Tuesday, August 09, 2016

Pro forma vote to approve Barclays Center bond refinancing; no details released (did BALDC vote on document they didn't see?)

So, an obscure, not-so-transparent state entity yesterday approved, in pro forma fashion, the refinancing of tax-exempt bonds used to pay for Barclays Center construction, plus first-ever taxable bonds. See below for the video of the half-hour meeting of the Brooklyn Arena Local Development Corporation (BALDC).

There was no mention of the amount of bonds, or the interest rate, or any other details. Nor was there any mention of the amount of taxable bonds. So we can't estimate the savings from today's lower interest rates.

There was mention of "ArenaCo," the holding company that operates the arena, but not the specific beneficiary of this state-assisted financing, owner Mikhail Prokhorov, the Russian oligarch, or his Onexim & Entertainment.

What did they know?

There's even evidence that the BALDC board members, all state officials, didn't even know such numbers.

After all, the Preliminary Official Statement, the document that would contain information about the amount of bonds and much more, was not included in the board materials made public before the meeting but was described as among exhibits being shared with the directors only.

Was it? As the photo above right indicates, the directors had relatively few pages in front of them. And the Preliminary Official Statement for the earlier, 2009 round of arena bonds was 772 pages.

I asked Empire State Development--whose alter ego, the Job Development Authority (JDA), created the BALDC--of a copy of the Preliminary Official Statement and was told it was "still being finalized." So it wasn't even ready for the meeting?

Of course, there was no reason for the directors to challenge their boss, Gov. Andrew Cuomo. Nor was there mention of the state's leverage in potentially requesting additional rent from the arena operator, given the arena's occupancy by a second major league team.

But more transparency just might have given the public a meaningful opportunity to comment. No members of the public nor press attended. (I was out of town.)

More obfuscation

Rather, there was more obfuscation. At about 22:06 in the video below, ESD lawyer Jonathan Beyer referred to "a notice to proceed issued by the New York Transportation Development Corporation" (NYTDC) as furthering the hiring of bond counsel.

As I wrote yesterday, it's quite odd for an unrelated entity--though also a creation of the JDA--to participate in this arena bond process. Perhaps the BALDC was unable to meet. But the role of the NYTDC means no one noticed at all.

One question

The discussion about the arena bond sale--as opposed to other, related actions--began at about the 27-minute mark of the meeting.

One board member had a question, driven by curiosity: if the payments in lieu of taxes (PILOTs) used to pay off arena construction can't exceed the assessed value of the arena, could the arena operator go to court and get the assessment lowered?

(Why would they? Their incentive is to get the assessment high enough that it's above the annual PILOT.)

A voice off-screen, in a part of the ESD board room in Manhattan not visible on the webcast, said it was possible but the odds were minimal, given that the assessment was based on construction costs.

(By the way, in an Orwellian triumph, that assessment was in 2014 referred to as "actual taxes," by the arena operator, Brooklyn Events Center--then owned by Forest City Ratner.)

It's unclear who the respondent was, but, based on the 2009 BALDC meeting regarding the first round of arena bonds, it was a representative of bond underwriter Goldman Sachs.

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