A Review of Public Investment in the Willets Point Redevelopment
The final plan for the redevelopment of Willets Point in the northeastern section of Queens comes following several prior attempts, despite being a longtime priority for New York City mayors and the city’s Economic Development Corporation (EDC). The recently released report by the New York City Independent Budget Office (IBO) provides an examination of public investments and incentives provided to the 1st and 2nd phases of the project which are underway and expected to be completed in 2027 and 2028 respectively. While a pre-development agreement through the EDC has been entered into with Queens Development Group (QDG) for the first two phases, the scope of Phase 3, which includes the largest tract of land and a planned completion of 2039, remains tentative at this time, and a developer has yet to be selected. A new soccer stadium for the New York Football Club (NYCFC) will be the centerpiece of the project that will also include affordable housing, a hotel, retail space, and a public school. IBO’s examination of direct operating and capital budget spending, as well as economic development tax breaks for Phases 1 and 2 will be useful context for future discussion around Phase 3. The independent report is not an environmental engineering review, investigation, or audit; but instead focuses on describing and quantifying the city’s public investment in the Willets Point redevelopment.
A snapshot of the report’s key findings include:
Soccer Stadium – Collection of payments equivalent to property taxes to be waived; and since the stadium will be built on city-owned land, it is therefore fully exempt from property tax liability. In contrast to the hotel, housing, and retail components of the development, throughout the stadium’s 49-year lease, it will not be required to pay the “payments in lieu of taxes” (PILOTs) that are typically required when public land is used for private purposes. Although in the field of public economics there is a consensus that the use of “substantial government subsidies for sports facilities are typically not an efficient use of scarce public resources,” the Willets Point arrangement to waive the payment of PILOTs is consistent with other professional sports stadiums in the city. As a comparison, if the stadium were built on private land, this would yield $538 million in property tax revenue over the term of the lease, but likely lower to $47 million since it would be eligible the city’s Industrial and Commercial Abatement Program (ICAP) according to estimates by the IBO. Due to a change in federal rules that no longer allow the tax-exempt financing structure for the debt that the city was able to arrange for the construction of Yankee Stadium, Citi Field, and Barclays Center, private financing is being provided by the development team, and debt is secured through their assets.
Land Acquisition, Affordable Housing and Economic Development Incentives – An outlay of nearly $1 billion dollars, between past spending and budgeted future funding, will be made by the city to purchase the development site, infrastructure investments, and environmental remediation. $550 million in city capital funds to finance the construction of 2,500 affordable housing units, $61 million in foregone sales tax on construction materials, and $26 million in foregone mortgage recording tax collections, which is in line with general city practices. The 650-seat K-8 public school that the city has committed to construct as part of Phase 1 has yet to be funded or start construction.