A strange story emerged last week when the New York City news site DNAinfo reported that developer Forest City Ratner was fighting the property tax assessments on the Brooklyn Nets‘ new arena, filing a court petition claiming that the city had made an “erroneous” valuation of the land at nearly seven times its actual worth. This was weird, as DNAinfo noted, because FCR doesn’t actually pay any property taxes on the arena:
In a 2009 report, the city’s fiscal watchdog, the Independent Budget Office, estimated Forest City Ratner received $761 million in subsidies and tax breaks from the city and state to erect the arena and develop the 22-acre Atlantic Yards.
Under the deal’s terms, the city agreed to forgo collecting property taxes on the site. Instead Forest Ratner makes payments in lieu of taxes, or PILOTs, to the city.
The PILOTs cover the debt service on the $511 million in tax-exempt bonds that helped fund the Atlantic Yards development. The law requires PILOTs be less than or equal to the property taxes that Forest City Ratner would pay on the arena.
In other words, FCR’s PILOT payments are going to pay off FCR’s own arena debt — mostly in order to give FCR a whopping big savings from using tax-exempt bonds. So you’d think that if anything, FCR would be fighting for a high assessment in order to justify the tax break on the bonds — as was the issue with the New York Yankees‘ similarly constructed deal.
So, WTF? Was this an attempt at some even more byzantine tax dodge? The answer arrived late Friday night, and it couldn’t have been more awesome:
On Friday developer Forest City Ratner withdrew its challenge to the city’s appraisal of the Nets home, claiming it made a mistake…
In a letter sent to the city’s Law Department and Finance Department on Friday, FCR said it goofed on challenging the appraisals of the Barclays Center and other developments on the 22-acre Atlantic Yards property.
“In challenging the assessments on Forest City properties, petitions on its arena and B2 sites were inadvertently included,” the letter said. “Forest City has instructed our attorneys to discontinue these petitions immediately.”
So basically, either some FCR lawyer filed a kneejerk challenge to the property valuations of every one of the company’s properties, in hopes of shaking loose a better deal, without checking to see if they were actually paying any taxes on them; or some FCR lawyer filed a challenge without realizing that it wasn’t to their advantage to bring down the valuation of the Nets arena. Either way, as Norman Oder of Atlantic Yards Report notes, “these people are professionals–they’re supposed to do better than this.”