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Decoding "shovel-ready": AY railyard may seem eligible, but with a huge bailout asterisk (and wouldn't be "fully vetted")

Last Wednesday, the Empire State Development Corporation's (ESDC) Atlantic Yards Ombudsman, Forrest Taylor was asked the definition of “shovel-ready,” the term used in discussion of projects eligible for federal stimulus funding.

“I think that ‘shovel-ready' will be a federal term,” Taylor said.

Perhaps, but there's no formal federal definition of shovel-ready, according to NPR. But the Federal Highway Administration's (FHA) "ready to go" designation seems a rough equivalent, NPR suggested last week, encompassing projects that have gotten through design work and environmental approval. And a New York definition, as I describe below, seems similar.

AY bailout?

The Atlantic Yards railyard might seem to qualify, though not the project as a whole, given that Forest City Ratner does not control the property. But the railyard would require a huge bailout asterisk, connected to FCR's lobbying.

As I've written, the difference between using federal funds for "shovel ready" city/state/MTA transit projects and using them for Atlantic Yards-- is that the former, unlike the latter, would not relieve a private developer of a previous commitment. (And, of course, federal aid to a private developer that relieves the developer of its costs and boosts the value of the team should mean federal ownership of the project and/or team.)

[Develop Don't Destroy Brooklyn quotes former Forest City Ratner point man Jim Stuckey, who said in September 2005, "That's not built with funny money - that's built with real cash."]

Rather, as Rep. Mike McMahon told the Brooklyn Paper, federal money should pay for not-yet-funded Metropolitan Transportation Authority (MTA) projects like renovation of train stations.

The railyard wasn't on a draft list of eligible projects, according to the New York Observer.

$182 million savings?

The reconstruction of the Vanderbilt Yard would be a $182 million project, at first. Forest City Ratner claimed its bid of $100 million cash plus the $182 million yard and other enhancements was worth $379.4 million. FCR's cash bid was doubled from $50 million after the MTA agreed to negotiate exclusively with the developer; though rival Extell, which bid $150 million in cash, was not given the opportunity to negotiate.

The MTA’s own appraiser calculated the value of the railyard site at $271.2 million and the cost of a new yard at $56.7 million, saying the agency should have gotten $214.5 million in cash.

Quizzical ignorance

Governor David Paterson and Senator Chuck Schumer, who last week expressed quizzical ignorance of whether Atlantic Yards would be eligible for infrastructure funding, should know better.

And beyond that, they skate on thin ice by advocating funds for a project which has no timeline and no design.

More legitimate scenario

Consider a more legitimate alternate scenario. What if, prior to putting the railyard site up for bid, the MTA had decided to invest public funds into moving the railyard function and building a deck, thus making the package far more attractive to investors?

In that case, federal funds could supply the jump-start. Instead, Forest City Ratner's bid for the railyard included a pledge to move and modernize the railyard, part of a package claimed to be worth $435 million to the MTA. A federal bailout would go directly to the developer's bottom line.

Transparency along the way

The apparent plan faces another significant hurdle. An overview of the stimulus package released by House Speaker Nancy Pelosi's office points to the need for transparency and fair dealing:
Governors, mayors, or others making funding decisions must personally certify that the investment has been fully vetted and is an appropriate use of taxpayer dollars.

But there's already evidence that work at the railyard has not been "fully vetted." Consider that the ESDC asserted, taking a cue from Forest City Ratner, that "the temporary suspension of work at Atlantic Yards is due to pending litigation. Once it has been resolved, work will continue. Stating that this site is not 'shovel-ready' was inaccurate."

Did Forest City Ratner explain to the ESDC why it had stopped work, and whether it was caused by litigation? No.

The only document I could find, after filing a Freedom of Information Law request, was an email (right) that quoted an FCR employee saying the developer "had completed the work needed thus far."

There was no explanation, for example, of how and why litigation had stopped work on a partially completed trestle (right).

(Photo by Tracy Collins)

In other words, the evidence suggests that the developer ran out of money, or decided not to spend any more money, while waiting for either new funding and/or the close of litigation.

And there's been no statement from either the developer or the ESDC explaining how the work suspension comports with the developer's claim, in sworn affidavits, that:
FCRC’s construction schedule has been carefully drawn to allow the arena to be ready for the 2009-10 season by commencing work now on vacant properties that are owned by FCRC, the MTA and the City, with work on properties that are owned or occupied by other parties deferred until the pending judicial challenges to the Project have proceeded to a point where ESDC is in a position to actually use its powers of eminent domain to acquire title to and possession of those properties.

The definition in New York

The ESDC and the Governor's Office for years have been working together on state program known as Shovel Ready Certification, essentially a "pre-permitting" program.

The explanation is logical:
Having an economic development site certified as a "Shovel Ready Site" means that the local developer has worked proactively with the State to address all major permitting issues, prior to a business expressing interest in the location. This advance work creates a site where construction can begin rapidly, once a prospective business decides to develop a facility there.
(Emphasis in original)

In other words, "shovel ready" means that the developer of a site has prepared it to attract new investments by businesses that would operate there. (Here's the self-evaluation checklist for developers.)

Analogously, in the case of projects eligible for federal funding, the definition would apply to a government agency that has already gotten permits but just hasn't raised the money yet.

The state's "Shovel Ready" program does involve grants from the Build Now-NY program. In the program, competitive grants "help local communities pay for professional services related to engineering studies, environmental assessments, and legal support."

In other words, the funds help get the sites "shovel ready." They don't pay for what happens next.

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