Skip to main content

Daily News: ESDC admits "green cards for investors" program won't create any new jobs

Despite a phenomenally dull (and misleading) online headline, there's some important news in a Daily News article today headlined State agency says Bruce Ratner used federal program to finance Atlantic Yards project, Nets arena.

The headline in print is far more forceful: "Ratner plan Nets critics: Insist fund is about money grab, not jobs."

The news is not that, to finance a required new railyard, Ratner is trying to use a program that provides immigrants and their families green cards if they invest $500,000 to create or retain ten direct or indirect jobs.

The news is that the Empire State Development Corporation (ESDC) admits that the investment "will not create any new jobs beyond those already forecast."

ESDC spokeswoman Elizabeth Mitchell is quoted:
"If this financing was not available - or if Forest City Ratner is not as successful as we hope in raising funds under this program - then Forest City Ratner will need to raise funds from other sources to facilitate build-out of the entire project," Mitchell said in an email.
Well, I'm skeptical:
"It's ridiculous to think that Forest City Ratner can't fulfill its obligation to build a new rail yard without this money," said blogger Norman Oder, whose Atlantic Yards Report serves as a clearinghouse for information about the Brooklyn project. "It looks like an effort to save money on financing. Parent Forest City Enterprises has more than $467 million in cash and credit capacity, to according to its 9/8/10 earnings release. If it had to spend the money, it would."
Beyond that, jobs associated with the entire project cannot be attributed to this investment, because they depend on other sources of funding, such as tax-exempt bonds for affordable housing.

Keep in mind; the Metropolitan Transportation Authority has already set penalties that should serve as an incentive for FCR to build the new railyard. See p. 3 of Staff Summary of June 2009 revised deal for the Vanderbilt Yard.

Can they get away with it?


The Daily News quotes former Labor Department official David North, a critic of the EB-5 program at the Center for Immigration Studies:
North said Ratner probably isn't breaking any rules by tapping into the pay-to-stay scheme for cut-rate financing because the program's rules are vague. But he does object to granting residency to anybody who can write a $500,000 check.

"It shows the artificiality of the program, since these jobs would be there anyway, no matter where the funding comes from," North said. "I think the whole program is a terrible idea."
I'm not so sure the rules aren't being broken. They sure look like they're being stretched.

After all, the whole effort is accompanied by astounding and misleading public relations, starting with the presentation of the project as coupled with the Nets and the NBA.

And it's clear that this is violating the spirit (if not the letter) of the law, given that Congressional backers all say it's about job creation, not job retention.

Show us the math

As I wrote, show us the math. Forest City Ratner spokesman Joe DePlasco offers some vague assurances:
"The scope of the work (EB-5 financing) would cover is a subset of the total Atlantic Yards scope," DePlasco said. "And the jobs are a subset of the total project job creation as calculated based on the federal application guidelines.
Yes, there are established formulas by which investment is multiplied to project indirect and direct jobs.

However, 7696 jobs would associated with this investment. Extrapolate these job figures--for an investment about 5% of the entire $4.9 billion project--and Atlantic Yards should create or retain nearly 154,000 jobs.

Looking more closely

To reprise my analysis.

Yes, EB-5 investment monies can apparently be used as "last-mile" funding and thus be credited for a project as a whole.

But that should be evaluated by the federal government. And let's test that against reality.

Can this investment be piggy-backed on the investment in the arena and thus be seen as saving a construction jobs?

By my calculation (regarding job estimates for 2011 and 2012) it would be 1756 construction jobs over two years, or 3070 direct, indirect, or induced jobs, a figure that's still insufficient.

Maybe they'll try, but that's ridiculous. The arena's already funded, and its timing is driven by the naming rights agreement and other obligations.

Can this investment guarantee future construction jobs, or future office or retail jobs? No.

We have no idea whether funding is available for those buildings.

The role of the press

Credit the Daily News, in the person of Sports I-team reporter Michael O'Keeffe, for following up. It should be a big news story, but apparently no one else was interested.

The New York Post has written twice about the Marty Markowitz angle. The Wall Street Journal ran a softball story at the start, with no follow-up.

The Times has been silent. So has the Observer.


Comments

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…