2012 Contra-Bid Book The NYC2012 Legacy: $6 Billion New Taxes 10,000 more cars No Second Ave. Subway Expected Displacement Objecting to a Manhattan Stadium, partial list
U.S. Representative Jerrold Nadler State Senator Thomas Duane State Senator Eric Schneiderman State Senator Liz Krueger State Assemblymember Richard N. Gottfried State Assemblymember Scott Stringer State Assemblymember Debra Glick City Councilmember Christine Quinn City Councilmember Gale Brewer City Councilmember Bill Perkins Former Bronx Borough President Fernando Ferrer Former NYC City Comptroller Alan Hevesi Manhattan Community Board 4 Manhattan Community Board 2 Manhattan Community Board 3
Manhattan Neighborhood Council (153 community organizations) Clinton Special District Coalition West 15th Street Block Association West 16th Street Block Association West 45th Street Block Association West 46th Street Block Association West 51st Street Block Association Coalition of Chelsea Block Associations Hell’s Kitchen Neighborhood Association Manhattan Plaza Tenants Association (1,800 residents) Soho Alliance Transportation Alternatives B.L.O.C. 19 Association Coalition for a Livable West Side Committee for Environmentally Sound Development Housing Conservation Coordinators Chelsea Owners & Tenants for Neighborhood Preservation Metropolitan Council on Housing Ludlow Street Block Association (East Side) Chelsea Housing Coalition Trees Not Trucks East Side Tenants Coalition
Other elected officials, while not necessarily voicing specific opposition to a stadium, have questioned the wisdom of prioritizing the #7 subway extension over more deserving transportation capital projects (i.e., Second Avenue subway). Those include:
Assemblymember Sheldon Silver, Speaker of the New York State Assembly Betsy Gotbaum, NYC Public Advocate William C. Thompson, Comptroller, City of New York Gifford Miller, Speaker of the New York City Council C. Virginia Fields, Manhattan Borough President Carolyn Maloney, U.S. House of Representatives Alan J. Gerson, City Councilmember Senator Martin Connor, State Senate Minority Leader Assemblymember Pete Grannis Assemblymember Steven Sanders Eva Moskowitz, City Councilmember
The Clinton Special District Coalition 305 W. 45th Street #6-D, New York, NY 10036 • tel: (212) 581-9022 • fax: (212) 974-2976 http://hellskitchen.net • email: [email protected]
October 29, 2002
Dear USOC Member:
We write because we must; we have no alternative other than asking you to reject the application of New York City for the 2012 Olympic Games.
You and other members of the USOC will meet on November 2nd to decide whether New York or San Francisco gets the USA nod to enter into international competition of the 2012 Olympics. As you consider your decision, we are aware that many New York residents are now calling and faxing the USOC to oppose a Manhattan stadium. We can only hope the USOC will share those sentiments with its members.
You will soon see the fake parade filmed by NYC2012 two weeks ago (implying that pedestrians on their way to work somehow supported the Olympic bid) and you will hear an impassioned plea from NYC Mayor Michael Bloomberg. You will hear from NYC Deputy Mayor Daniel Doctoroff and NYC2012 President Jay Kriegel as they continue to misrepresent the cost and impact of the plan to bring the Olympics to NYC, and in the process build a stadium in Manhattan.
But as you consider which city to designate, we understand your concern to be with proposed sports venues, the perceived internationalization and diversity of the U.S. host city, and the viability of the plans.
We ask you to also consider the impact a 2012 Olympics would have on the affected communities, the legacy of displacement and other adverse impacts, and the lack of real public enthusiasm.
New York City has a long history of public activism, and this issue is no stranger to controversy. We suggest that NYC2012 would have had a better reception if their bid was based in an altruistic concern for the overall welfare of New York City and not based on real estate machinations.
NYC2012 would have been welcome if they had worked with affected communities rather than coming in and telling us what they were going to do whether we liked it or not. After all, how do you negotiate a smaller stadium?
NYC2012 might have been more welcome if it had made its plans, including financial reports and recent Executive Summary, open to the public. After much criticism, its Bid Book was 'deposited' in a few dusty reference rooms, but never released to the public until we scanned it in and put it on the internet. Reporters were begging for the secretive "Bear Stearns Report" detailing the alleged viability of the Tax Increment Financing (TIF) scheme. NYC2012 never released it, and again it was made available, only in the last few weeks, from a leak rather than any attempt by NYC2012 to fully reveal its plans.
This attitude is reflected in their dismissal of community concerns that those opposed to the stadium are “a small minority,” “obstructionist,” or “citizens against virtually everything.” We simply live here.
We can't give you a sleek 600 page full color Bid Book designed to extol good feelings and impressions of glory, but we can try to correct misstatements by NYC2012, omissions by the press and certainly a Bronx Cheer to any plan that includes a Manhattan Stadium.
New Yorkers are not aware of the scope and cost of the proposed NYC bid, partly because the media has failed to publish the details. A recent New York Newsday poll indicated 73.5% of respondents preferred San Francisco for the Olympics. Another independent poll by the Quinnipiac College Polling Institute
indicated that while New Yorkers were receptive to a region-wide Olympics, they opposed (71%) using taxpayer dollars for any stadium on Manhattan’s west side. The Quinnipiac College Polling Institute press release quoting Director Maurice Carroll stated, "'Let the games begin,' New Yorkers say. But don't build a stadium on the West Side of Manhattan. And whatever you do, don't use our tax dollars to pay for it."
We ask you to give serious consideration to our objections.
1. NYC2012 says the west side of Manhattan is a "Wasteland" even though only three tenths of one percent (0.3%) of the buildings are vacant. They claim the property values of the west side are less than those of Park Avenue -- even though the threat of a stadium for the last several years has itself stinted normal development. While the area is not Park Avenue, it is an active mixed-use community where many buildings have been transformed from industrial uses to back office uses for legal firms, printers, photographers, arts-related industries, showrooms, car dealerships, etc. To state or imply that the area is bombed-out, abandoned, poverty-striken or otherwise 'blighted' is a complete fabrication by NYC2012.
Indeed, a recent report by New York City Planning Department stated:
"... this [1997-2000] analysis indicated that the study area continued to grow as a services-based economy ... identified the trend of reusing large floor plate manufacturing buildings for new arts-related (studios, galleries) and computer businesses. For example, the Starrett-Lehigh building originally built for manufacturing uses was repositioned during the late 1990's into a high-technology commercial building." .. and .. "The services sector had the strongest growth within the study area reflecting the area’s transition to arts-related and commercial businesses. The printing industry is amongst the last of the industrial uses within this area and these businesses have been in decline, in part due to changes in the industry and due to the competition for space from other users."
The USOC should not buy into the notion that because property values on the west side are less than those of Midtown, or because they claim the area is economically unproductive, therefore the area needs to be redeveloped. Indeed, the area is in transformation and its uses are shifting, but there is a demand for a variety of uses.
Any city will have a mix of areas. Here, the west side should continue to be a mixed-use area home to companies that provide services to larger corporate customers in Midtown. A city still needs it support infrastructure.
Development is already occurring in the area, but (compared to the plan proposed by NYC2012) more rational and sustainable, and certainly it is happening in the context of the private marketplace without the encumbrance of a tax scheme that may actually hinder growth.
2. NYC2012 falsely claims only 152 people live in the affected areas -- although U.S. Census figures show the population in the affected area is much higher, much higher. See the enclosed listing of U.S. Census figures.
3. NYC2012 claims it can build a stadium (in conjunction with the New York Jets) and it won't impact traffic-burdened Manhattan -- although the New York Jets' own traffic studies predict another 10,000 cars for events at the stadium, even with a subway extension. When all the parking lots cited by the New York Jets get developed, where will cars park? Many of those lots serve events at the Javits Convention Center, at Madison Square Garden and the city in general.
4. NYC2012 claims it really isn't a stadium; it's merely an extension of the Javits Convention Center. They claim "everybody" agrees the size of the Javits Center must be doubled. That is everybody except
the management of the Javits Centers which has called for a much more moderate expansion that does not include a pseudo-stadium.
5. NYC2012 claims it will be all privately financed - even though their suppressed studies show they will seek tax dollars from the Federal Government that could kill or delay the long-needed and widely desired Second Avenue subway. It could force property owners and tenants throughout all of New York City to pay much higher taxes.
They won't tell you it will take over $5 billion that will be diverted for the stadium, covering of the westside railyards, and the #7 subway to nowhere. Nor will they admit that $5 billion diversion will leave a huge hole in future NYC budgets and that NYC home owners and tenants will have to pay more to make up for it.
6. NYC2012’s argument that it will “all happen anyway” is bogus. They must make this claim to convince the USOC that the transportation components (which would double the costs) are really not part of the scheme.
The reverse is true — developers need the Olympic bid as an excuse to push through the massive re- zoning and taxation plans. If they don’t get the Olympic bid, it will not “all happen anyway.”
The “it’s all happening anyway” excuse was used in 1998 when developers and City Planning tried to push a massive rezoning of Eighth Avenue using Development Rights (AKA ‘Air Rights’) in conjunction with landmarked Broadway theaters. The community litigated the issue and the final court decision reflected a substantial reduction in opportunities to transfer development rights – so much so that five years later, not a single square foot of development rights has been sold or transferred pursuant to the 1998 rezoning. The Broadway Initiative, the proposed receiver of the benefits of the air rights transfers, is now defunct as the Broadway theatrical unions came to their senses and realized they were supposed to bear the burden of most of the cost. They defected.
In essence, it did not “happen anyway.” In New York City, real estate issues can not be predicted with any sense of assurance. When NYC2012 tells the USOC that it’s all happening anyway, they a) either have a bridge to sell you, or b) they don’t remember Westway (the plan to sink the West Side Highway that never happened). New Yorkers will eventually come to their sense about all this; will the USOC want this to happen about 2007?
7. Moreover, if there is any sense of sympathy from USOC members for New York given the tragic events of September 11th, then this is not the way to do it. A new stadium/business district on the west side would pull businesses away from downtown Manhattan, at the time when downtown Manhattan needs to be supported the most.
8. One thing that NYC2012 will not tell you is that the west side neighborhoods of Chelsea and Clinton/Hell's Kitchen are worth saving. We are not rich or famous. We are immigrants, the working class, the place where young actors and musicians make their home in (what used to be) affordable walk- ups, so that they can audition, wait tables and hold other jobs while auditioning for Broadway and off- Broadway shows. Chelsea and Hell’s Kitchen are the places where generations of families made their homes.
NYC2012 would have you believe that because the demographics do not reflect the East Side of Manhattan, or because the support companies do not carry logos worth millions of dollars, we do not have a worth. They are wrong.
Impact on the City’s Priorities
Many transportation experts believe that the funding necessary to complete the #7 subway extension to the Javits Convention Center will delay or kill the proposed Second Avenue Subway. This has merit. While NYC2012 will claim the projects operate at different timelines and from different funding sources, these claims are suspect at best. Many believe that Tax Increment Financing will simply not work, and there’s no experience with TIF in New York, or on such a grand scale to support its viability. Moreover, NYC2012 has suggested obtaining financial support from the Federal Government – which would compete with needed financing for the Second Avenue Subway.
New York is teeming with suggestions for transportation priorities. Many are related to downtown in an effort to rebuild that area’s economy after September 11th, but others reflect the city’s overall needs. For example, the East Side Connector is a priority with many. Simply put, an extension of the #7 line, while convenient for the Javits Center/Stadium plan, is not in this city’s priority list.
Emphasis on a stadium and associated infrastructure would have other impacts. While NYC2012 was correct that New York annually has construction projects in the neighborhood of $13 billion, a closer look reveals that much of that is public capital projects that are expected to wind down within a few years. And while a substantial portion is devoted to commercial buildings, the vagaries of New York Real Estate marketplace are very unpredictable. Who can say, with any certainty, whether New York will be facing a Real Estate boom or decline when the stadium and its infrastructure would be just getting underway.
A recent report by the New York Building Congress has predicted (for NYC in general) backlogs, cost overruns, supplies/materials constraints and a workforce shortage. Would New York willingly put commercial and housing construction on hold for 3 years while a stadium was being built? Would projects related to the reconstruction of downtown in the area on and near the World Trade Center site be put on hold for a stadium? Does the MTA have the institutional memory or capacity to undertake two large-scale projects at once? If not, what would fall by the wayside. New Yorkers would not want that to be the Second Avenue Subway.
If a substantial portion of New York construction workforce was devoted to Olympic-related projects, would the overall costs go up? Would other cities, hopefully also seeing rational development, let its workforce go to New York and put their projects on hold? Are these the problems we are now seeing in Athens, so far in advance of its Olympics; perhaps that is why the IOC is calling for less expensive and more sustainable Olympics.
TIF’n Poof
Little has been said about Tax Increment Financing (TIF) which is the underpinning of NYC2012’s financial plan. The press has mostly ignored it. (one reporter said his editors thought the public would not understand it). Well it’s really simple: it is public financing designed to look like private financing and it is a diversion of the city’s tax dollars for private use – precisely what the Quinnipiac Poll said New Yorkers did not want. That they may segment the financing away from a stadium and towards a subway is unconvincing; it’s all the same project.
Luckily the New York City Independent Budget Office has issued a report (enclosed) that is highly suspect as to the viability of TIF financing being proposed. Would the expected development produce the revenue needed to pay for the various parts of the project? Probably not if the needed taxes were added to the rents paid by tenants, forcing the rents to be much higher from competition elsewhere.
Where? There’s 14 million square feet of empty office space downtown (independent of the space lost from the World Trade Center). New Jersey has about 5 million empty square feet. Brooklyn and Long Island City have areas clamoring for development. In all these areas development could occur at a much
faster rate and the resulting rents would be much lower than developments on Manhattan’s Far West Side that were required to pay revenue for the infrastructure with TIF financing. Would developers build on Eleventh Avenue knowing their rents would be unrealistic? Would they require tax abatements as incentives to build or tenant incentive programs? Would tax appeals reduce the tax burden? Many large land owners on the west side are public institutions (MTA, Port Authority, etc.) and tax-exempt.
Viability of TIF
Even if TIF would work (and many think it won't), it diverts real estate taxes from the aggregate pool of the city's overall tax base, meaning building owners and tenants throughout the city will have to pay a higher disproportionate share for the same city services. If the west side develops into a new Central Business District as envisioned by NYC2012, then the additional city services required by such a large chunk of Manhattan (police, schools, sewers, etc.) would require a substantial increase in operating and capital spending. But revenue for those costs would be unavailable, instead being stuck paying off the new infrastructure for the next 40 years. In essence, the TIF freezes out the City from any new tax revenue, so when the cost of municipal services increase (as they always do), or when municipal services increase in scope, then the city must reach into existing revenue streams. Either existing property taxes will increase to cover this, or the services will be reduced.
We have enclosed the report on TIFs by the New York City Independent Budget Office (NYC-IBO). We ask you to read it carefully (it isn’t too long and not too technical). It does raise meritorious questions as to the viability of using TIF in this instance. Most TIF's are small scale and pale in comparison the NYC's plan. And they were predictable, not speculative.
NYC2012 has no plan to stop the type of displacement that occurred in the 1996 Atlanta Olympics -- where 15,000 people were evicted. Especially in NYC, immigrants have a higher risk of displacement. Yet NYC2012 claims it's all about New York being diverse and the world's second home, but they dismiss the people of NYC as a "small minority" - those who make New York our first home.
NYC2012 will claim all this has been fully explained in the press, but they won't tell you how stories critical to their plan have been pulled in several major daily papers, nor that the major dailies have financial connections with NYC2012, or the implied threat of withholding broadcast rights.
Don’t get us wrong. We are not anti-Olympics. But other than a few tourists, what we hear on the streets of New York is “why do we need this?” The press has been careful to relegate these question (and our opposition) to status of non-existence. New York 1 News (a cable channel operated by AOL/Time Warner, a sponsor of NYC2012) has refused to cover community opposition, even after we complained. They’ve given substantial time to Dan Doctoroff and Jay Kriegel. But they haven’t bothered to ask the community’s opinion. You have not seen a spontaneous outpouring of enthusiasm for NYC2012.
While the USOC may make it’s decision on November 2nd, this is not the end as New Yorkers are now becoming wise to what is planned, what is at stake, and what could be lost. We can’t imagine why the USOC would want this New York Nightmare. Come run in our Marathon. Play in the U.S. Open, but please don’t force a stadium in the midst of our neighborhoods.
Yours truly,
John Fisher President, Clinton Special District Coalition While NYC2012 claims only 152 residents would be displaced or impacted by the construction of a west side stadium, it is simply false and a misrepresentation.
The Inner Ring described below includes Census Tract Block Groups closer to the proposed stadium site than those blocks in the outer ring. But both rings will be equally impacted by many issues, most importantly by displacement pressures and tax obligations. The proposed Tax Increment Financing (TIF) district includes ALL of this area. If you reduce the TIF district to include only those areas cited by NYC2012, then the tax scheme is not even near viable. Conversely, an expanded TIF area impacts a much larger population. NYC2012 can’t claim only the areas currently occupied by the Hudson Rail Yards and the Javits Center will be impacted, but at the same time propose a much larger building and taxing area.
Population DIRECTLY impacted by a Manhattan Stadium* Source: United States Census 2000 New York County, Total Population Inner Outer Ring Ring
Census Tract 99
Block Group 1 10th-12th, 38th/39th-26th Streets 366 Block Group 2 10th-12th, 26th-14th Streets 789
Census Tract 117
Block Group 1 10th-11th, 42nd-38th Streets 340 Block Group 2 11th-12th, 42nd-39th Streets 0**
Census Tract 115
Block Group 1 8th-9th, 42nd-38th Streets 553 Block Group 2 9th-10th, 42nd-38th Streets 914
Census Tract 111
Block Group 1 8th-9th, 38th-34th Streets 1247 Block Group 2 9th-10th, 36th-34th Streets 1294 Block Group 3 9th-10th, 38th-36th Streets 507
Census Tract 103
Block Group 1 8th-9th, 34th-30th Streets 951 Block Group 2 9th-10th, 34th-30th Streets 512
Census Tract 97
Block Group 1 8th-9th, 30th-26th Streets 3592 Block Group 2 9th-10th, 30th-26th Streets 1260
Census Tract 93
Block Group 1 8th-9th, 26th-24th Streets 1693 Block Group 2 8th-9th, 24th-22nd Streets 1409 Block Group 3 9th-10th, 24th-22nd Streets 2970 Block Group 4 9th-10th, 26th-24th Streets 2642
______
5193 15826
Total Population in likely stadium/Tax District: 21019
* these figures do not include areas north of 42 St., which are also expected to be impacted by increased traffic and displacement pressures
** 1800 residential units have recently been constructed in this location.
Second Ave. Subway Should Be 1st Priority By GENE RUSSIANOFF Daily News, February 8, 2002
For subway riders, it's been great watching our new mayor take the No. 6 train to City Hall. Even better, he's encouraging others to use mass transit, cutting the number of official parking permits and holding fast on car-pool rules. Which makes it all the more disappointing that Mayor Bloomberg may put his clout behind the wrong transit priority.
Last week, he said that extending the No. 7 line to Manhattan's far West Side was "the most important transit project for New York City." But New York's top transit priority has to be achieving the long- delayed promise of a Second Ave. subway, running from East Harlem to the Financial District.
A Second Ave. subway shouldn't play second banana to a far less crucial project. It is essential to reviving lower Manhattan and relieving the misery of Bloomberg's fellow Lexington Ave. line riders — an amazing 1.3 million a day.
The Metropolitan Transportation Authority has set aside $1 billion for the design of a full-length Second Ave. line. Construction is to start by the end of 2004; costs could run $8 billion to $10 billion, and work could take until 2015 for an 8-mile, 16-stop line.
In contrast, the MTA is spending just $75 million for the initial evaluation of three projects, including a West Side extension of the No. 7 line. Nothing is firm, but supporters hope for completion by 2012, at a cost of $1.3 billion to $3 billion or more for about a 1-mile, two-stop extension.
Generations of riders have dreaded a rush-hour commute to downtown on the packed Lexington Ave. line, especially suburbanites arriving by commuter rail in midtown. So generations of businesses have counted this a major strike against lower Manhattan. Without better transit access, lower Manhattan simply can't compete effectively.
This consensus is even stronger in the wake of Sept. 11. A Second Ave. line would complement proposals to connect a rebuilt PATH train from New Jersey and downtown subways. Slow progress on a Second Ave. subway would be widely seen as a vote of no confidence in lower Manhattan. City and state leaders twice reneged on the line in the last century. If they put the project on hold again, many would think: three strikes and you're out.
Without a Second Ave. subway, things will get worse. The MTA is well along on another project that will draw thousands more daily riders to the Lexington line by connecting the Long Island Rail Road from Jamaica to Grand Central Terminal by 2011. And extending the No. 7 line wouldn't add capacity, just riders.A No. 7 line extension also would compete with a Second Ave. line for scarce public funds.
The MTA's $17.1 billion, five-year program relies heavily on federal funding and bonds backed by the agency's operating budget. The city directly contributes only $500 million to that plan.
Backers of a No. 7 line extension argue that its cost could be met by capturing the increase in property values on the far West Side in mid-Manhattan. But tax-increment financing has never built a subway line in city history. The financing scheme for the No. 7 extension requires massive development on the far West Side and faces legitimate community concerns, while a Second Ave. line enjoys broad support.
The Second Avenue subway is the most famous thing that's never been built in New York. For the first time in decades, there's serious momentum behind the project. It would be a tragedy if a short and fickle attention span put it on the back burner.
Rusianoff is senior attorney for the New York Public Interest Research Group's Straphangers Campaign
An Olympic Hopeful Walks Away, Limping The New York Observer, October 16, 2000 by Art Samuels
Alex Garvin did his best to help the people of the West Side share his Olympic dream, When the director of planning for NYC 2012, the group hoping to bring the Olympics to New York City, made a presentation at the Board 4 meeting on Oct. 4, he pulled out all the stops. He described why hosting the Olympics might not be the logistical nightmare New Yorkers imagine. He showed drawings of sports facilities metamorphosing after the games were over into public parks for art festivals. He even displayed slides of his recent trip to Sydney, waxing poetic about the spirit of the games and translating the Australian vernacular for his audience. ("Football," he explained, "means soccer to us.")
But if Mr. Garvin thought the West Siders would share his soft-focus vision of New York to come, he was sorely mistaken. The residents of Chelsea, Hell’s Kitchen and the rest of Board 4’s jurisdiction came ready to tackle his plan ("tackle," as in football -- the American kind). Mr. Garvin was in for a rough night.
After a brief description of the Sydney facilities and an overview of New York’s Olympic proposal, Mr. Garvin broached the matter that was of most concern to the 70 or so people in attendance: the rail yards and the Jacob K. Javits Convention Center by the Hudson River. That area is central to the Olympic Dream, Mr Garvin explained, but it cannot be "developed" until it becomes more easily accessible,
"People have to be able to get here," he said, "whether it’s to be able to go to the Javits Center, a potential stadium or anything else. Until that transit exists, this area will be very difficult to develop for any [purpose]. If you wanted to live here--"
"We DO live here!" interrupted the crowd. Oops.
Mr. Garvin envisions a major overhaul of the area, especially where public transportation is concerned. He would extend the No. 7 train to Penn Station and then to a new station at the Javits Center. He would electrify an existing Amtrak line, coming from the north, that would terminate at the 11th Avenue terminal. And the Long Island Rail Road tracks would be extended to stop at the Javits Center. The new terminal and all the feeding tracks would be underground.
On top of them would he an Olympic Square of 8 1/2 acres at 34th Street. The square would have two covered walkways that form a T, creating space for art exhibitions and other public events. There would be a skyscraper on the corner of 11th Avenue and 30th Street that would act as a media center during the Olympics and be turned into office space afterwards. And then, of course, there would be the oft-derided stadium.
The stadium, Mr. Garvin proclaimed (despite a few heckles), would sit on a platform on the West Side between 30th and 34th streets. On the waterfront side would be an esplanade or a colonnade, providing access to the soon-to-open Hudson River Park. This would create more public open space, access to the river and a connection for a proposed ferry transportation system to run along the Hudson.
The residents were pretty keen on that idea. Esplanades, colonnades and open spaces sounded good to them. The problem is, it might sound good to everyone else, too. In what residents already consider an overcrowded area, an 80,000-seat venue might be the straw that broke the camel's back, they said.
Board Member Bruce Levine, who lives on 43rd Street, told The Observer, "The open spaces and parks are wonderful, but what’s going to be surrounding those open spaces is going to make them as crowded as the rest of the area" Pedestrian traffic has gone from being a mere nuisance to being a real danger, he said. Because of over- crowded sidewalks, "I have to walk on the street, risking my life, dodging charter buses, limos and cabs. "It’s impossible to even fathom that they could put this much traffic into an area that’s already overwhelmed."
Mr Garvin was clearly upset by the board’s harsh reaction. He had come to garner the boards support, but instead it- voted to draft a letter to NYC 2012 president Daniel Doctoroff opposing the plan. Still Mr. Garvin was deflated, not defeated. He steadfastly refused to let fears of overcrowding deter his Olympic dream, maintaining that "the area isn’t overwhelmed."
But at 7:30 p.m., no closer to enlisting new Olympic dreamers than when he had arrived, he left the meeting. His proselytizing would have to wait for another day. He had tickets to the opera.
New York City Independent Budget Office Fiscal Brief IBO September 2002 Learning from Experience: A Primer on Tax Increment Financing
SUMMARY
To fund the estimated $1.5 billion extension of the No. 7 subway and perhaps other redevelopment proposals on Manhattan’s Far West Side, there has been increasing discussion of using a borrowing method known as tax increment financing, or TIF. The basic idea underlying TIF is that a city or town finances an improvement in a specific district with the property tax revenue generated by that improvement. While TIF has been used extensively throughout the country in cities such as Chicago, Los Angeles, and Washington, D.C., it has never been used here.
This report provides a primer on TIF––what it is, key features of the laws that authorize it, the types of projects undertaken, some of the reasons for its popularity, and a review of how it has worked in some other localities. Among the lessons from our review:
• While TIF has proven to be an effective and flexible financing method in a variety of settings, some municipalities have encountered problems with their projects, including insufficient revenue to pay debt service.
• TIF has been used to finance a variety of public works projects, but most have been small-scale. Larger projects usually have been joint ventures, mostly with private partners. No TIF project has been as costly as the proposed No. 7 extension.
The report concludes with a discussion of issues that will have to be considered before relying on TIF for financing the proposed subway extension. These considerations will be more closely examined in a subsequent IBO report that will look at the viability of tax increment financing for extending the No. 7.
New York City Independent Budget Office Ronnie Lowenstein, Director 110 William St., 14th floor New York, NY 10038 Tel. (212) 442-0632 Fax (212) 442-0350 e-mail: [email protected] http://www.ibo.nyc.ny.us Page One NEW YORK CITY INDEPENDENT BUDGET OFFICE 1 INTRODUCTION STATE AUTHORIZATION
Extension of the No. 7 subway line west and south from Although TIF differs from traditional methods of financing Times Square is seen as critical to the success of several of the public investments, it is still a form of public debt and as such major proposals for development of Manhattan’s Far West must be authorized by state legislation. The first state law to Side as an extension of midtown.1 These include proposals authorize tax increment financing was passed by California in from the Department of City Planning, the NYC2012 1952, although most states were slow to follow.4 By 1970, just Olympic Committee, and the Group of 35, chaired by six more states had enacted laws authorizing TIF––Minnesota, Senator Charles E. Schumer and former Treasury Secretary Nevada, Ohio, Oregon, Washington, and Wyoming. Robert E. Rubin. To pay for the estimated $1.5 billion subway extension—and possibly other capital improvements By 1997, however, 48 states had enacted TIF laws, and the in their plans—each of these groups propose using tax District of Columbia joined the list in 1998. New York’s increment financing (TIF), a method of financing projects TIF law (General Municipal Law Section 970-a et.seq.) was never used before in New York City.2 This report provides a passed in 1984. As of today, North Carolina and Delaware primer on TIF––what it is, key features of the laws that are the only states that have not authorized the use of tax authorize it, how it has been used in other places, and some of increment financing––although the Delaware House of the reasons for its popularity. Representatives recently passed TIF legislation.
HOW TIF WORKS The widespread adoption of TIF laws since 1970 reflects a combination of several factors. While the continued decline of In theory, tax increment financing works as follows: urban areas—particularly of central cities—created a growing need for redevelopment in the 1970s and 1980s, federal • a geographic area is designated (the TIF district) assistance for urban renewal projects fell, and voter opposition to new taxes rose. Tax increment financing represented a • a plan for specific improvements in the TIF district is politically viable tool for local government officials to publicly developed finance infrastructure and other economic development initiatives without drawing on existing revenues or proposing • bonds are issued and the proceeds are used to pay for the new taxes. planned improvements; Characteristics of TIF laws. Like TIF laws in most states, New • the improvements encourage private development and York’s law provides TIF as a tool to eliminate “blight,” subject thus raise property values above where they would have to the constraint that a municipality can only engage in been without the improvement redevelopment which “…cannot be accomplished by private enterprise alone…” (General Municipal Law Section 970-b • with higher values, property tax revenues rise, and Legislative findings and declaration). The law stops short of saying how this private enterprise condition should be • property tax revenue from increased assessments over and satisfied, however, and gives the municipality significant above the level before the TIF project began (the tax discretion in defining blight.5 Relatively few state laws provide increment) is used to service the debt. quantitative criteria to be applied in identifying blight. Some state laws explicitly allow the use of TIF for economic In some states, private developers can also arrange their development without a finding of blight. own financing, and the municipality uses the tax increment to reimburse the developers as the tax revenues are received. Under New York State’s law, a municipality has the power to issue TIF bonds.6 In contrast to general obligation bonds, In the case of the Far West Side, the various plans indicate TIF bonds are not secured by the “faith and credit” of that the TIF district could include much of the area either the city or the state, and the TIF debt does not count between 28th and 42nd Streets between 9th and 12th Avenues. against the municipality’s constitutional debt limit. Like The key improvement to be financed would be the general obligation debt, however, interest on TIF debt may extension of the No. 7 line west from Times Square.3 be tax exempt if it satisfies certain criteria set out in the federal Tax Reform Act of 1986.
2 NEW YORK CITY INDEPENDENT BUDGET OFFICE Although some states allow municipalities to use sales or • Chicago helped finance the expansion of the University personal property tax revenue to finance TIF debt, the law of Illinois at Chicago ($50 million in 2000), renovation in New York and most other states allow only real property of several theaters ($18 million for the Cadillac Theater, taxes to be used. Specifically, the New York law requires for example), and streetscaping of Michigan Avenue in that property taxes for the TIF district be divided as the Central Loop ($15 million in the late 1990s). follows: the municipality receives an amount equal to the Chicago is currently financing the construction of two current property tax rate applied to the last assessed schools (about $50 million per school). property value for the TIF district before the TIF district was formed; once the municipality has been paid, the • Fremont, California is contributing to the upgrade of remaining revenue can be used to pay the service on the four major interstate interchanges ($50 million for TIF debt; if there is any excess revenue, it must be returned construction in 1999 through 2005) and is planning to to the municipality. finance the construction of a Bay Area Rapid Transit (BART) station ($75 million). New York State’s current TIF law has no provision for sharing the tax increment with other taxing entities–– • Indianapolis helped finance the construction of the although in the case of New York City, which is a single tax Circle Centre mall downtown ($187 million in 1995) entity that provides all services typically provided by a and the United Airlines Maintenance Center municipality, school district, and county combined, such a ($244 million in 1991). provision would be irrelevant if it did exist. In some states in which entities other than the municipality have claims • Los Angeles helped finance the renovation of the Los on local property taxes (school districts and counties, in Angeles Central Library ($135 million in the early 1990s) particular), state laws require that these other entities get a and expansion of the Los Angeles Convention Center share of the tax increment. For example, California requires ($126 million in 1986-1987). that a TIF district allocate a fixed percentage of the tax increment to the other tax entities, and the required • Minneapolis helped finance 900 Nicollet Mall, a percentage rises with the age of a project. Such provisions downtown Target store and office complex ($62 million allow the other tax entities to benefit from growth within in 2001), and City Center, a downtown retail and hotel the TIF district. complex ($50 million in the mid-1980s). It also used TIF to acquire the Target Center, home of the Timberwolves Other rules for TIF projects are relatively flexible under basketball team ($72 million in 1994). New York State’s law. Industrial, commercial, and residential development can all be included in a • San Jose financed the San Jose Arena ($140 million in redevelopment plan for a TIF district.7 Unlike some states, 1993) and a convention center ($163 million in 1986), which impose size (acreage) or time limits on specific TIF and it is currently financing its share of the total cost of a projects, New York imposes neither. Joint City/University Library with San Jose State University ($73.4 million). TYPICAL TIF-FUNDED PROJECTS • Washington, D.C. used TIF to help finance the TIF has been used to finance a wide array of projects, International Spy Museum ($6.9 million in 2001), the including public infrastructure, private development, and Mandarin Oriental Hotel Project ($46 million this year), brownfield cleanup. Public works projects are typically and the Gallery Place Project, a downtown retail and small-scale. Examples include land acquisition, installation entertainment complex ($73.6 million this year). of streetlights and water and sewer lines, roadway expansions, and construction of public parking garages. THE DRAW AND DRAWBACKS OF TIF
Large-scale projects have usually been joint ventures, most For local policymakers, TIF has many attractive features. often with private partners. In joint ventures, the TIF But it also has potential drawbacks that need consideration. financing is used only to finance the public contribution to the project. Examples of relatively large TIF-funded The TIF draw. There are several features that draw projects include the following:8 policymakers to using TIF financing. As noted previously,
NEW YORK CITY INDEPENDENT BUDGET OFFICE 3 TIF debt typically does not count against a municipality’s finance last year, the education portion of local property tax debt limit, nor is the municipality or state responsible for increments that previously had gone to TIF projects was repayment from sources other than the tax increment for redirected to the state. TIF districts suddenly lost about 37 the TIF district. Perhaps equally as important, the local percent of the total increment they had received before the government essentially has full control once the state TIF change in policy. law is in place. Plans are generally not subject to state approval.9 Property tax abatements or exemptions, which are often used as incentives for developers, can also reduce tax Another factor explaining TIF’s popularity is voter revenues below projections if not anticipated correctly. A opposition to tax increases. Because property tax revenue study of Michigan TIF districts found that taxable property from pre-TIF assessments flow from the TIF district to the values in some districts actually declined from their base municipality as before, it is possible to portray any values, despite positive growth in commercial property additional property taxes paid by property owners in the values. The reason was the concurrent granting of property TIF district as payment for benefits received from TIF tax abatements for properties in the districts.12 improvements. Some project costs or changes in property values also are Potential drawbacks. While TIF has proven to be an very difficult or impossible to anticipate. For example, the effective and flexible financing method in a variety of town of Greenburgh, New York accumulated legal bills and settings, some municipalities have encountered problems settlement costs when it was sued over the price it paid for a with their TIF projects. property in its TIF district. The city of East Grand Forks, Minnesota saw a drop in taxable property value in one of Sufficient revenue. Actual TIF revenues may fall short of its TIF districts when a grain elevator burned down.13 the projections made when the TIF bonds were sold. Unlike a municipality with a variety of revenue sources to To reduce the risk of default, a municipality may designate draw upon for debt service obligations, a TIF district a relatively large TIF district. Indianapolis did this when it generally has only one source: incremental property taxes. A used TIF to finance its downtown Circle Centre mall. shortfall risks default or a bailout using other municipal Alternatively, a back-up revenue source can be built into the revenues, undermining the reason for using TIF in the first plan. St. Petersburg has used franchise taxes and parking place. revenue as its secondary revenue source, while East Grand Forks used lease payments and general revenue to fill its A revenue shortfall can occur for a variety of reasons. The gap. Of course, both of these policies redirect resources projected level of development might not be reached––or from other uses and stand at odds with the conceptual might be reached with significant delay. Assessed property underpinnings of TIF. values for a TIF district might also decline, at least temporarily. The city of St. Petersburg, Florida ran into The Redevelopment Agency of the City of San Jose, difficulties in its TIF districts because of recession, public California uses a third strategy to reduce the risk of acquisition of private property, and acquisition of private default—joint financing of TIF districts. Bonds are issued property by tax-exempt entities within the district, for all projects funded by the agency and tax increments removing them from the TIF tax base as well.10 In their from all TIF districts are used to service the debt. Their Bayboro Harbor TIF district (established in 1988), for 2003-2007 Capital Improvement Plan includes 157 capital example, the actual 1998 taxable property value for the projects and programs in TIF districts all over the city with district was $20.7 million––about 60 percent less than the a total cost of $882 million.14 projection made at the start of project, and about 25 percent less than its pre-TIF value of $28.1 million. Yet another strategy to reduce risk is a loan guarantee from a private developer. Hoffman Estates, a suburb of Chicago, Tax increments may also drop or grow more slowly than required such a guarantee when it entered a TIF deal with expected due to policy decisions. California’s Proposition Sears for relocation of its headquarters and development of 13 probably represents the most familiar example of an a new office park in Hoffman Estates. When tax increments unexpected change in the property tax code.11 More have fallen short of required payments, Sears has paid the recently, when the state of Minnesota took over education difference.15
4 NEW YORK CITY INDEPENDENT BUDGET OFFICE In the event that tax increments do fall far short of spillovers are concerns about benefit spillovers. If a TIF projections, the initial debt might be refinanced or improvement has regional benefits, many who benefit restructured. St. Petersburg has taken both measures in significantly from the improvement may make no recent years, in addition to lining up secondary revenue contribution to cover the cost. For example, the taxpayers sources. of Indianapolis are financing a mall and two sports arenas with TIF, while benefits are enjoyed by all in central Cost spillovers. Another potential problem with TIF is Indiana. spillover of costs to taxpayers outside the TIF district. Municipal service requirements––such as police, fire, Fragmentation of the tax base. Some observers say that the sanitation, education, and transportation––will almost use of TIF may ultimately lead to fragmentation of the tax certainly rise as development occurs within a TIF district. base, under which thriving neighborhoods would retain all In turn, the regular property taxes paid to a municipality by growth in their property tax collections for their own property owners within the TIF district—which are based development, rather than contributing part of this growth on pre-TIF assessments—could well fall short of the cost of to citywide investments and assistance for less prosperous services provided for the TIF district. When this happens, neighborhoods. Concern about fragmentation has been taxpayers outside the TIF district are faced with the tab. expressed in Chicago, which now has over 100 TIF districts The larger the TIF district, the larger this impact will be on within its boundaries. the surrounding area. Distribution of development. Another potential problem is One source of revenue to cover these additional costs could not specific to TIF but instead pertains to all geographically be the additional sales and income tax revenue generated by targeted economic development programs. It is possible the new development in the TIF district. Whether these that TIF projects may simply shift development around the additional revenues are sufficient will depend on the city, rather than attracting new business to New York City intensity of the development induced by the TIF-financed from elsewhere in the region and beyond. improvements and whether other sales and income tax incentives are also available within the TIF district. This appears to be happening in Columbus, Ohio, where the city has sold more than $30 million in TIF bonds to Some critics of TIF have questioned whether the amount of finance infrastructure improvements for the new Arena tax revenue generated by TIF improvements actually equals District, a large office and retail development project that is the tax increment revenue allocated to pay for the centered on the new home of the Columbus Blue Jackets improvements. Using data for a sample of 38 TIF districts hockey team. Just a few miles downtown, office vacancy in California and 38 matched areas with similar rates are above 20 percent and the City Center mall (which characteristics, the most comprehensive analysis of this was built in the 1980s with city assistance) sits half question found only four TIF districts where property empty.17 Similar criticism has been voiced in Dallas about values outgrew their matches by enough to justify the tax the proposed Victory office-retail complex between the increment received by the TIF districts.16 A total of eight city’s new hockey arena and downtown.18 Opponents argue projects generated at least 80 percent of the revenue they that downtown Dallas retailers will be hurt, and they point received. Not surprising, the TIF districts with the most to other city priorities, including more than $1 billion in vacant land before the projects began showed the greatest needed roadway repairs elsewhere in the city. tax increment growth. Overall, the study found that the 38 TIF districts collectively generated about half the tax In a worst-case scenario, TIF could shift development from revenue they received. This suggests that, on average, the more to less productive locations. If this happens, tax TIF districts could have generated additional revenue equal revenue––property, sales, income, and others––could to half the revenue generated with the TIF improvements actually be reduced from its potential maximum. A study of even if the improvements had not been made, and that this municipalities surrounding Chicago found evidence revenue would have been available to pay for some portion consistent with this hypothesis.19 Their results suggest that of the additional services required by the TIF districts or total assessed property values in cities that used TIF grew other capital improvements. more slowly than in cities that did not, after controlling for area characteristics. Benefit spillovers. In direct contrast to concerns about cost
NEW YORK CITY INDEPENDENT BUDGET OFFICE 5 Potentially expensive debt. Also of concern may be the corporation to oversee the TIF district, for example, and relative cost of TIF debt. Because TIF debt is not backed by the city might want to take this approach for many the “faith and credit” of the city or state, investors could reasons.20 view it as more risky than general obligation debt and demand a higher interest rate. To reduce the potential risk Limits on lessons learned. Lessons learned from other TIF of default to investors, policymakers might designate a users may take New York City only so far. Most important, relatively large TIF district or build in a back-up revenue the estimated $1.5 billion cost for the proposed subway source, but these tactics have opportunity costs, as noted extension dwarfs the project costs financed with TIF to above. date. TIF has been used in two locations in New York State, the town of Victor in Ontario County and the town of An additional issue that arises with large-scale TIF-financed Greenburgh in Westchester County. In both cases, the projects is required payment of debt service before commitment of the town was relatively small. Greenburgh significant revenue gains are realized. For large projects in a used approximately $1.2 million to make road city’s general capital plan, funds may be drawn from improvements (including the legal costs noted above). alternative sources. But in the absence of such other Victor provided approximately $8 million in financing for funding sources, the first several years of debt service must the renovation and expansion of a mall. also be borrowed, adding to the total project cost. Some projects outside New York State have been larger. But CONSIDERING TIF FOR EXTENDING THE NO. 7 LINE the most costly TIF project IBO identified was the construction of the United Airlines Maintenance Center in Determining whether tax increment financing is the best Indianapolis in the early 1990s. Although the total cost of financing method––or even a viable one––for the proposed the project exceeded $1 billion, the cost was shared by the extension of the No. 7 subway line goes beyond the city, state, and United Airlines. Indianapolis financed about objective of this report. But the information provided $244 million with TIF. Measures that have allowed other above points to some of the major issues that must be cities to use TIF successfully may not work on a project as addressed when evaluating the subway TIF proposals. large as the subway expansion.
Property tax revenues for the TIF district must be projected A second limitation of existing evidence on TIF is its lack cautiously––allowing for potential fluctuations in the real of information about how private development responds to estate market and local economy, construction delays (for major infrastructure projects, as would be required in the the subway and other projects), and other factors that have Far West Side proposals. The large TIF-financed created financial difficulties elsewhere. infrastructure projects that IBO identified were generally parts of larger plans with private developers lined up in Economic development policies for the TIF district need to advance. Because the scale and timing of the private be coordinated with development policies for the rest of the development response to the No. 7 subway extension would city. How will development of the Far West Side impact be pivotal to success of the proposed TIF financing, the development elsewhere in the city, and vice-versa? In development responses to other major infrastructure particular, how will development of Lower Manhattan projects––including the New York City subway––should be interact with development of the Far West Side of midtown examined carefully as part of the evaluation of TIF. if the two projects occur at roughly the same time? Written by Theresa J. Devine The city should also consider the cost of additional municipal services that the TIF district will require as the Far West Side develops. The final plan should estimate these costs and identify how they will be covered.
The Department of City Planning has suggested the need for changes in New York’s existing law, but has not yet indicated what changes would be required. As it stands, the law does not authorize the city to establish a public benefit
6 NEW YORK CITY INDEPENDENT BUDGET OFFICE END NOTES 9 In New York, the municipality must file an annual report with the state Comptroller’s office, but state approval is not required for project plans 1 The geographic definition of the West Side targeted for development or bond issues. Similar rules apply in California and elsewhere. varies somewhat. The Department of City Planning defines it as the 59- 10 See 1998 Annual Report: Downtown St. Petersburg, City of St. block area defined by West 24th and West 28th Streets on the south, West Petersburg Community Redevelopment Agency. 42nd Street on the north, Seventh and Eighth Avenues on the east, and 11 Under Proposition 13, the property tax rate is 1 percent of market the Hudson River on the west. See New York City Department of City value, with market value defined as the last sale price plus a maximum of Planning, Far West Midtown: A Framework for Development, NYC DCP 2 percent per year or the rate of inflation, whichever is lower. Revenue #01-21, page 3. projections on pre-existing TIF projects did not anticipate this change in 2 The Manhattan Borough President’s proposal also includes extension of 1978. It should be noted, however, that Proposition 13 also had the the Number 7 as one of several transportation options for development effect of increasing the use of tax increment financing in California, of the Far West Side and TIF as one of a few financing options. because Proposition 13 effectively prevented local governments from 3 The exact route for the Number 7 extension is also unsettled. One using General Obligation debt. The number of TIF projects jumped route under consideration is west from Times Square to 8th Avenue, from 297 in 1976-80 to 489 in 1981-85. (See Community Redevelopment south along 8th Avenue to 34th Street or 33rd Street, and then west again Agencies Annual Report: Fiscal Year 2000-01, California State Controller, to a new transportation hub near 11th Avenue. See New York City Figure 19) A law passed in 1986 allowed tax increases above Proposition Department of City Planning, Far West Midtown: A Framework for 13 levels to finance general obligation debt, but only with a two-thirds Development, NYC DCP #01-21, page 50. vote at the local level. TIF remains much easier to implement. 4 For a discussion of TIF laws in place as of 1997, see Craig L. Johnson 12 John Anderson, “The Landscape of TIF: Who Uses It?” presentation at and Kenneth A. Kriz, “A Review of Tax Increment Financing Laws,” in conference on TIF, Institute of Government and Public Affairs, Craig L. Johnson and Joyce Y. Man, Tax Increment Financing, State University of Illinois, June 2001. University of New York Press, 2001. For an earlier survey, see Jack R. 13 Office of the Legislative Auditor, State of Minnesota, Tax Increment Huddleston, “A Comparison of State Tax Increment Financing Laws,” Financing––Supplementary Report, Report Number 96-06, March 1996. State Government, Volume 55, Number 1, 29-33. For discussion of the 14 City of San Jose Redevelopment Agency, Proposed 2002-2003 Capital history and mechanics of TIF, see J. Drew Klacik and Samuel Nunn, “A Budget and 2003-2007 Capital Improvement Program. Primer on Tax Increment Financing,” in Craig L. Johnson and Joyce Y. 15 Technically, the Hoffman Estates financing mechanism for the Sears Man, Tax Increment Financing, State University of New York Press, 2001. deal is not a TIF, but a one-of-a kind Economic Development Area 5 Section 970-c, part (a), defines a “blighted area” as “an area within a (EDA) authorized by state legislation created solely for the Sears deal to municipality in which one or more of the following conditions exist: (i) keep the firm in the state; the EDA law was sunset shortly after the deal a predominance of buildings and structures which are deteriorated or was established. Unlike Illinois’ TIF law, the EDA law did not require a unfit or unsafe for use or occupancy; or (ii) a predominance of finding of blight. A total of $190 million in bonds were issued in 1990- economically unproductive lands, buildings or structures, the 91 for the Sears deal. redevelopment of which is needed to prevent further deterioration which 16 Michael Dardia, Subsidizing Redevelopment in California, Public Policy would jeopardize the economic well being of the people.” Institute of California, 1998. 6 Nearly all states and the District of Columbia allow debt to be issued 17 Michael Brick, “Commercial Real Estate: Downtown Columbus Loses for TIF projects. Out to Its Fringe,” The New York Times, June 19, 2002. 7 Some states have even more flexible rules. For example, Illinois allows 18 Michael Brick, “Commercial Real Estate: Downtown Dallas Project municipalities to use TIF to fund workforce development programs that Mired in Disputes,” The New York Times, May 1, 2002. will improve the skills of current and prospective workers in a TIF 19 Richard F. Dye and David F. Merriman, “The Effects of Tax district. For discussion, see NCBG’s TIF Handbook, Second Edition, Increment Financing on Economic Development,” Journal of Urban Neighborhood Capital Budget Group, Chicago, IL, 2001. Economics, 2000, Volume 47, 306-328. 8 Amounts shown are TIF-financed amounts; total project costs may be 20 See New York City Department of City Planning, Far West Midtown: much higher. All amounts were obtained from TIF program officers or A Framework for Development, NYC DCP #01-21. On page 63, the agency reports. proposal states that the City would “seek state legislation for a tax increment financing district.”
NEW YORK CITY INDEPENDENT BUDGET OFFICE 7