Monday, June 29, 2009

In "Why Atlantic Yards matters" editorial, Crain's ignores inconvenient facts

In an editorial headlined Why Atlantic Yards matters: Mr. Ratner must act quickly, or it will be too late, Crain's New York Business goes to bat for Forest City Ratner.

I've bolded sections for emphasis.

The editorial states:
Amid an outcry that the state and the MTA have given Forest City Ratner a sweetheart deal to keep alive its Atlantic Yards project, it's time to recall how this scheme originated and why it has such steadfast backing from responsible city and state officials. For those who are optimistic about the city's prospects, Atlantic Yards is crucial for realizing New York's potential.

Was the sweetheart deal necessary? Couldn't Forest City Ratner, whose parent company raised $300 million-plus in a stock offering, have been challenged to come up with more cash than $20 million?

The creation myth

The editorial continues:
It all began with a phone call from Brooklyn Borough President Marty Markowitz to Forest City's Bruce Ratner. “You have to buy the New Jersey Nets and move them to Brooklyn,'' said Mr. Markowitz. He argued that Brooklyn needed a professional sports team for the prestige it would bring and the economic benefits that would result.

At the time, Mr. Ratner admits, he was clueless about professional basketball, both on the court and as a business. Yet he was the go-to person for Mr. Markowitz because he was the driving force behind the construction of the MetroTech office complex in downtown Brooklyn in the 1980s. It is not an exaggeration to say that MetroTech saved the borough's economy.


The creation myth is a tad disingenuous. Remember that Chuck Ratner, CEO of parent Forest City Enterprises, called the land "a great piece of real estate" and said:
I will confess that it was less than two or three years ago we were sitting around in New York wondering where the next deals were going to come from. We had finished a whole bunch of office and we completed MetroTech and we didn't have the next great site in Brooklyn. That was one of the reasons we got so aggressive and creative, Bruce and his team did in this Atlantic Yards project. We saw that land sitting there for this last 10 years, realizing it would be a great opportunity if somebody could turn it on. We hope we've found a way to do that.

Mostly a rail yard?

The editorial continues:
Mr. Ratner was intrigued by the borough president's plea because it fit with his belief that the Atlantic Yards area, consisting mostly of a rail yard, was the perfect place to continue Brooklyn's revival. The infrastructure costs for building on the site were simply too high for a private company to assume. Only if Mr. Ratner could find a public benefit to justify the public dollars required would development be possible. The basketball team provided that, just as new baseball stadiums did in the Bronx and Queens.

Less than 40% of the 22-acre site consists of a rail yard. The basketball arena has hardly been touted as the main public benefit; the main benefit was "affordable housing," plus open space, transportation improvements, and the removal of blight--all of which are in question.

If the infrastructure costs were simply too high for a private company, why didn't the city and state invest in a platform, then bid out the property?

Best location for density?

The editorial continues:
The city has been in Mr. Ratner's corner because, if you believe the mayor that a thriving New York will attract 900,000 new residents in the coming decades, the transit hub at Atlantic Yards makes it the best location to build a new residential neighborhood with Manhattan-like density. All those new New Yorkers will need someplace to live.

Well, yes and no. There's surely an argument for increased density, and the UNITY Plan proposes significant density, as well. Much of the AY site is well beyond the transit hub and in fact closer to other subway stops.

The "Manhattan-like density" of the project, at least as approved, would be "extreme density." There are other ways to accommodate density, through a development-oriented transit and a better process.

Delays

The editorial continues:
Nothing has changed in that equation since Mr. Markowitz's phone call, but everything else has changed in the world of development and finance. Gone is the soaring design of world-renowned architect Frank Gehry, delayed for who knows how long is the completion of the entire project, and scaled back is the amount Forest City will pay the MTA.

So Crain's, unlike government officials, acknowledges that the project's completion and thus benefits would be delayed.

Crain's does not, however, follow the AY-supporting Regional Plan Association (RPA) in suggesting that maybe the MTA could've asked for a bit of the upside in exchange for the concessions it offered.

FCR's "black hole"

The editorial continues:
It is worth noting that while Forest City may wind up with a bonanza, up to now it has been a black hole. Stuck in New Jersey, the Nets lose around $20 million a year. Architecture and legal fees for the project total more tens of millions. Delays have been interminable.

Are taxpayers supposed to bail out Forest City for its business risks? If architecture and legal fees total more tens of millions, subsidies--$305 millions in direct subsidies, and hundreds of millions more in indirect ones--dwarf them.

No bonds, no project?

The editorial continues:
Time is running short. Mr. Ratner must sell bonds for the project and break ground soon after, or the project will have to be abandoned.

Ratner must have bonds sold for the arena, not the project, before an end-of-the-year deadline to get $100 million-plus in federal subsidies. Last year, a company spokesman told the New York Daily News that they would build the arena even without tax-exempt bonds.

It's all a bet

The editorial closes:
New York can continue to support Atlantic Yards, realize what is economically possible now and bet that the entire project can be built in the future. Or it can abandon Mr. Ratner and the project, in which case it is certain that Atlantic Yards will remain an open sore for decades to come.

Why does Crain's, tribune of the business community, not endorse free market practices--an appraisal, an effort to seek new bidders--but rather embrace a "market of one"? Why does Crain's not even endorse the RPA's desire to harness the upside?

And why does Crain's call a working railyard "an open sore," and treat the railyard as a substitute for the site itself, which just happens to be bounded by a new historic district?

1 comment:

  1. I agree. A shameful excuse for editorial insight.

    Crains is clearly in bed with the real estate industry as evidenced by the number of special inserts etc.

    One has a hard time bemoaning the loss of the mainstream media when they do such a piss poor job of getting the facts right.

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