The opening of the first Hudson Yards tower dominated headlines Tuesday, but with this milestone also came a resurgence of criticism. As Crain’s reports, the Independent Budget Office has released a new study (pdf) highlighting that, to date, the city has spent nearly $359 million paying interest on $3 billion in bonds that were taken out to pay for infrastructure around Hudson Yards, including the expansion of the 7 train. The city had originally anticipated spending between just $7.4 and $205 million from start through 2016.
The slow-moving nature of the development is the reason the city finds itself overextended; the 52-story building opened Tuesday is just the first of 16 expected for the massive site. Initially when structuring financing for the project, the city opted to take out bonds over funding the project through its capital program. It was anticipated that interest on the debt could be paid with money earned through property taxes and other fees, such as the sale of development rights. Unfortunately, the economic turndown of 2008-2009 led to numerous delays.
As Crain’s highlights, “A report drafted for the city a decade ago by the real estate services firm Cushman & Wakefield projected the city would reap between $986.6 million and $1.3 billion from those fees. Instead it collected only $755.4 million.”
The city responded to IBO’s report saying that the agency failed to consider all revenue streams. Developer Related Companies also added in a press release that the investment in infrastructure has brought with it billions of dollars in private money from various developers and has already created thousands of jobs. Related expects Hudson Yards to contribute $18.9 billion to the city’s GDP when open. The development will host 17 million square feet of commercial and residential space, supporting more than 125,000 workers and residents.
It is forseen that another $116.6 million in taxpayer money will be spent through 2020, but beyond that date, no budget has been forecasted. IBO did, however, include that the city will save $121.1 million in interest payments in 2018 and 2019 as more buildings break ground and development rights can be sold. Hudson Yards is expected to wrap by 2025.
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