IRS Regulations Jeopardizing Construction On N.Y. Projects
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IRS Concerns About Tax-Exempt Bonds
Could Delay Construction Of Barclays Center |
New York state and N.Y. city officials indicated that proposed IRS rules concerning the use of tax-exempt bonds are "jeopardizing what is planned to be the city's next big sports palace," the Nets' $950M Barclays Center in Brooklyn, according to Charles Bagli of the N.Y. TIMES. Barclays Center is "expected to be the most expensive arena in the world, and the lack of tax-exempt financing would substantially increase its cost." Forest City Ratner, the project's developer, said that it "plans to break ground on the arena this fall and has long expected to use tax-exempt financing to reduce its borrowing costs by tens of millions of dollars." State and city officials and Forest City Ratner have been lobbying the U.S. Treasury Department either to "block the rule change or, more likely, to provide waivers for projects that had been in the development pipeline" before '06. If adopted, the IRS rule would apply to all tax-exempt bonds issued after February '07. The changes by the IRS also could "pose a problem" for the new Yankee Stadium. The Yankees have already raised nearly $1B for the new ballpark, including $943M in tax-exempt bonds. In order to finish the project, the Yankees have been "planning to raise an additional" $250-350M for the ballpark, "much of it through tax-exempt financing." Yankees President Randy Levine said that the team "hoped to get a waiver from the new regulation." Meanwhile, the Mets have raised $612.9M, including $547.35M in tax-exempt financing for their new CitiField ballpark. Both ballparks have received "substantial subsidies from the city and state, including an investment of $204[M] in Yankee Stadium and $166.1[M] for CitiField." The proposed changes in the IRS regulations are "far more significant for the Nets and Atlantic Yards, which has not yet issued any bonds or started construction." Real estate execs said that if Nets Owner Bruce Ratner cannot get tax-exempt financing for the arena, it will make the project "significantly harder" (N.Y. TIMES, 6/13).
NOT CONCERNED: Nets President & CEO Brett Yormark, when asked how progress on Barclays Center was going, said, "We'll be there for the [2010-2011] season." Yormark also "expressed a lack of concern about the downturn in the economy and about selling packages for a facility that will open after those of the Devils, Mets, Yankees and Jets/Giants." Yormark: "People know this is not going to be a protracted downturn in the economy. It gives people a chance to invest now in a Frank Gehry-inspired suite. There are going to be only 130 of them" (NEWSDAY, 6/13).
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