2This mandates a new PACB review for Atlantic Yards as the changes since 2006 raise seriousquestions about the availability of funds to finance the project. The tax-exempt arena bond,which has yet to be issued—but is scheduled to be authorized on Tuesday, November 24 is of specific and urgent concern. These bonds are technically non-recourse to the State, but it isgenerally understood that should a default occur the State and its taxpayers will be on the hook.The PACB was formed specifically to guard against reckless borrowing by ESDC that couldresult in defaults and place the State in a moral obligation to support the bonds.There is no way for the PACB to know if the current Atlantic Yards proposal is financially soundand feasible.Since December 2006 the following substantial changes have occurred:
•
The Project was approved at $4 billion is now at least $4.9 billion.
•
The arena price tag shot up from $637 million to $900 million.
•
In 2006 it was uncertain what the amount of the arena bond would be, but it is now at least$700 million.
•
It is unknown if or when housing bonds will be available for the project’s proposedaffordable housing component.
•
Financing agreements were signed more than one year after the 2006 PACB approval andnew financing agreements are reportedly still under negotiation. Both these old and newagreements have never been vetted by the PACB (or the Comptroller).
•
It is unknown what rating the arena bond may get, but it has been reported that FCRC ishaving trouble getting a credible rating.
•
Changes in the project revenue model:
a.
The number of arena luxury boxes has been substantially reduced from 170 to 100since the 2006 approval. It is unknown what the rental of these suites would besince the economy has changed, but in 2006 FCRC projected a range of $58,000to $580,000 and KPMG, in consultation, projected a range of $65,000 to$450,000. b.
Whatever the suite rental projection is now, the total number of suites would bereduced by 41%, and a reduction of suite revenue would be
at least
41%.c.
The suites went on sale on May 5, 2008
1
, since that time, over 21 months, only20% have sold according to Nets President Brett Yormark
2
.d.
The new Yankees and Mets stadiums having major trouble filling expensive seatsand suites, and their bond issues have been devalued. The Nets are not nearly as popular and beloved as the Yankees and Mets.e.
The terms of the Barclays naming rights deal are unknown. At the end of 2008Barclays and FCRC reportedly renegotiated the sponsorship which had previously been reported to be either $300 million or $400 million. This revenue stream isnot publicly available.
1
Crain’s
. May 5, 2008. http://www.nolandgrab.org/archives/2008/05/nets_hold_court.html
2
Bloomberg News
. March 13, 2009. http://www.bloomberg.com/apps/news?pid=20601079&sid=aQKlOiAxeHr8&refer=home
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