Monday, March 15, 2010

Atlantic Yards a "job creation" engine? Only if you believe the myths propounded by Bloomberg, Paterson, and Ratner

This week and next I'll try to compensate slightly for the failure of any metro columnists to show up and glean insights from the rich spectacle of the Barclays Center groundbreaking March 11.

For a project that the leaders of our city and state seem confident will help rescue the local economy, the numbers regarding jobs and tax revenues are awful fuzzy.

Not just fuzzy--but those conveying them offered very different numbers, at the very same groundbreaking event.

Would Atlantic Yards generate $5 billion in new revenues, as developer Forest City Ratner claimed, or $1.5 billion, as Governor David Paterson (at right, with Mayor Mike Bloomberg) asserted?

Would it bring "up to 8000 permanent jobs" (FCR) or 5500 (Paterson)?

Would it really lead to 25,000 total jobs, as Bloomberg claimed?

Would the project "have job creation the likes of which Brooklyn has never seen," as Paterson claimed?

(Photos of groundbreaking copyright 2010 James Leynse)

It makes you wonder why they didn't get their ducks in a row.

It makes you wonder why virtually no one in the press did any math.

Yes, maybe it's too much to expect the press to do any fact-checking--I've looked at even the most conservative assumptions mentioned above, and found them unrealistic.

But couldn't they have noticed a few contradictions, or blatant exaggerations?

Job creation myths

Yes, Paterson's got a reputation, as per the Voice's Tom Robbins, for major prevarication. Yes, he must have been happy to talk about something other than the questions swirling about his performance and ethics.

And, yes, he surely won't be accountable for the job creation myth he propounded.

But the governor was a history major at Columbia. Shouldn't he have a little pride?

Here's some Brooklyn history, Mr. Paterson. During World War II, the Brooklyn Navy Yard had 70,000 employees. That's job creation. The Navy Yard was home to manufacturing, and, as an industrial park, it currently plays a similar role.

(Photo copyright Jonathan Barkey of banner hanging from apartment of Daniel Goldstein, Develop Don't Destroy Brooklyn spokesman)

An arena, as any economist would say, is not a job creation engine. Even Andrew Zimbalist, the sports economist who wrote an irresponsible analysis for Forest City Ratner, acknowledged:
The general conclusion that has come out of the academic literature on this subject is that a city, county or state should not anticipate a positive economic or fiscal impact from a new sports facility.
Nor is the construction of housing, which generates jobs in building services. Nor is the retail that would occupy the base of the buildings.

Office space might be associated with job creation--though in Brooklyn it often involves jobs "retained" rather than created. Moreover, there's no market for new office space in Brooklyn right now. None.

Forest City Ratner's press release

The official press release (also embedded below) contained some deceptive language:
It is anticipated that Atlantic Yards will generate over $5 billion in new tax revenues for the State and the City over the next 30 years and will create upwards of 17,000 union construction jobs and up to 8,000 permanent jobs when the entire project is completed.

...“The Barclays Center at Atlantic Yards is the first piece of what will be one of the largest private investments and job generators in Brooklyn’s history,” said Mayor Bloomberg. “The world-class arena will bring the Nets to Brooklyn, and the entire project will bring with it more than 25,000 construction and permanent jobs, thousands of units of affordable housing, and tremendous economic activity.
Anticipated by whom? Only by the developer--and elected officials like Bloomberg reading off Ratner's script. No wonder Bruce Ratner was so smiley last Thursday.

Does the mayor really think there will be 25,000 jobs and/or that 25,000 people will become employed?

It's not just a lie, it's a cruel one, given the desperate need for jobs and the city's significant subsidies and tax breaks in favor of the project.

Bender and Paterson on video

Below, on video, Forest City Ratner spokesman Bruce Bender smilingly claims that the project would bring 8000 jobs, while Paterson uses the figure of 5500 jobs--and $1.5 billion in tax revenue.



New revenues

Where does Forest City Ratner's estimate of $5 billion in new revenue come from? Perhaps the notorious $6 billion lie touted by sports economist Andrew Zimbalist, modified to $5.6 billion and $4.4 billion (net).

The most recent estimates by the Empire State Development Corporation (ESDC) suggest nearly $1.2 billion in net revenue, but that depends on an unrealistic ten-year buildout of the project, highly doubtful office jobs, an unlikely full buildout of the project of nearly 8 million square feet (the development agreement allows for a much smaller project, less than 5.2 million square feet) and a likely underestimate of costs.

So even Paterson's claim of $1.5 billion was dubious, but it's a lot closer to reality than Forest City Ratner's number.

Jobs in AY: construction

Building a project like Atlantic Yards involves a lot of construction jobs, but those jobs are temporary--significant, but temporary.

To repeat what I've written, Forest City's claim of 17,000 jobs actually means 17,000 job-years, or 1700 jobs a year for a decade--or, if the project takes 25 years, 680 jobs a year.

The ESDC uses more careful language, asserting 16,427 new direct job years.

But both estimates rely on the project being built as announced. It could be some 44% smaller--and thus the figure for construction jobs could be much, much lower.

Either way, there's no way 17,000 people would find lasting jobs.

Permanent jobs

The stunning thing about Forest City Ratner's claim of "up to 8000 permanent jobs"--a claim I saw repeated in virtually no news coverage--is that exceeds what the developer was promising nearly five years ago, in the June/July 2005 maiden issue of the Brooklyn Standard "publication": 6000 jobs.

There were once supposed to be 10,000 jobs, a figure that was bogus from the start. The figure of 8000 jobs promulgated by Forest City Ratner relies on a completely unrealistic configuration of office space--1.6 million square feet--for which there is no market.

But it's their story and they're sticking to it.

At least in the press releases.

Complicating the case

As I wrote last month, FCR in legal papers cited an 9/17/09 ESDC board memo from Chairman Dennis Mullen that estimated 3998 jobs in New York City and 4277 jobs in New York State, inclusive of New York City.

(The ESDC's 2009 Modified General Project Plan estimates an annual average of 4,538 new jobs in New York City and an annual average of 5,065 jobs in New York State; those totals include direct, indirect, and induced jobs.)

It makes you wonder where Paterson got the figure of 5500 jobs. Maybe he misremembered some facts read into his morning voicemail.

It's dismaying that, when I challenged the estimate of 8000 jobs in the Washington Post, an editor there was told by an ESDC spokeswoman that the estimate was reasonable. (Since then, Forest City Ratner added the qualifier "up to.")

This after the ESDC in December 2006 said there'd be 5000 jobs.

Indeed, the ESDC's current estimate of some 4000 jobs should be discounted by one-third given the office market. Building service and retail jobs would be dependent on a full buildout of the project, and also could be cut significantly.

Job creation engine? Look elsewhere.

Barclays Center Groundbreaking Press Release

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