Posts Tagged Tax-Exempt Bonds
UPDATE April 7
After the release of our report, and as reported in Crain’s Insider last week, we have confirmed that New York City Economic Development Corporation officials agreed with one of our recommendations regarding transparency and are considering ways to update the agency’s website to better inform New Yorkers on the status of proposed projects.
A city entity charged with allocating $122 million in Recovery Zone Facility Bonds regularly announced preliminary approvals and held public hearings on projects but left New Yorkers in the dark when deals fell through according to new report released today by Good Jobs New York. The report: Kept in the Dark: Poor Reporting on New York City's Recovery Zone Bond Deals exposes a confusing and un-transparent process that prevents New Yorkers from holding companies accountable for job creation. The report is available at www.goodjobsny.org.
“Despite historical changes in subsidy disclosure at all levels of government as part of the Recovery Act, the Recovery Zone Facility Bond Program fell dramatically short,” said Bettina Damiani director of Good Jobs New York and an author of the report. “GJNY spent countless hours breaking down the byzantine approval process to determine which projects received these special bonds when basic details should be at every New Yorker’s fingertips.”
The April 1 deadline for the Bronx Parking Development Corporation to get its act together is no prank. Thanks to a glut of parking space at the new – subsidized to the hilt - Yankee Stadium, the parking garages, also subsidized to the hilt, have gone so unused the owners are struggling to pay its bondholders. It was widely reported that the $237 million in private activity bonds to finance the garage were going to default at the end of next week. However, today Juan Gonzalez at the Daily News reports that directors at the firm agreed to dip into its debt reserves (again) to pay the bondholders as well changes to its operations, like getting approval for expenses from an appointee chosen by the bondholders.
We can’t say New Yorkers didn’t see this coming.
Is the New York City Economic Development Corporation (EDC) cooking up different sets of job numbers for the City Point project depending on its audience?
Conflicting figures in hearings, meetings, official documents, and the press over the past week are cause for some raised eyebrows at the very least.
Thanks to the federal stimulus bill, a new tax-exempt bond has hit the market: “Recovery Zone Facility Bonds” (RZFBs). And while that phrase might make your eyes glaze over, keep reading, because initial indicators of how these bonds might be allocated in New York City are cause for heightened alert.
RZFBs are one of several new bond programs created under the American Recovery and Reinvestment Act (ARRA). As the name suggests, they must be used for projects within designated “recovery zones,” the boundaries of which are determined by the bond issuer (in New York State this means Industrial Development Agencies) based on indicators of “economic distress.”
RZFBs are a type of private activity bond that make commercial and industrial projects easier to finance because the bondholder does not have to pay federal, state, or local taxes on interest generated by the deal, and is thus willing to accept a lower interest rate.
It’s difficult to evaluate the RZFB program so far because states across the country—including New York—are still grappling with how to take advantage of it. New York City is the exception. The Bloomberg Administration has started things off with a bang by selecting a controversial project in downtown Brooklyn called “City Point” to receive financing through these new bonds. If the deal goes down, City Point developer Albee LLC would receive $20 million in tax-free financing for a shopping mall that will likely be anchored by a big box store such as Target.
This isn’t the first round of public money sought by this project—subsidies were approved in 2007, but then fell through due to difficulty in securing financing after the economic meltdown. Now, Albee LLC is looking to the stimulus bill for help.
Advocacy groups on the ground, led by Families United for Racial and Economic Equality (FUREE), are experiencing déja-vu. Having resisted the 2007 deal, they will oppose this round of subsidies on many of the same grounds at a public hearing scheduled for September 10. But they will have plenty to beef about without reminding the city that the site was home to the old Albee Square Mall, which was demolished in 2007 to make way for City Point. That demolition displaced scores of longtime local business that catered mostly to Brooklyn’s black community. Those stores were at odds with the city’s vision of a newly gentrified downtown, which favors chains like H&M and Bed Bath and Beyond. None of the displaced businesses were given the option to return once the new facility is built, and no requirements for local hiring or living-wage jobs were tied to the 2007 deal, despite fervent protest.
This history lesson should be the backdrop to the bigger question of whether retail development should ever receive public financing. Asking whether more Targets and Wal-Marts are really what so-called distressed communities really need is not a radical question at this point. It is well established that such economic development strategies amount to a subsidization of poverty, since retail jobs are among the lowest-paid. As an alternative, FUREE is pushing for an affordable grocery store in downtown Brooklyn, which is lacking in healthy food options.
Good Jobs New York is keeping an eye on the City Point project, as more communities across the country recognize the dangers of subsidies for retail development, and are organizing to avoid them. There may be a bright spot to this story in the Bronx: The Kingsbridge Armory Redevelopment plan—also slated to receive public subsidies—is emerging as a model of how development in New York City might be done. Due to effective community organizing, Bronx Borough President Ruben Diaz recently announced his commitment to signing a Community Benefits Agreement with the developer that includes a living wage, local hiring and community space among a long list of points. So stay tuned!
Note: This item is crossposted on the Good Jobs First's STAR Coalition blog.