New York City and New York State have agreed to each sweep $200 million from the Battery Park City Authority to help close their budget gaps. The agreement also provides funds to provide mortgages for affordable housing projects.
“The state’s receiving the $200 million, the city is receiving an equal amount,” said BPCA chairman William Thompson Jr. “The intention was to see the excess in Battery Park City go to affordable housing. Using it for gap closing both in the city and state kind of is an indication of the tough financial position both are in right now.”
Gov. David Paterson proposed the fund sweep in last year’s budget, but Mayor Michael Bloomberg and the city comptroller’s office, then run by Thompson, had to sign off on the plan but initially balked.
The future of an agreement was very much an open question as the state has tried to close a $9.2 billion budget deficit for fiscal 2011, which began April 1. A memorandum of understanding was signed March 29 by Bloomberg, city Comptroller John Liu, and BPCA president James Cavanaugh.
Liu said the agreement came after lengthy three-way discussions between his office, the mayor’s office, and the authority, which is controlled by the governor.
“It’s pretty clear ... the mayor and the governor, they each need $200 million,” Liu said. “I wasn’t all that keen about it because that money was intended for affordable housing.”
The BPCA doesn’t have to issue any additional debt to make it work, Thompson said. “This is money the authority has gotten and received over a period of time,” he said. “Battery Park City, for want of a better phrase, makes a profit.”
The deal also provides $261 million of pay-as-you-go capital for the city.
The affordable housing component of the agreement obligates the city to finance half of a $400 million affordable housing fund, known as the “421-A Fund.” BPCA will fund the remaining half with its surplus. The New York City Housing Development Corp. will provide mortgages to affordable housing projects with proceeds from the fund as well as with its corporate reserves. The city will allocate capital to the fund over five years, according to the MOU. Loan repayments on the city-funded portion will be repaid to the city.
The city created the 421-A program in the 1970s to give tax breaks to developers but scaled it back in 2006. Part of the reform was to create a $400 million mortgage fund for projects in low-income neighborhoods.
“For four years we’ve lacked any kind of an agreement that would have allowed [BPCA] funds to be transferred into the 421-A program,” Liu said. “I’d like to have gotten the $400 million up front, but it had to be a three-way agreement.”