Far West Side Development Critics Line Up
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
At a hearing scheduled for today, critics will try to poke holes in the city’s plan to provide hundreds of millions of dollars in tax breaks to help develop a new office district on the far West Side of Manhattan.
The Bloomberg administration says Midtown is full and the incentives are needed to draw office developers into the area, now a low-rise expanse stretching from about Eighth to Eleventh avenues and from 31st to 43rd streets.
Critics, who include fiscal watchdog groups, say improving the area’s transportation by extending the no. 7 subway line and the recent rezoning of the neighborhood should be enough to entice developers to the far West Side.
A development consultant, Brian Hatch, said the city’s economy was strong enough to avoid handing out tax breaks.
“They say there is no place left to build in Midtown, but they need to give massive subsidies to get this thing going? That doesn’t make sense,” Mr. Hatch said.
“What we have is a demand side problem, not supply side. As soon as there is a tenant that wants to build, bang, they will find a site,” he said.
The rents in the area, the city suspects, will be 20% to 25% lower than Midtown, but construction costs will be the same, making it less profitable to build. City Hall says the incentives will help direct $17.2 billion in private sector investment to the area through 2035, 24 million square feet of office space, thousands of apartments, 225,000 new permanent jobs, and 217,000 construction jobs.
Last June, Assembly speaker Sheldon Silver killed Mayor Bloomberg’s vision for a West Side stadium in the Hudson Yards district, saying that it would compete against the rebuilding of Lower Manhattan, which is contained in the speaker’s district.
Yesterday, a spokesman for Mr. Silver, Charles Carrier, said the speaker had similar concerns over the Hudson Yards tax breaks. “We have a concern that the depth of the subsidies not place a greater advantage to development on the West Side than in Lower Manhattan,” Mr. Carrier said.
Deputy Mayor Daniel Doctoroff said tax incentives are common in most new commercial buildings across the city, and that the level of Hudson Yards incentives was justified to attract the “pioneer” developers who venture into the far West Side. He noted that the tax incentives were roughly half as big as those designed to boost redevelopment around the former World Trade Center site.
“The first movers are not exactly moving into the heart of Midtown,” Mr. Doctoroff said. “We feel that that makes it appropriate to give them some benefit.”
Today’s public hearing in front of the city’s Industrial Development Agency is largely a formality since the agency is expected to approve an amendment that will allow the tax breaks on Tuesday. The City Council approved the Hudson Yards plan in October.
Critics say the tax breaks are meant to accelerate the development of the area to help float what they call a highly ambitious and speculative financing plan by the city.
Developers in the Hudson Yards district, instead of paying property taxes and mortgage recording taxes to the city’s general fund, will give payments in lieu of taxes to a city-created corporation. The corporation will use that money to pay down debt on about $3 billion in bonds it hopes to issue this fall. The proceeds from the bond sale will be used to pay for the extension of the no. 7 subway line, as well as other area improvements like parks and new streets.The city will pay the debt service on the bonds for about three years, but if the project is a total failure, the loss will be borne by the bondholders.
A contributing editor of City Journal, Nicole Gelinas, who specializes in municipal finance, questioned whether the bonds would be attractive to investors.
“They are basically taking on all of the risk of speculative development,” Ms. Gelinas said.
Proponents of the city’s financing plan say an extra tax incentive is necessary to offset the added cost of building in the Hudson Yards district. Based on the city’s rezoning of the area, developers have to pay a fee to use the expanded air rights.
The president of the Partnership for New York City, Kathryn Wylde, said there is “some nervousness” that the extra costs for the expanded air rights would have “a chilling effect” on demand to build in the area. “That is balanced out by a discount” on property taxes, she said.