Friday, January 23, 2009

"Negotiating against ourselves": Council Member Gioia offered a prescient warning about the city's embrace of AY

Would you believe that, some four-and-a-half years ago, a top city economic development officials promised that the return on public investment in the Atlantic Yards project would be eclipsed by the impact of the New Jersey Nets moving to Brooklyn?

Or that an effort to "find a better deal" was seen to "discourage developers from coming to us," even though, since then, the city has held competitions for developers seeking to build megaprojects?

That's in the transcript of the 5/4/04 City Council hearing on AY.

There were two key exchanges between City Council Member Eric Gioia and Andrew Alper, then president of the New York City Economic Development Corporation.

(I augmented the transcript slightly with a look at some video.)

Dollar amount "within direct fiscal impact"

GIOIA: How much money, what is the real dollar amount, what is the public investment in this project, both in the City and from the State?

ALPER: We do not know yet, because it is still being negotiated. It will be within the direct fiscal impact of the arena and the team moving, we do not know the exact number yet, though.

That subsidy, $100 million, was announced in March 2005 after a Memorandum of Understanding was signed in the previous month. However, the city later quietly upped its contribution by $105 million and, arguably, that subsidy exceeds the modest fiscal impact predicted by the New York City Independent Budget Office, as an IBO official acknowledged in July 2007.

"Negotiating against ourselves"?

GIOIA: My last question, is, if we are trying to maximize public investment for public benefit, are we, for this issue, are we proactively then going out and saying to other similar developers, similar type entities? In other words, have you been doing a road show looking for other NBA teams or other athletic teams, or other developers to build stadiums? Or are we sitting back and that we’re in this position because this developer and this athletic team has come to us and said, 'I own this property, or I want to build this project and I think it is good for the City'? In other words, how proactive is the City's economic development plan: are we doing this now because this has been brought to us, or are we doing this because we proactively looked and said, we think this is good for Downtown Brooklyn, or we think this is good for New York City? And, depending on your answer, the second part of it: how do you know it’s a good deal, unless we know that there is somebody else out there? In other words, if we’re negotiating and it’s not--what else is the market out there, or are we negotiating against ourselves? If that makes sense, it is kind of a run-on question.
(Emphasis added)

ALPER: Well the answer is yes and no. We are actively out marketing the City all over the US, all over Europe, all over Asia to talk to companies and prospective tenants for buildings and prospective projects. We have been doing that very aggressively, and I think with some early success to bring more jobs to New York. This particular project came to us. We were not out soliciting, we were, as you know, developing a Downtown Brooklyn plan, but we were not out soliciting a professional sports franchise for Downtown Brooklyn. The developer came to us with what we though was actually a very clever plan. It is not only bringing a sports team back to Brooklyn, but to do it in a way that provided dramatic economic development catalyst in terms of housing, retail, commercial jobs, construction jobs, permanent jobs. So, they came to us, we didn’t come to them. And it is not really up to us then to go out and try to find a better deal. I think that would discourage developers from coming to us, if every time they came to us we went out and tried to shop their idea to somebody else. So, we are actively shopping, but not for another sports arena franchise for Brooklyn.

The Downtown Brooklyn plan, as proposed, overlapped with only a tiny piece of the Atlantic Yards plan, and that piece was excised from the rezoning. So one reason the city was not soliciting for a professional sports franchise for Downtown Brooklyn was that there was no place in the rezoning for an arena.

The developer's plan may have seemed "very clever," but there's ample evidence that the city knew that the market for increased office space was already tanking. And there's no evidence that city planner had evaluated whether there'd be enough tax-exempt bonds for the ambitious housing plan.

The "very clever" plan involved not only a claim on valuable public property, the Metropolitan Transportation Authority's Vanderbilt Yard, plus a host of special benefits, including a state override of zoning and a state use of eminent domain to acquire private property.

Boiled down, Alper's justification was apparently that sports franchises are such a scarce commodity that the city must negotiate against itself--an argument that, as Neil deMause might out, is often effective, especially in cities desperate to be "major league." (Do I hear Oklahoma City?) No other project was suggested or considered for the railyard or the rest of the Atlantic Yards site.

Since then

Though Alper claimed that "trying to find a better deal" would "discourage developers from coming to us," since then the city, in projects like Hudson Yards and Willets Point, however controversial, have at least put developers at the same starting line.

And the city, negotiating against itself, not only doubled its contribution to the Atlantic Yards project but has left itself open to future direct support and/or indirect subsidies.

1 comment:

  1. Speaking of Oklahoma City, I'm sure the new owners of that franchise would never have considered moving from Seattle to Brooklyn instead. I'm sure that the team is worth much, much more in Oklahoma City (the 48th-largest metro area in the U.S.) than it would be in the New York metropolitan area (#1).

    This is just more proof that the Atlantic Yards plan was Ratner's plan, and Ratner's plan only, from day one –- clearly violating the "no pre-selected developer" clause in Kelo.

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