October 8, 2008
Reality Bangs on Bloomberg's Development Door
Four more years may not help as finance crisis compounds uncertainty of big projects
The Real Estate Observer
Mayor Bloomberg is citing the current economic crisis as justification for casting aside the term-limit law, permitting him to run for a third term, but budget challenges could stand in the way of several planned megaprojects.
Reporter Eliot Brown assesses the local-megadevelopment landscape, which includes Bruce Ratner's highly subsidized Atlantic Yards arena and high-rise project in Prospect Heights, Brooklyn.
What another Bloomberg term would mean for approved developments such as the West Side rail yards and Atlantic Yards isn’t clear, but both developments require substantial investments where financing remains tricky. With Atlantic Yards, developer Forest City Ratner has yet to secure financing or to close on the nearly two-year-old deal, and has asked the city for a new infusion of subsidy.
As for development projects still seeking approval or those that need additional funding, the road could indeed be a rocky one, as city revenues over the next four years would take a major hit from a wounded financial sector.
“People would rather cut some long-term projects,” said John Tepper Marlin, former chief economist at the city comptroller’s office, “than cut regular workers, like police and fire and teachers.”
Generally, business leaders and fiscal experts credit Mr. Bloomberg with exercising fiscal discipline and express confidence in his ability to guide the city in a recession. Still, the amount of city debt accrued in his administration suggests that that, too, could compound budget problems in a third term. The total amount of city debt and obligations is slated to rise from $59 billion this year to more than $73 billion by 2011, according to city figures, and, should tax revenues fall, debt payments would take up a significantly larger portion of the budget. That, again, leaves less money for the big projects.
Atlantic Yards Report, "Total uncertainty," says Wylde about development projects (but is AY "shaky"?)
Norman Oder considers some of the opinions expressed in the Observer article and yesterday's Brooklyn Papers story, which described the status of the Atlantic Yards project as "shaky":
[T]he funding at issue, I suspect, may be linked less to the arena than the rest of the project. That means that, should legal challenges be resolved and tax-exempt arena bonds be made available, Forest City Ratner will go ahead and build the arena--and then might have leverage to extract subsidies for towers and additional infrastructure.
Well, there's certainly more doubt about AY than before, and there are a lot of moving parts and challenges, but that doesn't mean it's shaky or ready for a kill.
NoLandGrab: Though Norman may be quite right, it isn't too early to wonder who will finally pull the plug on Atlantic Yards: the State, which is wrestling with a budget gap in the several-billions of dollars; or Forest City Enterprises, which is covering the NJ Nets's approximately $40-million annual operating loss.
Posted by lumi at October 8, 2008 6:13 AM