Thank you for giving me the opportunity to speak today on the New York City Industrial Development Agency (NYCIDA)’s proposed plan to provide financial support to Eastern Rail Yards in Manhattan. My name is Nathalie Alegre and I work at ALIGN: The Alliance for a Greater New York. We are a nonprofit advocacy organization that works to create good jobs, vibrant communities and an accountable democracy for all New Yorkers. We also co-anchor the Getting Our Money’s Worth coalition, a statewide labor-community coalition that works to create a just and sustainable economic development system.
The NYCIDA is proposing to grant ERY Tenants LLC $106 million in property tax exemptions to construct an office tower and retail development. There is also a subtantial subsidy granted through using the PILOT payments to repay the bonds for upgrading infrastructure at the site. ERY Tenants is a subsidiary of Related Companies, the largest private developer in New York. We should question why this huge, successful developer needs giant public subsidies to go about its businees, and whether the residents of New York City will receive any benefit from this development that they are subsidizing.
- Will the jobs created by this development be good jobs?
- Will Walmart or other big box stores be a part of this development?
- Will local residents have access to the jobs?
- Will there be strong subsidy recapture policies in the event that Related Companies fails to meet its job creation targets?
- Will any of these targets be memorialized in the financial assistance agreement to ensure that there is accountability in this project?
Our concerns about Related Companies and the NYCIDA are not misplaced.
Related Companies is the primary developer of the Gateway Center II mall in East New York, Brooklyn. According to news reports, Related is in advanced negotiations with Walmart for a lease at the mall. The East New York community, including Community Board 5, which represents the area, has come out against a Walmart in resolutions, protests, letters and lobbying. Yet Related has refused to meet with neighborhood leaders about the project several times, including cancelling a meeting with the full Community Board at the last minute. Related’s lack of transparency about the businesses it plans to bring into the community and its lack of responsiveness to community needs and concerns is a bad sign for the redevelopment of Hudson Yards and its surrounding community.
Related Companies is also the primary developer of Willets Point in Queens. This development is receiving up to $400 million in public support, yet Related recently announced that it wouldn’t build affordable housing, the community’s primary focus, until 2025. While rental prices skyrocket due to the redevelopment of the neighborhood, what do residents do for another 15-20 years before the affordable housing is built?
In both of these examples, the NYCIDA did not use its power to ensure that specific community benefits accompanied the granting of public subsidies. It is within the powers of the NYCIDA to establish prevailing wage or living wage standards, or require affordable housing targets in certain projects as a prerequisite to obtaining financial support. This ensures that public dollars contribute to the public good, and not just the bottomline for a wealthy private developer. It also means that if a corporation fails to meet its obligations and give taxpayers a return on our investment, the money can be returned to the public and used for another community benefit. In short, every public dollar spent on corporate subsidies should come with a money-back guarantee.
It’s vitally important that we raise and receive answers to our questions about the community benefits of this project. The current economic development process prioritizes big announcements about new projects, but rarely revisits the success or failure of projects once the subsidy is awarded.
An excellent example of this short-sightedness is a project that just ended at the end of June. For the last 15 Years, Merrill Lynch was subsidized with $12 million in tax exemptions and a $245 million bond by the NYCIDA for the World Financial Center North development. Merrill Lynch, in return, was obligated to create 2,000 jobs on top of the 9,000 that it already employed. Instead, Merrill Lynch fell nearly 5,000 jobs short of its goal, actually cutting jobs by the end of its deal. Seeing that the company would fall short of its agreement, the NYCIDA recaptured $379,000. The NYCIDA clawed back just 3% of the subsidy it had granted to the company. We need to prevent these accountability failures from ever happening again by establishing strong community benefit standards with clear benchmarks and automatic clawback provisions. Without such rules governing our subsidy programs, taxpayers will continue to throw money at development projects and ultimately be stuck holding the bill.
So, our question to the IDA board is this: how will you avoid the problems of the past and plan for a better future for all New Yorkers? We believe that prioritizing the community benefits of this project in the form of good jobs–not Walmart jobs, having a money-back guarantee, and engaging both Related and the public—whose money is on the line—in the process is critical before any subsidy is awarded.