Wednesday, November 18, 2009

Book on mega-projects offers more reasons for skepticism of Atlantic Yards

I wrote yesterday how the 2003 book Mega-Projects: The Changing Politics of Urban Public Investment, authored by Alan Altshuler and David Luberoff, implicitly criticized Atlantic Yards in advising that overrides of local decision making are "very rarely justified" for sports facilities, since they don't serve "urgent regional needs."

There's much more in the book to generate skepticism about Atlantic Yards, as I describe below, including how project proponents have subtly shifted costs to the public sector; why the AY footprint poses a tighter fit than nearly all other sports facility siting efforts; and how mega-projects invariably involve cost escalation.

The book offers some important and critical context missing, for example, in the New York Times's shallow 6/9/05 article Unlike Stadium on West Side, an Arena in Brooklyn Is Still a Go. In other words, when it comes to such large projects--highways, rail, convention centers, festival markets, airports--follow the green.

The Great Mega-Project Era

The authors describe what they call the Great Mega-Project Era, one in which public funding increased for sports facilities built outside (not in) downtowns and--crucially--team owners managed to shift costs on the public:
As of 1950 no locality had constructed a stadium for a professional sports team, though one major league baseball team and several football teams were playing in public stadiums that had been built in connection with bids for the Olympic games. Baseball and hockey teams more commonly played in public arenas, but these tended to be modest facilities that also housed a wide variety of amateur sports events.… During the 1950s, however, in the new environment of local development activism, cities began to compete for teams--primarily by offering them new, publicly financed venues in which to play…

Over the entire 20-year period 1950-70, the number of major league stadiums and arenas increased from 32 to 52, and the proportion owned publicly rose from 28 to 60 percent.

Only a few of these new facilities were located in or near downtown areas. For reasons similar to those of shopping center developers, professional sports team owners, particularly in baseball and football, strongly pressed for outlying locations, close to major highways and with plenty of land for parking. Governments, eager both to accommodate them and also to economize, generally went along.

...The days of big television and multimillion-dollar player salary were yet to come, however; the leagues had not yet perfected their techniques for intensifying local competition for teams; and localities were still constrained in most cases by the need to secure voter approval for general obligation bonds. So most of the facilities built were not lavish by later standards.

...What is most striking in retrospect is the rapidity and lack of controversy with which an activity viewed as mainly private through the first half of the twentieth century--the construction of facilities for professional sports--became mainly public during the 1950s and 1960s. There were, to be sure precedents for this in the history of urban infrastructure. Most early waterworks, mass transit systems, and airports were private, for example, and subsequently became public. The professional sports teams did not become public, however. Quite the contrary: while on the verge of their greatest growth and prosperity as private business enterprises, they succeeded in shifting an important element of their cost structure to the public sector.
(All emphases added)

The power of sports teams

Even after the 1970s, when, in the post-Robert Moses era communities were empowered to resist wholesale changes, team owners knew that they had special leverage, given the "symbolic importance" of the teams. The authors write:
The most significant new criterion that mega-project advocates now had to satisfy was an avoidance of disruptive side effects--on neighborhoods, parks, natural species, historic sites, and panoply of other community assets. This is not to say that every project was entirely nondisruptive. Particularly where localities were competing to attract large--or, as in the case of major-league sports teams, symbolically important--private corporations and intense competitive pressure was perceived, significant amounts of dislocation still occurred at times…
The examples provided were clearance for the Poletown development in Detroit and the new stadium for the Chicago White Sox. So sports facilities presumably have enduring sway.

Shifting costs

In what might in first blush seem to be an endorsement of the process behind Atlantic Yards, the authors suggest that the role of private developers is routine. (They do not, however, deal with the issue of eminent domain, which, as we now know, should not be pursued at the behest of a private developer.)

The authors explain that deals tend to evolve:
Finally, whereas the urban renewal model had been one of detailed public planning without developer input (so as to avoid potential favoritism) and binding developer competitions on the model of those for public works contracts, the new model was one of public-private partnership from a very early stage. [Authors Bernard] Frieden and [Lynne] Sagalyn emphasize that the initial agreements between cities and developers tended to be highly unstable, not as a result of carelessness or bad faith but due to inevitably changing circumstances. As a result, the real agreement in very successful case they examine was to continually work the problem and rework the deal. Often, moreover, the deals provided for governments, in partial return for their investments, to share in mall revenues or to build collateral revenue-generating facilities (such as parking garages.)
Let's note that Atlantic Yards would not produce any special revenue. But the lesson of Times Square, in a book written by Sagalyn, is that the deal, once established, continually gets reworked.

Why sports facilities got more expensive

Sports facilities weren't always so expensive:
With vastly increased television revenues and franchise expansion into many new cities, the major sports leagues had achieved much higher profiles than formerly as symbols of "big league" cities. They we also attracting more sophisticated capital and had become highly adept at stoking competition among localities, both to secure new teams and to retain the ones they already had.

The most distinctive feature of this competition was the insistence of all the four major sports leagues… on better, more heavily-subsidized facilities in which to perform.
No economic boon

As most people should know, sports facilities do not an economic boon make. The authors write:
It was virtually impossible to find an independent economist who viewed sports facility subsidies as good investments in local economic growth. The chief executives of most large American cities, however, urged on by local business groups and the media, took this competition as one in which it was urgent to succeed. It provided a highly visible indicator of mayoral success or failure. The local support base included highly motivated fans as well as the usual array of business and labor supporters for development projects. The media, with their large commitments to sports coverage, were intensely interested. And doubtless many public officials believed as well the consultant reports--commissioned by teams--that promised large spin-off economic benefits.
Yup--as in the 2005 letters to the MTA supporting Atlantic Yards. And Mayor Mike Bloomberg just dismissed evidence of losses to New York City as described by the New York City Independent Budget Office.

Making subsidies harder to detect

The people have begun to resist subsidies:
The advocates of sports facility investment faced a serious problem, though. Even as the costs of accommodating new league and team demands were sharply escalating, local voters were communicating far greater resistance to property tax increases than a few years earlier, and also objecting to public subsidies for private teams. Michael Danielson reports, for example that local electorates, when given a chance to express their views directly, rejected 13 of 15 sports facility proposals during the 1970s and 1980s (versus only two of nine in the prior two decades) and that "poll after poll underscores hostility to public financing of sports facilities."
But there are solutions, the authors write:
Sports facility coalitions reversed this negative trend in the 1990s, however, with a series of tactical adjustments:
--They turned to different sources of public revenue, less likely to trigger voter ire or referenda requirements than broad-based taxes on host city residents... sin taxes, regional sales taxes/
--Additionally, they were far more successful in eliciting contributions from state and county governments--primarily for new stadiums… State involvement also enabled stadium and arena advocates in many cases to tap new sources of revenue without referendum approval and to bypass normal procedural constraints.
--Particularly where referendum approval was required, they secured much larger participation in the capital costs of facility development by the teams and other private investors.
In order to obtain these up-front, highly media-worthy commitments form the teams, public authorities granted them compensating (and less visible) concessions: sweeter lease terms, long-term maintenance commitments, land contributions, collateral infrastructure investments, and property tax exemptions… After adjusting for these factors [Judith Grant] Long concludes, the actual trend in public subsidization was opposite to that reported publicly. Whereas the reported public sector share of new stadium and arenas costs dropped from 66 percent before 1990 to 5 percent thereafter, the "real" public sector share rose from 69 percent to 80 percent.
With these changes in place, most projects were able to go forward without referendums, and when there were referendums, voters proved generally more receptive.
In the case of the Atlantic Yards arena, all but one of the concessions highlighted above (except for maintenance) apply: "sweeter lease terms, land contributions, collateral infrastructure investments, and property tax exemptions." The grant of arena naming rights also should be included.

Costs go up, but why?

The authors observe:
Mega-project costs rose dramatically in the years 1970-2000 and generally exceeded official estimates at the time of project authorization by a considerable margin. It is striking that this long-standing pattern, which appears to prevail worldwide, continues unabated despite major improvements in the technical capacity for cost estimation--suggesting that its causes lie primarily in the realm of politics rather than those of engineering or accounting.
We still don't know why the projected cost of the Atlantic Yards arena declined so little in the wake of lowered construction labor and materials costs.

Siting issues

The increase in costs for sports facilities was caused not only by the addition of luxury features like suites, but it reflected a move back toward the edge of downtown. The authors write:
Mayors and governors were eager for visible success in the competition for professional teams but not for battles with neighborhoods, environmentalists, and historic preservationists. Exclusive of parking, stadiums and arenas have very relatively small footprints, thought--typically 15 to 25 acres for a central-city stadium, four to six for an arena. And unlike festival markets, which depend significantly on impulse visits from nearby office workers and residents, sports facilities can be located successfully on the edges of downtown in older commercial or industrial districts. Virtually all cities have suitable locations available, unlikely to generate substantial resistance but easily accessible from the heart of downtown (and by transit as well as car).
The Atlantic Yards site poses a special challenge, given that the blocks near the Vanderbilt Yard had long begun a revival. So the site--directly abutting the Prospect Heights Historic District--cannot be--as the authors write of most sites used--"sufficiently distant from residential enclaves and high-end commerce to allay most potential opposition."

"Do no harm?

In the post-Moses era, it's not easy to get a project passed. The authors write:
However broad their support clarions, mega-project proposals rarely proceeded to implementation if they imposed more than trivial costs on neighborhoods or the natural environment. We label this the 'do no harm" paradigm.
Or, as former Deputy Mayor Dan Doctoroff asserted, "making omelets without breaking eggs."

But there is some balancing to be done. The authors write:
Even the most sensitively planned mega-projects generated some negative impacts, however, and it became widely accepted that these should be "mitigated" as far as possible. The line between offsetting harms and conferring net benefits was often blurred, though, and project advocates were strongly motivated to dampen controversy. So the norm of mitigation frequently became an important source of leverage for groups with other concerns than merely repairing or counterbalancing project damages.
That would be the Atlantic Yards Community Benefits Agreement, or, in Mayor Mike Bloomberg's later assessment (of CBAs in general): extortion.

The role of activism

The authors note the importance of activism by
middle-class and affluent urban residents that underlay the movements for environmental protection and historic preservation.

...Neighborhood, environmental, ethnic, preservationist , and other interests with little or no capacity to mobilize support coalitions can, if aroused, generally block or modify initiatives that threaten them.

We call this pattern "negative pluralism," though it certainly involves elements of elite domination as well, for two reasons…. it is unrealistic to expect ordinary citizens, preoccupied with their private lives and lacking access to institutional resources for mobilization, to initiate or frequently mobilize in support of development policy proposals.
In other words, it's not quite fair to blame activists opposing Atlantic Yards for not coming up with a proposal for the Vanderbilt Yard in the past (though they have one now.)

And the general lack of diversity in the activist AY opposition is not surprising, if you consider this observation by the authors:
Lower and working-class interests have always been hard to mobilize in American politics--in part due to ethnic and racial tensions within their ranks, and in part due to features of the larger political system that discourage class-based political organization.
Guidance for the future

The authors do not believe that the pendulum has swung too far, perhaps because they recognize that many mega-projects aren't necessarily worth it:
Our own view is that on balance the constraints placed on mega-project development since about 1970 have been beneficial, and that future adjustments should be guided at least as much by concerns about the pressures for excessive mega-project investment as the barriers to enough. Project merits have not been a central concern of this book, but it seems clear that a large proportion of recent mega-projects fail any reasonable benefit-cost test. And why should it be otherwise, with rent-seeking constituencies in the vanguard, able to tap sources of revenue (from federal grants to hotel taxes) that are all but invisible to most local voters?

The problem of balancing multiple values has no solution, of course, that will command universal assent.
Would AY fail these criteria?

They suggest some criteria to balance those multiple values:
Public investments should generate net benefits for society as a whole rather than just, or even primarily, a narrow but mobilized group of claimants (rent-seekers).

Where specific beneficiaries, and particularly corporations, do seem likely to reap large benefits, they should be a proportionate share of project costs and risks.

Projects should not significantly harm individuals, communities, or the natural environment--at least not when viewed in combination with efforts to mitigate and compensate for such harm as may be unavoidable.

Decisions to proceed should be arrived at democratically, following full and open public debate.

Access to the courts for review of significant issues of statutory interpretation and compliance should be relatively liberal, but the judicial process should not be available to project critics merely engaged in delaying actions or seeking to extract costly benefits having little to do with the project at hand.
While most of those criteria could be debated--is Forest City Ratner's not insignificant investment a proportionate share of project costs?--it's hard to say that the decisions to proceed were arrived at democratically.

Eminent domain

And should the authors have considered the issue of eminent domain--virtually absent in the book--they almost certainly would have further stressed the importance of democratic accountability. They mention eminent domain almost as an aside:
[S]ince private developers are unable to exercise eminent domain, they tend to shy away from sites with large numbers of established property owners--and particularly settled neighborhoods where residents are committed emotionally as well as economically to their current locations.
Well, the Atlantic Yards site had a not-insignificant number of property owners, some well-established, some not. And while the number of "committed emotionally" residents in the footprint may be small compared to projects completed in the Great Mega-Project Era, there are many such residents bordering the AY site--hence the persistence of opposition and criticism.

What about referenda?

The authors even support the notion of referenda:
[W]e lean in favor of enabling critics to initiative referendums on urban mega-projects--but with three very important caveats: (1) such votes should be restricted to up or down expressions of opinion on projects already approved by the locality's duly constituted representative institution(s); (2) the requirements for ballot access should be relatively formidable (to discourage frivolous challenges); and (3) the elected representatives should be free to reaffirm their original decision, even in the face of a referendum defeat, if they can stand the political heat.

This specific judgment reflects, but is also subsidiary to, the more general conclusion that we take away from this study: while private rent-seekers and public entrepreneurs are invaluable sources of energy and ingenuity in the evolution of urban mega-projects, local champions of environmental protection, of neighborhood preservation, and of fiscal sobriety have no less valuable roles to play. Further, in seeing the wisest balance among those multiple perspectives, there are no good substitutes for representative democracy, empowered and required to approve all major projects, and a vibrant local pluralism.
Imagine a referendum after the IBO said the arena would be a money-loser for the city. After all, the oft-cited poll from Crain's New York Business contained evasive language like: The project will provide 2,250 low-, moderate-, and middle-income rental apartments.

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