By Albert Samaha
By Darwin BondGraham
By Keegan Hamilton
By Anna Merlan
By Anna Merlan
By Tessa Stuart
By Tessa Stuart
By Albert Samaha
The unelected officials behind the multibillion-dollar Jets stadium and development complex on Manhattan's West Side may not be very good at finding ways to pay for it; at last count, there remained a nearly $1 billion hole in their financing plan. As for finding new ways to avoid public oversight of the spending of taxpayer money, though, Deputy Mayor Dan Doctoroff and state development chief Charles Gargano are breaking new groundand increasingly pissing off those who would be cut out of the loop.
"Silly me, I thought the state constitution required legislative approval for the spending of the state's money," Assemblymember Richard Gottfried, whose district includes the proposed stadium site, griped to the Voice about Gargano's latest proposal, which would use backdoor financing to evade an anticipated state vote on the project. "If the governor thinks he can direct resources to the city that were not ordinarily going to go to the city over the objections of the legislature, I think he's asking for big trouble."
The first signs of a coming end run emerged last February, when Doctoroff unveiled his financial plan for the greater Hudson Yards project, which would cover Manhattan's West Side with not just a stadium, but also an expanded Javits Convention Center and acres and acres of new commercial development. Initially, Doctoroff had proposed using the increased property taxes from new developmenta mechanism known as "tax increment financing," or TIFsto pay off the billions in city bonds required to extend the No. 7 subway line and clear land for the project. While new to New York, TIFs have spawned controversy in many other parts of the nation, where they've been blamed for depleting cities' treasuries to fund private development projects.
By the time the Hudson Yards finance plan was revealed, however, TIFs had been shelved in favor of a complex gambit wherein a new quasi-public development agency, the Hudson Yards Infrastructure Corporation, would exempt developers from property taxes entirely and instead collect "payments in lieu of property taxes," or PILOTs. The effect would be exactly the samenew property-tax proceeds that otherwise would go to the city's general fund would instead be used to pay off the subwaybut without the messy little complication of having to go to the City Council or state legislature for approval of a TIF.
Even so, Doctoroff was still left with a problem: To prepare for a possible Summer Olympics in 2012, he wants to break ground in 2005, but the PILOT payments wouldn't start flowing until 2010. To cover the gap, he proposed having the Transitional Finance Authoritya quasi-public agency created in 1997 to get around fluctuations in the city's debt limitissue a billion dollars' worth of short-term "commercial paper," rolling it over into new debt every few months. According to the city Independent Budget Office, this dodge could cost the city an additional $1.3 billion in financing costsand, if the promised PILOT payments don't roll in on time, leave the city holding the bag on up to $1 billion in debt. In a strongly worded letter to the mayor last month, City Comptroller William Thompson wrote that the use of the TFA also "creates a troubling and inappropriate precedent with potential impact beyond this project: any local development corporation, such as Hudson Yards, could be created at any time to divert funds from the City's operations without the consent of the City Council."
The latest evasive maneuver was revealed by Gargano earlier this month, at a press event that was supposed to tout his Empire State Development Corporation's finance plan for its half of the $600 million in public funding promised to the Jets. Instead, Gargano let slip a startling revelation: If the state legislature balks at appropriating funds for the stadium, he suggested, New York's City Council could take on the entire nutand Governor Pataki would find a way of compensating the city under the table, perhaps by having a state agency like the ESDC or the Metropolitan Transportation Authority pick up a larger share of a joint city-state project.
Needless to say, state legislators were mighty steamed to hear they could be cut out of the appropriations loop. "I think it's going to be very difficult to figure a way to get $300 million in state tax dollars to the city over the objections of the legislature," says Gottfried.
But State Senator Liz Krueger, another vocal critic of the stadium plan, is less certain. "The state of New York's budget operates like a slush fund, because that's how it's been set out by Governor Pataki, and the legislature hasn't stopped it," says Krueger. "When Chairman Gargano seems to imply '$300 million there, $300 million there, I can find that in the petty cash drawer,' it disturbs me immensely, but he may be right."
If so, responsibility for the state's share of Hudson Yards could fall back on some familiar faces: Assembly Speaker Sheldon Silver and State Senate Majority Leader Joe Bruno, who hold veto power over the project via their role on the Public Authorities Control Board. While neither is considered a stadium backera Silver spokesperson told Bloomberg News last week that the speaker still "has reservations and qualms" about the stadiumit's nearly impossible to tell what sort of deals will ultimately be cut in the smoke-filled world of Albany politics.