Two reasons Ratner's arena switch is fishy: construction costs down and Gehry design impossible; are other costs being off-loaded?
Ratner would be saving only about 20%--$200 million on an arena reported at $1 billion or $950 million--so that's fishy, since lowered construction costs should already have taken care of much of that gap.
Construction costs decline
Construction costs have already been going down--9% nationally since mid-2008, according to Turner Construction Company, which is also the main Atlantic Yards contractor.
Beyond that, local concessions from unions and the construction industry in New York have lowered costs 8% to 20%, as shown in Forest City Ratner's renegotiation after stopping work at the Beekman Tower.
So that should have taken care of most of the cost difference between the announced arena cost in 2008 and the current announced cost.
Ellerbe Becket vs. Gehry
The new arena (right) would cost much more than several previous iterations of the Gehry design, which began at $435 million, at project approval in December 2006 cost $637.2 million, then ballooned to $950 million last year, and has since been reported--perhaps inaccurately--at $1 billion.
It's a design issue
As I pointed out on Friday, Gehry's design was impossible, given Forest City Ratner's unwillingness to build the four towers surrounding it and the Urban Room at the entrance to Building 1, the flagship office tower.
FCR may blame the office market for the inability to construct Building 1.
However, the delay in the other three towers likely is also owed to the scarcity of tax-exempt housing bonds, and there's no evidence so far--I've filed Freedom of Information Law (FOIL) requests, so far stymied--that that the Empire State Development Corporation (ESDC) assessed the availability of such funding when it approved the project in 2006.
The new arena in Orlando would cost $480 million. That's a decent benchmark for current arena costs.
Indirect costs added?
So, what about that slack? Is Forest City Ratner attaching indirect project costs to the arena price tag, thus having them paid for via tax-exempt bonds, which are a cheaper way to raise money?
We need some specifics about the costs of the arena. The ESDC which is supposed to oversee the project, should explain.