Thursday, July 21, 2011

Budget watchdog: big projects "generally do not end up generating jobs or investment that was promised when subsidies were provided"

The news from the July 19 conference on the Future of New York City, sponsored by Crain's New York Business, concerned the city's revival after 9/11, and the city's effort to recruit an engineering campus.

(The city's offering up to $100 million in subsidies and low-cost land. Didn't the Atlantic Yards project get nearly $300 million in direct subsidies and discount land?)

There was no mention of Atlantic Yards, at least at the panels I attended, but there was some unease about city policies that have led to such projects, and when I buttonholed Public Advocate Bill de Blasio to ask about Atlantic Yards, his answers, not surprisingly, were vague.

During a panel, a representative from the Citizens Budget Commission offered a warning that might have been heeded by city and state agencies that have promoted Atlantic Yards: big projects "generally do not end up generating jobs or investment that was promised when subsidies were provided."

That, said Carol Kellerman, is why a more rigorous analysis beforehand is necessary. However, I'd point out, agencies like the New York City Economic Development Corporation and Empire State Development Corporation are compromised, charged to promote investment as well as protect the public interest.

Quality of life

Former Deputy Mayor Dan Doctoroff, as did others pointing to New York's efforts to recruit top performers, stressed quality of life, and the "aggressive rezoning plans" aimed to open up more housing.

When he spoke to a group of graduating seniors at Yale last year, he said, 45 percent were planning to come to New York and "80 percent of them were planning to live in Brooklyn." (I'm betting Williamsburg/Bushwick.)

Police Commissioner Ray Kelly reminded attendees that, in 2001, the columnist Jack Newfield proposed that, should the city get the murder count below 600, the police deserved a ticker tape parade--and the count went down by 2002.

Diversifying the economy

City Council Speaker Christine Quinn, a likely 2013 candidate for Mayor, observed that  "at least 25 percent of tax revenues come from Wall Street, right behind that is real estate...and the two are incredibly linked."

So, she said, "we have to dig even deeper to diversify our economy... that's not saying we don't want Wall Street to be part of our economic base… just more diverse."

Mayor not activist?

At a panel on jobs (here's coverage in Crain's), de Blasio, a likely 2013 candidate for Mayor, said the Bloomberg administration did a good job laying the foundation for jobs, investing in such things as public safety and education, but not in playing an active role in stimulating or shaping the economy.

"When it comes to, for example, our city planning process, we haven't done enough to ensure maximum jobs," de Blasio said. "We haven't used our pension funds sufficiently to invest… in areas like affordable housing/infrastructure... we haven't used the procurement process in an activist manner."

"I think he has a pretty laissez faire approach when it comes to the role of government in the economy," de Blasio asserted, ignoring the Bloomberg's intervention, for example, in support of favored projects like Atlantic Yards.

In contrast with the Doctoroffs of the world, David Jones of the Community Service Society criticized the city for being "dead last in career/technicel education" that could help the working class, not just the elites.

"We're building an enormous reservoir of young people" neither working nor in school, Jones observed, warning of future costs in "crime and a host of social ills."

The need for analysis early

Carol Kellermann, president of the Citizens Budget Commission, stressed investments in education and transit, as well as the impact on services of "embeddedness, debt service, and fringe benefit costs."

"The more I learn about economic development efforts, and subsidies and tax exemptions, the less confident I am that they do produce the value they promise," she warned.

"There's a lot of focus on big projects, but they generally do not end up generating jobs or investment that was promised when subsidies were provided," she said. "There needs to be much more cost-benefit analysis and rigor in analyzing these projects before we get into them."

(I've argued that city and state agencies analyzing such project should, along with the typical best-case scenarios, present worst-case scenarios. Heck, why not a range.)

Kellerman wasn't talking about Atlantic Yards--she mentioned waterfront development and affordable housing--but her comments were very much on point.

"It's understandable we want to develop," she said, "but we do have very limited resources. We'd do better focusing on keeping the tax burden low and the infrastructure we all need."

Office space?

Richard Anderson of the New York Building Congress stumped the panel somewhat when he pointed to a slowdown in the creation of office space and asked how to stimulate the creation of office jobs.

"One way to not stimulate," responded E.J. McMahon of the conservative Manhattan Institute, "is to embark on a policy that attempts to make up for budget gaps with tax increases."

Over the next decade, the New York Observer reported last October, well over 30 million square feet of office space is planned--which is why the Atlantic Yards office space is on hold.

Beyond that, companies have been downsizing, not growing, their back office operations.

Then again, if New York does fully develop a technology industry, as seems the aspiration, there would be more demand for office space.

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