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June 22, 2009

Big Week for Atlantic Yards Sweetheart Deal-Making

The MTA will present a new deal for Atlantic Yards today to its board's finance committee in advance of a possible vote on Wednesday by the authority's board to green-light the revamped plan, according to Daily Intel. The revised plan is poised to be breathtaking in its concessions to Forest City Ratner. Rather than the developer forking over $100 million upfront to the MTA for the right to build on state land, "the MTA appears willing to settle for a drastically reduced price in order to salvage some kind of short-term development at Atlantic Yards: Sources say the new price tag is likely to be either $20 million upfront or $10 million per year for ten years." But wait, there's more! Ratner's pledge to build a new LIRR rail yard may result in a facility with 25 percent less capacity than the existing one. And, as Crain's reports, tomorrow the Empire State Development Corp. board is scheduled to vote on a new timetable for the project that would push the completion date for the mega-project way past the original 2014 target year. (No big surprise there.) AY Report posits that the negotiations are rooted in Forest City's need to start building this year or risk losing out on tax-exempt bonds for the arena, as well as to stop losing money on the Nets. Seven elected officials who have long been opposed to the project—including Councilwoman Letitia James and State Senator Velmanette Montgomery—shot off a letter last week urging the MTA to disclose changes to its deal with FCR to the public before voting on them: "We respectfully suggest that a hasty decision to modify the obligations of the developer could be detrimental to the needs of the mass transit system and that any decision should only be made after the public and elected officials have had a fair opportunity to present their views."
Ratner Close to Railroading MTA on Atlantic Yards [Daily Intel]
Electeds Want Delay on M.T.A. Atlantic Yards Vote [Observer]
Atlantic Yards Won't Be Derailed [Crain's]
AY: "Out of the Barn" or Driven by FCR's Tightening Timetable? [AY Report]

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I hate to keep harping on here-- but thanks Develop Don't Destroy-- the results of your work:

1. Crappy looking stadium instead of artistic-crappy looking Gehry stadium
2. More time with an empty rail yard
3. Higher cost to taxpayers
4. More profitability for Ratner
5. The project taking longer
6. Less rail capacity
7. Delays (and possible scrapping) of the affordable housing elements

I understand you fought a good fight and I'm not suggesting that people should have laid down for Ratner or that they're NIMBY's for disagreeing-- but please revise your tactics for the next time some developer wants to build something big in Brooklyn. There is almost no way to imagine that the end result could have been worse than this.

Posted by: havelc at June 22, 2009 9:48 AM

I'm hoping the ultimate result of Develop Don't Destroy is that the project doesn't happen. It gets to be a worse deal every day. Enough already, just stop.

Posted by: slopenick at June 22, 2009 9:59 AM

The bad economy has actually worked against DDD. Everyone is talking about unemployment on Wall Street, but there are tons more people in the construction industry who are out of work.

Do you realize how many construction/ pipe fitters/ carpenters et al union workers there are in BK/ NYC as a whole?

How many NY pols get elected without union endorsements? Not many. They're not going to bite the hand that feeds them, and they're certainly not going to say to their constituents, "I'm voting against your having a job b/c the people in brownstone Brooklyn are concerned about scale/ traffic etc."

The economic deterioration is what makes this project necessary from a political perspective. DDD can shout until they're blue in the face about scale, traffic, gov't subsidies etc., but until they have an answer to the job situation, they're going to lose this battle

Posted by: havelc at June 22, 2009 10:14 AM

So, havelc, you'd rather have more sewage w/ no place to go, more kids w/ no schools, more traffic, etc. There are plenty of projects that would be financially beneficial to the city & communities that need construction workers & that wouldn't be gifts to the already-rich.

Posted by: Arkady at June 22, 2009 10:18 AM

Alternate scenario to the one put out by havelc. Develop Don't Destroy did nothing to delay the project. The developer started construction just as the market was beginning to tank. The Developer pleads poverty and the taxpayer gets put on the hook for increasing its subsidy to an economically unvaible project. Result = taxpayers get to pay for an out of scale high end residential real estate project with few public amendities.

Posted by: Boerum Hill at June 22, 2009 10:21 AM

While I applaud DDDB's efforts to stop this boondoggle, the fact of the matter is that the project didn't stand a chance of working financially from the get-go with Gehry's design, even in "bubble" times. The project would have finished up where it's at right now with or without DDDB's involvement. I've heard that, even now, in "aircraft hanger" mode, estimated construction costs are higher than the financial model will support. I'm resigned to a bunch of corrupt politicians and patronage appointees giving Ratner even more of our money to further subsidize this folly. Plus, with no residential towers likely to be built for years, we're going to be blessed with two thirds of the arena perimeter (at the interface between the arena proper and the future towers) being the cheapest imaginable construction - blank, windowless, and lifeless except for the inevitable monster advertising graphics.

Posted by: helluvajob at June 22, 2009 10:33 AM

I am with havelc. DDDB did Brooklyn a great disservice. We are still getting an arena, except now it's going to look like Walmart.

Posted by: bupe at June 22, 2009 11:08 AM

Look, Boerum Hill and Arkady, I'm not some huge AY proponent, nor do I think stadiums should be built with public financing. But step back from your Ratner-rage (which is hard, because he's such a prick), and consider a few things.

1. DDDB's efforts absolutely lead to this. AY had been approved back in the fall of 2006. I remember, I was at the meeting, because I thought it was B.S. Financing was available for almost 1 complete year afterward, but the 20 lawsuits (or whatever) completely stalled it. I'm not suggesting DDDB intended for this to happen, but it was the unintentional consequence. To say "The project would have finished up where it's at right now with or without DDDB's involvement" misconstrues the facts of the lawsuits and the financial climate.

2. There simply aren't tons of other projects with huge job potential for construction workers right now. Please name those that are happening in BK at the moment. I'm a Democrat, but at least I'm in touch with the reality of what that means in NYC-- that the unions will get their way. Who do you think contributes the most money to our party? If we were in Nebraska, we'd be powerless to stop a megachurch instead of an arena.

Posted by: havelc at June 22, 2009 11:20 AM

But again, I don't like the problems of traffic, sewage, school capacity or services; nor am I naive enough to think the market provides for those problems given demand.

My main point is this-- put yourself in the shoes of our politicians. They want to get re-elected and many of their constituents don't have jobs. AY will provide jobs to their base and it has a guarantee of 30% of contracts going to minority-owned businesses.

If you can come up with something that will increase pol's popularity among their base more than delivering that, then you have a political argument, not a parlor room argument such as traffic or caring capacity.

Posted by: havelc at June 22, 2009 11:24 AM

From my perspective this is a pox on all their houses type situation. I live in Prospect Heights (the neighborhood that will supposedly be most adversly effected by AY) and can tell you that development on this property is desperatly needed. The northern edge of prospect heights (north of Bergen) and the souther edge of Ft. Greene/Clinton Hill are desolate and poorly designed areas. Smart and sensible development of this parcel could have a tremendous positive impact on both neighborhoods. While I have always felt that the Ratner plan was too big and too out of scale, something clearly must be done. I am disapointed that DDDB and our local elected officals chose to leap for the baricades (and press conferences) instead of working with the developer to create a sensible and economically workable alternative.

And Arkady, gimme' a freakin' break. I'm so sick of people who live in some of the wealthiest communities in the borough hyperventilating about "gifts to the rich" and all this class warfare bullshit. That sort of language does a tremendous diservice to the entire conversation and serves to discredit the more reasonable critics of AY.

Like it or not, wealthy & greedy developers built this city...from day one. And that includes the precious brownstone blocks we all adore in Park Slope. Who the hell do you think built those??? A not-for-profit community affordable housing cooperative using sustainably quaried brownstone and union workers?

Posted by: clintonhillbuyer at June 22, 2009 11:30 AM

havelc,

You're right that financing was available when AY was signed off at (sub-sidized financing at that). If the Developer had started the project when he wanted, he'd be defaulting on that financing as we speak because his project isn't economically viable

If we're going down the route of spending tax dollars on construction because its a jobs program, then the projects undertaken should clearly be for the public good and not for the benefit of private interests i.e. let's build some new schools or new parks (i.e. a non-cmmercial Brooklyn Bridge Park). Or rebuild the BQE. We don't need an arena that isn't going to make money or high end apartments that are going to get sold at a loss.

Posted by: Boerum Hill at June 22, 2009 11:54 AM

Boerum Hill said it right.It's very easy to try to put the blame on DDDB but just look around at all the stopped projects (and these involved much less money and on a much smaller scale) in the City to get an idea of where AY would be today- DDDB or not.

Granted development is wanted there (to claim its needed is to imply the borough will be decimated without it- despite the fact Brooklyn has fared rather well all these years without an AY project). But the kind of development ratner wants to build is the worst kind of urban plan. There's no reason to waste billions on a crap project instead of rethinking what could go there. And for what? The promise of 25 million dollars return over 20 years? That's laughable. Jobs? Yes- for the construction industry, which are transient. As much as I want jobs for construction workers and tradesmen , for the public to finance jobs for them with billions of dollars while so many other workers get little to nothing, and so many organizations need funding- is a real travesty.

And lets not forget the main beneficiary of all this - Ratner. People keep complaining about how awful DDDB is and how they are singlehandedly ruining Brooklyn by stopping him- I see them as saving us money, because AAY will be a huge money pit. Ratner doesn't have the money to build it- never did.

Posted by: bxgrl at June 22, 2009 12:29 PM

Ratner tries to con the New York taxpayers out of $2 billion and the villain here is DDDB???

Hate to sound, even temporarily, like the What but his is - and always has been - a scam. We build Ratner's Nets a free stadium and in return he lets us buy tickets to the Nets.

OK, so the amounts of the corporate welfare have declined of late. Big effin' deal. Don't like looking at the hole in the ground? Then support rational development. And if you think the bills stop when the stadium's done, think again. The tax breaks we give Ratner will only get worse when the lease is up. Then we have to pay him to stay or else we've got an empty stadium and even more needless expense.

Jobs - at what cost? Spend the money elsewhere and still creates jobs. The city's laying off people 'cause they can't afford to pay them so the net increase in jobs/taxes of this is actually less than zero.

A disaster from day 1. Either this stops or our grand kids will be footing the damn bill for our stupidity.

Posted by: Johnny at June 22, 2009 12:51 PM

Look, Johnny, I would love to build more schools and parks-- but the refrain of "Then support rational development" is so completely cliche, not to mention FUBAR. Define rational development. Show me all these rational development projects that exist in dense urban areas.

Almost no city in the world has the cash for public development (especially now) so they depend on public-private partnerships. As someone who works in finance, you know this. Is Ratner a prick? Yes. Will he make money off this? Sure he will. But the city lacks the cash to build just about anything on it's own, so it will always need people like him if they want to get anything done.

The way to build parks (or in this case affordable housing) is to mandate it as part of a bigger deal. The city can't afford to do it, and no private developer will attempt it due to the insane building costs in this city.

Posted by: havelc at June 22, 2009 1:41 PM

Also-- and not to sound like a jerk, but:

"Jobs - at what cost? Spend the money elsewhere and still creates jobs. The city's laying off people 'cause they can't afford to pay them so the net increase in jobs/taxes of this is actually less than zero."

You do realize that money in government agencies is the least efficient job creation tool possible, right? And that's not a right wing yarn-- Obama recognizes this, which is why so much of his stimulus and green jobs program is aimed at public-private partnerships.

Posted by: havelc at June 22, 2009 1:44 PM

" The city can't afford to do it, and no private developer will attempt it due to the insane building costs in this city. "

So how does this make sense? The only way for ratner to be able to build AY is with the same public financing you say the city can't afford.

Posted by: bxgrl at June 22, 2009 1:47 PM

Actually tax cuts for millionaires and billionaires is the least efficient job creation tool possible. Ratner's welfare plan is essentially Bush tax cuts for one particular multi-millionaire. We all get our taxes raised. Ratner gets our money. Quite simple.

One, we're renting an asset (Nets) for many times what it's worth to buy.

Two, economic benefit is largely localized to the owner(s) of the Nets. Ratner.

Three, nothing wrong with public-private partnerships. But this aint a partnership, it's a mugging. Ask yourself what do we get for the money. A crappy stadium and debt. Lots and lots of lovely debt.

Long after the Nets have moved back to Jersey we'll still be paying for this.

Posted by: Johnny at June 22, 2009 2:06 PM

DDDB only delayed this if your business model assumed no lawsuits. Given that, even before approval, there were lots of folks complaining about the subsidies, the scale of the project, the lack of a public planning process, and the lack of justification for eminent domain, "no litigation" would have been a horrible assumption for a business plan, whether you agree with the lawsuits or not. Anyone could have foreseen the litigation. If FCR's business plan had room for an upfront payment of $100m and Gehry as archtiect only if there was no litigation, then it was a faulty business plan.

Posted by: slopefarm at June 22, 2009 2:26 PM

Criminals

Posted by: werner at June 22, 2009 2:36 PM

Bxgirl,

'" The city can't afford to do it, and no private developer will attempt it due to the insane building costs in this city. "

So how does this make sense? The only way for ratner to be able to build AY is with the same public financing you say the city can't afford."'

The point is that the city can't afford to build affordable housing on its own because it doesn't have the cash on hand. It can offer tax incentives and breaks which never commits cash on hand.

On the flip side, because building costs are so high in NYC-- higher than anywhere in the country with the possible exception of SF-- the fixed costs associated with a project mean that in a fully privately funded situation, developers will only pursue luxury projects because they have higher profit margins and the gross profits necessary to clear costs. It is not profitable, without public subsidy (given costs) to build affordable housing-- the cap rates are WAY too low.

And since the city can't afford to do it on their own (they have no cash) the best they can do is offer incentives, which are essentially future discounts on unrealized and currently non-existent cash flow streams to pay for it. The city won't give Ratner billions, they'll give him the equivalent of billions which is a huge difference.

Posted by: havelc at June 22, 2009 5:15 PM

Sorry for making that overly complicated.

Put more simply:

Neither the city, nor developers have the ability to build affordable housing completely by themselves.

Posted by: havelc at June 22, 2009 5:22 PM

"Neither the city, nor developers have the ability to build affordable housing completely by themselves. "

Not entirely true. The private market used to build unsubsidized affordable housing on Staten Island, until it was outlawed by mapping the entire island with exclusionary zoning districts.

Posted by: Sparafucile at June 22, 2009 5:55 PM

havelc- I take your point but the issue with ratner is
1. this is not and was never meant to be an affordable housing project. Ratner only added "affordable" housing under duress and in an effort oto get community support.
2. Some of this subsidized housing will be for people with incomes up to 125,000. Now I am sorry but there are loads of people making far less than that and making it. I make far far less- why should I subsidize someone who is making a decent salary just because they decided to have too many kids? I could say that same for those making far less, but you can have a pretty nice life on 125,000 a year and you do not need public subsidies.
3. Ratner gave himself an out as to when and where the affordable housing would be built. It does not have to be on site at AY, and it can be done at the tail end of construction. In other words, if he runs out of money it most likely will never get built at all.

Basically in return for public funding and subsidies, sweetheart deals and rules bending, ratner really promised the city not much, if anything. (25 mil over 20 years? He must think the city is pretty stupid to settle for that- and if our elected officials do, they are pretty stupid.)

Posted by: bxgrl at June 22, 2009 7:00 PM

According to Crain's, the offer to Ratner is to pay the $100 million over TWENTY YEARS, with the bulk of the payment to come after 2016, when the "second half" of the plan gets started. Maybe.

DDDB wouldn't have been able to organize and get the traction it did if Ratner had not conspired with local officials to sideline true community residents with a sham "Community Benefits Agreement" that paid off several organizations, most of which were created explicitly to agree in a pleasantly financially beneficial way. Yes, there are always cranks and naysayers. But they wouldn't have gotten support if the true stakeholders in this project had been invited to the table in the first place.

Posted by: Brooklyn Chicken at June 22, 2009 8:45 PM

I just want to point out that there are hundres of thousands of projects that ran over budget, rubbed people the wrong way, etc. - but the ultimate result were marvelous, and persited to be iconic of the cities where they were bilt.

That could have been the case with AY had it not been for NIMBYs who stalled, stalled, stalled - and the end result - they are still getting an arena, now just with a heaping side of ugly.

Maybe we should have run this like the co-op... (where friends who belong ask me for notes to excuse them from their shifts - LAME! you are not in 3rd grade anymore, is my answer).

Posted by: bupe at June 23, 2009 12:22 AM

« Open Thread Jonathan Adler Coming to Atlantic Avenue! »

June 22, 2009

Big Week for Atlantic Yards Sweetheart Deal-Making

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