Today’s Hearing on Proposed Issuance of $515 Million Additional Yankee and Mets Stadium Tax-exempt Bonds

Here is Noticing New York’s testimony given at today’s hearing on proposed issuance of $515 million additional tax-exempt bonds to finance the Yankee and Mets Stadiums.

Additional observations about the hearing follow afterward.

We would like to have provided lengthier, more thorough testimony. What is provided below is much less than ten minutes of testimony and much closer to three. As it was, there was a question as to whether we would be required to terminate our remarks before completion. We were able to complete oral delivery of the written testimony below which we also handed in.

Noticing New York’s Hearing Testimony

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January 15, 2009


New York City
Industrial Development Agency
110 William Street
New York, New York 10038


Re: Today’s hearing on proposed issuance of $515 million additional tax-exempt bonds to finance the Yankee and Mets Stadiums.

Dear IDA:

This testimony is presented in the name of Noticing New York, which addresses itself to issues of what is good public policy and planning critical to New York development issues.

Our testimony must, in large part, address the very legitimacy of this hearing.

1. We submit to you that this hearing does not meet met the minimum statutory requirements for validity since the required ten day notice was not actually given.

2. The presupposed purpose of any hearing should be to actually hear, listen to, consider, evaluate and take into account any testimony presented at that hearing, but the fact that the vote on this matter is scheduled for just one day later clearly shows that the IDA has already decided what it wants to do, that this hearing is perfunctory and that there is no intent to actually “hear” or consider what is said here.

3. If this hearing was intended to engender honest evaluation of the cost-benefit of issuing additional bonds, the IDA and Mayor Bloomberg would not be obfuscating and misinforming the public about those costs and benefits. For example, information made available would clearly have specified what possible benefit there might be to issuing additional bonds (we think there is none) rather than conflating this with arguments about the benefit of having already issued the original bonds. For example, the Mayor and the IDA mislead the public to believe that costs would only be borne by the federal government and not by the state and city.

4. We question why the IDA provided such cost-benefit information as it did only at the last possible moment. It is only last night that we were able to learn that the city’s Independent Budget Office’s current estimate that the cost of Yankee Stadium now being picked up by the taxpayers is $854.7 million. For the Mets, the IBO calculated cost to the public is now $371.5 million. But that is without even counting the fact that neither team will be paying property taxes.

5. We don’t understand why the IBO, Mayor Bloomberg or anyone else would exclude real property taxes not being paid to the city as a cost to the public of these projects unless we are talking about the portion of those taxes under PILOT agreement, (the R-TIFC-PILOT agreement) which actually represent fake taxes due to a consciously and illegally contrived overvaluation tax assessment of the Yankee Stadium property. We do not know why anyone would consider buying the proposed additional Yankee Stadium bonds since this manipulated overvaluation makes those bonds taxable (as bonds now outstanding are also likely to be taxable too).

6. Clearly, the IDA’s and the Mayor’s focus in negotiating these transactions has been misplaced as exemplified by the documented pursuit of a luxury suite (plus food) for city officials at exorbitant cost to the public. Relinquishment of the luxury suite has not made those costs go away. If anything the full price paid for by the public has been underestimated.

7. The stadiums have already been built. Issuance of additional bonds will not change this nor whether the baseball teams involved would ever threaten to leave either pretextually or for real. Financing additional luxuries at the stadiums induces no additional public benefit. It is only a way heap more financial benefit on those already flush with benefit. If there is any value to building these things they can and will be built by the teams themselves at their own expense rather than the public. In other words, paid for the old-fashioned way. That is what can and should happen.

8. When we were preparing this testimony the IDA could not inform us, even a day before the hearing, how long we would be afforded to speak. We noted that the federal regulations for hearing on federal tax-exempt private activity bonds require that each speaker be afforded at least ten minutes speaking time. Despite a number of efforts, we could find no one at the IDA to tell us how long we would be permitted to speak.

Attached* is Noticing New York’s most recently published comment on the IDA’s issuance of these bonds. For greater depth, that piece refers and links to other previous commentary.

* (Tuesday, January 13, 2009, Another Lulu: Revisiting the Yankee and Mets Stadium Scams)


Sincerely,


Michael D. D. White

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Observations on the Hearing

The hearing, scheduled to begin at 10:00 AM, lasted almost three and half hours, ending just before 1:30. It was reasonably well attended.

We observed that, with perhaps only a few oddball exceptions, most of the speakers fell into one of the following categories:

1. Good government organizations and citizens who had scrutinized the relevant issues and were speaking quite universally against the issuance of the additional bonds.

2. Small, little-known groups or organizations that might be characterized to be, in one way or another, on the dole. Often they had fairly incidental connections to the stadiums and surprisingly little obvious reason to have gotten themselves out on a snowy day to testify about giving the stadiums extra money. Research into whether these organizations are receiving money from the city (or, for instance, its school system), from the Mayor’s Fund operated out of City Hall or from Bloomberg, LP would be worthwhile, especially given what was reported about the mayor previously using funding he controls in an arm-twisting fashion to generate favorable testimony for the term limits extension he wanted. (See: Monday, October 20, 2008, “Charity?” We Begin to Groan.)

3. Organizations that had been the object of Yankee organization marketing initiatives, sometimes including some small-scale donations from the Yankees. One observer at the hearing commented how oblivious these groups seemed to how little they were getting compared to what the Yankees are getting. The observer likened it to the image of someone standing blithely on a twenty dollar bill while bending over to pick up a penny.

4. A few local politicians who signed onto the stadium deals (apparently come hell or high water).

5. The dependable construction workers and their relatives in the construction industry. As usual, there sure were a lot of them. They just don’t seem to get it, that when they are uncritically and automatically available for rent as stage props by wealthy people seeking to fleece the taxpayer, their opinions no longer mean anything. We wish they were reading the writings of Gregory A. Butler, a union carpenter who analyzes what kind of sense this doesn’t make. (See: Tuesday, January 06, 2009, Militant union carpenter: unions shouldn't compromise with contractors or support Atlantic Yards.) Not only can bussed-in construction workers routinely be counted upon to support bad public policy that hurts the public; this often means that those construction workers support projects using public resources so poorly that fewer rather than more union jobs are created than might be with alternatives.

Sports Team Rah-Rah

Most of those who spoke in favor of piling additional money on the stadium owners spoke in a very rah-rah superficial fashion. It was on the order of letting us know that if the Yankees are playing a game they are out there rooting for them because the Yankees are the home team that they always root for. This seemed to translate seamlessly into thinking that if the Yankees are playing a game of tax loopholes, they are rooting for them to win that game as well even if it means the public loses. Some of it was oxymoronic. One speaker praised the Yankees for being so loyal to the Bronx that they never left, but argued that we need to give them money or else they might, in fact, leave.

Some Better Testimony

On the logical, thoughtful side there was some good testimony opposing the issuance of the bonds. Without meaning to slight anyone not mentioned (we were not in the room continuosly), we recommend the following available (or coming) on the Good Jobs New York web site:

1. The testimony of Good Jobs New York with their most recent analysis of the figures. Current documentation shows that only perhaps 57 additional permanent jobs are being created by the $854.7 million in public subsidy (exclusive of the real property taxes not being paid) that the IDA seeks to direct to Yankee Stadium. There are also part-time jobs like ticket sellers and takers for the relatively few days a year the stadium is used.

2. The testimony of Dan Steinberg, a doctoral student in urban planning at Columbia University, who has worked as a researcher at Good Jobs New York and an aide to Liz Krueger. This testimony among other things focuses on the “covert legislative maneuver” that was sued to “seize parkland without a hearing or without notifying the local community board.”

3. Testimony consisting of a letter from Sustainable South Bronx that was signed onto by a score of other like-minded community organizations

Representative of the Community?

Not necessarily in the category of any of the above, we thought the following was interesting. One speaker got up to announce that she was the Chairman of the Bronx Community Board 4 and that she supported the issuance of the additional bonds without even noting that she was only there to so testify by virtue of Bronx Borough President, Adolfo Carrión Jr.’s wholesale purge from Community Board 4 of those citizens, (including its chairman- and some individuals at the hearing) who had previously voted against the stadium’s financing. Out of the 19 members whose terms were up, only five were allowed to remain. (See: Markowitz to Purge Community Board 6 over Atlantic Yards Votes, by Phil DePaolo, May 21, 2007.) Mr. Carrión said:

"My very clear expectation is that these appointees are there to carry out a vision for the borough president and the leadership of this borough, and that's simply what I expect," -Adolfo Carrion, NEW YORK DAILY NEWS June 21 2006

Mr. Carrión’s carrying out of his vision apparently did not extend to an effectively negotiated community benefits agreement actually delivering benefits in a timely manner. See: Stadium Goes Up, but Bronx Still Seeks Benefits, by Timothy Williams, January 7, 2008 and Time and Cost Rise for Yankee Stadium Parks, by Timothy Williams, May 25, 2008. (This, of course, we should note, raises concerns about how suitably qualified Mr. Carrión is as Mr. Obama’s pick to head the newly created White House Office of Urban Policy. (See: New Yorkers, Real or Nearly So, Taking On New Positions in Washington, by Sam Roberts, December 21, 2008)

In fact, we note the testimony at the hearing that it was only just a month ago, in December, that efforts got underway to fulfill community benefits agreement obligations. That is when, according to testimony given at the hearing, that Yankees President Randy Levine and Brian Smith first met with those drafted to represent the community to oversee distribution of community benefit funds and Yankee tickets. When those efforts were finally launched, it should probably have been considered a sign that this new request for additional funds was in the works. (That plus the mayor running around misinforming that the stadium give-aways were costless to the local public: (Wednesday, December 17, 2008, Who Gets Clipped? Bloomberg Radio Clip on Stadium Financing and Monday, December 15, 2008, Stadium Finance: Mayor, Professing to Know Numbers, Should Know He Can’t Have It Both Ways (Unless He’s Keeping Two Sets of Books))

The Times Editorial Page Weighs In

We were somewhat startled to see the Times editorial page weigh in today on the issue of the vote scheduled for this Friday. The Times has called for any vote on the issue to be postponed. (See: Editorial: Whatever Yankees Want.) We are not used to the Times editorial page venturing a responsible lead on these kinds of city issues, but here they do. This then seems to fall into the category of the Times having to call for good behavior from Mayor Bloomberg, after having already unleashed him with their ill-considered term limits extension endorsement editorials, something we have written about before. (See: Saturday, November 15, 2008, The Mayor, The Times’ Timing, and a Proper Ordering.)

The Yankees promise over 6,000 construction jobs. But once their new house is built, there could be as few as 22 full-time, year-round positions.

What makes this latest request feel like “icing on the cake,” as Assemblyman Richard Brodsky puts it, is that the rest of the city is staring at such hard times and a looming $1.5 billion budget deficit.

Mayor Bloomberg has — rightly — had to cut city budgets and increase property taxes and explain to residents how times are bad and how we all will have to share the pain. It is time for Mr. Bloomberg to make that same pitch to the Yankees.

Now all we need is for the Times to get similarly responsible on a bunch of other city development issues. The first priority for their next move? They should take up the issues that affect Forest City Ratner, their real estate partner: the Atlantic Yards megadevelopment.

Who Gets Clipped? Bloomberg Radio Clip on Stadium Financing

Following up another of our very recent posts (Monday, December 15, 2008, Stadium Finance: Mayor, Professing to Know Numbers, Should Know He Can’t Have It Both Ways (Unless He’s Keeping Two Sets of Books)) we want to take issue with a recent quote from Mayor Bloomberg advocating that the city issue more tax-exempt bonds (another $370 million) for the new Yankee Stadium. He tries to sell the bond sale by promoting the notion that the expenses all just wind up on the federal governments tab.

Here, courtesy of radio station WNYC, is the clip the station ran as part of its local news this past Friday (12/12).

WNYC NEWS READER: Mayor Bloomberg says the city should issue another 370-million dollars in tax-exempt bonds for the New York Yankees. The tax-free bonds are cheaper for the team...because investors don't have to pay taxes. And since federal tax rates are higher than the city's...Bloomberg says it’s really Washington that will be subsidizing the new bonds.

BLOOMBERG : (in audio clip) It's a trivial amount of money and it's basically federal money or forgone interest taxable income.

WNYC NEWS READER: A spokesman for the city's Industrial Development Agency...says the city would lose about 16-million dollars...because the bonds are tax-exempt. But the Yankees have agreed to pitch in about 11-million...and there would be other benefits...so that the city would more than break even. The extra bonds would allow the team to add extra features to its new stadium...which is supposed to open in April. The Yankees will pay back the bonds...but won't pay rent or property taxes.

We take issue with Bloomberg’s sales pitch to benefit the Yankees at our expense for the following reasons:

1. As we analyzed in our previous post linked above, the expense is not just on the Fed’s tab. The bulk of the expense, 85%, is paid for by the city. In the case of the extra $370 million in bonds, it should be considered that the entire amount, and then some, is the expense the city will bear.

2. Selling the idea that if it is just federal money, not city money, is an irresponsible and cynical ploy that also doesn’t pan out. Here is some of what we wrote in our previous post:

. . . it is possible to detect that Bloomberg is trying to sell NYC residents the unattractive notion that the heavy government expenditures subsidizing the stadiums might be all right if it is “not city money” and the expenses are instead being footed by a higher level of government, federal or state. But how would that work? We are all of us, as New York City residents, part of each level of government and we should be expecting responsible conduct from every level of government of which we are a part. Even allowing that taxing the many to benefit a certain few might have a cynically selfish attraction, that attraction is completely dependent upon the identified few to whom such benefit will flow. Certainly benefits do not flow to the average New Yorker or even to the average sports fan: for one thing, these construction projects have only boosted ticket prices. (New Stadiums: Prices, and Outrage, Escalate, by Richard Sandomir, August 25, 2008) Who are the few to whom the benefit flow? . . . Atlantic Yards Report provides the answer with this quote from Rep. Dennis Kucinich:

the practice of providing taxpayer subsidies to the building of sports stadiums is a transfer of wealth from the many taxpayers to the few wealthy owners.

3. Also, as covered in our previous post, it is far from clear that even the previous bonds issued to finance the new Yankee Stadium are legitimately tax-exempt. The exemption is in jeopardy because of collusive activity on the part of city officials when they established the real estate tax assessment figures upon which the exemption of the bonds is founded. It is quite possible that bonds already issued, plus any of the proposed additional stadium bonds issued, will retroactively be declared taxable. If that happens the city will be liable for substantial additional attendant expenses the mayor is not mentioning.

Stadium Finance: Mayor, Professing to Know Numbers, Should Know He Can’t Have It Both Ways (Unless He’s Keeping Two Sets of Books)

As a mayor who professes special financial expertise and an understanding of finance and the way numbers work, Michael Bloomberg should know that when it comes to stadium and arena finance he can’t have it both ways.

Premise for Tax-exempt Stadium and Arena Is Interception of Taxes: Ergo Two Choices

The whole premise for why bonds issued to finance sports stadiums or arenas can be tax-exempt is that the revenues used to support and pay the bonds are diverted city real estate tax revenues, intercepted before they go into city coffers. In other words, those diverted revenues pay for the stadium/arena bonds rather than being used for anything else for which the city might use sorely needed tax revenues.

Therefore, either:

1.) Stadiums and arenas are financed with diverted city real estate tax revenues and, accordingly, the stadiums and arenas are eligible to be financed with triple-tax-exempt municipal bonds;

or,

2.) The city does not forego any substantial moneys because stadiums and arenas are not financed with diverted city real estate tax revenues and, accordingly, the stadiums and arenas are not eligible to be financed with triple-tax-exempt municipal bonds.

John Gambling Radio Interview: Mayor Wants to Have It Both Ways

Last Friday, (12/12), on the Live from City Hall with Mayor Mike and John Gambling radio show, Bloomberg was trying to have it both ways. He was disingenuously trying to sell the public on the idea that 1.) no substantial city tax revenues are being diverted to pay the bonds and 2.) that the bonds will still be tax-exempt.

If you listened to him he even made it sound as if he had done the calculations himself. If he did, then he did them wrong, or just wants to misrepresent the expense to the public (at 23:50):

It's not city money, other than we would forego the taxes- (Gambling interjects the "revenues") a little bit of revenue, it's a. . .if you do the calculations, it's a very small amount of revenue,- on the interest on those bonds.

Interception of Real estate Taxes Too Substantial to Ignore

In other words, Bloomberg is attempting to represent that bonds will be tax-exempt and that the only revenue the city will be forgoing is income tax revenue that won’t be paid on the bonds. He entirely ignores that diverting the city real estate taxes is the essential foundation and prerequisite for the bonds to be tax-exempt. The diverted real estate taxes are, in fact, the bulk of the tax revenues that will not be collected by the public. For instance, looking to Atlantic Yards arena calculations for some representative figures, when tax-exempt bonds are issued, 84% of the forgone tax revenue would be real estate taxes the city is not collecting.

(The actual total construction costs of the Atlantic Yards arena won’t be known at least until the bonds are issued. The estimated amount of those costs, which are escalating, may be disputable, but no matter what the costs are, the percentages for the underlying bond transaction figures will remain proportional. Assuming the cost of building the arena is $950 million, then the public subsidy costs, in descending order, add up as follows: $950 million as the present value of forgone city real estate taxes, plus $154.6 million in uncollected federal income tax, plus $14.16 million in uncollected state income tax, plus $7.75 million in uncollected city income tax This all adds up to $1.1265 billion.)

Percentagewise all the foregone tax revenue figures break down as follows:

84.33% Present value of real estate tax revenue (forgone by the city measured by amount city could raise with that same or equivalent income stream)
13.72% Federal income tax revenue (forgone by the federal government)
1.26% State income tax revenue (forgone by the state)
.68% City income tax revenue (forgone by the city)

In other words, in terms of foregone tax revenues associated with issuing the tax-exempt bonds, the city is bearing 85% of the burden (84.33% + .68%). These are just the subsidies related to issuing the tax-exempt bonds. In bigger picture terms, the Atlantic Yards arena is getting other public subsides: the MTA and the city are both giving land at below market value and sales tax won’t be collected. There are similar additional subsidies to consider in the case of the Yankee and Mets stadiums.

Why the Mayor Would Not Have Just Forgotten: What Was Crafted at a High Level
It hardly seems likely that Bloomberg should have forgotten about the forgone NYC real estate taxes or their magnitude. Among other things, the city went out on a limb to claim a very high tax assessment and real estate tax value for the Yankee Stadium property. (See: Monday, December 01, 2008, Brutally weird: Why a vacant lot in Alphabet City is (not) like the land under Yankee Stadium.) This required interagency contortions that must have involved coordination at a very high level in the Bloomberg administration. To get things done, no doubt there were some people attributing what was wanted to the mayor. (See: Saturday, October 25, 2008, Testy Kucinich presses city officials on “gaming” Yankee Stadium assessment; big disagreement over “smoking gun”.)

We have written that the numbers the administration came up with do not seem legitimate or honest and that the Yankee Stadium bonds therefore do not seem entitled to the tax exemption claimed. (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?)

Bonds; Taxable or Not? Can’t Have It Both Ways

If we are right, the city, with all its shenanigans, will have earned itself substantial potential liability and the dubious distinction of upsetting the tax-exempt bond-buying market with bonds becoming taxable. No doubt Mayor Bloomberg will assert that we are wrong and that the bonds are tax-exempt because taxes are actually collectable on the Yankee Stadium property. But once again, Bloomberg can’t have it both ways; either taxes are collectable on the Yankee Stadium property and the city is forgoing them, or there aren’t collectible taxes on the property, in which case the bonds are taxable.

Intercepted Taxes Ain’t Private $$

It doesn’t make sense for Mayor Bloomberg to argue that these diverted real estate taxes should somehow be disregarded as private payments. The way Assemblyman Richard Brodsky put it at a October 24, 2008 Congressional hearing was:

Congressman, the private payments are the taxes they owe. It’s as though you built an extension on the house and you said to the taxing authority: send my payments to the bank to pay off the mortgage. The notion that this is being paid for by the Yankees is delusional.

(See: Wednesday, December 10, 2008, Brodsky announces expanded inquiry into aid for stadium projects)

We said it similarly:

The setup is basically like paying taxes on your home and then having the government use that money to help you pay off your mortgage.

(See: Your 'Net' Loss, $2B in Taxes to Ratner, by Rich Calder)

Now does Bloomberg want to argue that these ‘synthetic taxes” are just fictional and would never be owed in the first place? Could it somehow be OK to make believe high taxes would be owed on Yankee Stadium because none of the imaginary taxes would ever be paid? Is there supposed to be some kind of notion that we just don’t charge taxes on big projects? Where then is the tax exemption for the bonds coming from?

More in the Gambling Interview: Atlantic Yards Report

It should be noted that the Bloomberg quote from the John Gambling show to the effect that “if you do the calculations, it's a very small amount of revenue” that the city is forgoing, comes from a longer segment of the interview about the Yankee and Mets stadium bonds. In that discussion Bloomberg misrepresented other aspects of the tax-exempt financing for the bonds. Norman Oder wrote about it in Atlantic Yards Report, pointing out some of Bloomberg’s mistakes and contradictions: Bloomberg: "Letting any group have a special deal is not what democracy is about," Saturday, December 13, 2008.

Bloomberg’s Fictional Federal Program: Really Quite the Opposite

One misrepresentation that Bloomberg made during the Gambling interview was that the stadiums were being financed pursuant to a federal “plan” and/or “program.” In fact, quite the opposite is the case. In 1986 Congress passed the Tax Reform Act of 1986 which took away tax exemption for private activity bonds that were used to finance stadium construction. According to Senator Daniel Patrick Moynihan, who was instrumental in getting those 1986 provisions passed, the subsequent "Issuance of [tax-exempt bonds] contravenes the clear and expressed intent of Congress." (See: Is the sun setting on tax-exempt stadium financing? Janet Ward, Oct 1, 1996.) Moynihan introduced a new bill in 1996 to prevent the post-1986 financings that were occurring knowing that Yankee and Mets stadium financing swould be prevented by his corrective legislation. (See: Moynihan's Tax-Break Bill Could Foil Dreams of Fields, by Thomas J. Lueck, July 14, 1996)

What Bloomberg describes as a program is regarded as merely a loophole the use of which by Bloomberg is all the more questionable because of his administration’s abuse of the real estate tax assessment process. (See: Monday, June 16, 2008, As IRS moves to close "loophole," ESDC fights for AY funding scheme.)

Fictional Federal Program has Fictional Bloombergian Purposes to Go With It

Having created a fictional federal program (which as noted above Bloomberg seems to theorize can be run with fictional real estate assessment figures), Bloomberg then ascribes a fictional purpose to the program:

Why does the federal government have a program? It stimulates construction jobs and economic activity. They might not do these things, build stadiums, or in this case some infrastructure around it, if it costs them more. The economics might not work.

. . . .we'll get less income from taxing the interest that the bondholders would pay, but in return there's more construction, more jobs, and that's good for society.

Stadiums and Arenas Don’t Provide Benefit. . .

The fictional purpose Bloomberg ascribes to the fictional program is especially off-base because the economics in this area don’t work. They fail the test of providing benefit on multiple levels. Stadiums and arenas are not “good for society” since the studies show that they don’t provide a net benefit for the particular localities that construct them. (See: Monday, July 14, 2008, FCR consultant Zimbalist (in 2003): "no rationale" for federal subsidy of projects like AY arena)

. . . And Financing Them Would Not Make a Good Federal Program

Even supposing that stadiums or arenas did somewhat benefit localities that get them, a program subsidizing the construction of stadiums and arenas would not make sense as a federal program. That is because the team ownership franchise structure limits the number of professional sports teams that can exist. Consequently, all negotiating power resides with the team owners who play localities off against each other. It is never a good idea when the entity to receive subsidy has all the negotiating power since that entity can pocket the subsidy giving little or nothing in return. That might be bad enough for any level of government handing out a subsidy; the reason subsidizing stadiums and arenas makes particularly little sense as a federal program is because as, Atlantic Yards Report quotes Assemblyman Brodsky testifying on the subject in October before Kucinich's subcommittee:

“There’s no value to the economy of the United States when the state of New York buys off a corporation to move from Pennsylvania.”

A Cynical Ploy? The Good of the Few Outweighs the Good of the Many Taxpayers?

In Bloomberg’s Gambling interview it is possible to detect that Bloomberg is trying to sell NYC residents the unattractive notion that the heavy government expenditures subsidizing the stadiums might be all right if it is “not city money” and the expenses are instead being footed by a higher level of government, federal or state. But how would that work? We are all of us, as New York City residents, part of each level of government and we should be expecting responsible conduct from every level of government of which we are a part. Even allowing that taxing the many to benefit a certain few might have a cynically selfish attraction, that attraction is completely dependent upon the identified few to whom such benefit will flow. Certainly benefits do not flow to the average New Yorker or even to the average sports fan: for one thing, these construction projects have only boosted ticket prices. (New Stadiums: Prices, and Outrage, Escalate, by Richard Sandomir, August 25, 2008) Who are the few to whom the benefit flow? In its coverage of the Gambling interview, Atlantic Yards Report provides the answer with this quote from Rep. Dennis Kucinich:

the practice of providing taxpayer subsidies to the building of sports stadiums is a transfer of wealth from the many taxpayers to the few wealthy owners.

Bloomberg, Professed Financial Expert, Getting It Wrong Because . . .

How could Mayor Bloomberg, who professes special financial expertise and an understanding of finance and the way numbers work, be so off-base about all of the above? Part of the answer may be that his financial acumen is overrated. We have made that case: Bloomberg Qualified Financial Crisis Leader? He Can Learn Says Schumer! Thursday, October 23, 2008 and More Discredit of Bloomberg as Qualified Financial Crisis Leader, Saturday, October 25, 2008. There are other possible contributing explanations. The mayor’s focus may be in the wrong place: Mayor’s Focus on City Planning Matters: Some Quantified Analysis, Wednesday, December 3, 2008. Or his motivations may have more to do with honoring deals he has made or commitments he feels he has to keep, perhaps in connection with contributions his charities have collected: Are the Atlantic Yards Land Grab and City Official Fraud Being Used to Finance Bloomberg’s Bid for Billionaire Term Limit Exceptionalism? Wednesday, October 22, 2008

Two Points From Atlantic Yards Reports as Cappers

The Atlantic Yards Report article on the Gambling interview (which is much shorter than this article) efficiently points out two other things of pertinence respecting the overspending of public monies on the stadiums.

First, in the interview, Mayor Bloomberg was able to talk at some length about how the MTA is short of both operating and capital budget funds without noting that a substantial portion of the gap of several hundred million dollars would be closed if the MTA were not selling its Vanderbilt Yard property to the Atlantic Yards developer for substantially less than the property’s market value.

Second, immediately on the heels of his pontification about the value of stadium financings where the stadium owners don’t have to pay collectable taxes, Mayor Bloomberg said:

The bottom line is that the state should collect the taxes. It is money we need, number one. Number two, letting any group have a special deal is not what democracy is about. It breeds contempt for our laws.

The only problem is that Bloomberg, having shifted gears, was now no longer talking about the stadium owners with whom he has struck deals to let them intercept, uncollected, all their “tax payments” to cover their private sports business expenses. Instead he was talking about New York State collecting cigarette taxes from Native Americans. (Bloomberg also spoke derisively about possible hard feelings that might exist concerning the acquisition of New York’s land from the original native population.)- Did we happen to mention that Mayor Bloomberg likes to have it both ways?- - Yes, that’s where we began. . .

Forewarned and Forearmed: “A Big Fat Pitch”

Here for perusal at length is the entire portion of the Gambling/Bloomberg interview where stadium finance is discussed (at about 22:40), aptly described by Atlantic Yards Report as “a big fat pitch” on the controversial issue:

JOHN GAMBLING: Speaking of things that are expensive, I'm reading that our stadiums, our baseball stadiums are getting more and more expensive, and they've looked for more money or the right to bonds, to rent. . loan bonds or let (Gambling probably meant to say “get the benefit of borrowing from an issuance of”) bonds . . . .

MAYOR BLOOMBERG: The issue here is the federal government has a plan where, and the city has an agency that helps decide who gets it, there are tax-exempt bonds, they typically are free of state, city, and federal taxes. And since they are, you can sell the bonds at a lower rate. So something like the Yankees or the Mets organization would like to use these bonds, 'cause the interest costs to them would be lower, so that’s why they want to do it…

Why does the federal government have a program? It stimulates construction jobs and economic activity. They might not do these things, build stadiums, or in this case some infrastructure around it, if it costs them more. The economics might not work.

So everybody says, look, we'll get less income from taxing the interest that the bondholders would pay, but in return there's more construction, more jobs, and that's good for society. It's not city money, other than we would forego the taxes- (Gambling interjects the “revenues”) a little bit of revenue, it’s a. . .if you do the calculations, it’s a very small amount of revenue,- on the interest on those bonds. So would the state, so would the federal government. But our development bank is set up to do this, and you do it for big projects, and the federal governments [sic] approve these projects, and we'll go on with them.

Will It Come? What the Bloomberg Administration Wills at Willets Point (Part III)

(Continued from Part II)

Should a Slow Moving, Poorly Defined Project Still Be a Priority? Yes, Says the Mayor

With the project so poorly defined or flexible and its benefits so slow in coming perhaps Mayor Bloomberg would consider that a period of economic downturn is not a good time to make the wiping out the 250 businesses and thousands of jobs in Willets Point a priority. Not so. It is recently reported that he believes the opposite:

The mayor added that projects like the redevelopment of Willets Point should not be avoided during tough economic times, pointing out that the ambitious undertaking is expected to generate 18,000 construction jobs and more than 5,000 permanent jobs if approved.

“Just because we’re in an economic downturn doesn’t mean we’re going to walk away from our long-term responsibilities,” Bloomberg said. “The city did that in the 70s and it was a near disaster.”

(See: The Iron Triangle Tracker: Monserrate, Katz push for Willets approval, housing deal announced, Tully close, by Stephen Stirling, November 12, 2008)

Battle of the Job Figures: Why the Administration’s Should be Discounted

Of course, future job figures such as those issued when the administration is pushing for projects are untrustworthy. Though most recently the city has said the development will create 5,000 permanent jobs, not too long ago it was asserted that 22% more permanent jobs, 6,100, would be created. (See: Bloomberg Unveils Plan to Redevelop Willets Point, By Anahad O’connor and Terry Pristin, May 1, 2007.) Very likely the 3,000 figure given by the Willets Point Industry and Realty Association as the number of current jobs is high and that the actual number of current jobs is between 1,300 and 1,800, but those jobs, however disputed their count, are bird-in-the-hand. One needs to suspect the 5,000 permanent jobs predicted by the city is still too high and needs to be lowered again. That 5,000 figure also needs to be further discounted because those future jobs that will fully materialize only upon the project’s completion. As reviewed above, the indicators are that the full completion will be a number of years out perhaps as many as 30 or more. With the downturn in the economy, the present value of existing jobs gains comparative weight because the replacement jobs will take longer to materialize.

Obviously, whatever job figures one assumes, job creation figures should net out the number of jobs lost.

Why the Administration May Want to Proceed, at Least to a Point, Despite Economic Downturn

Given that the first steps toward the elimination of the Iron Triangle were undertaken a long time ago, it may understandable if the Mayor thinks that it is important to follow through. A process such as this can take so much time that when begun there is no telling when it can assuredly be completed or at what point in an economic cycle that might fall. Conceivably, the Mayor thinks it was important to get the approval from the City Council while he could. It may be unlikely, but it is possible that he envisions that the approval now obtained will not actually be utilized until the economic climate swings again. There is also the possibility that, having been resisted up to a point, the mayor is now interested in proving that the Iron Triangle can be eliminated for the sake of proving that he is able to do so. Eliminating it may say something about his administration and what it can accomplish where others have failed. Willets Point, after all, is famous for the its past successful survival despite effort of the powerful to put it out of existence.

Willets Point History; Stories of Visits by the Powerful and Wealthy

Depending on whose math you pay attention to, the neighborhood is 65- or 75-years-old, having been settled by some of the businesses now occupying it in the 30s or 40s. The first infrastructure was built in the 30s. The Willets Point area was not paved over when Robert Moses paved over adjoining property for the 1939 Wold’s Fair. The paved property was the ash heap or “valley of ashes” watched over by the eyes of the “Dr. T. J. Eckleburg” billboard in F. Scott Fitzgerald’s The Great Gatsby. (The triangle includes or abuts the location of George Wilson's gas station where, in Fitzgerald’s book, Myrtle Wilson was run over by Daisy Buchanan. The incident is pivotal for one of the book’s themes, that separated by their wealth, the characters of Tom and Daisy Buchanan are carelessly and insensitively destructive of other people’s lives: “They were careless people, Tom and Daisy–they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made…”)

New York’s next World’s Fair in 1964 with Robert Moses again in charge was on the same site during Mayor Wagner’s administration. Moses wanted to clear the Willets Point land for a parking lot in time for the fair. Successfully resisting Moses is credited with starting the career of a young lawyer named Mario Cuomo. After that, Mayors Koch and Giuliani both tried and failed to pout stadiums on the triangle site. (See: Willets Point, A Development Waterloo? Moses, Wagner, Koch, Giuliani—all have tried to redevelop the scrappy yard next to Shea. Now, it’s Bloomberg’s turn and it’s tough already, by Eliot Brown, February 19, 2008.)

Viewing Willets Point Demolition as Just Another Cost of New Citifield Stadium

Is the new Citifield stadium the reason the Mayor now wants to banish the Willets Point community into history? The Citifield replacement for Shea Stadium is closer to Willets Point than Shea was (by about the distance of a stadium). While we may think that the Willets Point is a perfectly acceptable neighbor for the spanking new stadium, Mayor Bloomberg appears to have other ideas. Willets Point property owners pay city taxes and the stadium owners do not, and yet the construction of the stadium may be bringing about the demise of Willets Point. If so, it will be an extra indirect cost of the stadium. Field of Schemes has used figures from public sources, including Good Jobs New York, NYC Independent Budget Office, and NYC Parks to calculate the total public cost of Citifield stadium as $484.99 million. Perhaps a cost for removing the Willets Point businesses should be added to that total.

It could be that Mayor Bloomberg doesn’t like the aesthetics of “junk yards” car parts or scrap businesses next to a new stadium. In terms of an economic argument, the Mayor has expressed a desire to build retail and entertainment space across from Citifield to lure visitors to the stadium. Years previously, the plan had been to build a “a massive entertainment complex” on top of Willets Point when the new stadium was built. (There are about 80 home games a year.)

Another Example of Bloomberg Administration’s Strange Non-Community Focus When it Comes to Stadiums and Parking Spaces?

It could just be that this is another example of the strangely misplaced focus the Bloomberg administration can have when it comes to stadiums (and their parking lots). Recent news stories mined newly unearthed e-mails concerning the administration’s negotiations concerning Yankee Stadium. They show that in lieu of those things that might be of most concern to the public and local community like restoration of seized parks and saving money, the Bloomberg administration was preoccupied with giving the Yankees an inordinate and undeserved amount of parking so that the administration could procure a theoretically “free” twelve-person luxury suite for its own use (together with “free” food). For more on this see: Mayor’s Focus on City Planning Matters: Some Quantified Analysis, Wednesday, December 3, 2008.

Predicting the Future of Willets Point (All Things Being Equal)

If one were to predict, one would probably say that one day, one way or another, the businesses at Willets Point will probably be replaced by other development representing higher and better uses. All things being equal this would probably naturally come to pass in due time without the use of eminent domain. But, when it comes to eminent domain, all things are not equal. Eminent domain is a tipping of the playing field that makes the unnatural happen. You are putting your faith in planners or government officials to know why the course of events should be taken away from Adam Smith’s guiding invisible hand. It therefore becomes incumbent upon those involved to ask whether eminent domain condemnations make sense given the alternatives or what would more naturally happen without the use of eminent domain. Eminent domain takings are done in the name of the public, so it is incumbent on the public (all of us) to ask these questions.

If eminent domain were not being used, the existing uses in Willets Point would assert their value economically. The existing uses would not be displaced unless other uses could out-compete them. Other uses would not bother to try to out-compete them if they could more economically go elsewhere.

Achieving Highest and Best Use: The Upzoning Alternative of Eminent Domain

For most people, upzoning is what probably first comes to mind as an alternative to eminent domain to stimulate an upgrade of property to a higher and better use. Upzoning without eminent domain allows change to proceed when it makes economic sense for property to change hands or use. It tends to naturally compensate departing businesses in much the same way that the divide- and-conquer deal the city’s EDC negotiated allows the three large individual land owners in the eastern part of Willets Point to benefit from the upzoned value when they sell their land. With upzoning, individual parcels would change hands or use in the sequence that made sense; the first parcels to upgrade being the ones where there was the greatest profit to be made. The speed with which a changeover would happen would depend on the economic climate, but land would not be likely to lie fallow because a change of use was artificially forced before the time was ripe. Change would be less controlled: If the economics were more attractive in Downtown Flushing or on land where businesses did not need to be displaced, change might occur there first instead of at Willets Point. Therefore, we might see the development there spearheaded by the local Chinese and Korean developers who are currently so active, rather than by through “big- developer” style development by the larger firms.

Upgrade of Infrastructure and Services if You Want Highest and Best Use: Lawsuit on the Subject

Another way to encourage a higher and better use of property is to upgrade the services and infrastructure in the area. The current situation at Willets Point is essentially the opposite. The city now provides minimal services to Willets Point. The area lacks sewers. There are no sidewalks. It has been so long since roads were paved that to say the area is spectacularly potholed would be a severe understatement. The potholes are lakebeds. The owners there have brought a lawsuit claiming that the level of services is discriminatorily low. The Daily News summarizes the allegation of neglect in the suit as follows:

The suit says the city has withheld services such as trash and snow removal and police surveillance; refused to maintain drainage, roadways and sanitary sewerage lines, and allowed curbs, gutters and fire hydrants to deteriorate beyond repair.

(See: Willets Point property owners sue city, by Jess Wisloski, April 10, 2008.)

Withholding services can be a strategy to, among other things, foster blight and pay a low price for land upon condemnation.

The Having-it-All-Plus-More Alternative to Today’s Proposed Willets Point Destruction

There is a way of having all the benefits of the Willets Point redevelopment plan plus more. There are alternative areas to build, even in the immediate vicinity of Willets Point. The parking lot for the new Citifield stadium involves an expanse almost as large as the Willets Point triangle. The world is quite familiar with ways that parking can be incorporated in other city structures. Building could begin in the areas immediately next to the subway and train station stops. In addition, also immediately next to the subway and train station stop there are rail yards that could be built over. There are obviously other areas in the city where our current priority is to build over train yards, Hudson Yards and Atlantic Yards providing examples.


Multiple Advantages

There would be significant advantages to building in these alternative areas, in addition to the fact that it would not involve the elimination of the existing private-sector-created Willets Point jobs and businesses. Initially, these areas would have a clearly defined and unique marketing appeal that would be comfortably consistent with developing the area at whatever speed unfolding economic conditions turn out to dictate. The buildings would attract people who wanted the pronounced convenience of being close to the subway. (The #7 train is actually one of the few subway lines whose capacity is recognized to be currently underutilized.) They would also be right next to Flushing Corona Park which apartments in the complex would overlook.

The problem of living in an emerging neighborhood not yet large enough to sustain supporting services would be greatly obviated by the immediate proximity to mass transit, which for commuters would make the neighborhood a near equivalent to an extension of the city they were commuting from. It would also mean that people moving in would be as little as one stop away from other neighborhoods like Downtown Flushing.

Rather than being hemmed in by problematic infrastructure like highways, the new development complex would make a substantial amount of problem infrastructure go away by building over it.

The retail that is supposed to be built to attract stadium patrons wouldn’t have to try to lure them in an unfamiliar direction away from the subways: It could instead present itself to patrons as they were walking to and from the subways and trains.

The housing could, and probably would, have all the same affordability components now talked about as being part of the administration’s Willets Point redevelopment plan. It might even be possible to do more affordable units. Buildings in this area are far enough west that they are not in the LaGuardia flight path; they could be built taller and, if otherwise appropriate, there could be greater density in this park side area.

Preparation of a Site and Proceeding in Parcels

The first phases of development could proceed immediately, far faster than the current Willets Point plan, because the impediments of an existing population, litigation included, would be avoided. In all likelihood, site preparation would be easier.

There would be site preparation costs, particularly for building over the rail yards, but there are also site preparation costs associated with building in the Willets Point triangle area. In the case of building over the parking lots and train yards, all of site preparation costs would constitute positive addictions to the city’s social capital whereas the cost of removing Willets Point businesses involves a partial subtraction of social capital. Rather than being out of pocket on the transaction, the city and the MTA might actually make money when the property to be built upon is put out to bid.

The development could be built in multiple chunks bid out over time to multiple developers following the model used in Battery Park City. Unlike building in the Iron Triangle, it would be relatively easy to phase development here.


Escalating Jobs

Presumably, development would grow out from the public transportation stops. It would grow out toward the Willets Point triangle. Jobs it created would be in addition to rather than sacrificing the private-sector-created Willets Point jobs. If the city’s figures are not inflated, when construction in the alternative area is half complete in perhaps 10 or 15 years, there would be 2,500 permanent jobs associated with the new development plus the 2,000 or so jobs at Willets Point would exist alongside those jobs. There is every reason to suspect that there would be more and better jobs in the Iron Triangle by that time.

By the time the development was all built out and reached the borders of Willets Point, there would be 7,000 or more jobs, a net increase of 5,000 or so versus the only 3,000 net increase in jobs in the area under the city’s current plan.

Probable Eventual Changeover for the Triangle

One would still expect that Willets Point would change. It is still predictable that the area will eventually graduate to higher and better uses. Some change might come gradually over time, but the complete changeover in uses might not happen until much later. Changes would happen through the private sector rather than being dependent upon subsidy. Presumably Willets Point development would respond, over time, to upzoning and an upgrade in services and infrastructure.

In time one might still predict a complete changeover in use that would probably come when the new development reached the borders of the triangle. But by the time the new development reached those borders the situation would be different. When the borders of the newly developed neighborhood reached and began to blend into the area of the Iron Triangle, be it 15, 20, 30 or 35 years out, the new complex spreading out from the transit stops would be a full-fledged neighborhood. Erecting residential buildings in the triangle thereafter would not involve the risky building of an isolated outpost. Anything built there at this later point would immediately have the services available because of the complex that had already been built, a neighborhood that the triangle could then become a part of.

Building in this alternative fashion would mean there would be no chance of the city being saddled with an unwanted mistake created by a public-sector, private-sector partnership. When ill-considered partnerships fail, the public faces clamorous lobbying for remedial corrections in the form of after-the-fact piling on of additional public subsidies.

We could be wrong about an eventual changeover of Willets Point from industrial use. Admittedly, there is a certain amount of crystal ball work involved in looking so far out into the future. The Municipal Art Society has submitted that:

Given its adjacency to other industrial sites, its relative proximity to the College Point industrial park, and its accessibility to major transportation routes as well as the airport, the site may be more appropriate for strategic investment in industrial uses.

MAS also suggested that the site has another rare characteristic making it a good candidate for continued industrial use; the site could be easily accessed by barge; such water transportation is especially energy-efficient. The advantage of proceeding in the fashion we are advocating is that the future need not be irrevocably dictated until future economic conditions have begun to better assert themselves.

A Win-Win? For Whom Could this Be Bad?

It seems like a win-win proposal that makes sense for the city. Shouldn’t the City Council, if it exercised leadership, be leading the city in this direction?

If this is not the direction in which the city is headed, one should ask why. For whom would such a proposal not be good? For whom is the Bloomberg administration’s proposal better?

The Bloomberg proposal is better for the one big developer that would get to have monopolistic sway over a multi-decade development project. The Bloomberg single big-developer proposal stands to be good for that single big developer for all the reasons such a proposal stands to be bad for the public.

Among other things, the alternative of building on the parking lots or over the train yards would mean that bidding developers would have to bid maximum value for the land to be built upon. The use of eminent domain to acquire land in the triangle pushes down the amount that developers might have to pay. According to one city document (the implementation strategy), the price would not be bad given the number of acres involved: “The total site acquisition estimate is $131.5 million.” According to the Municipal Art Society’s August testimony, “The city has already set aside close to 389 million dollars to support the redevelopment of Willets Point; and as part of this plan the city will be using public monies to either buy out the owners or to pay fair market value via eminent domain.” The problem that MAS points out is that since so much of the investment is public money for which the city, not the developer, is at risk, the private sector’s incentive to proceed on schedule is drastically minimized.

It is possible to speculate that the single developer chosen might be Muss. It is possible that Muss Development might prefer that the city develop the Willets Point triangle area first over other areas because it is closer to the development they have already begun on the other side of Flushing Creek. Arguably, it might have a potentially greater synergistic effect. (For more on the perspective of Muss see the next section.)

Returning for a moment to the recent Yankee Stadium stories and what we noted about the Bloomberg administration’s misplaced focus when it comes to stadiums and their parking; it is quite possible that the administration can be somewhat oblivious to community goals when it focuses on delivering a substantial quantity of parking to meet the demands of stadium owners.

Some Relevant Perspective on the Alternatives

The subject of the Willets Point redevelopment came up just recently in a December 2, 2008 panel discussion, On the Waterfront: Finding the Balance for Development and Communities, sponsored by the Center for New York City Affairs and Milano The New School for Management and Urban Policy.

New York Needs Industrial Waterfront: Rethink Willets Point

Carl Biers, Education Director for International Longshoremen’s Association Local 1588, noted that some of the available wisdom being offered asserts the that the current national economic crisis has some of it roots in policies that subsidize housing and residential real estate at the expense of the “productive” sectors of the economy. Not disputing this, the panel discussed with general agreement the related theme that a balance is needed between industrial and other uses of the waterfront such as housing and recreation. Joshua Muss, President, Muss Development Company, which, as noted, is developing the project on the other side of the Flushing River and is a candidate developer for Willets Point, said that as a New York City housing developer he might prefer that all the New York harbor’s industrial uses be in New Jersey, but that he realized that couldn’t be the case and that some of the New York waterfront needed to be industrial.

When the panelists were asked for specific suggestions for what should be done differently on the waterfront Mr. Biers said he thought the Willets Point redevelopment should be rethought.

Relevant Thoughts from a Relevant Developer, Muss

Mr. Muss offered a number of other thoughts during the course of the evening that we found relevant to the Willets Point redevelopment. Early on he was asked about the effect of the financial crisis on ambitious waterfront development. “Ambitious has a way of being redefined,” he said. He said that the downturn in the economic cycle would have an effect on overall development, but that the effect would be more pronounced for waterfront development in part because environmental factors and things like ground water level and water tables came into play as well as the fact that properties were zoned for industrial use. He said that no developers were going to be putting projects into the ground in the near future. He said this was true unless they “had all the money in the world” because financing was not available. He said that developers would not be proceeding because they “are not dumb.” He pointed out, however, that development takes a very long time: 3 - 10 - 25 - 33 years and that this was a good time to “seek approvals.” He explained it was a good time to get the government officials’ attention. He said it was also a good time to take a “slow look” at development “without actually building.” He noted that the project on the Flushing River had taken him 28 years to get to it current point and that he had been working on another project for 33 years.

Mr. Muss also offered the following observation relative to convention centers. He said that 25 years ago he had worked up a plan that proposed to put a convention center in Sunnyside Yards in Queens “rather than at the edge of the city.” Earlier we noted the consideration that had been given to moving the Javits Center convention center in toto to Willets Point. From time to time consideration has been given to moving the Javits Center to the Sunnyside Yards location. If Javits is torn down, its Hudson River waterfront can be put to a higher and better use. Manhattan (See: Expansion of Javits Center May Shrink to a Renovation, by Charles V. Bagli, December 10, 2007.) While the suggestion of moving Javits to Sunnyside is not currently in fashion, such a new location would be about the same distance from LaGuardia as Willets Point. The location is also probably a more central-city location, while Willets Point is more “at the edge of the city.” Sunnyside is, however, father away from Kennedy International Airport.

From Mr. Muss’s remarks you might assume that he would agree with Mr. Biers that the Willets Point redevelopment should be rethought. Not so. Before the evening was out he gave his opinion, saying he thinks “Willets Point is so warranted” and observing that it could not have been done without government involvement.

EDC Official, Lannon: the City Needs Time If Wants To Avoid Making Mistakes

Whose perspective, Mr. Biers or Mr. Muss’s, should win the day? Should Willets Point be rethought? Another member of the panel, Venetia Lannon, a Senior V.P., Maritime Division, NYC Economic Development Corporation, offered some general guidance that could easily apply. Ms. Lannon said that the good news about development slowing was that there was an opportunity to “reexamine where we are.” She stated that there are problems when things are rushed, when there are questions about what the right answer is. In this regard she cited the IKEA built on the shores of Brooklyn. We previously wrote about the IKEA mistake to which Ms. Lannon was almost certainly referring:

Industrial Assets Decommissioned and Carelessly Sacrificed

We don’t want to sidetrack into the question of whether so much land associated with the industrial sector of the city’s economy should have been decommissioned. Certainly it was important to make a shift, but it is important to do these things intelligently and not reflexively. The elimination of a sorely needed graving dock (dry dock) in Red Hook to create an IKEA parking lot was a mistake. It eliminated high-paying jobs while replacing them with a similar number of much lower-paying jobs. If it was essential to have IKEA (with its parking lot), we could have had both IKEA and the graving dock. The city is now looking at spending a billion dollars to replace the sacrificed dry dock.

(For this and links to the background articles see: Saturday, October 25, 2008, More Discredit of Bloomberg as Qualified Financial Crisis Leader)

Several times when Ms. Lennon was speaking about setting a proper balance in waterfront usage, she was feistily interrupted the moderator, Greg David, Editorial Director, of Crain’s New York Business who told her with debatable jocularity that he did not think she was properly representing the Bloomberg administration’s point of view.

(Continue to Part IV)

Self-Congratulation “Befalls” a Man Who Would Know No Limits

This is to assess what deserves congratulation and who should be handing out the congratulations that are given. We also use this opportunity to examine the largess of New York City Mayor Michael R. Bloomberg.

New York City Waterfalls Art Project; Update on Environmental Damage

We previously wrote that Olafur Eliasson’s “New York City Waterfalls”art project, with its attendant environmental damage, was not an unqualified success: Wednesday, September 3, 2008, “Yeah, sure. Bad for the glass.” (Inartful Clues to New York City Government?).

The art project’s salt-waterfalls were shut off this week but this week’s Brooklyn Paper bore more news about the level of environmental damage their salt-spewing has done (A salt of the earth! By Sarah Portlock). The level of salt in the spewed-upon surrounding soil is amazingly high. The salt level in the soil by the River Café where the above picture of denuded trees was taken Labor Day week is 10 times normal.

Salt levels were also disturbingly high in soil of the Brooklyn Heights Promenade gardens where, as of the beginning of September, there was significant damage to trees for two full blocks extending between Pierrepont and Remsen Streets. Though attenuating over distance, it is clear that the spay went even farther, detectably affecting the honey locust trees as far away as Clark Street, yet another exceptionally long additional block away. In theory, the waterfalls were to be turned off to avoid damage when winds were unusually high but just weeks ago it was “raining” on Hicks Street from a bight clear blue sky as wind-carried spay traveled two blocks inland from the falls. (For pictures of the Promenade trees denuded in August see the previous post.)

A Self-Congratulatory Award for the Waterfalls Project

Here is another recent update about the falls, which was also mentioned in the Brooklyn Paper article, that is exceptionally telling. On September 26th, well after the problematic effects of the salt spray provoked alarm, Mayor Bloomberg awarded the city’s Doris C. Freedman Award to The New York City Waterfalls for its contribution “to the public environment.” The Mayor’s award to the art project is more remarkable if you take into account the under-reported fact that the Mayor’s own media company, Bloomberg, LP, paid for a substantial portion of the Waterfalls art project with a tax-deductible donation. The Waterfalls cost $15.5 million. Of this, $13.5 million was sponsored by “private” donations. Heading a short list, Bloomberg, LP is set forth as a project “lead supporter.” Rather self-congratulatory?

To be fair, before we have at it, it should be admitted that the environment that is supposed to be improved when the Doris C. Freedman Award is given is not specifically the “environment” one is talking about when one talks about the environmental assessment that the city botched when considering the Waterfalls project. Rather, when the award is awarded we are speaking in terms of “greatly enriching the public environment” in a sense that has extended to public art and performance in past instances. The award has in the past been presented to urban life, design and architecture improvers like William H. (Holly) Whyte, to the Greenmarket Farmers Market network and its founders, Barry Benepe and Robert Lewis, to Margot Gayle, and to Friends of the Upper East Side Historic Districts and its founder, Halina Rosenthal. The award has also been given to those presenting art in public environments, like Dancing in the Streets and Battery Park City Authority for its public art program in Robert F. Wagner, Jr. Park.

Mayor Bloomberg’s award to this Bloomberg-funded art project was probably meant to acknowledge the Waterfalls project he sponsored as being in the same league as the Christo and Jeanne-Claude creation of The Gates Central Park project that received the award in 2005. (It has frequently been commented that the Waterfalls were not as impressive as the Gates.)

A Self-Referential Loop; Bloomberg With Many Hats

All the same, whatever the nature of the award, doesn’t it all seem incredibly self-referential?

How self-referential? Consider:

The Mayor’s media company funded the project (tax-deducibly). The Mayor’s Parks Department and other agencies then considered whether to “approve” the project. As Shane McAdams writes in the Brooklyn Rail, the fact that the project “had received the blessing of Michael Bloomberg (as well as a generous helping of his own cash). . .certainly helped grease the bureaucratic gears, making it easier to secure building permits and expedite what would otherwise have been a Byzantine logistical process.” Of course, we must remember the botched environmental assessment for which Bloomberg’s city is responsible. The project was announced with a press release by Bloomberg as Mayor wherein he promises “the Waterfalls will have little impact on the environment.” The worth of the Waterfalls was then publicly assessed at $55 million by the head of the Mayor’s Economic Development Corporation. (Calculating the Worth of East River ‘Waterfalls’, By Ken Belson, June 28, 2008) The project was reported upon as a news event by the Mayor’s media company (New York's East River to Host Artist Eliasson's `Waterfalls’ , By Henry Goldman) which in good reportorial form discloses that “The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. The company is one of several private sponsors of the project.” The project was next reviewed as “art” by the Mayor’s media company. (Eliasson's Waterfalls Make Instant Monuments for N.Y. Harbor, Review by Carly Berwick) In both good and not-so-good form that article concludes with the warning that Ms. Berwick “is an art critic for Bloomberg News. The opinions expressed are her own” but this article does not mention that the art is funded by Bloomberg itself. Next, after doing unexpected environmental damage the project is given a city award by the Mayor himself.

No Relief From Disaster; Funds from the Lower Manhattan Development Corporation

Of course, there is other money in the project. $2 million in federal Community Development Block Grants from the U.S. Department of Housing and Urban Development was provided by the Lower Manhattan Development Corporation. Half of the sixteen directors of the Lower Manhattan Development Corporation are appointed by Mayor Bloomberg, so this money is once again traceable to the Mayor.

The Lower Manhattan Development Corporation was set up after the September 11, 2001 terrorist attacks to plan the reconstruction of the lower Manhattan World Trade Center site and distribute federal funds aimed at rebuilding downtown Manhattan. The lack of progress at the World Trade Center site has been criticized and plans for its redevelopment have been cut back because of scarcity of funding. It could be asked exactly how helpful to LMDC’s reconstruction goals the decision to fund the Waterfalls was. Of course, the city has previously been known to go far afield in distributing resources the federal government had made available for downtown Manhattan’s recovery after the attack. “Liberty Bonds” specifically authorized by the federal government to aid in downtown Manhattan’s recovery were used as far uptown as Chelsea Piers to build the Frank Gehry “Dirty Iceberg” building opposite the piers (the IAC building).

According to LMDC’s website, LMDC gets “funds awarded under the HUD Disaster Recovery Initiative and for other program management purposes” and “HUD and the Disaster Recovery Grant Reporting System are collecting information regarding the use of Community Development Block Grant (CDBG) funds awarded under the HUD Disaster Recovery Initiative and for other program management purposes.” Does HUD then need to be told that $2 million in federal Community Development Block Grants were used for the Waterfalls art project rather than something more directly related to “Disaster Recovery?”

Bloomberg Wants More Control

Bloomberg wants to the Lower Manhattan Development Corporation’s functions to turned over to him and made a city function. In an op-ed in the Wall Street Journal (Opinion: There Should Be No More Excuses At Ground Zero, September 10, 2008) he wrote:

We will ask Gov. Paterson to dismantle the Lower Manhattan Development Corporation and hand over its development responsibilities to the city. Although the LMDC, a conduit for federal funds, must remain a legal entity, turning over its other functions to the city would eliminate one redundant layer of bureaucracy.

Knowing What Was “Privately Donated” by Bloomberg

How much of the $13.5 million privately donated money was actually donated by Bloomberg, LP? However large Bloomberg’s principal chunk is rumored to be, you don’t know how much it really is because it hasn’t been reported. Noticing New York has tried to find out. Noticing New York has inquired about the amount by contacting those who have, or should have, the information. The Mayor’s Office referred us to the Parks Department. The Parks Department declined comment, referring us to the Public Arts Fund. Bloomberg, LP also referred us to the Public Art Fund to whom Bloomberg gave the money, saying that Bloomberg, LP never discloses figures about how much money the Mayor’s media company is donating. The Public Art Fund did not supply the information either. They informed us that:

It is the policy of the Public Art Fund not to release details about donations raised from the private sector.

Donations in support of The New York City Waterfalls started at $100 and included the $2 million received from LMDC.

Influence of Donations

Because Bloomberg, LP giving is clearly an extension of Mayor Michael Bloomberg’s influence, the Mayor’s heavy personal giving to so many of the city’s cultural institutions has been viewed as a problem. People have pointed out that giving quietly immunizes the Mayor from criticism. Institutions receiving the money are apt not to express criticism of the Mayor and each institution has associated with it huge numbers of New York’s most influential (and wealthy) citizens whose impulses to criticize the Mayor are probably also largely neutralized.

Loops: Strategic Use of Charities and Donations

Are the Mayor’s personal donations politically strategic? We may not have the information about the Mayor’s personal “munificence” to clearly assess the question, but an indicative pattern can be seen in the way that the Mayor has distributed public taxpayer money. The New York Post investigated and reported that the Bloomberg administration has handed out $2.7 million in city taxpayer cash to three nonprofit groups that Brooklyn Borough President Marty Markowitz set up. (See: Sure Pays for Marty to Be Mike's Buddy, by Rich Calder, October 14, 2008.) These are groups Markowitz himself has improperly favored financially with taxpayer funds and which he uses in politically strategic ways. (Oh the circles upon self-referential circles we can find when these “charities” are involved!) Has Bloomberg exercised restraint from politically motivated strategy when it comes to his undisclosed personal largess that he hasn’t similarly exercised when he distributes taxpayer money? It would seem unlikely. Has Bloomberg personally donated to Markowitz’s charities?

More “Giving” In Store; Bloomberg Percentage to Go Up

One thing we know about Bloomberg’s giving is that with the advent of the new Wall Street fiscal crisis, Bloomberg while predicting that overall charitable support for New York arts groups and institutions will be going down, is advertising that he will be increasing his personal donations at this time. If predictions and advertised promises bear out, then you can expect Bloomberg’s proportional influence to go up.

The Non-comfort of Other “Private” Donations; Forest City Ratner

Are we comforted that there were others contributing in addition to the $2 million from the Lower Manhattan Development and the direct lead sponsorship from Bloomberg LP? Probably not. Why should we be comforted when another company high on this list of principal contributors to the Waterfalls is Forest City Ratner Companies. Predicated on Bloomberg ’s stalwart assistance, Forest City Ratner Companies is demanding over $2 billion in misguided taxpayer-financed subsidies for their proposed Atlantic Yards megadevelopment in Brooklyn, with more than $1 billion alone just to subsidize a private franchise basketball arena.

The Non-comfort of Other “Private” Donations; the Mayor's Fund to Advance New York City

The Public Art Fund’s list of private sponsors for the Waterfalls project consists of five categories. First on the list are “lead supporters”. Bloomberg. LP is one of the four lead supporters. Another is the Mayor's Fund to Advance New York City. Ostensibly this fund is an independent private 501(c)(3), but if you want to know more about it you have to go to the New York City government website, nyc.gov, where you will find a message about the fund from none other than Mayor Michael Bloomberg. While technically a donation from the fund may qualify as a “private” donation, it makes you think about what “private” really means. It certainly appears that it was additional money that Bloomberg was able to deliver to the project by virtue of his public position as Mayor.

The Non-comfort of Other “Private” Donations; the Lauders

Next on this list are “major” supporters (of which Forest City Ratner Companies is one of seven). Together with the Ratner Companies on this list is the Leonard and Evelyn Lauder Foundation. Leonard Lauder is the brother of Ronald Lauder, who in a flagrant ploy only days ago negotiated a billionaires’ pact with Bloomberg: Lauder will support the repeal of term limits so that Bloomberg can run for a third term as Mayor and, in exchange, Bloomberg will appoint Lauder to the head of a charter revision commission so that Lauder, who does not believe in the repeal of term limits for anybody else, can reimpose term limits before any subsequent officeholder can take advantage of their repeal. (See: Ethics Complaint Filed Over Bloomberg-Lauder Pact, by Michael Barbaro, October 9, 2008 and Lauder and Bloomberg Strike a Deal, by Michael Barbaro AND Sewell Chan, October 8, 2008)

The Non-comfort of Other “Private” Donations; Real Estate and the Mets

There are 18 “generous” supporters, 64 “additional funds” supporters and 29 “assistance has been provided by” supporters. The list is predominated by other well-known real estate developers besides Forest City Ratner. It includes the “New York Mets Foundation, Inc.” The Mets are similar to Foret City Ratner in that they are involved in controversial tax-exempt financing for another sports venue, the new Mets stadium. Even when you get down to level of the smallest donors, influence is perceptible in that there are many companies that are obviously construction industry subcontractors.

“Self-referential” Becomes “Self-reverential”

I have used the term “self-referential” several times above but certainly when Bloomberg directs huge sums to the real estate and sports franchise industries and they, in turn, give that money back to a project the Mayor is taking the lead in sponsoring, the result becomes a mind-boggling self-referential loop. When Bloomberg, as Mayor, then awards the project he himself sponsored with a city award for merit, the “self-referential” becomes “self-reverential.”

Self-reverential Elimination of Term Limits

These self-referential loops were to have been broken by term limits, but taking the “self-reverential” one step further Bloomberg has proposed elimination of these limits. He has proposed their elimination in the middle of this ongoing 2009 mayoral election cycle and his focus is to eliminate them particularly as they would apply specifically to him. I noted above that with the advent of the new Wall Street fiscal crisis, Bloomberg is advertising that he will be increasing his charitable giving to New York art groups and intuitions, while predicting that overall charitable support for these institutions from other sources will be drying up. With a disconcerting simultaneity, Bloomberg has also used the advent of the fiscal crisis to argue that only he himself has the knowledge to address the crisis for the city and that he can properly assist the public only if he is exempted from term limits and granted a third term as mayor. How self-reverential can you get? Inaccurate too, I believe. Did Bloomberg offer one predictive statement about this crisis coming to pass? There were those who did. I know of no special acumen on the part of Bloomberg that would make him suitable to the role. It may be the reverse because, as a crisis-insider, he likely lacks perspective.

Third Term the Charm to Crack the Silence?

It has been suggested that Bloomberg’s flow of charitable donations silenced criticism from people and organizations. Those people and organizations expected him soon to be out of office because of term limits. Why should they have picked a fight when they didn’t have to? Why should they bite the hand that feeds them? When it comes to the Waterfalls, why look a gift horse in the mouth?

Let us hope that the equation whereby silence makes sense changes when those same people and organizations that have been silent perceive that Bloomberg might continue in office for four or more additional years. Let us hope we all realize the importance of bringing out into the open honest and forthright assessments about Bloomberg policies that don’t work. Let’s hope that we come forward with our own assessments, rather than leaving it to the Mayor to give himself awards and proclaim that only he is fit to be Mayor.