Wednesday, May 27, 2009

Money questions for the Senate hearing: public benefit plunging, MTA obligation thrown off, per-unit subsidy compared

(This is one in an irregular series of articles about issues that a State Senate committee might address when it holds a hearing on Atlantic Yards.)

In the end, perhaps, it all comes down to money.

What's the public benefit now?

Atlantic Yards never got a real cost-benefit analysis, in which costs were realistically assessed. Such a cost-benefit analysis is still in order.

But even a revamped fiscal impact analysis--essentially a benefit analysis--would still be meaningful. Remember how in December 2006 the Empire State Development Corporation (ESDC) quietly cut projected net new tax revenues by nearly one-third, from $1.4 billion to $944 million?

The main reason, according to the ESDC, was a loss of 270,000 square feet of office space, which could accommodate approximately 1000 jobs.

But right now Atlantic Yards would include zero office space; there are no plans to build the 650,000 square foot B1 office tower.

There's a bit of a glut. Today, the New York Times reports: In Midtown Manhattan — where many of the world’s largest financial companies are headquartered — three out of every four office towers now have sublet space available.

So, for now, shouldn't projected tax revenues be cut a lot more?

Revising the MTA deal

While an appraiser for the Metropolitan Transportation Authority (MTA) said that the rights to the Vanderbilt Yard were worth $214.5 million--with a new railyard--Forest City Ratner bid $50 million cash (to Extell's $150 million), then upped the cash bid to $100 million after the MTA board, controlled by the governor and mayor, decided to negotiate exclusively with the developer.

In September 2005, then-MTA Chairman Peter Kalikow notoriously dismissed the appraisal his agency commissioned as "just some guy's idea of what it's worth."

The Independent Budget Office suggested that month that the tax-free status of the railyard was supposed to help the public coffers:
Indeed, the MTA has an incentive to make a deal that maintains the tax exemption in order to maximize the price it receives for the development rights.

Now that Forest City Ratner is in the driver's seat--at least as long as the mayor and governor support the project--what if the developer wants to revise the deal with the MTA, paying even less cash for development rights, or paying over a longer schedule?

(The $100 million is supposed to be due before or contemporaneously with the ESDC's acquisition of land via eminent domain.)

What if the developer wants to build a cheaper than promised temporary yard?

If the MTA approves any or all of this, isn't that a shifting of costs to other sources of MTA revenue, notably... straphangers?

Affordable housing's affordability?

I've previously questioned whether the ESDC ever considered whether enough housing bonds would be available to build the affordable housing at the announced timetable.

Evidence suggests the timetable was never realistic.

But did the ESDC ever compare the per-unit subsidy with the subsidy for units at other developments? Would this be a prudent use of housing subsidies? Obviously, cost should not be the only factor, but when and how should the various factors be applied? 

These questions never came up in public, to my knowledge, but they're still worth asking.

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