Comments from Good Jobs New York

June 12, 2002

Regarding the Allocation of Liberty Bonds for “20 River Terrace”

Good evening and thank you for providing us with this opportunity to comment on the proposed allocation of $125,000,000 Liberty Bonds for the benefit of “20 River Terrace,” located in the Battery Park City section of Lower Manhattan.

My name is Bettina Damiani of Good Jobs New York, a project of the Fiscal Policy Institute with offices in Albany and New York City and Good Jobs First, based in Washington, DC promotes accountability to tax payers in the use of government subsidies.

We are here to urge the New York State Housing Finance Agency to reconsider the use of Liberty Bonds in assisting the completion of this project. As much as we can tell from the information provided to us, it is not justified by the benefits the public will get in return for its investment. These Liberty Bonds are meant to help stimulate New York City’s economy in the wake of the unprecedented disaster on September 11^th, and are required to be used for a public purpose.

What Are the Public Benefits vs. the Costs?

In the documents on this project, made available to us for inspection prior to this hearing, the “public purpose” claimed by the applicants is 15 units of housing offered at a reduced price, available to families making at most 150% of the Area Median Income for New York City (AMI). In other words, a family of four would have to earn at most $94,200 a year in order to be eligible for this housing. As it turns out they must also earn at least this amount in order to manage the rent, which according to project documents is 30% of 150% of the AMI. In other words, by setting the income bar so high, the majority of New Yorkers will not benefit from this project, simply because they don’t make enough money.

We are unsure what the total cost of this project to the public will be. We don’t know because we don’t have any estimate of how much the applicant will save by using Liberty Bonds – which are tax exempt and carry a lower interest rate – rather than using regular financing. We don’t know the value of the real estate tax abatement or the Green building tax credits that the applicant most likely will receive. Before we can make any judgment about whether the public is getting at least its money’s worth by granting River Terrace Associates $100 million in Liberty Bonds, we need to have better access to information about how much it will cost.

On the other hand, we can make an educated guess that these funds could be put to better use based on the New York State HFA’s usual practice when it comes to the giving assistance to private developers. As we understand it, normal protocol requires a split of 80% to 20% between market rate units and affordable units of housing, which are generally set aside for families earning 50% or less of the AMI. In the case of this development, that would set aside 59 (instead of the current 15) of the 291 units and cut their rent price by two thirds. According to the NYSHFA usual standard of public benefit, this project does not measure up.

Weak Rental Market?

The applicants state in the project documents that public assistance is needed to finance its project because the rental market in Battery Park City has become weak, after 9/11. While that was true immediately after the attacks when occupancy in Battery Park City fell as low as 60% according to some estimates, it is no longer true. At the most recent Board meeting of the Lower Manhattan Development Corporation, Chairman John Whitehead announced that Battery Park City had achieved a benchmark success by boasting at least 90% occupancy rates in all the buildings surveyed. Private financing got this project well into construction before the September 11^th attacks. Now that the rental market has been strengthened, private financing can be used to finish the job.

These Liberty Bonds are meant to address the needs of those many who are struggling in the difficult economic environment and housing crisis that New York City faces today. The HFA should use these bonds to leverage housing that is affordable to the majority of New Yorkers. Of the $8 billion only $1.6 billion is available under this program to build housing. It is important that the HFA does not throw away an opportunity to use these bonds well by subsidizing a project that clearly provides such a questionable benefit to the majority of New Yorkers post September 11^th.

Thank you for the opportunity to speak to you this evening.