Sunday, September 14, 2008

Flashback January 2004: where's the team store in the "privately financed" arena?

Along with the extreme hype, two interesting aspects emerge in a second look at the cover of the 1/22/04 New York Times Sports section. (Click on graphic to enlarge.)

First, the caption at left declares that the arena would be "privately financed," though that phrase didn't appear in the overview article. While no direct public subsidy had been announced--a 2/18/05 Memorandum of Understanding set out $200 million in subsidies, $100 million each from the city and the state--the Times could have been more skeptical.

After all, the 12/11/03 article announcing the Atlantic Yards plan stated:
Mr. Ratner said that the project "will be almost exclusively privately financed," although taxes derived from elements of the project will be diverted to help pay for it.

(Emphasis added)

From TIFs to PILOTs

That was apparently a reference to TIF (tax-increment financing), a strategy suggested in the early days of AY but soon abandoned, perhaps because TIFs in New York State require legislative approval.

As it turns out, the private financing now envisioned relies on tax-exempt bonds, a subsidy worth perhaps $165 million, which is borne mainly by federal taxpayers. Of course, that plan may not fly, since it relies on fixed PILOTs (payments in lieu of taxes) to repay the bonds, which the chief counsel of the Internal Revenue Service calls a "loophole."

The IRS has proposed a revised rule that would require PILOTs to be tied to actual foregone property taxes, which means the bond payments would fluctuate. The "loophole" has inspired some apparent shenanigans regarding the valuation of the new Yankee Stadium, the subject of a Congressional hearing Thursday, which also should touch on the AY arena.

What about the team store?

Note that architect Frank Gehry, who later said, "We tried to understand the body language of Brooklyn," initially put the team store in Building 2, on Dean Street, between Flatbush and Sixth Avenues, though quite much closer to Flatbush, with the entrance toward Flatbush.

The store has since been moved to the Urban Room, connected to the base of Building 1, closer to the intersection of Flatbush and Atlantic avenues.

The site map suggests that a good part of Building 2 would be opposite the blank wall of a retail enterprise, rather than the row houses elsewhere on the south side of Dean Street. Still, someone had to figure out that the team store would draw a large population to Dean Street, which will remain a relatively narrow residential street.

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