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City provides $32.5M cash for project infrastructure, claims total subsidy to Ratner is lower than previously stated; reasons for skepticism

Yesterday, the Empire State Development Corporation amended the State Funding Agreement for Atlantic Yards so it could pass along an additional $32.5 million in city funding to Forest City Ratner for project-related infrastructure.

From one perspective, it seems like a significant increase in city subsidies for Atlantic Yards, given that the Forest City Ratner will have directly received $171.5 million.

That's far more than the initial $100 million pledged in 2005.

City subsidy actually down?

However, representatives of the ESDC and New York City Economic Development Corporation (NYC EDC) both stated yesterday that the city's commitment to Atlantic Yards was well below the $205 million figure that has been reported for three years. (With $100 million from the state, that would be $305 million.)

I distrust that explanation, as I will explain below. After all, Forest City Ratner itself counted $205 million in city funds, as noted in the screenshot at right from the former Atlantic Yards web site.

Rather, the evidence suggests that NYC EDC is taking a very narrow view of subsidy--cash delivered directly to the developer--and excluding other infrastructure work that is related to the project but paid for directly by the city.

If so, that means that the administration of Mayor Mike Bloomberg has been willing to increase the city's commitment to a private-public project like Atlantic Yards, while proposing cuts to quintessential public services like libraries by $75 million. (The City Council just restored many of the library cuts.)

It all deserves a closer look, perhaps in an oversight hearing.

At the meeting

At about 40 minutes into the meeting (webcast) yesterday, ESDC Senior Counsel Steve Matlin, the closest to an Atlantic Yards point person at the agency, updated the board members on the project.

He noted that the city would provide $8.5 million for Atlantic Avenue infrastructure work, and $24 million of the $40 million needed for Carlton Avenue Bridge related infrastructure work.

Matlin commented that, while the press has "often talked about a city investment of $205 million... I’m not sure that’s a real number. " (As noted above, it's not just the press.)

In a similar vein, he said of the funding announced yesterday, "It’s not new funds. These are funds that were anticipated. We’re now putting in place the mechanism to get the funds to Forest City to make these improvements."

From the audience, Noticing New York blogger Michael D.D. White, a lawyer and urban planner, took the opportunity for public comment: "I acknowledge that I am not up to speed with exactly what you are proposing. I became aware less than 24 hours ago... It seems to me it’s generally a safe assumption that when you are acting on Atlantic Yards, it’s not going to be something good.... There’s nothing that you can do to redeem the project from its essentially despicable nature and despicable origins."

Looking more closely

According to the document distributed to the board (embedded below), the Modified General Project Plan included $100 million from the state/ESDC and $131 million from the City/New York City Economic Development Corporation (NYC EDC), reimbursing Forest City Ratner for land purchases.

(Remember, initially the city's $100 million was supposed to go to infrastructure, but could also be used for land. It was all used for land, and then some.)

The document stated:
Additional public infrastructure improvements will be made in connection with the development of the Project. These improvements would typically be funded by the municipality. To ensure the timely and efficient completion of the public infrastructure improvements, it is expected that such work will be performed by Forest City and funded, in part, by New York City. City funds will flow through ESDC.
The Atlantic Avenue infrastructure work consists of the replacement of a 36 inch cast iron water main the the bed of Atlantic Avenue with a 48 inch high pressure trunk main.

Doing the math

This was my initial offhand calculation regarding city support:
  • $100 million initially for land
  • $105 million for infrastructure
  • ($31 million of that was shifted to land)
  • $32.5 million for infrastructure.
Total = $237.5 million in city funds.

I ran that by representatives of the state and the city, who said it was off.

ESDC spokesman Warner Johnston said he thought that was wrong, but "it it would be best for the City to characterize their commitment as they deem appropriate. The only City funds that have–or will come through the City and that are reflected in the project documents are the $131 [million] for acquisition and the $32.5 [million] that Steve [Matlin] described in the materials. "

Querying NYC EDC

I had several rounds of questions with a city spokesman who would be quoted only on background, stating:
The funds allocated today are part of the City’s previous $105 million commitment to infrastructure. The total City commitment is actually less than $205 million.

ACTUALLY GIVEN/FUNDING NOW: $131 million for land + $8 million for City work + $32.5 million for infrastructure (in today’s ESDC board item) = $171.5 million total
I asked about the itemization in an August 2008 letter I got from the city and asked whether individual expenditures noted in the letter (right; click to enlarge) 1) were made (or plan to be made) and 2) are related to Atlantic Yards?

The response:
When the $205 million was originally contemplated, there were estimates on what the City would pay for and what FCR would pay for. Now that we’re actually at the point of building, we have a better idea of the actual work each party will do, and the total City contribution is $171.5 million. Other than that funding, Forest City is contractually obligated to undertake the necessary infrastructure work to complete the project.
Looking more closely

My response:
Thanks, but to be clear, the $30M in water main improvements previously contemplated--that was paid for or will be paid for by FCR?

Same for $5M in MTA infrastructure?
The response:
The city's infrastructure expenditure includes monies for the water main and as I said Forest City is contractually obligated to undertake the necessary infrastructure work to complete the project.
So the city is putting in $30 million for the water main. I didn't get an answer for the MTA spending.

City itemization

As suggested above, it looks like the city is excluding from its total all Atlantic Yards-related infrastructure spending that is not directly passed on to the developer.

When, in August 2008, the city provided an itemized list of capital and infrastructure projects that were part of the additional $105 million, the mayor's office said that the sum "represents capital projects to support infrastructure and other capital needs in the area, some of which are independent of, but in the area of the planned Atlantic Yards project."

As I wrote, most of those capital projects did not seem independent of Atlantic Yards .

What percentage is appropriate to assign? The New York City Independent Budget Office (IBO) tried to make an estimate. According to the IBO's September 2009 report:
When questioned at the time, the Bloomberg Administration explained that it was also counting infrastructure projects such as rebuilding and expanding water and sewer capacity and street upgrades at or near the site. In some cases these projects are needed in order to handle the demands on municipal infrastructure resulting from a project on the scale of Atlantic Yards. In other cases, there were infrastructure projects in the Atlantic Yards vicinity that would have been necessary sooner or later whether the project was built or not.

Because a portion of the additional $105 million in city capital contributions cited by the Mayor would likely have occurred in the absence of the project, IBO counts about half of this addition—$50 million—as part of the city’s capital contribution for the project.
That's still more than the $40 million or so the city counts in direct infrastructure subsidy right now.

And, given the increase in the costs for the Carlton Avenue Bridge, there's reason to believe overall infrastructure-related costs for Atlantic Yards have gone up.

So a better estimate is needed.

Questions remain

Regarding the water main spending noted above, left unclear is whether it serves Atlantic Yards, or just the neighborhood, or--quite likely--both.

Similarly, that original letter detailed more than $40 million in work on Atlantic Avenue. Is only the $8.5 million passed on to FCR related to Atlantic Yards? Is the rest of the money being spent?

One expenditure in that letter--$7 million for the Sixth Avenue Overpass--is almost surely off the table, since there are no longer plans to demolish it.

However, the city originally allotted only $7 million for the Carlton Avenue Overpass. Now the sum is $24 million, which may or may not encompass other components of the infrastructure project. So the costs seem to have gone up.

It deserves a closer look.

Future infrastructure costs

If Forest City Ratner will be bearing additional infrastructure costs, it surely will seek government assistance.

Remember, at one point the Brooklyn Arena Local Development Corporation (BALDC)--a creation of the ESDC alter ego Job Development Authority--was authorized to issue $400 million in tax-exempt infrastructure bonds, but last year said that plan was off the table.

ESDC Atlantic Yards Funding Amendment 062410


  1. It is odd that just yesterday the "V" subway line ran for the last time before being shut down for lack of funding of the MTA. More subway lines are planned to close soon, as well as libraries, bus lines and other services. All of it when the city is wasting money without accountability on a useless arena, and it's allowing more and more generous conditions to the developer. In this time where so many services are at stake, it is disheartening to see the New Yorkers passive and indifferent to how their money is being spent: a bad mix of inertia, lack of identity, submissiveness, and resignation.


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