Thursday, December 16, 2004

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New York City Mayor Michael Bloomberg’s administration is considering selling $650 million of bonds backed with payments in lieu of taxes, or PILOTs, and other fees in order to finance a $350 subsidy for the Jacob Javits Convention Center and a $300 million subsidy for the proposed Jets stadium.

The bonds would come on top of $4 billion of bonds and notes the administration has proposed for other infrastructure projects such as the extension of the No. 7 subway line in the neighborhood around the Javits center and proposed stadium. These bonds and notes would also be secured with PILOTs and other fees, though only from developers in the Hudson Yards neighborhood.

Deputy mayor Dan Doctoroff said on Wednesday evening after he testified at a City Council hearing about the Hudson Yards Infrastructure Corp. that he believes there are sufficient PILOT payments and other fees paid to the city to back bonds to finance both a $300 million subsidy to the Jets stadium and a $350 million subsidy to the Javits expansion.

“It’s not just PILOT payments,” he said. “It’s other fee streams that we could capture.”

According to city budget documents, New York City had more than 5,000 property tax exemption agreements in place last year through public agencies such as the Industrial Development Agency. In lieu of property taxes, developers and others have agreed to make annual PILOT payments that were estimated to total $209.2 million in fiscal 2004, which ended June 30.

The IDA accounted for $46.6 million of PILOT payments in fiscal 2004, according to the estimates, while the state-run Battery Park City Authority accounted for $131.5 million.

The Bloomberg administration originally proposed using money from the Battery Park City Authority to back bonds for the $350 million Javits subsidy. Earlier this month the state Legislature and Gov. George Pataki reached an agreement on legislation permitting the convention center expansion that includes language preventing the city from using “any funds” from the Battery Park City Authority.

Doctoroff said the city would not attempt to use the Battery Park City PILOTs for the Jets stadium.

The Bloomberg and Pataki administrations have been working in concert on redevelopment plans for Manhattan’s far West Side, including building platforms over the Hudson Yards to accommodate a football stadium and other developments.

The two sides signed memorandums of understanding in March, along with the New York Jets, whereby the city agreed to provide $350 million of the financing for the $1.4 billion Javits expansion, with the state proving the rest. The city and state also agreed to subsidize $600 million of the proposed $1.4 billion Jets stadium, with the football providing the other $800 million.

The state and city said it would sell $400 million of tax-exempt bonds to raise half of the Jets contribution.

It was later revealed that the city would sell raise all of the $600 million of the Jets stadium subsidy if the state Legislature prevented the Pataki administration from selling $300 million of state appropriation bonds.

Doctoroff said the city would not sell PILOT- and other fee-backed bonds for the state.

“We won’t do $600 million unless there is compensation from the state in another form,” he said. “So we don’t ever see our exposure being $950 million.”

The City Council on Wednesday evening criticized the Bloomberg administration’s plan to use the Hudson Yards Infrastructure Corp. to sell $4 billion of bonds and notes. It said the financing could be done more cheaply through the city’s general obligation bond program.

State Assemblyman Richard Gottfried also criticized the administration’s reluctance to reveal the sources of funding for the stadium subsidy. Gottfried said that New York City’s deputy budget director Alan Anders testified to the City Planning Commission last July that the Bloomberg administration was “looking at several revenue streams to back” bonds to raise the $300 million subsidy it agreed to make in March for the proposed $1.4 billion Jets stadium.

Anders said “those revenue streams are currently not supporting the city budget and estimated the amount needed to be $20 million to $30 million,” to back the $300 million bond issue, according to a letter Gottfried submitted to the administration seeking more detail.

Gottfried distributed a copy of the letter from July on Wednesday at the City Council hearings. “At a time when the mayor is asking the council to cut important services and projects, OMB [the Office of Management and Budget] says there are several revenue streams that could support that magnitude of expenditure that are coming to the city but are not currently being used to support the city,” Gottfried testified at the council hearing.

The OMB referred questions about the PILOT payments to the city’s finance department. A spokeswoman for the finance department said that it estimates “what [the public agencies] should pay in PILOTs]” and referred questions about where the money goes from there back to OMB and to the public agencies. The IDA did not respond to questions about the PILOT agreements.

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