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IBOAtlanticYards091009

IBOAtlanticYards091009

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Atlantic Yards analysis showing affect on government finances
Atlantic Yards analysis showing affect on government finances

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Published by: Eliot Brown / New York Observer on Sep 10, 2009
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IBO
New York City Independent Budget Ofce
Fiscal Brie
 September 2009
New York City
Independent Budget OfceRonnie Lowenstein, Director110 William St., 14th oor
New York, NY 10038Tel. (212) 442-0632Fax (212) 442-0350e-mail:
iboenews@ibo.nyc.ny.u
s
http://www.ibo.nyc.ny.u
s
 Also available.
..
City Ramp Art FuningProc: Mor Fun orMor Group
... at www.ibo.nyc.ny.us 
T Propo Arna at Atlantic Yar: An Analyi o City Fical Gain an Lo
SUMMARY 
IBO hAs RevIewed t cal impact o t propo Atlantic Yar arna at t rqut o  Ambly Mmbr Jam Brnnan, hakm Jri, an Joan Millman; snator Bill Prkinan vlmantt Montgomry; an Council Mmbr Ltitia Jam an dai Yaky. T arnai IBO’ ocu bcau it account or almot all o t pcial bnt bing grant by t city an tat to t largr Atlantic Yar projct. In aition, tr i conirabl uncrtainty aboutt timing o t compltion o iniiual builing in t rt o t projct, ic maktimating t cal impact o t ull projct or t nxt 30 yar xtraorinarily uncrtain.IBO a analyz t cot to t currnt city an tat bugt rom pcial capital pningan t lo o xiting tax rnu at t it ru our projction o n tax rnu rultingrom t contruction an opration o t acility. Among our ning:Or a 30-yar prio, t arna oul cot t city narly $40 million mor inpning unr currnt bugt plan tan it ill gnrat in tax rnu (prntalu, 2009 ollar). T cot total narly $170 million rom nancing city xpnitur on t arna an t lo o xiting tax rnu at t it.For t tat, t arna oul a a nt cal bnt o $25 million a n taxrnu oul xc pning currntly bugt or t acility. T MtropolitanTranportation Autority oul garnr narly $6 million in n tax rnu.T n irct an inirct conomic actiity gnrat il t arna i unrcontruction in 2010–2011 inclu an annual arag o 3,282 n job in t city,mot in t builing tra. wn t acility i opn tr ill b an arag o 955n job, many o tm part tim, an motly in prorming art an pctator port.For t lopr, Fort City Ratnr Compani, t mix o pcial gornmntbnt rult in total aing o $726 million.T projct alo inclu tax xmption an otr proiion tat ruc t ll o potntialaitional rnu t arna migt gnrat or t city, tat, an Mtropolitan Tranportation Autority. T opportunity cot total $181 million or t city an $16 million or t tat,plu anotr $22 million or t tranportation autority u to it blo markt rat al o lan. wr gornmnt not ni t rnu, t city oul raliz a ubtantial nt calgain rom t arna inta o a nt lo.Bcau ti tuy ocu on t projct’ bugt impact, tranportation, lan u, an otriu rlat to t projct ar not cor. At t am tim, IBO not tat timat o calcot or bnt ar only on apct o t many irnt actor tat oul b takn intoaccount n aluating t orall mrit o a projct.
 
NEW YORK CITY INDEPENDENT BUDGET OFFICE
DESCRIPTION OF THE PROJECT
 Fort City Ratnr Compani (FCRC) a propo a majorrlopmnt o t Atlantic Yar ara in ontonBrooklyn—a 22-acr it currntly ominat by t opn,blo-gra Mtropolitan Tranportation Autority (MTA)rail yar. T mot rcnt cription o t Atlantic Yararna an rlopmnt projct—t Jun 2009 MoiGnral Projct Plan—call or t contruction o a 18,000-at baktball arna on t outat o t intrction o  Atlantic an Flatbu Anu an 16 mix-u builing(motly at o t arna), plu rconguration o t MTA’rail yar. T projct oul alo ntail ubay, utility, anotr inratructur impromnt
.
dlopmnt oul occur in to pa. T rt pa oulatur t contruction o t $772 million Atlantic Yar arnain tim or t Nt to rlocat rom t N Jry Maolanto Brooklyn or t tart o t 2011–2012 National Baktball Aociation (NBA) aon. T moi projct plan o notinclu a pcic timtabl or t rmainr o contruction inPa I— ig-ri builing nar t arna plu t rail yar’upgra—or or t bginning o Pa II, in ic aitionaltor an poibly a cool oul b built in t atrn portiono t lopmnt ara.
1
T non-arna builing ar to containoc, commrcial, rintial, an poibly otl pac, tougt latt projct plan o not prnt a pcic allocation o tirnt u among t builing.
Why the Arena Only? 
A in ourpriou rport, IBO’ ocu ion t arna an t nt cal impact rulting rom t u o public ollar to upport tat part o t largr projct. Tr arto raon y  a again conn our impact calculationto t arna. T rt i analytical an t con i practical. Analytically,  ar only intrt in calculating t rturn to tpublic c rom t icrtionary bnt bing grant to tiprojct abo an byon t a-o-rigt bnt tat oul baailabl to any lopr at ti it or lr in t city. Int ca o Atlantic Yar, t arna account or irtually all o ticrtionary bnt foing to t projct. T rt o t projct oul rci bnt tat ar aailabl a-o-rigt to all qualilopmnt or l pcial arrangmnt tat ill rult in bnttat ar conitnt it to a-o-rigt program. Tu, nitr tpublic cot o t commrcial an ouing lopmnt incntitat oul b u or t largr lopmnt, nor t conomican tax impact rulting rom aing oc pac an apartmntar count in our analyi. w ar only analyzing t xtraorinary bnt or t arna an t conomic an tax impact rultingrom opration o t arna.T practical raon or ocuing on t arna i t mucgratr uncrtainty about t timtabl or t rt o tprojct, particularly gin tat crit markt a till notully rcor rom t ock o t lat 18 mont antat man or oc pac an ouing—pcially luxury ouing—i ignicantly akr tan it a arlir ti ca n t projct a initially appro. Altoug otn trata a ingl projct, unr t currnt plan Atlantic Yar oulb lop in to itinct pa, an n itin t topa tr i conirabl uncrtainty a to n ac builing oul b contruct. wil t agrmnt btn FCRCan t city an tat inclu prormanc targt an nancialpnalti or miing tm, ty a bn a, rt in tuning agrmnt ign in 2007 an tn urtr o in tmot rcnt Moi Gnral Projct Plan tat i pningapproal. I Fort City Ratnr u t maximum tim aailablunr t n moi projct plan, contruction coul xtnuntil atr 2020. Gin ti uncrtainty about t timing o compltion o iniiual builing an t ultimat timing orull buil out, IBO a con not to timat t cal impacto t ull projct or t nxt 30 yar.
DISCRETIONARY BENEFITS FOR THE ARENA 
T baktball arna at Atlantic Yar oul rci a numbro city an tat bnt grant at t icrtion o N York’conomic lopmnt agnci. T bnt inclu irctcontribution o ca, capital intmnt an proprty; accto tax-xmpt nancing; xmption rom proprty, al, anmortgag tax; an a blo markt al o MTA proprty.In riing t icrtionary bnt proi or t arna,IBO itingui btn to tat rquir t city an tatto mak outlay or gi up xiting rnu, an to tatinol orgoing potntial n tax an micllanou rnurom t arna. w rr to t ormr a cot to t currntbugt, or balin cot, an to t lattr a opportunity cot.
City and State Capital Contributions.
T projct plan along contmplat irct paymnt o $100 million ac romt city an tat to Fort City Ratnr to b u or projctinratructur uc a builing t platorm or t rail yar.In t ca o t city, t contribution coul alo b u orlan acquiition, xcpt or t purca o MTA proprti orlan acquir troug minnt omain. T city a alray committ it contribution in t capital bugt an mot o tproc appar to a bn u by FCRC or lan purca.In January 2007, ortly atr t rt moi projct plan aappro, Mayor Mical Bloombrg cit capital contribution
 
NEW YORK CITY INDEPENDENT BUDGET OFFICE
or Atlantic Yar rom t city o $205 million ratr tant priouly announc $100 million. wn qution att tim, t Bloombrg Aminitration xplain tat it aalo counting inratructur projct uc a rbuiling anxpaning atr an r capacity an trt upgra at ornar t it. In om ca t projct ar n in orr toanl t man on municipal inratructur rulting roma projct on t cal o Atlantic Yar. In otr ca, tr rinratructur projct in t Atlantic Yar icinity tat oul abn ncary oonr or latr tr t projct a built or not.Bcau a portion o t aitional $105 million in city capitalcontribution cit by t Mayor oul likly a occurrin t abnc o t projct, IBO count about al o tiaition—$50 million—a part o t city’ capital contributionor t projct.For bot t city an t tat, t “cot” o t capitalcontribution i t total bt ric or t li o t bonol to nanc t paymnt to FCRC. For t city, tiamount to $156 million (prnt alu), an or t tat tcot i $104 million. T cot ar irct xpn rom tcurrnt city an tat bugt balin. For Fort City Ratnr,t aing qual t bt ric tat t company oula a to pay or nancing t contribut capital itl. IBOtimat tat t aing or FCRC total $320 million.
Contributions of City Property.
T city ill proi omproprty or t projct at no cot. Accoring to t lattmoi projct plan, ti ill inclu t trt b o Fit Anu btn Flatbu an Atlantic Anu an t trtb o Pacic strt btn Flatbu an sixt Anu,a ll a a mall trac triangl at t intrction o Fit Anu an Pacic strt. Ba on rcnt al pric in tara, IBO timat tat t 2010 al alu o ti proprty i$3.7 million.
2
Not lling ti lan at a markt pric to anotrlopr or to FCRC a to t opportunity cot o tprojct. In t portion o t projct at o sixt Anu— ic i outi o t arna ootprint—FCRC i committ topaying a markt pric or t trt b o Pacic strt btnsixt an vanrbilt Anu.T city ill alo tranr to city-on parcl to t empirstat dlopmnt Corporation (esdC) at no cot, ic illtn b la to FCRC, tat appar to b inclu in t arnait. T rt (block 1127, lot 33) i alu by t dpartmnt o Financ at $124,000 on t currnt tax roll, an t con (block 1118, lot 6) a a rport ull markt alu o $5.8 million.
3
 Ba on t markt alu, t alu o t ubiy romignoring t opportunity to ll t proprti i $6.0 million.
 Access to Tax-Exempt Financing.
Muc o t contructioncot o t arna oul b nanc troug tax-xmpt bon
un
Public Costs and Private Savings From Exemptions and Subsidies forAtlantic Yards Arena
Present value (dollars in millions) 
CityCostsStateCostsMTACostsFederalCostsTotal PublicCostsFCRCSavings
Costs to Current Budget 
City and State Capital Contributions for Arena$(156.4)$(104.3)0.00.0$(260.7)$320.3Loss of Existing Property Taxes on Arena Site(13.0)0.00.00.0(13.0)0.0
Total Costs to Current Budget$(169.4)$(104.3)0.00.0$(273.7)$320.3
Opportunity Costs 
Tax-Exempt Financing for Arena(1.5)(4.9)0.0(193.9)(200.3)193.5Arena Property Tax Exemption(146.0)0.00.00.0(146.0)146.0Mortgage Tax Exemption for Arena Financing (13.0)(2.1)(11.3)0.0(26.4)26.4Sales Tax Exemption for Arena Construction(10.4)(9.2)(0.9)0.0(20.4)20.4MTA "loss" on Rail Yard (Arena Portion)0.00.0(10.0)0.0(10.0)10.0
 
pporyos oranser o y roperyo......Opportunity Cost of Transfer of City Streets to FCRC(3.7)0.00.00.0(3.7)3.7
Total Opportunity Cost$(180.5)$(16.2)$(22.2)$(193.9)$(412.8)$406.0
SOURCE: IBO.NOTES: Present value of fiscal years 2010-2039 costs and savings computed using discount rate of 6.0 percent. Costs to currentbudget are direct government expenditures or existing revenues lost on behalf of arena. Opportunity costs are potential arena-related government revenues foregone as benefit to arena.

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