The Truth About Times Square

John Kramer
John Kramer · April 21, 2009

There is an old expression in journalism:  “Consider the source.”  So, when a former government official who oversaw a development as prominent as Times Square says his agency and its use of eminent domain actually impeded the area’s development, that is news.

In a new report released today by the Institute for Justice, William J. Stern, former chairman and chief executive of New York State’s Urban Development Corporation—the agency tasked with orchestrating Times Square’s revival—tells the story of government incompetence and eminent domain abuse in The Truth About Times Square.

Since its revival in the 1990s, Times Square has been touted as the standard of urban planning, with government and private actors working harmoniously to produce the great tourist destination we know today.  But in The Truth About Times Square, Stern demonstrated how all of that is a myth.  In the report, Stern said, “Almost none of the grandiose plans my colleagues and I created and aggressively spearheaded at the time ever came to fruition.  Our extravagant plans actually retarded development for decades.  The changes in Times Square occurred despite government, not because of it.”

“Eminent domain was not needed in Times Square,” continued Stern.  “In fact, it delayed the development, added tremendous cost, and was unfair and inefficient.  There was no shortage of developers willing to acquire property the old-fashioned way—through the private market.”

After watching Times Square decline for decades, Stern and his fellow state officials working under Gov. Mario Cuomo decided to completely remake the former “Great White Way” with the 42nd Street Development Project, which envisioned four giant office towers, a 2.4-million-square-foot merchandise mart and a luxury hotel. The plan relied on the use of eminent domain to condemn a 13-acre area of mom-and-pop shops interspersed with seedy sex shops.  Soon after the project’s approval, Stern saw the influence peddling, cronyism and corruption involved in determining which properties had to go, especially in The New York Times’ attempts to become a key influence in the project—later going so far as to have the state condemn an entire city block for its third and latest headquarters move.

By 1989, property owners trying to defend what was rightfully theirs had filed 40 lawsuits, tenants dropped out, and developers balked, as the city continued to pursue condemnation.  All the while, private development boomed in the area outside the government’s project area.  Only after the government’s plan for 42nd Street failed did Viacom, the Walt Disney Company and other attractions flood in, developing Times Square with private investment rather than government force.

“Times Square succeeded for reasons that had little to do with our building and condemnation schemes and everything to do with government policy that allowed the market to do its work, the way development occurs every day nationwide,” concluded Stern.  “By lowering taxes, enforcing the law, and getting out of the way instead of serving as real estate broker, the government incentivized investment and construction and encouraged the rebirth of Times Square to what it is today.”

“The monolithic power of state and local government, the media and developers worked together to condemn small businesses in Times Square but couldn’t produce a successful development,” said Institute for Justice Director of Activism and Coalitions Christina Walsh.  “Stern’s paper makes it clear that Times Square was restored to its former glory not with government control and intervention, but only when the government got out of the way.  That is a lesson others should be heeding across the nation and especially in New York City, where eminent domain for private gain is destroying property rights in Brooklyn, Willets Point in Queens and in both East and West Harlem.  Each of these government-forced development projects is yet another example of those who refuse to learn the lessons of history, thereby repeating its failures.”