A controversial plan to use public subsidies and tax-exempt bonds to build a football stadium on Manhattans Far West Side has largely overshadowed a similar plan to finance a basketball arena in Brooklyn.
Both plans involve the use of tax-exempt bonds backed by payments in lieu of taxes, or PILOTs. In the Manhattan plan, the citys $300 million contribution to the New York Sports and Convention Center will be backed by broad PILOT payments that the city collects. However, revenue that the project generates will be dedicated to repaying bonds proposed for the Brooklyn arena, according to Ron Jury, a spokesman for the Empire State Development Corp.
Thats a risk the bondholders will be taking, Jury said.
The football stadium has garnered more attention partly because Mayor Michael R. Bloomberg has put it at the center of New York Citys 2012 Olympic bid and has tried to expedite the approval process to satisfy the Olympic selection committee. The cash-strapped state Metropolitan Transportation Authority owns the land that both developments would occupy, but the Manhattan land has already received competing bids that have helped stir the publicity surrounding the project.
While the Brooklyn development is not as far advanced as its more controversial cousin and the MTA has said it will seek the highest bid for its Brooklyn land as well critics and fiscal watchdogs say both projects should be considered together since they both involve heavy public subsidies.
Theres a serious question of priorities right now, especially when were struggling so hard to fund the MTA capital projects, said Jeremy Soffin, spokesman for the Regional Plan association, a public policy group, noting that the citys health and education needs could also lose funding to the stadiums.
No dollar amount has been set for the PILOT-backed bonds that would be issued to finance part or all of the Brooklyn arena, though the building costs of the arena have been estimated at $450 million to $600 million. City and state officials released general financing information on the Brooklyn arena earlier this month when they signed a memo of understanding with the developer, Forest City Ratner Cos.
We havent discussed anything publicly about bonds at all, Ratner spokesman Barry Baum said regarding the level of tax-exempt bond financing the developer would seek.
The bond financing comes on top of the $100 million that the city and state each pledged towards infrastructure improvements relating to the Brooklyn project. The proposed Frank Gehry-designed arena will house the New Jersey Nets pro basketball team.
The arena is a loser, said City Councilwoman Letitia James, whose district encompasses the project, noting that the 17 residential and commercial towers proposed for adjacent land will likely subsidize the entire $2.5 billion development.
Stadium supporters and opponents have joined together in the City Council to support legislation introduced this month that would ensure the councils oversight of the use of PILOT payments. The mayor has argued that the administration has sole discretion over the way the payments are disbursed. The matter is expected to be resolved in court.
New York City collects roughly $40 million per year in PILOT payments, which are generally lower than real estate taxes and are offered as incentives to large firms to remain in the city. The revenue stream is expected to grow to $70 million by 2009, according to city officials.
