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FOR IMMEDIATE RELEASE: June 20, 2005

SCHUMER OUTLINES NEW VISION FOR WEST SIDE

Charts Way to Build #7 Line Without Using MTA Funds, Also Lays Out Plan to Nearly Double Size of Javits Center

Schumer: We Can and Must Do Both, Build Downtown and Far West Side

Today Senator Schumer laid out his vision for the West Side in a major speech to business leaders from the Partnership for New York City. He discussed how New York City's creeping "culture of inertia" could overwhelm the necessity of Far West Side development and put forth new thoughts and ideas on what should be done to move forward now that the stadium has been rejected. Schumer initiated the original Group of 35 that targeted far West Side for commercial/residential growth.

The text of Schumer’s remarks follows:

Introduction – Is the #7 Extension and Future Commercial Development of the West Side In Jeopardy?

Good morning, I’d like to talk about something very important to us all today – the future development of the West Side and the overall economic growth of our City. I’ve spoken on this topic before, but I am compelled to speak out right now in the wake of the Public Authorities Control Board’s rejection of the new stadium and because the MTA has recently submitted their current five-year capital plan for approval by the MTA Capital Program Review Board. The Board is expected to approve or disapprove the MTA capital plan any day now.

Recently we have heard whispers that the CPRB, which consists of representatives appointed by Governor Pataki, Mayor Bloomberg, Majority Leader Bruno and Speaker Silver, may not agree to approve the extension of the #7 subway line to the Far West Side. We hear that there are concerns that both the City and the MTA are overextended and that the commercial development the #7 will spur on the far West Side isn’t needed right now, or will compete with the rebuilding of Downtown.

I believe the #7 line should and must be approved and I want to urge the members of the Board to approve the extension of the #7 and the MTA’s entire capital plan to keep the momentum going for the redevelopment of the Far West Side. I was religiously agnostic on the West Side Stadium because I felt it was so important that the other parts of the plan – the rezoning, expansion of the Javits Center and extension of the #7 line – happen, regardless of the stadium controversy.

And so I chose to work with both sides – Mayor Bloomberg and Deputy Mayor Doctoroff, who were pushing the stadium, as well as Speaker Miller and other Council members, some of who opposed the stadium – to keep momentum going on the plan overall.

The stadium debate is over now and we have come to a fork in the road. We can continue to delay projects -- critical projects like the #7, turn our backs on the future, and feed the culture of inertia or we can move forward.

Public transportation is what separates New York from almost every other American city. It is the reason that our city is growing once again in the 21st century. Mass transit allows our city greater density of population than any other in our country and with it comes a density of job opportunities, economic cross-fertilization, cultural, educational and social opportunities. It is this very density, which only mass transit allows, that has always allowed our city to attract the wealthy, the middle class, and the poor, all seeking one or more of these opportunities. The density that mass transit facilitates is even more important to attracting these groups in our 21st Century information age society.

It comes as no surprise then that the history of the City of New York teaches us that development follows subways. The Hudson Rail Yards is the last significant developable parcel in Midtown Manhattan and building the #7 extension will light a stick of development dynamite under the Far West Side.

We must summon up not only the will to pursue the #7, rebuild Downtown, and pursue other grand plans, but I believe we must also commit more public dollars to large transportation-oriented public works. New York faces stiff economic competition from other U.S. cities and major cities across the globe and we need to invest in our own economic future. To do so we must push ahead with our long term goals – unlocking the potential of the less developed parts of the City like the Far West Side – while continuing the most vital work of rebuilding Downtown. We can and we must do both.

The late Senator Pat Moynihan used to observe that while New York receives a lot of what he termed “disaster relief” from the Federal government – welfare, Medicaid and Section 8 housing dollars – we do not receive enough Federal dollars for things that generate economic activity and create jobs, like transportation and military bases. And just as Pat Moynihan fought to bring New York major transportation dollars, I have joined with our entire delegation in the fight to ensure that New York gets its fair share of Federal transportation funding.

The House and Senate are currently in conference on the next major Federal transportation bill and we do not yet know what the final allocations will be. But even though Pat Moynihan is no longer here with us, New York will still do well. Our highway funding will likely increase around 20 percent to over $10 billion for the next six years. Our transit funding will increase well over 30 percent, providing at least $6 billion for the next six years. And in addition to those formula funds, New York will receive hundreds of millions in project earmarks.

But to realize all the important projects we need, we must also boost our own capital investments at the City and State level. We used to be a City that was willing to make major investments in our economic future, but we have let inertia set in and a reluctance to make the fiscal sacrifices needed to build a better future for our City and the generations of New Yorkers to come.

Group of 35

As many of you here recall, several years ago I helped create a task force, called the "Group of 35," which I chaired with former Treasury Secretary Bob Rubin. It included chief executives and leaders in business, real estate, academia, labor and government. At that time, New York's real estate market was booming and the Group's mission was to identify areas within the City where we could build new office space to both attract and retain businesses. When the Group released its report in June of 2001, it projected the City would need 60 million square feet of new office space by 2020 to keep pace with projected job growth of almost 300,000 new office sector jobs.

The Group's main recommendation was the creation of three new and expanded "Central Business Districts" in Downtown Brooklyn, Long Island City and the Far West Side of Manhattan. For the Far West Side, the Group specifically proposed creating at least 20 million square feet of new office space within the area west of 9th Avenue between 28th and 42nd Streets, expanding the Javits Center, rezoning the area, assembling development sites, creating open space and pedestrian-friendly corridors, creating an Urban Business Campus, and most importantly extending the #7 Line to connect with Grand Central, Penn Station and the Port Authority Bus Terminal. The #7 line extension was to be the base upon which the other recommendations would successfully take root.

When the Group of 35 report, entitled "Preparing for the Future: A Commercial Development Strategy for New York City," was released in June of 2001, there was general agreement that many of recommendations were urgently needed and both the public and private sectors should create a partnership to pursue them.

Three months later our City was attacked and the country's economy started to slow, with New York being especially hard hit. Naturally and correctly, the recovery and rebuilding of Lower Manhattan became the focus for so many of us. In Congress we worked to obtain the $20 billion in funds needed to rebuild the City and that process continues today as we seek to get the last piece of that funding, $2 billion for the Downtown/JFK Airport Rail Link.

But as we all know, New York is estimated to have lost approximately 250,000 jobs after 9/11 and I, and so many others, have made it our number one mission to help the City not only recover all the jobs lost after that horrible, tragic day, but grow and create even more jobs. History has shown that if New York City doesn’t grow, it dies. Those who say New York’s only goal and focus should be only bringing us back to where we were on September 10, 2001 do not appreciate New York’s glorious past and our potential for an even greater future. Three-and-a-half years after 9/11, my focus on job creation has only grown stronger, as I have seen too many New Yorkers still out of work and still in need of our help.

Economic Growth in New York City

Every 40 years or so New York sheds its skin with a burst of public and private investment in transportation infrastructure. At the turn of the last century, New York built much of its remarkable subway system, which helped make the City one of the world's greatest. In the 1940s, '50s and early '60s, Robert Moses was responsible for a massive expansion of New York's transportation infrastructure, until New Yorkers finally rebelled against his refusal to address the human costs of his projects. Nevertheless, Moses helped further build the New York region into an economic powerhouse.

Now, as the 21st century dawns, New York must once again make major investments in its transportation system which will fuel the region's economic growth for the coming decades.

Between 1990 and 2000, New York City's population grew by about 800,000 people and the metropolitan area grew by over 1 million people, more growth than our region had seen in decades. And that growth is being fueled largely by two dynamic groups of people – new immigrants from all over the world and creative, well-educated, young people, flocking to New York from all over the country. Both groups of newcomers have spurred a fantastic renaissance of so many of our City's neighborhoods – Harlem, Green Point, Williamsburg, DUMBO, Red Hook, Bedford-Stuyvesant and even the South Bronx.
To make sure these newcomers succeed, our City must grow and must create new jobs. Much of our present growth is being fueled by this influx of newcomers and the concomitant residential real estate boom they create. But if they cannot find good paying jobs they and their successors will leave And I believe that we cannot create significant new and good paying jobs without significant new investments in transportation. Without them we will literally and economically stand still. And in today's competitive economy, to stand still, as I said, is to die.

I believe we have a rare moment here in New York – we have strong political consensus on a number of key transportation projects needed for our region, including East Side Access, Second Avenue Subway, linking Lower Manhattan with Kennedy Airport , extending the #7 Line to the far West Side, and the cross-harbor freight rail tunnel.

And right now, fortuitously, funding for these projects can be found in a number of different pots – the reauthorization of TEA-21 and the annual Federal Transportation Appropriations process, our remaining September 11 funding, and bonding future revenues from the Far West Side.

It is especially remarkable in that the City has not built a new rail line for 60 years, despite all the growth we have experienced. In so many ways we have never been more ready to expand our City’s transportation network, but I am fearful that there is a certain culture of inertia creeping into City’s efforts. That culture of inertia threatens to mar this grand experiment of the possible that we call New York City. Criticism predominates over construction; critics are given more weight than those trying to build and we all find it far too easy to second-guess every decision -- in political circles, in the news media, and in the public debate.

We’ve always been a City that loves free-thinking criticism, but it’s always been countered by a “can do” spirit. The culture of criticism doesn’t completely stop New York from growing because of capitalism. Someone can go ahead and build a small business or even a skyscraper on his or her own. The goal to make money overcomes the culture of criticism. But when it comes to large public works, where the profit motive vanishes and public pressure has great effect, we seem paralyzed and lacking in confidence.

That is why there can be no “either/or” question of Downtown vs. the Far West Side. We can’t choose one over the other or let one area lay fallow until the other is completed. I say this as someone who has devoted some portion of nearly every day of my life for the last three and a half years to helping our City rebuild and triumph from the devastating attack of 9/11. To insure our City’s future success it is our duty to see that our City continues to meet future economic demand and provide choices for employers and residents. Developers, companies, residents will each have their own needs and preferences for location, space and amenities. Some will be better served Downtown and some on the Far West Side. If New York is to keep growing and thriving, we must be ready to provide the broadest menu of options for employers and residents alike.

Providing several different venues and then letting businesses and residents decide which they prefer is the tried and true free market way of New York and America. To simply have government choose one place and tell businesses and residents to take it or leave it will not inure to New York’s long term benefit.

Enter the West Side!

That is why I was so delighted when Mayor Bloomberg and Deputy Mayor Doctor off embraced so many of the Group of 35's recommendations for the Far West Side and became such big boosters of that area’s potential. I want to compliment the Mayor and his team on their efforts so far, which I firmly believe will spur job creation, new housing development and benefit the entire City and metropolitan region.

I also want to compliment Speaker Giff Miller and the members of the City Council, who not only provided their strong support back in January for much of the Mayor’s proposal, but made many improvements to the City’s plan. Thanks to the Council’s work, the project’s overall cost was reduced by $1 billion and significantly more affordable housing for low- and moderate-income New Yorkers was added to the mix. While agreement could not be reached on the stadium, the teamwork of the entire City on the rest of the plan has already produced exciting results.

The rezoning of the 42-black area west of Eighth Avenue for large-scale development, has spurred widespread developer interest. Earlier this month, the New York Times reported that land prices in the area have more than doubled and developers are planning to build large new residential buildings, a 1,500-room hotel and even some commercial property.

I also agree that the renovation and expansion of the Javits Center from its current 790,000 square feet to eventually 1.75 million square feet is long overdue and will have clear and immediate economic benefits to the entire region. New York City has been missing out on some of the largest and most lucrative conventions and trade shows. New York City reports that the Javits Center is currently unable to host the 60 largest conventions and trade shows in the United States. And there are also many smaller conventions that bypass Javits due to its lack of meeting rooms.

The current proposed expansion will increase the number of meeting rooms tenfold and enable New York to attract the type of conventions, like the American Federation of Teachers or the American Veterinary Medical Association, that each account for over 15,000 hotel room nights and all the spending, from Broadway shows to restaurants to shopping, that accompanies those visitors. And I hardly need to tell this audience what the impact of that spending is – jobs and tax revenues for the City.

But now that the stadium project, which would have included a large plenary space for conventions, is off the table, I believe it is worth revisiting the Javits expansion design and considering adding more space, possibly on the former stadium site over the Western Rail Yards. Plans for the stadium limited Javits to 1.75 million sq. ft. and only northward growth; with the rejection of the stadium we can think more grandly. The convention business is fast-moving and competitive and we need to build in anticipation of where it is headed. Many other cities – Chicago, Orlando, Las Vegas, and Atlanta, for example – have invested far more in their convention infrastructure. Can’t New York do better?

Why not consider expanding the Javits Center even further, perhaps to as much as 3 million square feet, which would make us the largest convention center in the United States? Why shouldn’t New York become the number one destination for both U.S. and international conventions? Medium-sized cities and their convention centers may be struggling, but we are in a different league. People the world over want to come to New York. Given the attractions of our city we can become the number one convention city for the world. And if the current convention center expansion may add 10 or 15 hotels, just imagine what a 3 million square foot project could do! The hotel jobs alone, which are such an important “ladder” into the workplace for low-income and immigrant workers, would be worth benefit to our growing City.

And just as we should think big on the Javits Center, we must think big on transportation, which will always be the most important driver of economic growth of our City, our region, and our State. As Senator, I have seen not only how a project like East Side Access or a Downtown link to JFK could spur economic growth in our region, but I have seen what a dramatic effect JetBlue's low-cost flights from Kennedy Airport to Buffalo, Rochester and Syracuse have had on Upstate's economy or the exciting promise of the Rochester-to-Toronto fast ferry.

And so to slow down or deny the necessary support for the #7 line extension would be shortsighted, and feed the dangerous culture of inertia that threatens to subsume our City’s appetite for grand public works projects.

What the Critics Are Saying

Many thoughtful people have raised good questions about the need to extend the #7 line and where it fits into the City’s overall financial and economic development plans. We should certainly address their arguments. The chief concern raised is that investing in the #7 will spur commercial development in the Far West Side at the expense of Downtown.

I certainly share the fear that many have that we are losing our focus on Downtown. The plans for a Goldman Sachs headquarters are on hold and security concerns threaten to bog down the Freedom Tower and other projects. And I have called on the Mayor, Governor and all our civic and business leaders to break the culture of inertia that seemed to envelop downtown rebuilding and to rededicate themselves to revitalizing Downtown. That is a clear moral imperative for us all.

But I refuse to believe that this great City of eight million people cannot do the equivalent of walking and chewing gum at the same time – rebuild Downtown while also redeveloping the Far West Side.

At the dawn of the last century, we built a subway system and grand public works like Grand Central Station. In the 1930s through 1960s we built a city highway system, Lincoln Center, and the World Trade Center. But there hasn't been a major public work built in this city for 50 years. Surely we can do both Downtown and the West Side. In fact, we must do both.

Others take issue with different elements of the City’s and MTA’s financing proposal. Because neither the City nor the MTA can afford any more direct capital investments, this project relies on the creation of a new entity, the Hudson Yards Infrastructure Corporation (HYIC), to float approximately $3 billion in bonds to fund the #7, construction of the platform over the Eastern Rail Yards, and creation of open space and streetscape improvements. HYIC’s bonds will be largely supported by allowing developers to purchase additional development rights and through an innovative type of financing known as “value capture,” which closely resembles tax increment financing.

Instead of collecting property taxes on new development in the area, the City will actually take ownership of any new buildings and lease them to developers for 30 years. While the #7 extension and the platform over the Eastern Rail Yards are being built, the City will cover the debt service for the bonds for a total estimated cost of around $1 billion over 10 years. Once developers start putting up projects, they will then make payments in lieu of taxes (PILOTs) and those payments will back the HYIC bonds and eventually provide the City with additional revenues. The City has discretion in the PILOTs it charges the developers and can offer them a substantial discount over what they would pay in property taxes as an incentive.

Let me say right here that I think the “value capture” financing plan that the City created will succeed and Speaker Miller and the City Council deserve credit for shaving $1 billion off the costs of the original version. But I do not believe we need to give developers tax breaks -- the reduced PILOTS -- to get them to the West Side. That money should be used for the building of the #7 line if needed.

There is already growing developer interest in the area and I see no evidence that reductions in PILOT payments – de facto tax breaks at the City’s expense – are needed. Traditionally in this City, infrastructure alone is sufficient to induce development. In the early part of the last century, when the City announced it was building the IRT subway line in the Bronx, the Grand Concourse was bought up and developed within a year. I expect the similar interest on the Far West Side. Once developers believe the #7 line expansion is for real they will flock to the area and property values and concomitant property tax collections will soar.

As far as I am concerned, the #7 line IS the subsidy for that development and West Side developers should pay “full fare.” The funds saved can be plowed back into the #7 line construction if overruns develop, or if not needed for the #7, into infrastructure investments elsewhere that benefit everyone. Generally, the City does best when it creates favorable conditions for development – adequate transportation and city services -- and lets the market decide who comes to the table, rather than pick winners and losers with individual incentive packages.

And by not offering extraordinary inducements to developers in the Far West Side, the City also ensures that our development efforts for Downtown will succeed. Downtown, which must overcome unique security concerns in the wake of 9/11, is the natural choice for providing deep tax incentives to lure employers in. I agree with those, such as Speaker Silver, who have said that we must provide extra assistance to businesses locating Downtown. We do not need to and should not provide similar breaks for businesses that locate on the Far West Side.

There are also those that argue that we do not need to worry about the commercial development of the Far West Side now, the demand for office space is low citywide and residential development will be sufficient for now. But in truth, the timelines differ for the two areas and over the coming years, as New York City continues to grow, there will be enough demand for office space both on the West Side and in Lower Manhattan. These two important areas of the City do not have to compete.

Many of the Lower Manhattan infrastructure projects are ready to start soon – the Santiago Calatrava PATH terminal and the MTA’s redesigned Fulton Center – and, we hope the Goldman Sachs building and other buildings on the World Trade Center site will commence construction soon. By comparison, the MTA would not start construction on the #7 line extension until 2006 and we wouldn’t expect to see a new commercial building until 2010 or 2011.

New York City’s latest estimate, assuming that the metropolitan region grows at its past rate of 1.4 percent per year, is that the City will need 68 million sq. ft. of Class A office space by 2025. We can expect to build around 14 million sq. ft. in Lower Manhattan and another 24 million sq. ft. in the Far West Side. So even if we fully develop both areas, we will still need another 30 million sq. ft. just to keep up with current growth rates over the next 20 years.

And if we fail to keep building at a healthy pace, we may find ourselves making the same mistake we made during the 1990s, when high vacancy rates and a lack of large developable sites led us to all but stop building large new developments. We all know what happened, from 1991 to 2003. Demand for space increased dramatically, there was a shortage of parcels for development, and the price for office space in Manhattan skyrocketed. As a result many new developers and businesses who wanted to stay in New York but could not afford it, went elsewhere. Northern New Jersey added 19 million sq. ft. of office space and lured quite a few businesses across the Hudson. Tens of thousands of other jobs went to more distant locations, like Tampa and Dallas and beyond. And while we can build new space for new and expanding businesses, the jobs lost to New Jersey and other locations are not coming back.

Building the #7 will avoid this problem from repeating itself as the City starts growing again. The availability of new parcels on the Far West Side will increase supply – lack of new sites and their stratospheric costs is the number one hindrance to new development in the City. In 2015 instead of prime office space costing, for example, $120 a square foot, it will only cost $95, keeping prime space affordable and keeping jobs growing. Thus the #7 line expansion will do more to retain and attract jobs to our City than individual tax breaks aimed scattershot at select companies seeking to locate on the far west side. The combination of tax breaks going to Downtown only, and the West Side getting the #7 line, is serendipitously complementary.

MTA Finances

The other question about the “value capture” financing plan is whether it will offer sufficient safeguards for the MTA’s budget and ensure that the extension of the #7 does not compete with other key priorities such as East Side Access and Second Avenue Subway. I would submit that if done right, expansion of the #7 line will not interfere with other mass transit priorities.
Given the precarious state of the MTA’s finances, and its earlier willingness to sell off the development rights to Hudson Rail Yards without a competitive bidding process, it is certainly legitimate to question the details of the City’s proposal for extending the #7. The MTA’s Capital Plan says that the City will cover 100 percent of the $2 billion cost of extending the #7, but the details are a bit more complex than that. Two issues have not yet been resolved that could potentially cost the MTA money – development of the Eastern Rail Yards and coverage of potential project cost overruns.

It is especially important that the City make a commitment that the extension of the #7 does not drain funds away from other MTA priorities. While I believe the “value capture” financing plan should cover the costs of the #7 extension and other infrastructure improvements, the City should have a backup plan if there are unforeseen cost overruns. The city can and should pledge what may be one billion in the reduced PILOT tax breaks to construction of the #7 instead should there be cost overruns. The MTA should pledge the dollar from the sale of air rights over the East Rail Yards to go to the #7 as well if they are needed. And as a last resort, we should consider an increase in the hotel tax, should the #7 project’s costs skyrocket. The extension of the #7 will produce clear and quantifiable benefits for the hotel industry as it makes the convention center and the City in general more of a destination for visitors around the world. The industry should pledge some of those benefits back if they are needed.

The MTA has serious capital financing problems with both keeping its existing stock in good shape and in building important new projects like East Side Access and the Second Avenue Subway. I believe the City, State, and Federal governments should be doing more to help the MTA out with this large and important problem. But those very real and equally important problems should not be an excuse to holding up the #7 line. The #7 line project can and will be a tub that floats on its own bottom and pays its own way. With “value capture” financing, asking developers to pay their full PILOTs, the increased proceeds from the East Rail Yards airspace, and, as a last resort a temporary increase in the hotel tax, the #7 will pay its own way. It should not interfere with MTA financing of other needs, like East Side Access and Second Avenue Subway.

Conclusion

As I have also said recently, I am fearful that there is a certain culture of inertia creeping into City’s recent efforts at public works projects. I am also fearful that as a City and region, we are no longer willing to make the public investments necessary to foster economic growth.

Throughout our City’s history, development and economic growth have followed the same pattern – we build a subway line and businesses and jobs follow. We are now about to determine the fate of that #7 line, and subsequently, the fate of the whole Far West Side Central Business District. We must build it.

Once again, I call on the MTA Capital Program Review Board to approve the Agency’s capital plan and for all of us to join together to do whatever it takes to move the #7 line extension and all our other important priorities forward. To do otherwise would be shortsighted, and feed the dangerous culture of inertia that threatens to subsume our City’s appetite for grand public works projects.

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