The board of New York's Metropolitan Transportation Authority on Wednesday authorized a bond offering to monetize a portion of the 99-year lease payments from Hudson Rail Yards commercial and residential development.
Voice-vote approval without debate came two days after the finance committee approved the measure following considerable discussion.
While the authority has to finalize par amounts, the issue would yield $1.053 billion, or the full amount of proceeds assumed in its 2005-2009 and 2010-2014 capital programs, after deducting for issuance costs.
"This is a way to bring that money forward and to really close out that funding necessary for the capital program," finance manager Patrick McCoy told the finance committee. The MTA is one of the largest municipal issuers with nearly $37 billion of debt. On Wednesday it was issuing $500 million of new-money transportation revenue bonds.
The authority would issue the Hudson Yards obligations under a trust agreement with Wells Fargo Bank as custodian, probably as a 40-year bond. The authority chose Wells Fargo after a request-for-proposals process.
In the mid-2000s, then-Mayor Michael Bloomberg's administration devised a so-called value capture financing plan through the issuance of $2 billion in special-purpose bonds, to be repaid from revenue streams generated by Hudson Yards development and other sources, including payments in lieu of taxes.
Last September the MTA opened the long-delayed No. 7 subway line extension, 1.5 miles from Times Square to the new 34th Street-Hudson Yards station.
Real estate development has picked up notably on the eastern half of the yards. On May 31, luxury handbag company Coach Inc. moved into its 52-story headquarters at 10 Hudson Yards. The next significant buildout phase is west of 11th Avenue.
"Given the dynamics of the pace of development, the interest-rate environment and the need for the money, quite frankly, that's what really makes this transaction [viable]," said McCoy.
The MTA last month received approval from a state review panel for pared-down $27 billion 2015 to 2019 capital program that had remained in limbo for 18 months.
Hudson Yards reflects a trend of real estate-related development built around transit. In Boston, for example, Boston Properties has a similar redevelopment around decrepit Back Bay Station.
According to a survey by transportation infrastructure firm HNTB Corp., nearly 75% of Americans would support changes in land use or zoning regulations in their community that encourage transit-oriented development.
The survey, "Transit Oriented Development in America," found that roughly 55% of Americans would pay more for their mortgage or rent to have this option. Millennials, said HNTB, are much more willing to pay more monthly than older Americans, 70% versus 49%.
Hudson Yards is one of several MTA megaprojects. Others include the Second Avenue subway line, which the MTA hopes to open by year's end.
"Are we getting enough accurate reads with respect to the performance of that project? The answer is yes," Prendergast told reporters Wednesday.
Two days earlier, capital construction chief Michael Horodniceanu said the MTA could do so, while acknowledging "the risks are not behind us." Independent consulting engineer Kent Haggas of McKissack Group said catching up with completion of fire alarm systems and a buildout of communications systems are essential to meeting the deadline.
