June 14, 2008
IRS Rule Coverage
The Real Estate: Cost of Extra Yankees Financing to the City: About $3.6 M.
The most at-risk project appears to be the Nets’ arena in Brooklyn, which is now seeking somewhere between $600 million and $700 million for the more than $900 million cost, though the final amount of financing has not been determined. Should the team and developer Forest City Ratner be unable to finance in the manner initially planned, it seems a new financing plan, likelier at a higher cost, would need to be devised.
Develop Don't Destroy Brooklyn: Ratner's Tax-exempt Atlantic Yards Bonds Worth $165 Million in Savings
We asked here: Why is Bruce Ratner telling NY1 "we don't see really a problem...there's not a problem" with new IRS regulations while his surrogates are in Washington lobbying for an IRS waiver so he can receive triple-tax-free bonds for his arena? Norman Oder provides the answer on his Atlantic Yards Report. Its pretty simple: Ratner was just doing some not very subtle spinning. They do have a problem if they can't get their triple-tax-free bonds—a $165 million problem.
River Ave. Blues: NY pols bemoan stadium subsidies
As Charles Bagli wrote in The Times today, the end game of this debate will probably lead to cost increases across the board for projects of this nature with the potential rule changes impacting the Atlantic Yards development, Citi Field and Yankee Stadium. But somehow I think the sports franchises will worm the money out of the public coffers one way or another.
Develop Don't Destroy Brooklyn: Ratner Says "No Problem" About Atlantic Yards. Twice in One Interview.
All news reports today said that the IRS tax exempt bond regulations may spell doom for Forest City Ratner's Barclays Center arena. So worrying are the regulations for the Ratner team that they, along with the city and state, are lobbying the Treasury Department in Washington to waive the rules for the Nets. But Ratner tells NY1 it's not true, there are no worries.
We don't see really sense being made here. If having to use taxable bonds, rather than tax-free bonds because of the IRS regulations, is not a problem for the developer, then why are his surrogates lobbying in DC and why did he go for tax-free bonds in the first place if he doesn't need them?
Atlantic Yards Report: The $165 million difference: why Ratner can't play it cool about IRS rules
The difference is worth many millions. The Yankees would save $189.9 million over the 40-year life of $920 million in tax-exempt bonds, according to the Independent Budget Office. (The Times, quoting the IBO, suggested $190 million savings on $943 million in bonds.)
Though the IBO has not calculated the savings on the arena's new $950 million price tag, a similar ratio to the Yankees numbers suggests that those building the Atlantic Yards arena, for which $800 million in tax-exempt bonds are sought, would save $165.1 million.
So Ratner may tell the press that the arena might go forward with taxable bonds. But surely Forest City Ratner's investment plan assumes tax-exempt bonds and the attendant savings.
Posted by amy at June 14, 2008 9:53 AM