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Ratner Would Fall Short On His Bonds Under Old and New IRS Rules
Bond Buyer
covers yesterday's IRS ruling
and explains the problem facing Ratner even if his interpretation of the ruling
is that he can have access to triple tax-free bonds for his $950 million arena:
PILOT deals - typically economic development projects - involve payments
from private entities that are used to pay debt service on tax-exempt bonds.
To meet the tax code's private-payment restrictions, PILOTs must be
less than, and commensurate with, the taxes that would have otherwise been collected
on the property.
(Emphasis added.)
So, with Ratner's PILOT the question hanging out there, which has been unanswered
for years, is how much will the Payment in Lieu of Taxes (PILOT) be? Because from
our calculations there is no way the tax assessment for his planned arena would
equate to the $800 million bond he will be seeking.
Norman Oder has done
the math on his Atlantic Yards Report:
The value of Madison Square Garden, IBO’s George Sweeting told me in a recent email, is now calculated for tax purposes at $250/sf. So even if doubled to $200/sf, the foregone property tax for the AY arena would be less than $8 million a year--a reasonable ratio if the figure for Madison Square Garden is $11 million.
Ratner would be seeking to fund pay for the bond with about $40 million per year
in PILOTs, while his property tax would be only $8 million or less.
That's not commensurate.
Posted: 10.22.08
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