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

So, were Barclays Center tax revenues from direct spending in line with initial projections? Not even close (though numbers did change).

The sunny and (I believe) outlandish estimate by Nets/arena CEO David Levy that Barclays will host 285 a year got me thinking about another, even more dubious set of numbers.

Remember this 10/1/13 Daily News headline, Barclays Center scores: City says arena generated $14 million in tax revenues in its first year?

I was skeptical, since the New York City Economic Development Corporation is an arm of the mayor's office, and its previous studies of Atlantic Yards had been rather self-serving,

But I didn't have the data and context at the time to refute it. Which I do below.

The claims

From the article:
The $14 million in tax revenues includes sales tax associated with purchases inside and outside the sports and entertainment complex, as well as income tax generated by Barclays Center employees and the Brooklyn Nets.
Forest City Ratner executive chairman Bruce Ratner called the numbers confirmation that the city and state's investment in the Barclays Center was money well spent.
...Likewise, Mayor Michael Bloomberg, who provided critical support for the Atlantic Yards project, touted the first-year numbers.
"In just its first year, the Barclays Center is already proving to be a major win for New York City and its economy," Bloomberg told the News.
...The city declined to say whether the numbers met its projections.
That was a key question by reporter Phyllis Furman.

What were the projections?

Well, Andrew Alper, then President of the New York City Economic Development Corporation (NYC EDC), set a benchmark at a 5/4/04 City Council oversight hearing: "Our initial estimates indicate that the arena alone can generate in excess of $20 million a year in tax revenue from direct spending."

Yes, the transcript is correct. I confirmed it against a video of the hearing, shot by the producers of the Battle for Brooklyn documentary.
Click to enlarge

But that number wasn't realistic.

It was dialed back significantly by the time the NYC EDC produced a report dated 6/27/05, excerpted at left.

The direct sales tax impact was expected to be $2.95 million after the arena opened and then reached income stabilization in 2009, with very small numbers from income tax.

Visitor spending was estimated at $1.38 million in direct impacts. An additional $3.46 million in indirect impacts was estimated.

Add up the spending numbers, assuming that indirect impacts includes spending, and the total is $7.79 million.

So what were the numbers developer Forest City Ratner reported to the city?
Annotation added

Doing the math

My Freedom of Information Law request to NYC EDC, with documents excerpted at right, showed two types of tax revenue from spending:
  • $3.53 million in sales tax from arena retail spending
  • $3.05 million in sales tax from visitor spending outside the arena. 
That's barely $6.6 million, one-third of Alper's estimate, and still well below the $7.79 million once estimated.

But even that's not an apples-to-apples comparison, because the sales tax from visitor spending was divided into three buckets: direct, indirect, and induced, resulting from workers' spending.

(Note that the earlier NYC EDC estimates did not include induced spending, which some consider a stretch.)

If perhaps one-third of that, or $1 million, was direct spending, then the total was barely $4.5 million, or less than one-fourth Alper's estimate. Cut out the induced spending, and it's even further below the $7.79 million estimate.

(Note: sports economist Andrew Zimbalist's 2005 report for Forest City estimated $9.62 million in new sales tax revenue from the arena, up significantly from his 2004 estimate of $6.43 million.)

Not that NYC EDC, or Bloomberg, or Ratner, were about to come clean.

They produced a report about benefits, without assessing it against previous estimates and reports, or against the public costs, such as in the 2009 Independent Budget Office report, which took a broader look.

No wonder an IBO official, interviewed for a 2/13/15 WNYC piece, said it was still unclear what the city figures meant. Now we know more.

Further adjustments

Given rising costs and inflation, the more recent numbers should have been higher than previously projected.

Another factor is that the 2005 NYC EDC report, for example, assumed that 30% of the Nets' New Jersey ticket holders were retained, which obviously didn't happen. The estimates from 2013 were based on tax revenues from non-New York City residents.

It may well be that a future fiscal benefits report will find that far more income taxes than projected will be paid, as more and more higher paid employees (including the Nets) live in the city (unless they have savvy tax advisors and only live part time).

If so, that still won't obviate the need for a cost-benefit analysis, not merely a report on benefits.