The opening today of Hudson Yards’ first tower, the Coach-anchored behemoth 10 Hudson Yards, is milestone for the Far West Side mega-development, which has been served by a conspicuously empty 7 train since last September. But while the debut of the 52-story Related tower heralds the neighborhood’s transition from rendering to reality, Hudson Yards is still a long way from financial independence, with the city remaining on the hook for a substantial share of its infrastructure costs.
To its credit, Hudson Yards has yielded slightly higher than anticipated revenues from development this year, allowing the city to eliminate its planned $58.1 million interest support payment in 2018 and reduce the 2019 payment from $89.8 million to $26.8 million (subsidies for 2016 and 2017 were eliminated in previous city budgets). But revenues from the development still remain far below initial forecasts made when the interest support payment plan was approved, according to a report from the Independent Budget Office.
Not to be a naysayer, but it’s worth taking note of the extent to which the nascent neighborhood is still dependent on city subsidies, particularly in the midst of all the back-slapping that will inevitably attend the opening of 10 Hudson Yards.
(As Stephen Ross, chairman and founder of Related, told The Wall Street Journal, “It’s really the beginning of seeing the result of our vision. It’s a realization moment, but it’s just the beginning.”)
The IBO blames the slower than anticipated pace of the redevelopment project, in part the recession, for revenue that “has fallen short of even the more conservative forecasts made when the initial bonds were issued.”
“By the end of this year, HYIC tax and fee revenue collections since 2006 are expected to total $755.4 million,” they note. “Based on a planning study prepared by Cushman and Wakefield in 2006, the project was expected to generate from $986.6 million to $1.3 billion in HYIC development revenues through 2016—considerably above what it has actually generated.”
Which is not to say that the city shouldn’t seed monies for infrastructure improvements to facilitate development in new areas, but it’s always worth examining the cost to the city, for the purposes of making future funding decisions (and claiming credit where credit is due).
Overall, the city has provided the Hudson Yards Infrastructure Corporation with $358.8 million in interest support payments since 2006, according to the IBO, which adds that “interest support payments were initially expected to total between $7.4 million (based on the planning study’s more optimistic revenue forecast) and $205.3 million (using the study’s more conservative projection).”
The opening of the neighborhood’s first luxury brand-anchored office tower should begin to reverse this tide, of course, with higher revenues obviating the need for city subsidies in coming years. Nonetheless, such public subsidies are, and will remain, a fundamental component of the neighborhood’s current and future successes.
Not that it’s likely to happen, but it would be nice—and factually accurate—if those who herald the contributions made by private developers in the future to the growth and development of the city remember how much of the bill the city footed to make that possible.