Skip to main content

Breaking down the AY fiscal analysis: why if you follow NYC EDC in your personal economics you could go to jail

OK, I too am inspired by Empire State Development Corporation CEO Marisa Lago's folksy style, explaining that value engineering is just like getting a four-burner stove instead of a six-burner stove.

Noticing New York's Michael D.D. White demolished Lago's arguments, suggesting some very helpful rules regarding both kitchen renovations and megadevelopments.

NYC EDC's "analysis"

So let's talk "economic and fiscal impact analysis." That was the exercise by which the New York City Economic Development Corporation (NYC EDC) concluded that Atlantic Yards would bring more than half a billion dollars in revenue to the city over 30 years, a figure touted enthusiastically by NYC EDC president Seth Pinsky at Friday's AY oversight hearing.

I don't want to be accused of "blocking the program, with these complicated questions" (to quote the disrespectful Rev. Herbert Daughtry), so let me break it down.

To NYC EDC, "economic and fiscal impact analysis" concerns revenue you take in. That's it. No costs, no subsidies.

A personal example

OK, I have just conducted an "economic and fiscal impact analysis" regarding my personal future revenue stream. After 20 years, I conclude, I will easily become a millionaire.

Yippee!

Oops--I forgot to factor in rent, food, and tons of other things, including taxes. If I don't pay taxes, well, I go to jail. 

It renders my "economic and fiscal impact analysis" slightly flawed.

Didn't this kind of shoddy math lead to our economic meltdown?

Cost-benefit analysis?

At one point, Pinsky even called the NYC EDC's exercise a cost-benefit analysis, even though it didn't factor in direct subsidies from the city (at that point, $100 million; now, $205 million), indirect subsidies (e.g., tax exemptions), and increased public costs to provide services.

He clearly misspoke. 

I asked NYC EDC spokesman David Lombino when a new NYC EDC analysis was coming, and he said it would be soon.

I also asked about the methodology--whether it would be a true cost-benefit analysis--and didn't get an answer.

IBO vs. NYC EDC

The Independent Budget Office (IBO) calculated that the arena would be a money-loser for the city, given the doubling of the city's contribution. (The IBO works for NYC, so it didn't recalculate the impact on the state, which might well still come out ahead in terms of new arena revenues.)

NYC EDC's Lombino told WNYC's Matthew Schuerman that the IBO report was incomplete because it considered only the economic impact of the arena rather than the project as a whole.

Fair enough, especially because the IBO applied all the direct subsidies to the arena. But the IBO was unable to conduct a cost-benefit analysis for the project as a whole, saying in its September 2005 report it was limited by methodological challenges.

In its report, NYC EDC didn't even try. It just added up new revenues for the project as a whole. 

And even that strategy has its flaws.

Arena revenues are overstated, as I suggest below. And the operations of the mixed-use development likely would generate far fewer taxes than estimated.

Why? For one thing, there no longer would be 2 million square feet of office space, which NYC EDC estimated would generate some $87 million in revenue. Sure, there's an office building on the boards with about 650,000 sf, but there's no market now, and maybe never.

For another, NYC EDC counts $132 million in new revenue from the income taxes of new residents. Forest City Ratner consultant, sports economist Andrew Zimbalist, also counted income taxes, in a report that triggered my $6 billion lie post.

The Empire State Development Corporation, in its own flawed fiscal analysis, didn't count income taxes. No one should. 

As James Parrott of the Fiscal Policy Institute told me, "I don't know of any serious cost-benefit analyses of mixed-used economic development projects that count the taxes of residents."

Flaws regarding arena revenues

Both the NYC EDC and IBO analyses suffer from fundamental flaws regarding arena revenue, as I pointed out in February.

Both assumed that 30% of New Jersey season ticket holders would be retained. However, as I pointed out, there's reason to believe the team now has a lower attendance base, thus sending  a smaller percentage of New Jersey-based fans to Brooklyn and lowering new revenues for New York City and State.

Also, both analyses assumed that both the Meadlowlands arena would close and there would be no new arena in Newark, thus making it easier to book events at the Brooklyn arena. However, the Prudential Center in Newark is already open.

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…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Atlantic Yards/Pacific Park graphic: what's built/what might be coming + FAQ (post-dated pinned post)

This graphic, posted in January 2018, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won't be so cheap.

As …

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Some skepticism on Belmont hockey deal: lease value seems far below Aqueduct racino; unclear (but large?) cost for LIRR service

As I wrote for The Bridge 12/20/1, The Islanders Say Bye to Brooklyn, But Where Next?, the press conference announcing a new arena at Belmont Park for the New York Islanders was "long on pomp... but short on specifics."

Notably, a lease valued at $40 million "upfront to lease up to 43 acres over 49 years... seems like a good deal on rent for the state-controlled property." Also, the Long Island Rail Road will expand service to Belmont.

That indicates public support for an arena widely described as "privately financed," but how much? We don't know yet, but some more details--or at least questions--have emerged.

An Aqueduct comparable?

Well, we don't know what the other bid was, and there aren't exactly parcels that large offering direct comparables.

But consider: Genting New York LLC in September 2010 was granted a franchise to operate a video lottery terminal under a 30 year lease on 67 acres at Aqueduct Park (as noted by Gov. Andrew Cuomo).

As…

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…