Wednesday, December 02, 2009

The slippery, risky Atlantic Yards bond deal

Did you notice that the Atlantic Yards financing deal keeps changing and has some very unclear numbers?

No infrastructure bonds

In September, the Brooklyn Arena Local Development Corporation (BALDC) agreed that it was willing to authorize up to $400 million in tax-exempt bonds for Atlantic Yards infrastructure. Now that plan is off the table.

PILOT bonds lowered in a week

Last week, the BALDC contemplated issuing up to $825 million in tax-exempt and taxable bonds for the arena. Yesterday, the amount of tax-exempt bonds had declined from $600-$650 million to just $500 million, in order to reassure investors.

Risky tactics denied but not ruled out

Officials of the BALDC say they won't do the following things, but won't definitively rule them out:
Unclear source of funds

Ratings agency Moody's says:
The financing structure of the Barclays Center Project has a substantial equity component of approximately $424.4 million (40%) of the approximate $1.06 billion in total funding sources. The funds are being contributed to the Barclays Center Project by New York City ($131 million) and the sponsors/developers, Forest City Enterprises Inc. and affiliates as well as Mikhail Prokhorov ($293.4 million), in the form of additional rent. The $131 million from New York City demonstrates strong municipal government support for this project.
That $131 million city subsidy doesn't make sense. If Moody's is counting city funding for land and infrastructure--and considering the "project" the arena plus infrastructure--it should also count at least some portion of the state's $100 million for infrastructure.

Overblown number of arena events

Ratings agency Moody's says its assessment of the Atlantic Yards bonds depends on 225 events a year. But the developer of the Barclays Center claimed in September that the arena would hold 200 events a year. That's an 11% difference.

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