Wednesday, December 02, 2009

So, are tax-exempt bonds for infrastructure ruled out forever? Where would infrastructure funds come from?

So, have the Empire State Development Corporation (ESDC) and Brooklyn Arena Local Development Corporation (BALDC) ruled out the use of tax-exempt bonds for Atlantic Yards infrastructure, though the BALDC is authorized to issue $400 million in such bonds?

Well, yes--but not definitely.

Scenario not foreseen

The ESDC said Monday that it ultimately "decided not to pursue that type of financing."

Does that mean that it's been ruled out for ever, I asked the ESDC, noting that the Inducement Resolution for BALDC sets out a Public Improvement Project to be financed by tax-exempt bonds. Is that Public Improvement Project off the table? If so, does BALDC have to rescind part of the resolution?

"ESDC does not foresee a scenario in which the abandoned financing structure would be taken up again," responded spokeswoman Elizabeth Mitchell. "Even so, there is no formal action required of the BALDC with respect to the Inducement Resolution."

As I read it, "does not foresee" does not preclude the possibility of issuing such bonds. And the term "abandoned financing structure" belies the fact that the financing structure was approved in September, not so long ago.

(Given the time involved in marketing bonds, I hardly think--as a few readers have suggested--that my report Monday prompted the ESDC to abandon the plan to use tax-exempt bonds for infrastructure. Still, it's odd that the ESDC was not prepared to answer queries last week, albeit as a holiday weekend approached.)

Where the funding would come from

So, without tax-exempt bonds, how will the infrastructure be financed? As noted, there seems to be a major funding gap.

"The funding for the entire project will be a combination of tax-exempt bonds, New York State funds, and New York City funds," Mitchell responded. "Any additional funding required will be made available by Forest City Ratner Companies."

She left out taxable bonds--unless that's subsumed under FCR funding. Still, there's a gap. Will the developer go back to the city and state for "extraordinary infrastructure" funding? Stay tuned.

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