WCBS: "With the state in such dire fiscal straits why are you supporting this costly project, which according to this writer may end up costing the state and New York City about 2 billion in subsidies and tax breaks?"

Governor Paterson: "There is a point that the listener correctly has addressed, that if it starts to become too costly, a lot of these projects that we were for, we might have to change our mind. To this point we don't think that we are there with the Atlantic Yards and continue to try to help them."

It is encouraging to know that the Governor agrees, especially in this economic environment, that megaprojects that become too costly require re-evaluation. But we'd argue that we are there with Atlantic Yards and have been for quite a while. With no evidence at all that Forest City Ratner can build its project, let alone bring its pruported benefits to fruition, the city and state have committed substantial subsidies, breaks and other special support to the project.

Clearly during this dire fiscal crisis—so dire the Governor himself presented a rare broadcast speech about the situation just two weeks ago—the construction of a One Billion Dollar and Counting Arena is a frivolous and risky endeavor which is too costly. The city and state will, if not legally then effectively, be on the hook for the $800 million tax-exempt bond Forest City Ratner has stated it is pursuing.

Then we must look at some of the rest of the accounting:
- $100 million direct cash subsidy from the state.
- $205 million direct cash subsidy from the city.
- A blank check promised by the city for "extraordinary infrastructure costs."
- An estimated $1.4 billion worth of tax-exempt housing bonds from the state.

Though the NY Post's $2 billion in government back financing is debatable, the developer claimed three years ago that the public investment in the project would be $1.1 billion. Either figure is too costly considering neither the city or state have shown that there would be a meaningful financial return for the taxpayers—especially seeing as how Ratner has provided the public and government with no confidence whatsoever that the project can be built.

Ratner's land speculation—speculation on private and public land (the rail yards and city streets)—is too costly.

And while the MTA threatens successive fare hikes, the agency which is largely controlled by the Governor, can make a choice:
Does it close its $100 million deal with Ratner to sell the 8-acre Vanderbilt rail yard to the developer well below the $214.5 MTA appraisal of the property? Or does it pull out of that deal (the deal has not closed yet and no money has been exchanged), divide the yards into multiple parcels and put the parcels through a genuine bidding process which would be likely to bring in something around the appraised value or even higher?
----------------

Norman Oder gives his take on the Governor's response on his Atlantic Yards Report.

...“A neighborhood changes incrementally,” said Scott Levitan, Forest City senior vice president and development director for the project. “It’s filled with people who’ve owned their house, meticulously maintained it, and you wake up one morning and the neighborhood has disintegrated around it. It’s not anyone’s fault. Hopefully, this is the last time we’ll have to demolish a neighborhood in order to save it.”... (Emphasis added.)

From the newspaper that has never seen a Forest City project it didn't like, today The New York Times ran a fairly uncritical story about how the development company and Johns Hopkins Hospital "have joined forces to demolish a neighborhood to save it." [No joke!]

Though the article contained this disclosure, "One of its affiliates, Forest City Ratner, was the development partner for the new Manhattan headquarters of The New York Times Company," it doesn't mention that the Times Company and Forest City Ratner (FCR) now co-own the building.

Also absent from the article is any mention of "eminent domain," a controversial component of the plan to build The Times's headquarters and FCR's Atlantic Yards project. Instead, The Times dances around the topic:

To accumulate land for the site, the city, state and Johns Hopkins in 2003 created East Baltimore Development Inc. to acquire buildings, tear them down, and then sell the land to developers.

[Read: In order to acquire enough land, the government and Johns Hopkins created a public-private corporation empowered with the use of eminent domain to force people to sell their homes and/or businesses.]

...State Constitutional claim

The novel state claim relies on Article 18, section 6 of the New York State Constitution, which provides that no loan or subsidy shall be made to aid any project unless the project contains a plan for the remediation of blight and the “occupancy of any such project shall be restricted to persons of low income as defined by law and preference shall be given to persons who live or shall have lived in such area or areas.”

However, the suit states, the project is not “restricted to persons of low income” and no preference has been given to “persons who live or shall have lived in such area,” the petition claims. Actually, residents of the three adjacent Community Board districts would be given preference in access to the project’s affordable housing.

Article 18 concerns housing; its text:
§6. No loan, or subsidy shall be made by the state to aid any project unless such project is in conformity with a plan or undertaking for the clearance, replanning and reconstruction or rehabilitation of a substandard and unsanitary area or areas and for recreational and other facilities incidental or appurtenant thereto. The legislature may provide additional conditions to the making of such loans or subsidies consistent with the purposes of this article. The occupancy of any such project shall be restricted to persons of low income as defined by law and preference shall be given to persons who live or shall have lived in such area or areas. The defense on this will be interesting. The ESDC may argue that the $100 million, is directed at the arena alone. However, section 6 seems to contemplate that eminent domain used for recreational and other facilities can include housing. Perhaps the ESDC will argue that other sections of the state constitution may offer different guidance.

Any precedent?

I asked plaintiffs' attorney Matthew Brinckerhoff if there were any precedent regarding section 6. He responded that there was no precedent, which (to me) makes the claim dicey, despite what might seem a strong argument on its face:
If your question is whether or not ESDC/UDC has used its powers in the past to condemn land and provide bonds/loans/subsidies and the like to developments that were not restricted to aiding persons of low income, the answer is, of course, yes. So, in a very narrow sense, there is precedent that ESDC/UDC has done this in the past, which to me only means that it has violated this provision of the NY Constitution in the past.

There is no legal precedent that I know of that addresses the issues raised by this particular claim. Article 18 of the Constitution was enacted in 1938 after the constitutional convention of that year (the last one to be enacted by a vote of the people). Section 2 grants the legislature the power to delegate its eminent domain power to local governments and "public corporations." Section 6 restricts loans or subsidies to projects that are (or presumably will be) occuppied by low income persons who live or have lived in the area. Section 10 says that nothing in this Article 18 "shall be deemd to authorize or empower the state, or any city, town willage or public corporation to engage in any private business or enterprise other than the building and operation of low rent dwelling houses for persons of low income as defined by law, or the loaning of money to owners of existing multiple dwellings as herein provided."

I read Article 18, sec. 6 as a substantive restriction that attaches whenever the government seeks to both (1) clear slums or blighted areas and (2) replace slums with housing for persons with low incomes by providing loans or subsidies. If both condition are met, as ESDC alleges they here are when it claims that the purpose of the project is to remedy blight and provide affordable housing, than sec. 6 requires, that the housing be restricted to low-income (which presumably cannot include luxury condos and corporate sky boxes) with preference given to residents who lived in the footprint in the first place.

"It is not a new schedule. I think Bruce was just stating that the schedule in place is in fact very aggressive. We plan to break ground this fall and are working to open in calendar year 2010. While that's the goal, if it is not met then it would end up being calendar year 2011."

Bender's statement is about as trustworthy as Chuck Ratner's clarification last year, when, after slipping and indicating the arena would open in 2010, insisted that he meant 2009.
http://atlanticyardsreport.blogspot.com/2007/03/fcr-offers-clarification-on-ay.html

Bruce Ratner makes it official: AY arena would open in mid-2011 (best-case scenario)

Despite public statements to the contrary, as on the Barclays Center web site (right), the New Jersey Nets have three, not two, more years at the Izod Center in the Meadowlands--and that's in a best-case scenario.

The word comes directly from Forest City Ratner president (and Nets majority owner) Bruce Ratner, who indicated to shareholders in June that construction would start in January and take two-and-a-half years--a timetable far different from the developer's and team's public statements, including to season ticket-holders.

Indeed, just last week, during a July 30 Fox Business Channel segment (go to 3:43), Nets Sports & Entertainment President CEO Brett Yormark claimed, "We plan on breaking ground in November and being there for the '10-'11 season."

In May, claims of 2010

Yormark was consistent with the developer's rhetoric. Remember, in a May 4 op-ed in the Daily News, Bruce Ratner stated that the developer aimed "to break ground on the Barclays Center later this year," then "break ground on the first residential building," complete and open both at the same time, then "break ground on the next residential tower in 2010."

That sequence suggests a 2010 arena opening; indeed, the accompanying Daily News article reported 2010 as the arena opening date. (Note that the FAQ on the Atlantic Yards web site leaves some wiggle room, because it does not indicate that construction on the second residential tower would begin after the arena and first tower were completed.

Governmental officials buy the 2010 opening date. In a 5/8/08 letter to the Internal Revenue Service and U.S. Treasury Department, arguing that the AY arena deserves tax-exempt bonds under a more lenient standard, the New York City Industrial Development Authority and the Empire State Development Corporation repeated the claim that the arena was anticipated to open in 2010.

In the May 12 Sports Business Journal, Yormark said the arena would open in time for the 2010-11 season.

However, a May 15 press release announcing the sale of luxury suites promised an opening in "calendar year 2010," which I suspect might mean New Year's Eve, given that the three-year bridge reconstruction schedule ends in January 2011.

In June, candor about 2011

A month later, at the June 19 annual meeting in Cleveland of Forest City Enterprises, parent of Forest City Ratner, Bruce Ratner revised his prediction by one year, to mid-2011, which means the arena would open for the 2011-2012 season, three seasons from now.

While the webcast of the meeting has expired, the transcript is available (for sale) and has not been corrected, so I'm assuming this segment is correct:

WILBUR BLACK: I'm [Wilbur Black], and I've been attending for many years. We were wondering, my grandson, was wondering about your New York Nets -- or New Jersey Nets, the situation on that...

ALBERT B. RATNER: Okay. Bruce, do you want to answer the Nets question?...

BRUCE RATNER: I don't know whether your grandson is a Nets fan or a Brooklyn fan or both so I know how to answer the question. But we're doing very well on the Atlantic Yards project. Our hope is that we can close our loans and close the transaction by the end of the year. And then it will be about two and a half years to build our arena, and then the Nets will move from New Jersey to Brooklyn. So, we're working hard at it, and I think we're finally close to a closing.
(Emphasis added)

If it takes 2.5 years to build the arena, and construction starts in January 2009, the arena would open in July 2011. Still, keep in mind that the Nets have extended their lease in their current facility to 2012-13, just in case.

Also keep in mind that there's no certainty that groundbreaking for the arena would occur in January--legal cases, including the just-filed state eminent domain lawsuit, may still be pending.

Misleading the public and ticket holders

Beyond the regularly misleading statements to the public, Forest City Ratner has been deceiving season ticket-holders. On July 8, NetsDaily reported, some 40 such supporters were told at an event in Manhattan that the team “anticipates” playing in the Barclays Center during the 2010-11 season.

That was more than two weeks after Bruce Ratner told shareholders in Cleveland something very different.

As noted, Yormark repeated that timetable during the July 30 Fox Business Channel segment.

This week in history...

Although Marty Markowitz is big on unions now, this was not always the case. Before becoming the illustrious Brooklyn Borough President, Markowitz was the State Senator that the Times described as "the only politician in the city who deliberately seeks to entertain." His favorite form of flamboyance, then as now, was free concerts. And what better way to keep costs down for the corporate sponsors?

To keep costs down, Mr. Markowitz persuaded the state to dispatch prison inmates to set up the stage for each concert.

Perhaps this practice would have gone unnoticed, until tragedy struck in 1990:

At Wingate Field six years ago, the rhythm-and-blues singer and composer Curtis Mayfield, best known for the hit title track from the movie "Superfly," severely injured his spine when a windstorm blew over a lighting tower and part of the stage collapsed.

But the important thing is that no egos were injured in the incident:

Mr. Markowitz said attendance did not suffer at concerts after the incident, but added that he lost a corporate sponsor and that Mr. Mayfield, who is paralyzed from the neck down, sued his insurance company...

Continue reading.

News Highlights of the Week: July 26 – August 1, 2008
Architectural Record. Jenna M. McKnight and Alanna Malone

In mid-July, Frank Gehry pulled out of his first major venture in England: King Alfred Development, a seafront mixed-use project in Brighton that has been mired in controversy since it was unveiled. Now, the developer, Karis, says the Canadian-born architect is considering getting back on board, according to The Architects’ Journal. Karis managing director Josh Arghiros told the UK-based publication that he thinks Gehry would consider returning for the chance to “tweak it the way he would want it to be.” His statement came a day after Dutch Bank INC, the project’s main investor, pulled its support—an announcement that prompted World Architecture News to declare that the “King Alfred Project is dead.” The half-billion-dollar project has encountered fierce resistance from the get-go, much like Gehry’s Atlantic Yards in Brooklyn (RECORD, May 2008). It remains to be seen whether Karis will be able to secure the necessary funding before the King Alfred Development becomes a lost cause.

• Rep. Dennis Kucinich, chair of the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee
  
• Bettina Damiani, Project Director of Good Jobs New York
  
• Neil deMause, Author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit. His website is Field of Schemes

... REP. DENNIS KUCINICH: Well, I could say that my subcommittee staff—and again, I’m the chair of the Domestic Policy Subcommittee, which has jurisdiction over this matter—and our subcommittee staff is in contact with officials of both the City of New York and the New York Yankees to discuss their potential appearance in front of our congressional subcommittee.

I think that it’s very important to understand that we’re looking at a public policy matter here that relates not only to New York and not only to the Nets and the Atlantic Yard project, but it also relates to the whole country, as your other guests have said, because it’s quite possible that there are billions of dollars in tax benefits that should be going to municipalities for the purposes of repairing their infrastructure and for schools and other things and that are instead being diverted for these private sports complexes.

And the question is one of public policy, one of the IRS, and in the case of the New York Yankees, questions of securities law, because of the various amounts of the appraisal, $45 a square foot versus $275 a square foot, which have a bearing on the overall cost of the project. And if the cost of the project is inflated, that’s going to be of interest to the SEC, as well as the IRS.

(Emphasis added)

Since not everyone has the time to visit the office during the day, for the second consecutive year, Assemblyman Jeffries will bring his office to a location where many community members find themselves at some point when returning home from work: The subway. Please refer to the schedule below for locations and times:

A modest proposal: Bruce Ratner should bunk on Dean Street

If, despite noise and disruption experienced by residents, daily life is sufficiently tolerable in the Atlantic Yards footprint, as per the Empire State Development Corporation (ESDC), perhaps some ESDC officials, joined by representatives of the Bloomberg administration and developer Forest City Ratner, can spend a few nights on Dean Street.

After all, then-Chicago Mayor Jane Byrne and Newark City Council Member Cory Booker lived in housing projects to show their solidarity with residents and to point to conditions that needed improvement. So Brooklyn booster Bruce Ratner could take a field trip from his $7 million Upper East Side mansion and host a sleepover in one of the residential buildings his company owns.

FEIS Noise Receptor Locations: The noise impact on the "footprint" [heavy black outline] residents was not studied.

Glaring gap: AY EIS ignored noise, vibration, disruptions faced by footprint residents

Grating, honking noise from construction equipment. Vibrations that shake buildings, enforcing a 7 a.m. wake-up call. Cracks in building walls and steps. Dust and dislodged paint in the house. Unsavory diesel and sewer aromas. Surprise cutoffs of water and gas. Long waits for restoration of utilities.

That’s life some days for the people--fewer than two dozen--living on the north side of Dean Street between Flatbush and Sixth Avenues in the Atlantic Yards footprint, as massive construction equipment is used to upgrade water and sewer connections destined to help service an 18,000-seat arena and thousands of apartments. (Click on graphics to enlarge.)

(See The Footprint Gazette blog for video here and here. On 7/25/06, the New York Times, in an article skeptical about AY blight claims, focused on this block.)

The AY catch

Here’s the catch: the Empire State Development Corporation’s (ESDC) voluminous environmental review, required to disclose the potential impacts of the project, said nothing about the impact on those in the footprint, whether residents or those working at or visiting Freddy’s Bar & Backroom, on the corner.

The Final Environmental Impact Statement (FEIS), which detailed the potential impact of the project, did acknowledge that construction activities might be “perceptible and annoying in buildings very close to a construction site.” But it didn’t acknowledge that some “very close” buildings might be on the north side of Dean Street, destined to be demolished for the project.

As the graphic [above] shows, construction noise receptors were placed only at locations across the street from construction activities. (I've highlighted some--but not all--areas on Dean and Pacific Streets where there are residents, as well as a business open to the public. For example, I left out P.C. Richard/Modell's at Site 5 in the far west of the footprint.)

Two excavators have been working on the block, models 345C and 315D, equipment that in Caterpiller’s own brochures is shown by itself at a non-urban construction site, not in a residential street. (The current 345D model is similar to the 345C model.)

Some residents consider it a form of harassment, an effort to wear them down and choose buyouts rather than remain in lawsuits challenging the project. While there’s no evidence that’s the motivation, project planners’ effort to get the work done sooner rather than later certainly makes people uncomfortable.

Legal recourse?

It's hardly clear that there's legal recourse. "As there was no construction or infrastructure work going on when we filed the EIS suit in April 2007, this situation is not something we could have considered in that suit," Develop Don't Destroy Brooklyn spokesman Daniel Goldstein told me, after I queried him. (The dismissal of the case is under appeal, with a state appellate court expected to hear oral arguments in September. Success would not necessarily block the project but could require an additional and expanded environmental review.)

"But now that the intolerable situation for residents in the footprint—impacts which were not contemplated or reviewed by the ESDC in the environmental review process—continues to worsen we are reviewing and considering what legal avenues are available to us," added Goldstein, who lives on the south side of Pacific Street, abutting the north side of Dean Street. (At right, new larger pipes destined for installation are stored in a Dean Street lot, with Goldstein's building in the background.)

"Additionally we are advocating politically along with those residents, and doing our best to assist them," Goldstein added. "We urge our elected officials to bring relief to the residents in the footprint from the noise, vibrations and near round the clock disruptions impacting their lives in an unacceptable manner."

Residents, however, have told me that sympathetic elected officials have said there's not much they can do and less-sympathetic officials have pretty much passed the buck to the ESDC, the agency in charge.

ESDC punts

So, why were these residents left out? I suspect that planners assumed that, by the time construction activities began, no one would be there.

But I don’t know for sure, because, when I asked the ESDC why the impact on footprint residents was left out and whether that was standard operating procedure, the questions were ignored.

Similarly, I didn’t get an answer to the question of whether there’d been any attempt to measure noise or inspect for vibratory impacts for these residents.

ESDC avoidance of public policy issue

Goldstein told me that, as a footprint resident, rather than as a DDDB representative, he queried ESDC ombudsman Forrest Taylor, pointing to the FEIS graphic that omitted the footprint and stating that “the FEIS never contemplated people living in the project site while work was going on, so that needs to be reconsidered.” (Goldstein in February posted videos on YouTube showing late night construction work that interfered with his sleep.)

Taylor wrote back, “Since your attorneys have brought suit against ESDC with respect to the EIS, I have been instructed not to discuss your allegations with respect to the EIS, as these issues are being handled by the attorneys.”

Actually, Goldstein as an individual has not sued ESDC; DDDB has funded and led a challenge to the EIS joined by 25 groups, though that lawsuit, as noted, did not address the situation of footprint residents.

Residents of 473 Dean Street, home to the Footprint Gazette blogger, are plaintiffs in three suits filed by attorney George Locker against the ESDC and other defendants.

But putting the issue of plaintiffs aside, this public policy question deserves an answer...

Questions Raised Over Financing Deals of New Yankees Stadium
WNYC-Radio, by Matthew Schuerman



NEW YORK, NY July 29, 2008 —The Yankees broke ground on their new stadium a year ago, but its financing details are still coming out. Yesterday, a state legislator criticized part of the agreement that gives city economic development officials a free luxury suite. WNYC's Matthew Schuerman has more.

REPORTER: The new Yankee Stadium is receiving more than $600 million in city, state and federal subsidies. Almost half of that money came in the form of tax exempt bonds issued by the city's Industrial Development Agency, or IDA. Under the bonding agreement, the IDA would have permanent access to a luxury suite at the new stadium. Westchester Assemblyman Richard Brodsky says the agreement is another reason to question what public interest the new ballpark is serving to deserve such a high level of taxpayer support.

BRODSKY: I doubt that the Average Joe in the street was going to get access to the box that was controlled by the IDA or the Mayor's office.

REPORTER: Stu Loeser, a spokesman for the mayor, says that the city has not decided whether to accept the suite or not. But he defended its use to reward employees and entertain official guests...

THAT '70S WOE IN RERUN
GOV WARNING OF WORST ECONOMY IN DECADES
NY Post by Fredric U. Dicker

Gov. Paterson, convinced the state faces its worst fiscal crisis since the mid-1970s, will deliver the grim news in an unprecedented special address to New Yorkers as soon as tomorrow night, The Post has learned.

The governor's address - which his aides hope will be televised by public and cable news stations - will say that plunging state revenues will force painful cuts in state services, necessitate a reduction in the state work force, possibly through layoffs, and require other difficult economic measures, source said.

Paterson is also expected to announce that he's ordered state agencies to slash spending beyond the relatively modest 3.3 percent cuts he ordered in late spring.

Full article

So, what'll it be? We need this luxury-suite-filled arena more than ever in these tough economic times? Or, Atlantic Yards, an unsupportable commitment of public funds at a time when we all need to be tightening our belts? You can bet that Forest City Ratner's lobbying machine is going all out to convince the Gov that the Net's net is positive for state coffers.

Congress probing whether city wildly inflated value of land for new stadium

A Congressional committee has launched a probe into whether the city and Yankees wildly inflated the value of the site for the team's new stadium to float nearly $1 billion in tax-free bonds.

Rep. Dennis Kucinich (D-Ohio) last week demanded "specific documents and reports" that could show the city claimed the land beneath the new Yankee stadium was worth nearly seven times its true value.

The massive switcheroo allowed the city to sell $941 million in bonds for the stadium, which must by law be linked to a site's actual value.
...

Kucinich, who heads the House Committee on Oversight and Government Reform, is zeroing in on dramatically different estimates the city offered for the stadium land - one of $275 per square foot and another of just $45. A hearing is set for September...

Why such wildly different values for the same property?

"Our assessors jacked up the numbers and the comparables for the Council to justify the stadium bonds," said a Finance Department official familiar with the project.

Full article

(Emphasis added)

Yankee Stadium’s worth?
Planned Congressional inquiry may find that two sets of books exist

...To get the financing, the Yankees needed to pay off the debt with payments in lieu of property taxes, though the team has never paid property taxes. If the Yankees did pay property taxes, the IBO said, the amount would fall $29 million short of what the team needed to satisfy the debt. The city disagreed: The stadium would be valued at $1 billion, and the land underneath it was worth $200 million.

But a much lower number was offered when the city got that land appraised to satisfy a federal requirement to replace parkland with property of equal value. In a second set of appraisals obtained by NYC Park Advocates, the value of Macombs Dam Park was put at $21 million, just below the $25 million total of the replacement parcels...

Rep. Kucinich probes Yankee Stadium debt data

A Congressman said on Friday he was probing aspects of the tax-free bonds sold to pay for the New York Yankees baseball team's new stadium in the Bronx, including whether land and buildings were accurately valued.

Dennis Kucinich, the Democratic Chairman of the House Committee on Oversight and Government Reform, said in a statement that he "has broadened the Subcommittee's investigation of tax-exempt public financing of professional sports stadiums to include specific document requests relating to the valuation of the new Yankee Stadium.

The Yankees, which have won 26 World Series titles and are one of the world's richest professional sports teams, want a city agency to sell $350 million of extra bonds to help finance their new home.

But the Internal Revenue Service must approve the new debt. It stiffened its rules after $941 million of stadium bonds were sold for the Yankees in 2006.

The Yankees repay the bonds that were sold by making so-called payments in lieu of taxes. If the land and buildings are overvalued, the city agency can sell more debt because the payments in lieu of taxes can be higher...

...Kucinich's subcommittee, which held its first hearing in March 2007, has focused on how pro sports teams repay stadium bonds.

"The subcommittee is investigating the accuracy of representations made to federal agencies and bond investors about the property value of the land and buildings in the stadium construction project," the Congressman said.

The bond issue has gained new currency because the New Jersey Nets basketball team, who plan to move to a new stadium in Brooklyn, New York, also want the IRS to let a city agency sell more than $800 million of tax-free bonds for them. The new arena for the Nets would anchor a big development now struggling in a cooling real estate market...

Full article

Was Yankee Stadium value "gamed" to issue PILOTs? Congressional probe could affect AY

Was the valuation of the new Yankee Stadium "gamed" so that the foregone taxes exceeded the expected bond payments, thus allowing a PILOT (payment in lieu of taxes) financing deal?

That's the subtext of the inquiry launched yesterday by the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee, which in March 2007 and October 2007 held hearings regarding tax-exempt financing for sports facilities.

And should the subcommittee, chaired by Rep. Dennis Kucinich (D-OH), find the procedures sketchy, that could cast doubt on similar financing plans for Atlantic Yards arena and the new Mets stadium...

Continue reading...

New Limits on Builders in an Area of Brooklyn

...Ms. Burden said the change in the Carroll Gardens zoning rules demonstrated the Bloomberg administration’s commitment to preserving neighborhood character.

That's excepting Prospect Heights, West Harlem, Willets Point, Queens West, Coney Island, the Bronx's Macombs Dam Park area, Jamaica, the Lower East Side, Downtown Brooklyn, etc. etc...

Representative Anthony Weiner, a mayoral hopeful, gave his support for a string of large development projects in the city today, saying they're important in a time of economic uncertainty.

"New York needs to continue to grow–I'm a pro-development guy," he said, speaking at a Crain's breakfast. "If you look at downtown, you look at West Side, you look at Penn Station, you look at Ratner, you look at these things–I think that you're going to see that I'm going to be advocating. I want them to be successful, particularly in this time of slow economic growth."

Then, hitting on his favorite theme, Mr. Weiner said the middle-class does not always see a clear, tangible benefit from the projects, adding, "It does create challenges that we have to solve." ...

In these tough economic times, there's nothing more important than shoveling scarce tax dollars at a basketball arena. Is it any wonder that middle-class New Yorkers — and upper- and working-class NYers, too — are having trouble seeing "a clear, tangible benefit" in that?

Today in Atlantic Yards Report, Norman Oder takes a look at the letter DDDB sent last week to the IRS arguing against reopening the tax loophole that would allow Federal tax-exempt bonds for the project.  As Oder notes:

“….the specific criticisms in the letter likely had not been raised previously in direct communication to IRS and the Department of the Treasury.”

Indeed.  What the IRS had heard previously is a May letter from the New York City Industrial Development Agency (IDA) and the Empire State Development Corporation (ESDC), putting the happiest possible face on the stalled and floundering project.  At stake: an estimated $165 million in Federal tax breaks on the arena financing, effectively roping in tax payers all across the country to help fund the Ratner project.  Oder summarizes:

Some of those criticisms were first reported in this blog: the [IDA and ESDC] letter overstates how much land Atlantic Yards developer Forest City Ratner actually controls and it fails to point out that, at least according to available evidence, the foregone property tax might be much less than the anticipated PILOT payment. Also, DDDB points out that the city and state overstate the amount of progress achieved on the project.

…the reason the Nets assessment is missing is…because it is that only after FCRC calculates the arena construction cost and the tax-exempt bond financing it requires, will it be able to make up a PILOT value necessary to pay the debt service BUT call it “Annual Estimated Taxes” as in Exhibit D of their letter.

Were ESDC to provide for you today the estimated taxes, the developer would be boxed into a corner from which it would have trouble removing itself when the arena cost increases again as it is certain to do.

The last time we checked, the IRS tended to discourage the concept of making up numbers based on how you want your taxes to turn out.  The FCRC approach just sounds like a slightly more sophisticated version of that technique, one that presumably, in these tough times, the IRS will find not in the taxpayers' interests.   

Bloomberg said he thinks sports "should stand on its own" and "can stand on its owner" when it comes to owners such as the Steinbrenner family in the Bronx footing the bill for a new Yankee Stadium, Ratner in Brooklyn, and the Wilpon family in Queens picking up the tab for a new Mets ballpark. But the city (and state) is still heavily subsidizing the two new baseball parks and the Brooklyn arena with significant tax breaks, tax incentives, and funding for infrastructure (Bloomberg declined to comment on city subsidies).

It's been a bit of a slow news week for Atlantic Yards watchers, but as underground radio legend Scoop Nisker used to say, "if you don't like the news, go out and make some of your own."  And the interesting news event over the past two days has been watching the multimedia dust-up between Smith College sports economist Andrew Zimbalist (one-time sports arena critic and author of the laudatory FCR report on Atlantic Yards) and Norman Oder from Atlantic Yards Report, who needs no introduction in this space.  The exchange has also been enlightening for students of the changing dynamics of the media landscape.

For Prof. Zimbalist it started innocently enough, with an appearance on the Brian Lehrer show in this All-Star week ostensibly to discuss the economics of baseball.  But early on host Lehrer began to home in on Zimbalist's apparent new enthusiasm for the tax-exempt financing that the Yankees (and the Nets) are seeking, finally saying with some surprise "So you’re really a defender of the Steinbrenners, on these various controversies?"

Zimbalist began a quick verbal tap dance but it was too late.  A few minutes later, this exchange occurred:

Lehrer: ...somebody just wrote on our comments page… Zimbalist opposed tax-exempt bonds for stadiums in his 2003 book May the Best Team Win but hasn’t raised that point in the debate over Yankee Stadium and Atlantic Yards.

Zimbalist: Now, wait a minute--I didn’t realize that my entire writings from the last 20 years on stadiums was going to be the subject of this conversation.

deMause: I think there are a fair number of people who don’t take him seriously any more. There are certainly people who will talk to him and cite him and refer people to him. He’s still a smart economist, but the fact that this is someone who has said, oh, consulting reports paid for by sports team owners are worth crap and then went and did a consulting report paid for by a sports team owner [Bruce Ratner]--that doesn’t make him look very good.

Oder: It was not peer reviewed.

deMause: Yeah. I don’t think it's destroyed his reputation by any means, but I think there are a lot of people who don’t take him as seriously as they used to. I certainly don’t. I used to think he was somebody who you could go to and would give you a straight answer based on his years and decades of study. I’ve just seen too much work by him that seems to be bending over backwards to make a project look good. His response, when I ask him about it, is What do you know, you’re not an economist.

I’m like, Yeah, I know I’m a journalist. That’s why my job is to question the economists. So, if the numbers don't add up, I’ve got a calculator. So it’s been very difficult. Andy has always been a prickly guy in the best of times and he’s never taken kindly to people disagreeing with him on stuff.

We find the Nets’ policy of not signing players for more than two years a bit rigid… and some of us are skeptical that it’s all about Lebron. We suspect it’s about cutting back on salary commitments just in case Brooklyn falls through and the team is put up for sale. Whenever any business with poor growth prospects starts cutting back on long-term commitments, selling assets, investors believe that company is “in play”, meaning up for sale.

Although sports entertainment corporations have an entire section of every day’s newspaper devoted to them, the Yankees and the Mets are, we must always remember, privately owned entertainment corporations. It’s discouraging that officials are confusing teams with public goods like parks, water and transit that are essential to the city’s public health and economic vitality.

This has become the week of the Great Reassurance, as Nets spokespeople ramp up a vigorous campaign to convince the world that the Nets are really coming to Brooklyn.  Both No Land Grab and Atlantic Yards Report have excellent rundowns on the action, ranging from wooing 40 fans at the Barclays Center showroom in the The New York Times building, to a press conference in which  Bruce Ratner seemed to slide the actual opening date a bit further out into the next decade. 

One additional note, thanks to the wonders of blog commenting, comes the above-linked NetsDaily blog item, which includes this optimistic public relations statement: The team anticipates that at least 35% of the Nets’ New Jersey season ticket-holders will move with the team and to facilitate that is considering shuttle bus service from New Jersey to Brooklyn once Barclays Center opens. 

That's of course a crucial bit of the argument for why the Arena will be good for Brooklyn--all that extra money flowing over from New Jersey.  But a reader named Trenton immediately questioned the math:

35%??

Come on.

I’d say if anything, the courtside people and some of the very low lowers would consider that, pending that they can get the same seats at the same rate.

That would represent about 12% of the arena (guessing) and if that is the case I would not broadcast it.

Personally, I would not drive up to the Meadowlands, hop on a bus, then ride to the game, hop on the bus again and drive home.