Downtown Brooklyn Partnership claims (nah) city & state governments have already funded platform over LIRR railyard, claims $686M (!) in arena public support.
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| Downtown Brooklyn Partnership growth map; Atlantic Yards/Pacific Park is at right |
It's an interesting project, using maps and graphics to show the remarkable transformation of the area--not just the rezoning area--since the 2004 Downtown Brooklyn rezoning, with 32 million square feet of new development.
What shocked me was the claim, discussed further below, that city and state governments have already funded the platform, which I first suspected was an inadvertent disclosure of an upcoming subsidy but turned out to be a bogus overreach.
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| From DBP report |
Also, it was surprising that the DBP, rather than trying to minimize--as is typical for boosterish business groups--the public subsidies and tax breaks supporting the Barclays Center, instead leans toward maximizing them, citing a $686 million figure.
That, as I discuss below, deserves multiple caveats. But it does bolster the argument that the financial success of BSE Global, which owns the arena company, the Brooklyn Nets, and more, should be shared with the public.
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| Downtown Brooklyn rezoning boundary |
Boundary issues
It's worth noting how the DBP self-interestedly stretches the boundaries of Downtown Brooklyn into DUMBO, Fort Greene, and below Atlantic Avenue to include various sites, including the dogleg outline, at far right, of Atlantic Yards/Pacific Park.
(Heck, it even include the block between Sixth and Carlton avenues between Dean and Pacific Street that includes Newswalk and row houses, which is omitted from Atlantic Yards/Pacific Park.)
While arguably the arena extends the edge of Downtown Brooklyn, the rest of the buildings identify with Prospect Heights.
Consider: 461 Dean, 38 Sixth, 662 Pacific (Plank Road), and 18 Sixth (Brooklyn Crossing), near the arena, and 535 Carlton, 595 Dean, and 550 Vanderbilt, all at least one long block away, each claim Prospect Heights.
As I wrote in 2016, the impressive statistics the DBP cites for new buildings, residents, and private-sector jobs rely on a “Greater Downtown Brooklyn” well beyond that CBD, including Brooklyn Bridge Park, DUMBO, the Brooklyn Navy Yard, and pieces of Fort Greene.
Only by citing Atlantic Yards/Pacific Park does the DBP generate its affordable housing totals.
What went right, and wrong
The DBP report, in triumphant mode, also scants the failure to require affordable housing in the Downtown Brooklyn rezoning, which turned out to be a residential upzoning rather than a rezoning for office space as originally conceived, and analyzed.
As I wrote in 2016, the DBP, focused on growth, doesn’t acknowledge the losses, what filmmakers Kelly Anderson and Allison Lirish Dean called a “sort of red-lining in reverse.”
"Public investment" of $686 million for arena?
The report claims, in the graphic and text excerpt below, that the Barclays Center claims 29% of the public investment in "Downtown Brooklyn" since 2004, with $688 million "invested" by city and state governments.
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| From DBP report |
That includes "funding for the arena and project infrastructure such as the platform built over the LIRR rail yard."
What?
Was that an error, or were they jumping the gun by disclosing an upcoming public commitment of more than $300 million to build the platform?
After all, original developer Forest City Ratner claimed $305 million in direct subsidies from the city and state, used for land purchases and infrastructure--the city disagreed--and the two-block platform should cost more than $300 million.
Not the platform
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| From DBP report |
That document, titled "The Proposed Arena at Atlantic Yards: An
Analysis of City Fiscal Gains and Losses," does not address the future platform, which is needed for construction of six towers over the Metropolitan Transportation Authority's Vanderbilt Yard, a cost that has so far stymied two developers, Forest City and now Greenland USA.
Looking at the IBO
The $686 million in total public costs, I was told, is calculated by adding the $273.7 million in total costs to current budget and the $412.8 million in opportunity cost. I outlined those in blue below.
Given that $193.9 million, outlined in orange, is a federal cost, based on tax-exempt financing, that sum--about 28.2%--should be subtracted from the city and state "public investment," producing a new total of $492.6 million, at least as of the 2009 analysis.
It's also worth nothing that, as outlined in green, the IBO calculated an overall savings on the arena as $726.3 million, more than the total direct costs and opportunity.
However, all those numbers deserve asterisks. The IBO assumed a tax-exempt bond issue of $678 million, not the ultimate $511 million, which means commensurate lower opportunity costs, from a total of $200.3 million to closer to $150 million. at least based on 2009 assumptions.
The Brookings Institution, for example, in 2016 calculated a federal subsidy of $122 million, with a total revenue loss of $161 million.
Then again, later that year, a refinancing at a lower interest rate was estimated to save the new arena operator, Mikhail Prokhorov, and his successors, $90 million more.
"IBO’s spending estimates are also based on basketball revenue
projections consistent with an initial average ticket price of close
to $60, which is in line with current average NBA ticket prices," the report said. Ticket prices are way higher now.
IBO assumptions
Keep in mind that some IBO assumptions deserve a re-assessment, as either add to or subtract from the presumed revenues. (The IBO just analyzed the arena, not the rest of the project, and ignored some forms of publicly-enabled support, such as the giveaway of arena naming rights.)
"IBO assumes half of the
money spent by Nets fans, concert-goers, and other spectators
at the new arena and surrounding area would amount to an
infusion of new spending into the New York City economy (the
other half being spending shifted within the city by residents)," given that "a portion of existing Nets fans would
travel to Brooklyn for games."
However, far fewer New Jersey fans of the Nets wound up coming to Brooklyn, and the team reconstituted its fan base locally.
But the IBO also assumed "an average of 1,100 motorists paying
$18 for parking during games." Far fewer drivers pay for parking, and it costs a lot more.
The IBO also, to my mind, lowballed the value of the street beds of Fifth
Avenue between Flatbush and Atlantic avenues, the street
bed of Pacific Street between Flatbush and Sixth avenues,
as well as a small traffic triangle at the intersection of Fifth
Avenue and Pacific Street, as worth only $3.7 million.
The IBO also valued city-owned parcels provided at no cost as worth, according to city records, $6 million.
Those numbers, however much they rely on "comps," don't reflect the new valuable of buildable square footage under New York State's override of zoning to allow the developer to build the project as approved.
The IBO bottom line: a loss?
As shown in the graphic below, the IBO ultimately projected that the arena would be a loss to the city based on the costs to the current budget compared with new tax revenues.
And while it was projected to bring a net benefit to the state and the MTA based on those metrics, it ultimately would be a loss based on opportunity costs. Those figures, of course, were ignored by the DBP in its report.
Yes, that chart deserves a re-analysis, based on updated information.
Even losses were still calculated, it wouldn't surprising for boosters to argue that the arena has been "worth it" in helping redefine Brooklyn.
Still, it's wild to debate that when the arena's clearly been such a huge benefit to the owners of BSE Global, which includes the Brooklyn Nets, New York Liberty, and the arena operating company, enabling a recent investment of $688 million by the family of Julia Koch.
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