Daily News columnist Juan Gonzalez has this to say today about the $237 million in tax-exempt debt behind the overly luxurious parking “system” near Yankee Stadium in the Bronx:
If [the garage defaults], the Bloomberg administration faces the biggest default of a tax-exempt bond in this city since the 1970s. The mayor’s people downplay the problem, saying the city is not directly on the hook for these bonds, and bondholders will just have to eat some losses.
Such claims ignore that City Hall, as part of a deal with the Yankees for a new stadium, fostered the creation of Bronx Parking Development because team execs wanted a 9,000-space garage system.
That’s why members of the city’s Economic Development Corp., the Parks Department and the Bronx borough president’s office sit on the garage company’s board of directors.
Gonzalez further states that Ruben Diaz, the Bronx Borough President, “wants Bloomberg to come up with a rescue plan that helps [Bronx] residents and bondholders,” perhaps with the city paying the bondholders off, taking possession of the garage, and building something else.
Hmmm. New York City bondholders should absolutely not be on the hook for bondholder losses related to the garage.
Bondholders may whine that the city put its moral support behind this project. As Gonzalez reminds us, former deputy mayor Dan Doctoroff told city council members five years ago that the parking “system” would all but print its own money.
Yet bondholders should have known that the debt carried no explicit government guarantee. Rather on rely on crony capitalism, they should have done their due diligence — which would have illustrated that the parking garage’s owners had little hope of wringing $23 from game-goers when there’s plenty of cheap space nearby in store lots. (The owners have since hiked the price to $35, but succeeded only in driving a few more of their scarce customers away; imagine that.)
If it makes sense for the lenders of the parking “system” to foreclose and sell the property at auction, then the lenders should do it — and take their warranted losses in the meanwhile. The city, of course, is free to purchase the written-down property at auction, if it feels the need to control yet more real estate in New York.
But City Hall should head off any attempt by Bronx pols to exercise a bondholder bailout in the guise of another government-subsidized community development project.
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