IRS OKs Tax-Exempt Bonds For Barclays Center, Other N.Y. Venues
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Tax-Free Financing For Barclays Center Project
Could Save Bruce Ratner Up To $165M |
IRS officials this week ruled that Nets Owner and Forest City Ratner CEO Bruce Ratner for his planned $950M Barclays Center in Brooklyn "can use tax-exempt bonds to pay for the building, providing some rare good news for the delay-plagued project," according to Charles Bagli of the N.Y. TIMES. The ruling, which was adopted Monday by the IRS and the Treasury Department, would also allow the Yankees and Mets to "issue a new round of city-issued tax-exempt bonds worth hundreds of millions of dollars" for their new ballparks, which both will open in '09. Tax experts indicated that the ruling "would not allow other governments to issue such bonds on behalf of professional sports teams." But Bagli notes the N.Y. teams still "may have difficulty finding investors who will buy the bonds, given the current turmoil on Wall Street and in the credit markets." The ruling came four days before Yankees President Randy Levine and two N.Y. city officials are scheduled to testify at a Congressional subcommittee hearing "investigating the tax-exempt financing" of the new Yankee Stadium. The Yankees and Mets did not comment on the ruling, and N.Y. Mayor Michael Bloomberg's administration said it was "good news" (N.Y. TIMES, 10/22).
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IRS Ruling Opens Door For Yankees To
Receive $336M More In Tax-Free Bonds |
EARNING THEIR STRIPES: In N.Y., Greg Smith reports the Yankees already have approval for $942M in "tax-free bonds but claim they need $336[M] more to finish" the ballpark, and if the IRS had "rejected the exemption, that request would have been dead." The IRS in the ruling "rejected opposition letters from groups" such as Good Jobs New York and Develop Don't Destroy Brooklyn (DDDB) (N.Y. DAILY NEWS, 10/22). In N.Y., Juan Gonzalez writes under the header, "Just Call The New Yankee Stadium The House That Tax Subsidies Built." While the Mets and Nets for their respective new facilities "also qualify for the specially tailored exemption," the Yankees "spearheaded an intense lobbying effort in [DC] for the special tax loophole" (N.Y. DAILY NEWS, 10/22).
LENDING A HAND: In Newark, Maura McDermott reports Ratner is "seeking up to $800[M] in tax-free financing" for the arena. The IRS ruling "tightens regulations for development projects seeking tax-free financing -- but carves out exceptions for projects that earned initial approval and made significant expenditures" by October '06. The IRS ruling states that the "tax-free bonds must be issued by the end of 2009," and Empire State Development Corp. News Press Officer Warner Johnston said that the Nets "appear to meet all the criteria as long as the bonds are issued by the end of next year." DDDB spokesperson Daniel Goldstein said that getting tax-free financing "would save Ratner" about $165M. McDermott notes the "crux of yesterday's IRS ruling was whether developers can make fixed payments to government agencies instead of paying ordinary real estate taxes." Prior to the ruling, developers "could make a 'payment in lieu of taxes' that would not change, even if real estate taxes went up or down." The ruling states that developers "subject to the new rules can still make 'payments in lieu of taxes,' but the payments will go up and down to keep pace with ordinary real estate taxes." N.Y.-based attorney Mary Reichert said the ruling "dramatically changes stadium financings." Reichert: "It won't make them impossible, but it will make them much more difficult" (Newark STAR-LEDGER, 10/22).
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