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September 10, 2010

Yankees parking garages nearing default on bonds

When New York Daily News columnist Juan Gonzalez reported back in June that the parking garages at the new Yankee Stadium were losing money and could cause the garage operator to skip rent payments to the city, city Economic Development Corporation spokesperson David Lombino wrote to Gonzalez (and to me):

When the bonds were issued, an independent analysis found that typical parking demand would eventually generate enough revenue to cover bond expenses, rent and PILOT. Last year, occupancy was lower than the analysis predicted. As the economy improves, we can expect that occupancy would improve. So far this year, there are more vehicles using the parking lots (through April), and if occupancy returns to typical historical levels in line with the independent analysis, revenues will increase and based on these assumptions the lots will generate enough revenue to cover bond expenses, and to begin paying rent and PILOT. That could be as soon as this year.

Or not. Gonzalez writes in today's News that the garages are on the verge of defaulting on their bonds, with the nonprofit Bronx Parking Development warning bondholders that it has "insufficient funds" to make a $6.8 million payment due October 1. The problem: Too many Yankees fans are taking the train to the game, or parking at the nearby Gateway Center mall where rates are much cheaper.

If the garages do default, that wouldn't mean the city would be on the hook for the whole cost of the garages — whoever bought the bonds would be the ones holding the bag. But it would mean the city would lose out on expected rent payments ($2.3 million a year according to my figures, $3.2 per Gonzalez; not sure if that's a typo or if the number has in fact changed). And one bond lawyer told Gonzalez he's worried default would "spook investors" against future city development bond sales, which could raise borrowing costs for the city on future projects.

Either way, it's not good news, even if it does validate the concerns of those of us who warned that the garage finances looked dubious in the first place. Whether it means that "parking rates at the stadium will rise sharply next year," as Gonzalez predicts, remains to be seen; it'd seem like that'd drive even more fans to go park at the mall and only undercut the garage revenues, but desperate times lead to all sorts of odd pricing behaviors.

COMMENTS

Apparently, part of the Yankees "conditions" for "staying" in the Bronx (as if there was any place to go) was an increase in parking spaces.

But this is why you don't let a baseball team do your infrastructure planning for you.

Posted by D Train on September 10, 2010 10:19 AM

It's a total shame. They should know better.

Posted by Mr. Rene Moreno on September 10, 2010 05:19 PM

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