A September 2005 IBO report, which focused not on the Atlantic Yards project but on the arena alone, concluded that the arena would "likely to generate a modest net positive fiscal surplus for the city, state, and MTA, measured in present values discounted over the 30-year financing term."
But that surplus, a large majority going to the state rather than the city, was calculated before the city more than doubled its pledged $100 million contribution. Now, the city would provide $205 million for infrastructure and to reimburse developer Forest City Ratner for the acquisition of land.
(About $100 million would be used for land, though the tab was $135 million as of January. Not all of the remaining $105 million would go to infrastructure for the arena block alone, but a significant fraction would. As of June 2004, the infrastructure cost was already $136 million. That suggests a potential $271 million out of the $305 million pledged by the city and state, though 1) the infrastructure cost has undoubtedly risen and 2) the city apparently won't pay the entire cost of land.)
A measly $1 million?
I plugged the new number into the chart, adding, as the IBO had done, a slight adjustment for debt service, thus bringing the city's cost to $206.2 million.
(Graphic adapted by Abby Weissman/SouthOxford.com)
That would leave the city with a loss of $77 million over 30 years, expressed in present value, defined as "today's value of a future payment, or stream of payments, discounted at some appropriate compound interest, or discount, rate." Even if a minimum of $28.5 million of the city's additional $105 million were devoted to the arena block--and that's likely--the city tab turns into a loss.
Meanwhile, if all the new city money were devoted to the arena block, the total public contribution would only barely be offset by the revenues to the state and the Metropolitan Transportation Authority, leaving a net fiscal impact of little more than $1 million. (That number is likely higher.)
Inexact, but telling
Of course this is an inexact exercise. The IBO figures were calculated in 2005, not 2007, so presumably, with inflation, the total tax revenues would have increased somewhat. Some of the infrastructure funds wouldn't go directly to the arena block. And city officials, notably Deputy Mayor Dan Doctoroff, have asserted that some of the funds grouped under the city's $205 million contribution would have been spent anyway.
But it suggests that, with the arena, developer Forest City Ratner would be the winner. FCR would benefit from some $20 million a year in naming rights and an unusually large number of luxury suites. Also, the IBO tallies numerous carrots, including tax-free bonding and the use of Payments in Lieu of Taxes, or PILOTs, to repay the bonds, even though the PILOTs would not be the equivalent of city property tax payments.
The Barclays Center promotion proclaimed ,"It’s time the world gave something back to Brooklyn.”
It looks like the opposite may be at work.
The IBO should take another look.