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June 13, 2008
A Question Mark Looms Over 3 Expensive Projects
The NY Times
By Charles V. Bagli
More than two years ago, the Bloomberg administration came up with an aggressively creative way to use tax-exempt bonds to finance two of the most expensive stadiums in the world, one for the Yankees in the Bronx and another for the Mets in Queens.
...The Internal Revenue Service initially approved the use of the bonds for the ballparks, but quickly issued a proposal in 2006 to tighten the rules governing the use of tax-exempt bonds so that it would be more difficult, and perhaps impossible, for this kind of financing to be used again by profitable, private enterprises like professional sports teams.
Much of the financing for the two ballparks, which are both under construction, is already in place. Atlantic Yards developer Bruce Ratner is hoping to score a huge windfall from Washington:
Now state and city officials say the proposed rules are jeopardizing what is planned to be the city’s next big sports palace: the $950 million Barclays Center, an 18,000-seat basketball arena for the Nets that is the centerpiece of the huge residential and commercial complex in Brooklyn known as Atlantic Yards. The project’s developer, Forest City Ratner, says it plans to break ground on the arena this fall and has long expected to use tax-exempt financing to reduce its borrowing costs by tens of millions of dollars.
Barclays Center is expected to be the most expensive arena in the world, and the lack of tax-exempt financing would substantially increase its cost. The $4 billion Atlantic Yards project already faces delays because of litigation, a sluggish economy, the lack of commercial tenants and the reluctance of lenders to finance large real estate developments.
...
In an interview this year, Bruce C. Ratner of Forest City said that he hoped to raise about $800 million through tax-exempt bonds. He acknowledged that “the tax changes would make it more difficult” to do the project, although he was still optimistic that he could break ground for the arena this fall.
...
[T]he proposed changes in the I.R.S. regulations are far more significant for the Nets and Atlantic Yards, which has not yet issued any bonds or started construction.
Some follow up to the story on The Times's City Room blog: I.R.S. Rule Change Could Imperil Atlantic Yards Arena
Posted by lumi at June 13, 2008 10:12 AM