Those are some takeaways from the board meeting (board materials, video) 12/21/17 of Empire State Development (ESD), held one day after Gov. Andrew Cuomo triumphantly announced plans for a new "privately financed" arena--with unspecified public infrastructure costs and a seeming sweet lease worth $40 million--for the New York Islanders at Belmont Park.
Newsday's Jim Baumbach pointed out the meeting and the likely timeline in tweets yesterday (noted in Metro), and one respondent, claiming authority though without clear insider knowledge, suggested that next year--during which the Islanders have already committed to a fourth season at the Barclays Center--they'll play half their games at the Nassau Coliseum, and then would play there for the next two years. (We'll see.)
(Update: Islanders' co-owner Jon Ledecky says "something will be worked out," but the Coliseum "doesn’t have the amenities and it doesn’t have the things that a third generation new arena will have. … It’s small, there’s no suite revenue, there’s no sponsorship revenue. There’s a whole bunch of issues, if you want to be a cap-max team, to play all your games there is going to be difficult.")
Proposed project terms
According to the board materials (p. 335), the proposal from New York Arena Partners involves:
• A 49-year lease with renewal options for a total of 99 years;(Emphasis added)
• Commitment to construct a mixed-use entertainment complex on the Sites that includes an approximately 660,000 square foot arena with approximately 18,000 seats that will be the home of the New York Islanders, 435,000 square feet of retail, dining and entertainment space, a 193,000 square foot hotel, and 10,000 square feet of offices and parking;
• Commitment to build and operate up to 10,000 square feet for community use and up to 305,000 square feet for open and/or recreational space;
• Commitment to construct the Project as LEED Version 3 Gold or equivalent;
• Commitment to achieve an overall goal of 30 percent for MWBE participation, 15 percent for New York State-certified Minority-owned Business Enterprise (“MBE”) participation and 15 percent for New York State-certified Women-owned Business Enterprise (“WBE”) participation as well as a 6 percent goal for Service-Disabled Veteran Owned Businesses (“SDVOB”);
• Commitment to pay prevailing wage during the initial construction; and
• Commitment to pay all costs associated with the transaction as well as an ESD administration fee of 6.5% of the transaction.
I'm not sure what "all costs" refers to--surely they include the fees for legal representation and the environmental review. If ESD takes 6.5%, that differs, as far as I know, from the Atlantic Yards example, and would represent a recognition of the in-house administrative costs.
Questions at the board meeting: market study
The description of the project, by ESD staffer Tom Conoscenti, begins at about 1:54 of the video, and questions from board member Joyce Miller (who once raised a smidgen of doubt about Atlantic Yards) begin at about 2:00.
"Was a marketing study done for this kind of use," she asked. "Was it done by the agency, by the developer? What were the results?
"ESD has not done a market study for this type of proposal," Conoscenti responded. "The developer, in their submission, analyzed the hotel market, the retail market. They have not shared the full details of those studies, but their proposal is based on the information and the market conditions that they perceive."
Note that the hotel market and retail market are a smaller part of the project than the 660,000 square foot arena--which, by the way, is about the same volume as the Barclays Center, but in this case would be built with hockey in mind, not basketball.
The Belmont arena, especially if it takes event business away from the Nassau Coliseum, might be a financial success, but the Belmont partners' perspective--and market study--is not necessarily that of the state, which might care about the impact on other government-owned and -supported arenas, Nassau Coliseum and Barclays Center.
Note that, when the arena builders go to the bond market, they'll have to include a market study. But such studies have their flaws--in the case of Barclays, the initial study predicted nearly three times the revenues needed to cover debt service, but that was way over-optimistic. A second study, upon the 2016 bond refinancing, predicted an easily profitable second year with the Islanders, again over-optimistic.
Miller noted that "this kind of development has not always been successful" and was "based on optimistic market projections, usually."
Conoscenti said the offer was based "on the market studies and the information they have prepared and submitted to ESD." That still ignores the issue of the regional market for an arena.
No loss if it doesn't work out?
"If there's a problem, and it does not work out for the developer, ESD does not suffer a loss, Miller asked.
"Correct," Conoscenti responded.
"We just have to find a new project," she said.
Consocenti noted that formal designation does not happen after the environmental review is concluded.
His answer about the lack of a loss seems a bit incomplete. Surely New York State coffers would suffer a loss if the project is not paying the lease, valued at $40 upfront million over 49 years (and surely cumulatively more), and would suffer from the lack of an alternative project bringing in new revenue.
"What's the community response?" Miller asked.
"We've gotten responses in all buckets," Conoscenti responded, indicating pro and con.
"We've gotten very positive response from locals about new jobs and economic revitalization," added ESD's Holly Leicht, noting that people are also concerned about traffic, transit, and security, all of which would be dealt with in the environmental review.
Kevin Fitzgerald, the deputy mayor of Floral Park, which borders Belmont, noted that a letter submitted in December prior to a public "listening session" raised many questions that went unanswered. They "continue to request that a master plan be developed, so all developments are complementary to each other," he said.
The review process
Leicht said the environmental review would take 12 to 16 months, and ESD was already talking with the Long Island Rail Road and the Metropolitan Transportation Authority. The scoping hearing--assessing the scope of the environmental review--should happen in March.
They will start a Community Advisory Committee, "which we typically do upon designation," she said. (With Atlantic Yards, the CAC was criticized as inadequate, then was not reconstituted.)
The CEO's take
ESD President and CEO Howard Zemsky was asked about "your own reaction to bringing the hockey team to Belmont."
"You're talking about 40 acres of underutilized parking lots, the border of Long Island and Queens," Zemsky responded. "This has been discussed for a long time, how are we going to utilize this underutilized asset that gets used for the Belmont Stakes once a year. You're talking about a billion dollar investment, a long term lease, no public money of any consequence."
No direct public money. But clearly significant costs to the public. He's right that this is an underutilized asset; it's just not clear that this is the best solution for the public.
"The Islanders have wanted a hockey team back on Long Island," he said. "It's not just a hockey team, it's a venue for events year round, a tremendous economic development engine. You're talking about 12,000 construction jobs, 3,000 permanent jobs."
I've previously noted that construction jobs are in job-years and it's hardly clear that the permanent jobs will be full-time. The term "economic development engine" always gets bandied about.
Asked about the Nassau Coliseum, Zemsky noted that it's been renovated, but the National Hockey League has made it clear "that the Coliseum does not meet a standard for NHL hockey in this era. So they're building an arena that's about 18,000 people, a state of the art arena, mixed use, retail, commercial, it's a massive project, I mean, it's a billion dollar project."