Thanks to the federal stimulus bill, a new tax-exempt bond has hit the market: “Recovery Zone Facility Bonds” (RZFBs). And while that phrase might make your eyes glaze over, keep reading, because initial indicators of how these bonds might be allocated in New York City are cause for heightened alert.
RZFBs are one of several new bond programs created under the American Recovery and Reinvestment Act (ARRA). As the name suggests, they must be used for projects within designated “recovery zones,” the boundaries of which are determined by the bond issuer (in New York State this means Industrial Development Agencies) based on indicators of “economic distress.”
RZFBs are a type of private activity bond that make commercial and industrial projects easier to finance because the bondholder does not have to pay federal, state, or local taxes on interest generated by the deal, and is thus willing to accept a lower interest rate.
It’s difficult to evaluate the RZFB program so far because states across the country—including New York—are still grappling with how to take advantage of it. New York City is the exception. The Bloomberg Administration has started things off with a bang by selecting a controversial project in downtown Brooklyn called “City Point” to receive financing through these new bonds. If the deal goes down, City Point developer Albee LLC would receive $20 million in tax-free financing for a shopping mall that will likely be anchored by a big box store such as Target.
This isn’t the first round of public money sought by this project—subsidies were approved in 2007, but then fell through due to difficulty in securing financing after the economic meltdown. Now, Albee LLC is looking to the stimulus bill for help.
Advocacy groups on the ground, led by Families United for Racial and Economic Equality (FUREE), are experiencing déja-vu. Having resisted the 2007 deal, they will oppose this round of subsidies on many of the same grounds at a public hearing scheduled for September 10. But they will have plenty to beef about without reminding the city that the site was home to the old Albee Square Mall, which was demolished in 2007 to make way for City Point. That demolition displaced scores of longtime local business that catered mostly to Brooklyn’s black community. Those stores were at odds with the city’s vision of a newly gentrified downtown, which favors chains like H&M and Bed Bath and Beyond. None of the displaced businesses were given the option to return once the new facility is built, and no requirements for local hiring or living-wage jobs were tied to the 2007 deal, despite fervent protest.
This history lesson should be the backdrop to the bigger question of whether retail development should ever receive public financing. Asking whether more Targets and Wal-Marts are really what so-called distressed communities really need is not a radical question at this point. It is well established that such economic development strategies amount to a subsidization of poverty, since retail jobs are among the lowest-paid. As an alternative, FUREE is pushing for an affordable grocery store in downtown Brooklyn, which is lacking in healthy food options.
Good Jobs New York is keeping an eye on the City Point project, as more communities across the country recognize the dangers of subsidies for retail development, and are organizing to avoid them. There may be a bright spot to this story in the Bronx: The Kingsbridge Armory Redevelopment plan—also slated to receive public subsidies—is emerging as a model of how development in New York City might be done. Due to effective community organizing, Bronx Borough President Ruben Diaz recently announced his commitment to signing a Community Benefits Agreement with the developer that includes a living wage, local hiring and community space among a long list of points. So stay tuned!
Note: This item is crossposted on the Good Jobs First’s STAR Coalition blog.