Atlantic Yards Cost/Benefit Analysis

I. Summary

The Economic Research and Analysis Department has completed a cost/benefit analysis of the
Atlantic Yards project. The development program herein represents the City’s determination of a
reasonably likely build program consistent with the General Project Plan and Environmental
Impact Statement. The proposal includes a 675,000 gross square feet (GSF) Arena to host
basketball games and other events, 581,000 GSF of office space, 225,000 GSF of retail space,
150 commercial parking spaces (in addition to those required for the Arena), approximately 6,400
residential units and 8 acres of public space. The net new fiscal impact of the project on New
York City is shown in the following table:

Table 1. 30-Year (2007-2036) Incremental Fiscal Impact to NYC

Impacts are net new to NYC and in Millions of 2009 Dollars.
The Arena NPV @ 6.25%
Construction/Temporary Impacts $5.3
Operations Impacts $211.3
Total $216.6
Mixed-Use Development (Incl. Site Acquisition)
Construction/Temporary Impacts $42.2
Operations Impacts $422.3
Total $464.5
1
Benefit to NYC, Net of Unrealized Fiscal Income $681.0
Cost to NYC
2
Direct City Capital Contribution ($178.7)
3
Indirect City Costs ($91.0)
Total ($269.7)
Net Benefit to NYC $411.3 123

All values reported in the table have been adjusted to reflect tax impacts that are estimated to be
net new to NYC.

II. Overview of the Analysis

In the table, the estimated impact of construction activity includes four components: (1) the
personal and business taxes related to the activity of the construction workers and the associated
indirect and induced jobs; (2) the sales tax revenues generated by the purchase of construction
materials; 4 (3) the mortgage recording taxes associated with the financing of the private land

1
These benefits do not include revenue that will be "unrealized". Unrealized benefits are sales taxes waived on
construction materials, certain mortgage recording taxes, PILOT benefits in respect of actual real property taxes, and
certain income taxes associated with tax-exempt bonds issued to finance the project, which are not to be collected in
connection with the project.
2
The "Direct City Capital Contribution" includes capital disbursed to Forest City Ratner and City-funded infrastructure
improvements in the project area (some of which are not directly related to the project, but which have been included in
their entirety in order to ensure that the analysis is as conservative as possible).
3
The “Indirect City Costs” include the City’s contribution of certain property interests (e.g., interests in street beds to be
demapped) and housing subsidies generally made available by NYC Department of Housing Preservation and
Development (HPD) and NYC Housing Development Corporation (HDC) to affordable housing developers.
4
Of the $5.3MM construction/temporary impacts associated with the Arena, none of that impact is attributable to sales tax
on construction materials because Forest City Ratner is to receive a sales tax waiver for construction of the Arena. Of the
$42.2MM construction/temporary impacts associated with the mixed-use development, $11.2MM is attributable to sales
tax that will be paid on the materials required for construction of all towers.
acquisition and the construction of the office tower; 5 and (4) the real property transfer tax
generated at the time of the acquisition of private land parcels needed for the development. The
value is net of certain foregone income taxes deriving from the issuance of tax-exempt bonds that
will be used to finance the project.

The operations impacts include taxes that will accrue once construction of each component of the
project has been completed and occupancy begins. Almost half of the impact is the result of
personal and business taxes from the workers who will be employed onsite and their respective
employers.

Operations impacts for the Arena also include: (1) sales tax revenues generated by spending
within the Arena on items such as tickets, concessions, retail merchandise, and parking; and (2)
the direct and indirect tax impacts that will be generated by spending associated with the project,
but that takes place outside of Atlantic Yards. The estimates are adjusted such that they account
only for spending that would not have taken place in New York City but for the Arena.

Additional fiscal impacts from the mixed-use development include real property taxes (net of
ICAP and 421(a) benefits for which the project is eligible as-of-right and net of certain foregone
property taxes during the construction of towers 1 through 4 and 11 through 14), real property
transfer taxes and mortgage recording taxes that are expected to be generated by the sale of
individual condominium units, as well as personal income taxes and sales taxes attributable to
6
households occupying the residential units that are considered net new to the City. Operations
impacts are net of the taxes associated with any economic activity displaced by the Atlantic Yards
project. 7

As indicated in Table 1 and footnotes 2 and 3 above, the costs to the City of the Atlantic Yards
project reflect City capital contributions, City-funded infrastructure improvements (some of which
are not directly related to the project, but which have been included in the analysis in order to
ensure that it is as conservative as possible), the subsidy implicit in Housing Development
Corporation (HDC) second mortgages available to certain residential portions of the project
(which are generally consistent with benefits available to other affordable housing projects in the
City), and foregone fiscal revenues from the below-market sale or contribution of certain property
interests (e.g., street beds that are to be demapped in connection with the project).

In reviewing the foregoing, it should be noted that many of the taxes deemed to be
“foregone” herein would not be collected if the project were not to proceed and therefore
could be argued not actually to be a “cost” to the City. However, to ensure that this
analysis is as conservative as possible, all such foregone taxes are being treated as “lost
revenue”.

III. Comparison to Previous Estimates

In June 2005, NYCEDC released the results of a cost/benefit analysis based on the
characteristics of the Atlantic Yards project at that time. In 2005, the project included the Arena,
approximately 2.3 million GSF of office space, 226,000 GSF of retail space, 4,500 residential
units and 8 acres of open space. At that time, the benefit to NYC, gross of costs with the
exception of sales tax and mortgage recording tax waivers, was estimated to be $524MM (NPV in
2005 dollars over the period 2006 through 2035, discounted at 5.5%).

5
Of the $42.2MM construction/temporary impacts associated with the mixed-use development, $4.0MM is attributable to
mortgage recording taxes. Mortgage recording taxes associated with the financing of the Arena and all residential towers
are to be waived and are therefore not reflected in the respective totals.
6
It was assumed that the residents and workers who are estimated to be new to NYC as a result of Atlantic Yards are two
mutually exclusive population groups and thus, there should not be any double counting of fiscal impacts between the
personal income tax and sales tax associated with households and the personal taxes calculated from onsite jobs.
7
Such taxes include real property taxes, personal and business sales taxes from direct jobs, sales tax generated from
sales at retail establishments, and personal income and sales tax of residents.
Between 2005 and the present, in addition to the passage of time, there have been significant
changes in the project’s characteristics that contributed to an increase in gross benefits to the
City. These include, in particular, an increase in construction costs and estimated in-Arena
spending. In addition, since 2005, in an attempt to ensure as fulsome and accurate a picture of
the fiscal impact of City projects generally, NYCEDC has updated and refined its cost/benefit
methodology, providing a more complete estimate of taxes generated by projects in the City. This
new methodology is, in many ways, more conservative than earlier methodologies employed by
NYCEDC, as, in most instances, it reflects only direct (rather than indirect) impacts associated
with project operations. The model’s assumptions regarding inflation/discount rates and discounts
for net new activity have also been refined since the 2005 analysis.

It should also be noted that, unlike the analyses that NYC’s Independent Budget Office (IBO)
completed in 2005 and 2009, the analysis contained herein does not simply set the costs of the
entire project against the benefits of the Arena portion only. Instead, this analysis includes a
comprehensive assessment of costs and benefits of the entire project. In addition, as discussed
in the previous paragraph, NYCEDC’s new analysis has also been updated to reflect current
conditions.

IV. Conclusion

The cost/benefit analysis completed for the Atlantic Yards project estimates a positive, net fiscal
impact on New York City of $411.3MM over a 30 year period.