What does a tiny Arab emirate have in common with the NBA’s worst team, which currently plays in New Jersey? And why should the answer matter to a taxpayer in Buffalo or Syracuse? Nicole connects the dots in a timely op-ed in today’s New York Post.
Dubai World, the investment arm of the Dubai government, is in financial trouble. It’s looking to freeze debt repayments and to cut the $60 billion that it borrowed to speculate on office towers, hotels, luxury retailers and the like. So? What’s that got to do with the price of bagels? Nicole explains:
Pay attention, New York: Albany and New York City have their own “Dubai Worlds” — state-owned entities that borrow buckets of money to invest in oft-dubious projects without the “official” backing of taxpayers.
New York’s public authorities and other state-related corporations have $150 billion in debt. And some of these entities are smokescreens for boondoggles that taxpayers would never support if they thought they were on the hook.
The most recent example is Atlantic Yards, the $4.9 billion basketball arena and luxury-apartment project in Brooklyn. By December, developer Bruce Ratner must raise the arena’s first bonds, $800 million approved by the Empire State Development Corp. The debt supposedly comes without a government guarantee: If revenues from luxury-box sales and such don’t cover the debt, bondholders lose.
By the way, Empire State Development (ESDC) absorbed the Urban Development Corp., whose February 1975 default helped precipitate the state and city fiscal crisis of the 1970s. Governor Hugh Carey and the Legislature then felt compelled to appropriate roughly $200 million (the quivalent of $800 million in today’s terms) to complete unfinished UDC projects and prop up the authority until it could re-enter the debt markets a couple of years later.
Speaking of losing, the New Jersey Nets–the team Ratner wants to put in the Brooklyn arena–just fired its coach and tied an NBA record for futility by losing its first 17 games of the season. Ratner is in the process of selling a controlling interest in the Nets, along with a large share of the Atlantic Yards arena, to a Russian tycoon known as the “bachelor billionaire,” who appears to have made his fortune in precious metals.
Luxury box, anyone?