Wednesday, July 30, 2008

Typo? City/state letter on tax-exempt bonds backdates MTA RFP by three years

Maybe it's just a typo. Maybe it's a calculated slip. But there's another misleading element in a letter that, as I and Develop Don't Destroy Brooklyn have contended, deserves serious scrutiny.

The 5/8/08 letter to the Internal Revenue Service and U.S. Treasury Department from the New York City Industrial Development Authority and the Empire State Development Corporation backdates the issuance of the Metropolitan Transportation Authority's request for proposals (RFP) for the Vanderbilt Yard by three years, to 5/24/02.

The MTA's RFP was issued on 5/24/05. (Click on graphics to enlarge.)

Looking at the chronology

The passage at top appears in a chronology of the Atlantic Yards project, aimed to convince the federal agencies that they apply a 2006 "loophole" (in the words of the IRS's Chief Counsel) used for bonds to construct new stadiums for the Yankees and Mets to be used, as well, for the Atlantic Yards arena.

Both the Yankees and Mets want additional tax-exempt bonds backed by fixed payments in lieu of taxes (PILOTS). A proposed IRS rule would require that the PILOTs fluctuate so as to resemble the foregone taxes, given that tax assessment changes. Bonds with fluctuating payments would be much, much harder to sell.

The city and state argue that the AY arena should be grandfathered in under the more lenient rules allowing fixed PILOTs because "substantial progress" had been made before the proposed regulation was issued on 10/19/06.

The letter states:
Finally, the new regulations should not apply to bonds issued to finance a project that was described in a resolution, memorandum of understanding [MOU], or other preliminary approval adopted by a governmental entity prior to October 19, 2006. As we discussed, the Atlantic Yards project fits into this last category.

The chronology cites not just the MOU but public hearings and preliminary approval by the ESDC of the General Project Plan, which, at least in the section regarding tax-exempt bonds, remained virtually unchanged when finally approved in December 2006.

Looking at the MOU

Note that the Atlantic Yards MOU, signed 2/18/05, is quite tentative, stating that the project "may include" up to 2.16 million square feet of office development and 4.46 million square feet of residential development, though the former has declined by some 75% and the latter increased by 50%.

It also promises that the city and state would each commit $100 million in capital funding, though the city has since added $105 million. And it concludes:
This MOU is non-binding and does not create or give rise to any legally enforceable rights or legally enforceable obligations or liabilities of any kind on the part of any party hereto.

The advantage of 2002

What's the value of the 2002 date, compared to 2005? Well, maybe it's none, given that 2005 still would fall well before the October 2006 cutoff.

Then again, a 2002 date suggests that momentum for the project--which the letter says commenced in 2003--reached back even earlier.

Also, the 2002 date avoids potential consternation should regulators wonder why, if the project began in 2003 and the MOU was signed in February 2005, the Vanderbilt Yard was put out for bid only in May 2005.

That sequencing issue has been at the heart of the AY federal eminent domain case, which was dismissed by a district and appellate court and refused a Supreme Court hearing--but was never really addressed by the courts.

1 comment:

  1. Since they are both about rewriting history, I couldn’t help thinking about this story in conjunction with the same-day piece in the New York Times by Jim Dwyer, “When Official Truth Collides With Cheap Digital Technology.”

    I posted something brief on this “Dig-it-all! “Truthy” His-Stories On the Decline” (Wednesday, July 30, 2008) at

    http://noticingnewyork.blogspot.com/2008/07/dig-it-all-truthy-his-stories-on.html

    Michael D. D. White
    Noticing New York
    http://noticingnewyork.blogspot.com/

    ReplyDelete