The Yankees parking lots that went bankrupt, skipped city payments and took city land
— Mike Stanton (@MikeStanton1891) July 11, 2013
Bond Buyer Publisher Mike Stanton, (@MikeStanton1891) and I were slugging it out on Twitter after I tweeted that the Yankee Stadium parking garage bonds were likely one of the most corrupt muniland deals ever.
I might have said this because the bonds had defaulted. Or because the $238 million of bonds were unrated. Or it might have had something to do with the issuer of the bonds, the Bronx Parking Development, being a couple working out of their home in Hudson, New York, who had defaulted on two previous municipal bond deals structured in the very same way. Or maybe I said this because, in the event of a default, the deal allowed the bondholders to take control of extremely valuable public land and convert it to use for private gain. This fourth explanation actually prompted my opinion of the deal.
The Independent Budget Office of the City of New York describes the parking garage deal in a blog post:
The parking system, which contains nearly 9,300 spaces, was built with substantial public subsidies, including $238 million in tax-exempt bonds and direct subsidies of $70 million from the state and $39 million from the city. Additionally, about 3 acres were removed from use as city parkland and leased by the city to the parking system. Use of the garages and lots has been well below expectation and the parking system has not generated sufficient revenue to make recent payments to bondholders.
The Bronx Parking Development Company defaulted on the bonds last fall. Here is what happened next, according to IBO:
With the Bronx Parking Development Company, which runs the parking system, in default and in need of new revenue, a request for proposals was issued to sublease and redevelop two lots near Yankee Stadium. The responses were due June 5 to the Bronx parking company. Edward Moran, who was hired to restructure the parking company, did not respond to two e-mail requests and a follow-up phone call for information about the number of proposals received and when a selection is expected to be made.
So bondholders now have control of formerly public lands. The story gets even worse, according to the IBO:
The Bronx parking company has not paid the city any of the $3.2 million in annual rent that has been due since January 2008 nor has it made any of the required payments in lieu of taxes. Under the terms of the lease with the Bronx Parking Development Company, money owed to the city takes a back seat to payments to bondholders if revenues are insufficient to cover both.
In October 2012, it was reported that the parking company owed the city $25.5 million. City financial documents that IBO receives do not specify how much is currently owed by the Bronx parking company. Neither Moran nor the Mayor’s Office of Management and Budget responded to several requests for this information.
Who on earth structured this deal that subordinates public interests to private entities? Was it the couple who controlled the BPD sitting in their living room in Hudson, New York – 120 miles north of the Bronx? Somehow I don’t think they were sophisticated enough. But someone was clever enough to put the city in the back of the line after taking control of public assets.
I would like to know if the city can sue BPD over unpaid fees and get back the land for public use. Whoever managed this project for the public did a horrible job, and I question if there was corruption involved. Or will taxpayers just have to choke it down and walk away?
A previous version of this post called Mike Stanton the editor of The Bond Buyer. He is the publisher.