You Get What You Pay For

For the last year-and-a-half, the New-York Historical Society has been locked in a bitter feud with its neighbors around Central Park West over plans for a 23-story condominium tower that would help finance the project. But in early July, it changed tack. “We don’t have plans for a tower,” Louise Mirrer, the society’s president, told The New York Times. “We think we can meet our needs over the next few years by focusing on our building.”

It is a rare sentiment these days, and while it may be changing in light of economic realities, the trend of governmental and not-for-profit institutions relying on the private sector for the financing or construction of capital projects has continued apace. As the number of such public-private projects continues to rise, touching everything from schools to parks to hospitals, so too does the debate over which side benefits more.

Don Elliot, chairman of the City Planning Commission during the Lindsay administration, when such programs became more popular as the city’s fiscal crisis grew, said it is an issue of political math. “If it means less public money to get the same building, that’s what politicians will do,” he said. “The question is, are you getting the same building?”

Then again, what if the alternative is no building at all? “The city and the private institutions, if they were able to do it efficiently and in a timely way, they would have done it themselves,” said Michael Slattery, vice president of the Real Estate Board of New York, the powerful developers group.

A prime example of this dichotomy is the current fight in Greenwich Village over St. Vincent’s plans for a new hospital. Short on funds, hospital administrators partnered with the Rudins, one of the city’s storied real estate families, to swap its old facilities on 7th Avenue for a new hospital across the street. Of the project’s estimated $850 million budget, $310 million would come from the sale of those facilities. The Rudins would then adaptively resuse some buildings as condos while tearing down others.

On the other end of the city, in East Harlem, Mount Sinai Medical Center is pursuing a similar plan, and partnered with the Durst Organization, which agreed to contribute $250 million toward a new research facility in exchange for the new building’s air rights, which in turn would make way for a 540-foot luxury tower. Community opposition was swift and immediate, especially considering local dislike of the hospital’s Annenberg Building, the 436-story, blockwide black monolith that many see as a blight on the Central Park skyline.

“It’s a complex problem and we’re really alert to that,” said T. Gorman Reilly, president of Civitas, a local planning advocacy group that opposes the project. “The problem is, these community facilities do provide a lot of public good. But it’s gotten out of control because there are so few sites left.” But Brenda Perez, a spokeperson for the hospital, said it had no choice. “Mount Sinai considered multiple options,” she wrote in an e-mail. “Selling the air rights was the only option to make the financial equation work.”

No one questions the need for more hospitals. The question instead is one of public financing for such projects, or lack thereof. “There’s been an attraction in government to think that you can get the private sector to build infrastructure without having to pay for it,” said Kent Barwick, the outgoing president of the Municipal Art Society who also worked in the Lindsay administration. “The idea was, you’d pay for it with development rights, but we quickly learned that there are costs associated with such deals, as well.” Barwick points to the Education Construction Fund, which was created by Lindsay to offer bonds and air rights transfers in exchange for school construction. The fund created 18,000 school seats in a dozen schools, 4,500 units of housing, and 1.2 million square feet of office space, according to the city’s Department of Education. But Barwick highlighted its first project, the AT&T exchange tower (now Verizon) at 375 Pearl Street, which he called one of the city’s ugliest buildings, in part for the way it looms over the Brooklyn Bridge. “We have come to learn there can be hidden costs on the public realm that can negate the public gains offered by these projects,” he said.

Slattery countered that with developers’ experience, it is irresponsible of the city to otherwise use taxpayer dollars trying to complete these projects. “Developers have the kind of requisite experience to do this business, whether it’s schools or hospitals or parks,” Slattery said.“It’s compatible with what they do everyday.” He cited Battery Park City as a prime example of the private sector undertaking a project with public support that the government would have struggled to complete on its own.

The city, or at least the Bloomberg administration, seems to agree.“That’s our bailiwick,” said Janel Patterson, a spokesperson for the city’s Economic Development Corporation. “We take underutilized public land and work with the development community to develop it into something that benefits both parties.” She was also quick to emphasize the deep community involvement in creating such projects, which she said ensures local support and approval.

Still, some question whether the city is being taken advantage of, especially during the real estate bonanza of the past half-decade. “It’s not a positive trend,” said Tom Angotti, a planning professor at Hunter College. “It’s the neoliberal dream and what it leads to is the weakening of the public sector.”

Ron Shiffman, director emeritus of the Pratt Center for Community Development, believes such deals can work, though they require a balance that may be missing. “It’s a tool,” he said. “Tools can be used properly and improperly. At the moment, it’s being overused and misused. It’s not something I would throw out, it just needs to be used responsibly and accountably.”

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