Nassau County Executive Edward Mangano says a plan to borrow up to $400 million for a new Nassau Coliseum is an economic development initiative that carries some risk, but the threat of allowing the arena to close when the Islanders' lease expires in 2015 is far more risky to Nassau's struggling economy.
In an interview with Newsday reporters and editors, Mangano said Long Island desperately needs new revenue sources, economic development and jobs -- and his proposal to create a sports-entertainment destination in the heart of Nassau's Hub would fill that need.
"You cannot create jobs and opportunities by doing nothing. Doing nothing hasn't worked in this county," he said.
Some doubts on revenue
But he acknowledged the possibility that promised revenue from the team might not meet expectations. Also, if Nassau spends all $400 million, the average Nassau homeowner will pay $58 in additional county property taxes for debt service on the new facilities, he said. Those costs come at a time of economic uncertainty in which Nassau recently laid off 128 workers and is under the control of a state monitoring board.
"Is there risk? Yes," Mangano said. "We believe that the risk is minimal and when you look at the risk, you need to analyze what happens if we do nothing."
Mangano, however, says his plan won't cause a net property tax increase because the county will be reimbursed through a revenue sharing agreement with Islanders owner Charles Wang. He adds that, if the Islanders leave, the county would lose 2,100 jobs and the shortfall in sales tax revenue would necessitate a $16 property tax increase, a county consultant said.
"I can understand politically why people want to say it's a tax increase," Mangano said. "But I say it's an investment."
For the first time, the county executive also acknowledged a "Plan B" if an Aug. 1 referendum on the project is voted down, but didn't reveal it.
The deal guarantees Nassau 11.5 percent of all revenue from the Coliseum, or a minimum of $14 million in annual rent -- plus additional sales and entertainment taxes that a new arena would generate. The revenue would go into Nassau's general fund, which the county has discretion to spend as it wishes.
Mangano said the county would use the new revenue to retire more expensive variable rate debt first. It was not clear what impact variable rate debt has on the county's finances.
If all of the revenue from the Coliseum were used to offset property taxes, the average homeowner would pay $13.80 per year in additional taxes, the independent Office of Legislative Budget Review said.
Wang will pay for all costs to the arena above $350 million. If construction exceeds $375 million, the Islanders can walk away or go back and change the plan, said attorney Christopher Melvin, managing director of Nixon Peabody's Public Finance group, who negotiated the lease agreement for the county. If Wang moves forward with the project, however, the team would have to provide $100 million in cash or a letter of credit before the county will issue its bonds.
"We have . . . protected the county's back in this document as best we can," he said.
Mangano also said he takes seriously Wang's statement that the Islanders will not stay in the 39-year-old arena beyond 2015.
"The Islanders by all counts have to make a commitment by next April," he said. "So, the clock has ticked. This is decision time."
Preparing for a 'no' vote
Behind the scenes, however, county officials have begun to prepare for the possibility of a "no" vote, he said. "We would move forward with other options," Mangano said.
Mangano declined to elaborate on his backup plan until after the vote. He noted that the county "has time to figure other things out and entertain more than one scenario."
Either way, Mangano said he is confident the 77 acres surrounding the arena will not go to waste. "Developers will find a way to make dollars there," he said.
But, to build on the site, developers would need to construct a parking garage to maximize available space, the lease states. While officials say a garage could cost more than $160 million, Mangano said he doesn't expect it to be a roadblock to future development.
"This is a real estate deal plain and simple," he said. "It has nothing to do with the Islanders."
Despite ABLI's reservations, labor unions and restaurateurs have campaigned for the project, saying it would generate jobs and economic activity.
Mangano said he scheduled the vote for early August to insulate the project from the "silly season" of politics. But, much like the Lighthouse Project, Wang's previous attempt to build on the site, politics has been ever-present.
The plan has taken fire from Democrats who say the timing of the vote is designed to keep turnout low. Presiding Officer Peter Schmitt (R-Massapequa), has questioned whether the revenue needed to pay the debt service would materialize. The Nassau Interim Finance Authority, which took control of Nassau's finances in January after identifying a large budget gap, said the plan would spark a 3.5 to 4 percent property tax increase. NIFA and a two-thirds majority of the legislature, including at least two Democrats, are needed to approve the deal.
Despite his recent war of words with NIFA and Nassau Democrats, Mangano expects both sides to approve the Coliseum plan on its merits.
"We are at a crossroads," Mangano said, "where we need to make a decision if we want to maintain the concept of creating a sports entertainment destination."
With Randi F. Marshall
and Ted Phillips