Municipal bond financing will boost a long-awaited nearly $1 billion waterfront redevelopment in a fiscally stressed Long Island city.
The mixed-use Garvies Point project on former industrial land in Glen Cove, N.Y. is slated to include 1,110 condominiums and apartments along with parks, marinas, restaurant, retail and offices.
The Glen Cove Local Economic Assistance Corporation recently voted to issue $97 million in tax increment financing bonds to build parks and enhance infrastructure surrounding the 56-acre property. The Glen Cove Industrial Development Agency also approved $24 million in tax exemptions for the developer, RXR Glen Isle Partners LLC, a subsidiary of Uniondale, N.Y.-based RXR Realty.
"This is a transformational redevelopment project," said Michael Zarin, attorney for the City of Glen Cove. "It's one of the largest public-private partnership projects on Long Island."
Glen Cove and Nassau County were among 15 municipalities cited in September 2015 report from New York State Comptroller Thomas DiNapoli as facing "significant stress" fiscally. Glen Cove, on Long Island's North Shore, had a population of 27,414 according to the U.S. Census' 2014 American Community Survey; it has struggled since the turn of the century to balance its budgets.
"When you have a city with serious financial problems a project like this can really be a savior, at least for a very short period of time," said Anthony Figliola, vice president of Uniondale, N.Y.-based consulting firm Empire Government Strategies. "The city has seen some financial struggles and could certainly use some additional revenue."
The large-scale development is estimated to bring $250 million in tax revenue to Glen Cove over the 40-year life of the bonds, according to Zarin. The project will also generate an additional $400 million for Nassau County, the Glen Cove School District and Glen Cove Library District, he said.
"This project will create economic stability," said Glen Cove Mayor Reginald Spinello. "This will bring new revenue into the city both short-term and long-term."
Glen Cove is rated Baa3 with a stable outlook by Moody's Investors Service. It revised the city's outlook to stable from negative in November 2013 after financial operations stabilized following a decade of negative fund balances from 2002 to 2012. A December 2015 Moody's report affirming Glen Cove's Baa3 rating on $37.6 million in debt cited budgetary concerns and a reliance on one-time revenues to maintain balanced operations.
"They are expected to get things right with fund balances if everything goes well with the waterfront development," said Moody's analyst Cristin Jacoby. "Overall the long-term boom to their economy could be huge."
Planning for the Garvies Point project dates to 2003, following an extensive cleanup of the land after it was designated a Superfund site in 1986.
RXR, which was selected as the redevelopment partner in 2007, spent more than $42 million of private capital during the planning process and anticipates spending over $860 million to complete the project, according to city officials.
"The property hasn't been on the tax rolls in 30 years," said Spinello. "It's exciting for the city to get this project going after many years."
Glen Cove's financial woes led to a 2007 issuance of $12.8 million in deficit refinancing bonds, but its budgetary pressure continued.
The city issued $3.4 million in general obligation limited tax bonds in December to redeem $3.5 million of maturing bond anticipation notes.
"They have been moving positively toward balancing fund operations, but still have some challenges ahead," said Jacoby. "To the extent that the redevelopment project leads to new revenue and positive property values we would likely consider it to be a major credit strength."
Citi is underwriter for the planned TIF bonds, which are nonrecourse with no liability to the Glen Cove in case of a default, and are backed by future Garvies Point revenues. The bonds are structured to provide annual tax distributions to the City of Glen Cove, Glen Cove School District, Nassau County and the Glen Cove Public Library.
TIF bonds are unusual for IDA projects on Long Island, according to Figliola, a former deputy supervisor for the Town of Brookhaven in nearby Suffolk County.
"It's very creative," he said. "You don't see tax-increment financing too often on Long Island."
Mayor Spinello said he hopes for a September bond sale. He said the deal will likely be attractive to investors since RXR has had strong track record with other P3 developments.
"There is an appetite in the bond market for a high-yield investment like this," said Spinello. The bonds are expected to be sold without a rating, he said.
"One of the reasons there is so much demand for it is RXR has had so much success," Spinello said.
Citi declined to comment on the status of the sale.
Zarin estimates a total of 1,000 new jobs being added from the project during the construction and post-completion period. New residents are also expected to add $50 million in local spending and the city will realize $600,000 of recurring revenue from different sources related to the development, Zarin said.
The redevelopment could also provide a boost for Nassau County. The suburban county has been controlled by the Nassau Interim Finance Authority since 2011 and has relied on borrowing and one-shot revenues to balance budgets in recent years. Nassau is rated A2 by Moody's.
The waterfront redevelopment project is closely linked to a new ferry terminal scheduled to open early next year that will offer service into Manhattan in less than an hour.
The city built a $14.6 million dock and boat basin and a $4.3 million terminal using mainly federal funds. A previous Glen Cove ferry service launched in 2001 failed in part due to the 9/11 terror attacks, but Mayor Spinello expects the new terminal to have successful ridership due in large part to the new housing in the Garvies Point development.
"This gives people the opportunity to jump on a ferry and be in Manhattan in under an hour," said Spinello. "This will be the only commuter ferry service on Long Island."
Glen Cove is 27 miles by road from Midtown Manhattan.
Garvies Point is inching closer to a shovel in the ground after years of opposition from residents who complained that the proposed development was too large. There remains some resistance from the neighboring Village of Sea Cliff, but Glen Cove officials are optimistic that much-needed economic activity is right around the corner.
"We have spent a tremendous amount of time addressing opposition," said Zarin. "We're very close to the finish line."
