Wednesday, December 02, 2009

Times roundup on bonds, court case adds some important context but gets basic issues wrong

A roundup story in the New York Times on arena bonds and more, headlined online New Nets Arena Wins Another Court Challenge, adds some important context--the bond ratings issued yesterday are no different from those assigned to bonds for the Yankees and Mets stadiums this year and in 2006. And rating agency Moody's says it's not worried about lawsuits.

But the article also contains some major errors.

Start with the headline. The arena didn't win the challenge. While Forest City Ratner was a defendant in the case, the main defendant was the Empire State Development Corporation and the case concerned much more than the arena.

Bond ratings

The Times reports:
The financial underpinnings of the project, the cornerstone of the 22-acre Atlantic Yards development, also emerged on Tuesday when two rating agencies assigned an investment grade rating for $646 million in bonds for the project. In addition, the developer and his partners will use a $131 million subsidy from the Bloomberg administration and invest $293.4 million of their own to build the 18,282-seat arena at the intersection of Atlantic and Flatbush Avenues.
The investment grade rating was assigned only to the $500 million in PILOT bonds, not the riskier $146 million in subordinated bonds.

And that $131 million subsidy, stated in the Moody's report, doesn't make sense. If Moody's is counting city funding for land and infrastructure, it should also count at least some portion of the state's $100 million for infrastructure.

The court case

The Times reports:
At the same time, the Court of Appeals declined to hear an appeal from some property owners who said the state’s decision to condemn their land would benefit a private developer, rather than the general public, as required by the New York Constitution. Last week, the Court of Appeals ruled six to one that the state could exercise eminent domain in claiming businesses, public property and private homes for economic development projects like Atlantic Yards.
Actually, those two sentences describe the same eminent domain case. The appeal denied Tuesday challenged the environmental impact statement (EIS) and the petitioners were community groups, not property owners.

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