So NIFA, while not taking a formal position on the arena plan, has nonetheless expressed (informal?) criticism against it. I guess this isn't surprising, although at one point there was some chatter that given that the hot rhetoric against the arena plan was coming mainly from a single NIFA director, George Marlin, perhaps this was not a reflection of the sentiment the other directors. Sadly, this does not seem to be the case.
A couple of quick thoughts on NIFA’s observations of the plan as expressed in a NIFA fact sheet helpfully summarized by Corey Witt at IBP.
- 3.5-4% Tax Increase. NIFA estimates that the referendum involves a 3.5-4% tax increase on homeowners. But can that be right? Both supporters and opponents of the plan have been citing the legislative budget office’s estimate of an average $58 per homeowner tax increase. A 3.5-4% tax increase is much, much more than that. The average tax bill in Nassau County is $8,474. 4% of that amount is $339. Am I missing something?
UPDATE: Newsday helpfully clarified via email that the 3.5-4% relates only to the county portion of homeowners' tax bills, which amounts to 17% of the overall bill (the other portions going to the school district, the village or other taxing jurisdictions).
- The Arenaco SPE LLC Issue. Who’s Arenaco SPE LLC? That’s the entity that would be leasing the new arena and surrounding property from the county. NIFA noted this point in its fact sheet, implicitly echoing an argument made by arena plan foe Desmond Ryan of ABLI, that the use of this entity as the lessee (rather than the team) might be a ruse by Wang to pull a fast one on the county and shirk his obligations under the lease. However, if either Ryan or NIFA actually read the lease, they would know it’s a non-issue. Under the lease, as a condition of lease going into effect, Arenaco is required to enter into a sublease with the Islanders that must be approved by the County. The sublease must require the same payments by the Islanders to Arenaco as is required under "master" lease between Arenaco and the county.
Arenaco is also required to assign all rents due under the sublease directly to the county. So in the end, Arenaco is a simply a pass through between the team and the county. The lease also requires the Islanders to separately enter a pledge agreement agreeing to pay all rents directly to the county if Arenaco files for bankruptcy.
Why is it structured this way? Well, oftentimes parties that wish to issue bonds or other financial instruments will create a special purpose entity (such as Arenaco SPE LLC) to actually issue the bonds so that investors are protected in case the party goes bankrupt. This can happen in the sports context where teams want to raise money by securitizing, say, the future cash flows from the sale of luxury suites. The special purpose entity sells the actual securities so that the investors are somewhat insulated from risk of the team going bankrupt. Not sure why this was done here, but from the county’s perspective, it’s irrelevant because the team is effectively guaranteeing the Arenaco’s obligations.
Let’s hope that when it comes time to take a "formal" position, NIFA takes the time to read the actual lease rather taking their talking points from ABLI.