Report: Yards arena is a money pit

The Brooklyn Paper
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The basketball arena at the core of the Atlantic Yards mega-project is actually a money pit that will cost city taxpayers nearly $40 million more over the next 30 years than they will get back in revenues, according to a new report issued last week.

Though the arena was approved in 2006 with promises that it would be a net gain for city coffers, the Independent Budget Office said today that it would soak taxpayers for $39.5 million over the next 30 years.

The report also concluded that developer Bruce Ratner is enjoying $726 million in “special government benefits.”

“The arena would cost the city’s budget $169 million (present value),” the study said. “These costs exceed the $130 million in new revenues from economic activity … over 30 years.”

The latest report by the non-partisan budget watchdog reverses the group’s own 2005 analysis that found new jobs and spending at Nets basketball games would raise $28.5 million in revenues for the city over 30 years.

But earlier this year, IBO Deputy Director George Sweeting started reconsidering those numbers because of the arena’s escalating costs, from its original $435 million to nearly $1 billion before architect Frank Gehry was shelved in favor of the new, cost-conscious team of Ellerbe Becket and SHoP Architects.

Opponents seized on the IBO study as evidence that one of the $800-million arena’s main selling points — that it would raise money for the city, not cost it millions — had vanished.

“It is clear that the highly subsidized Atlantic Yards proposal has a negative benefit for the public while providing enormous financial benefits to Forest City Ratner,” said Daniel Goldstein of Develop Don’t Destroy Brooklyn, who added that this “stark imbalance” will be a part of his group’s upcoming challenge in the state’s highest court.

The IBO report also raised a red flag over whether Ratner’s arena will generate enough revenue to pay back the $700-million tax-free loan that finances the arena. If true, the result would be either be an increase in the city’s assessment of the value of the arena land or the need for more money put into the project by its cash-strapped developer, Goldstein said.

“The question is will the arena land assessment be illegally inflated by the Finance Department to meet Ratner’s desired debt service or will the bond amount be lowered, requiring a greater investment by the developer,” he said. “This complicated issue is precisely what Assemblyman Richard Brodsky investigated with hearings and subpoenas on the new Yankee Stadium. He should play the same watchdog role with the Nets arena.”

A spokesman for Ratner slammed the report.

“The IBO’s analysis is wrong,” said the spokesman, Joe DePlasco. “Their assumptions … seem to be intentionally low-balling sales and tax revenue. Also, [the IBO is] conveniently applying the state and city subsidies to the arena while ignoring the benefits of the larger project: the development of the housing, office and other uses, creating jobs and tax revenues.”

City officials have also questioned the IBO’s decision to look only at the arena, not the larger project.

A cover sheet to the report did point out that the IBO understands that “estimates of fiscal costs or benefits are only one aspect of the many different factors [in] evaluating the overall merits of a project.”

Updated 5:14 pm, July 9, 2018: Story was updated with a response from Forest City Ratner.
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Reasonable discourse

sam from downtown says:
How can IBO look at anything other than the arena if Ratner doesn't show or provide numbers about anything other thant he arena? Also IBO explains very clearly why they are only studying the arena, so "city officials' whining about methodology is off point.
Sept. 10, 2009, 12:45 pm
Bill Harris from Boerum Hill says:
Good article, Gersh. "New" design still looks like ——, though. Just needed to add that for the record. Nice rendering doesn't change the insult to the eyes if this crap ever saw the light of day. A rendering is not the same as reality. If it could be built for free and make profit for the City I would still object. Crap is crap.
Sept. 10, 2009, 1:41 pm
C from Boerum Hill says:
Somebody stop these people.
Sept. 10, 2009, 2:17 pm
Pacholo from Red Hook says:
Bring the Nets home! Build the arena now!
Sept. 10, 2009, 9:43 pm
al pankin from downtown says:
compared to what the city wastes the $40 million dollars (if true) is a drop in the bucket. today, I saw a work crew for the mta working at a job site at downtown brooklyn, the driver in the truck was sleeping, the worker on the back of the truck was reading a newspaper, two others were drinking coffee...some workers! why doesn't one of the bruce ratner critics step up to the plate with some of their own money and do a better job? these critics are nothing but a bunch of cry baby phonies.
Sept. 10, 2009, 10:50 pm
Roberto from Park Slope says:
If you like big projects, move to Yonkers and enjoy Ratner's Ridge Hill complex.

Ratner's Yards doesn't belong in Brooklyn. Period.

Sept. 11, 2009, 9:44 am
sam from downtown says:
Yes, Al, let's start wasting money on big boondoggles everywhere.

You give us $726 million in subsidies and we'll build you an arena that doesn't look like a cockroach and a spaceship mated.
Sept. 11, 2009, 10:21 am
phil from pslope says:
The fix was, has and ever shall be, in. Ratner's projects are abysmal. Maybe AG Coumo should look into how this "plan" or whatever you want to call it made it through the EDSC and MTA.
Sept. 11, 2009, 11:06 am
Eric McClure from Park Slope says:
@phil from pslope,

Good idea, but Bruce Ratner has already outfoxed you. He co-hosted a big-ticket fundraiser for Cuomo's gubernatorial run earlier this year:

So, Brooklyn Paper, do you STILL support the "money pit?"
Sept. 11, 2009, 5:35 pm
Paul from Park Slope says:
Good question, Eric! So how about it, BP? (YIKES! sounds like I'm talking to the Cheesecaker!)
You actually said we should throw stimulus money into this boondoggle. Still feel that way?
Sept. 12, 2009, 9:57 am
Johnny from Kensington says:
$40M over 30 years is absolute peanuts for the city budget. Build it--I'd love to have the Nets in Brooklyn!
Sept. 14, 2009, 1:52 pm
Michael D. D. White from Brooklyn Heights says:
Comment Part 1

Your article (with the print headline: “Report: Arena will cost city $40M over 30 years”) is inaccurate and misleading. The arena will “cost” the city $40 million over 30 years? No, the arena will cost the city a great deal more, hundreds of millions of dollars. What the City Independent Budget Office is writing about is the NET LOSS to the city and it conservatively calculates that net loss at a much more substantial figure: $220 million ($39.5 million in direct losses and $180.5 million in opportunity losses). Further, if you noticed, that figure, only for the arena, has already begun to rise. This week at its board meeting, ESDC casually shook the advance of another $25 million out of its sleeve. Since the project is unlikely ever to return the accelerated advance of that money, this extra $25 million could well bring the calculated net loss from $220 million to $245 million.

Michael D. D. White
Noticing New York
Sept. 19, 2009, 3:52 pm
Michael D. D. White from Brooklyn Heights says:
Comment Part 2 (conclusion)

The print headline is particularly misleading ushering in dismissal (i.e. “al pankin” or “Johnny from Kensington” ) that all that is being talked about is a $40 million “drop in the bucket” overall expenditure or “peanuts for the city budget.” Not so. Among other things, per the IBO report, we are talking about$726 million in no-bid giveaways for the developer just for the arena. Ultimately, for the total project, we are talking about more than $2 (perhaps $3) BILLION that could be better spent elsewhere.

Finally, since the as yet UNDESIGNED rest of megadevelopment has been formulated as a multi-decade no-obligation developer monopoly on a swath of valuable Brooklyn real estate it will allow the developer to blackmail the public into deeper subsidies redoubling ultimate total net losses.

Michael D. D. White
Noticing New York
Sept. 19, 2009, 3:54 pm

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