Observer » Independent Budget Office

Zone A Zoning: Independent Budget Office Critical of Bloomberg’s Two-Faced Waterfront Developments

Matt Chaban — Wed, 21 Nov 2012 13:50:41 -0400

Battered and broken. (Mayor's Office/Flickr)

While the Bloomberg administration has largely come in for praise for its Hurricane Sandy recovery efforts, questions remain over whether City Hall made things worse by encouraging waterfront development. The Independent Budget Office certainly believes so in a critical analysis it has issued looking at the seemingly hypocritical policy initiatives Mayor Bloomberg had championed.

On the one hand, the city had taken pains to reduce its carbon footprint as it acknowledges the dangers posed by rising sea levels and superstorms. At the same time, the administration continues to encourage new residential and commercial projects in the very areas it is wringing its hands over.

Yet even as City Hall grappled with these concerns it continued to put substantial resources into major development projects on the waterfront, rezoning sites as manufacturing declined— including some in prime areas for flooding, the so-called Zone A evacuation areas. Just one month before Sandy struck the city, Mayor Bloomberg announced a plan by private developers to build a $500 million complex on city-owned land on Staten Island’s North Shore that would include the world’s largest Ferris wheel as well as a hotel and outlet mall. Part of the site sits in a floodplain.

An even larger development project is planned on the Coney Island waterfront, one of the neighborhoods hardest hit by Sandy. The city has rezoned the area to allow the development of hotels, housing, and a new amusement park, and has allocated more than $400 million for sewer upgrades, land acquisition, lighting, boardwalk and park improvements, and other projects to foster the redevelopment plan. On the Queens waterfront, the city is investing $147 million in the Hunters Point South project, which also sits in Zone A. Already under construction, Hunters Point South includes 5,000 apartments, a 1,100-seat school, and retail space.

To be fair, the Bloomberg Administration has taken steps to protect the city from the affects of rising sea levels and storm surges, following existing city building codes and Federal Emergency Management Agency guidelines. But these guidelines may not be adequate in the face of storms with the fury of Sandy.

So is this a sound policy, or a sinking one?

Actually New York’s Streets Aren’t That Filthy, Or So Claims City Hall

Charlotte Lytton — Tue, 23 Oct 2012 16:11:59 -0400

Not your average cesspool. (windfucker/Flickr)

It seems that trash, as well as beauty, is in the eye of the beholder if two studies of New York’s street cleanliness are anything to go by. Travel + Leisure recently released a much-publicized list that found New York to be the dirtiest city in America. In an effort to try and rebut this filthy scarlet letter, the city's Independent Budget Office dug into the Mayor's Management Report, released the following week, that found 95.5 percent of the New York City's streets here are "acceptably clean."

The IBO collated information from the 2012 fiscal year, which found that the vast majority of streets in New York only have scattered litter here and there. It is a far cry from the results of the magazine’s survey, which apparently sees the place as one giant trash heap. This makes the city’s $81m investment in street cleaning measures seem pretty futile. Oh, and the other $570m spent on curbside garbage collections. The pricey debacle takes blowing money on trash to a whole new level.

Not even the technological wonders of 450 mechanical brooms could help clean up the disparity in perceptions between the two conflicting sources. Each year, the mayor's office asks community boards to rank local services in order of importance, with street cleaning coming in at 17th. This placed above the likes of services for the homeless and economic development initiatives, reinforcing just how selfless the good people of New York really are. Why spend money helping those without a roof over their heads when your taxes can go towards funding a mechanical broom? At least we can all agree on that.

A few feeble ‘explanations’ have been offered up in order to elucidate the gulf in public and municipal opinion, namely that the mayoral rating scale was drawn up some 40 years ago and probably doesn’t reflect our diminished tolerance for dirt. Let’s not forget that Donny Osmond was also acceptable in the 1970s, so that period of LSD addled disarray may not be the best indicator of contemporary opinion. Operations staff has promised to update the system accordingly, so only time will tell if the new ratings will be as amusingly shambolic as those currently in place.

After Negative Report, Bloomberg Cheers Louder for Atlantic Yards

Eliot Brown — Thu, 10 Sep 2009 22:05:21 -0400

With an election two months away, Mayor Bloomberg certainly isn’t running away from Atlantic Yards, the $4.9 billion mega-project that never ceases to elicit fervent opposition in neighboring areas of Brooklyn.

Confronted Thursday with an Independent Budget Office report that alleges the centerpiece Nets arena is a net-money loser for the city—which is incentivizing the project with $169 million in discretionary subsidy—Mr. Bloomberg loudly hailed the project, implicitly comparing the private development to the city's finest public assets.

“I don’t know what the IBO studies would have shown back when they tried to establish the value of Central Park or Prospect Park or anything else,” he told reporters. “These are the kinds of projects you have to do because without that we don’t have a future, and we’re going to get this one done.”

Mr. Bloomberg criticized the report, saying it says “that if you count the costs, but don’t count the benefits, it doesn’t make any money.” That seems like something of an unfair simplification of a complex issue, but regardless, he went on to further laud the project.

“The Atlantic Yards is a project that we really need—it will be great for this city, it will be great for Brooklyn,” he said.

IBO: Nets Arena a Net Financial Loss for City

Eliot Brown — Thu, 10 Sep 2009 17:55:16 -0400

The planned new Nets arena in Brooklyn is anticipated to result in a net loss of money for the city, a new report from the city's Independent Budget Office has found, a change from the agency’s last report in 2005 that found a small financial gain. The report, released Thursday, comes a day after the Nets released renderings of a new arena design, and announced their intention to seek financing for the arena within a month.

The report found that over a 30-year period the new arena planned by developer Bruce Ratner would come at a financial loss of approximately $39.5 million to city coffers. The study estimates that the $130 million in projected new tax revenue to the city will be drowned out by the city’s $169 million in discretionary subsidies for the project, part of a larger $4.9 billion development known as Atlantic Yards. (The report found the state and M.T.A. would show a net gain of $25.4 million and $5.8 million in financial gain, respectively.)

The city’s Economic Development Corporation rejected the findings, taking issue with the methodology, particularly the IBO’s decision to count the subsidies as particular to the arena (the city says if they are counted as subsidizing the larger project, the result is hundreds of millions in additional revenue to the city).

“It’s sloppy and filled with inaccuracies,” said David Lombino, an EDC spokesman.

But measured in isolation as incentives for an arena, the finding serves to illustrate how the Nets arena, estimated to cost around $800 million, follows the model of most every other professional sporting venue in this country, built with the prop of subsidies that elected officials are often ever-so-willing to offer.

The Nets arena, of course, was supposed to be different. Not only would the new arena be an especially attractive venue for concerts and other events—Brooklyn, with its 2.5 million people, has no event space anywhere near as large—but it was also bringing in a new team from the outside, if only moving it a few miles east. Typically, losses to cities on sports venues come as a team stays within city limits and thus there is no net gain. Many a team has threatened (or blackmailed, depending on one’s point of view) their host cities into subsidizing new facilities by stating their intention to move to another unless taxpayers pick up a substantial portion of the costs for new stadia. This decision-making process for policymakers in cities nationwide inevitably becomes highly politicized: losing a professional sports team would be a major black eye for any elected official, thus the pressure to give into teams’ subsidy requests is enormous.

But here the Nets were being stolen from New Jersey, bringing a whole new set of salaries, ticket sales, merchandizing and associated activity into the borders of New York City: the subsidy is meant to attract new money—not retain existing spending. Still, at least according to IBO’s analysis, the new tax revenue from that activity is not enough to cover the $169 million or so the city is adding in infrastructure investments and direct subsidy, a testament to just how substantial these incentives are for this project.

With that said, the report has the state government still registering a net gain, and it’s debatable whether or not it’s fair to isolate the arena without factoring in the benefits of the rest of the project (the IBO did this because the subsidies were generally specific to the arena, and housing would likely have been planned for the site regardless).

The Bloomberg administration’s EDC took particular issue with the way the benefits and subsidies were measured. The subsidies were not specific to the arena, EDC contends, as the subsidy funding agreements with the developer call for Mr. Ratner’s firm to pay damages to the city if other components such as housing are not built.

Further, there are other benefits that are not included—new open space, for one—that come as a result of the larger project, though not particularly because of the arena.

On another level, the IBO report was also not able to analyze something that cannot easily be quantified, but is a critical question to any city grappling with the question of subsidies and sports teams: What is the social, psychological, and cultural value of a new professional basketball team in Brooklyn?

Sports teams are rarely, if ever, about generating revenue for the public sector. Rather, they are far more about satiating a public hunger.

Update: 3 p.m.

Developer Forest City Ratner responded by calling the report inaccurate. Here's part of the statement from the firm's spokesman, Joe DePlasco:

"The Independent Budget Office’s analysis is wrong. Their assumptions are widely off mark, including for sales and other tax revenues. Also they are conveniently applying the State and City subsidies to the arena while ignoring the benefits of the larger project. A large portion of the public benefits are also realized through the development of the housing, office and other uses, creating jobs and tax revenues to both the City and the State."

Report: $1.1 Billion Budget Gap for N.Y.C. for 2010

Azi Paybarah — Wed, 20 May 2009 16:15:45 -0400

The gap mainly comes from the IBO projecting lower tax revenues than the mayor is expecting.

Also, that gap “could increase” because of contracts with the United Federation of Teachers and District Council 37, which are up for renewal this year, the IBO report says.

The report says the majority of job cuts the mayor is banking on to help reduce labor costs are not primarily coming from city agencies.

“Although not typically counted towards city job cuts, about half the total layoffs accounted for in the Mayor’s plan would come at organizations other than city agencies, including more than 900 in the library systems and 400 at cultural institutions."

Also, this passage is worth noting:

“Based on the Mayor’s plan, IBO estimates that total spending will grow from $61.0 billion in 2009 to $72.3 billion in 2013. Although the Mayor’s budget plan shows a decline in spending between 2009 and 2010, the actual level of funds used to provide services in 2010 is higher than presented,” the report says.

Report: $1.1 Billion Budget Gap for N.Y.C. for 2010

Azi Paybarah — Wed, 20 May 2009 16:12:00 -0400

There is a $1.1 billion shortfall in the most recent budget Michael Bloomberg presented to city lawmakers, according to the Independent Budget Office, which just released its analysis of that presentation.
The gap mainly comes from the IBO projecting lower tax revenues than the mayor is expecting.
Also, that gap “could increase” because of contracts with the United Federation of Teachers and District Council 37, which are up for renewal this year, the IBO report says.
The report says the majority of job cuts the mayor is banking on to help reduce labor costs are not primarily coming from city agencies.
“Although not typically counted towards city job cuts, about half the total layoffs accounted for in the Mayor’s plan would come at organizations other than city agencies, including more than 900 in the library systems and 400 at cultural institutions.

Co-op and Condo Buildings Win City’s Valuation Game

Tom Acitelli — Mon, 05 Feb 2007 00:00:00 -0400

When is a luxury condo not a luxury condo?

When the city assesses it for property taxes. Then it becomes a rental.

Under the city’s notoriously convoluted property-tax code, condos and co-ops are assessed for property-tax purposes as if they were rental buildings. This rule, based on the concept of guessing how much income apartment buildings could generate in rent rolls, leads to vastly undervalued condos and co-ops.

That, in turn, leads to low assessments that can mean low tax bills for condo and co-op owners.

Thus, the New Yorkers who can afford to pay more in property taxes end up paying less.

Not so for renters and commercial-building owners, as The Lab reported last week. Their property-tax burdens have inched upward since the early 1980’s relative to those of city homeowners.

And now that the city estimates the five boroughs’ property value at more than $800 billion for fiscal year 2008—an increase since May 2006 of 19 percent—taxes are likely to increase, despite Mayor Michael Bloomberg’s late January proposal of a one-time $750 million tax cut.

The die is cast, the gamble continues, because condos and co-ops are treated like rentals—sometimes the cheapest rent-stabilized rentals in the neighborhood.

Go to the city’s Department of Finance Web site, www.nyc.gov/finance, and click under the “Property” link on the left. Plug in addresses or building-lot numbers and find assessments and likely tax bills. It’s a digital parlor game of shock you can play.

Take a six-story co-op doorman building in Morningside Heights. The city valued the entire building at $1.78 million; it’s assessed for taxes at $495,485, based on comparisons with the values of nearby rental buildings, many either rent-stabilized or owned by neighborhood hegemon Columbia University and rented to students and faculty at below-market rates.

To put that into ridiculous perspective, the average sales price of a Manhattan co-op unit was $1,047,219 by the start of 2007, according to appraisal firm Miller Samuel.

Or take 110 Livingston, a swanky new condo conversion of the old Board of Education headquarters in once-gritty, now-fashionable downtown Brooklyn. The 300-unit development’s valued at $62,525,000, and assessed for taxes at $28,136,250. The average sales price of a Brooklyn condo unit was $705,000 at the beginning of this year, according to brokerage the Corcoran Group.

You do the math.

The city’s Independent Budget Office in December released a major report on trends in the city’s property taxes since the early 1980’s, when the state and the city started making changes that ultimately benefited city homeowners over renters.

One of the biggest changes was how the city assessed co-ops and condos.

“Given the age and location of many co-ops and condos,” the report said, “the comparable buildings are rent-regulated buildings.”

Property-tax assessments for condos and co-ops would be as much as 5.2 times higher in fiscal year 2007 if the city used sales price rather than nearby rental comparisons as the measure, according to the budget office.

The median condo or co-op apartment value, in fact, according to the budget office, would be $319,326 in fiscal year 2007, not the city’s much lower median value of $61,789 (oh, if only that were true!).

Using sales prices rather than rental comparisons, the true market value of New York’s condos and co-ops would be $216.8 billion in the current fiscal year, which ends June 30, according to the Independent Budget Office; the city’s got it officially pegged at $52.4 billion. (The calculations exclude co-ops and condos that are fully tax-exempt.)

That’s a big difference—and one that’s not likely to change.

And any property-tax cuts will be mere relief—however brief, considering the recent rise in values—leaving in place a confusing system that measures a newer luxury condo as if it were a rental with roots in the early 20th century.

Sky-High Property Taxes Give Renters the Shaft

Tom Acitelli — Mon, 29 Jan 2007 00:00:00 -0400

Renters, beware! You are about to get shafted—thanks to property taxes.

The city’s Finance Department recently announced that New York’s property-market value shot up 19 percent since May 2006.

The city’s property is now valued at $802.4 billion, up from $674.1 billion at the end of fiscal year 2007.

Higher property values normally bring higher property taxes.

So naturally, Mayor Michael Bloomberg last week proposed a $750 million property-tax cut. That, however, should provide little solace for the city’s approximately 5.3 million renters.

Mr. Bloomberg’s proposal would lower property taxes on all four property classes in Manhattan, including for-sale housing, rental buildings and commercial properties.

“I’ve always said I wanted to cut property taxes, and this year we can,” Mr. Bloomberg said during his Jan. 17 State of the City address.

“We” can precisely because of the property-tax windfalls flushing the municipal coffers; this fiscal year, the city should collect $13 billion from property taxes, about 40 percent of all local tax revenue.

But for many years now, rental landlords (and commercial-building owners) have been paying disproportionately more in property taxes; and they often pass these higher taxes on to tenants through higher rents. Therefore, renters—particularly market-rate renters—often pay more proportionally in property taxes than actual property owners, like those in condos and co-ops.

The effective property-tax rate—the tax on every $100 of market value—dropped 65 percent for owners of one- to three-bedroom homes from 1984 to 2006, according to a December study by the city’s Independent Budget Office. At the same time, up it went for rental landlords in elevator buildings, from 3.64 percent to 3.72—the only such increase among the city’s larger commercial and rental properties.

In 1997, the city added a co-op and condo tax abatement. In that year, according to the budget office, the effective tax rate for rental apartment buildings was 1.8 times higher than for co-ops, Manhattan’s dominant form of for-sale housing. Now, rental buildings are taxed at an effective rate 5.5 times higher than that of co-ops.

This disproportion comes at a time of increasing rents in an apartment market only drifting tighter.

A new report by investment brokerage Marcus & Millichap concludes that New York City will end 2007 with the lowest apartment-vacancy rate (2.8 percent) of any city in the nation. And from 2002 through 2005, the median monthly rent for unsubsidized apartments shot up 20 percent, according to the latest State of the City report from the Furman Center for Real Estate & Urban Policy at New York University. Even adjusting for inflation, the report notes, that’s an increase in just three years of 8 percent.

Mr. Bloomberg’s proposal, then—eschewing as it does reform of the city’s notoriously complicated and homeowner-centric property-tax code—will likely do little to give relief to renters.

“Landlords will get a 5 percent decrease for one year in the tax rate, seemingly, but that leaves in place the original problem,” said Glenn Pasanen, an adjunct professor of political science at the City University of New York. “[Bloomberg’s proposal] would once again give more of a benefit to house owners, co-op and condo owners than renters or commercial owners.”

Mr. Pasanen, who has written extensively about property-tax effects on city renters, and others point out the gnawing cause of the disproportion: Condo and co-op owners have more money, and with money often comes political clout. The median household income for renters is around $34,000 annually, according to the Independent Budget Office; for co-op owners, it’s $70,500, and for condos it’s $85,000.

Elected officials respond to this flusher constituency, which has only grown more powerful the last few years, as condo development (almost all of it luxury) has picked up, while rental development has dribbled to a trickle beneath crushing land and construction costs.

In fiscal year 2007, which ends this June, rental landlords paid an average of $2,200 per apartment in property taxes, according to research by the Independent Budget Office with data from the Finance Department. By borough, the average varied widely: Manhattan landlords paid the most, at $3,600 per unit, and Bronx landlords the least, at $1,160.

Given the jump in New York City property values and the owner-favored Bloomberg proposal, landlords will continue to pass on such growing burdens to tenants.

Renters, you’ve been warned.

IBO: Surplus!

Tue, 09 Jan 2007 13:24:43 -0400

The city Independent Budget Office just released a report [pdf] on the city's economic health which says that the mayor's warnings about a projected 2008 budget gap of $3.8 billion "appear premature" thanks to "better-than-expected tax revenues."

"Based largely on the on IBO's latest tax revenue estimates, the city's short-term fiscal picture appears even brighter than the Mayor's most recent projection. We expect tax revenue to be more than $250 million higher than projected by the Mayor's office in November for the current year and more than $1 billion annually above their estimates for 2008-2010--even though we project tax revenue will grow more slowly than it has in the recent past."

Far from Bloomberg's projected gap of $3.8 billion, the IBO expects "2008 to end with a surplus of $688 million."

The downside for the city, of course, is that this report is not going to make it any easier to ask for more education money from Albany. But I'm sure that's a worry for another day.

-- Azi Paybarah

Ratner Faces Fewer Tax Breaks

Fri, 15 Dec 2006 13:19:59 -0400

Quinn's proposed exclusion zone is outlined in green.

Bruce Ratner's so-called friends are about to cost him tens of millions of dollars in lost tax breaks because of a bill pending in the City Council.

The stormy debate over the 421-a multifamily housing tax incentive still has a few days to play out (and another year in the state Legislature), but the version backed by Speaker Christine Quinn and a majority of City Council members would revoke a 15- to 25-year tax abatement that Ratner's condos would have received had they been built under current rules.

More after the jump...

- Matthew Schuerman

Right now, the city awards developers (and their condo customers) a 15-year tax abatement for the trouble of building market-rate housing in the outer boroughs. Those abatements are worth an average $19,385 per unit over the lifetime of the provision, according to a 2003 Independent Budget Office report (PDF).

Some--it's hard to say how many--of Ratner's towers would have qualified for 25-year tax breaks (worth an average $31,271 per unit), since they would fall south of Pacific Street, in an area the city considers distressed and therefore worthy of more financial encouragement. Multiply those figures by the number of condos Ratner is planning to build (1,930), and you end up in the $37.1 million to $60.4 million range.

All of that would be done away with under Quinn's bill, which would expand the so-called "exclusion zone" (the area in which developers do not qualify for automatic tax breaks) to encompass the Atlantic Yards footprint in Prospect Heights--all the way to Classon Avenue, in fact. (See map above.)

The 4,500 rental apartments that Ratner is planning would be treated the same under Quinn's bill as they would be today, qualifying for 25-year abatements as long as at least 20 percent of the units in each building are reserved for low-income tenants. Those breaks are worth an estimated $140.7 million total, based on IBO per-unit figures. (Hey, there are plenty other perks out there for Ratner, no question.)

Quinn is nominally an Atlantic Yards backer: She let the city's $100 million capital commitment go through. And even more ironically, the coalition that has been pushing for 421-a reform, and which has proposed an even stricter set of rules, is made up of housing groups that include ACORN, Ratner's partner on Atlantic Yards. (Of course, one of Ratner's enemies, Councilwoman Letitia James, is also in that camp, as is the more centrist David Yassky.)

Jonathan Rosen, a spokesman for that coalition, Housing Here & Now, said that member organizations received no pressure from Forest City Ratner on how to draw the boundaries, and that Atlantic Yards played no role in the 421-a campaign one way or the other.

Joe DePlasco, a spokesman for Ratner, e-mailed this to The Real Estate: "FCRC needs to review the legislation to see what impact it has on current and upcoming projects. We cannot comment until we have done a thorough review and until the legislation is passed."

There may be ways, by finessing the final legislation, for example, that Ratner will still get tax breaks on the condos. One of the surest ways would be to get steel in the ground on as many of the condo buildings as possible by the end of 2007.

- Matthew Schuerman