Sunday, December 02, 2012

In Times series on "United States of Subsidies," a glaring gap: no mention of Atlantic Yards or Forest City Ratner, which should lead the pack in New York State

The New York Times today begins a three-part series, UNITED STATES OF SUBSIDIES, A series examining business incentives and their impact on jobs and local economies.

The first installment, which dominates the front page, is headlined As Companies Seek Tax Deals, Governments Pay High Price.

Surprising, though Brooklyn-based developer Forest City Ratner has collected hundreds of millions of dollars in subsidies and other support for the Atlantic Yards project, neither the firm nor its parent, Forest City Enterprises, appears among those company that have received more than $100 million.

In fact, as I explain below, Forest City Ratner, rather than being absent from the list of firms taking advantage of subsidies in New York State, should be at the top of the list, as it gains far more than the $157 million attributed to JP Morgan Chase.

(Here's my posted comment, which responded to another commenter's statement that "Atlantic Yards is a perfect example of the worst kind of corporate welfare..."

The Times summary of the article:
A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.
The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.
“How can you even talk about rationalizing what you’re doing when you don’t even know what you’re doing?” said Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.
The Times analyzed more than 150,000 awards and created a searchable database of incentive spending. The survey was supplemented by interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants.
A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them.
Who benefits?

The Times reports:
Far and away the most incentive money is spent on manufacturing, about $25.5 billion a year, followed by agriculture. The oil, gas and mining industries come in third, and the film business fourth.
Location is crucial:
Even big retailers and hotels, whose business depends on being in specific locations, bargain for incentives as if they can move anywhere. The same can be said for many movie productions, which almost never come to town without local subsidies.
This recalls the New York Yankees' threat to leave the Bronx, the Bronx Bombers' storied location. And it puts into perspective Forest City Ratner's desperation to move the money-losing Nets from an antiquated arena in New Jersey to a new arena in the country's media capital.

However, oddly enough, there's no reference to Forest City Ratner in the database, and only a piddling mention of parent Forest City Enterprises, below.

Fuzzy data, including on New York


According to the Times, the leading beneficiary of subsidies in New York is JP Morgan Chase, which gained $157 million in a property tax abatement. The Yankees and the Mets, via their corporate entities, each gained about $100 million in a property tax abatements.

The Times reports:
Collecting data on property tax abatements is the most difficult because only a handful of states track the amounts given by cities and counties. Among them is New York, where businesses save an estimated $1.1 billion a year in property taxes. The American International Group, the insurance company at the center of the 2008 financial crisis, continued to benefit from a $23.8 million abatement from New York City at the same time it was being bailed out with $180 billion in federal money.
Since 2000, The New York Times Company has received more than $24 million from the city and state.


What about Atlantic Yards?

The best summary, though imperfect, regarding Atlantic Yards, comes from the New York City Independent Budget Office's (IBO) September 2009 report, titled The Proposed Arena at Atlantic Yards: An Analysis of City Fiscal Gains and Losses.

The IBO delineated $169.4 million in direct costs to the city budget, and $104.3 million in costs to the state budget. Beyond that, for example, it counted $146 million in city costs for the arena property tax exemption and $193.9 million in federal costs regarding tax-exempt financing.

(As I described, because the IBO predicted $678 million in tax-exempt financing rather than the ultimate $511 million, the savings on such financing should be cut by about one-fourth. Thus the IBO's assertion that the net gain to Forest City was some $726 million should be dialed back by at least $50 million--one-fourth of the $200.3 million in projected savings on the financing. Then again, as noted below, Forest City achieved other savings unmentioned in the report.)


The methodology

The Times describes its methodology:
The Times included incentives of many types: cash grants, corporate income tax credits, sales tax exemptions or refunds, property tax abatements, low-cost loans or loan guarantees and free services like worker training. The database does not reflect the savings businesses receive in states with minimal or no corporate income tax or sales tax.
The $80 billion figure is based on more than 100 records requests to state agencies nationwide and on an examination of numerous government reports. The Times identified 1,950 incentives programs and compiled figures on benefits used by businesses in the most recent year available.
Since many state programs The Times examined did not identify the names of specific beneficiaries, examples of companies were obtained from several sources, including Investment Consulting Associates and Good Jobs First, a non-profit policy center that focuses on economic development. (For some of those examples, the dollar figures reflect the initial award; it is not known whether the entire benefit will be used.)
Apparently because Atlantic Yards benefits come from rather unusual "pots" compared to most other corporate incentives--they're absent from databases regarding the NYC Industrial Development Authority nor state PILOTs (payments in lieu of taxes)--they didn't show up in the Good Jobs First/Good Jobs New York database the Times consulted.

Even so, among the "numerous government reports" could have been that from the IBO, which would have been a good start.

I don't think the Times was trying to protect Forest City because it was the newspaper company's partner in the Times Tower. However, as I've said before, I think the newspaper has an obligation to cover Forest City Ratner exactingly, and it has often fallen short.

More Atlantic Yards savings

And that IBO report, for example, doesn't even get to the giveaway of arena naming rights, worth more than $200 million, or the state and city help in getting Forest City Ratner low-cost loans via the federal government's EB-5 program of investment immigration, likely saving more than $100 million.


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