Blank Check for Hudson Yards
It's not politics until someone hauls out an oversize check, and last month New York assemblyman Richard Gottfried obliged.
Hoisting a foot-tall piece of mock accounting on the City Hall steps, Gottfried charged that the NFL's Jets, in order to use tax-exempt bonds for their planned West Side stadium, were secretly planning to heist more tax money from city coffers.
As it turned out, Gottfried's warnings were a false alarm: Although paying for tax-exempt bonds with private money is normally a big IRS no-no, the Jets' bond lawyers think they've found a loophole that would allow it. But on the larger issue of both the Jets' stadium and the greater Hudson Yards plan to remake Manhattan's West Side, a big blank check is an apt metaphor, because each is increasingly awash in questions about hidden public costs.
First off, there's the lingering question of how much rent the Jets would pay to the MTA, an agency so cash-strapped that it's considering selling corporate naming rights to subway stations. Everyone involved says the rent will be "fair market"; what's in dispute is what exactly the market is for 13 acres of real estate in a corner of midtown that, depending on your perspective, is either desolate or ripe for development. Former MTA chief Richard Ravitch says it's worth $3 billion; current MTA chief Peter Kalikow says more like $600 million.
Meanwhile, Jets president Jay Crossthe stadium gun-for-hire brought in by owner Woody Johnson after his successful arena-lobbying effort for the NBA's Miami Heatdeclared recently in amNewYork that "we are going to be paying millions of dollars a year in ground rent, I'm pretty confident of that. Not tens of millions, but millions." Even at its most generous interpretation, that would come to less than $300 million in present value over the course of the lease, stiffing the MTA and its subway riders for anywhere from half to 90 percent of the site's actual value.
Another potential pitfall lurks in the funding scheme for the $2.8 billion No. 7 subway extension that would bring fans to WoodyWorld. To entice developers to build on the far West Side (and, incidentally, evade oversight by putting the whole shebang in the hands of a quasi-public Hudson Yards Infrastructure Corporation), Deputy Mayor Dan Doctoroff has proposed excising dozens of blocks of the newly expanded midtown from the property-tax rolls. Instead, developers would be charged "payments in lieu of taxes"PILOTsat a 10-to-12 percent discount from existing midtown property-tax rates. Some fear that, over time, this rate cut could end up costing the city billions in lost income. "They say there's ample demand for all this office space," says James Parrott of the Fiscal Policy Institute, who first blew the whistle on the tax-rate disparity. "If that's the case, why do you have to subsidize it?"
Finally, there's the expansion of the Javits Convention Center, a project that's been tacitly endorsed even by such bitter Jets opponents as Gottfried. Like the stadium, the Javits expansion carries a whopping $1.4 billion price tag; unlike the stadium, it would be paid for entirely by state and city tax money. The rationale is that more space would allow the Javits to draw new and bigger conventions, which, unlike football games, are almost entirely attended by visitors from out-of-state, thus pouring new money into the local economy.
Hogwash, says University of Texas professor Heywood Sanders, a specialist in convention-center economics: "Las Vegas expanded its public convention center in 2001, adding a million square feet to a million-square-foot center. So with double the space, what happened to the attendance in 2002? It went down. In 2003, it went down again."
Sanders adds, "The assumption that the [convention] business is constantly expanding so you need to keep up is a lot of hooey. It stopped expanding a while ago, and it's not clear there's anything to keep up with."
Meanwhile, cities keep on building more convention space, resulting in what Sanders calls a "price war": The sparkling new Boston Convention & Exhibition Center has booked only four events for 2004, at highly discounted rates. "If a place like Dallas is offering rebates on hotel rooms," asks Sanders, "where does that leave the most expensive destination in the continental U.S.?"
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