"IRS Haunts Stadium Deals" NY Observer blog The Real Estate 10/20/6
IRS Haunts Stadium Deals
FILE UNDER: Atlantic Yards, Stadiums
The IRS is planning to revisit the financing scheme behind the new Yankees and Mets stadiums because, according to sources cited by The Bond Buyer, the arrangements looked "too much like a private loan." The feds approved those deals earlier this year, concluding that the payments in lieu of taxes that the sports teams would use to pay off the bonds resembled general taxes. Dan Steinberg, research analyst at Good Jobs New York, told us that it is unclear if the proposed regulations would have prohibited the stadium bonds had they been in place earlier (thay almost certainly won't affect them now, just other similar projects around the country), but that yesterday's action "is a reflection of the ambiguities in the IRS decision and how difficult it is for the IRS to make the case that PILOTS are the same thing as tax revenue."
What's the big deal? The new regulations will drive to the heart of the question about whether cities should be allowed to use their power to issue tax-exempt bonds for the benefit of privately owned sports franchises (which don't even make it into the World Series, to boot). And the new rules may imperil Forest City Ratner's deal to finance the Nets arena.
Posted by The Real Estate on October 20, 2006 02:09 PM