In case there was any doubt, government officials are now saying that it is far more difficult to get Brooklyn’s Atlantic Yards project started in today’s financial environment than that of the heady days of 2007.
Now that key lawsuits have been dismissed and development firm Forest City Ratner is newly confident in its ability to get the project built, it’s becoming clear that its benefits to the public sector will decrease, as the government has been making concessions to get the $4 billion housing and basketball arena project started.
The M.T.A. has now publicly acknowledged that it expects less upfront cash from Forest City and less costly transit improvements made by the developer, a point that was enumerated at a raucous state Senate hearing on the project Friday afternoon. Further, figures released by the Independent Budget Office suggested the fiscal impact for the city of the arena would turn from net positive to negative given the substantial government subsidy added since the last analysis, done in 2005, which then showed a $25 million benefit to the city.
M.T.A. interim head Helena Williams said at the hearing, held by Senators Bill Perkins and Velmanette Montgomery, that she expects Forest City will give the agency less than it initially pledged to the agency in its bid for the project, $100 million, in an upfront cash payment. She also said the agency had reached a tentative agreement over the new LIRR rail yard that Forest City is expected to build for the agency, one that would cost Forest City less than the $350 million or so that it included in its bid. She said it was “value engineered,” and included modifications such as a decrease in the number of planned tracks to seven, from nine. Asked at how much she valued this yard, she said the final number was still being negotiated with Forest City.
That Forest City was looking to decrease its upfront payment to the M.T.A. has been known for some time, but now it has been publicly stated and the talks seem to be maturing. Ms. Williams said the agency would likely take up the changed plans at its board meeting next month.
The city is undergoing negotiations with Forest City over its subsidy to the project, although Mayor Bloomberg has publicly ruled out increasing the cash payment to the developer.
THE NEW IBO NUMBERS, which take into account an extra approximately $100 million the city added in subsidy in 2007, put the 30-year fiscal impact of the new arena on the city in the neighborhood of a $65 million loss. This assumes the subsidy is all going directly for the arena, though the project as a whole is far larger—it calls for 6,400 units of housing and a commercial office tower—and Forest City sold the project as one large package.
The president of the city’s Economic Development Corporation, Seth Pinsky, said the city previously estimated the 30-year impact at $500 million, and he expected a revised cost/benefit analysis to still show a positive return.
The IBO testimony, made by deputy director George Sweeting, also included an observation that appraised land values of the area have tripled in the last three years. And while he did not specifically allege wrongdoing, he suggested those figures would create controversy given the complex financing agreement needed for the deal, which requires a high assessed land value to get tax-free bonds:
Relying on this interpretation also depends on the city’s Finance Department assigning a property tax assessment to the arena which results in a payment in lieu of taxes—supposedly equivalent to a regular property tax bill—large enough to cover the annual debt service. This assessment process for Yankee Stadium proved quite controversial, with the city’s assessment higher than those of several independent appraisers, and the process may prove controversial again at Atlantic Yards. In the case of the Yankees and Mets stadiums, the department indicated what the assessments would be prior to the start of construction. No similar announcement has been made for Atlantic Yards, but it is notable that the land assessments for the parcels under the arena have more than tripled in the last three years.