Skip to main content

Featured Post

Atlantic Yards/Pacific Park graphic: what's built/what's coming + FAQ (pinned post)

Obscure city bond program set to offer Ratner tax-exempt re-financing for Atlantic Terminal office tower; largest in Brooklyn

The office tower at Forest City Ratner's Atlantic Terminal mall is set to get $90.8 million in triple tax-exempt re-financing, and though the city claims there's no politics at play, this is apparently the largest allocation of tax-exempt bonding for a private company project under the city's discretionary BUILD NYC program. (See this map to compare.)

And it's nearly the largest ever under the life of the program, which goes back to at least 2008. There was a $112 million bond for Mount Sinai Hospital in Queens. But the additional $14.2 million in taxable bonds for Atlantic Terminal put the total at $115 million. 

The BUILD NYC program is used significantly for private schools, hospitals, and social service agencies, and less often for private companies. So, if there's a finite amount of capacity to issue such bonds--since there's no reason federal government to allow unlimited financing--Forest City's application could crowd out other potential projects.

Also, while the city claims the tax break is a wash in terms of city coffers, the real benefit to Forest City Ratner, not publicly calculated, is several millions of dollars in savings, since the tax-exempt bonds require lower interest rates. The bigger hit goes to state and especially federal taxpayers.

The Daily News scoop

The Daily News today reports, in Key player in de Blasio's attempt to bring DNC to Brooklyn seeking $90M city-backed subsidy:
A key player in Mayor de Blasio's drive to lure the Democratic convention to Brooklyn is seeking $90 million in tax-free bonds to refinance one of his already-subsidized properties.
Bruce Ratner - who developed the Barclays Center where de Blasio hopes the convention would be held - requested the city-backed subsidy from a quasi-governmental agency controlled by the mayor.
If approved, the tax-break will cost the city general fund nearly $1 million in tax revenue and create not a single new job. A hearing is set for Thursday.
Ratner and Maryanne Gilmartin, CEO of his firm, Forest City Ratner, are both members of a committee of movers and shakers de Blasio formed two months ago to raise money for the Democratic convention bid.
...Mayoral spokesman Marti Adams said the deal will be a wash for taxpayers because Ratner will pay a fee to handle the financing. Ratner officials put the fee at $963,000. The money goes to the quasi-governmental Economic Development Corp., not the city’s general fund.
The public hearing is at 10 am today in Lower Manhattan, and a vote is scheduled next Tuesday.

The application, below, actually puts the cost to the city at $911,561 in foregone tax benefits, and $1,519,637 in projected tax revenues.

No politics?

de Blasio's spokeswoman told the Daily News, "To suggest that politics are at play here is absolutely baseless. There are strict eligibility requirements for projects financed through BuildNYC, requirements which are long-established and are rooted in federal tax codes, not politics."

But at the same time, program guidelines state:
All Build NYC benefits are discretionary. Selection considerations include, but are not limited to, need for financial assistance and the impact of the proposed project on New York City’s economy.
BUILD NYC is formerly New York City Capital Resource Corporation (NYCCRC) , which has this rather malleable mission statement:
The mission of the New York City Capital Resources Corporation (NYCCRC) is to “encourage community and economic development and job creation and retention throughout New York City by providing lower-cost financing programs to qualified not-for-profit institutions and manufacturing, industrial, and other businesses for their eligible capital projects.”
The Brooklyn context

Here's a list of BUILD NYC projects in Brooklyn, with projected jobs added:
  • $15 million to Wythe Hotel (33)
  • $10 million to Poly Prep Country Day School (0)
  • $6 million to United Cerebral Palsy (0)
  • $48 million to Cobble Hill Health Center (0)
  • $8 million to Mary McDowell Friends School (10)
  • $10 million to Brooklyn Heights Montessori School (4)
  • $20 million to Albee Retail Development (68)
  • $9 million to SCO Family of Services (0)
Total: $128 million.


The Wall Street Journal, in Firm of de Blasio Ally in Line to Get a Break, offers context, noting that BUILD NYC has authorized bond financing for only three for-profit firms among 24 projects under de Blasio, and only two of 23 last year under Bloomberg:
No one testified Thursday at a public hearing on the deal. The corporation’s 15-member board is scheduled to vote on whether to approve the deal next week. Comptroller Scott Stringer, one of the few members of the board whose appointment isn’t connected to the mayor, is still reviewing the project, a spokesman said.
...For New York state, the transaction would result in an estimated loss of $3.4 million in forgone tax revenue on interest earned by bondholders over the next 25 years. City officials said they couldn’t calculate the loss in income to the federal government.
Rest assured, the federal hit is much larger.

The article ends oddly with this quote:
“This is the way in which business is done in New York City with people who have a close relationship with the mayor,” Mr. [Dick] Dadey [of Citizens Union] said. But without evidence that there’s a “quid pro quo,” he said, there’s every reason to believe it’s a “merit-based decision.”
Wait a sec. Even without a quid pro quo, it's a discretionary decision, meaning the board can choose among projects that meet a certain threshold of merit. And shouldn't the size of this financing, relative to others in the program, be a red flag?