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Spring 2005
   
How Not to Develop the Far West Side
Steven Malanga
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In his State of the City address, Mayor Michael Bloomberg proclaimed development of Manhattan’s Far West Side crucial to New York’s economic future. The mayor should be overjoyed, therefore, about what’s happened since. Buoyed by government plans to rezone and improve access to the area, developers are snapping up Far West Side sites. The area’s long-dormant waterfront is slowly waking up. And the Metropolitan Transportation Authority, prompted by an unsolicited $600 million bid from Cablevision, will auction off the development rights over its 26-acre rail yard near the Jacob K. Javits Convention Center.

But far from encouraging this eruption of the free market, the businessman mayor is out to derail any development of the MTA site that competes with his plan to build a stadium there to lure the 2012 Olympics. In pushing his centrally planned vision, the mayor who was once a CEO seems to have lost faith in the free market and succumbed to New York’s political culture, which reflexively favors its own idea of how the city’s economy should work over the more inventive and spontaneous visions of entrepreneurs. That culture believes that it is okay for government to warehouse valuable land, to employ restrictive zoning that unreasonably limits how the free market can work, and to micromanage economic-development projects with paralyzing inefficiency. Occasionally, the free market fights back and wins, as in Times Square, where market forces overwhelmed a government plan to make the area an uninspiring office district and instead revived it as a bustling entertainment and tourism mecca.

What’s beginning to happen on the Far West Side is the most hopeful signal about the city’s future since the 9/11 attacks. Rather than stifle or redirect it, Mayor Bloomberg and the rest of the government should get out of the way and let it blossom.

New York’s political class has been trying for 30 years to spark the redevelopment of the Far West Side, with unimpressive results. Consider, for starters, the cautionary history of the Javits Center.

In 1975, when officials were making a mess of trying to replace the city’s existing convention facility, the increasingly dilapidated New York Coliseum on Columbus Circle, up-and-coming developer Donald Trump proposed building a privately financed, for-profit convention center on the Far West Side. City and Port Authority officials had originally proposed a fantastic scheme for a new center on a giant platform over the Hudson River, but they dropped that project as too costly. Their next notion, to build the center in Battery Park City, similarly died, since there was then no hotel in lower Manhattan.

Perhaps to save the city from itself (and to get some publicity), the brash Mr. Trump identified a better site and proposed a modest, $110 million center. After first dismissing Trump’s plan, the Port Authority then decided essentially to buy him out and do its own project on his site. It seems that Trump didn’t have a grand enough vision to suit it—though he’s never subsequently been accused of lacking grandiosity. Officials went on to hire a famous architect and upsize Trump’s plans by a mere $270 million. Meanwhile, New York State squeezed the Port Authority out of the project and named the Urban Development Corporation (UDC), previously a developer of subsidized housing under a recently defunct federal program, as the builder and operator of the new convention center.

What happened next demonstrates why government likes to elbow aside the private sector: to keep the patronage power that comes with such enormous undertakings. The reborn UDC handed out Javits contracts to politically connected businesses and politically powerful, mobbed-up unions. Construction was rife with Mafia influence, bid rigging, and costly delays. Mafia chieftain Fat Tony Salerno, for instance, got the concrete contract and overcharged by about $10 million. In the end, Trump’s original $110 million project cost $430 million. With the state still in control, the mob moved from building the center to running it, and for more than a decade the Javits Center had the reputation as the most expensive, frustrating, and corrupt facility in the country.

Meanwhile, across America other cities were rushing to build or expand their convention centers, completing more than 200 projects in the 1980s and 1990s despite a growing glut of space. The result has been catastrophic. Since the late 1990s, the U.S. convention business has declined 40 percent. Cities that spent hundreds of millions on their convention centers are getting little or no payback. Boston’s new center will attract 50,000 visitors during its first year in operation, only one-sixth of original projections. Attendance at major events in Chicago is half of what it was in 1993, though the city spent nearly $1 billion to expand its center. “The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community,” according to a Brookings Institution report by Professor Heywood Sanders.

Just when industry growth was skidding to a halt, New York was finally pushing the mob out of the Javits Center. Almost immediately, local hoteliers and state pols sought to expand Javits to cash in on all that convention-center business that they imagined New York could win but that didn’t actually exist. After all, they reasoned, everyone must want to come conventioneering to New York—though surveys have shown that the city’s high costs place it low on the list for many industry groups. Mayor Bloomberg subsequently made expanding Javits a centerpiece of his Far West Side/Olympics plan, even though predictions dating back 20 years that the original Javits Center would spark a stampede of new development had proven disastrously incorrect and the area around the center remained a virtual dead zone.

But convention centers, for all their hype and cost, aren’t the most unproductive publicly financed urban megaprojects, by any means. That honor goes to stadiums and arenas, with their big subsidies to rich team owners and rich players. Starting in the late 1960s, municipalities began churning out these facilities, thinking that they would generate additional tax dollars and prompt new economic activity, even in moribund neighborhoods. In the last three decades, cities and states have built 40 publicly subsidized stadiums and 52 arenas.

The one thing that is not controversial about these facilities is their low worth as economic engines. As Smith College economist Andrew Zimbalist has written: “Few fields of empirical economic research offer virtual unanimity of findings. Yet independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facilities construction and economic development.” At least ten economists have reached the same conclusion, largely in peer-reviewed work, so that, as one reviewer of the literature recently noted: “It is virtually impossible to find an independent economist who views sports facility subsidies as good investments in local economic growth.”

So what do we find as the centerpiece of the Far West Side plan? A stadium/convention-center complex joining together what are universally recognized as two of the worst economic-development engines in urban planning. How we got to this point is a case study of the propensity of government leaders, prompted by their own grandiose ideas and urged on by self-interested executives, to pervert the best-intentioned plans.

The Far West Side rezoning effort began with the city planning department’s efforts to spur development during New York’s 1990s economic expansion. As Gotham’s job rolls grew faster than ever before, companies looked to build office buildings outside the city because they could no longer find sites for major towers in midtown. Suddenly, for about two years before 9/11, it looked as though the city would break out of its 40-year boom-and-bust economic cycle—in which no net job growth has taken place since the late 1960s—and emerge with a new, larger economy. This economic growth, combined with declining crime rates and the city’s rising reputation, also promised to push up Gotham’s population. In response, the Far West Side plan took shape: if New York City’s economy and population were to expand, then that centrally located neighborhood could accommodate much of the growth.

But the Far West Side plan got hijacked—not once, but several times. First, Mayor Rudy Giuliani decided that all that space on the West Side was perfect for a new Yankee Stadium. Owner George Steinbrenner suggested that his team might leave the city without a West Side stadium, arguing that he needed a Manhattan venue to attract corporate sponsorships and young women, the new groups baseball was trying to attract. Neither group would go to the Bronx, he averred.

Of course, things turned out differently. Last year, the Yankees broke their own attendance record, attracting nearly 3.8 million people to the Bronx, the highest number in the major leagues and 55 percent more than the league average.

But in New York, bad ideas don’t die; they just get reincarnated as even worse ideas. The Far West Side plan went from having no stadium to a Yankee Stadium, to a Jets football stadium—a stadium that has become the linchpin of an Olympics plan that would include towers built to accommodate the games before being recycled as office and hotel space for New York’s expanding economy. With this idea, the tail really is wagging the dog.

Advocates of the Far West Side stadium acknowledge the overwhelming evidence that stadiums do not spur economic development, but they argue that what the city wants to build is something new and different, a sports venue that learns from past failures. Their models are new projects like one in Pittsburgh that encompasses two new stadiums on abandoned land along the Allegheny River, land that is beginning to attract residential and commercial development. How is Pittsburgh trying to overcome the deficiencies of stadiums as economic-development tools, according to the advocates? By paying attention to the basics. Officials are building a new light-rail transportation line to reconnect the area to downtown. The local development authority has rezoned the land to create new sites for office and residential building and has provided new access to the waterfront through a $47 million riverfront promenade. In short, government is doing everything that sensible urban planners would urge to unlock the potential of an underused waterfront area. But when a city does those things, it doesn’t need to make a stadium the centerpiece of its plan, and the stadium is not what propels redevelopment.

Despite the track record of such big facilities, Mayor Bloomberg argues that New York needs a stadium to attract the Olympics, and it needs the Olympics to impel a host of new projects that otherwise wouldn’t get built. It has now become fashionable to say that because of the anti-development attitudes of local Luddites and enviromaniacs, who stopped Manhattan’s proposed Westway highway project 20 years ago, New York can’t build anything any more, and that bringing the Olympics here, with all its attendant construction, is one way to bury this legacy. This is a strange argument, considering that right now there is more residential building going on in New York than at any time in the past generation, that commercial building reached a feverish pitch during the late 1990s boom, and that even long-delayed major infrastructure projects like the AirTrain and the renovation of JFK Airport are now proceeding apace.

These days, the real impediment to major development in New York is government. It warehouses vast tracts of valuable land and uses narrowly drawn and outdated zoning laws to bar developers from constructing projects there without getting zoning variances—which gives the pols a big say in almost any significant building in the city and turns the real-estate business into a quasi-political activity, with a pay-to-play overtone.

Even worse, just look at New York’s waste of valuable waterfront property. The city boasts more waterfront than any other American city—578 miles of it, stretching throughout the five boroughs. But much of the land is former industrial space that couldn’t be recycled for new uses without government approval because it is still zoned for manufacturing. Having sat unused for years because there is little demand for manufacturing space in New York, large swathes of this land have been abandoned and taken over to be turned into parkland by the state, like the former Eastern District Rail Terminal on the Brooklyn waterfront or the Hudson River Park stretching from lower to mid-Manhattan. On these sites, government is transforming formerly productive land into land that must be forever supported by tax dollars, even while interest in waterfront development burgeons. For example, a bidding war is raging over one of the few sites the state is making available for commercial development to help finance the Hudson River Park. Struggling over a pier near 15th Street are two groups: one led by Roland Betts, the force behind Chelsea Piers; and the other featuring real-estate executive Steven Witkoff and the Cipriani restaurant family. The winning group may wind up investing up to $150 million—an indication of the kind of investment that New York could spark if it made more waterfront property available for redevelopment.

Even when government frees land for economic development, it often insists on controlling the process itself and ends up accomplishing little. A prime example is the beautiful waterside site opposite Manhattan’s East 30s known as Queens West, where boosters hope the Olympics village will rise. Controlled by three government entities, representing New York State, the city, and the Port Authority, the site has been under development for over 20 years, with just two apartment buildings to show for it on land that could accommodate a dozen. Infighting among the three government groups, together with obsessive micromanagement of the project, has hampered development, with the result that the site has missed several real-estate booms over the last two decades. And while that land sat fallow, similar ex-industrial land on the New Jersey waterfront opposite the West Side of Manhattan has witnessed an explosion of development, as government there encouraged builders and then got out of the way. Indeed, developer Samuel LeFrak began his massive Newport City project on the Jersey City waterfront after he grew frustrated with the government’s wrangling over Queens West.

Ironically coming full circle, the organizers of the city’s Olympics bid plan to use government-controlled land on or near the waterfront for everything from their stadium to the Olympics athletes’ housing to a shooting range on the waterfront in Pelham Bay to a beach-volleyball site at the former Eastern District Rail Terminal. On many of these beautiful sites, what began as an economic-development plan will leave the city with nothing but unproductive leisure facilities, rather than tax-generating office or residential space. And in one further ironic twist, the organizers of the Olympics use government’s laggard performance at Queens West as a justification for building the athletes’ village there because, they say, no one else is likely to use the land soon.

Given the growing interest in the Far West Side—“you lick your chops for a piece of land that size,” as one developer said recently—why is the city trying to force through a plan revolving around convention and stadium facilities that few independent observers think will accomplish what their boosters say they will? How did an effort to begin rezoning an underused part of the city in anticipation of new growth turn into the urban megaproject of all time?

One reason is that too many politicians, including New York’s businessman mayor, have little confidence that the freewheeling free market really works. Mayor Bloomberg, for instance, has lately taken to saying that his Olympics plan is crucial to the economic future of New York, even though big parts of that plan rely on public financing that is questionable and even though the plan may cost city taxpayers hundreds of millions more than the mayor is anticipating. The mayor can’t believe that alternate, privately financed proposals for the Far West Side, such as Cablevision’s $600 million–plus proposal, are for real. But Cablevision’s proposal stirred up private-sector interest in the site, forced the MTA to extract maximum value from the deal, and prompted the Jets to extend their own bid by adding partners to develop residential and office towers around their proposed stadium. The lesson in all this is that no stadium was needed in the first place to spur Far West Side development. All it took was government willingness to let the free market operate.

Of course, politicians love big projects because they make them seem like visionaries, and they create a physical legacy of their reign, like ex-governor Rockefeller’s massive and mind-numbing Albany Mall. Pols are supported in their fits of pharaonic building by a powerful constituency, including the financiers who will benefit from the giant bond offerings, the hotel industry that hopes to see even a marginal increase in its business—no matter what the cost to the city—and the construction unions that see gigantic public building projects as more desirable than market-driven ones because they are usually subject to union-friendly regulations.

With all these special interests to be fed, government will gladly crowd out the private market to build its megaprojects. In the late 1990s, for instance, developer Larry Silverstein built an apartment tower on 42nd Street, near the Lincoln Tunnel—previously a residential no-man’s-land.

When Silverstein announced plans to build another building on an adjacent site, the state considered using eminent domain to seize the site for the expansion of the Javits Center. That, more than anything, should tell you what’s wrong with state-sponsored projects: New York would actually contemplate derailing a largely privately financed project providing housing to an underused neighborhood—exactly the kind of project that represents the economic development that the convention center’s expansion will never offer.

If state-sponsored megaprojects are not right for the Far West Side, then what is? How should the Far West Side be developed? For an answer, look at the rest of New York. The city did not spring up in one gigantic eruption. Neither midtown nor SoHo nor Harlem nor Greenwich Village is the product of a centrally planned vision; all of those districts have evolved bit by bit, layer upon layer over years, with diverse uses not only sharing these neighborhoods and feeding off one another, but also often competing vigorously in a way that ensures that the neighborhood will get maximum value and vitality out of the land.

Around the country, cities are discovering what is right in front of us in New York: that this is how districts grow. Increasingly, they are rejecting the megaproject, centrally planned–neighborhood approach, because it just doesn’t work. Certainly whenever voters get a chance to register a preference on these plans, they say no.

So the city’s first task should be to go back to the original intention of the Far West Side plan: to create the conditions for the marketplace to build on those 60 blocks of garages, parking lots, and other ramshackle structures only as and if demand requires it. Government should first of all continue the rezoning of the area for much denser residential and commercial uses. Too often, city officials wait until the end of an economic cycle to start such rezonings, and before their plan can work its way through the approval process, the economy has already turned down and the momentum to finish the rezoning evaporates. The city also ought to extend the Number 7 subway line into the district, since better transportation will spur its development, and that kind of infrastructure improvement is government’s proper sphere.

Will the Far West Side ever be needed? I’m optimistic enough to think that sooner, rather than later—though certainly not next year or even the year after—Gotham’s economy may regain the vibrancy of the late 1990s. If that happens, and the city adopts a plan that does more good than harm, the area will develop, block by block, project by project, in a variety of uses that are not part of some grand centrally planned government vision. It won’t happen at once; it may even take more than one economic cycle; and no one politician will be able to take credit for it.

But it is possible that the city’s boom-and-bust cycle of the last 40 years will just keep repeating itself, in which case much of the Far West Side will remain underdeveloped no matter how much money officials pour into megaprojects to spur the area. Moreover, the city will have built those projects by raising taxes, increasing public debt, and taking valuable public money from other sources, which, if the city’s economy doesn’t rebound, will only depress growth further.

The choice is clear. New York can recognize and remember what built a great metropolis, or it can head down the path that cities and neighborhoods across the country are rejecting after years of failure.

 

 

 
Pols should get out of the free market’s way.
City Journal Spring 2005.
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