I.R.S. Could Crimp Bloomberg's Big Plans

“New York has had a bad experience with creating public, accountable authorities,” said Councilman Eric Gioia, who represents the area. “I’m skeptical that government can create a new entity for large developments.”

“It’s a terrible idea to, without any other guidelines or rules, allow municipalities to use tax-exempt bonds for middle-income housing,” said Brad Lander, executive director of the Brooklyn-based Pratt Center for Community Development. “This administration has done well at building low-income housing, but … letting folks use their tax-exempt bonds to have developers build middle-income housing—there’s lots of places where that would be used to the planned exclusion of poor people.”

With regard to Atlantic Yards, the $4 billion-plus planned home to a Frank Gehry-designed Nets arena and housing complex, the issue is in its broadest sense the same: The city (and state, in this case) want to take advantage of tax-free financing to get the project completed at a lower cost. The city has yet to apply to the I.R.S. at Hunters Point, but for Atlantic Yards, the federal agency has pushed back against the city and state, as it made a proposal in 2006 that would bar the type of financing being pursued.

The proposal has yet to go into effect, as the city and state are lobbying to seek exemptions from the ruling for the Nets arena and hundreds of millions in additional bonds for the Yankees and Mets stadiums. A spokesman for the Treasury Department said that it was “an important issue” that the department continues to work on.

Atlantic Yards developer Forest City Ratner has been hoping to finance the bulk of the $950 million arena cost through tax-exempt financing. For an amount of this magnitude, the savings from tax-free bonds could be considerable: The city’s Independent Budget Office calculated that the Yankees, in the same financing scheme for $866 million in bonds, would see savings of $147 million over standard, taxed bonds.

Without the tax-free bonds, Forest City Ratner, already se
eing delays in its project given the tough lending market, would face greater obstacles. The company has been lobbying officials on this issue, and the chairman of the developer’s parent company has indicated the company needs additional subsidy for the project.

“There was no formal request that was made for additional assistance, but obviously this is an important project for them and an important project for us,” Mr. Pinsky said.

As for whether there would be additional city subsidies for the project if the I.R.S. failed to rule in the city’s favor, Mr. Pinsky would not indulge.

“I don’t want to speculate on hypotheticals,” he said.


I.R.S. Could Crimp Bloomberg's Big Plans