Monday, January 16, 2012

Some "Truth Vigilantism" toward a 2005 New York Times account of AY arena costs

I didn't start writing about Atlantic Yards until late 2005, so I'll apply some retrospective "Truth Vigilante" treatment to Stadium Games: Give and Take And Speculation; What the Teams Want And What the City Gets, a 1/16/05 New York Times articles about the proposals then in play:
Nonetheless, the mayor and Gov. George E. Pataki are on the verge of approving three new sports sites -- a football stadium for the Jets, a baseball stadium for the Yankees and a basketball arena for the Nets -- that will require a combined public investment of at least $1.1 billion.

It is not easy to assess precisely what the taxpayers will get out of their investment, which is equivalent in cost to a major Manhattan skyscraper or 25 schools with 600 seats each. In part, that is because the economic benefits are based on studies commissioned by the teams themselves, and promoted by the government sponsors of the projects.
What about AY?

So, what did it say about Atlantic Yards?
The Nets arena in Brooklyn will require a public investment of about $200 million and the condemnation of several blocks of housing and stores. New York will get a basketball team back from New Jersey and an arena with a public garden on top that is intended to serve as an anchor for a residential and commercial development. The arena could also be used for high school or college games.
Well, the public direct investment is nearly 50% higher now, while there are numerous other subsidies and opportunity costs, leading the New York City Independent Budget Office, in 2009, to pronounce the arena a net loss for the city.

The public garden? Long gone.

Arena as anchor for residential and commercial development? Not so much. Maybe leverage for subsidies.

The curious Zimbalist mention

The Times's Charles Bagli wrote:
Sports economists have long said that stadiums and arenas often enrich teams but are relatively poor public investments.

''There's no intrinsic economic benefit from building a sports facility,'' said Andrew Zimbalist, a leading sports economist who teaches at Smith College. ''You have to look at the details of the financing, the facility and the location.''
All true, but the Times did not mention that "leading sports economist" Zimbalist was the author of the promotional study regarding Atlantic Yards.

More on the arena

The Times reported:
The Nets' $430 million Brooklyn arena, in the Long Island Rail Road yard at Atlantic and Flatbush Avenues, is an eye-catching but ultimately modest element of a larger $2.5 billion residential and commercial development next door. The developer Bruce Ratner bought the New Jersey-based team for $300 million last year, intending to use it as a lever to build the arena, 4,500 apartments and 2 million square feet of office space on a 21-acre site in downtown Brooklyn.

The project has won considerable support in Brooklyn, but some local residents and others object to the state's willingness to condemn land on behalf of a private developer, especially in an area that is finally enjoying a revival. They also say that the level of subsidies outweigh the benefits of the project.
OK, were they right? The Times didn't help much.

The article continued:
Mr. Ratner's initial request for $450 million in subsidies and infrastructure work has been whittled down to $200 million to $215 million in negotiations with the city and the state, according to officials involved in the talks.
Whittled down? Maybe Ratner, as is his pattern, started with a simply outlandish request, and then moved closer to a mutually acceptable number. After all, he figured out a new way to save--thanks to federally tax-exempt bonds.

The Zimbalist fig leaf

The article continued:
A newly revised analysis by Mr. Zimbalist, the sports economist, estimated the net fiscal impact of the entire project at $1.06 billion over 30 years. Proponents argue that the principal benefit is the housing, about half of which would be for middle-, moderate- and low-income tenants. Of course, those apartments would benefit from an as yet undetermined level of tax breaks and other incentives.
Um, why does Zimbalist get described merely as "the sports economist" rather than "Ratner's hired consultant"? I don't think the phrase earlier in the article--"economic benefits are based on studies commissioned by the teams themselves"--is sufficient disclosure.

A hint, and a question

The article continued:
Real estate executives in Brooklyn said that Mr. Ratner was considering a sharp reduction in the amount of office space, and an increase in the number of apartments.

Sifting out the value of the arena alone is difficult, but based on Mr. Zimbalist's original analysis, it would appear to be a modest $107.5 million over 30 years, after deducting the cost of the public investment.
Real estate executives in Brooklyn? How about Forest City executives who didn't want to be quoted by name? The implication, which the Times didn't pursue--and not until much later that year--was that there'd be fewer jobs.

And why should Mr. Zimbalist's original analysis be considered credible? Even though there was no IBO report yet, or one from the Pratt Center for Community Development, at the least the Times should at least have taken seriously the Kim/Peebles critique of Zimbalist. Which it didn't.

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