What an eye-opener this article is!! I have asked the BPCA repeatedly for better information about the bonds that underpin our land, but it takes a bond rating company to elucidate how our bonds really work. So, the reversion of our homes to NY State and to the Bondholders is ultimately why our bonds are so well rated. It’s great that the high ratings allow the Authority to pay lower interest rates, but how at risk are our homes?
Someone asked about bonds related to resiliency expenses during the Q&A at last week’s Community Meeting and received a glossed-over response.
I really hope the next meeting date will be announced soon and cover financial issues.
I ask everyone who lives in BPC to please look at http://democracy4bpc.org
and consider signing this petition to ask Gov. Cuomo to appoint local representatives to the BPCA Board.
Maryanne P. Braverman
To the editor:
Re: Your Word Is Their Bond, March 27, I am writing to provide some amplification and clarification.
As the piece correctly notes, a “AAA” bond rating is indeed a “prized imprimatur,” allowing BPCA, through its bonding capacity, to borrow money (used to fund capital projects) at the lowest possible cost. This rating is a testament to BPCA’s prudent stewardship of residents’ funds and a benefit to all who call Battery Park City home.
Here’s why: Due to the way BPCA is constituted, each year we must pass all of our excess revenue through to the City of New York. “Excess revenue” is the money left over after BPCA pays the debt service on its bonds and operating costs. So the less we pay in debt service – and remember, we pay as little as possible due to our highest possible bond rating – the more we can spend on operational considerations (like the parks, public spaces, and programming that make Battery Park City the treasure it is) while still meeting our financial obligations to the City.
Also important to note – Battery Park City’s revenues are almost entirely predetermined, and do not change based either on our budgeted expenses or debt service. This, I know, has been a point of contention for some readers in the past so I’m glad to clarify it here.
BPCA’s revenues consist primarily of two components: Payment in Lieu of Real Property Taxes (“PILOT”); and “ground lease” payments, or the rent and other payments each building pays to BPCA as the owner of the land. PILOT is determined by the assessed value of the property (as determined by the City based on market forces) and New York City tax rates (established by the City), and accounts for more than 73% of BPCA’s revenues. Rent and other payments remitted by buildings are governed by the Master Leases periodically negotiated between BPCA and each building’s ownership.
What this all means to you, as a BPC resident, is that your rent and PILOT are not – not – determined by BPCA expenditures or debt payments.
While the article correctly notes the value of our “AAA” bond rating, it was less precise in its assertion that the financial burden carried by BPC’s commercial landlords has eased. PILOT payments from commercial tenants have in fact increased every year since 2011, to an all-time high in 2016, and can be expected to continue increasing as assessed values in turn increase, and as tax rates remain stable (or increase). Coupled with rent payments, the total pledged revenue from commercial development was $136 million in 2016, as compared to $116 million paid by residential developments.
What may be more accurately said is that commercial and residential properties are approaching a 50-50 balance, both in terms of square footage (roughly 10 million square feet each) and assessed value (roughly $1 billion each). As the Fitch report correctly notes, pledged revenue from residential development has increased to approximately 46%, from 40%, over the past decade. The main drivers of this increase are as follows:
The residential portion of the neighborhood is now complete, with the four newest buildings (Riverhouse, The Visionaire, Liberty Green, and Liberty Luxe) opening during that time.
The original tax abatements residential buildings enjoyed for many years – provided to stimulate their development in a new, then-primarily commercial neighborhood – have begun to roll off. This roll-off is the same for any building in New York City that has benefited from an abatement, and has resulted in a larger net contribution by BPC’s residential buildings – albeit one that still trails the commercial contribution.
The assessed value of residential property – the value of which is set solely by the City of New York – has appreciated rapidly since 2006, which, when combined with a higher tax rate as compared with commercial property (currently 12.9% for residential vs. 10.6% for commercial) results in an increase in the amount of residential PILOT contribution. Significantly higher property value is not only great news for owners, of course, it’s good news for all residents in that it allows BPCA to assure the steady stream of revenue required to keep Battery Park City one of the best neighborhoods anywhere.
Finally, a note about the ground leases, which run through the year 2069 as the article notes. BPCA is certain that the issue will be addressed well in advance of the lease expiration, and well in advance of anyone experiencing difficulty securing a mortgage.
And for at least a portion of those intervening 52 years, I look forward to meeting many of you in service to this amazing community.
Chief Financial Officer / Treasurer
Battery Park City Authority