Bloomberg’s Midtown plan dies, but subsidies for a temporary ally survive

Grand Central. (Tomas Fano.)
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Mayor Michael Bloomberg’s ambitious plan to move the Grand Central business district into the 21st century will not come to pass, at least in its current form.

But that’s not for a lack effort from the administration, or an unwillingness to make concessions to interested parties.

In the waning days of the administration, Bloomberg’s City Hall was so eager to appease a union that it thought might be an ally in the Midtown East rezoning effort, that it channeled millions of dollars in subsidies to a developer in Staten Island so he could build a project there that will end up using entirely that same union’s labor. The grand total in city and state development subsidies for the Empire Outlets and hotel project on the island’s North Shore: $50 million. About $42 million of that will be applied to the outlets' $260 million cost.

With the hotel, the whole project is expected to cost $316.5 million. 

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“It was just understood in the last days of the administration that we needed people whose stars were rising to be happy,” said a source involved in the negotiations for the Empire Outlets mall, referring in particular to Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York.

The negotiations to build an 80-store rival to Woodbury Commons near the Staten Island ferry terminal, a mall that would take shape next to a 200-room hotel and a 625-foot Ferris wheel slated to become the tallest in the world, took place in an unusual context.

It was fall 2013. Bloomberg’s leverage was waning rapidly. Bill de Blasio, the self-styled outerborough progressive slated to replace him, was running for mayor as the anti-Bloomberg, and on the promise of a rapprochement between City Hall and city unions.

It’s not easy, under such circumstances, to get much of anything done, and the fact that the administration did push through Empire Outlets is an accomplishment. But it came at a cost.

With the outlets’ developer, Don Capoccia, refusing to use union labor, and with local councilmember Debi Rose’s insisting on it, the project threatened to crash on the shoals of the city’s land use review process.

Hanging in the air was an implicit threat. If LaBarbera didn’t get his way on Empire Outlets, his support for Bloomberg’s other big pet project, Midtown East, might also hang in the balance.

“They were linked,” said another person familiar with the negotiations. “The expectation was they went along with LaBarbera on Capoccia, he would step up to the plate on Midtown East.”

A spokesman for LaBarbera denied that any threat was made.

“The premise about Gary threatening to pull support from Midtown East absolutely never happened,” he said, adding that there was "zero connection" between the two projects.

Nevertheless, the Bloomberg administration’s decision to push Empire Stores developer Don Capoccia to use all union labor on the project’s construction struck many observers as unusual, given Bloomberg’s general opposition to imposing those sorts of requirements on unwilling developers, his unwillingness in the past several years to subsidize retail projects, and Capoccia’s longstanding preference for running an open shop.

“The developer's oft-stated stance makes the reported terms of this 11th-hour surprising, especially as Ms. Rose had been facing growing criticism for seeking a laundry list of changes to the Empire Outlets proposal," noted Crain’s in its write-up of the news. "But indications are that government funding was added to the deal to help offset the cost of union labor."

Those indications have been borne out.

To grease the wheels, the administration channeled nearly $50 million in city and state subsidies to the project, about $14 million of which came in the form of loans the developer will have to repay, according to the city’s Economic Development Corporation. There is also an $11.5 million grant for infrastructure work; a $10 million sales tax waiver on construction materials; and another $3 million mortgage recording tax waiver, which the city’s Industrial Development Agency will have to approve in December.

All that, plus an $11.5 million state grant, brings the total subsidy to about $50 million.

“The largest economic development and job creating project in Staten Island history would have sunk if we didn’t include those provisions in the final proposal,” said Marc LaVorgna, Bloomberg’s spokesman. “That is why we included the subsidies, to ensure the project became a reality for Staten Island.”

While LaBarbera’s union got what it wanted out of the Staten Island project and on paper supported Midtown East, it didn't go all out for it. They testified in favor of it at community boards, at City Planning and Manhattan Borough President Scott Stringer's hearings, but as far as I can tell, there were no op-eds in city papers, and at the day-long hearing the Council held on the topic in October, the union didn't send anyone to testify.

There are some theories about that apparent equivocation, including that LaBarbera is merely biding his time until de Blasio takes up the Midtown East rezoning, as he has promised to, and offers the union more favorable terms.

The statement LaBarbera's chief of staff Paul Fernandes put out after the plan’s demise could be read one of any number of ways, including that one.

“The rezoning of midtown east, expansion and modernization of its commercial office space, and investment in public infrastructure necessary to support the needs of this district are critical to New York City maintaining its position as a global center of commerce and economic opportunity,” he said. “We commend the Bloomberg administration for working so hard to develop a plan to address the very real challenges involved in keeping midtown east vital. It is disappointing that the current land use procedure to advance this goal may not be approved but that cannot dissuade us from working to resolve outstanding issues of concern with Mayor-elect Bill de Blasio, Councilman Dan Garodnick and members of the next City Council. We have every confidence that these leaders understand the importance of this matter and will reconsider it as a priority in 2014.”

NOTE: This article has been updated to give a more detailed breakdown of the cost of the Empire Outlets project that includes the hotel portion.

 

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