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November 2, 2006

Bond bombshell

IRS would hike Ratner’s Yards cost
Experts: New rules could scare off investors

The Brooklyn Papers
By Ariella Cohen

Bruce Ratner’s sweetheart deal may be about to turn sour — thanks to the IRS.

Just in time for the final approval of Ratner’s Atlantic Yards project, the Internal Revenue Service has proposed the reform of a development-friendly tax program — a bond-financing scheme that happens to provide a funding foundation for Atlantic Yards.

The program under scrutiny is called “payments in lieu of taxes,” or PILOTs. Using PILOTs, a city can take land off the tax rolls in exchange for fixed rent-like payments — but the payments are typically less than property taxes and, in Ratner’s case, would not even end up in the city’s coffers.

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NoLandGrab: PILOTs were created when the IRS outlawed Tax Increment Financing (TIFs), which was created to get around public approval for bond issues. How much you wanna bet that someone has already figured out a new way to publicly finance private projects, along with a new acronym to boot?

Posted by lumi at November 2, 2006 11:17 PM