Where’d All that Redevelopment Money Go?

The banner justification for redevelopment is that the new construction will generate additional taxes, and they will benefit the city. That was actually the whole justification for the taking in the wretched Kelo case. Right? Well, maybe not so right. We know that redevelopment deals often include provisions whereby the redevelopers get to enjoy “tax abatement” — they don’t have to pay property taxes on their redeveloped projects, or they don’t have to pay the full amount of those taxes, either  temporarily or in perpetuity. Which is exactly what happened in Kelo — the municipal goodies included a 12-year tax abatement for Pfizer, the giant pharmaceutical company that was supposed to benefit from the project. The same was true of the notorious Poletown case in Detroit where General Motors (then the largest company in America) got a multi-million dollar tax abatement. As we know, that didn’t help — GM went bankrupt anyway.

But since redevelopment bonds (whose sale produces the funds used to finance the project) have to be serviced and eventually paid off, that means that the net cash flow from redevelopment projects is . . . We like the way California’s Court of Appeal Justice Macklin Fleming put it in one of his opinions: the project promoters, said he, promise to bake a bigger economic pie, with bigger slices going to all, but in reality what they often produce is pie in the sky.

Thus, we now learn from none other than that great supporter of redevelopment takings, the New York Times, that the new Barclays Center in Brooklyn, built on the newly condemned land of the Atlantic Yards redevelopment project with a “taxable” assessed value of $329.1 million, won’t have to pay any property taxes like the rest of you peasants. Isn’t that nice?

In receiving such royal treatment Barclays will be joining such luminaries as Madison Square Garden, Yankee Stadium and CitiField who also don’t pay property taxes on their playgrounds. See Jim Dwyer, Vital City Revenue, Lost in Fine Print, N.Y. Times, February 13, 2013, at p. A23. Quoth Mr. Dwyer:

“A classic in the field is Madison Square Garden, which received a tax exemption on its property in 1982, as long as the Knicks and the Rangers agreed to play there for 10 years. Everyone in government apparently thought that meant a 10 year tax abatement. There were great worries that the sport teams would move away with the trauma of the Dodgers leaving Brooklyn in 1957 having ossified into an abandonment neurosis, acted out in compulsive, humongous handouts of public money to sports  teams.

But in 2002, 20 years from when the “10-year” tax exemption was granted, Joyce Purnick, a columnist for The New York Times, read the fine print and discovered that it expires on the 12th of Never.

That is, Madison Square Garden pays no property tax today either, 31 years later. And by the way, for many seasons, the Knicks gave no sign of playing actual basketball.

Moment of bewilderment. All the people involved in the deal, which was made when Edward I. Koch was Mayor, said they thought the exemption was for only 10 years, but ohmygosh!”

Stay tuned, folks. There is more to come on this subject.

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