Cooper Union Will Begin Charging Tuition, But Will Still Be Getting Special Tax Breaks From the City

Posted by Doug Turetsky, June 4, 2013

In April, Cooper Union ended its 150-year tradition of providing students a tuition-free education. Although starting in 2014 the school will no longer be giving all of its students a free education, Cooper Union will still be getting an unusual set of tax breaks from the city—breaks that help fund the school’s annual expenses. These tax breaks cost the city about $20 million in forgone revenue this year, in effect providing a more than $21,000 a year subsidy to each of the highly selective school’s roughly 930 undergraduate engineering, architecture, and art majors.

The largest and most well known of the unusual tax breaks dates back to 1902 and centers on land at Lexington Avenue and 42nd Street given to the school to boost its endowment by heirs of Cooper Union’s founder Peter Cooper. The endowment paid off for Cooper Union when the school leased the site to Walter Chrysler in 1928 to construct the eponymously named Chrysler Building. The land has remained exempt from property taxes because it is owned by the school.  Cooper Union gets rent from the land of about $9 million a year along with payments equal to what the city would collect in property taxes if the site were still on the tax rolls. The payment amounted to $18 million this year.

Schools typically get a property tax break only for locations where classes are held, students housed, or administrative operations conducted. But the unusual property tax exemptions afforded Cooper Union, which include land the school sits on as well as any land it may receive as part of its endowment, date back to the charter granted to the school in 1859 by the state Legislature, provisions upheld in subsequent court cases.

Albany has continued to do its part to keep the break in place. In 1969, Mayor John Lindsay sought legislative help in restoring the site to the tax rolls for a cash-hungry city that several years later would begin to charge tuition to City University of New York students. Albany did indeed pass legislation stipulating that only property directly used for educational purposes could receive a tax exemption. But the legislation only applied to property acquired after the bill went into effect.

More recently, Cooper Union engineered two more commercial deals on land it owns. In order to generate funds, Cooper Union proposed a large-scale development plan that included two locations it would lease much as it did with the land under the Chrysler Building: 51 Astor Place, where its engineering school stood, and 22-36 Astor Place, which was a parking lot. In 1959, ownership of 51 Astor Place–then a city property—was transferred to Cooper Union with the condition that it be used for educational purposes.

To make the sites more attractive to prospective developers, Cooper Union won zoning changes from the City Planning Commission. In addition, in 2007 the Bloomberg Administration released Cooper Union from the requirement that 51 Astor Place be used for educational purposes in exchange for a $980,000 payment to the city and a promise that a portion of the building would be used for school purposes.

Cooper Union leased the parking lot to Related Companies, which built a 21-story luxury residential building on the site. At 51 Astor Place, Edward J. Minskoff Equities leased the site and is seeking tenants for a 13-story “starchitect”-designed office building with a Jeff Koons sculpture in the lobby.

The tax breaks for these two locations, hammered out with the Bloomberg Administration, are more complex than the tax exemption for the Chrysler Building. While both Astor Place buildings will remain fully exempt as is the Chrysler Building, the city will get payments—technically called payments in lieu of taxes—equal to half of what the tax bills would be.

The city can’t collect payments at either site until the office building is ready for occupancy. The residential building opened in 2005 and was exempt from any payments until fiscal year 2011. But the city still has to wait to collect any payments on that property until a certificate of occupancy has been issued for the office building. IBO’s Ana Champeny estimates this cost the city $2.1 million this year in foregone taxes from the residential building. We won’t know the amount of taxes foregone on the office tower until the building is completed and assessed.

When seeking the Astor Place zoning changes, Cooper Union told the City Planning Commission it needed them in part to generate funds to continue to provide a tuition-free education for its students (the school also wanted a new building for its engineering program, which it built at 41 Astor Place). With the public purpose of the unusual tax breaks now mostly a thing of the past (about 25 percent of students won’t pay tuition), some New Yorkers may question why the city should forego tax dollars on Cooper Union’s commercial development deals at a time when the city’s own university system has seen repeated tuition hikes.

Filed in Taxes | | Permalink |

Missing From Albany’s Family Relief Tax Break: 1.2 Million NYC Kids

Posted by Doug Turetsky, April 19, 2013

Tucked into the state budget adopted last month is a special three-year tax break for New York families with children. The first of three annual rounds of checks for $350 per qualifying family will be sent out in October 2014 (just weeks before the next year’s gubernatorial and legislative elections) at a cost of about $400 million statewide. While New York City families stand to garner a large share of the checks, many will find their mailboxes empty.

An analysis by IBO’s Michael Jacobs, which uses data from a sample of 2010 income tax returns, finds that about 575,000 of the city’s tax-filing families with children will qualify for the check next year. Each of these families will receive a check for $350, bringing just over $200 million into the city.

But that same analysis also reveals that nearly 725,000 New York City families with children—families with an estimated 1.2 million kids—will receive nothing. That’s because in most instances they earn too little to qualify.

Here’s how the tax break, called Family Tax Relief, works: To qualify, a tax-filing family or household with at least one child needs an income after tax-deductions (adjusted gross income in tax-speak) of between $40,000 and $300,000, and they must have owed New York at least a $1 on their 2013 state income taxes. If the family qualifies, they’ll get a check for $350, regardless of whether they have one child or a dozen under the age of 17, and even if the amount they owed is far less than the $350 check they’ll receive.

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Family Tax Relief is described as help for “middle class families that are struggling to make ends meet” Yet in a city where the median adjusted gross income for families with children is $38,400, Family Tax Relief’s definition of middle-class is high and wide of the mark. As a result, tens of thousands of relatively well-off New York families will get a check while many low, moderate, and middle-income families with children will not.

To put that observation into numbers: more than 190,000 New York City families with children and adjusted gross incomes from $100,000 to $300,000 will be receiving checks worth more than $66 million combined. But roughly 660,000 families with adjusted gross incomes under $40,000 will find their mailbox empty. Among those left out are about 126,000 families—most of them single mothers with children—with incomes below $40,000 but who still owe income tax to New York State.

IBO’s Julie Anna Golebiewski estimates that about 60 percent of all the households with children in the Bronx will not qualify for the credit, based on data from the American Community Survey. In nearly all cases, the households won’t qualify because their incomes are too low. In Staten Island, about 28 percent of households with children won’t qualify and in Queens about 36 percent. In Brooklyn and Manhattan, roughly half of all households with children are expected to get a check. About 16 percent of Manhattan households with children won’t get a check because their incomes are too high, giving Manhattan the largest share of over-the-limit earners among the five boroughs.

New York’s Family Tax Relief bears some similarity to a 1991 proposal by former New Jersey Senator Bill Bradley to provide a $350 tax credit to families in the U.S. for each of their children. But Bradley’s plan called for the program to be universal, with everyone regardless of income getting help. If a family was too poor to owe taxes they would get the benefit in the form of a direct payment rather than a tax credit.

IBO’s Jacobs calculates that making the New York State program universal so that it covers all families with children—regardless of their income level or state tax liability—would more than double the cost of the program in New York City to about $453 million in 2014, even if the checks are capped at $350 a family no matter the number of children. Alternatively, if Albany were to let those single mothers and other families with incomes below $40,000 qualify for relief while maintaining the requirement that families have some tax liability, it would raise the total cost to the state of the Family Tax Relief program in New York City to roughly $245 million—about $45 million more than under the current legislation.

Filed in Uncategorized | | Permalink |

The City’s Easiest Savings

Posted by Doug Turetsky, April 12, 2013

Over the past few years, one of the biggest sources of city budget savings has come without any effect on municipal services. It’s involved no reduction in staffing. No cutback in program operations or number of New Yorkers served. The savings has come from debt service, the interest and principal the city pays on the money it borrows to build schools, fix roads, buy fire trucks, and the like.

Record low interest rates over the past few years have enabled the Bloomberg Administration to save a bundle. The cost to the city on money borrowed through variable-rate bonds has been relatively low, and the city also has been able to refinance some existing fixed-rate debt at lower interest rates than when those bonds were first issued. In IBO’s report on the Preliminary Budget for 2013, we estimated that the city had recognized $875 million in savings just on its variable-rate general obligation debt (the city also borrows large sums through an entity called TFA) due to lower than forecast interest rates in fiscal years 2010 through 2013.

Besides the $875 million in savings, there are two additional terms to focus on in that last sentence: “recognized” and “forecast.” When and how the Bloomberg Administration has been building these savings into the city budget is worth a closer look.

Take the city’s current budget plan, for example. The Mayor’s plan assumes interest rates on variable- rate general obligation bonds will be 2.45 percent through the rest of this fiscal year, which ends in June. In fact, as IBO’s Sean Campion points out, interest rates on these bonds (based on a Securities Industry and Financial Markets Association index) have been below 0.50 percent—about one-fifth of City Hall’s forecast—since April 2009.

And the Bloomberg Administration projection for this interest rate in fiscal year 2014? Try 4.15 percent. Yet there’s no indication this rate is poised to rise and the Federal Reserve has made clear its intention to keep interest rates low, at least in the near term.

While some might see the Bloomberg Administration’s interest rate projections as fiscal prudence others might view it as a bit of forecast sleight-of-hand.

Last month in IBO’s report on the Preliminary Budget for 2014, Campion estimated that if the city lowered its interest rate assumption for the rest of the fiscal year to a still-above-market-rate 0.30 percent for variable-rate bonds and issued no more of this debt in the remaining months of this fiscal year, debt service spending in 2013 would be $148 million less than currently projected. That savings won’t be recognized until late in this year’s budget cycle and will likely become part of the end-of-year surplus.

One way to look at these savings is as a cushion in case some revenue source comes in lower than expected, or some form of spending such as shelter costs for the homeless winds up costing more than budgeted. Having this type of savings tucked away in the budget plan can fill a last minute shortfall, although the city maintains a general reserve for just this purpose.

But another way to think about it is $148 million that could have been used elsewhere in this year’s budget. The considerably higher than likely projections of debt service enable the Mayor to “park” money out of sight and out of mind of Council Members and other elected officials who might want to use those funds for new or existing programs. With the much higher than likely forecast for interest rates in 2014, the amount of money that could be “freed up” in next year’s budget by a projection closer to recent trends would be even more substantial.

Despite the record low interest rates and the savings they ultimately produce in the budget, overall debt service spending under the Mayor’s budget plan continues to be one of the city’s fastest growing expenditures. Spending on debt service is projected to increase $1.7 billion from this year through 2017 (adjusted for the use of the 2012 surplus to prepay some of the 2013 cost), when debt service expenditures are expected to total $7.7 billion.

But if past is prologue, debt service costs will not grow by as much as in the budget plan. Still, costs will grow largely because of the plan for more borrowing. The Bloomberg Administration expects that the city’s total outstanding debt will grow from $68 billion this year to nearly $75 billion in 2017.

 

Filed in City Budget, Debt | | Permalink |

The Last (Budget) Dance?

Posted by Doug Turetsky, March 1, 2013

Public hearings on the Mayor’s budget plan get underway next week at City Hall. These hearings are the opening steps in what has become known as the “budget dance” between the Mayor and the City Council. The dance begins with the Mayor proposing budget cuts to a mostly routine group of programs and ends with a typical set of restorations negotiated by the City Council.

While the dance involves funding for services that many New Yorkers find crucial—and are crucial to the budgets of many service providers—there are many who probably wish the annual ritual had faded with the Macarena. For all the angst kicked up by the annual dance, the process revolves around less than 0.5 percent of the city’s $70 billion budget.

That there are cuts in the proposed budget that would affect city services may come as a surprise to those who got their budget information from the city’s social media feed. On the afternoon the Mayor presented the preliminary budget for the upcoming fiscal year, the City of New York’s Twitter feed brightly chirped: “Today Mayor Bloomberg presented FY2014 Budget which will not increase taxes or cut services.”  NYCgov’s Tumblr post proclaimed that there’s “no reduction in city services” in the budget plan.

Social media assertions aside, some of potential service reductions in the budget plan were in plain sight. Consider for example, a new $10 million reduction in funding for after-school programs that would eliminate about 3,600 slots from the 2014 budget, the $8.1 million cut in subsidies for cultural groups,  or (speaking of plain sight) the elimination of all $2.8 million in funding for eye exams for kindergartners and first graders.

Besides such newly proposed spending cuts that would lead to service reductions, other cutbacks were introduced by the Mayor in previous budgets and embedded in the financial plan for 2014. In most of these cases, the programs had temporarily escaped cuts through City Council-initiated restorations for one year at a time. This is the heart of the dance: the Mayor proposes a cut for the upcoming budget year as well as for the subsequent years of his four-year financial plan; the Council restores the funds only for the upcoming year; but the cut remains in the financial plan for the ensuing years, to be negotiated again and again, sometimes with additional reductions.

Take, for example, the Mayor’s recent proposal to reduce after-school spending by $10 million next year. To offset a cut proposed to take effect this year, last June the Council restored $50.6 million to the Out-of-School Time program for 2013, but only for 2013. (The Council only can vote on changes in the current year’s budget and, come June and the final negotiations with the Mayor, the budget adopted for the upcoming year. The Council has no control over the remaining years of the Mayor’s four-year financial plan). So no money was added to the plan for 2014 through 2017 to cover the funding cutbacks for those years. That means that the new $10 million reduction introduced for 2014 would come on top of the previously scheduled cutbacks. If the new and underlying cuts are not restored, the number of Out-of-School Time slots would shrink from 56,000 this year to 21,500 next year.

Over the past five years, the Council has made changes totaling more than $300 million annually to the Mayor’s budget plan, reversing proposed cuts as well as funding some of its own initiatives. But as the Mayor’s proposed cuts have mounted, the Council’s ability to fully restore cuts or maintain or start new initiatives has become more difficult.

As the partners line up for the opening strains of this year’s budget dance, Council Speaker Christine Quinn has already said she intends to prevent the loss of 2,500 teachers that are part of the Mayor’s budget plan, which will cost about $160 million (although a legal challenge now underway could prevent this cut). She has also announced her intention to restore funding for 20 fire companies ($44 million), once again avoiding a cutback that the Mayor has been pursuing since his preliminary budget for 2010.

Then there are some of the other routine restorations which grow more expensive each year when you count the newly added cuts for 2014. It will take $102 million to avoid a cut to libraries, $78 million for youth services (including Out-of-School Time), and $77 million for child care.  Already the list comes to more than $400 million, and that’s without restorations to other Council perennials such as cultural programs, health services, parks programs, legal services, domestic violence programs, and senior services.

This is the last go-around on the budget for Mayor Bloomberg and the current City Council. Only time will tell if it’s the last dance.

Filed in City Budget, Cultural Affairs, Education, Librabries, Youth | | Permalink |

City’s Assessment of Property Values May Need Some Extra Reassessing

Posted by Doug Turetsky, February 12, 2013

Last month the Mayor presented his Preliminary Budget for 2014, which included the projection that revenue from the property tax would increase by more than $900 million in the fiscal year that begins July 1 and total $19.4 billion. But don’t start spending all of that additional revenue quite yet.

The property tax revenue projection is derived from the most recent estimate by the city’s Department of Finance of changes in assessed value of properties across the city. A quick look at the latest assessment roll by IBO’s Ana Champeny finds that the city seems to be adding some unlikely sites to its roll of taxable properties.

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Photo Credit: Flikr/Simon English

Take the Chrysler Building as a prime example. It has been tax exempt for decades in order to help subsidize tuition-free education at Cooper Union. Yet the Chrysler Building shows up on the city’s initial tax assessment roll for fiscal year 2014 with a taxable assessed value of $184.4 million. This is the amount used to compute tax liability and should not be confused with the city’s estimate of the building’s market value, which the finance department lists at $448.7 million. (The city’s property tax system can be mind-numbingly complex. To learn more about the system and how it got this way, see IBO’s 2006 report.)

You’ve probably heard of the Barclays Center in Brooklyn, that big new arena that was the source of much controversy right up until Jay-Z took the stage the night it opened. A lot of the controversy centered on the city’s subsidy and the use of the funds the developer would otherwise owe for property tax to instead go towards paying the annual interest and principal on the money borrowed to build the arena. Under this deal the property should be recorded as fully tax exempt. But the arena shows up on the 2014 tax roll with a taxable assessed value of $329.1 million.

How about the Museum of Modern Art’s Museum Tower? The tower was developed through an arrangement with the Trust for Cultural Resources that enables cultural organizations like MOMA to generate revenue by spinning off part of their property for private development, which remains exempt from the property tax. Although the trust’s board of directors includes the city’s Deputy Mayor for Economic Development and the head of the city’s Economic Development Corporation, Museum Tower shows up on the tax roll for the first time since it was built in 1985 with a taxable assessed value of $79.6 million for 2014.

There are many other examples as well such as Interchurch Center, which is part of Riverside Church; 3040 Broadway, owned by Columbia University; and the Church of the Heavenly Rest, which has been at 90th Street and Fifth Avenue and fully tax exempt for more than 80 years.

When the Mayor’s budget office forecasts property tax revenue, it assumes that some of the initial increase on assessments will be rolled back due to challenges by property owners and administrative changes by the finance department. But some of the jump in assessed values for 2014 is driven by these unusual shifts in exemption status, and may augur a larger number of properties than usual with assessment changes before tax bills are sent in June. Right now, these six buildings alone account for about $70 million in potential property tax revenue, which is about 8 percent of the anticipated growth in property tax collections next year.

Perhaps the appearance of some buildings on the roll of taxable properties could be explained by an effort initiated by the finance department last year to ensure that only eligible properties are getting tax exemptions. This effort requires owners to file annual applications for the exemption. But the failure to submit the necessary paperwork doesn’t explain why schools and parks department sites are also showing up on the assessment roll as taxable properties. Don’t think, though, that the glitches are limited to those showing higher assessments. The sale of buildings owned by the Jehovah’s Witnesses in Brooklyn Heights received a fair amount of press attention over the past couple of years. For the city, the sales should mean the return of tax-exempt church property to the tax rolls.

Somehow, 161 Columbia Street and 50 Orange Street are still listed in the property records as receiving tax exemptions as houses of worship. Together, the mistaken exemptions for the two buildings are worth more than $420,000 in tax savings for the property owners in the coming fiscal year.

Filed in Taxes | | Permalink |

Federal Plan for Cleanup of the Gowanus Canal May Mean Growing Costs for the City

Posted by Doug Turetsky, January 23, 2013

For decades, the Gowanus Canal has been synonymous with a polluted, and sometimes stinking, body of water. Soon after the Gowanus opened in the 1860s, it was generally treated as an open sewer. Industrial waste from coal yards, refineries, and tanneries as well as raw sewage poured into the canal. This fetid stew contained hazardous substances such as PCBs and polycyclic aromatic hydrocarbons, pesticides, and heavy metals such as mercury, copper, and lead.

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Photo Credit: Flikr/Doug Turetsky

Fast forward to March 2010 when the federal Environmental Protection Agency declared the 1.8 mile Gowanus Canal a Superfund site and set about developing a plan to contain the hazardous materials in the canal’s sediment and to prevent recontamination. Part of the Superfund process also includes determining who’s responsible for creating the environmental mess and making those responsible pay the cost of alleviating the conditions.

The EPA is still determining who is responsible and the degree of their culpability. Some of the companies being investigated may not be surprising, such as National Grid and Consolidated Edison. But based on the agency’s review so far and the remedies proposed in a plan released late last month, one of the entities on the hook for footing the cleanup bill may be the city itself.

The federal environmental agency estimates that its preferred plan (there are also some alternatives) would cost in the range of $467 million to $504 million. New York City’s share of that cost could be substantial.

For years, the city has allowed sewage and stormwater to spew into the canal. Looking just at the period from 1952 until the Red Hook Wastewater Pollution Control Plant opened in 1987, the city dumped about 20 million gallons of sewage a day into the Gowanus. The Red Hook plant and the nearby Owl’s Head wastewater plant still send sewage and stormwater into the canal when there’s an appreciable amount of rain and the two plants exceed their capacity for treating the wastewater. In a September 2011 presentation, the city’s Department of Environmental Protection estimated that about 300 million gallons of stormwater and sewage drained into the canal in a typical year, about two-thirds of it untreated sewage.

To reduce the continued contamination of the canal from what are called combined sewer overflows, or CSOs, the EPA wants the city to build holding tanks that will store the wastewater until the two treatment plants have sufficient capacity to handle much of the excess. The EPA estimates the cost of the tanks to be about $78 million.

A general reading of the EPA’s proposed cleanup plan and some other documents gives the impression that the city’s share could include more than the cost of the tanks as the federal agency sorts out who is responsible for various aspects of the canal’s pollution. Much of the heavy industrial uses along the canal ended long ago. National Grid owns the three sites where plants produced manufactured gas from coal, oil, and water to be used for street lights and home heating. These plants appear to be a significant source of the canal’s past pollution and may lead the utility to also bear a heavy share of the remediation costs. But the EPA’s extensive discussion of the role of CSOs in the canal’s past and future may be indicative of the extent to which federal officials believe the city should be underwriting the cleanup.

Any spending due to the Superfund plan comes on top of substantial sums the city has already been investing to improve the water quality of the Gowanus and reduce CSOs. Based on a review of capital budget spending by IBO environmental analyst Justin Bland, over the past 12 years the city has invested nearly $160 million to repair and upgrade a flushing tunnel that helps oxygenate the canal’s relatively stagnate water and an additional $18 million on other Gowanus cleanup-related environmental projects. The city plans to commit an additional $51 million for these projects over the next four years.

The Bloomberg Administration strenuously opposed the federal Superfund designation and developed its own plan for restoring the Gowanus. The Mayor argued that the Superfund designation could cause years of legal battles and delay redevelopment of the surrounding area. But City Hall’s plan relied in part on Congressional appropriations for the canal, funds that the EPA’s regional administrator considered far from certain. Insufficient funding could mean a lag in the cleanup.

The EPA is holding public meetings in Brooklyn on its plan on January 23 at PS 58 and January 24 at the Joseph Miccio Community Center. Written comments until March 28.

Filed in Environment | | Permalink |

Homeless for the Holidays, and Beyond

Posted by Doug Turetsky, January 7, 2013

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Photo Credit: Flickr/-LucaM- Photograph

 

Last month, the U.S. Conference of Mayors released a report that offered a discouraging view of homelessness across the country. Among 25 cities participating in a survey by the organization, 15 said the number of homeless in their communities had been increasing and another three said the number had stayed the same as last year. The other seven reported declines.

Some of the biggest cities in the survey admitted turning away a significant share of their homeless population because emergency shelters simply don’t have enough beds. Philadelphia reported turning away a third of those seeking shelter, Charlotte 25 percent, and Boston 20 percent.

New York City didn’t participate in the survey, but it could have provided some stark numbers of its own. Not only is the number of homeless on the rise here, but individuals and families are experiencing ever-longer stays in shelter beds. While court orders dating to the 1980s provide the homeless with a legal right to shelter, some advocates would argue that the city effectively turns people away through its eligibility review process.  Still, with a growing number of people entering the homeless system, the city has added new shelter sites in recent months.

Over the first five months of this fiscal year (July-November), an average of 11,184 families, including those with children and adult families without children, spent the night in the city’s shelter system. That’s up by more than 1,600 families, or 17 percent, compared with the same five-month period last year.

These families are remaining in the shelter system more than a month longer on average than last year. Families with children typically spent 355 days in the city’s shelters as of the first four months of fiscal year 2013—up 40 days compared with the first four months of last fiscal year. For families without children, the picture is much the same. Average stays in the shelter system increased by 51 days, to 443 days during the first four months of this fiscal year.

The number of single adults spending the night in a city shelter has also grown by 10 percent, and averaged 9,213 over the first five months of this fiscal year. They, too, are also spending more days on average in the shelter system: 275 days during the first four months of this year, 12 days more than for the same four months last year.

There’s been a steady rise in the number of homeless and longer stays in the shelter system since the city eliminated the Advantage rental assistance program last year . The program had helped the homeless, mostly homeless families, leave city shelters by providing temporary rent subsidies. The program ended after the state eliminated its share of funding for the program, which cost in total about $210 million in 2011. The city’s share of the program’s cost was about $114 million.

Not surprisingly, more people and longer stays are driving up shelter spending. In November, the Mayor added $42.9 million in city, state, and federal funds to the budget for family shelters, bringing the total budget for 2013 to $466.5 million.

But IBO’s Elizabeth Brown says the additional funding is not enough to meet likely costs. Based on recent trends, she estimates that providing families with emergency shelter will cost about $42 million more than the Bloomberg Administration has budgeted for this year. Costs for emergency shelter for homeless single adults have also climbed.

In June 2004, the Mayor announced a five-year plan to cut homelessness by two-thirds. That plan never came close to meeting its goal and in recent months the city has sheltered record numbers of homeless New Yorkers. On Christmas Eve, more than 47,300 children and adults bedded down in the city’s shelters—a population about equal in size to the number of people who live in the upstate city of Binghamton.

Filed in Homelessness, Housing, Social and Community Services | | Permalink |

Seas Rise, Storms Surge, and NYC Presses Ahead with Waterfront Development Projects

Posted by Doug Turetsky, November 21, 2012

Long before Sandy slammed the city’s coastline, the Bloomberg Administration had been sounding alarms about coming threats to the city due to climate change. In well-known reports such as PlaNYC and through less publicized efforts such as the convening of scientists and risk management experts for the New York City Panel on Climate Change, the Bloomberg Administration signaled that it clearly recognized the significant impact global warming and rising sea levels could have on New York.

Photo credit: flickr/drpavloff

The Mayor’s March 2011 report Vision 2020: New York City Comprehensive Waterfront Plan forecast the coming of storms like Sandy and the potential affects: “The rise in sea level and increased frequency and magnitude of coastal storms will likely cause more frequent coastal flooding and inundation of coastal wetlands as well as erosion of beaches, dunes, and bluffs.”  A few weeks later, in an update to PlaNYC, the warnings were reinforced: “As a city with 520 miles of coastline—the most of any city in America—the potential for more frequent and intense coastal storms with increased impacts due to a rise in sea level is a serious threat to New York City.”

Yet even as City Hall grappled with these concerns it continued to put substantial resources into major development projects on the waterfront, rezoning sites as manufacturing declined— including some in prime areas for flooding, the so-called Zone A evacuation areas. Just one month before Sandy struck the city, Mayor Bloomberg announced a plan by private developers to build a $500 million complex on city-owned land on Staten Island’s North Shore that would include the world’s largest Ferris wheel as well as a hotel and outlet mall. Part of the site sits in a floodplain.

An even larger development project is planned on the Coney Island waterfront, one of the neighborhoods hardest hit by Sandy. The city has rezoned the area to allow the development of hotels, housing, and a new amusement park, and has allocated more than $400 million for sewer upgrades, land acquisition, lighting, boardwalk and park improvements, and other projects to foster the redevelopment plan. On the Queens waterfront, the city is investing $147 million in the Hunters Point South project, which also sits in Zone A. Already under construction, Hunters Point South includes 5,000 apartments, a 1,100-seat school, and retail space.

To be fair, the Bloomberg Administration has taken steps to protect the city from the affects of rising sea levels and storm surges, following existing city building codes and Federal Emergency Management Agency guidelines. But these guidelines may not be adequate in the face of storms with the fury of Sandy.

As Yale University’s Environment 360 Web site noted, “The storm easily overwhelmed many of the relatively minor adaptations that New York had already put in place.” For example, Brooklyn Bridge Park, where another large development project is planned, was created with what are called “soft edges.” These are supposed to help reduce the force of waves and accommodate rising tidal levels. While these edges may work in many instances, they were no match for Sandy, which swamped the park and sent water lapping at the structure housing the newly installed carousel.

In Sandy’s wake, Governor Andrew Cuomo, Mayor Bloomberg, and Council Speaker Christine Quinn are promising to ramp up efforts to protect the city and the city’s infrastructure from what many believe is the increasing threat posed by major storms.  Speaking to a group of business and civic leaders, Council Speaker Quinn said, “We…must rethink the way we build in neighborhoods that were destroyed by the storm.”

Such rethinking takes time for evaluation and planning, time that some city officials and developers seem disinclined to take.  Just last week, as many Staten Island residents and business owners continued to clear the rubble from Sandy—and mourned the loss of family and friends—the city’s Economic Development Corporation held a hearing to advance the Ferris wheel project on the North Shore.

The city can press ahead with waterfront projects like the one on Staten Island’s North Shore, as well as others throughout the five boroughs, before there is a clearer plan for the kinds of steps New York will take to minimize the danger from future Sandys. But doing so increases the risk that the next “superstorm” will exact an even higher price tag.

Filed in Capital Budget, Economic Development, Environment, Hurricane Sandy | | Permalink |

Sandy’s Aftermath: How Much Federal Aid Can the City Expect?

Posted by Doug Turetsky, November 8, 2012

In the decade since the terrorist attacks on 9/11, New York City has faced several other disasters that drew federal aid, such as last year’s Tropical Storm Irene and the blizzard and tornadoes of 2010. As IBO’s George Sweeting points out, the city received federal aid for a far wider range of uses in the aftermath of 9/11 than it did following the weather-related events.

While Hurricane Sandy shares the climatic origins of Irene, the blizzard, and tornadoes, the extent of the physical devastation is more akin to 9/11. The number of lives lost due to Sandy, while tragic, paled in comparison to the World Trade Center attacks. But the widespread devastation in the wake of Sandy —from large swaths of Staten Island to the Rockaways to Coney Island, and once again, Lower Manhattan—has a price tag that puts it in a league with 9/11. Moody’s Analytics has estimated a cost of $12 billion for the New York City area.

[UPDATE: Gov. Andrew Cuomo estimated today that losses due to Hurricane Sandy could total $33 billion in New York State.]

The question for the coming days and weeks for New York City and other hard-hit areas is: Will federal disaster relief have the more limited scope of the typical response after a serious storm or will Washington respond with much broader types of aid as it did following 9/11?

Federal aid in the wake of storms usually has one fundamental component: emergency response and recovery. This immediate assistance may include rescue effort; emergency food and shelter; low-interest loans to residents and small businesses; unemployment payments; the cleanup of debris; and repair of damaged infrastructure such as roads, buildings, equipment, parks, and utilities. The $20.5 billion in aid provided after the attacks on the World Trade Center featured two other significant components: assistance for additional rebuilding and development and substantial budget relief for the city to make up for expectations of lost tax revenues.

The aid for rebuilding and development after 9/11 was substantial, totaling $11.3 billion in direct assistance and tax breaks. A large portion of this was dedicated to transportation projects such as the approximately $4 billion World Trade Center Transportation Hub and $530 million for the now Sandy-flooded South Ferry subway station.  For a more detailed look at World Trade Center-related aid, see this IBO report. Washington also authorized lower-cost financing for development projects through the creation of tax-exempt Liberty Bonds estimated to cost the federal government $1.2 billion in foregone tax revenue. The use of these bonds became controversial as some were directed towards projects such as the new Goldman Sachs office downtown as well as the Bank of America building in midtown and the Bank of New York tower in Brooklyn.  Good Jobs New York, a nonprofit that monitors local economic development deals, has already raised concerns about how decisions will be made if wide-ranging rebuilding aid comes the city’s way as part of Sandy relief.

Post-9/11 assistance also included nearly $2 billion in budget aid mostly for the city (a portion of this amount was for the state).  About half of this aid came through a provision that allowed the city to refinance some of its tax-exempt bonds and as a result reduce its spending on debt service. The other half materialized when expenditures for the initial emergency response and cleanup turned out not to cost as much as expected; the city just got to keep the money.

Federal aid following the September 2010 tornadoes was typical of the sorts of aid that follow natural disasters. The cost of cleaning up and repairing the damage from the storm was $21.2 million. The Federal Emergency Management Agency provided $10.8 million, the state $1.8 million. The rest was on the city’s dime. That was also the year of the blizzard that paralyzed the city in the days after Christmas. Washington only provided some disaster aid to cover costs in Staten Island. Coupled with the costs of several other big storms, the city spent more than $100 million that fiscal year on snow removal and related road repairs, the vast majority at our expense. For more details on weather-related costs in fiscal year 2011, see this report, pg 49. Damage from last year’s Tropical Storm Irene cost the city about $55 million, with 90 percent of the expenses eligible for federal reimbursement.

With the dust still settling from Tuesday’s election, it remains to be seen how extensive federal aid for Sandy will be. A $12 billion proposal to supplement federal disaster cleanup and recovery funds has been introduced in the House, but the Senate appears to be waiting for updated estimates on the extent of the damage before it acts. Neither the House nor the Senate seems to be discussing the kind of broader aid that followed 9/11.

Filed in Economic Development, Federal and State Aid, Hurricane Sandy | | Permalink |

Whose Streets You Calling Dirty?

Posted by Doug Turetsky, October 23, 2012

Last month, a Travel & Leisure magazine reader survey ranked New York the dirtiest city in the U.S.  Just a few weeks later, the Bloomberg Administration released the Mayor’s Management Report for fiscal year 2012, which found that 95.5 percent of the city’s streets were ”acceptably clean”—meaning there were only scattered  bits of litter on the streets.  The report deemed not a single section of the city dirty.

Even acknowledging that there can be sharp differences among individual perceptions of intolerable levels of grit, grime, and litter, there’s a huge gulf between the T&L survey and the Bloomberg Administration’s rating.  In 2012, the city spent $81 million on activities related to cleaning its streets such as running the city’s 450 mechanical brooms and emptying litter baskets, according to figures provided by the sanitation department. About $570 million more was spent collecting curbside trash and recyclables. Given these expenditures, chalking up that gulf in perceptions solely to eye-of-the-beholder differences seems insufficient—especially since city residents may not see eye-to-eye with the Bloomberg Administration rating either.

In July, the Mayor’s Office of Operations, which does the street cleanliness ratings, scored 98.4 percent of the streets in Manhattan’s Community Board 1 as acceptably clean. Yet Crain’s recently reported that complaints about overflowing trash cans in Lower Manhattan, which is part of Community Board 1, led city officials to add more trash cans in the area in August, the very month following the pristine rating. And now Lower Manhattan’s Downtown Alliance has placed solar powered trash-compacting bins that can hold five times the amount of garbage as a regular litter basket at five heavily trafficked street corners.

Community boards citywide also may be less sanguine than City Hall when it comes to the cleanliness of the city’s streets. As a way to gauge the demand for certain services, the Mayor’s budget office asks community boards each year to rank by importance 90 different services provided locally. Street cleaning ranked 17th citywide, ahead of other efforts such as economic development initiatives, housing code inspections, and services for the homeless.

On a recent Wednesday morning IBO’s Justin Bland and I joined Edwin Cuevas and Alicia Robinson as they rated the cleanliness of about 25 streets in Crown Heights. Each month three teams from the Scorecard program in the Mayor’s Office of Operations rate the same set of 6,900 of the city’s 120,000 blocks. As Robinson drove, Cuevas, a 19-year veteran of the program, eyeballed and quickly rated the cleanliness based on a seven-point numerical scale.  To better ensure that the drive-by survey is representative of daily conditions, the week, day, time, and team doing the rating for each set of streets in the sample varies from month to month.

But there are two key reasons the survey findings may not mesh with public perceptions. First, the streets surveyed and the rating scale were developed in the late 1970s, a time when there may have been lower expectations—at least compared with today—for what measured up as an acceptably clean street. Additionally, the surveyed streets may no longer provide the most representative sample. Operations staff members acknowledge that public perceptions of what’s clean or dirty have changed over the years and are working to recalibrate their rating system as well as adjust which streets are surveyed.

Secondly, the ratings are compiled Monday through Friday. So the survey doesn’t capture a view of street cleanliness on weekends and holidays, when tourists abound and neighborhood commercial streets are busiest and litter most likely to pile up and trash cans overflow. For years, the City Council funded litter basket pick-ups on Sundays and holidays in business districts around the city. But the Council hasn’t provided funds for this service since 2009, when it pitched in $1.4 million.

Reconciling tourist impressions of what’s a clean street with those of New Yorkers may be impossible. For some tourists, the sense that the city’s streets are dirty may be heightened by the crowds and disorder that characterizes street life in some parts of New York, a level of activity that may be alien to their usual experience.

What may be more important is comparing New Yorkers own impressions of street cleanliness with those of the Mayor’s scorecard. Even if the Mayor’s office updates and improves its rating system, putting City Hall’s self-assessment alongside a survey of the views of residents and business owners could be instructive. After all, they’re the ones paying for the service.

Filed in Sanitation | | Permalink |