by Neil deMause
Others, though, pointed out that the proposed stadium site had a monster of a problem passing the “but-for” test that haunted TIF projects in other cities. “If it’s the most underutilized area in Manhattan, then why wouldn’t it develop anyway?” wondered California TIF expert Howard Greenwich when told of Doctoroff’s plan. (In fact, apartment towers were already rising on the site, to take advantage of the easy walk to midtown.) By slicing off fifty-nine square blocks of prime Manhattan real estate—“the grandmother of all TIF districts”—Greenwich noted, “you’re tying the hands of future governments twenty years from now, because these property taxes will be off-line, and there’s nothing you can do about it.” There were also questions whether bond buyers would even purchase the Hudson Yards debt without costly bond insurance. “Someone’s going to have to guarantee those bonds,” insisted Dallas TIF guru Ryan Evans, noting that for projects in his city, bond buyers demanded costly bond insurance even after construction was already under way. He observed, “It sounds like a rough row to hoe, because someone has to take the risk, and then hope there’s enough taxes generated to pay it back.”
Publicly, at least, Doctoroff seemed unworried about the naysayers. To those who wondered if dropping a huge swath of skyscrapers across the West Side might cannibalize office-space development that was already being counted on to revitalize lower Manhattan following 9/11, he replied, “We don’t have that concern.” But the criticisms—or the worries of the bond market—were clearly weighing on his mind. On January 30, 2003, Doctoroff was scheduled to make a presentation of his Olympic finance plan to the city council. Instead, he requested a two-month delay. It would be more than a year before he returned with a revamped plan.
It eventually became clear that the deputy mayor was making a last-minute lineup substitution: Out were TIFs, and in was a concept called payments in lieu of taxes (PILOTs), whereby developers would be entirely exempted from property taxes, then pay special fees to a newly created Hudson Yards Infrastructure Corporation. As Doctoroff himself explained, “The precise structure may be different than a classic TIF but the concept of using incremental revenues generated in the area is still exactly what we’re planning to do. The name will be different.”
Something else that would be different: Unlike a TIF, PILOTs would not require a vote of the state legislature. It was the first sign that though Doctoroff was plotting one of the biggest planned developments in the city’s history, he had no intention of asking either New Yorkers or their elected representatives for permission.
Hoops and Cheesecake
While Doctoroff shuffled acronyms in Manhattan, another sports-facility controversy was brewing across the East River in Brooklyn. Like the Jets plan, this one proposed to bring a team from New Jersey to a New York rail yard. The way it played out, though, would be very different.
The New Jersey Nets already had history on both sides of the Hudson River. Born in 1967 as the New Jersey Americans of the fledgling American Basketball Association, the team had bounced back and forth between the Garden State and Long Island over the years, ultimately landing in 1981 at the then new Brendan Byrne Arena, built on a plot of land wedged between Giants Stadium and the New Jersey Turnpike.
By the turn of the millennium, the Nets had played in their first NBA finals and had at last begun to compete with the Knicks for the attention of city sports fans. But success on the court hadn’t translated into success at the ticket window: The Nets’ arena, isolated in the New Jersey swamps, was difficult to get to by public transit, and the legendary traffic jams after Nets games helped lead USA Today to rate the arena as the worst facility in the NBA. In the late 1990s the team’s owners began working on a deal to move to a new arena in downtown Newark, where two commuter rail lines could have been used to draw fans from New York City. But talks quickly broke down in 2003 when the team’s owners began insisting that the city of Newark would have to front the entire construction cost, with the team repaying just one third of the debt payments.
It was at this point that Bruce Ratner entered the picture. The heir to a family-owned real-estate empire—named Forest City Ratner, for its roots in Cleveland—Ratner had been a major player on the city real-estate scene for the better part of two decades. Starting in the late 1980s, when he partnered with the city to build the massive MetroTech office complex that demolished several blocks of downtown Brooklyn, he’d been steadily remaking the Brooklyn skyline, most recently with a pair of suburban-style malls near the busy intersection of Flatbush and Atlantic avenues.
The first word of Ratner’s interest in basketball came in July 2003, when the Newark Star-Ledger broke the news that the developer was looking to build a $500 million basketball arena atop the rail yards just south of his Atlantic Center mall. Brooklyn borough president Marty Markowitz—a longtime Brooklyn politician who had recently ascended to the borough’s top spot, and who would become best known for standing astride the Brooklyn Bridge with a megaphone during the summer’s blackout and shouting, “Welcome home to Brooklyn!”—gushed with joy to the press: “As a boy, I cried when the Dodgers left in 1957. I’m looking forward to shedding tears of joy when the NBA comes to Brooklyn.”
The site that Ratner had identified for a new arena was prime Brooklyn real estate: Sitting at the nexus of the booming neighborhoods of Prospect Heights, Fort Greene, Park Slope, and Boerum Hill, it was served by ten subway lines and a Long Island Rail Road commuter terminal, making for easy access for both city and suburban fans. Nonetheless, it had some problems. For one thing, although the open-cut rail yards stretched for three blocks along Atlantic Avenue, they were only one block wide—less than two hundred feet—and any self-respecting NBA arena would need a footprint at least twice that size. With Atlantic Avenue, a major thoroughfare, to the north, the only way to expand would be south, requiring the closure of another street and demolition of an entire block of apartment buildings and row houses.
As it turned out, this was exactly what Ratner intended, though at first he didn’t let any of the block’s residents in on his plans. Dan Goldstein, a thirty-three-year-old Web designer, was just moving into a newly renovated seventh-floor condo on Pacific Street when news began to spread of the arena project. “When I was looking to buy this place, they had some newspaper articles saying how great the area was, and there was a mention of maybe a new basketball arena in the area,” he says. “I thought, ‘Oh, that’s cool.’” It wasn’t until he spotted local community activist Patti Hagan putting up flyers warning “This Neighborhood Is Condemned” outside his front door that he realized his apartment was targeted for the wrecking ball.
That December, at a packed press conference at Brooklyn Borough Hall hosted by Markowitz (”Those tears of joy are swelling up in me,” burbled the borough president. “I just can’t wait!”), Ratner was joined by rapper Jay-Z (who’d joined his team as an investor) and celebrity architect Frank Gehry to introduce the project he’d dubbed “Atlantic Yards.” It was far more than an arena: Across five blocks of Brooklyn real estate, two of them currently occupied by buildings, Ratner proposed to build a series of high-rise apartment and office towers, all represented in Gehry’s models by a few blocks of balsa wood hastily glued together. (”Don’t worry about these funny shapes at this point,” the architect, whose credits included such modernist icons as the Guggenheim Bilbao and Seattle’s Experience Music Project, reassured the assembled crowd. “These are just blocks. We’ll make something out of it as we go.”) The tallest of the funny shapes, an office building dubbed “Miss Brooklyn,” would tower sixty stories over the low-rise brownstones that surrounded it, dwarfing even the nearby Williamsburgh Bank building, a clock-faced landmark that was the tallest building in the borough.
Concerned locals, including Goldstein, immediately began gearing up to fight what they saw as both a publicly sponsored land grab on behalf of a big developer and an incursion of Manhattan-style development into their low-rise neighborhood, and launched the group Develop Don’t
Destroy to oppose Ratner’s plan. As for the invited guests at Ratner’s coming-out party, as they exited Brooklyn Borough Hall clutching “BBall” tote bags and free samples of Junior’s cheesecake, only a very few had likely noticed that as Ratner presented his dream, he had carefully avoided mentioning who would pay for it.
In the Footprint
Bruce Ratner may have been small in stature—at one press event, he donned the fedora of former NBA great World B Free and almost disappeared into it—but he was a giant when it came to connections. A law school chum of New York governor George Pataki, Ratner had begun his career as New York City’s consumer affairs commissioner and had long been a major donor to local politicians of both parties. Perhaps because of this political clout, he soon came to specialize in construction projects that required public land, money, or both.
For MetroTech, which replaced several square blocks of Brooklyn’s old downtown with a collection of corporate towers segregated from the streetscape on their own self-enclosed campus, Ratner had received not only the use of city eminent-domain powers to evict existing residents but also an extra $300 million in city rent subsidies to lure Chase Manhattan and Bear Stearns to rent space in his office towers. Across the street from his planned Nets arena site, Ratner’s Atlantic Terminal tower—derided as “the Ugly Building” by locals peeved that its brick-and-glass bulk blocked views of the Williamsburgh Bank building—had somehow garnered $114 million in tax-exempt Liberty Bonds earmarked for rebuilding lower Manhattan. And in perhaps his most audacious project, Ratner used the state’s eminent-domain powers to obtain land at below-market prices for a new headquarters for the New York Times off Times Square—then requested an additional $400 million in federal Liberty Bonds when he couldn’t find sufficient tenants to fill it.
To hear Ratner tell it, though, his mission was less to produce profits than to remake the face of the city, and in particular Brooklyn. “I was never interested in traditional real estate—you know, luxury high-rises in Manhattan,” he told one reporter. “I mean, there are lots of ways to make money. I found my niche, creating buildings that keep jobs in this city.”
While “jobs” would be Ratner’s watchword, some Brooklynites wondered about his record in that area. Velmanette Montgomery, the state assembly member whose district included the proposed Atlantic Yards site, noted that in addition to getting the city to subsidize rents for MetroTech, Ratner had filled out one of his malls by renting out $1.6 million a year worth of office space to the state’s Department of Motor Vehicles and the Empire State Development Corporation—the latter the same agency that was to take the lead in building Atlantic Yards. “We are essentially bailing out this white elephant,” said Montgomery. Ratner’s own figures would show that the malls had created only a little more than half as many jobs as had been projected.
Nonetheless, Ratner continued to sell Atlantic Yards as a boon to city taxpayers. To pay for his planned Nets arena, Ratner first floated the notion of “incremental tax revenues,” implying a TIF- or PILOT-style plan on the model of the Jets deal. But he soon replaced this with a more nuanced argument: Any public money or tax breaks he required for the project would be more than repaid by the surge of resulting new tax revenues.
To that end, Ratner enlisted an unlikely ally, hiring Andrew Zimbalist, the renowned sports economist who had made a name for himself debunking the alleged benefits of publicly financed sports facilities, to conduct an economic-impact analysis of Atlantic Yards. Even before beginning his study, Zimbalist had declared that he considered the Nets plan an exception, in part because it would relocate a team across state lines—“if they came to Brooklyn, [players] would pay $5.5 million or 11 percent of their income to New York State and New York City,” he told Newsday. In his report for Ratner, Zimbalist estimated that by generating around $1.5 billion in new revenues and just under $700 million in new costs, “the fiscal impact of the Atlantic Yards project” would be “a significant plus for the New York City and New York State treasuries.”
Zimbalist’s figures, though, showed very different results for the basketball piece and for the rest of the development. The arena, he estimated, would bring in $257 million in new city and state revenues—largely from the Nets fans who he expected would travel to Brooklyn instead of New Jersey, bringing their spending money with them—but could cost the public even more, if one included the cost of such items as decking over the rail yards to create space for the arena. Ratner’s planned forty-five hundred new units of housing, meanwhile, accounted for nearly 60 percent of Zimbalist’s projected benefits, leading some to wonder why, if housing was the real cash cow for the public, the state wasn’t looking into finding a developer who would just build apartment buildings, which would require neither eminent domain (since, unlike an arena, housing could be fit atop the narrow rail yards site) nor special subsidies (though it would be eligible for the same “as-of-right” tax breaks that other developers—including Ratner—habitually received for building in New York’s outer boroughs).
Brooklyn activist Gustav Peebles and economist Jung Kim issued a rebuttal to Zimbalist’s report, charging, among other things, that it had overestimated the incomes of both tenants and workers in the project, underestimated the degree by which Brooklyn office space vacancies were largely filled by government agencies, low-balled the value of the Long Island Rail Road yards where the arena would be built, and failed to account for the cost of educating the estimated 931 public school students who would live in the complex. Their conclusion: Zimbalist’s $800 million profit for the city would turn into a loss of between $100 million and $500 million.
When the city Independent Budget Office was asked to investigate the costs and benefits of Ratner’s project, it largely supported Zimbalist’s findings that the arena itself would generate a “modest” fiscal benefit for the city—but threw up its hands on the larger project, thanks in part to the “methodological limitations in estimating the fiscal impacts of mixed-use developments.” Arenas attached to commercial skyscrapers and office towers, it seemed, were beyond the understanding of even trained economists.
If this wasn’t confusing enough, neither Ratner nor his government allies could explain exactly where the money for the project would come from. When the city’s economic development director was asked by city council members how the $2.5 billion project would be paid for, he replied, “We don’t know.” Council member Letitia James, whose district included the planned arena site, summed things up: “We don’t know how much subsidies are involved. We don’t know how much the MTA rail yards are being sold for. We don’t know how this project is going to be financed. We don’t know how much subsidies will be involved with respect to the affordable housing units, and how many units are actually going to be affordable, and for what income bracket. There’s a lot of unanswered questions.”
Ratner was pursuing the everything-but-the-kitchen-sink strategy to a T. Even local activists who were immersed in the minutiae of Atlantic Yards were hard-pressed to wrap their brains around how the financing was to work. “It took me six months of living with the people at Develop Don’t Destroy, basically, to not be intimidated to open my mouth about the project, because there was so much that I didn’t know,” recalls Candace Carponter, a lawyer who joined the group in early 2004. “And that works to Ratner’s advantage. It is so complicated on so many levels—the financing and the political support and how he accumulated this land and what really constitutes a public subsidy, and the whole issue surrounding whether or not you want a stadium in this neighborhood. All that stuff is so complicated that people just run the other way.”
Before anyone could begin untangling the finances, though, the Atlantic Yards debate would take on a different tone entirely.
Whose Community?
Even as the public debate raged, Ratner moved swiftly behind the scenes to dispel as much local opposition as possible, offering lucrative buyouts to homeowners in the path of the arena, so long as they agreed to a gag ord
er prohibiting them from speaking out against the project or giving money to groups that did. The board of Goldstein’s condo building, which was set to be demolished to make way for the arena, was told that as a condition of Ratner’s purchase of their apartments they would need to designate two homeowners to “testify in favor of the project at hearings” and to the press. Mailings promising “jobs, hoops, and housing” clogged mailboxes across the borough, while a new tabloid newspaper, the Brooklyn Standard, began appearing on the streets of adjacent neighborhoods, the headline boasting “BROOKLYN’S BOOMING: Atlantic Yards Will Bring Jobs, Housing and Hoops.” The newspaper’s publisher: Forest City Ratner.
As far as building public credibility was concerned, though, Ratner had his eye on a bigger prize. Word soon spread that Ratner was looking to implement a “community benefits agreement” that would guarantee specific benefits for the project’s neighbors in exchange for their endorsement.
CBAs, as they’re known, were a relatively recent addition to the lexicon of urban redevelopment. The original model, in fact, was named for a sports facility, though one that was already in place before its namesake agreement was struck. After the Staples Center in Los Angeles opened in 1999, its developers sought permission to build an adjacent development that would include housing, entertainment outlets, a forty-five-story hotel, and an expansion of the nearby convention center—with as much as $150 million of the cost being underwritten by the public. Thinking back to how the arena had landed in their midst with little community input, a coalition of labor and community groups, under the banner of the Figueroa Corridor Coalition for Economic Justice, negotiated a binding contract assuring that the developers would supply $1 million for parks and a recreation center, would offer seed loans to create affordable housing, would guarantee that at least 70 percent of the jobs created would pay a living wage, and would provide job training for local residents. “It’s a huge step forward,” said Madeline Janis-Aparicio, executive director of the Los Angeles Alliance for a New Economy, and one of the lead community negotiators. “Bringing all these groups together showed how housing relates to jobs relates to environment. These are holistic people with holistic needs, and to have a developer take that into account… is just amazing.”