Mikhail Prokhorov's Unique Offer
Mikhail Prokhorov, the Russian billionaire being courted by Forest City Ratner to help fund the Barclays Center arena for the New Jersey Nets (to become the Brooklyn Nets), posted his counter offer to the Atlantic Yards shareholders on his blog yesterday. Develop Don’t Destroy Brooklyn brings us a translation of the entry, which DDDB calls…
Mikhail Prokhorov, the Russian billionaire being courted by Forest City Ratner to help fund the Barclays Center arena for the New Jersey Nets (to become the Brooklyn Nets), posted his counter offer to the Atlantic Yards shareholders on his blog yesterday. Develop Don’t Destroy Brooklyn brings us a translation of the entry, which DDDB calls “rather foolish and absurd.” The gist is that Prokhorov will finance the arena in exchange for a significant share in the project as well as a controlling share in the Nets. What’s unique about the post is that it sounds like Prokhorov’s primary interest in the deal is the opportunity to elevate the state of basketball in Russia, which he says suffers from inconsistent financing and an unstable, unprofitable business model. He writes: “For our group, participation in such a complex project undoubtedly is interesting only in the event that NBA technology can be used for the systematic development of basketball in Russia.” (Perhaps NBA technology sounds less bizarre in Russian? And since when do oligarchs have blogs?)
NJ Nets and the Development of Russia’s Basketball [Mikhail Prokhorov Blog]
Prokhorov Issues Absurd Statement on the Nets, AY [DDDB]
actually its 205 million direct subsidy plus the infrastructure of an additional 100. Its 105 from the city and 100 from the state with the city responsible for the infrastructure improvements(roads with the sewers water etc that then get added to the water bills YOU pay plus what ever else lights etc..)
Mr Joist the 200 million I count is without the infrastructure amounts. Its direct costs and the IBO issued a new report that says the benefit is less than 0.
The infrastructure amounts are an added 105 million and I didn’t count them at all….
I did get my information from an unbiased source, the New York City Independent Budget Office, linked in my last post.
On the bottom of page 3 of the report is a list of all the “costs” related to the project.
I don’t count the City and State Capital Contributions for Arena because these are a combination of infrastructure upgrades (sewer, power) and the construction of the deck over the rail yards (debatable). Some of this should probably be counted but there is no breakout.
Loss of Existing Property Taxes on Arena Site = $13MM
Tax-Exempt Financing for Arena = a federal tax cost from forgone tax on the interest payments received by buyers of the bonds. $0 before, $0 after issue.
Arena Property Tax Exemption = $0 before, $0 after issue.
Mortgage Tax Exemption for Arena Financing = $0 before, $0 after issue.
Sales Tax Exemption for Arena Construction = $0 before, $0 after issue.
MTA “loss” on Rail Yard (Arena Portion) = $10MM
Opportunity Cost of Transfer of City Property & Streets to FCRC = $6MM + $3.7MM = $9.7MM
So: $13MM + $10MM + $9.7MM = $32.7MM on a present value basis. Small potatoes.
On a pure financial analysis, I don’t care that the “benefit†to Ratner is calculated at $726.3 million … I just care about the cost to me, the taxpayer, which is $33MM.
Looks like they have a deal
http://bit.ly/hAdFS
the city and the state gave $200,000,000 in direct support to this project. the tax exempt bonds are repaid by using what would otherwise be real estate taxes(Pilots-payment in lieu of taxes) to repay the bonds so that in the end we actually pay for the arena and don’t own it. The 200 million in cash was used to repay the cost of acquiring the property.
The affordable housing will be built using as of right tax payer subsidy programs.
The IBO office said that they city would not get back its money in tax payments. ratner they believe would make about 3/4 of a billion dollars.
You can get more information mostly without too much bias at Norman Oder’s atlantic yards blog.
Ratner has spent some of his own money- they claim about a total of $500 million spent so far(about 300 m of their own investor’s money)
I think what bothers me is that the city gave it away to him- even with other offers on the table that would have given the MTA more money. That area was nicely coming back and Ratner essentially bulldozed out all progress. After creating real blight, now he claims he is fighting it. Basically since you’re saying the lost revenue is fictitious, then we have nothing to lose by letting the hole in the ground remain either. I feel like you’re saying we are not going to get any financial return so lets have anything there no matter if its beneficial or not. I don’t like a hole in the ground either- I’m just not so willing to give it away just to fill it now.
I’m still not seeing the logic.
We have no arena now, so no property tax now. No arena now, so no mortgage recording tax now.
Foregoing the collection of these taxes is an opportunity cost but NOT an out of pocket cost to taxpayers. We had $0 before and we’ll have $0 afterwards if it all gets cancelled.
The REAL out-of-pockets cost are the things we’ll lose such as:
Loss of Existing Property Taxes on Arena Site ($13 million over 29 years)
MTA “loss” on Rail Yard (Arena Portion) ($10 million over 29 years)
Contributions of City Property (streets) ($9.7 over 29 years)
The present value of these losses seems miniscule.
Anyway, I haven’t decided if I’m for or against yet but I won’t be making my ultimate decision on the financial impact.
http://www.ibo.nyc.ny.us/iboreports/AtlanticYards091009.pdf
i have to agree w dr j on this one bx.
if the alternative is a (monstrous) empty lot then there is no cash from you to ratner. and that’s what’s really bugging you, i sense. lost revenue is fictitious. did he get a deal on mta land? debatable, but it doesn’t appear to me that the city is rolling over. more like they are debating merits of a non-revenue, blighted hole in the ground vs a [use your own adj] something.
Not agreeing with them is not bashing them. And sorry- but taxpayer subsidies do come out of pocket for all of us. We are investing far more than we will ever get back and I don’t see either the need or the purpose since these guys are so rich. In fact, now that he’s trying to pay less for the rail yard rights, its a very real hit. And he already got a special favor on that one.