$2B Bond Sale Strong Signal for Hudson Yards

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The New York Sun

The city issued $2 billion of municipal bonds to private investors yesterday, the strongest signal to date that the Bloomberg administration’s vision for dense residential and commercial development on the far West Side is finally moving forward.

The proceeds would fund a western extension of the no. 7 subway line from its terminus near the Port Authority bus terminal to a site close to the Javits Convention Center on 34th Street and Eleventh Avenue. They also would pay for infrastructure improvements, such as adding parks and roads, in the Hudson Yards district, an area roughly bordered by 30th and 42nd streets, between Eighth Avenue and the Hudson River. The improvements are designed to attract private developers to the area. The city is planning to issue another $1 billion in bond debt for the project in the coming years.

Deputy Mayor Daniel Doctoroff said yesterday the sale means “there is no turning back.”

“I think it is a very gratifying ratification of the entire idea of the Hudson Yards,” Mr. Doctoroff said. “What this does today is the single most important indicator — in fact it makes it very definitive — the infrastructure on the Hudson Yards is going forward.”

In a plan for the Hudson Yards that was approved by the City Council last year, payments in lieu of taxes from future development within the Hudson Yards district and fees from developers will be used to pay back the bond debt over the next 35 to 40 years. The city will pay for the debt on the bonds until the Hudson Yards area develops, a process expected to take at least a decade.

Some critics have suggested that the subway extension would cost far more than the city’s $2.1 billion commitment, potentially saddling the MTA with the extra debt. Others have suggested that the far West Side would develop without the expensive subway extension.

The city had intended to issue $1.5 billion in municipal bonds yesterday, but increased their issuance when more than $8 billion in offers came in. The increased demand allowed the city to reduce the yields on the bonds, decreasing the amount of money it will have to pay back.

An economist for the Fiscal Policy Institute, James Parrot, said the demand for the bond issue was “impressive” and reflects the market’s confidence in the city’s plan, and increased market demand for city debt.

“The city took a huge step today,” Mr. Parrott said. “I knew they were anxious to do it before the end of the year. They don’t know what the new governor might do, and they are anxious to get the project moving.”

A senior vice president for public finance at Moody’s Investors Service, Robert Kurtter, said the city’s bond issue was unique because the city is guaranteeing that if payments in lieu of taxes and other revenue streams are not sufficient, it will make sure that the interest on the bonds will continue to be paid.

“The city is assuming that risk. The principal would not be paid out for 35 or 40 years, so their risk is minimal and long in the future,” Mr. Kurtter said.”If the development is successful, the city is likely to be a broad beneficiary.”


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