Skip to main content

IBO report: Hudson Yards projections were overoptimistic, leaving city on the hook

Rosy projections should be taken with a grain of salt regarding big development projects, right? From the Wall Street Journal, 4/23/13, Hudson Yards Woes Leave City on Hook:
When the city agreed to pick up the tab for the extension of the No. 7 subway line to ease the creation of a new office and residential district on the far West Side, it expected the project could begin paying for itself as early as 2008.
Instead, a single 1.7 million square-foot office tower in the Hudson Yards area has broken ground, while the project envisions 25 million square feet of new office space. And the district generated 40% less revenue from taxes and other development fees than projected between 2006 and 2012, according to a report to be released Wednesday by the New York City Independent Budget Office.
Hudson Yards was expected to produce $283 million in revenue through 2012, but it actually created $170 million, according to the report by IBO, an independent city agency that studies the local economy.
"The commercial development has been much slower than they thought," said Ana Champeny, a supervising analyst at IBO.
The city issued $3 billion in bonds to pay for subway construction and other infrastructure upgrades guaranteed by tax revenues in the area. If those revenues weren't enough to meet interest payments on the bonds, the Bloomberg administration agreed to pay those with additional money drawn from the city budget.
Typically such transit projects would be paid for by the Metropolitan Transportation Authority with help from the federal government, but that could have delayed construction of the subway-line extension for years.
The city agreed that if revenue to a quasi-independent agency, the Hudson Yards Infrastructure Corp., fell short, it would make up the difference: Between 2006 and 2012 the city gave HYIC $137 million from the budget to help it make interest payments. It has allocated $125 million for interest support payments in 2013, according to IBO.
The IBO cited a 2006 report commissioned by the city from real-estate firm Cushman & Wakefield that anticipated the city would have to help make one interest payment in 2008. In a more conservative scenario, that report said the city would likely have to continue helping pay interest until 2014,
At least the report provided multiple scenarios. How many scenarios did Atlantic Yards backers produce? Only uniformly optimistic ones, at first, then, after the project was approved a second time, they got the deadlines extended from ten to 25 years.

Note: because the Wall Street Journal got a scoop, acquiring the report before publication, other dailies didn't pick up on the news. That's pissy news judgment, denying readers important information just because the publication doesn't want to appear trailing others.

The IBO report

Here's the IBO report. The summary:
The Bloomberg Administration is now proposing a major rezoning of East Midtown. Concerned that this new initiative would compete with Hudson Yards and slow the revenue growth needed to make Hudson Yards self-supporting, Council Member Daniel Garodnick asked IBO to review city spending to date on the plan and to consider the short-term outlook for revenues at Hudson Yards. Among our findings:
  • Public expenditures paid to the Hudson Yards Infrastructure Corporation, including funds to help make interest payments on the $3 billion in bonds issued by the corporation, have totaled $374 million since 2006.
  • Over the same period, the city has committed an additional $22 million from its capital budget and $12 million from its operating budget to the project.
  • Revenue collected by the Hudson Yards corporation has fallen short of expectations. The corporation projected that it would collect $283 million in tax and fee revenues through 2012, but in fact has collected $170 million.
  • Property tax revenue that has been dedicated to the project (tax equivalency payments) from other newly developed buildings in the area is expected to grow from $28 million in 2012 to $33 million this year and $44 million next year. IBO expects payments from the first new office tower in Hudson Yards to begin in 2017 or 2018.
The extension of the 7 train, originally estimated at $2.1 billion, is now expected to cost $2.4 billion. The higher cost comes despite the complete elimination of one of the planned subway stations as well as savings on other parts of the subway-related work. The city is responsible for cost overruns on the 7 extension and $55 million of its $101 million in capital spending for Hudson Yards is for the transit work..

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…