Contractor defaults on Fresh Pond bridge replacement project

From QNS:

For residents of Ridgewood and Middle Village, the reconstruction of a railroad bridge in a high-traffic area has caused headaches for commuters after repeated delays to the project, and things just got worse.

On Friday, a Department of Transportation spokesperson confirmed to QNS that its contract with Mugrose Construction to rebuild the Metropolitan Avenue and Fresh Pond Road bridge over the Montauk line of the Long Island Rail Road has defaulted. The project that was once projected to have its first phase completed by January 2018 has now been completely stalled.

The DOT cited delays that were beyond its control, and is now working closely with the bonding company to get the project completed as quickly as possible, the spokesperson said.

Construction contracts typically involve a contract surety bond to protect the owner of the property (DOT, in this case) from the risks associated with construction projects. The bonding company assumes that burden, and in the event of a defaulted contract their options are to re-bid the job for completion, bring in a replacement contractor, provide financial or technical assistance to the existing contractor or pay the penal sum of the bond.

Therefore, a defaulted contract doesn’t necessarily mean the contractor has been ousted, but the DOT offered no further details.

Yankee Stadium parking garage debacle worsens

Photo from Daily News

From Crains:

The last-place New York Yankees aren’t the only struggling enterprise in the Bronx. Documents show the net loss on the municipal-bond financed parking garages outside Yankee Stadium widened last year to $31.2 million.

Bronx Parking Development Co. issued $237.6 million of municipal bonds in 2007 through New York City’s Industrial Development Agency to build three garages and renovate two others.

The garages and five parking lots, which have about 8,700 public spaces, have suffered as more fans take public transportation to the Major League Baseball games and drivers balk at paying $25 to $35 to park. In June 2015 fewer than 10% of fans attending Yankees games parked in the garages, according to bond filings.

Hudson Yards not a great bargain for taxpayers

From DNA Info:

The creation of Hudson Yards will cost the city another $368 million through 2019, bringing the city’s total payout to more than $947 million, according to projections from the Independent Budget Office.

The city has been footing the bill for Hudson Yards preparations — including most of the cost of the 7 train subway expansion — by floating $3 billion in bonds through the Hudson Yards Infrastructure Corporation (HYIC).

The cost of the project was supposed to be offset by revenue from commercial and residential taxpayers moving into the area. But the IBO found that taxes have yet to cover the cost of the project, leaving the city on the hook for hundreds of millions of dollars more than expected, as the Daily News reported previously.

Port Authority as real estate speculators

From the NY Times:

The developer and philanthropist Larry A. Silverstein has cut a striking figure in New York City. He owns the H.M.S. Bounty-size yacht favored by his peers and has dominated the rebuilding of ground zero for a decade.

Along the way, he has internalized a developer’s rule of thumb in New York: Only a rube puts much of his own money at risk.

Billions of dollars in Liberty bonds, insurance money, developer fees: Year after year, Mr. Silverstein has shaken the public tree and benefits have fallen to the ground.

Construction of 4 World Trade Center is completed and it stands about half empty, with commitments from just two tenants: New York City and State. Now Mr. Silverstein wants to complete his 70-something-story 3 World Trade Center. He has found just one prospective tenant for it.

City and state officials, ever helpful, agreed to give that company, GroupM, a $15 million cash subsidy and tax breaks worth about $75 million.

Now Mr. Silverstein wants to shake the tree again. In March, as Charles V. Bagli reported in The New York Times, he asked the Port Authority of New York and New Jersey to guarantee up to $1.2 billion of his construction loans. The authority’s board could vote on the proposal this month.

As chutzpah, this was impressive. As public policy, it was less salutary.

Kenneth Lipper is a board member of the Port Authority, a former deputy mayor under Edward I. Koch, an investment banker and a novelist with a keen eye for currents of power, municipal and financial.

In an interview on Monday, he described how the board had signed off this winter on a capital plan, carefully assigning priority to rebuilt bridges, a new terminal at La Guardia Airport and — Mr. Lipper’s personal favorite — the rebuilding of that corroding pile of metal and concrete that is the Port Authority bus station in Midtown.

Then Mr. Lipper saw the request from Mr. Silverstein.

“Am I in ‘Alice in Wonderland’?” he recalled thinking. “I wanted to get a modern bus terminal built and we’re talking about putting $1.2 billion into a private developer, in which he gets the gain and we take the hit?

“Is it the role of an agency representing taxpayers and toll payers to speculate in real estate?”

Education trumps environment for Cuomo

From Capital New York:

Gov. Andrew Cuomo's proposed education bond act might put an iPad in the hands of every student, but a chance to fix the state's leaky sewage infrastructure River would go down the drain.

The $2 billion education bond act floated by Cuomo in Wednesday's State of the State speech would get computers, tablets and high-speed broadband into every school across the state. But it will also effectively kill off any chance of a $5 billion environmental bond that would pay for sewer upgrades, drinking water protection, climate change adaptation, improved air quality and farmland protection.

Only one bond plan can be put to voters statewide vote a year and it must be for a single purpose, according to the state Budget Office.

Cuomo made it clear Wednesday that he'll put his weight behind the education initiative, not environmental improvements, on the same ballot where his name will appear in November.

Developers get all the breaks

From the Village Voice:

Remember that $328 million subsidy for a shopping mall and skyscraper being developed by the Related Companies? Well, as expected, the city's Industrial Development Agency went ahead and approved the massive giveaway despite questions about its propriety.

The 25-year tax exemption comes on top of a $106 million tax break for another skyscraper on the site. The project is also getting $3 billion in city bonds to extend the No. 7 subway line. The snail's pace of building the platform which will undergird the 13.3 million-square-foot project has already cost the city more than $100 million in taxes it expected to have collected by now.

This latest subsidy will force the city to pump yet more money to meet the debt obligations of the subway bonds. As as we previously wrote, it's a break from a previous Bloomberg era policy of denying subsidies for shopping malls.

City officials insist the subsidy is "consistent" with the original 2006 Hudson Yards plan and necessary because of the size of the project. In remarks before the IDA board, a Related official called the tax breaks "indispensable" to the project and insisted the area was "underutilized."

However, property values are rising in the area, once again raising the question of why yet another tax break is needed for an area likely to blossom just from market forces.

City will probably never see money from parking garage

From Crains:

The embattled Bronx Parking Development Co., which has defaulted on its bonds and owes millions of dollars to the city, is trying to raise money by selling development rights to two street-level parking lots it owns near Yankee Stadium-area, but the outcome is unclear.

In April, the BPDC issued a request for proposals to develop two lots on city-owned land under a sublease from the parking company, which holds the lease. The request for proposals, which was posted on the website of the city's Economic Development Corp., specified that the development be built to sustainable standards and include a rent schedule for the entire term for the sublease, which would run through 2106.

Responses were due back in June. Edward Moran, who was brought in as BPDC's chief restructuring officer in March after the company, which owns a total of five garages and nine street-level lots, defaulted on its bonds, could not be reached for comment on Friday.

The BPDC has been losing money since last year, driven by lower-than-expected demand for parking at its 9,294 parking spaces, which remain half-empty on some game days. The company missed its last payment to bondholders, due April 1, after dipping into its reserve fund to make the previous payment.

The city is not on the hook for the bonds, but as of last October, the BPDC owed $25.5 million to the city in rent and payments in lieu of taxes. The Mayor's Office of Management and Budget did not respond to questions of how much is currently owed the city.

But unless the BPDC can dramatically turn around its fortunes the city is unlikely to see the monies it is owed anytime soon, said Doug Turetsky, chief of staff at the Independent Budget Office.

Our tax dollars used to bail out huge developer

From the Wall Street Journal:

When the city agreed to pick up the tab for the extension of the No. 7 subway line to ease the creation of a new office and residential district on the far West Side, it expected the project could begin paying for itself as early as 2008.

Instead, a single 1.7 million square-foot office tower in the Hudson Yards area has broken ground, while the project envisions 25 million square feet of new office space. And the district generated 40% less revenue from taxes and other development fees than projected between 2006 and 2012, according to a report to be released Wednesday by the New York City Independent Budget Office.

Hudson Yards was expected to produce $283 million in revenue through 2012, but it actually created $170 million, according to the report by IBO, an independent city agency that studies the local economy.

"The commercial development has been much slower than they thought," said Ana Champeny, a supervising analyst at IBO.

The city issued $3 billion in bonds to pay for subway construction and other infrastructure upgrades guaranteed by tax revenues in the area. If those revenues weren't enough to meet interest payments on the bonds, the Bloomberg administration agreed to pay those with additional money drawn from the city budget.

Real estate experts and budget-watchers have said the city was taking on too much risk by agreeing to make interest payments on the bonds out of the budget.

Nice, eh? Bloomberg is always there to bail his buddies out with our tax money. By the way, his buddy in this case is Related Company, the one he is giving a chunk of city parkland over to at Flushing Meadows so they can build a mall with the Wilpons.

Yankees parking garage operator defaults on payment

From the Daily News:

Even as the Red Sox thrashed the Yankees on Opening Day, the company that operates the Yankee Stadium garage system struck out big time.

Bronx Parking Development LLC failed to make a $6.9 million payment due April 1 on more than $237 million in tax-exempt bonds arranged by the Bloomberg administration back in 2007.

The group, which is not connected to the Yankees, thus fell into one of the biggest defaults of a New York City-sponsored bond in decades.

That failure ramps up the pressure on City Hall to avoid an embarrassing full-blown bankruptcy by reaching some kind of deal for the company’s bondholders to take a hit on their holdings.

After all, Mayor Bloomberg originally signed off on a new 9,000-space garage system, something the Yankees demanded before agreeing to build a new stadium. The mayor even appointed two city officials to Bronx Parking’s board of directors.

“These garages were part of his legacy, hook, line and sinker,” an official with Bronx Parking said. “It’s better he deal with the problem now, than leave it to the next mayor.”

City economic development aides have privately acknowledged they were ordered by City Hall back then to “make the numbers work” in order to justify tax-exempt bonds.

But the garages were a financial disaster from day one, even though Bronx Parking received more than $100 million in city and state subsidies on top of the bonds.

Since they opened in 2009, they have operated at less than 50% capacity. That’s perfectly understandable given the $35 price tag to park — $48 for valet service.

It’s been obvious for a long time that Bronx Parking would eventually run out of money.

Yankee Stadium garage scheme strikes out

From the Daily News:

Plans to build affordable housing and stores on failed Yankee Stadium parking lots in the Bronx have struck out - for now.

Talks between the city and a real estate developer have stalled and officials are no longer pursuing the partnership, the Daily News has learned.

Officials hoped a project with Jackson Development and Joy Construction would bail out Bronx Parking Development, the nearly bankrupt company that owns and operates the Yankee Stadium parking system.

Last year, the company's board approved the general parameters of the development scheme and authorized the New York City Economic Development Corporation to negotiate a deal, officials said.

But the EDC recently ended negotiations with the two companies for reasons it won't comment on, said Kyle Sklerov, agency spokesman.

New development options will be considered moving forward, Sklerov said. The parking system is a ticking time bomb because Bronx Parking has defaulted on about $240 million in tax-exempt bonds held by private investors that were issued by the city.

The company has until next spring to supply the bondholders with $15 million in principal and interest payments. But its reserves total less than half that figure because its garages and lots now average just 43% occupancy on Yankees game days.

The development deal meant to rescue the bondholders called for 550 units of low-income housing and 45,000-square-feet of retail on two lots south of Yankee Stadium near the Gateway Center shopping mall.

Now that project is headed for the dugout and the city needs a new partner or partners to step up to the plate.

Photo from WNYC

Yankee Stadium parking garage a huge failure

From the Daily News:

THE FIRM that built and manages the new Yankee Stadium parking garages can’t repay $237 million in tax-exempt bonds the Bloomberg administration arranged for it four years ago, new financial records show.

Bronx Parking Development Company LLC is running perilously low on cash reserves and faces a looming default by the end of the year, according to a report filed Friday by a trustee for the firm’s bondholders.

Time is running out, in other words, to avoid one of the biggest failures in decades of bonds issued by a New York City agency.

The simple fact is that Bloomberg and his aides made a costly mistake when they succumbed back in 2005 to the Yankees’ demand for a 9,000-space garage system. It was all part of the deal for the team to build a new stadium in the Bronx.

But Yankees fans have shunned the garages, where gameday self-parking rates soared last year to $35 — up from $23 previously and more than double the original $14 charge. Valet parking now goes for $48.

So many fans are staying away, in part due to the lure of cheaper local competition, that Bronx Parking Development now projects only 3,500 paying customers per game for the upcoming season.

EDC messes up something else

From Crains':

The first pitch of the baseball season and the return of thousands of fans cannot come fast enough for most businesses around Yankee Stadium. But one company might prefer that April be postponed this year.

Bronx Parking Development Co., which runs the garages for the new stadium, faces an April 1 due date for a $6.8 million interest payment on bonds issued to fund construction of three facilities. The company had to dip into reserves to make a similar payment in October, and—barring a last-minute renegotiation—all signs point to a default this time.

A default could set up a seizure by bondholders and would leave the garages' future in question. The property, which covers some 21 acres, was part of parkland taken over to make way for the current incarnation of Yankee Stadium.

The potential irony has some in the community seething.

Score another one for the Bloomberg Administration!

From the Daily News:

The developer of the Yankee stadium parking system is on the verge of defaulting on $237 million in tax-exempt bonds issued by the city's Industrial Development Agency.

So many fans are shunning the network of 9,000 stadium parking spaces that revenue for the first half of 2010 was only $4.8 million - half of what was projected - according to a stunning financial disclosure by Bronx Parking Development.

The firm, which is independent of the Yankees and has existed for only three years, warned bondholders in an Aug. 18 letter that it currently has "insufficient funds" from operations to pay a $6.8 million interest bill due Oct. 1, and another $6.8 million due next April. And despite an additional $100 million in city and state grants it received on top of IDA bonds, Bronx Parking has failed for three years to pay its annual rent tab of $3.2 million to the city. It also has yet to pay any property taxes for the 21 acres of publicly owned land it is leasing to operate the parking system.

According to Bronx Parking, the garages have suffered from several unforseen problems:

* More than 800 fans are heading on game days to the Gateway Shopping Mall five blocks from the stadium, where they pay only $10 to park instead of the stiff $23 self-parking fee ($35 for valet service) at the stadium garages.

* A new Metro North station has lured many fans (about 5,000 per game) to ride the train.

* The Yankees prepaid for only 190 parking spaces this year for their season ticket holders instead of the 900 spaces they prepaid last year.

The firm's announcement sparked an immediate drop in the trading value of its bonds. It also sent city officials scurrying to come up with a solution to what could be the biggest default of an IDA bond that anyone can remember.

The Bloomberg administration selected Bronx Parking in 2007 to build and run the garages after the Yankees demanded a minimum of 9,000 spaces to stay in the Bronx.

Perkins calls on Cuomo to investigate Atlantic Yards bond issuance

From Atlantic Yards Report:

Well, if state Senator Bill Perkins can't get a written statement from Governor David Paterson's office regarding the Atlantic Yards bond deal, maybe Attorney General Andrew Cuomo will weigh in.

Perkins, as he promised, sent a letter to Cuomo yesterday:

"I write to request your opinion of the recent bond issuance on behalf of Forest City Ratner for the construction of the arena at Atlantic Yards.

On December 18, 2009 I sent a letter to Governor Paterson outlining my concerns. Your office was carbon copied. In essence, the ESDC crafted an unusual transaction whereby a nearly defunct entity, the Job Development Authority (JDA) was used to form the Brooklyn Atlantic Yards Development Corporation (BALDC) which then issued the $511 million worth of arena construction bonds.

I believe that the bond issuance was done in this manner to avoid a review by the Public Authorities Control Board (PACB) and the state Comptroller. I respectfully request that your office issue an opinion as to whether the process employed during the bond issuance was legal, as the public must have utmost confidence in the processes of government.

Enclosed please find a copy of my letter to the Governor. I look forward to your diligent response."

Update: note contrast

Note that Perkins's letter focused on the avoidance of PACB review, not the other issue raised in his letter to Paterson, whether the BALDC deserves a tax exemption.

Looks like Cuomo is going to be asked to investigate every state or city-supported development scheme... simply because of how corrupt they all are.

Atlantic Yards bonds may be issued illegally

From Atlantic Yards Report:

The issue was unearthed by Amy Lavine, a staff attorney at the Albany Law School's Government Law Center who has been studying public authorities.

Typically, public authorities have to get their bonds approved by the Public Authorities Control Board--the governor, Senate Majority Leader, and Assembly Speaker hold the controlling votes--and the state Comptroller.

The BALDC [Brooklyn Arena Local Development Corporation] was authorized under § 1411 of the Not-For-Profit Corporation Law. The PACB approves the financing and construction of any project proposed by the ESDC or the sibling Job Development Authority, which created the BALDC.

"ESDC apparently did not want to go through this process," she said, and thus it created the BALDC, to which it will lease the arena land. The BALDC in turn will lease the land to the private company that will manage the arena.

The ESDC, she said, does have the authority to issue bonds, but "by skirting the process that's supposed to be followed, it seems that the bonds may have been issued illegally."

"Basically, the LDC is not a public entity," she said. "And it's controlled by different sections of the tax code in New York State. Either ESDC didn't think of the implications of this or they didn't think anyone would notice, because it is rather esoteric. It seems that, under the tax section that applies to the LDC, they're not eligible for exemption from property taxes." (The LDC is subject to §420-a of the property tax code.)

And if they're not exempt from property taxes, she said, there's no way to divert property taxes to pay for the arena bonds, via PILOTs (payments in lieu of taxes), and so nothing backing the bonds.

"To go forward, I believe that the process has to start over and ESDC will have to do this properly and get it reviewed by the Public Authorities Control Board and the state Comptroller," she said.

And that means they'd have to review the financial merits of the bonds, which hasn't happened, she said.

I'd add that the BALDC was also apparently set up to ensure that the bonds would be issued before the end of the year, beating a December 31 deadline, after which the arena would not have been eligible for such bonds.

(Yet the MTA is expected to close on this tomorrow.)

From DDDB:

State Senator Perkins (D- Harlem), Chair of the Senate Committee on Corporations, Authorities and Commissions, sent a letter to Governor Paterson on Friday explaining the legal concerns, which the Senator described as "raising the spectre of fraud," and rendering the bonds "effectively worthless."

Senator Perkins said at a Saturday community meeting confronting eminent domain abuse that he spoke to the governor's counsel, Peter Kiernan, who was taking the matter seriously. He asked that the Governor halt reportedly imminent closing on Atlantic Yards project agreements. He said that if the state did not respond, legal action would be considered.

Wow, so if I am reading this correctly, this entire project may get derailed because the state fucked up on a technicality. Six years of court battles, buying up land and demolishing a neighborhood because they thought they had it in the bag when in fact what was being pushed was illegal. Nice work! How much did this folly cost the taxpayers of New York State?

Time to BRING IN THE FEDS.

Using this as evidence, we can also speculate why Claire's LDC was formed by the EDC. I kind of thought the agenda didn't stop with sending the old battle axe out there to lobby her fellow tweeders to simply vote "yes" on the Willets Point project...