Wednesday, December 3, 2008

Mayor’s Focus on City Planning Matters: Some Quantified Analysis

No matter who we are, there is only so much of us to go around. Psychologists will tell you that the attention and focus human beings can give to things is limited. There is, for instance, what is refereed to as the “rule of seven;” the idea that is that the human mind can only remember or give focus to a limited number of items at one time. This idea of human limitations jumped into our thoughts when we read the recent New York Times article that reported what was important to Mayor Bloomberg and his top lieutenants when they negotiated the financing and development of the new Yankee Stadium. (City Pressed Hard for Use of Yankee Luxury Suite, by David W. Chen, November 29, 2008) The article confirms our concerns generally about where the Bloomberg administration’s focus is placed when negotiating all the multiple deals and trade-offs that are shaping this city.

The Illusions of “Free” for a High Price

The Times article is about how the Bloomberg administration paid a very, very high price for a “free” luxury suite for its own use at Yankee Stadium including, but not limited to, giving the Yankees 250 parking spaces in exchange.

Very Important to the Mayor and His Top City Urban Development Lieutenants

According to the Times, in one 2006 e-mail, Seth W. Pinsky, then the executive vice president of the city’s Economic Development Corporation wrote:

“This is a big issue to the mayor.”
Fascinatingly, Bloomberg had his top lieutenants in charge of development for the entire city giving their attention to this matter with Mr. Pinsky exchanging e-mails on negotiation decisions with Daniel Doctoroff, Bloomberg’s powerful Deputy Mayor for Development, concerning giving the parking spaces in exchange for the luxury suite. The administration was even negotiating for “free” food with the suite.

$56,250,000.00: An Unfair Assessment of What the 250 Parking Spaces Given Away Were Worth

How much were those 250 parking spaces Mayor Bloomberg gave away worth?

We are going to do something quite unfair here. We are going to point out that parking spaces in Manhattan, circa summer of 2007, were worth $225,000. (Waiting List for $225,000 Parking Space in Manhattan, In the Space-Starved City, a Spot to Keep Your Car Is Money in the Bank, July 13, 2007.) So that means that the 250 parking spaces were worth $56.25 million dollars?

250 spaces x $225,000 = $56,250,000.00
Why is that calculation unfair? Because the $225,000 parking space in question is in Chelsea and the parking spaces the mayor and his city lieutenants gave up to the Yankees are in the Bronx. Why are we doing this anyway? Because, when it comes to valuing the land up at Yankee Stadium to get a good deal out of the IRS and fleecing the taxpayers, the mayor and cohorts had no compunction about letting Downtown Manhattan land values serve as comparables for land values in the Bronx. Of course, this is quite bogus; see: Monday, December 01, 2008, Brutally weird: Why a vacant lot in Alphabet City is (not) like the land under Yankee Stadium. For our own thoughts on why this kind of mendacity is likely to make taxable, bonds issued for Yankee Stadium that were supposed to be tax-exempt see: Wednesday, October 1, 2008, Safety in the Numbers You Pull out of a Hat and Saturday, November 8, 2008, Does Questionable Assertion of Attorney-client Privilege Point to Yankee Stadium Bond Taxability?

But If Alphabet City Land Can Stand in for the Bronx, Why Not Chelsea?

So the Bloomberg administration thinks that Alphabet City land values can stand in for real estate values in the far away Bronx. Alphabet City is just a brisk walk across 14th Street from Chelsea. Seems fair then, to compare those $225,000 parking spaces to land in the Bronx. (The specific Chelsea condominium written about was at 28th Street and Eighth Avenue: For Parking Space, the Price Is Right at $225,000, by Vivian S. Toy, July 12, 2007)

Fairer, More Wonky, Calculations of the Parking Spaces Worth

Figures from the New York Times Bagli Article

Here are some, perhaps fairer, calculations to put in perspective what those 250 parking spaces were worth. Part of the Yankee Stadium deal was construction of garages to create additional parking spaces. There were three garages with, we understand, 3,600 new parking spaces.

Charles Bagli of the Times reported that initially, “the city and state would contribute $208.6 million for parks and garages” and “The state contributed $70 million toward the $240 million cost of building three garages with 3,610 spaces at the new Yankee Stadium. And the city issued $170 million in tax-exempt bonds on behalf of the private garage operator.” (See: As Stadiums’ Costs Swell, Benefits in Question, by Charles V. Bagli, November 3, 2008)

Exclusive of land the cost per parking space then comes to $66,666 per parking space or $16.667 million for the 250 spaces.

Field of Schemes Revenue Assessment: Bloomberg Administration “Got Rolled”

But is that a good total calculation? Field of Schemes has

But is that a good total calculation? Field of Schemes has itemized costs for Yankee Stadium available on its website, but using them to come up with a total per parking space cost is a challenge. Easier to understand is the income valuation of the spaces which Field of Dreams’ Neil deMause did and which is available at his post: The Yanks' Suite Deal With Bloomberg November 30, 2008. He uses a figure (from a Daily News story: Throwin' stadium tantrum City demanded free suite, food from Yankees, e-mails reveal, by Juan Gonzalez and Greg B. Smith, November 29th 2008) that the 250 parking spots are worth $820,000 a year in revenue. But then, as the Times story pointed out and deMause notes, the city also turned over to the Yankees three new billboards along the Major Deegan with an estimated revenue value of $750,000 a year. DeMause concludes:

Then there's the tax-exempt bonds, which, according to the e-mail trail, city lawyers threatened to withhold if they didn't get their free suite. ("'No nothin' can go both ways," wrote city lawyer Joseph Gunn.) According to the latest figures from the city Independent Budget Office, the subsidized bonds will cost the city treasury about $100,000 a year in lost tax revenue.

Add it all up, and the city handed over more than $1.6 million a year worth of goodies in exchange for a single suite out near the left-field foul pole. Given that suites down the foul lines at the new stadium are selling for $600,000 a year -- or not selling, as the case may be -- it looks like the city got rolled like the Pittsburgh Pirates.
The $1.6 million revenue figures, however, are recurring annual figures that will go on for many years. Even netted against the $600,000 per year that suites are going for, that leaves a revenue stream of $1 million a year. When the total number of years involved is known, those figures convert to a present value of what?

The Myths Fall Away: Revelations About What Bloomberg Really Cares about

Now that we know where Mayor Bloomberg’s focus was, it further debunks the mythology of what he cares about. Once upon a time the myth was promulgated that Bloomberg was so wealthy that he would not be distracted, as the rest of us, by the lure of money and fame; that he could address himself to public goals with businesslike efficiency, staying on track to protect the public interest, and that he was eager to give of his wealth for the sake of giving. We might have looked at his substantial charitable giving as evidence of his generosity and thought he had no petty needs to satisfy. Perhaps we naively ascribed these traits to him imagining that we ourselves might be so selfless if we had millions at our disposal. But if we bought that myth then, perhaps we inadequately understood the preoccupations that have gotten Mr. Bloomberg where he is and perhaps we ignore what drives him to covet a third term.

At least lately, those who are paying attention are realizing that Bloomberg’s use of charities is not purely “charitable.” The revelations have come out partly in connection with Bloomberg’s use of charities as he engaged in his other strong-arm tactics to roll back term limits and secure a third term. Bloomberg manipulates charities for political gain. (See: Monday, October 20, 2008, “Charity?” We Begin to Groan and Wednesday, October 22, 2008, Are the Atlantic Yards Land Grab and City Official Fraud Being Used to Finance Bloomberg’s Bid for Billionaire Term Limit Exceptionalism?)

But aside from their misuse we must ask, if when it comes to charities, was it ever an altruistic love of giving that attracted him? Consider to what else we may ascribe Bloomberg’s affection for the world of charities. Bloomberg’s hell-bent pursuit of the Yankee Stadium luxury suite at any cost bespeaks much about the values of a man who overlooked the public trust because for him a luxury suite was the “big issue” in the Yankee Stadium transaction upon which he focused. It reveals a man transfixed by pomp and hobnobbing with the powerful. We can’t help but note that it’s the same kind of pomp and hobnobbing often seen in the world of charitable events.

Considering the Price (Multiplied) of Misplaced Focus

The Yankee Stadium transaction presented other issues upon which a mayor should have focused. Yankee Stadium is being built atop what were once two popular public parks. There are now serious issues about replacing those parks for the community. There were also multiple questions about saving money for the city, maximizing revenue and dealing honestly with the IRS. And it should have been a concern whether the bonds would be safely qualify as tax-exempt.

There is a high price to pay with respect to misplaced focus. Since we are quantifying, we must remember to multiply: The list of prices paid with respect to misplaced focus goes on with respect to Yankee Stadium and the other sports venues with which the city has been making sweetheart deals: the Mets new Citifield Stadium, the proposed Nets arena, the intercepted Jets stadium deal. It doesn’t stop there; the question of the Bloomberg’s misplaced focus likely extends to the negotiation of all the grandly conceived, huge-scale real estate megadeals in which the administration has been involved.

1 comment:

Neil said...

Present value of $1 million a year over 40 years (the length of the Yanks' lease) is going to be around $15 million, depending on the discount rate used.

I thought about giving present value in my post, but decided that annual figures would be easier for lay readers to wrap their brains around. If you want a guesstimate for how much value the city left on the table in the swap, though, it's reasonable to go with $15 mil (or if you prefer, 0.375 Pavanos).