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June 13, 2008

Key Form of AY Arena Financing Appears Shaky

A big chunk of financing for Atlantic Yards may be in jeopardy, the Times reports. The IRS is looking to end the days of tax-exempt bond giveaways for pro sports teams' projects, a form of financing that Forest City Ratner was counting on for its $950 million Barclays Center. The Nets facility is expected to be the most expensive arena in the world. Forest City Ratner had expected to raise about $800 million in tax-exempt bonds. Real estate pros say the arena will be much harder to bring to fruition if the tax-exempt dough doesn't come through. Forest City Ratner is poised to get more than $2 billion in tax subsidies for Atlantic Yards, according to reports published earlier this year, but the developer says that may not be enough public financing for the project to be realized. The move by the IRS could also impact plans for the new Yankee Stadium in the Bronx among other projects.
A Question Mark Looms Over 3 Expensive Projects [NY Times]
You Pay and the Nets Will Play [NY Times]
Photo by andriz.

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Comments

Did that landlord from yesterday's Forum post on the cat... "Tenants Have A Cat!!!"...evict that cat and now he has to sleep on top of some ATM?

Posted by: Bold type guest at June 13, 2008 9:21 AM

cute cat.

Posted by: guest at June 13, 2008 9:36 AM

Yes! Go IRS!

Posted by: guest at June 13, 2008 9:37 AM

Done deal my a$$ hat.

A $2 billion transfer of taxpayer money to Ratner isn't enough? 50% of the total cost of the project underwritten by the taxpayer and it's not enough????

Oh that's right. Jobs.

Perhaps those in favor of AY could support the shortfall by making donations to Ratner directly? Or invest in FCR? God knows he needs the money.

Posted by: Johnny at June 13, 2008 9:48 AM

Let's get rid of AY and do something progressive with that same money. I was just in Chicago and they are making good use of the congestion pricing $ we turned down.

Posted by: guest at June 13, 2008 10:05 AM

ATM Guard Cat says
No Cheezburger, No Dough.

Wait a second, what site is this?

Posted by: guest at June 13, 2008 10:13 AM

Less and less likely everyday there'll be an arena.

Posted by: guest at June 13, 2008 10:17 AM

Is that the new Gehry plan?- Jeesh! They redrew them again? Gonna say I'm liking the organic lines and the toned down colors though. Still not sure about the striping but the design seems much more cohesive overall. Is that furry stuff a new hi-end exterior finish?

Posted by: bxgrl at June 13, 2008 10:21 AM

bxgrl wins brownstoner today. brilliant!

Posted by: z at June 13, 2008 10:27 AM

Yes, 9:21, that's definitely the cat from yesterday's forum post. She's trying to register for one of the AY affordable housing units, having been thrown out on the street by her insensitive landlord. She's curled up for a nap because she knows it's going to be a bit of a wait until the units are ready.

Posted by: slopefarm at June 13, 2008 10:50 AM

Perhaps Barclay's has pulled out of the project and has been replaced by Deutchesbank.

One thing for sure: die Katze ist nett! (cute)

Montrose Morris

Posted by: guest at June 13, 2008 10:59 AM

If in fact the IRS gets rid of tax exempt financing for sports facilities, Atlantic Yards is a dead duck. That being said, I seriously doubt that this measure will go forward. This sort of ruling will not only effect Atlantic Yards. Let's keep in mind that this financing mechanism is the scheme pursuant to which most cities finance sports stadia. Despite the fact that most people on this blog are Anti -AY, this would also impact Yankee Stadium, Citi Field and just about every other sports facility in the country (including popular, publicly supported projects in other parts of the country. Furthermore, it's a powerful and popular tool for municipalities throughout the country. I doubt it comes to fruition.

Posted by: guest at June 13, 2008 11:18 AM

Johnny,

you're right! and i just thought of another idea too. if it's about jobs then Bloomberg should just take our $2 billion (!) in taxpayer money that he's decided to give Ratner and give it to the people who need jobs. it would go a lot further toward its goal that way. who needs Ratner to make jobs??

Posted by: guest at June 13, 2008 11:25 AM

One of the things they talked about is making the change non-applicable to projects already in the pipeline or under construction. AY would possibly be considered not far enough along to be protected (yay!).

Beyond that I am sticking my neck out to say I think it's not the best way to spend our money- so to speak. AY reps say the project will return $1 billion in tax revenues over 30 years to the city. considering how much we'll put into it, and inflation, etc., that's piddling.

Posted by: bxgrl at June 13, 2008 11:25 AM

Thanks for injecting some realism into this thread, 11:18, something in short supply amongst the anti-AY crowd these days.

But their behavior is understandable, as their long record of losses in court has left them with no option but to fantasize.

D-O-N-E-D-E-A-L!!!

Posted by: guest at June 13, 2008 11:38 AM

LOL, gotta love that optimism! cracks me up every time ...

Posted by: guest at June 13, 2008 12:05 PM

$2 billion to Ratner is realism? It's completely $%#$ing insane to most people.

IRS is going to look long and hard at a project that seeks to avoid taxes on $2 billion of non-tax funding on a $4 billion project that FCR itself says is going to generate $1 billion in tax revenue. . . .over 30 years.

Since my suggestion for AY proponents to donate the shortfall themselves didn't get a lot of positive response (odd really), another fiscal challenge to them:

Give me $2 million today. I'll spend some of it, thereby increasing employment and economic growth and, over the next 30 years I'll give you $1 million of it back. Bring your checks and form a line next to Ratner's Bentley. Parked at 7th Ave and 9th street most mornings.

Posted by: Johnny at June 13, 2008 12:26 PM

Johnny, if you want money, you should go to the anti-AY opponents. Daniel Goldstein has so much money that he's been able to devote the past four years of his life to fighting Ratner. Also, his father is a hedge fund manager. Lumi Rolley, who runs nolandgrab, owns a brownstoner in park slope and a second home on long island. maybe she could sell them and make a donation. her husband, Eric McClure sold his company for a mint a few years back, so maybe you could hit him up, too. I'd suggest that you also ask Patti hagan, as she owns several buildings in prime brooklyn neighborhoods, but she was recently ousted and senor Goldstein refused to tell the press why, even as he decries Ratner for not being transparent.

Posted by: guest at June 13, 2008 1:02 PM

Having money isn't the problem. Asking that taxes be used to add to your personal hoard is.

Posted by: bxgrl at June 13, 2008 1:16 PM

Yeah, what bxgirl said.

1:02. I certainly want more money. It's just that, like Ratner, I'd rather take someone else's than earn it. But let's not argue. See you by the Bentley with your check.

Posted by: Johnny at June 13, 2008 1:57 PM

Wow, Team Ratner (guest 1:02PM) is getting pretty desperate if they need to slag off anti-AY supporters because they are, shock-horror, property owners. I mean obviously being worth a couple of million on paper makes a person entirely unqualified to criticize a private developer who is expecting a $2 billion tax-payer subsidy.

Posted by: guest at June 13, 2008 2:01 PM

a pigeon takes a crap near the yards and gabby would write a story on it.

hey brownstoner - how about getting someone on staff who is pro AY (or at least not raving anti development) to even things out on this website a bit.

ratner > gabby

Posted by: BrooklynLove at June 13, 2008 2:11 PM

Ratner is *not* being given $2,000,000,000.

I don't know why people keep reporting these lies.

Tax breaks and bond financing are used all the time to construct residential real estate in this city. The benefits the AY will receive are also intended to offset the cost of environmental remediation and extremely high site improvements - the kind of improvements that are so unusual and speculative no traditional lender would ever consider them. It is totally irrational to consider the difference between market financing and bond financing a cash benefit as market financing is totally not available.

The PILOT program is generous, but not radically different from the 421(a) program.

The point is AY is not getting substantially more preference than say, Avalon Bay, when they construct an 80/20 apartment building.

I have yet to see an intelligent breakdown of the $2B figure. So, if I am missing something - please let me know.

Posted by: Polemicist at June 13, 2008 2:12 PM

polemicist > gabby

Posted by: BrooklynLove at June 13, 2008 2:17 PM

2:01

It very much does matter. These are people who are the landed gentry of this city. How they got there is irrelevant. It is improper for those who have so much to stand in the way of bringing 22,000 new homes to a city desperately in need of more housing.

High density residential development in this city has barely taken place without some kind of subsidy since the city radicalized real estate development with the 1960 zoning act and rent stabilization in the 1970s. It is completely unreasonable to expect this project should be exempt from these benefits.

Posted by: Polemicist at June 13, 2008 2:18 PM

2:18 hits the nail on the head.

Posted by: guest at June 13, 2008 3:14 PM

I'm actually in favor of developments getting, as 2:18 said, "some benefits."

But $2,157,260,000 is not "some benefits." It's a subsidy of such massive proportion that it is 50% of the estimated cost of the entire development.

It's a $2,157,260,000 subsidy over the next 10 years that Ratner's own PR says will generate only $1 billion in benefit over the next 30 years. Any guess on what the actual number is if Ratner's saying $1 billion? Exactly.

If the pro-AYers want to invest more than their tax money in a scheme that returns half of it back to them 30 years from now I have just the investment for them. See my earlier rant.

It's a $2,157,260,000 gift to a company that's broke so they can build a stadium for the broke company's other holding.

It's a $2,157,260,000 ponzi scheme with taxpayer money.

But you're right about one thing. This type of development must use public money - because private investors would never fall for a scam like this.

Posted by: Johnny at June 13, 2008 3:44 PM

1. I don't object to subsidies and tax breaks in general
2. I agree the City needs housing. Whether it needs so much "luxury" housing is a different matter
3. 4. Why did the MTA agree to give Ratner the Air rights when another group was willing to pay more for the rights, as well as build a project more in line with the community and without seeking eminent domain?

And money in the form of subsidies is a double edge sword. The tax base forgoes the income it would have gotten basically on a promise. Ratner has not demonstrated that he can build the project he promised, or keep the promises he made. So in strictly financial terms, we lose money before we see any gains, we are hoping he can in fact deliver, and that over 30 years we'll get a pittance of a return on the investment.

In real terms, tax subsidies cost us in uncollected funds which in turn means goods and services not provided to the rest of us. Add to that the demands and stresses on the community and infrastructure while AY is being constructed, it's costing us even more.

Nor does it inspire confidence that the plans did not go through a proper review, and they have been redrawn and scaled back. that I don't mind, but it is an indication that confidence in Ratner's ability to do this is in question by the very people he needs to get it done. So all the numbers can be pumped up and put in the most optimistic terms yu like- but the reality can be very different.

Posted by: bxgrl at June 13, 2008 3:45 PM

Stick a fork in it, AY is done.

Posted by: guest at June 13, 2008 5:10 PM

the last 3 posts above this should join forces to write a novel.

Posted by: BrooklynLove at June 13, 2008 11:00 PM

Fork > BrooklynLove

Posted by: guest at June 14, 2008 10:58 AM

original thought > 10:58 anon

Posted by: BrooklynLove at June 15, 2008 6:39 AM