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Atlantic Yards Doomed If Ratner Can't Get More Corporate Tax Breaks
The richest team in sports (the Yankees), and the billionaire developer of the
most expensive basketball arena ever proposed (Forest City Ratner's arena for
his Nets) want more money and the IRS to bend the rules*...for
From the Associated Press:
Assembly questions Yankee Stadium funding
Forest City Ratner is desperately trying to lobby the Treasury Department in Washington
(along with NYC, NY State and the Yankees) to waive an IRS regulation that would
make it very difficult for Ratner to get the triple tax-free bond he desires for
his billion dollar arena.
..."These sports teams are private companies that appear addicted to keeping
their hands in the government cookie jar," said Assemblyman Hakeem Jeffries
This begs the question: If Ratner/Steinbrenner succeed in getting a waiver, opening
up an IRS loophole they want for their respective sportsplexes, what then would
the IRS do when the next team from, let's say Chicago, wants triple-tax-free bonds
for their new sportsplex? Where does the waiving stop? Will the United States
government actually break its fiscally prudent regulations just for Bruce Ratner
and George Steinbrenner?
You'll notice the "we'll break ground in the Fall" mantra from Forest
City Ratner. If they believed it they wouldn't need to repeat it over and over.
And if you believe it, we have a bridge to sell you. It is simply impossible for
Forest City Ratner to break ground in the Fall.
And now, on top of all of the project's problems moving forward, the developer
may be unable to get the bond he needs for his Barclays Center arena, jeopardizing
his entire project.
The New York Times reports on Ratner's troubles and efforts, and his
Question Mark Looms Over 3 Expensive Projects
Bettina Damiani, Project Director for Good
Jobs New York, told WNYC-radio:
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
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.
“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.”
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
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.
Neil DeMause explains the intricacies of the IRS regulations and what the
Yankees and Nets would like to see waived over at the Village Voice