Wednesday, October 06, 2010

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.


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