December 26, 2006

Steel costs to affect NYC sports plans?

This one somehow slipped through the weekend update news net: My Village Voice colleague Jarrett Murphy reports that the cost of steel and other construction materials is through the roof in New York City, with one major project (a water filtration plant that's being built in a public park in the Bronx - sound familiar?) seeing its price tag soar from $992 million to $1.896 billion in the past three years.

I've reported on this before - citing the Katrina Effect, among other things - but Murphy notes that the blizzard of new megadevelopment projects in New York will likely throw a new twist into things:

The fact that all those projects (the stadiums, Ratnerland, and Ground Zero) will be going on at basically the same time means that each will increase the costs for every other one, because there are only so many laborers around, and because already scarce construction material will be even harder to come by. Whether those costs hurt the developers or the city depends on how each deal is structured. But if any community goodies are contingent on developers' profits, and inflation was under-estimated when everything got costed out, that pricy copper pipe and rebar might take a bite.

The Yankees, Mets, and Nets have all committed to paying cost overruns on their new facilities, so they should take the hit for rising steel prices there. But there are associated "infrastructure" projects that could see their costs rise, too - the pilings being driven to support the Mets' new stadium, for example, and the Yankees' parking garages, both of which are being paid for by the state. (And in the case of the garages, in part by as-yet-undetermined private developers, which means it could now be even harder to find someone willing to build them without additional public subsidies.)

Also, the affordable-housing component of the Nets project is mostly set to be built as part of the second phase of the project, meaning that a combination of rising steel prices and sinking housing demand could end up jeopardizing what's been sold as the development's main public benefit. The project's estimated cost has already risen from $2.5 billion to $4.2 billion, so it's possible inflation in construction materials has already been factored in - but given the limited amount of info revealed about the project's finances, we may never know.