New York City Mayor Michael Bloomberg Thursday announced the creation of a new bonding authority that would access the capital markets for nonprofit organizations throughout the city.
Medical centers, charter schools, arts groups, senior housing developers and other nonprofits have been locked out of using tax-exempt bonds and notes for infrastructure needs after a provision that enabled them to issue debt through the New York City Industrial Development Agency was allowed to lapse by the state Legislature in January 2008.
The Bloomberg administration calculates that there are 20 different capital projects for nonprofits totaling $400 million that are ready to go and looking for financing.
The mayor believes even more projects could come forward since nonprofits currently do not have a local issuer to help educate and guide them on tax-exempt financing.
“New York City is home to tens of thousands of nonprofits that are looking to expand, create jobs or move into new facilities, but for the past few years they have faced more expensive financing costs, while some have had to forgo expansion altogether,” Bloomberg said in a statement.
“This new entity will make it easier and more inexpensive for our critical nonprofit sector to grow and expand,” he added.
Bloomberg plans to form the new bonding entity as a local development corporation within the next four to six months. The as-yet unnamed agency would include a board that would weigh in on borrowings, with the city comptroller and borough presidents nominating board members.
According to the mayor, more than 13 different organizations have sought a combined $337 million of financing from sources outside the state and city since the IDA lost its ability to issue for nonprofits.
Elizabeth Berger, president of the Downtown Alliance, which promotes business growth in Lower Manhattan, said having a local bonding entity for nonprofit organizations would help overall neighborhood development.
“At a time when many not-for-profits are struggling to make ends meet amid the nation’s fiscal woes, this new issuer will serve to strengthen and support an increasingly important sector in our city’s economy,” Berger said in a statement.
“In Lower Manhattan, not-for-profits represent a vital and growing sector, and this action recognizes their value,” she added.
The initiative does not require approval from the City Council or the state Legislature, according to the Bloomberg administration.
The new bonding corporation would not require projects funded with its tax-exempt financing to include prevailing wages for workers, according to Patrick Muncie, spokesman for the New York City Economic Development Corp. The IDA is a subsidiary of the development corporation.
State lawmakers in 2007 and 2008 debated whether to add a prevailing wage provision in the bill that would have continued IDA’s ability to serve as a conduit issuer for nonprofit entities.
Democratic lawmakers pushed for the wage condition while Republicans objected to the compensation requirement.
City Comptroller John Liu expressed his support, but stressed the need for future scrutiny.
“The goal is laudable but at least for now the devil may be in the details, which we hope can be worked out with an eye to accounting for the use of taxpayer dollars,” Liu said in a statement.
The New York City Independent Budget Office said it would review the initiative before commenting on it.
Dorothy Hutcheson, head of the Nightingale-Bamford School in Manhattan, said the private college preporatory school for girls needs financing alternatives to help update its facilities.
“We at Nightingale have been fortunate to educate our girls under one roof for more than 90 years, but as our curriculum expands and adapts to the modern world, we must develop increasingly sophisticated educational spaces — which also means increasingly expensive educational spaces,” Hutcheson said in a statement. “We welcome a new entity aimed at helping institutions like ours finance our future.”