Last week the Mayor annouced he is developing a new formula to more accurately determine who is poor in NYC, and more accurately assess the effectiveness of his administration's initiatives to end poverty. In December the Mayor announced 31 of some 40+ initiatives, on a budget of $150 Million dollars, were up and running with more coming online soon. The move has generally been praised by advocates for the poor who say the current federal formula does not accurately represent the depth of the problem America faces. But this interest in scrutinizing the effectiveness of $150 Million worth of programs is curious. It is curious, not for its own purpose - which is logical and wise and seems worthy of admiration, but it is curious in the context of other public subsidies doled out by the city. It is curious in light of the lack of scrutiny give to massive subsidies paid to real estate developers.

Billions of dollars in public subsidies are payed out to real estate developers in NYC. Most of these public subsidies receive minimal cost benefit analysis during planning and seemingly none post development. Most developer subsidies of course are intended to support the creation of jobs and affordable housing, at least that's how they are solid in the media. The problem is we have no way of knowing, outside the analysis done by watchdogs groups, whether these Billions of dollars are money well spent. So why doesn't the Mayor show any interest in applying his technocratic skills to these deals?

That developers receive billions in public subsidies is not really news. And the list of projects that have received gragantuan public support over the past few years is not full of any surprises; most of these projects are well known among average New Yorkers. But the magnitude of tax payer dollars following to these projects, without much rigorous cost-benefit analysis, is still shocking when they are considered in sum.

Where Is That Harvard M.B.A. Conditioning?

In last weeks NYTimes article about the Mayor's new poverty formula plan, the paper wrote, "in developing the new programs, however, the city discovered a serious obstacle: the federal poverty standard was all but useless in assessing whether the efforts were having an effect. This was especially frustrating for the mayor, whose business background and Harvard M.B.A. have conditioned him to look for measurable results."

I had to laugh. First off the above paragraph hardly seems like something a journalist would come up with off the top of their head. More likely that paragraph was a rehash of a statement from the Mayor's office. Next I thought about all the real estate deals that have gone down during the Bloomberg administration and what little interest he has shown in measurable results - in fact at times he has gone as far as to complete ignore measurable results.

Below is a list of notable development projects receiving massive public handouts. Most were pushed during Bloomberg, though some were put in place before the current Mayor took office. The practice of unscrupulous public subsidies is an old NYC practice, as the Dolans know.

Of course the Mayor's new poverty formula eventually could effect billions of dollars. The federal definition is used to determine the City's eligibility for numerous federal entitlement programs. And it could be used nation wide if it wins merit with policy makers. In addition there are more than a billion dollars worth of low income programs in the City. The New York City Housing Authority alone has an annual budget over $1.7B. In 20007 NYCHA received $170M from NYC, $3.4M from the State (with an additional $47M to be phased in over 3 years) and $1.57 Billion from the federal government. And NYC spends more than half a Billion dollars a year on homeless shelters and services. While a complete accounting of dollars flowing into nyc was impossible to fully research for this article, those dollars seem dwarfed by the amount of money that follows to real estate developers.

Summary

Here is a quick list of some of the biggest deals getting public financial support in recent years. This is greatly simplified. Following is more detailed list about each project and the monies they have received. It is worth noting that this is to say nothing of the poorly accounted use of PILOTs that is going on; PILOTS are payment deals developrs strike with the City to pay a reduced fee to a Mayoral slush fund instead of real estate taxes. Only recently has the magnitude of real dollars the City sacrifices via PILOTs come to light ($100M annually), thanks in part to a new law requiring the Mayor to report PILOT payments to City Council. The point of all of this is not actually to say that all the deals are bad, though many have problems, but rather that there is no serious and comprehensive evaluation of the efficacy of these subsidies going on.

Goldman Sachs

$1.6 Billion in low rate financing

Lower Manhattan

$300 Million Marshal Plan
$155 Million cash to Silverstein
$2.9 Billion in reduced rate financing Silvertein

Atlantic Yards

Land sold with no bid
$3.5+ Billion in cash, tax breaks, and financing, plus likely hundreds of millions in pending cost offsets not yet calculated

Bronx Terminal Market

Land sold with no bid
$14 million in cash
$32 million money-back guarantee
$400 million in low rate financing
Unaccounted tax breaks

Yankee Stadium

$795 Million in financing and tax breaks

Mets Stadium

$177 Million in financing and tax breaks

Theater Owners of Times Square

$100-$400+ Million in rezoning value

Hudson Yards

$3 Billion worth of bonds for Subway payed with PILOTs (e.g. reduced property taxes)

West Side Railyards Jets Bid (never realized)

Land offered with no bid
$600 Million in financing and tax breaks, plus hundreds of millions in transfered air rights.

The Mayor is to be applauded for seeking a more accurate picture of poverty in the city. Now it would be nice if you could put those technocratic skills to work where the big money is.

Continue reading for more details about each project, including analysis of those which clearly are developer welfare.

The Details

Goldman Sachs

$1.6 Billion in liberty bonds plus $150 million in tax breaks, and $32 Million in job retention grants from New York City and State and Federal taxpayers to finance the Firm's new headquarters near the World Financial Center in Lower Manhattan. This subsidy was given to Goldman presumably to "rescue" Lower Manhattan and keep jobs in NYC (as if Goldman really has somewhere else to go).

Lower Manhattan

$300 M Marshal Plan - tax breaks and other incentives for developers in Lower Manhattan
$155 M to Silverstein in developer fees for Freedom Tower
$2.9 Billion in tax-exempt Liberty Bond proceeds for Silverstein
$1.5 Billion in insurance proceeds for Silverstein
NYC and Port Authority guarantee leasing 600,000 swrf from Silverstein for 15-25 years

Atlantic Yards

Land sold with no bid
$3.5+ Billion, plus likely hundreds of millions pending in subsidies for costs not yet calculated like arena construction sales tax exemptions and public utility changes, and funds for slushy costs like "extraordinary infrastructure costs". That includes cash handouts to Forest City Ratner of $204 Million from NYC and $100 Million from NY State.

NYState never reviewed a financial plan for the project. Which means NYC didn't either, and yet NYC's dole out to FCR for AY is greater than the Mayor's poverty initiatives budget.

Additionally, the public is clearly being scammed by the abuse of the city-wide Average Median Income rate, which is used to determine rents Forest City Ranter can charge for "affordable" apartments. FCR gets more than a Billion in low-rate financing in exchange for 85% market rate apartments. Lastly FCR is getting tax breaks for nothing by being excluded from 421a reform.

Bloomberg has vehemently backed the Atlantic Yards project.

Bronx Terminal Market

Exemption mortgage recording taxes for construction financing up to $400 Million.

Exemption from NYS and NYC sales tax for construction work and off site work

Extension of Liberty Bonds outside Liberty zone up to $80 million.

City land was sold with no bid, tax incentives, tax-free Liberty Bonds, low-interest loans, and $14 million in cash in what many labeled an unnecessary sweetheart deal; additionally the city promised it would reimburse the developer for the cost of the lease if it didn’t get the zoning changes it needed - a $32 million money-back guarantee to Related.

Yankee Stadium

Including new Garage Bonds public subsidies for Yankees Stadium are now up to $795.9 million. Thats up from $422 Million back when fiscal watch dogs thought it was a loser deal in early 2006.

On October 9th 2007 the Industrial Development Agency agreed to issue $225 million in tax exempt bonds to build three new garages and renovate existing parking facilities around Yankee Stadium. The city estimates this will mean over $2.5 million in forgone city taxes (in addition, there will be approximately $5 million and $51 million in forgone taxes at the state and federal level, respectively).

Previously, on March 24, 2006, the Empire State Development Corporation (ESDC) approved the allocation of $70 million for the parking garages, which were then expected to cost approximately $239 million to construct (not including the $32 million cost to the city of building public parks on top of the garages).

Even when there is evidence suggesting public subsidies might not be justified, they are ignored. In the case of the Yankees a preliminary study by New York City showed the City would only see a return of $225 Million on it's then pledged $444 Million ( now $795 Million ) investment. Michael Bloomberg, declared in 2006 that "We make 'investments.' We don't do subsidies. We get our money back, and we make money". But then he ignored the City's own study saying Yankees stadium is a loser. So much for that Harvard M.B.A. conditioning.

Mets Stadium

Their $444 Million dollar stadium was backed by $177 Million in public subsidies through the usual sports development cocktail of city rent rebates, parking revenue rebates, construction sales tax breaks, property tax breaks, and savings via tax-exempt bonds

Theater Owners of Times Square

Theater owners have just started to cash out by transferring air rights - they landed the free money under a rezoning 9 years ago. No deals were acted on until last year, but seems the rezoning will net them revenue well in excess of the estimated $100 Million winfall originally envisioned. Air-rights prices have sky rocketed since the original zoning.

Air-rights prices 9 years ago where ~$50/sq-foot

Air-rights prices jumped to ~$200/sq-foot in 2006

And the record price for air-rights seemingly has doubled this year from 2006

The benefit the City received from the rezoning is a fixed $10 per sq-foot for an arts fund, a benefit which decreases in value every day theater owners wait to sell.

Hudson Yards

$3 billion worth of bonds for the Subway 7 line extension will be serviced by Hudson Yard PILOT payments, reduced property taxes collected in the district. This a double bonus for developers - subway extension and reduced property taxes. Meanwhile the city pays for the debt until there are buildings built.

The Subway extension will be built for Hudson Yards but not for Hell's Kitchen - this has been seen as Bloomberg's office reneging on the original Hudson Yards deal.

West Side Railyards Jets Bid (never realized)

The Jets Bid for the Westside was spearheaded by Bloomberg. The deal proposed subsidizing construction of the Jets stadium with $600 Million in funding from the City and NYState, plus hundreds of millions in air rights which would have been transferable from the rail yards to neighboring streets (Just like in the theater rezoning). The property was also offered without a bid requirement.