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September 18, 2009

From "economic impact analysis" to "economic benefit analysis;" behind the ESDC's funny numbers and methodology

Atlantic Yards Report

If you've ever wondered how and why economic bubbles and other financial fiascos happen, read on.

There are multiple layers of deception, obfuscation, and inconsistency attached to the "Economic Benefit Analysis" included in the memorandum distributed yesterday to the board of the Empire State Development Corporation (ESDC) before it voted to approve the 2009 Modified General Project Plan (MGPP) yesterday.

First, it was once called, somewhat more accurately, an "economic impact analysis," given that the ESDC was willing to consider some public contributions and thus not simply tote up new revenues. Second, the ESDC once mentioned the value of public improvements and infrastructure.

More importantly, the "economic impact analysis" was never a full cost-benefit analysis, given that it looked at public costs and subsidies quite narrowly.

And most importantly, the new numbers--even if you accept the ESDC's methodology--are almost surely a fantasy, since they're based on a full buildout of the project in ten years and the first 30 years of operations. Not only is that schedule highly unlikely--as evidenced even in informal admissions from the ESDC and developer Forest City Ratner--new tax revenues are based crucially on operations of the one office tower, which faces a forbidding market in the short term.

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Posted by eric at September 18, 2009 9:43 AM