NY Assembly questions Yankee Stadium funding

..."These sports teams are private companies that appear addicted to keeping their hands in the government cookie jar," said Assemblyman Hakeem Jeffries of Brooklyn...

A Question Mark Looms Over 3 Expensive Projects

By Charles V. Bagli

More than two years ago, the Bloomberg administration came up with an aggressively creative way to use tax-exempt bonds to finance two of the most expensive stadiums in the world, one for the Yankees in the Bronx and another for the Mets in Queens.

The Internal Revenue Service initially approved the use of the bonds for the ballparks, but quickly issued a proposal in 2006 to tighten the rules governing the use of tax-exempt bonds so that it would be more difficult, and perhaps impossible, for this kind of financing to be used again by profitable, private enterprises like professional sports teams.

Now state and city officials say the proposed rules are jeopardizing what is planned to be the city’s next big sports palace: the $950 million Barclays Center, an 18,000-seat basketball arena for the Nets that is the centerpiece of the huge residential and commercial complex in Brooklyn known as Atlantic Yards. The project’s developer, Forest City Ratner, says it plans to break ground on the arena this fall and has long expected to use tax-exempt financing to reduce its borrowing costs by tens of millions of dollars.

Barclays Center is expected to be the most expensive arena in the world, and the lack of tax-exempt financing would substantially increase its cost. The $4 billion Atlantic Yards project already faces delays because of litigation, a sluggish economy, the lack of commercial tenants and the reluctance of lenders to finance large real estate developments.

“We’re working to address tax-exempt financing because the proposed regulations will have a significant impact on projects planned in the city,” said Avi Schick, chief executive of the Empire State Development Corporation, which is working with the Atlantic Yards developer.

State and city officials, along with the developer, have been lobbying the Treasury Department in Washington either to block the rule change or, more likely, to provide waivers for projects that had been in the development pipeline before 2006, which would include the Yankees, Mets and Nets.

If adopted, the I.R.S. rule would apply to all tax-exempt bonds issued after February 2007.

In an interview this year, Bruce C. Ratner of Forest City said that he hoped to raise about $800 million through tax-exempt bonds. He acknowledged that “the tax changes would make it more difficult” to do the project, although he was still optimistic that he could break ground for the arena this fall.
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“The proposed I.R.S regulation has removed an important tool for a number of key important economic development projects, including the Yankees and Nets stadiums,” said Seth W. Pinsky, president of the city’s Economic Development Corporation. “We are working with the state in Washington to receive relief from the I.R.S. regulation.”
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But the proposed changes in the I.R.S. regulations are far more significant for the Nets and Atlantic Yards, which has not yet issued any bonds or started construction. Mr. Ratner bought the Nets in 2004 and planned to move them to Brooklyn from New Jersey as part of a 22-acre development project, which is to include more than 5,000 apartments, at the intersection of Flatbush and Atlantic Avenues.

Since then he has had to deal with a lengthy public approval process and significant opposition from neighborhood and civic groups, as the cost of the arena rose to nearly $1 billion from $637 million. When the project was approved in December 2006, Mr. Ratner optimistically indicated that its first phase — the arena, an office tower, a retail complex and three residential buildings — would be completed by 2010. But under a financing agreement completed nine months later, he was given 12 years to complete the first phase.

The economic picture has changed significantly. This year, Mr. Ratner acknowledged that he would not begin construction of the office tower, once known as Miss Brooklyn, until he had an anchor tenant, which could take years. He did say that he hoped to complete the arena in 2010, along with the first residential building.
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Real estate executives say that if Mr. Ratner cannot get tax-exempt financing for the arena, it will make the project significantly harder.

Joseph DePlasco, a spokesman for Forest City Ratner, said on Thursday that the company remained confident that it would break ground on the arena this fall.

I'm not surprised the Yankees want more. I'm totally surprised that public officials are willing to entertain the idea, much less try and lobby Washington and the IRS to make it happen.