Though New York City didnt win the right to host the 2012 Olympics, the city demonstrated through its bid for the Summer Games that its not afraid to pursue an ambitious development agenda with new and innovative financing methods.
The International Olympic Committees selection early yesterday of London as the 2012 host city dashed New Yorks hopes, but left alive a list of economic development initiatives that will likely proceed in the coming years.
Most of the proposed Olympic venues would have been funded by licensing and other private revenue, so yesterdays outcome will have little effect on the citys bonding capacity. In that sense, Mayor Michael R. Bloombergs proposed 10-year, $53 billion capital plan will remain unchanged in the face of what the administration viewed as yesterdays big disappointment.
Theres a legacy nonetheless, said Moodys Investors Service analyst Robert Kurtter.
This Olympic legacy will take the form of facilities initially proposed for the games whose fate is not tied to the IOC vote. It also involves a new type of debt for New York City, first proposed to help pay for the Jets pro football stadium on Manhattans far West Side.
The stadium served as the centerpiece of the citys bid until its rejection last month by a New York state panel. Some observers say the failed plans may also redirect attention to capital projects that have languished as city officials poured much of their energy in recent years into the Olympic effort.
This effort sparked plans for a new stadium for the Mets baseball team, scheduled for completion in 2009. The Mets had long hoped for a new facility, but it wasnt until the high-profile demise of the West Side stadium that city and state officials scrambled to replace it with a new Mets ballpark and pledged about $268 million of bonds for infrastructure, site preparation, and the costs associated with converting the stadium into an Olympic venue.
Specific details have not been released yet about the Mets stadium financing, but the plan could include a new type of bond for New York City that is backed by payments in lieu of taxes. The financing structure for the Jets stadium involved at least $750 million of PILOT-backed bonds, and a planned new stadium for the Yankees a facility not tied directly to the Olympic bid would also involve PILOTs, a banker familiar with the deal said.
This type of debt involves the creation of a local development corporation to issue bonds backed by PILOTs, which are offered as incentives for companies to move to, or stay in, the city, and are generally lower than property taxes. While PILOT-backed deals have occurred in other parts of the country, such transactions remain rare, market participants say.
Some hope that yesterdays loss will free up time and energy for other capital needs. Observers named the decades-old plan to build a subway on Second Avenue in Manhattan, the redevelopment of Lower Manhattan, and a court case providing for billions of dollars in additional aid for New York City schoolchildren as some of the priorities that deserve to be expedited by state and city officials.
Earlier this year, a lower court judge sided with the advocacy group Campaign for Fiscal Equity, ruling that the citys schoolchildren had been shortchanged by the state and deserved an additional $5.6 billion per year, to be phased in over four years. However, state lawmakers filed an appeal and have not decided where that money will come from if the ruling stands.
The mayors quest to build a stadium for the Jets and the Summer Games diverted state lawmakers attention away from this lawsuit, said Michael Rebell, executive director and counsel for the Campaign for Fiscal Equity.
I would be willing to say that the major lobbying effort by the mayor was the stadium, not CFE, Rebell said. Now that this is resolved, I would hope there will be more of a focus on CFE.
I think the Bloomberg administration would do well to focus on the Second Avenue subway, said Gene Russianoff, staff attorney for the nonprofit Straphangers Campaign. Russianoff has argued that a Second Avenue subway line would improve the lives of about 600,000 riders by giving them another transportation option and relieving crowded conditions on the Lexington Avenue line. The states Metropolitan Transportation Authority runs and funds the New York City subways.
New York takes a very Darwinian approach to development, Russianoff told The Bond Buyer. There is little effort at consensus building, he said and a project will die without serious boosters.
Every one of these projects has a rabbi, Russianoff said of proposed capital initiatives like the Second Avenue subway, championed by New York State Assembly Speaker Sheldon Silver, who effectively killed the Jets stadium deal. What matters is how big your rabbi is and who he knows.
