New York City's Hudson Yards project has generated less revenue than even the most conservative forecast by the development's planners when the city issued $3 billion in bonds to finance the No. 7 subway line extension and other Far West Side improvements, according to the watchdog Independent Budget Office.
"While revenues from development in Hudson Yards are picking up, they still fall short of initial projections and are largely in the form of one-time payments," wrote Elizabeth Brown, IBO's supervising analyst for housing environment and infrastructure. "As interest earnings on investments of unused bond proceeds have petered out, the city's interest support payments — although reduced through 2019 — are likely to continue in future years."
IBO's May 31 report coincided with the opening of developer Related Cos.' first building at 10 Hudson Yards where luxury handbag company Coach Inc. moved into its 52-story headquarters.
Partly due to the recession of seven years ago, revenue from development collected by the Hudson Yards Infrastructure Corp., which the city established, has fallen short of even the more conservative forecasts made when the initial bonds were issued.
Then-Mayor Michael Bloomberg trumpeted the project in the mid-2000s, devising a so-called value capture financing plan through the issuance of special-purpose bonds, to be repaid from revenue streams generated by Hudson Yards development and other sources, including payments in lieu of taxes.
According to IBO, despite HYIC having collected $266.1 million in other revenues, mainly interest earned on investments of unused bond proceeds not included in the initial forecasts, the city has provided the corporation with $358.8 million in interest support payments, with its most recent payment made in 2015.
Mayor Bill de Blasio's, $82.2 billion executive budget, which the City Council is considering, reduces the amount the city plans to pay to cover Hudson Yards interest costs over the next several years by $121.1 million. HYIC collected higher than anticipated revenues from development this year — although still well-below initial forecasts — allowing the city to eliminate its $58.1 million interest support payment planned for 2018 and reduce an $89.8 million payment budgeted for 2019 to $26.8 million.
The Metropolitan Transportation Authority last September opened the long-delayed 7 line extension, 1.5-miles from Times Square to the 34th Street-Hudson Yards station.
