blog devoted to the Atlantic Yards project.


Though I'd previously sent numerous letters regarding Atlantic Yards to the Times over the past few years, none had been published. Yesterday's demi-publication might be attributed to the increased amount of space on the web, and that I pointed out how the previous Public Editor had been ignored.

Richard Ford: I love NBA hoops, hate going to NBA games

In today's New York Times Sports Magazine, Play, novelist Richard Ford has an essay titled The Noise Is Killing Me, subtitled "Sports-as-game has become sports-as-babble, and I refuse to play."

He writes:
I don’t want to be sappy about all this and wish for a time that’ll never come back and that maybe never existed, anyway. But the truth is I love N.B.A. basketball, but I hate going to an N.B.A. game — because of all the dancing girls and the acrobats and the P.A. guy’s tumescent, Michael Buffer-ish voice wounding my ears while some citizen in a pink mascot suit does flying dunks off a trampoline every time the timeout whistle blows. (Don’t we all hate mascots?)


Last year, I described some of the nonstop babble and tumult at a Nets game--which is probably pretty typical for the league.

Saturday, October 27, 2007

Errol Louis suggests AY poll results represent democracy

In his 10/16/07 Our Time Press "Commerce & Community" column, Errol Louis asks, "Who Speaks for Brooklyn?" and takes us on a peculiar ride, in which he seemingly concludes that poll results represent democracy. (This column's not online, and may never be.)

He begins:
It would be a disaster if a person who had just moved into a neighborhood could exercise a kind of veto power of development in that area for all time, even if a majority of his neighbors want something different. That is one of the little-discussed aspects of the lawsuits brought to stop the $4 billion Atlantic Yards project.

Actually, we don't know what the neighbors really want, since they haven't been asked about alternatives. What if the city had followed the guidelines it later issued in PlaNYC 2030:
Building communities requires a carefully tailored approach to local conditions and needs that can only be developed with local input. We will begin the process of working with communities, the agencies that operate these facilities, and other stakeholders to sort through these complicated issues.


Time-barred rights?

Louis continues:
Daniel Goldstein, the lead plaintiff in a federal lawsuit, says he moved into his Prospect Heights condo three months before the announcement of the Atlantic Yards project, and that it would violate his constitutional rights to have the government compel him to sell his unit to make way for a planned sports arena and thousands of units of subsidized housing.

Goldstein is one of 13 original plaintiffs. (Two are expected to leave; one more has been added.) Many of the other plaintiffs have a much longer tenure as residents or property owners. And the lawsuit is supported by donations from hundreds of people, which suggest much broader support.

Also, since when are constitutional rights dependent on length of tenure? Can a new immigrant protest that his free speech rights are being abridged, or must he wait some specified time?

As for "thousands of units of subsidized housing," well, that's hardly the raison d'etre of the project. Remember: 900 units for those at Brooklyn's median income, another 1350 subsidized units, and 4100 market-rate units. Real housing for the real Brooklyn?

And "veto power... for all time"? Louis is exaggerating.

Selective memory

The Atlantic Yards lawsuits Louis strenuously opposes challenge the Empire State Development Corporation's dubious claims of blight in a neighborhood where new construction is coveted and apartments sell for half a million dollars and more.

Louis erroneously called the Atlantic Yards site a "junkyard" and rail parking facility, while Forest City Enterprises executive Chuck Ratner has called it "a great piece of real estate."

Louis's take on Atlantic Yards contrasts with his 11/11/03 New York Sun column headlined "Business, Not Blight" (updated: it's online, as Louis points out in his comment), in which he savaged the ESDC's designation of blight in Manhattan, which would help the "Durst real estate organization to gather a fat bundle of public subsidies" for a new midtown office tower.

In September 2006, Louis declared himself unconcerned about such subsidies in his home borough of Brooklyn. As for Atlantic Yards, he said, "Suffice it to say that the railyards portion in particular and the area in general has been slated for urban development for decades. And there’s been a cost for not doing anything.”

In his 2003 column, he took a much more skeptical line toward corporate welfare:
The blight seems to consist of 21 low-rise buildings, which "contain miscellaneous retail and commercial businesses, including, among others, cell phone stores, a pizza parlor, a check-cashing business, a deli, and a messenger service delivery point." This is claimed to be an economic catastrophe: "The project location has remained in a comparatively primitive state consisting of an anachronistic patchwork of small lots, each developed with comparatively small buildings... there has been no significant development activity within the project location for over 50 years."

Even if the phony "blight" argument had merit, it's not clear why the public should cough up millions to pay the tab. "To date, the private market has failed to eliminate these blighting conditions," the report says, which, in a competitive, free-market system, pretty much should be the end of the story.

Louis sounded there like a pure libertarian. Regarding Atlantic Yards, the free-market system was bypassed; the city could have rezoned the land, thus increasing the value of the development rights, and negotiated with the Metropolitan Transportation Authority to put the Vanderbilt Yard up for bid. Instead, Forest City Ratner got essentially a private rezoning.

What the polls say

Louis's recent column continues:
One judge has dismissed the suit and an appeals court is expected to issue its own findings in the coming weeks. But what’s worth noting is that most people in the area, when asked, have said they actually want the project.

It depends, of course, on how they’re asked.

He writes:
A poll was conducted in 2005 by Pace University and sponsored by the New York Observer, WNYC radio, and WCBS-TV. Was reported in the October 31, 2005 edition of the Observer, “Asked outright what they think about the plan, 39% of the 538 voters polled said they support it, 23% oppose it, and the rest were undecided."

Support was even stronger among Brooklynites (50%) and black men (59%). A set of follow-up questions gave the best arguments in favor (jobs, housing, civic spirit) and against (the large size, a $200 million taxpayer subsidy, use of eminent domain) and then asked respondents to rate their support: 46% were somewhat or strongly for it.

“Between 30 percent and 36 percent of the public opposed it, depending on how the question was worded.”


I offered numerous criticisms of the poll and also some alternative wording.

Remember that the poll director said that public opinion was "fixed." That's highly doubtful, especially since public contributions haven't been fixed.

What if those polled now were told that the city's subsidy—the direct taxpayer subsidy—has already [corrected] more than doubled to $205 million and that the state and city may ending up paying additional “extraordinary infrastructure” costs?

The Crain's poll

Louis writes:
A second poll was commissioned by Crain’s New York and conducted by Charney Research in 2006. As reported in the 9/4/06 Daily News, “The colossal and controversial 8.7 million square foot Atlantic Yards development of 16 office and residential towers and a basketball arena is disliked by 25% of New Yorkers surveyed.” Support for Forest City Ratner’s $4.2 billion proposal also ran at 60% in Brooklyn, though 33% there view it unfavorably. The survey found the plan is viewed favorably by 56% of African-Americans, 58% of whites, 68% of Latinos, and 72% of Asians.”

I criticized the Crain's poll at length.

Vast conspiracy?

Louis continues:
Opponents of the development dismiss these polls. Their view seems to be that WNYC radio CBS, Pace University, Charney Research, Crain’s, and the Observer are all part of some vast conspiracy of people and institutions who have been bought off by Ratner.

Nah, it's simply that a poll can be "gamed" depending on how you word the questions.

What's democracy?

Louis closes his column:
A more reasonable look at the situation suggests that the people complaining about the development violating the spirit of democracy have a peculiar definition of the word.

It would be more peculiar, even brutally weird, if Louis were in charge of the dictionary. Democracy (definition) may be rule of the majority, exercised "through a system of representation usually involving periodically held free elections." It has never been defined as poll results. (Even ballot initiatives give the pro and con sides a chance to argue their strongest points.)

Absence of democracy?

In an August 2006 cover story, New York magazine political reporter Chris Smith concluded:
But in looking at Atlantic Yards up close, it’s outrageous to see the absolute absence of democratic process.

Brooklynites were unrepresented, which is why BrooklynSpeaks stated:
The Atlantic Yards proposal was conceived by the developer and the political decision-makers behind closed doors and has moved forward with no significant input from New Yorkers. No Brooklyn official will get to vote on the project.

Only seven people got to vote on Atlantic Yards, despite what the developer says about it being "approved by the state." Four were unelected board members of the Empire State Development Corporation, who took all of 15 minutes to evaluate the project publicly. The others were the “three men in a room” of the Public Authorities Control Board, then Gov. George Pataki, Senate Majority Leader Joe Bruno, and Assembly Speaker Sheldon Silver, who took even less time in public deliberations.

Peculiar, indeed.

The LID vote on AY

I had thought that the Lambda Independent Democrats meeting/vote on Atlantic Yards last Monday seemed quite late, but Lumi Rolley of No Land Grab corrals the political context: Gay and lesbian activists have been promised a community center in a Downtown Brooklyn building owned by developer Forest City Ratner, and they don't want to appear to be co-opted.

Friday, October 26, 2007

Zimbalist: "not clear" that Newark arena will make it

Can the arena in the Meadowlands--formerly the Continental Airlines Arena, now the Izod Center--survive in a market with the new Prudential Center in Newark (right), Madison Square Garden in Manhattan, the Nassau Coliseum on Long Island, and the planned Atlantic Yards arena?

(Photo from New York Times)

Opinions differ, according to those quoted in a 10/1/07 NJBIZ article headlined The Battle of the Arenas. One skeptic is Smith College sports economist Andrew Zimbalist, who pointed out that each facility must compete for corporate sponsorships and sales of premium seats.

The article states:
“All of those things will be difficult,” says Zimbalist. “It’s not 100 percent clear that the Meadowlands will stay in business, and it’s not clear to me that the Newark Arena will make it.”

Certainly Newark's new Prudential Center, with only one major sports team rather than two as a main tenant, and in a city carrying a rep for crime, will face challenges, especially if the Meadowlands remains as competition for concerts. If the latter arena closes, well, New Jersey needs a major venue. Still, the Pru is spiffy, near transit, and went through an apparently successful opening yesterday.

Wishing it away?

NJBIZ should've pointed out that Zimbalist is hardly a neutral observer when it comes to Newark's arena.

As a paid consultant to Forest City Ratner, Zimbalist produced a rosy and misleading report on potential Atlantic Yards revenues. In it, he stated:
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).

But a Newark arena was on its way. Now it's here, an inconvenient fact that bollixes up his projections regarding Atlantic Yards arena revenues, just as costs for policing the Brooklyn arena would well exceed the zero-based budget Zimbalist posited. It's not clear that the Atlantic Yards arena "will make it," either, because it doesn't even exist yet. Maybe it's easier to wish Newark away.

CB2: BrooklynSpeaks proposal should beef up role of community boards

The recommendations by BrooklynSpeaks for reforming the governance of Atlantic Yards deserve some modification to beef up the role of community boards, according to Shirley McRae, Chairperson of Community Board 2.

Last week, McRae wrote to BrooklynSpeaks' Gib Veconi:
The Executive Committee believes that the community boards should have the same relationships to the proposed “Project Oversight Entity” and “Stakeholder Council” as the local elected officials, as diagrammed in Figure 2 of the draft.

[This would mean an extra arrow pointing from the CBs to the oversight entity as well as the stakeholder council. Click to enlarge.]

This comment is not meant to imply that community boards are comparable to elected officials. However, the committee believes that a relationship to both groups most fairly reflects the role of community boards as set forth in the New York City Charter.

Gib Veconi of BrooklynSpeaks, asked for comment, responded, "We're grateful for the feedback we have received from CB2, as well as from other Community Boards, agencies, and elected officials. The BrooklynSpeaks sponsors are working to incorporate the comments into a revised proposal for reform of Atlantic Yards governance."

At the Brooklyn Bear's Garden, a Jacobs reminder

At the not-so-quiet (and likely much more unquiet, whether or not the Atlantic Yards project moves ahead) Pacific Street and Flatbush Avenue intersection, a poster for the Jane Jacobs and the Future of New York exhibit.

While the Brooklyn Bear's Garden would remain, the rest of Site 5 would change dramatically under the AY plan; the big box Modell's and P.C. Richard stores would be replaced by a 250-foot building, originally announced at 400 feet.

(Photo by Jon Crow)

Thursday, October 25, 2007

Newark arena police costs--a benchmark for AY?

So, cops for an arena will cost taxpayers, right?

In a 10/21/07 article headlined Determined to show Newark at its safest, the Star-Ledger reported that, in policing the area around the new Prudential Center opening today, the city will deploy "more than 80 cops -- roughly five times the normal number" and expects to spend about $3 million this year on police overtime.

Now Downtown Newark has a much bigger crime problem than Downtown Brooklyn and Prospect Heights, and Newark might well dial back on police presence after a while. Still, the number suggests a rough benchmark regarding costs to police the planned Atlantic Yards arena.

IBO on AY

The New York City Independent Budget Office (IBO), in its September 2005 Fiscal Brief estimated annual overtime costs of $1.7 million for 45 Nets games.

Additional events at the arena would raise the cost, but the IBO didn't estimate that, given that "security needs and therefore the policing costs would vary widely depending on the types of events."

FCR's fudge

Remember, Forest City Ratner's paid consultant, sports economist Andrew Zimbalist, wrote in his rosy estimate of project revenues:
FCRC has made an initial estimate of the city’s operating expenses at Atlantic Yards. Based on conversations with former budget officials, FCRC concludes that the increment in fire and police budgets would be negligible.

As I noted, he didn't even put the statement in his own words--did he believe it? He shouldn't have.

Analyst lowers rating on Forest City, cites "difficult financing market"

Let's put that Wall Street Journal interview yesterday with Joanne Minieri, new president of Forest City Ratner, the New York division of Forest City Enterprises (FCE), in a little more context--one in which an investment analyst, long bullish on the company, has put up a yellow "caution" sign. That also hints at potential delays in the Atlantic Yards project.

Minieri told the Journal: The availability of capital to do these terrific developments and stimulate the economy concerns me... Liquidity and the availability of funds is always something I try not to lose too much sleep over, but it can keep me up at night. Value creation is impacted tremendously when you have to pay more for financing proceeds.

(Two-year stock chart from Yahoo Finance.)

Ratings revision

On 9/14/07, RBC Capital Markets analyst Rich Moore, who follows Forest City Enterprises, issued a ratings revision, nudging FCE down from "outperform"--meaning better than its peers in the real estate sector--to the middle ranking of "sector perform." In doing so, RBC rather dramatically cut its Forest City price estimate fom $80 to $54. (The current price is about $56.)

The reasons include a tougher market for homebuilding and office space, but also, more crucially, "an overstretched balance sheet in a difficult financing market" and a requirement to sell assets "to fund the big development pipeline."

The ratings revision was the subject of an AP story last month; the nine-page document was provided to me by a reader who got it from his broker. Moore is the top-rated analyst of FCE.

Optimism remains

However, the forecast remains optimistic, as Moore called FCE "one of the top, if not the top, mixed-use developers in the country," which "is poised to produce significant value from a development pipeline" that likely exceeds the $10 million current book value. However, for the next year, don't expect anything special.

Beyond general economic trends like demand for commercial space and access to capital, the report also cites "higher raw material and labor costs" as well as "additional risks, including the threat of terrorism, weather and key personnel changes," which FCE has outlined in documents (as I've noted) filed with the Securities and Exchange Commission.

AY delay?

Does that pipeline include Atlantic Yards? Probably not. Moore's report also refers to the "shadow pipeline," projects in development. Remember, FCE categorizes Atlantic Yards in the "initial development stage," one step behind the "shadow pipeline."

But the report also states that FCE "will likely face some near term difficulty funding its development pipeline," which suggests potential delays in moving ahead projects like Atlantic Yards. (Another potential delay: the "crisis" in availability of finance for affordable housing.)

Minieri, to the Journal, was philosophical: We will probably encounter a couple of different market cycles as we move through that development.

Moore hinted at potential delays to the New York Observer in September 2006:
“The quality that Forest City has is that they are very disciplined about moving forward in stages,” said Rich Moore, an analyst at RBC Capital Markets who covers Forest City Enterprises. “They build one office tower and see if they are doing well, and if they are not, there is always the option of waiting until the market catches up to them or of altering their plans.”

In other words, Forest City will build as it sees fit, not necessarily to produce the project's stated public purposes, among them affordable housing and open space, within the stated project timeline.

BrooklynSpeaks issues FAQ re oversight proposal

BrooklynSpeaks has issued an FAQ regarding its proposal for new oversight entities regarding Atlantic Yards. Some excerpts and comments.

1. Is this proposal an attempt to stop or slow down the Atlantic Yards project?
No. Regardless of what is built on the Atlantic Yards site, a structure for accountable governance and meaningful community input is needed.


No doubt, but BrooklynSpeaks members/sponsors also believe that the current project "must be changed substantially or rejected."

Continuity

Creating a “Project Oversight Entity” would also provide continuity of governance over the project as newly elected officials replace those originally involved in the project, or in the event that the developer sells its interest in the project to a third party.

Also, the project will probably take several decades, says BrooklynSpeaks, and could change according to market conditions, architectural tastes, construction costs, and ownership.

Maybe litigation too. Could Forest City Ratner dump part of Atlantic Yards as quickly as former executive Jim Stuckey was whisked out of the picture? It's not out of the question.

Who's in charge?

6. Isn’t Atlantic Yards a privately-led development? Why should it be necessary for it to have a government-run oversight entity?

Atlantic Yards is a State project. The construction of the project will involve the exercise of State powers, including the override of local zoning and potentially the use of eminent domain, and the project will be built pursuant to a General Project Plan developed and administered by the State, in accordance with the UDC Act of 1968. Notwithstanding the substantial role of a private developer in the project, the BrooklynSpeaks sponsors believe that the use of these State powers, and the magnitude of public funds for the project, require that public oversight and involvement in the project be maximized.


As I reported in August, the ESDC's Errol Cockfield suggested a distinction, that LDCs—local development corporations—have more typically been created for projects in which a governmental entity has taken the lead. However, Atlantic Yards, he said, is more comparable to a project like the Columbia University expansion, in which a nongovernmental private entity has taken the lead.

The amount of public funds, however, is significant.

Some pols sign on

The FAQ states:
The governance reform proposal has been endorsed by the following elected officials: Council Members Letitia James and David Yassky; Assembly Members James Brennan, Joan Millman and Hakeem Jeffries; State Senators Eric Adams and Velmanette Montgomery. Brooklyn Borough President, Marty Markowitz, has also stated that he believes a vehicle for community input is essential

That doesn't mean Markowitz has endorsed this proposal. The group above is a reasonably big tent, however, since it includes AY opponents like James as well as more lukewarm supporters. But the group must grow to have more of an impact.

Another AY stop-work order issued, resolved, but questions remain

A stop-work order was issued Tuesday at the Ward Bakery site on Pacific Street, according to the Department of Buildings (DOB) web site.

The order was resolved, but the incident deserves notice: apparently a truck backed into a sidewalk shed, knocking down three support posts for a 60-foot-high pipe scaffold sitting on top of the shed.

I sent an email yesterday to the DOB, but haven't gotten any more details yet on the incident and the resolution. An Atlantic Yards ombudsperson, which the Empire State Development has been trying to hire for five months, might help with things like this.

Wednesday, October 24, 2007

FCR executive claims: "We are proceeding according to plan"

An interview in today's Wall Street Journal with new Forest City Ratner president Joanne Minieri finds her, not surprisingly, on message.

The interview, headlined Forest City's Minieri Gets Tested in New York:Brooklynite Executive Steers Big Atlantic-Yards Project Amid Tough Credit Market, has her claiming:
We think it's a tremendous opportunity to help the economy to revitalize the neighborhood -- all the things we like to do in our development projects. We are on the site now, doing some work. We are waiting for the conclusion on some of the litigation. We are proceeding according to plan.

First, Atlantic Yards is hardly the savior of a "blighted" neighborhood. An open bidding process for the Metropolitan Transportation Authority's Vanderbilt Yard would have ushered in development over the working railyard that separates neighborhoods.

Market-rate development has been proceeding apace; a rezoning could have unlocked new development possibilities and required affordable housing. Instead, we get a state override of zoning--essentially a private rezoning.

Also, while the developer may be working on preconstruction demolition and other site preparation, the project is about a year behind plans as announced in last year's environmental review, and several years behind plans as announced in 2003. (The arena was supposed to open in 2006!).

Credit stress

Yes, the financial markets could have a significant impact.

WSJ: Given your financial background, does the stress in the credit markets keep you up at night?

Ms. Minieri: The availability of capital to do these terrific developments and stimulate the economy concerns me.... Value creation is impacted tremendously when you have to pay more for financing proceeds. [Re Atlantic Yards] We will probably encounter a couple of different market cycles as we move through that development.

Translation: the project could be delayed well beyond the stated ten-year time line and, as with the Frank Gehry-designed Beekman Tower project that went from condos to rentals, things can change.

After all, as former Atlantic Yards project head Jim Stuckey once famously said, "Projects change, markets change."

On the promotion

People have asked me if I thought Minieri's promotion signaled anything untoward. Given that the job change was not announced by p.r. guru Howard Rubenstein, as with Jim Stuckey's mysterious departure, and that Minieri was made available for a Wall Street Journal interview, we can assume that parent company Forest City Enterprises and subsidiary Forest City Ratner are quite happy with it.

Critic on Newark arena: "mostly what it is is marketing"

In his review of the spiffy new Prudential Center in the 10/22/07 Newark Star-Ledger, headlined An arena for TV fans, Dan Bischoff suggests that it might be a very enjoyable place to see an event, but he doesn't lose sight of the bottom line:
The brand-new Prudential Center, the hockey/soccer/college basketball/rock concert arena on Lafayette and Mulberry in downtown Newark, is many things. It's a food court, a sports bar, an art gallery... and a glass-fronted vantage point overlooking the huddled hectares of parking lots behind City Hall.

But mostly what it is is marketing. And in honor of that purpose, the dominant architectural motif is television.


He cites the 4,800-square-foot LED monitor in front of the arena's main window, and "733 plasma flat-screen TVs scattered about the place," helping patrons keep track of action and also order food and drink from touch screens. (Rendering from official site.)

And at AY

Could the planned Atlantic Yards arena (aka Barclays Center) be any less about marketing, given the Nets' branding juggernaut and the plans for Times Square-like signage? We're not in (Brooklyn) Dodgerland any more.

"This is more of a residential district. This would not be Times Square," architect Frank Gehry told the Daily News in May. "The question was how do you create activity at game time and have it disappear."

Remember, he said last April:
It's obvious that buildings are becoming billboards, all around the world....[re AY] And it can be used for community issues, as well as advertising. It has a social function, if it's played right, it can be used for art...

We'll see.