Here's another way to phrase the question: what are the Actual Taxes?
Answer: $41 million.
Does the arena pay those Actual Taxes?
"It's Orwellian," sort of.
See, to enable the arena, a complicated series of transactions, with a fig leaf of public ownership, allowed the issuance of tax-exempt bonds, which have a lower interest rate. (The bondholders don't pay tax on interest received, so they accept a lower rate.)
The tax-exempt financing on $511 million of arena bonds saves arena developer Forest City Ratner and partners perhaps $150 million, with the hit going mostly to federal taxpayers.
As explained in the Atlantic Yards 2009 Modified General Project Plan, Empire State Development Corporation owns the land and arena premises, and a subsidiary, the Brooklyn Arena Local Development Corporation (BALDC) leases it, thus exempting it from taxes.
The BALDC then leases the arena to the arena holding company, Brooklyn Events Center (a Forest City Ratner affiliate), which, to pay for arena construction in the most advantageous way, agreed to make payments in lieu of taxes (PILOTs) "not to exceed the amount that full real estate taxes would be if the land and improvements were not exempt from such taxes as a result of ESDC's ownership thereof."
Hence the need for Actual Taxes, which were reported to bondholders in January 2014 at $41 million, as noted in the document above right. (Presumably a new calculation is forthcoming.)
Also, a larger bond issuance might have meant annual PILOTs would exceed Actual Taxes, which would be unacceptable.
At that point, IBO was estimating a $55 million annual debt service payment for a $678 million bond. So that had to shrink.
The value of the subsidy?
Note that the IBO does not consider the tax-exempt financing for the arena to be a full subsidy, in the way former Assemblyman Richard Brodsky considered tax-exempt financing for Yankee Stadium to be a full subsidy. (As does Michael D.D. White, regarding the arena.)
Rather, the IBO only counts the difference between taxable and tax-exempt financing, as well as the lost property taxes on formerly taxable property within the arena site.
It also argues that the Metropolitan Transportation Authority took a hit by not maximizing the price it could have gotten for the railyard portion of the arena, suggesting that the price should have been higher because the buyer would be able to maintain the advantageous tax-exempt status of the site.
|From the December 2009 Official Statement for the arena bonds|