Another roadblock popped up in front of the controversial, $4.9 billion Atlantic Yards project in Brooklyn last week when the New York Court of Appeals agreed to hear a legal challenge to the use of eminent domain.

The case, brought by a group of property owners, will be argued in Albany in October, calling into question whether developer Forest City Ratner Cos. will be able to sell bonds for the project by the end of the year.

The Internal Revenue Service has said payments in lieu of taxes can be used to back bonds to finance a basketball arena on the site provided that the bonds are sold by the end of the year.

The Empire State Development Corp., which would use eminent domain to seize properties on behalf of the developer, would be the issuer of about $700 million of PILOT bonds.

Briefs in the case are due on July 31 and Sept. 25.

The Atlantic Yards project would include 16 towers, mostly apartment buildings that could be financed through the New York City Housing Development Corp.

So far, courts have found in favor of the ESDC and Forest City in numerous legal challenges. The case was originally brought in 2008.

The ESDC has scheduled public hearings on July 29 and 30 due to amendments to the general project plan the board approved last month. The developer had originally planned to pay the Metropolitan Transportation Authority $100 million for the development rights over the Vanderbilt rail yards where a large part of the project would be built, but under a new agreement the developer would pay $20 million and then $80 million at net present value in installments over 19 years.

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