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October 6, 2009
The wild card regarding arena financing; could Build America Bonds take up the slack if tax-exempt bonds were insufficient?
Atlantic Yards Report
There might be a way around a potential financing snag for the Atlantic Yards arena (or, perhaps, the affordable housing): new Build America Bonds authorized by federal stimulus funding.
(I have no inside information about this; a tipster suggested it was worth airing.)
On his Field of Schemes blog yesterday, Neil deMause wondered about limits on tax-exempt financing for the arena:
There's one other wild card here, which is that the New York City Independent Budget Office has projected that even under the expiring IRS rules, the arena project wouldn't generate enough property tax value to justify $700 million in tax-free bonds. (If you really want to know what property tax valuations have to do with tax-free bonds, start here.) It'll be interesting to see if Ratner has to take out bond insurance for the possibility of the IRS rejecting some of his tax-exempt bonds as well — and if at some point he needs to find another Russian billionaire to pay for it.
Build America Bonds aren't tax-exempt--but they are subsidized. So they can achieve the same goal for the developer: a lower interest rate than the taxable market. And, if the foregone taxes on the arena block could only support PILOTs (payments in lieu of taxes) for, say, $500 million in tax-exempt bonds, perhaps Build America Bonds could take up the slack.
The popularity of such bonds has shifted more than a quarter of state and local government debt into the taxable bond market, according to the Bond Buyer. New York City has sold $800 million in such bonds.
Posted by lumi at October 6, 2009 6:05 AM