The parking lots around Yankee Stadium still stink
Last June I wrote about a bizarre, unrated municipal bond deal that was issued to finance some new parking garages at Yankee Stadium. Because very few people were using the parking facilities, it looked like the $237 million of tax-exempt bonds would soon default. Now the law firm of the former mayor of New York, Rudy Giuliani, has been hired to strike a deal between Bronx Parking Development Co, the parking garages’ operating entity consisting of a husband-and-wife team based in upstate New York, and the bondholders. From the Daily News:
Former Mayor Rudy Giuliani’s law firm has been hired by a group of private bondholders to restructure $237 million in tax-exempt financing for the nearly bankrupt owner of the Yankee Stadium parking system.
The surprise choice of Giuliani’s firm, Bracewell & Giuliani, is part of an agreement reached last week between Bronx Parking Development Co, owner of the 9,000-space garage and lot system, and its creditors.
Giuliani, after all, is widely known as one of the Bronx Bombers’ most loyal boosters, while one of his former deputy mayors, Randy Levine, is the team’s president.
It’s interesting to note that shortly before leaving office, Giuliani announced a deal in which the City of New York would contribute $800 million in public financing for the new Yankee Stadium and provide an additional $390 million in extra transportation funds. Additionally, Giuliani’s original plan would have allowed the Yankees to keep all parking revenues, which angered state officials, who viewed those revenues as the state’s compensation for building the new garages for the team.
In the end, the parking concession was inexplicably given to the upstate husband-and-wife team behind the Bronx Parking Development Co. The duo had defaulted on two previous municipal bond deals; brought no equity to the deal; had never built or managed parking facilities; and seemed to be placeholders for others’ interests in some strange scheme.
Everything about the project smelled odd. The new parking garages and lots would vastly increase the number of parking spaces at Yankee Stadium from 6,548 to 9,127. Parking supply was being increased even though the new Yankee Stadium was designed to hold more than 2,000 fewer spectators than the old one (pages 9-10).
Parking utilization for the old stadium was allegedly between 90 percent and 98 percent, or between 6,360 and 6,846 occupied parking spaces, according to two separate environmental impact statements cited in the bond offering Official Statement (Appendix A page 11). At the same time available on-street parking was only 47 percent to 50 percent utilized on game days (page 11). The financial projections for the bond offering were made by a parking consultant who prepared a report for the bond underwriter, Roosevelt and Cross, without the records of the parking operator (Appendix A page 14).
The alleged 90-to-98-percent parking utilization rate was achieved when parking fees were in the approximate range of $9 to $9.41 per space, according to the parking consultant. Because the project has been missing revenue targets, the parking operator has raised the parking fees to $35-$45 per game. Unsurprisingly, as fees increased fewer fans chose to drive and park at the new stadium, pushing down utilization rates to just 38 percent. Additionally, the MTA Metro-North and the City of New York funded a new train station that is handling approximately 3,900 game attendees. It’s not surprisingly that these bonds are nearly bust.
The husband-and-wife team behind the new parking lots and garages has never made required payments to the city for rent on the land or payments in lieu of taxes (PILOT), which are currently $17 million past due. The city and state kicked in $100 million in aid to build the garages. According to its 2010 Form 990, a required tax filing for non-profits, the Community Initiatives Development Corp, the non-profit shell corporation containing the Bronx Parking Development Co, has received $145 million in government assistance from 2008 to 2010 (page 3).
This bond deal has long raised big issues about process and, potentially, fraud. Here are a few questions I have for Giuliani and his law firm:
- Was there material misrepresentation in the parking revenue projections in the Official Statements, since there was no documentation to rely on?
- Do bondholders have any political or financial connection to the New York City economic development office that approved the husband-and-wife team?
- Does the lease between the city and the husband-and-wife team give precedence to bondholders over city and state taxpayers in bankruptcy?
- In default does control of the lease revert back to the city?
- Do New York Yankees affiliates own or control any of these bonds?
The people of the Bronx lost 13 acres of parkland to build these unused parking lots, and Bronx Borough President Ruben Diaz Jr. has been calling for the redevelopment of a garage into a luxury hotel. It would seem more beneficial for the city to buy out the bondholders, cancel the leases on city-owned land, and return parkland to the residents of the Bronx.