Thursday, December 4, 2008

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

(Continued from Part I)

A Matter of Class; Chop Shops vs. Stadium Builders

There is also the possibility that there is a class thing going on. Bloomberg may be able to see the value of real estate and the city only the way his Wall Street and big developer friends might see it. Perhaps that is why he imagines this busy thriving but lower-class area to be one of “deserted warehouses" where the only activity is illegal.

As stated, Willets Point is right next to the Citifield stadium replacement for Shea Stadium. The Mayor and his Wall Street and developer friends have been active with respect to building and financing stadiums and sports arenas like the new Yankee Stadium and the Nets arena. It is worth remembering that with all the shenanigans engaged in with respect to the development and financing of those sports venues, it is far from clear that the Mayor and his friends have stayed on the legal side of the line. (See: Saturday, November 8, 2008, Does Questionable Assertion of Attorney-client Privilege Point to Yankee Stadium Bond Taxability?)

While an illegal chop shop involves an illegal redistribution of wealth, the sport venue financings involve a far more massive redistribution of wealth from the average tax-paying citizen to the mayor’s wealthy associates (More Money for the Very Rich: An Unsporting Pursuit? March 17, 2008). The picking of the public’s pocket and massive redistribution of wealth that sports venue (stadium and arena) financings represent may technically manage to fall on the proper side of “legal” but that doesn’t make them more acceptable. To the extent that the financing is or might be legal at all it is a problem with the law and tax code loopholes.

Big-Developer Style of Redevelopment

The form that the Bloomberg Administration’s redevelopment of Willets Point is proposed to take involves replacing what is there with a big-developer style of redevelopment. If it succeeds as described with its “high quality” hotel and convention center, it is apparently supposed to surpass rather than resemble the regional community into which it would be implanted. Is it realistic? Whether realistic or not, there has been criticism that the vision pursued will be developer-originated and -driven rather than coming from the community.

One such critic is Brad Lander, executive director of the Pratt Institute Center for Community and Environmental Development, who said the city should have led "a public process, informed by data" before asking developers to submit detailed proposals.
(See again: The New York Times: Square Feet, A Redevelopment Scuffle in Queens, By Terry Pristin, May 17, 2006.)

Seven or Eight Prospective Big Developers

Eight finalist developers submitted plans for Willets Point in March of 2006. (See: The Iron Triangle Begins to Melt, by Matthew Schuerman, March 3, 2006.) The finalist developers at that time were (reciting below with reporter Mr. Schuerman’s characterizations included):

1. Macerich (operates Queens Center mall) with AvalonBay
2. Westfield (former owner of the World Trade Center mall)
3. Vornado Realty Trust (big dog on the porch)
4. TDC Development & Construction (Flushing Commons)
5. Forest City Ratner (of Atlantic Yards fame)
6. Related (another big dog)
7. Partnership of General Growth (new South Street Seaport owners), Rosenheim Associates , LCOR and Massachusetts-based Sage Hotel
8. Muss Development (Flushing Town Center)
We should note that the ordering on this list, which is not alphabetical, is out of an EDC press release. We can’t tell you why the order is what it is, why, for instance, Muss Development is listed last. Reportedly, Vornado did not submit a follow-up bid (Willets Point Plan Challenges Developers, by David Lombino, May 25, 2006).

Only One Developer for an Immense Project? Contrast Battery Park City Model

The City Economic Development Corporation site timeline calendar for the project cryptically states: “Spring 2009: Select developer.”

Why does the site say select developer referring to “developer” in the singular? If Willets Point is 60-62 acres, it is two-thirds the size of Battery Park City which is 92 acres and 9,000 residential units versus the 5,500 units proposed here. Battery Park City was developed by many, many developers. Why would the city award over 60 acres of development to a single company? It evinces an extreme faith in a big development model. It doesn’t make sense. It makes it much more likely that design will be a fluidly changing event driven by a developer rather than being dictated by the public. The majority of decisions will probably be made after the developer has been given a monopoly on the site and the public has lost its negotiating power to control events.

In contrast, the Battery Park City’s model of bidding separate parcels out to the development community at large ensures that the public will get maximum value for the subsidy contributions the public will be making. With a single developer the public will lose the ability to leverage its investment for maximum value when the parcel is developed. The public is also likely to lose control over the schedule of development. More likely that schedule will become what is convenient for the developer which is an undesirable form of additional subsidy in itself. There are already signs that schedule information that has been promulgated is deceptively fictive and the schedule is actually fluid. More on this below.

Municipal Art Society Hearing Testimony on One Developer

The Municipal Art Society shares many concerns with us respecting the Willets Point Development (including using only one developer) which they analyzed at length. Some extracts from their August 13, 2008 comments on the Draft Environmental Impact Statement are as follows:
. . . with respect to the EDC’s proposed ownership model, given the current economic climate doesn’t structuring the plan around a single developer risk long delays at the cost of promised public benefits?

* * * *
The Willets Point Development and Urban Renewal plans have been ill conceived.
o The City should invest in infrastructure and site preparation
o The City should incorporate a multiple-developer model with clear public oversight

* * * *

The Willets Point development plan, which relies on a single developer for site preparation as well as build-out, is a redevelopment model that has not proven to be successful, as demonstrated by the Atlantic Yards and Hudson Yards projects. By eschewing the public sector’s responsibility to prepare the site and provide the public infrastructure necessary for redevelopment, the City is running the risk that the development at Willets Point, as at Atlantic Yards, will stall indefinitely. At the same time, if the City acquires control over the entire site – if necessary through the use of eminent domain – local property owners will have relinquished their stake in the area. This creates the possibility that the site will remain vacant and/or underutilized for years to come.

* * * *
The recent experience at Atlantic Yards serves as a cautionary note to the strategy of developer constructed infrastructure, as their decision making is tied more to capital market fluctuations, compared to the public sector.
If One Developer- Do We suspect. . .

The fact that the city is putting all its development eggs in one basket is an indication that the city probably has an idea of who the developer will be even if it has not yet officially `selected’ the developer. Wouldn’t even the largest developers have to be gearing up already if there were going to take on a project of such scale on their own? The EDC timeline says that site acquisition and relocation is supposed to happen in Spring/Summer 2009 with site preparation, remediation, and construction beginning (right after?) in 2010. Should it be suspected that channels of communication are already open and that the city is hearing information about what the developer thinks will work for them?

Reckoning Acreage: Various Reported Figures

With so much hanging in the balance, it would make sense if much better information about what was going on was publicly available. We’ve noted the wide disparity in the calculation of the number of jobs that will be lost. If you want to calculate how many jobs per acre will be lost the task is even harder because there are different figures for how many acres comprise Willets Point. If you roam around the media, the acreage for the Iron Triangle is variously reported as 55, 60, 61, 62, 64 and 75 acres. Normally the figure is given at around 62 acres, which probably represents a rounding up from a 61.5 acre figure. We suspect that this may somewhat overstate the acreage associated with the Willets Point businesses. There are political advantages and disadvantages to both overstating and understating the business acreage. Stating the acreage low minimizes the eminent domain taking but increases the job/business per acre ratio. On the other hand, stating a high acreage figure could make the scrap metal businesses seem more `dog in the manger’ and as if they are standing in the way of valuable development. It also makes the upzoning seem less significant.

The city asserts surprisingly in one of its Downtown Flushing Development Framework documents that the jobs per acre for the M3-1 zoned Willets Point are low:

Willets Point is zoned M3-1 for heavy manufacturing, a land use designation that is in relatively short supply in the city. . . .Currently, however, the businesses on Willets Point . . . are significantly less productive than those in other M3-1 zones in New York City in terms of employment and value added. For instance, the City estimates that the total jobs per acre on Willets Point is between one-half and one-fifth of the figures for other M3-1 zones.
Obviously, the job ratio, unstated by the document, would depend on the figures assumed for the number of jobs and the for acreage. It is possible to calculate a higher ratio but 1,800 jobs divided by 60 acres would be 30 jobs per acre. A Pratt Study says that in Long Island City in 2000 “overall manufacturing job density is 10.3 jobs per acre.” In EIS documents for the rezoning of the much more prime Greenpoint Williamsburg real estate characterizes contrasting jobs per acre figures: “40.9 jobs per acre versus 6 jobs per acre in the areas slated for residential use.” Nearby to Willets Point, the Bloomberg administration planned to develop the 26 acre site of the former site of Flushing Airport to create 400 permanent jobs (15.4 jobs per acre).

It seems that the variously reported acreage figures for Willets Point can be reconciled this way. Apparently it is possible to calculate that the Willets Point area bounded in by the highways that will be turned over to private developers is a total of about 75 acres. (That’s according to an EDC press release.) Of this, about 45 acres are privately owned, but those acres are mixed in with streets and acreage owned by the MTA. The MTA has about 13.5 acres that it uses for a bus parking and storage. 16 acres are Streets. (The MTA will continue to use land in the area which the Municipal Art Society suggests may pose a concern for the workability of the redevelopment’s urban design.)

Open Space and Parkland?

Battery Park City is about 40% parkland with 36 of its 92 acres being devoted to park space. By comparison, 8 acres of open space are being talked about for the Willets Point development. No matter how it’s calculated that will be a much lesser percentage. While the Willets Point project is nearly surrounded water (Battery park City is actually on the Hudson), the experience on the edges of the project will be of the surrounding highways that intervene. The project is near the large Flushing Meadow Corona Park but it will be a long unpleasant walk past parking lots, a stadium and a train yard to get there.

How Long Will it Take? It Wouldn’t Be 10 Years like They Said Because a Deal for 15 Years . . .

Very recently, contemporaneously with the City Council approval it was reported that “The redevelopment of Willets Point, . . .is expected to be completed in about 10 years.” (See: Council Approves Queens Redevelopment Plans, by Fernanda Santos, November 13, 2008.) It is not clear whether that reported period includes or excludes the time that would precede EDC’s projected 2010 construction start date but perhaps the city conveniently neglected to inform the Times reporter that the 10-year construction period was out-of-date information. In order to negotiate deals with enough Willets Point landowners so as to persuade the City Council to vote for the plan, the city reportedly made deals which entail allowing land owners to remain in place up to 15 years before eminent domain would be used against them. The following is reported in Iron Triangle Tracker about an accord “struck in the morning before the vote”:
The proverbial ax may have fallen on most of Willets Point yesterday, but the three largest businesses in the industrial community were issued a stay of execution — at least for the foreseeable future.

In the 11th hour of negotiations ahead of yesterday’s City Council vote, the city inked a deal that will allow Tully Construction, House of Spices and Fodera Foods to remain at Willets Point for up to 15 years.
(See: Deal with Big Three a win-win: EDC, by Stephen Stirling, November 14, 2008)

City’s Divide-and-Conquer Deal; Three Big Owners Get Upzoning Value

The deal was a divide-and-conquer strategy by the city. It allows three major owners not only to remain in place for a substantial period of time with more control over planning their departure. It also allows them to sell their land for a much higher price. The plan allows these owners, unlike their neighbors, to benefit from the coming upzoning of the land (also per the above article):

Should a situation arise where Tully, Fodera or House of Spices opt not to sell their land, the city would be able to pursue eminent domain after 15 years, though it remains confident this will not be necessary, sources with knowledge of the negotiations said.

The EDC said the businesses will be able to sell their land directly to the developer at a much higher price than they would through negotiations being conducted by the city — chiefly because the rezoning the City Council passed boosts the perceived value of the land to a third party.
A Two-Phase Project and an Admittedly Longer Time Frame

The deal apparently envisions the project proceeding in at least two phases, with an eastern phase where construction would perhaps not begin until at least 15 years out. So much for completion of the project within 10 years!

The EDC said that because the properties all reside on the easternmost portion of the 62-acre site slated for redevelopment, the city will be able to conduct a multi-million dollar environmental remediation and implement much of the infrastructure improvements — such as a sewer system — needed to sustain the planned development.
Negotiating Postures; Transparency Suffers When Information Valuable to Public is Withheld

The process for disclosure of what the public is getting and when the public is getting it is not transparent. As an indication of this the Iron Triangle Tracker article above points out that EDC had previously contended the project could not be phased, a postion apparently taken publicly for the purpose of negotiating. For whatever reason, true and correct information which would have been valuable to the public process was withheld and/or obfuscated. This is keenly relevant since eminent domain is being invoked in the name of the public. The Iron Triangle Tracker:
The agreement represents a step back for the city from its initial assertion that the 62-acre swath of land earmarked for development would need to be cleared and remediated as a whole.
Dividing the Project in Two

Indication that the project could be divided into two phases surfaced this spring, though there were perceived detriments to doing so. (See: Borough President Marshall rips 'crazy' option to split Willets Point plan, by Frank Lombardi and John Lauinger, April 29, 2008)

The mammoth Willets Point redevelopment plan could be divided into two stages under an alternative approach being considered by city officials.

But a key backer of the city's Willets Point vision, Queens Borough President Helen Marshall, denounced the piecemeal option as "crazy." Marshall said she believes the option is aimed at averting the controversial use of eminent domain.

* * *
City Economic Development Corp. officials discussed the option while presenting the Willets Point plan to the City Planning Commission on April 21, kicking off the public review process.

Under the alternative, the heavily polluted 62-acre site would be divided into two segments.

The western portion would be developed first, with land acquisition beginning in 2009, followed by site cleanup and then construction. Once the western portion is finished sometime in 2013, the eastern portion would proceed down the same path, with construction expected to conclude in 2017.

Information About Divided Project Helps to Calculate How Long: Certainly Not 10 Years, the Project Now Looks like it Could Take Over 30

The 15-year holding period negotiated with the three eastern owners would obviously take the commencement of the eastern phase out to 2023, not 2013 as the above seems to suggest (without actually committing to it). Taking this discrepancy as an indicator may point the following: It may take 15 years rather than the projected 3 years (after ESDC’s 2010 web site commencement date) to construct the western phase of the project. The eastern phase is officially projected to take an additional 5 years; if those 5 years were proportionately extended then perhaps the eastern phase of the development should be projected take more than an additional 15 years. That would mean that it is expected that the entire development could take in excess of 30 years. This substantially longer time frame is probably much more consistent with what developers of megadevelopments generally reckon rather than the shorter time frame previously promulgated.

The option of using multiple developers which is being forsworn here would have assured faster overall construction. Battery Park City, 92 acres and 9,000 units has used multiple developers and is only just now nearing completion. It was begun, on a vacant site 28 years ago in 1980.

While the above indicates that we could be dealing with a buildout that could take in itself take over 30 years, the pertinent period could be longer still if there is litigation. Delaying litigation could occur at the outset. With the 15-year hold-off in bringing eminent domain with respect to the eastern parcels a second round of litigation might occur then. The second round of litigation could be the more interesting if in the next generation we see legislatively or judicially implemented eminent domain reform.

A Slower Constructed Two-Phase Project; a Few Problems/Benefits?

If there is a substantial period of time when the project is only half constructed, then the people living in the development will experience the problems experienced on Roosevelt Island when it was a community with too few units (2,141) for there to be good services supporting them.

Here are the other perceived problems discussed in the continuation of the Daily News article above:

But Marshall said it is impractical to develop the site piecemeal, particularly because it would produce the awkward juxtaposition of families living alongside contaminated land cluttered with junkyards and auto-body shops.

"I don't want to subject families to that," she said.

EDC officials did not respond to multiple requests for comment.

But the benefits of a piecemeal approach, as stated in the draft plans, are that it would "allow the city additional time to find suitable relocation sites" and also "spread the cost of property acquisition and infrastructure improvements over time."
Note that the benefits described above do not mention using the divide-and-conquer approach and allowing upzoning benefit value to be pocketed by three eastern owners.

Marshall, however, said she believes the option is aimed at reducing the likelihood that the project - opposed in its current form by 29 City Council members - will require controversial eminent domain land grabs.

"I don't think it's a secret. What they're trying to do is to avoid the anti-eminent domain spirit that is going around the City Council," Marshall said.

Marshall also feared the conference center - much needed by the Queens Chamber of Commerce - would be imperiled under the piecemeal approach.

Compared to the single-phase development model, the piecemeal approach "would not provide the same flexibility in siting" the conference center that the draft plans note, the borough president contended.
The “Flexible” Long-term Project; Where the Public Gets Shortchanged

Reference to “flexibility” in the last paragraph points to the fact that plans for the development are fluid. But it doesn’t make sense to be negotiating with a developer about fluidly changing plans after you have granted a developer a monopoly on 75 acres of development opportunity. Once again we point out that this is the opposite of the very effective Battery Park City exemplar of bidding out building sites over time to multiple developers after the public has determined what it wants. Everyone knows that with respect to building your own home you don’t bid out constructions before you know what you want and expect to change it all through change orders later on.

The idea of completing the project maybe 20 to 30 or 35 years out rather than 10 is quite consistent with the idea that the city envisions accommodating a single developer by letting them proceed with this project entirely on their own time frame. It is a very accommodating posture, essentially like tying a feedbag on a horse. The developer gets to munch at their own pace over an extended period of years. Again, this should be considered a subsidy. The fact that the 15-year deal was recently negotiated probably reflects a realistic recognition that the project is likely to proceed slowly given the current state of the economy.

The current poor economy is likely to mean that the single developer’s bid in 2009 will be a low one. That is especially unfortunate because by not dividing the site up and bidding it out as parcels over time the city is sacrificing its ability capture increasing values in future bids as the area develops. The larger a site and the more protracted its development, the more critical the application of this principle. This criticism has been made of developing the much smaller 26.2 Hudson Yards site and is also applicable to the 22-acre site of the proposed Atlantic Yards.

The more slowly the project proceeds, the more it is likely to change. The more it changes after a developer has been awarded a monopoly the more likely it is that the public will be shortchanged. Figuring out what the redevelopment plan is and whether it makes sense is not that easy from the information that has been made publicly available. It is possible though that the most definite part of the Bloomberg administration’s development plan is the desire to use eminent domain.

How Much Might the Project Change? Some Thoughts on the Convention Center

What sort of changes might occur at Willets Point? The last paragraph of the above quoted article (see the last indent) referred to possibilities with respect to siting the conference center. There has been discussion about expanding the size of the convention center to make it a replacement for the Javits Center. (See: Javits Expansion May Decamp to Queens, By Peter Kiefer, February 25, 2008.)

That may not happen, but even though the project may have changed a great deal in terms of schedule, City Councilman John Liu was previously complaining about the lack of development plan specifics back when this was discussed.

Another critic of the plan has been Councilman John Liu. Mr. Liu is in favor of developing Willets Point but has been critical of how the EDC has communicated the details.

"What was a plan that should have been flushed out more and more as time went on actually has become more of a skeleton," he said.

But Mr. Liu says that with 61 available acres, expanding the proposed size of the convention center would not be a problem. "I think that if the plan is to build a convention center at Willets Points there will be overwhelming if not universal enthusiasm," he said.

(Note, earlier and more recent rendering show a conference center in different locations. The later renderings show the conference center backed against the elevated highway to the northeast, which is probably preferable to putting it next to the creek and wetlands.)

(Continue to Part III)

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