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October 22, 2008
Treasury Gets Tough On PILOTs
Tighter Regs Issued As House Panel Opens
The Bond Buyer
by Peter Schroeder
Some industry insight into yesterday's IRS ruling, including the news that said ruling increases the risk for buyers, which might in turn make the bonds tougher to sell — unless you're George Steinbrenner, Fred Wilpon, or Bruce Ratner.
The Treasury Department yesterday issued more restrictive final regulations for bonds issued by payments in lieu of taxes, just three days before a House panel is scheduled to hold a hearing questioning the use of PILOTs to finance the new New York Yankees stadium.
But the rules contain a transitional provision that appears to enable the New York Yankees, Mets and Nets to continue to issue PILOT bonds as planned without having to comply with the new rules.
...David Caprera, a partner at Kutak Rock LLP in Denver, said the new regulations will require a shift in how many market participants view PILOTs.
...Since the PILOTs must be tied to taxes, Caprera said the new regulations shift a small amount of risk to the bondholder, who cannot be guaranteed a fixed payment, and unexpectedly low tax revenues could jeopardize a timely payment.
Posted by eric at October 22, 2008 1:39 PM