Adams faces criticism over movie studio development deal

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Developers hoping to grab real estate in big cities often persuade local authorities to shower them with taxpayer-funded inducements to seal the deal and keep them from moving elsewhere.

But a new movie studio set up on a pier in Midtown Manhattan is shaping up to be a particularly good deal, at a particularly difficult time for New York City.

Mayor Eric Adams’ administration said the project is an important win for the city’s future and for taxpayers, but it involves subsidies that some residents and experts seem unnecessarily generous.

The city will contribute tens of millions of dollars to repair and maintain the pier, which it does not automatically do in such projects, and it will exempt the development from any form of property taxes. He also set a much lower rent for the location than tenants at nearby docks pay.

Timothy J. Bartik, senior economist at the WE Upjohn Institute for Employment Research, a Michigan research group, said New York City’s concessions for the project were very high and comparable to bids typically used to attract major employers. like cars. and battery manufacturing plants.

The Pier project rekindles an age-old debate in New York and beyond about the pros and cons of offering heavy incentives to attract development and business; opaque and often exaggerated projections of economic impact; and whether those concessions are needed in the first place. The central question is whether such generosity is vital to maintaining a city’s competitiveness or whether it does more harm in the long run, putting a strain on essential budgets and services.

City officials said the studio project and another recent initiative that includes similar incentives, for a professional football stadium in a mixed-use development in Queens, are critical to New York as it emerges from the Covid-19 pandemic. The first project will provide jobs; the second will also produce affordable housing, which the city desperately needs.

On the dock, the incentives were also meant to ensure the project moved forward as quickly as possible, officials said, saying the new studio would help keep New York’s film industry competitive.

We’re very happy with these deals, you know, Andrew Kimball, president of the New York City Economic Development Corporation, said in an interview.

But, Mr. Bartik said, with the studio expected to create 400 jobs, the city’s concessions, including rent reductions and tax exemptions, amount to about $215,000 per worker over the first 15 years of employment. a possible 99-year lease. Incentives of this size are common in economic development agreements nationwide, he added, but the median amount per worker is around $50,000.

It’s a very high offer that only seems justified if you believe this project is absolutely essential to the future of the film industry in New York, Mr. Bartik said.

New York’s heavily subsidized film production industry has grown rapidly in the city over the past decade, with new studios opening in the Bronx, Brooklyn and Queens, some involving major players like Netflix and Robert De Niro.

Yet a group of local, state and federal officials, joined by community leaders, are questioning the studio deal, saying the Pier 94 location near West 52nd Street in the Hells Kitchen neighborhood is real estate of first order which should not require concessions to be developed. .

Those critics pointed out that the same real estate group now developing the site promised previous city governments it would build there years ago and never did. And they questioned the Adams administration’s decision to let the company, Vornado Realty Trust, develop an entirely new project in an arrangement that was not put out to tender.

From an economic development perspective, it’s a giveaway, said Jeffrey LeFrancois, chairman of Manhattan Community Board 4, which covers part of the West Side that includes the pier. Given that Vornado has already had the ability to do this for the past 13 years and has done nothing, it is outrageous that they are taking this taxpayer pier for pennies on the dollar.

Mr. LeFrancois said the conditions were particularly favorable because Vornado, which operates mainly office properties in New York, was eager to find new sources of revenue as companies jettisoned physical offices. Subsidies are part of doing business, he said, but the loss the city has decided to take here is beyond the norm, given the 99-year lease term.

The two projects on city-owned properties further cement the Adams administration’s alignment with the real estate industry: I am real estate, said Mr. Adams, a small landlord, during his run for the city ​​hall.

The relationship is mutually beneficial: developers can build on municipal land and the mayor can point to new projects as proof that he is pulling New York out of the pandemic.

In Queens, the mayor has touted a redevelopment plan for part of the borough that will include the new football stadium and what officials have described as the largest construction of fully affordable housing since the Mitchell-Lama developments in the 1970s. Like other stadiums in the city, the new one will not pay property taxes, although the team playing there, the New York City Football Club, will pay rent.

That puts the deal a cut above previous stadium deals the city has entered into, said Sean Campion, director of housing and economic development studies at the Citizens Budget Commission.

But economists who study stadium subsidies tend to agree that the costs of such deals generally outweigh the benefits, and in January the city’s independent budget office said the cost of waiving property taxes on the football stadium would be at least $516 million in lost revenue on the teams 49-year lease. (Mr Kimball called the report devoid of reality, as he assumed another developer would have wanted or could have built on the land.)

At the wharf, the city pledged $73.5 million to repair and maintain the property through 2060 and set a starting rent of $4 per square foot, or about $900,000 per year. Annual rent would peak at $2.8 million in 86 years. Vornado, which would share a portion of studio revenue with the city, would take over responsibility for the pier in 2060.

In comparison, tenants like Chelsea Piers and the Intrepid Sea, Air & Space Museum that occupy piers operated by the Hudson River Park Trust, which is controlled by state and city governments, are required to maintain themselves their jetties. The museum spends about $1 million a year on its location, Pier 86, and sometimes millions more if repairs are needed, a museum official said.

Chelsea Piers has spent $80 million since 2010 to maintain its docks, the company said, and it pays the trust about $9 million a year in rent, more than twice Vornados’ base rent per square foot. Annual rent for Chelsea Piers is expected to reach approximately $31.4 million in 2065.

Given its prime location on Manhattans West Side waterfront, it’s unclear whether the cost per square foot is enough or not, a group of elected officials, including Rep. Jerrold Nadler and Mark Levine, the president of the borough of Manhattan wrote about the pier deal in a later statement to the city’s economic development corporation.

Vornado is a publicly traded company whose shares have been battered since early 2020, and the project could ultimately involve Hudson Pacific Properties, which has film studios on the West Coast and in England, and private equity firm Blackstone in as partners.

Vornado also holds the lease for adjacent Pier 92, which, like Pier 94, extends into the Hudson. More than a decade ago, Vornado promised to double the size of an exhibition center already on site.

The company never followed through, leading to tense arguments between officials from previous administrations and Vornado executives, according to two people familiar with the talks who described them on condition of anonymity. Under the current deal, the studio would be built on Pier 94 and the city would take over Pier 92, which was deemed unsafe in 2019 due to structural issues.

Mr. Kimball said the rent paid by the studio would be comparable to what Steiner Studios, the largest studio in the United States outside of Hollywood, is paying for its recent expansion in Brooklyn’s Sunset Park neighborhood. Pier 94’s piles need immediate repair, requiring the city to cover those costs to move the project forward, he said.

A Vornado spokesperson said in a statement that the studio project would also create public amenities, including public restrooms and open spaces, and 1,300 construction jobs, and cement New York’s position as a leading market for content production and studio space.

Mr Kimball suggested it was unfair to compare the Vornado pier deal with the Hudson River Park Trusts pier deals. In economic development, there is no cookie cutter, he said.

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