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Public Subsidies Flowing Up the West Side

by Brad Lander, Apr 12, 2004
 
 Proposing to convert Manhattan’s west side from a low-rise, formerly industrial waterfront community into high-rise housing, office towers, and grand civic space is nothing new. Neither is controversy about whether public subsidies should be used, and whether any of the new housing will be affordable to the average New Yorker.

So perhaps it should not have been a surprise when Mayor Michael Bloomberg announced that the city would use $350 million from the Battery Park City Authority to help pay for the proposed Jets Stadium and Javits Convention Center expansion. Still, affordable housing advocates were stunned. They claim that the city is breaking a long-standing promise to use these funds for affordable housing. West Side stadium opponents were also dismayed, complaining that the publicly-subsidized stadium and related development will spell the end of Hell’s Kitchen. Meanwhile, the Bloomberg Administration claims that the stadium and related development are the highest and best use for the West Side.

The skirmish over the Battery Park City surplus is only the latest in a 40-year battle that serves as a lesson in how community development and real estate development interact in New York City.

Two-Thirds Of Battery Park City Was Supposed To Be Affordable Housing

In the early 1960s, the government began to plan a major new neighborhood in place of rotting piers along the southern section of Manhattan’s Hudson River waterfront. In a 1969 agreement that seems utopian today, Mayor John Lindsay and Governor Nelson Rockefeller pledged that two-thirds of the 15,000 apartments in the new Battery Park City would be affordable to families of low and moderate incomes. According to the development’s master plan, “one-third of these apartments are to be low-income, one third moderate-income, one-third conventionally financed units. The units will be thoroughly mixed throughout the project to create an economically and racially integrated community without enclaves of high or low rent housing.”

The development and operating costs for Battery Park City have been heavily subsidized by New York City taxpayers. The Battery Park City Authority leases the land from the city, and then sells land to developers, or charges rents and “payments in lieu of taxes” (which are called PILOTs) to landowners. The authority makes an annual payment to the city. However, over the past 20 years this payment has averaged just 20 to 35 percent of what the land would be taxed at under the city’s normal tax rate. This is why Lindsay developed the plan to make two-thirds of the housing units affordable. ''If you are going to use public land and public money, you have an obligation to be sure that it is racially and economically integrated or at least benefits people of all classes,'' according to then-Manhattan Borough President Percy Sutton .

Battery Park City Turns Luxury, With A Promise To Subsidize Affordable Housing Elsewhere

That obligation to develop an integrated community, however, was abandoned by the time Battery Park City was finished. By the mid-1980s, as the property market in lower Manhattan rebounded after the city’s fiscal crisis, it was agreed that Battery Park City would be an exclusive, luxury community – with very few affordable units (there are today around 325), instead of the 10,000 that had been promised. In place of those units, the city agreed to use $1 billion generated by the Battery Park City Authority to subsidize affordable housing elsewhere in the city.

In 1986, Governor Cuomo and the state legislature agreed to issue $400 million in bonds – backed by the Battery Park City Authority surplus – for 24,000 units of housing for people of low and moderate income, but it would be off-site. Far less resulted: $143 million of bonds were used to create 1,557 low-income housing units in Harlem and the Bronx, including the much-praised New Settlement Apartments.

In 1989, Mayor Koch signed a new agreement with the Battery Park City Authority – in which the authority agreed to give the city $600 million to pay for affordable housing around the city. The city agreed not to use any of the $600 million to substitute for existing city spending. Instead, it was supposed to be new money for affordable housing, beyond what the city would already have spent.

No Money For Housing

Mayor Bloomberg’s March 25th press release quotes Battery Park City Authority Chairman James Gill saying that “After fulfilling our commitment of providing $600 million to the City of New York for low-cost housing, the Battery Park City Authority is proud to work with Governor Pataki, Mayor Bloomberg and Comptroller Thompson for the joint purpose of expanding the Javits Center and providing economic opportunity for Manhattan's West Side.” To the claims of advocates like Housing First! that this was not true, City Hall spokesman Jordan Barowitz said “Through four administrations and 18 years, the city has allocated the Battery Park City money in the same way, and to claim foul now is sophism."

Sophism perhaps, but certainly not a new claim. A 2000 study by City Project concluded that while the Battery Park City Authority had paid several hundred million to the city, none of that money had produced any identifiable housing. Instead, the money has simply gone into the city’s general revenue, helping it to balance the budget. The City Project report concludes: “The 30-year history of the Authority confirms in several respects a common criticism of public authorities … Although created to serve a public interest, they largely benefit narrow private interests at huge public cost. The primary public purpose of the Battery Park City Authority was to fund a substantial number of affordable housing units in New York City. With one modest exception, the State, City, and Authority have collectively failed to meet that public goal.” (See Public Authorities by Glenn Pasanen, who was the author of the City Project report, and Gail Robinson)

This criticism is not leveled only by advocates. Meyer Frucher, president of the Battery Park City Authority from 1984 to 1988 and later CEO of the Philadelphia Stock Exchange told The New York Times in 2001 “I am terribly disappointed. I think it has been a breach of faith.” . And even mayoral candidate Michael Bloomberg called in 2001 for “renewing the promise of Battery Park City to support affordable housing.”

But three years later, it is the Jets who stand to benefit. From the Administration’s point of view, the key feature of the Battery Park City surplus is that it can be given to the Jets without any approvals from the City Council. And with 60 percent of New Yorkers opposing using public money for the Jets’ stadium, and a growing number of City Council members opposed, that flexibility may be needed.

West Siders see an even greater irony here. Harvey Epstein, Associate Director of Housing Conversation Coordinators claims that “the stadium and related plans for the redevelopment of Hell’s Kitchen will displace existing low-income tenants, and take away the option of space to build many more units of affordable housing in the years to come.”

If you are keeping track for the next 35 years, the Department of City Planning has indicated that there will be 1,500 units of affordable housing amidst the 20 to 40 million square feet of commercial, residential, convention, sports, and open space development on the Far West Side in the coming decades. No word on whether any of them will be funded with future revenues from Battery Park City, or from the Jets.

Brad Lander is the director of the Pratt Institute Center for Community and Environmental Development, and former executive director of the Fifth Avenue Committee.


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