Monday, March 18, 2013

Austerity Planning? Land Sell-Off in NYC

A recent article in the New York Times caught my eye. The article describes the conversion of a series of public-properties, primarily old libraries and schools, into new residential towers that would include replacement space for the lost civic institutions. I don't wish to get into the disruption of students' lives or the fact that existing neighborhoods will be without convenient library services, in some cases, for multiple years. These are quite serious impacts and should not be ignored, but there are many better education and library writers who could probably do justice to those topics.

What I am intrigued about is the approach certain offices in the city are taking-selling city land to the highest bidder for repair or renovation costs. There are a LOT of overlapping factors here that I have neither the time not the skill to fully delve into but I think we should question a second as to why it is necessary for these sites to be sold. For example, the schools that are being sold off are managed by the Educational Construction Fund. The Fund, since the 1960s, has been tasked with developing new school space through mixed-use development to help support construction. The Fund has done this primarily through the issuing of bonds and leasing the land to developers. The Fund has a variety of projects listed on its page, although many seem to be older than ten years old.

I think the next question to be made here, at least in the case of Fund, is why the desire to sell-off these properties? This especially confusing when the city's Housing Authority is leasing land on existing parking lots to new residential developers to the tune of $60 million.

The city is approaching this question of redevelopment, renovation, and amenity provision in a variety of ways, but I am incredibly curious as to why the Fund, an organization with a history of leasing and bond management, has decided to sell off this land, thus losing any claim to future gains land value and control? I could not find details on the contracts between the Fund and these developers, but I am always concerned with the sell-off of public amenities, especially during times of fiscal distress/austerity. It's quite clear that NYC's libraries and schools are hurting for revenue, but the sell off of precious assets to act as one-time payments does absolutely nothing to fix the structural funding gap that exists. Since the late 1970s/early 1980s the sell off of public assets has been a central strategy that cities and nations have made in the face of structural adjustment programs imposed by financial institutions like the WorldBank. Of course, the most famous example in the US may have been Ford's mythical declaration to New York City to "Drop Dead" in 1975 when NYC was on the verge of defaulting. While Ford eventually got Congress to approve a set of federal loans to the city, the repayment of those loans involved a series of painful cuts to city services including the imposition of fees on what was once the free CUNY system. We see a similar set of events now in Detroit with the imposition of a state emergency manager to tame the city's debt. The expectation, of course, being that Detroit will see even more cuts on worker pay, available city services like fire and police, and the potential sell-off of public assets.

This is not to defend the mismanagement of city finances, but to point out that varied financial crises both domestic and abroad have been used as a way for the private sector to extract huge gains at the expense of the public sector. We should not question the efforts of cities to raise more funds to meet their financial and social obligations but we should look at the policies that cities choose to get there. Selling off land, even with a promise to rebuild the library, should be seriously analysed, especially given the strong history and ability of the city to lease land to interested developers and more fully recoup gains on land redevelopment.

The overriding question in all of this should be what is the actual problem these varied city agencies are trying to solve? If the city feels its landholdings are legitimately bloated, then selling some properties for a high return can be a solid strategy. But in the case of a persistent, structural funding gap, like in the case of the libraries and schools, it is irrational to sell off assets as a primary means of funding. What they need is a consistent stream of funding that will cover renovations and repairs and that can only be handled through policy that increases funding in order to cover capital costs or it could be done through a longer-term leasing arrangement that the schools and libraries could draw from and set up vehicles for consistent capital cost financing.

I am not privy to the political and financial dealings of the varied New York City agencies, but this current path that the schools and libraries are on seems terribly short-sighted. Only time will tell us whether this strategy will help make these agencies more solvent and support the surrounding communities.