A slew of affordable housing is not the only transformative element brewing at Sunnyside Yards.
While announcing his intention to deck over the 200-acre rail yard in Queens and construct a mixed-use development atop it, New York City Mayor Bill de Blasio described the proposed creation of 11,250 affordable homes as “game changing.” At the same time, the city appears to be considering an equally innovative funding mechanism for the Sunnyside Yards initiative called value capture financing (VCF), which uses the revenue anticipated from an infrastructure investment to finance the project.
But just like the affordable housing plans for the site, which Gov. Andrew Cuomo was quick to shoot down, the funding scheme is a big question mark. While VCF can open up revenue streams for municipalities otherwise limited by capital plans and debt ceilings, it can be risky if forecasted revenues don’t materialize and the government is saddled with larger interest payments and debt.
Some point to Manhattan’s Hudson Yards development as evidence of the risks. The project, located on the far West Side, was VCF’s major debut in New York City. To help fund it, the city backed bonds for a No. 7 subway line extension with projected increases in property taxes and fees.
“Hudson Yards has not been successful,” said David King, assistant professor of architecture, planning and preservation at Columbia University. “That’s a lot of investment that went into expanding the system for land development that’s not showing up … and that’s money that the city cannot or will not spend elsewhere on the transit system.”
Nonetheless, the city’s recent request for proposal (RFP) to study the feasibility of decking over all or part of Sunnyside Yards called for research on the success VCF at Hudson Yards and other sites as well as for a recommendation on its viability in Queens. The RFP does not explicitly state whether the value would come from an upscale development with affordable units, new transit or other infrastructure improvements. But local politicians have made it clear de Blasio’s vision is a non-starter without linking transit investment—and said that the administration is aware of this.
“If the administration is thinking so big, in terms of future development, then the thinking around transportation infrastructure has to be equally as big,” City Council Majority Leader Jimmy Van Bramer said, before ticking off a list of potential projects to pair with housing, including a new train line, additional bus routes, more ferry stops, expanded bike sharing and a pedestrian bridge from Long Island City to midtown Manhattan. “I can’t support going forward with anything that doesn’t address the needs of the people I represent today, never mind the tens of thousands or hundreds of thousands that might be envisioned for the future.”
He and state Sen. Michael Gianaris said growth near the targeted area—bounded by Northern Boulevard to the north, Skillman and 49th avenues to the South, the No. 7 train tracks to the west and 43rd Street to the east—already has led to burgeoning transit needs. Van Bramer said subways are under stress due to dense, market-driven developments in Long Island City and upzonings passed without parallel transit investments before he took office. The administration is also contemplating re-zoning in Long Island City to allow for large developments that further its affordable housing push.
Increased capacity on Amtrak is already in the works. The national railroad system has crafted a Sunnyside Yards master plan that aims to meet increased demand by reconfiguring the yards, doubling the number of high-speed rail tracks and adding roughly 40 daily trips by 2030, according to the city’s RFP. The Long Island Rail Road currently uses the yards to stage construction for the East Side Access project, which will add a new terminal beneath Grand Central, and has considered a new LIRR Sunnyside station below the Queens Boulevard Bridge near Skillman Avenue. But the city RFP notes that it is not fully funded in the MTA’s 10-year capital plan.
Specific infrastructure investments aside, Nicole Gelinas, a fellow at the right-leaning policy Manhattan Institute policy research group, said that Hudson Yards is an example of how not to proceed in Queens. The anticipated revenues did not materialize, she said, so the city wound up paying more in interest than it would have with bonds backed by traditional sources. The Bloomberg administration secured $3 billion in bonds to finance building the No. 7 train line out from Times Square to 11th Avenue, but the project proved costlier than expected, even after scrapping plans for a second subway stop. Since the project’s inception, the city has made $152 in capital commitments and $334 million in interest payments, according to the Independent Budget Office.
VCF in most New York City settings is “a gimmick,” Gelinas said. “If you’re going to use [VCF], it’s not really afford-able housing anymore. … It would be high, six-figure costs per apartment.”
VCF also poses political questions. Gelinas and King said it involves selecting investments based on the potential to generate value, not on need. That can divert funds to a single area instead of letting all constituents and legislators compete for them.
“Value capture is ripe for shenanigans,” King said.
Yet VCF can also provide financing that otherwise would not have existed, according to Stephen Schlickman, executive director of the Urban Transportation Center at the University of Illinois Chicago. For instance, Schickman said a group of property owners in downtown Chicago approached the city and offered to put up the financing for transit improvements that would not be possible in the transit authority’s budget.
“None of them hired anyone to do a forecast for them,” he said. “They knew prices would go up, and they would get paid back. … They made a business judgment and went to the mayor.”
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