Thursday, April 25, 2013

Our tax dollars used to bail out huge developer

From the Wall Street Journal:

When the city agreed to pick up the tab for the extension of the No. 7 subway line to ease the creation of a new office and residential district on the far West Side, it expected the project could begin paying for itself as early as 2008.

Instead, a single 1.7 million square-foot office tower in the Hudson Yards area has broken ground, while the project envisions 25 million square feet of new office space. And the district generated 40% less revenue from taxes and other development fees than projected between 2006 and 2012, according to a report to be released Wednesday by the New York City Independent Budget Office.

Hudson Yards was expected to produce $283 million in revenue through 2012, but it actually created $170 million, according to the report by IBO, an independent city agency that studies the local economy.

"The commercial development has been much slower than they thought," said Ana Champeny, a supervising analyst at IBO.

The city issued $3 billion in bonds to pay for subway construction and other infrastructure upgrades guaranteed by tax revenues in the area. If those revenues weren't enough to meet interest payments on the bonds, the Bloomberg administration agreed to pay those with additional money drawn from the city budget.

Real estate experts and budget-watchers have said the city was taking on too much risk by agreeing to make interest payments on the bonds out of the budget.

Nice, eh? Bloomberg is always there to bail his buddies out with our tax money. By the way, his buddy in this case is Related Company, the one he is giving a chunk of city parkland over to at Flushing Meadows so they can build a mall with the Wilpons.


Jon Torodash said...

The capital budget is a massive shell game of debt, which is in turn financed by the operating budget. Unexpected shortfalls like this, when the city has to dip in more deeply into tax revenues, are only the ugly tip of the problem.

The IBO claims that it's not "fair" for current residents to pay for long term projects they will never see/use, and that the operating budget is too "erratic" for the projects funded. The first point is surprisingly simplistic for an agency like the IBO: why not also argue that childless people not pay for schools, or subway riders not pay for highways? The second point draws a false dichotomy: just because the operating budget can't fund large, long-term projects as-is doesn't mean the capital budget is the only other answer.

Right now the city pays 6% of the operating budget (roughly $4.2 Billion) in debt service. This figure is growing by 7% a year according to the IBO. Why can't the city instead set aside small portions of the operating budget to be doled out over the course of multiple years for long term projects (the money taken off the table for other purposes), and borrow at much lower rates on short-term bonds to cover annual gaps? This is one idea, at least, I'm not claiming it's the best solution.

Why is this important, if your eyes are glazing over? Because even if the city could slash its interest payments by 25%, that'd open up over a $1 billion and maybe help us stop groveling like this.

Anonymous said...

Why is this surprising ?

Our tax dollars paid for the Boston terrorists food stamps, housing and welfare payments.

Anonymous said...

But Bloomjerk was the mayor that was going to solve the city's financial dilemma. What is the world coming to?

PS A $1/year salary was a real bargain, wasn't it?

Anonymous said...

Once again:

Privatized Profit.

Socialized Loss.

Twenty years of gop "leadership" have brought us here...again.

BTW: "25 Million square feet of new office space"?

The commercial R.E. industry is already shitting bricks over what to do once the WTC site is fully built out.

Queens Crapper said...

20 years of GOP leadership? Who passed zoning, approved the scheme and gave away property that allowed for this? The City Council, which hasn't been Republican in any current person's lifetime.

Anonymous said...

Blame city council folks, they control the purse strings and vote on the budget.

As long as you give them a free pass you will accomplish nothing.