Tuesday, June 30, 2009

Destroying Coney: By Planning to Shrink Coney City Plays Into Sitt’s Land Speculation Schemes

(The City has a plan to fade Coney Island out of existence. Click to enlarge.)

Under the guise of wanting to “save Coney Island” the city is doing an excellent job of destroying Coney Island. How? The city is has created desolation and increased costs for itself by proclaiming that it wants to shrink the historic Coney Island amusement area down to pee wee proportions. (Those pee wee proportions that will likely spell the death of Coney because they will be unworkable.)

An Absurd and Expensive Situation for the City

An article in yesterday’s Crain’s reminds us what an absurd situation the Bloomberg administration has gotten itself into turning “preservation” of a small portion Coney Island’s amusement acreage into a huge expense, expense that should have been entirely unnecessary. (See: June 28, 2009, Coney Island keeper Thor Equities' Joe Sitt gives city a ride for its money.)
Credulous Crain’s

The Crain’s article focuses on Thor Equities’ Joe Sitt, the land speculator who has been buying up Coney’s amusement acres. The article credulously reports that “Mr. Sitt is locked in a battle with the Bloomberg administration, which plans to develop the depressed area into a thriving year-round amusement district with housing” and says that to that accomplish this the city “needs the 10.5 acres that Mr. Sitt assembled over seven years at a cost of $93 million.” For reference, those acres the city wants are acres that are zoned for amusements which the city, in its plan wants to use for amusements. So what’s happening that causes the main point of the Crain’s article to be that the city has reportedly offered to pay Sitt (a rejected) $105 million just so that the amusement acres will be used, as intended, as zoned, as they should be, as amusement acres?

Good question. What has happened is that five years ago with extraordinary ineptness the city launched a speculative furor for Coney Island’s land that has created the underlying situation where, according to the city, according to Crain’s, Sitt is now demanding “more for the property than what it's worth.”

City Tells the Story of Speculative Furor It Launched

Below are the words of Purnima Kapur, the Director of City Planning's Brooklyn Office, that describe the launching of the speculative furor. She was speaking at at “Which Way Coney Island? A Symposium on Its Future,” at New York University’s Arthur L. Carter Journalism Institute on Wednesday, April 29, 2009. (Emphasis supplied.)

[The] pace of disinvestment and loss of amusements has accelerated really deeply in the last four or five years with speculative land transactions that have gone on.

* * * *

It started about five years ago with the formation of the Coney Island Development Corporation and the mayor’s strategic plan that was issued for Coney Island. Since that time the city and its partners have been engaged in a very intensive outreach at the community level to local stakeholders, with property owners, with amusement operators . . .
Ms. Kapur probably did not intend the above juxtaposition of statements from her presentation, but it is inescapably pertinent to the unnecessary demise towards which the city is impelling Coney’s historic amusement park. (See: Tuesday, May 12, 2009, The City to the Public: “We’ve Got Your Coney Island: If You Want It Back, Better Do Exactly As We Say. . . ”)

One Set of Unbelievable Self-Described Good Motives Does Not Make Another Set Believable

The Crain’s article quotes Mr. Sitt’s self-described good motives respecting Coney: “It's my passion to make Coney Island better.” It then undercuts that with: “Trouble is, many people simply don't believe him.”

The trouble is also this: As Crain’s ought to have recognized, an unbelievable Mr. Sitt does not make for a believable Bloomberg administration.

Though the Bloomberg administration similarly says that it wants to make Coney Island “better,” that it wants to “save” it, we think it is clear that the city, like Sitt, should not be believed. We have written a great deal pointing out the obvious inconsistencies in the city’s positions. For more about this, see the list of links in our previous post about tomorrow’s City Council hearing about Coney (Thursday, June 25, 2009, July 1, Wed, 10 am: City Council Hearing on Coney Island Rezoning.)

Coney’s Hope

Perhaps the one thing that ought to give us the most hope about Coney Island’s future is that Coney is so beloved that no one wants to admit they don’t want to save and improve it, not even those like Sitt and the city, who are currently responsible for so much of the recent destruction befalling Coney. Nobody actually wants to take responsibility for Coney’s destruction.

Primer on Establishing Speculative Value for Land

So, how exactly has the city been working against itself at the bargaining table and driving up the cost of preserving amusement acreage at Coney?

Using Coney’s amusement acres for amusement has incredible value for the city and all its communities. We think of Coney as New York’s seaside version of Central Park. In fact, in recognition of this the city has invested considerably in making Coney readily accessible to all New Yorkers (just as Central Park is) by building subway infrastructure that make it easy to get to. Notwithstanding, that does not mean that the Coney Amusement acres wouldn’t be more valuable to their owners if they were converted to other uses particularly if those other uses, like housing, were heavily subsidized by the government. (We should note that while Coney could thrive in the near term as an amusement area such a proposed conversion would prevent such thriving and would likely take “generations.”)

The possible conversion to such other use is the basis of Sitt’s speculation. It is the basis for the very high sums Sitt is demanding from the city in order for his amusement acres to be restored to the amusement use for which they are currently zoned. Sitt can speculate, but that doesn’t mean that he is entitled either to a zoning change or such high sums- - But the city has played into his hands with its plan to shrink the amusement park.

All else being equal, the value of Coney’s amusement acres should be the value they have for continued amusement use. In fact, recognizing this is critical to the economics of keeping the Coney amusement area alive. As we said, the converse of this, a zoning change, or an increased price is not something Mr. Sitt or any other land speculator is entitled to.

No Entitlement to a Zoning Change: Condemnation vs. Political Probabilities

Repeat: Mr. Sitt is not entitled to a zoning change. In view of that fact is there a speculatively higher value for the land than that of acres being used for amusement? If the city condemned Mr. Sitt’s land (arguing that he was creating blight by not fully utilizing the land the way it was zoned) the value of the land awarded in the condemnation might be higher if the court overseeing the condemnation could be convinced that there was a likelihood that the land might be rezoned for another use. The court wouldn’t award the full value based on this alternative use, only a portion of it based on the degree to which there was an arguable probability that such a zoning would occur.*

(* For instance, in the case of setting values for the proposed Atlantic Yards condemnations, a very significant chance exists that the property being condemned would be upzoned were it not for the way that ESDC is trying to seize all the value of that upzoning for Forest City Ratner’s benefit via its zoning override.)

Similarly, without such a condemnation process to set value, real market value is based on a game of political probabilities as to whether land will be rezoned. Though no one is entitled to a rezoning of their land, everyone is entitled to pursue political process to have that land rezoned. To the extent that one believes that a rezoning is politically probable the market value of the land goes up.

City’s (Repeated) Announcements that Land Will Be Rezoned Resets Equation

By announcing (each respective time) that it was going to shrink Coney Island’s amusement acres, the city reset the expectations and probabilities of rezoning in Sitt’s favor. It was now no longer a question of whether Coney Island amusement acres would be rezoned; it was now just a question of whose amusement acres would be rezoned, Sitt’s or somebody else’s. When the city says that Sitt is demanding too much money for the restoration of his acres to amusement use it is therefore decrying a situation of its own making.

What’s Up in Albany

Right now Sitt has enlisted aid in the New York State senate where there is opposition to city’s plan. That plan cannot be effected unless the senate approves a parkland designation for the few scant acres the city wants to preserve as amusement area. (See: Traffic Jam on Coney: Parking Lot or Parkland? Fate Could Foil Mayor's Plans, by Eliot Brown, June 2, 2009.)

We are not deluding ourselves: The senate opposition to the city plan (led by State Senators Carl Kruger and Diane Savino) even though characterizing the city’s inept plan as “as pie in the sky” is not about preserving Coney Island or assisting in any serious desire Sitt has for a better Coney Island plan. It is only about assisting Sitt in the political game to get a higher speculative price. But the Albany opposition is something that the city and Coney Island Amusement park supporters can wind up benefitting from. The best thing to happen now would be for the city’s plan to die..

Steering Into the Skid

The city has played into Sitt’s hands with its plan to shrink the amusement park. Its best tactic at this point would be to announce that it is not going to shrink the amusement acreage, even to announce that the city plans to grow the amusement acres. Given the changes that have occurred in the economy this is exactly what the city should do.

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