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September 10, 2009
IBO: increase in land assessments insufficient for arena PILOTs
Atlantic Yards Report
The New York City Independent Budget Office (IBO), in its new report, The Proposed Arena at Atlantic Yards: An Analysis of City Fiscal Gains and Losses [PDF], points out that the New York City Department of Finance has steeply increased assessments on properties destined for the arena block, especially the vacant land.
I've previously raised questions about this issue, and the IBO does not back up those concerns, though it raises new ones.
The IBO does not conclude that that the increased exemptions are fishy--I think they still deserve scrutiny--but does say that the foregone property taxes would not be sufficient to generate PILOTs (payments in lieu of taxes) to pay off the arena bonds.
The implication is that either the assessments would have to be increased--or the total amount of bonds lowered.
The IBO reports:
Turning to Atlantic Yards, IBO estimates that a typical property tax assessment would result in a PILOT that falls short of the payments needed to cover debt service in the early years of the project. Assuming the arena is assessed using a cost methodology, taking into account hard and soft construction costs and actual land acquisition costs, IBO estimates that in the early years after the arena opens, a typical property tax assessment would yield a tax bill of about $40 million annually. (If the developer took advantage of the as-of-right Industrial Commercial Abatement Program, the bill would be less than $10 million annually for more than a decade). In contrast, IBO’s estimate of the annual debt service payment for the arena’s tax-exempt bonds—assuming a 7.0 percent interest rate, 30-year term, and level payments—is $55 million.
Although the Department of Finance has sharply increased its assessments on land (particularly vacant land) throughout the city over the past year, the increases elsewhere in the city are just a fraction of those at the site. Citywide, the average increase in assessments on vacant land from 2009 to 2010 was 63 percent; for Brooklyn as a whole, vacant land values grew by 100 percent. Over the same period, the aggregate assessment increase for the three tax blocks that will be at least partially covered by the arena at Atlantic Yards has grown by 238 percent, while the assessment on the arena site’s vacant land has risen 702 percent—an eight-fold increase.
NoLandGrab: The arena land assessment rose 700% in one year?!! Either some heads need to roll because land values were not properly assessed in the past, leaving sorely needed tax revenue on the table, or somebody needs to go to jail, for cooking the valuations in order to grease the skids for Ratner's PILOTs.
Posted by eric at September 10, 2009 12:23 PM