Latest estimate halves cost-savings from (best-case) modular construction, but delays make it worse; platform cost mitigated by leap in land value
Why? The previous document had left out a key element in Phase 2 of the Atlantic Yards project: the platform over the railyard.
The revised estimate translates into a 12% cut in tax revenues--half the previous projection--compared to conventional construction. On this specific metric, it would be not as bad a deal for the public than previously estimated.
Overall, the revised estimate suggests that, in the best case, the savings from modular would be far less than the 25% Forest City was projecting only a year ago (or 15-20% less, in other projections).
Without more detail, we don't know exactly why the projection changed so much. Either the savings were overstated from the start, or two estimates, issued this year as part of the court-ordered Supplemental Environmental Impact Statement, were already acknowledging that the first tower was taking long than assumed.
Cost overruns/delays change the picture
For now, however, any cost estimate is suspect, since the best-case projection of the modular buildout is unlikely, given the news of extensive cost overruns for the first modular tower, B2, and the bitter legal dispute between Forest City and Skanska.
Forest City's new partner/overseer on Atlantic Yards/Pacific Park, the Chinese government-owned Greenland Group, has decided that the next towers will be built conventionally.
So we won't be hearing the much-promoted claims that modular construction, shifting most work to the factory at the Brooklyn Navy Yard, would mean fewer trucks, less waste, and safer working conditions.
As of April 2014, it was slated to open in the fourth quarter of 2015, a three-year buildout. Now there's no projected opening date. Savings evaporate with delay, and clearly the cost projections are altered by increased, unanticipated costs.
Error in environmental review leads to recalculation
This article revises what I wrote on 3/31/14, Revealed: Atlantic Yards modular construction means 22% drop in costs/wages, 10% cut in jobs, 24% loss in tax revenues.
I didn't miscalculate. I was merely reporting on the data in the Draft Supplementary Environmental Impact Statement (Draft SEIS), released by Empire State Development after preparation by the ubiquitous consultant AKRF.
It seemingly contrasted with the Forest City Ratner statement, as shown in the slide at right, that modular construction would require the same amount of person-hours as conventional construction (though with lower wages).
Yes, my doubt was unfounded, it turns out, but Forest City had not released detailed information to bolster its statement. (When it comes to statistics, well, the developer's record is less than stellar.)
When ESD accepted and approved the Final SEIS on 6/12/14, the Executive Summary indicated an error, though without a clear admission: "The numbers included in this FSEIS have been revised to reflect inclusion of the costs associated with the platform work, which were not included in the DSEIS."
That led to the recalculation: "the investment for construction of Phase II of the Project using modular construction methods is estimated to equal about $2.15 billion in 2013 dollars. This would represent about a 12 percent reduction from costs using conventional construction methods."
That also means an 11% cut in wages, and only a 1% cut in job-years.
The statistics, from Final SEIS
|From Final SEIS|
Direct wages and salaries would be $653.20 million, in 2013 dollars, an 11% reduction from conventional construction. In the broader New York State economy, total direct and generated wages and salaries from construction would be about $1.11 billion, again an 11% cut.
The total $153.41 million in tax revenues for New York City, MTA, and New York State, in 2013 dollars, is about 88% of the total estimated for conventional construction, or, a 12% cut.
The statistics, from the Draft SEIS
As I wrote, the Draft SEIS stated:
Based on the preliminary estimates, the investment for construction of Phase II of the Project using modular construction methods is estimated to equal about $1.90 billion ($1,895.66 million) in 2013 dollars. This would represent about a 22 percent reduction from costs using conventional construction methods.
|From Draft SEIS|
The Final SEIS estimates the total cost of Phase 2 at $2,145,650,000, while the Draft SEIS estimate was $1,895,000,000. The difference is just about $250 million, or $249,990,000.
That $250 million sum apparently represents "costs associated with the platform work," which may or may not include spinoff costs.
The cost of the platform has been estimated at between $200 million and 300 million. In March 2010, then-Daily News columnist Errol Louis wrote:
State agencies and the Ratner company haven't been blameless. We still don't know who will pay to create an expensive deck over the Vanderbuilt railyards, the section of the project area where thousands of units of housing are supposed to be built.May get picked up by Ratner? That's the developer's responsibility, and part of why the cash payment for the 8.5-acre railyard--$100 million, with a gentle interest rate--was so little.
The expected cost - as much as $200 million to $300 million by some estimates - may get picked up by Ratner, or the bill may get handed to the city or state a decade from now, long after human and institutional memories of the original deal have faded.
Now Greenland Forest City Partners, the new joint venture, is responsible for the platform. They may use current or--I'd bet--future EB-5 funds to pay. If they get the city or state to pay, well, that would great for their shareholders, less so for the public.
The value of development rights: more than $1 billion?
As I wrote, development rights for the 8.5-acre Vanderbilt Yard, after a MTA-requested appraisal, were appraised in 2005 at $75/square foot, for 3,615,790 developable square feet.
If we calculate platform development rights at $300/square foot, the value would be $1,084,737,000. At $350/square foot, the value would be $1,265,526,500, and at $400/sf, the value would be $1,446,316,000.
How much will railyards support?
|From Develop Don't Destroy Brooklyn|
|Two recent versions of Atlantic Yards/Pacific Park|