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November 25, 2009
Atlantic Yards Decision Drama! More Lawsuits as Financing Questions Remain
NY Observer
by Eliot Brown
The ever-astute Mr. Brown follows the money.
The project, developed by the Brooklyn firm Forest City Ratner, received a key victory early Tuesday morning with a decision from New York's highest court, as the judges ruled 6-1 to uphold the use of eminent domain in the project.
Shortly after, the plans for financing were revealed, and the state's development agency said that the project was expected to receive an investment grade rating from the ratings agencies on hundreds of millions of dollars in bonds for the arena.
There has been skepticism that the bonds would be able to reach investment grade; failure to do so would render the project unable to receive financing ahead of a Dec. 31 deadline on the use of tax-free debt.
Now, the question becomes whether or not Forest City will succeed in selling the tax-free bonds, and then if it will be able to ward off any additional obstacles, including lawsuits, between now and the end of next month.
THE SPECIFICS OF THE financing are still unclear, though the state-run Empire State Development Corporation, said at a hearing Tuesday that the state expected $600 million in tax-free bonds to be approved as part of a complex financing agreement meant to skirt federal laws intended to bar many stadiums and arenas from using tax-free debt. (These have proved controversial when used on recent stadium deals, with critics alleging that land values were improperly inflated in order to make the numbers work. Would-be property tax payments are used to pay the debt service on the bonds.)
The ESDC said that there would also be $150 million in taxable bonds, which are far more expensive for Forest City. The stated reason? The property taxes are not excepted to be high enough to cover more than the $600 million in debt.
Posted by eric at November 25, 2009 5:54 PM