AY project cost rises to $4.9 billion; ESDC promises arena 2012, one tower; maintains ten-year timeframe while saying delay wouldn't be material
It’s just been delayed, and time has led to increasing costs, to a projected $4.9 billion. However, despite public statements by departing CEO Marisa Lago that the project would take “decades,” AY--according to the amended General Project Plan (GPP)--would still take ten years to build, would still generate the same number of construction jobs, and still generate the same $944 million in net tax revenue.
(Lago is pictured at right with board member Kevin Corbett. Photos by Jonathan Barkey.)
Indeed, the few renderings that were released yesterday show the towers next to the arena as something of a mirage. Revised renderings should be released “over the summer,” said ESDC spokesman Warner Johnston.
(Note that the figure at right does not include signage. Click on graphics to enlarge.)
Yesterday’s pro forma approval by the board--the Daily News accurately said it was rubber-stamped, the Post said it would be rubber-stamped later, WNYC did a barebones report, and the Times passed on the story--was the first step in a 60-day process that will include a public hearing in 30 days, a community Q&A session, opportunity to submit public comments, and, likely, approval of the project in August or September.
Though most of yesterday’s ESDC board meeting was taken up by passionate and contentious public comments, mostly in favor of the project, that was essentially a sideshow: none of those commenting had examined the new documents. Supporters maintained blanket enthusiasm for AY; opponents, relying on partial information and the brief outline that had emerged at the time, suggested the ESDC had no guarantees of the benefits it promises.
The project was outlined by Senior Counsel Steve Matlin (pictured at right, next to General Counsel Anita Laremont). "Without these changes, the project cannot move forward," he said. "This project is probably more important to the state and the city then when it was approved in 2006." He cited "thousands" of construction jobs, permanent jobs, and housing units, new tax revenues, "the conversion of a blighted, underutilized stretch of property into a vibrant community," and the return to Brooklyn of a national sports franchise.
But more news was in the 68-page Technical Memorandum released yesterday. Beginning on page 55, a section titled POTENTIAL FOR DELAYED BUILD OUT, acknowledged that “prolonged adverse economic conditions” could slow all buildings after the arena--scheduled for first quarter of 2012--and just one tower.
However, no additional environmental review would be required:
Does that settle it? Assemblyman Hakeem Jeffries told the New York Post, "The sweeping promises of affordable housing made by the developer at the onset of this project have now evaporated to a mere whisper."
Develop Don’t Destroy Brooklyn savaged the ESDC:
By playing this charade the ESDC has made themselves vulnerable to new litigation, a risk they are willing to take in order to fast track the process in an attempt to help developer Bruce Ratner meet an end-of-year deadline to issue tax-exempt bonds for the proposed arena. The ESDC’s action props up a failed project whose alleged public benefits have all vanished, while missing a great opportunity to develop the rail yards properly with affordable housing and using union labor.
DDDB pointed out that none of the board members asked if funding were available for affordable housing.
No one from Forest City Ratner gave a presentation, though uber-flack Joe DePlasco (at right, in black, talking to John Brennan of The Record) was in the house, and Forest City (presumably) organized a significant number of supporters to attend.
And there’s no guarantee that a platform over the new railyard would be built or--as far as I could tell--a requirement to build the new railyard. (That’s in the documentation before the Metropolitan Transportation Authority; Forest City Ratner could get out of the obligation by paying the MTA $86 million.)
At right, the projected pace of construction workers and trucks. (Click to enlarge)
Economic benefits delayed
The memo does acknowledge that “the delay of the full build out of the project would result in a delay in the realization of the full economic benefits of the project as disclosed in the FEIS.”
Indeed, if the one projected office tower is delayed--as is depicted in the graphic below right-- that should significantly lower the projected $944 million in net tax revenues, given that a loss of projected office space previously helped chop projected tax revenues by nearly one-third.
I asked Johnston if there was an alternative projection for tax revenues based on a delay of five or ten years in the office tower or based on the potential for a delayed project as a while.
He didn’t give much of a response: “The economic impact numbers are being updated. We expect the tax revenues to be higher.” (Johnson said he could only offer brief answers given the crush of information requests yesterday afternoon. )
New railyard vs. MTA schedule
Those economic conditions wouldn’t delay construction of a new railyard, however, which is projected to be finished by 2013. However, the deal unveiled Monday by the Metropolitan Transportation Authority--and to be voted on today--indicated that Forest City Ratner would have until September 1, 2016 to build a new permanent railyard.
Doesn't the MTA contract trump the expectation in the technical memo? “We hope that they can do [it] sooner,” responded Johnston. “They have the right to pull down the air rights quicker.”
What about blight?
The memo says the project “would eliminate blighted conditions in the area” but does not assess whether a delayed project would in fact cause blight to persist.
The Project Description Chapter of the Final Environmental Impact Statement sets out the goals of the project, including:
Eliminate blighted conditions on the project site, including dilapidated and structurally unsound buildings, debris-filled vacant lots, and underutilized properties.
Even if Forest City Ratner offered some activity in cleared spaces, the potential remains for “underutilized properties.”
Two of the three main modifications in the ESDC’s GPP were already aired Monday at the meeting of the MTA’s Finance Committee: the conveyance of a portion of the MTA’s Vanderbilt Yard for $20 million--still to be voted on today--and the requirement that Forest City Ratner supply an $86 million letter of credit to secure its obligation to upgrade the yard.
The main change for the ESDC had already emerged: the acquisition of the project site in stages, this year concentrating on the arena block and another block needed for construction staging and parking.
That means that not only Site 5 and Block 1120 (the buildings on the center railyard block) would be spared until (at least 2011), so would the buildings in a 100-foot-wide stretch east of Sixth Avenue between Dean and Pacific streets.
A cover memo to the ESDC Directors summed up the rationale:
Forest City, in cooperation with ESDC, has been seeking to reduce Project costs (most specifically by value engineering the Arena) and, where appropriate, to defer certain Project costs with the expectation that financial conditions will improve.
Costs go up; arena financing shifts (lowered PILOTs?)
The numbers have changed regarding project financing and spending, with documentation providing only hints rather than full expctations.
Under “Anticipated Funding Sources,” private equity/other increased from $926.2 million to $1.52 billion and private financing--including scarce tax-exempt housing bonds, though it was not explained as such--increased from $2.2 billion to $2.65 billion. The changes were largely a function of time, Johnston said. (Here are the old numbers.)
Though the arena is now projected to cost $772 million, tax-exempt arena financing has declined from $637.2 million to $531.1 million.
That’s likely because officials calculated that the assessments on the arena block could not support foregone taxes to generate the PILOTs (payments in lieu of taxes) to pay off arena construction. The arena construction would be paid for by tax-exempt bonds, taxable bonds, and payments from Arena tenants--the latter subsumed under “private financing” rather than “Arena financing.”
Infrastructure cost rises
Other “Funding Uses” rose: the cost of site acquisition has gone up from $386.1 million to $417 million and the cost of the residential component has increased from $2.2 billion to $2.65 billion.
More dramatically, the cost of infrastructure has gone from $554.4 million to $717 million, and the cost in the “miscellaneous” category from $19.5 million to $92 million.
Why did those numbers change? Johnston said it was largely a function of time and having adjusted numbers (2009 versus 2006). Still, the jump deserves greater scrutiny.
No demo of Sixth Avenue bridge
Also, while the Carlton Avenue Bridge has been demolished and must be reconstructed, the Sixth Avenue Bridge will not be demolished; rather the arena block has been reconfigured to spare it.
I asked if that saved infrastructure costs. Johnston said he didn’t have numbers.
In a message to reporters, Johnston said that the “project is expected to create almost 22,000 construction jobs during the 10-year construction period.”
More specifically, in December 2006, the ESDC said (i) Construction of the Project will generate 12,568 new direct job years and 21,976 total job years (direct, indirect and induced).
New landscape architect
Should Building 1 not be constructed as planned, meaning no Urban Room, there'd be no interim open space, and the name attached the rendering is not Laurie Olin, who did the master plan, but Field Operations, a well-regarded firm headed by James Corner that worked on the High Line.
The New York Observer reported:
A Forest City spokesman, Joe DePlasco, said that Laurie Olin, the landscape designer that was used prior to--and after--the approvals process, had done the master plan. "We are using Field Operations to look at the interim space on the arena block," though he did not elaborate on Forest City's future plans with respect to Mr. Olin.
As with the meeting of the MTA Monday, the meeting yesterday began with essentially off-point public comment.
One difference, however, is that some on the MTA Finance Committee challenged MTA staff over the deal that had been negotiated. Yesterday there were five ESDC board members in attendance--two watching via video hook-up from Buffalo--as well as numerous staffers, and Upstate President (and not yet confirmed Chairman/CEO) Dennis Mullen.
Because Mullen was not confirmed, the meeting was chaired by Derrick Cephas, pictured with Lago.
The board members offered the barest of questions and endured some critical challenges from public commenters. Near the end of the meeting, board member Richard Neiman noted that the purpose of the meeting was not for board members to answer questions from the public and their failure to respond did not indicate a lack of concern.
One board member, Corbett, recused himself from voting. The firm for which he works, AECOM, recently acquired EarthTech, a contractor now working for the ESDC on the AY project. (I raised the issue last week and asked whether there were guidelines or rules; I didn’t get an answer, so I don’t know what impact my inquiry had.)
Testimony in favor
Among those testifying were several people from the Downtown Brooklyn Partnership (DBP); the first was Bob Catell, the DBP's co-chair and chairman of National Grid. "I've known Bruce Ratner for over a quarter-century, and he's a proven visionary," Catell said. "He's also a pioneer who was willing to take risks on Downtown Brooklyn when few others were." (Some might say he also hedged his bets by leveraging subsidies.)
Don Elliott, a DBP board member, said--as did the Technical Memorandum--that the Atlantic Yards project follows the principles of sustainable growth articulated in Mayor Mike Bloomberg's PlaNYC initiatives.
Others were from the hospitality and real estate industry, including Alan Rosen of Junior's restaurant and representatives of the Marriott Hotel and the Nu Hotel and CB Richard Ellis.
Tracy Collins (right) of the Dean Street Block Association, best known for his photos of the AY footprint, spoke without a prepared statement in calm but compelling tones, getting the attention of the board members, who seemed alternately attentive, bored, and frustrated.
"I sit here today and wonder who's in charge of the project," Collins said. "Is it the ESDC? Is it Forest City Ratner? Is it the MTA? Is it the Governor? Is it the Mayor? From what I can tell, and what I've read, it seems as if Forest City Ratner is... calling all the shots. Forest City sets the timetable. Forest City Ratner defined what the project footprint will be. Forest City Ratner decides how much money they need from the state, the city... and remarkably, they fail to show at community hearings; they fail to show up when our legislators ask them to, to be held accountable. As a resident, citizen, MTA user, I am in disbelief at how little oversight and how little accountability Forest City Ratner is being held to by people who are being paid by our money."
Incoming Chairman/CEO Mullen (left in photo), a resident of Rochester, looked like he was taking it all seriously.
On a monitor at the end of the room, two ESDC board members in Buffalo--more than 290 miles away--were following the meeting via a video feed.