February 18, 2010
Memo suggests ESDC overstated AY economic benefits by assuming 10-year buildout, office space on track, full 8 million square feet
Atlantic Yards Report
So, how credible are the rosy figures for jobs and tax revenues stated in the Empire State Development Corporation's (ESDC) "Economic Benefit Analysis" for Atlantic Yards?
We're going to go out on a limb here and guess: not credible?
The numbers conveyed in a 9/17/09 memo from ESDC President Dennis Mullen to the board may sound good, but a look at the backing document--received via a Freedom of Information Law request--shows numerous holes in the analysis.
1) Timing. The calculations of new tax revenue rely on a ten-year buildout of the project, which is highly unlikely. No alternative calculations or assumptions were provided, despite the likelihood, as even supporters such as then-ESDC CEO Marisa Lago have said, the project would take "decades." The Development Agreement allows 25 years, plus extensions.
2) Office jobs. The new tax revenue--as we learned back in 2006--relies significantly on office jobs, which are highly unlikely to come online within ten years.
3) Size of project. The revenue relies on a full buildout of the project, nearly 8 million square feet. But the development agreement allows for a much smaller project, less than 5.2 million square feet.
4) Costs underestimated. The costs are most likely underestimated and there's no effort to explain the calculations.
There are other fudges, such as an increase in the amount of commercial space.
The bottom line
The fact remains: no one has done a credible cost-benefit analysis of the project as a whole. The IBO has come closest, given its study of the arena, but that's not very close.
Nor has anyone done a cost-benefit analysis based on multiple timetables and scenarios, such as a 25-year buildout or the absence of office space.
And if a non-economist like me can poke so many holes in the memo, what would peer reviewers do?
Posted by eric at February 18, 2010 9:19 AM