March 16, 2011

Yankees garages headed for default by April 1

Last September, the New York Daily News' Juan Gonzalez warned that the non-profit owner of the Yankees' new parking garages was nearing default on its bonds. And now, it looks like that time is at hand: Crain's New York reports that "all signs point to a default" when Bronx Parking Development Co. is faced with a $6.8 million interest payment to bondholders on April 1.

What would that mean? The way the bond deal was written, taxpayers won't be on the hook for the bond payments, so they won't be stuck with the entire $340 million garage construction cost, but rather face losing only $43 million worth of future rent payments if Bronx Parking goes under.

That's not good, but it's far better than things would look for bondholders, whose only recourse would be to seize possession of a bunch of money-losing garages. River Avenue Blues notes that the garage operators are responding to as many as 800 cars a game opting for the $5 parking at the nearby Gateway Mall by hiking their own rates to $35 and up, which seems to betray a basic misunderstanding of microeconomics. Bronx Borough President Ruben Diaz Jr., meanwhile, wants to build a hotel nearby to help goose the parking numbers, but lord knows how much that would cost in city subsidies, or if it would even increase the number of cars by all that much, especially when there's plenty of mass transit available at the stadium.

What seems likely to happen at this point is that the bondholders take a large bath, city taxpayers take a small one, and the garages sit mostly empty until somebody realizes it's time to admit they're a sunk cost and lower rates to match those down the block. Or maybe the city could just buy the Gateway Mall and raise the parking rates there to reduce competition — it's already shown a willingness to throw money at that project, so why stop now?