Report: New Yorkers Kept in Dark About Outcomes of Recovery Zone Facility Bond Deals
March 31, 2011
Want to learn about how a Recovery Zone Facility Bond project in your neighborhood is creating jobs? Or even whether a particular development is financed by one of these special bonds authorized under the American Recovery and Reinvestment Act of 2009 (Recovery Act)? Good luck.
Despite attention from media and constituency-based groups, tracking the 10 projects that applied for these special bonds is nearly impossible. To help New Yorkers understand the projects so they can hold firms accountable for promised job creation, GJNY has mapped and summarized them in a report titled, Kept in the Dark: Poor Reporting on New York City's Recovery Zone Bond Deals.
An interactive map detailing the various projects around the City that applied and were approved for Recovery Zone Facility Bond financing. Not all the projects will go forward. For more details, click on the map or visit: http://www.google.com/fusiontables/DataSource?snapid=168772.
In June 2009, the “Recover NYC” program was unveiled to help select projects that applied for Recovery Zone Facility Bonds (RZFB), a bond program authorized as part of the Recovery Act. While the program seemed to have good intentions, the vague requirements related to job quality, how the projects were to assist unemployed or underemployed New Yorkers, and how the projects would help the city’s sustainability efforts, made it difficult to measure the program's success. Indeed, the objectives were so vague that merely allocating the bonds became a benchmark of success by economic development officials.
This report details RZFB projects and is a real-life example of how projects receiving discretionary subsidies make their way through the public – and not so public – application process. Accountability begins with transparency, an area that is lacking in the RZFB program. We conclude that economic development officials need to make the process of allocating subsidies more accessible to New Yorkers, to encourage more public participation in future projects, and to hold these projects accountable for creating good jobs.
Of the 11 RZFB bond projects mentioned in this report, 10 were proposed by the New York City Capital Resource Corporation (CRC, a sister to the Industrial Development Agency, the discretionary-subsidy arm of the Economic Development Corporation). Four projects located in Brooklyn, Queens and the Bronx received allocations totaling $66 million (out of the City's nearly $122 million allowance as per the Recovery Act). Should each project reach its goals, 498 construction jobs and 281 full-time equivalent (FTE) permanent jobs will be created in New York City.
The final allocation of RZFBs represents a much larger deal in Manhattan, dwarfing the 10 detailed in this report and the accompanying map: 3 World Trade Center received not only the $55.4 million remaining RZFBs from New York City, but the unused RZFBs from other authorities in New York state, for a total of $338.6 million. These bonds were allocated by the Liberty Development Corporation, a state entity. This created a lopsided allocation of economic development resources favoring Manhattan over the other boroughs.
The goal of this report is two-fold:
- To detail how poorly disclosed the RZFB allocation process is, making it difficult for taxpayers or public officials keep RZFB projects accountable for the jobs promised.
- To provide a broad overview of the RZFB allocation process based on our experience promoting public participation in other economic development programs. Many RZFB projects went through a detailed public hearing process but their applications were withdrawn. No explanation of the aborted projects was given to the public, a disincentive for public participation. Five projects garnered public attention.
The 10 RZFB proposals examined in this report are summarized by the following factors:
- The amount proposed and allocated
- The number of construction and permanent jobs promised
- Whether the CRC board voted in support of the project
- When the Recovery Zone Facility Bonds were sold on the market
- Where possible, we included occupational wage data for completed projects
This information is not publicly available in one location. GJNY staff assembled it by keeping close tabs on the public hearing process, requesting information from CRC staff, submitting Freedom of Information Law Requests, attending CRC board meetings and reviewing board meeting minutes, and analyzing municipal bond sales documents at the website of the Municipal Securities Rulemaking Board.
The five proposed Recovery Zone Facility Bond projects that garnered special interest are:
St. Barnabas Hospital/Arthur Management ($19.5 million sold) – Proposed amidst efforts by the hospital to block its resident physicians from unionizing, the upgraded parking facility financed by the bonds will actually require fewer workers to operate than the current parking lot. At the time of the application, the Committee of Interns and Residents (CIR/SEIU Healthcare) was fighting for union recognition for the hospital’s 280 residents, who in 2009 voted overwhelmingly in favor of the union, but were unable to begin contract negotiations pending the hospital’s appeal of a labor ruling. The Teamsters local representing the parking lot workers and CIR presented payroll documents showing that 28 parking lot attendees worked at the parking lot at the time of the public hearing, but the RZFB bond application for the garage says only six permanent jobs will be created (and 87 temporary construction jobs).
Albee Development LLC/City Point ($20 million sold) – This project sits on what was known as Albee Square Mall, which was demolished in 2007 by the city, displacing dozens of small, mostly minority-owned businesses to make room for a more upscale mixed-use project called “City Point”. The original City Point project faltered in the recession, but its retail phase was resuscitated by the RZFBs. CRC documents claim the project will create 108 construction and 68 full-time equivalent permanent (mostly retail) jobs. But in press releases after the project won CRC approval, officials combined the retail job figures with a future housing component to claim 328 construction jobs and 108 permanent full-time equivalent jobs would be created.
ESmith Legacy ($19.7 million proposed) – This proposal for a new hotel in Harlem did not receive RZFBs even though it was authorized by the CRC board. Media reports indicate that the developer worked with the Hotel Trades Council and agreed to a local hiring agreement for the hotel staff. Such an agreement could have established a positive precedent for subsidized projects not only in Harlem where unemployment is at least 14%, but throughout the city. CRC documents cited 129 construction and 81 permanent full-time equivalent jobs for he hotel. The developer withdrew its application and stated on its website that the project would continue without RZFB resources.
Broadway Stages ($13.5 million proposed) –This proposal to expand a television, music and video production facility in the Greenpoint section of Brooklyn generated a well-attended hearing demonstrating broad support from employees, neighbors and local union affiliates. The proposal was expected to create 59 construction jobs and 38 permanent jobs. However, due to its location on a U.S. Environmental Protection Agency Superfund site (indicating severe contamination by a previous occupant) and its inability to meet the RZFB deadline, this application was pulled and not voted upon by the CRC board.
WyhteHotel LLC ($15 million sold) --This proposal for a 73-room boutique hotel in Williamsburg, Brooklyn and in an Industrial Business Zone, received less supporting public comment than some of those mentioned above. However, GJNY and other policy groups expressed concern that the deal undermines the purpose of the Industrial Business Zone (IBZ) program. IBZs were established by the Bloomberg Administration to help retain and create manufacturing jobs. Putting an upscale hotel in an area targeted for manufacturing may fuel gentrification and land-price pressures. The project is expected to have approximately 53 construction jobs and 33 permanent jobs.
The Recovery Act raised transparency on federal spending to its highest level ever (see Recovery.gov). While we are encouraged by the bold actions taken by New York City with the development of the stimulus tracker specifically for Recovery Act funds (nyc.gov/stimulustracker), those innovations were oddly not applied to Recovery Zone Facility Bonds.
Want to know who applied for a subsidy? Sign up for our "Subsidy Alert"
GJNY takes a close look at the proposed subsidy package--worth nearly $130 million--for Fresh Direct to relocate to the South Bronx. In early 2012, Fresh Direct started a bidding war between New York City and New Jersey officials when it threatened to leave its current home in Long Island City, Queens. Learn more about the subsidies, job promises and the efforts of residents to block the on-line grocery retailer's move to their waterfront.
As government aid begins to flow into areas devastated by Hurricane Sandy, Good Jobs New York will provide analysis and recommendations regarding these resources that promote a transparent and equitable allocation of funds that go to individuals and businesses that need it most.
Our database contains information on thousands of companies that received economic development subsidies in New York City.
Learn about major corporate giveaways to the financial industry, sports facilities and retail developments in New York City.
- The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation by Greg LeRoy, executive director of Good Jobs First
- Corporate Subsidies and You: Where Do New Yorkers Fit In?
- Guide to Corporate Research by The Corporate Research Project
- Glossary of Terms by Good Jobs First