Monday, November 09, 2009

How Bruce Ratner further undermines the ESDC's dubious AY "economic benefit analysis"

The Empire State Development Corporation (ESDC) has never produced a real cost-benefit analysis for the Atlantic Yards project, because it never bothered to consider costs beyond the direct subsidies.

And it never produced an honest "economic impact analysis" or (most recently) "economic benefit analysis" because the analysis was premised on a decade-long build-out of the project. No alternative timetable was considered.

And the ESDC's analysis was further undermined in the recent Crain's profile of Forest City Ratner CEO Bruce Ratner, who acknowledged there was no timetable for the project's single office tower: “Can you tell me when we are going to need a new office tower?”

Why that matters

But office space matters. As I wrote September 18, Between July and December 2006, the ESDC revised its net tax revenue down by nearly half a billion dollars to the $944 million figure, a discovery that made the dailies. The main explanation was reduced office space, though the numbers were murky.

At the time, I noted, the office space was in severe doubt, but the ESDC ignored the impact of delay in its "Economic Benefit Analysis."

Shouldn't the ESDC provide a range of estimates, based on a full build-out of the project and multiple scenarios for delays? In a June memo, the ESDC acknowledged that “the delay of the full build out of the project would result in a delay in the realization of the full economic benefits of the project as disclosed in the FEIS.”

In the ESDC's critique of the New York City Independent Budget Office's AY arena analysis, the main flawed assumption cited was the IBO's focus on the arena rather than the project as a whole.

No office tower

But the project as a whole won't include an office tower for the foreseeable future.

So the ESDC's numbers--$657.6 million in new city tax revenues over 30 years, on a present value basis--deserve much skepticism. First, those numbers aren't offset by costs. Second, they depend crucially on an office tower that doesn't appear in any renderings and thus hasn't even graduated to "vaportecture."

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