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December 19, 2009
Hail Mary or silver bullet: Perkins, raising questions of fraud in arena bond sale, asks Paterson to put Atlantic Yards on hold
Atlantic Yards Report
Did the Brooklyn Arena Local Development Corporation (BALDC) slip up in authorizing bonds for a proposed Nets arena? State Senator Bill Perkins thinks so and is calling on Governor Paterson to take action.
Suggesting that bonds for the Brooklyn arena were issued improperly, state Senator Bill Perkins yesterday asked Governor David Paterson to halt the "master closing" for the project scheduled for Wednesday and to stay condemnation proceedings until "serious questions... are addressed."
Had the bonds been issued by an Empire State Development Corporation (ESDC) subsidiary, they could be repaid via for payments in lieu of taxes (PILOTs), but the issuance would have had to have been approved by the Public Authorities Control Board (PACB), Perkins wrote in a letter. However, in an apparent effort to avoid the PACB, the ESDC created the Brooklyn Arena Local Development Corporation (BALDC), and that murky entity--which issued $511 million in bonds--should not possess a property tax exemption, the letter said.
Perkins, speaking at a public meeting in Harlem this morning, said that last night he spoke to the governor's counsel, Peter Kiernan, who was taking the matter seriously.
Paterson, interviewed this afternoon at a separate event, did not seem aware of the controversy.
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The bond issuance, Perkins said, "prevents it really from going forward," adding that "we consider [it] an illegal action."
Perkins, who has stood out as the legislator most interested in reforming the state's much-criticized eminent domain laws, said he expects to hold hearings on the Columbia case, the Willets Point plan, and even another hearing on Atlantic Yards, in light of the bond issue.
"Essentially what we have here is a situation in which it unfortunately it appears that the government is in cahoots with the developers, that the best interests of the community are not being represented but rather the best interests of, let's say, the elite," he said.
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The "spectre of fraud"
The letter, citing a unanimous Court of Appeals decision from June, suggests that the arena does not deserve a tax exemption:
In light of this analysis, the BALDC property is not tax exempt if used for arena purposes. Consequently, payments-in-lieu of taxes cannot be used to secure the bonds, and they are effectively worthless. If ESDC knowingly misrepresented the legitimacy of these bonds, this raises the spectre of fraud.
The letter was also sent to Attorney General Andrew Cuomo and state Comptroller Thomas P. DiNapoli.
What next?
I asked Perkins (off camera) what happens now.
"We sent that out yesterday; I spoke with the governor's counsel," he responded. "He seemed to acknowledge that he needs to take a look at it. He indicated that he would get back to me."
And if they don't?
"I'm going to reach out to them again this week," he said. "But in the event that they have a different point of view, we'll see some legal measures we can take."
"As I said to him, the murkiness of this situation flies in the face of the [public authorities reform] legislation we just passed," Perkins said. "This is a representation of the old way of doing business."
Read the rest of this blog entry to get an explanation from Amy Lavine, a staff attorney at the Albany Law School's Government Law Center, who first discovered this issue.
Posted by steve at December 19, 2009 3:06 PM