ISLANDERS fans and construction workers cheered wildly Wednesday as Nassau County officials announced plans to build an arena for the team, promising plenty of revenue and jobs in its new home. But by Thursday, jubilation gave way to the reality that a proposal to borrow up to $400 million to replace the Nassau Coliseum, and to build a minor league ballpark, face daunting challenges.
First, there's the need to get approval for a bond referendum from a public wary of government spending. In addition, the county legislature needs to give its OK.
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And the Nassau Interim Finance Authority, which controls the county's finances and will have the ultimate say, has indicated it has questions about the plan and wants more data on the cost and the benefits.
Here is a look at the hurdles ahead.
Getting the voters' nod
The opening act in the long string of needed approvals is to persuade voters -- already burdened with skyrocketing property taxes, rising consumer prices and a struggling economy -- that the cost of building two new facilities will not come out of their wallets.
Supporters have the edge, with so little time for organized opposition. Still, there are plenty of voters with concerns over anything that has to do with their taxes.
"The biggest obstacle is the cynicism the public has about elected officials, which can stop even the best of projects," said Lawrence Levy, executive dean of the nonpartisan National Center for Suburban Studies at Hofstra University.
Supporters of the proposal have a number of key logistical advantages heading into the election, Levy said. The timing of the vote, on a Monday in August, when many families may be on vacation or focused on summer activities, could lead to low voter turnout.
If county officials and the Islanders can rouse supporters, namely sports fans and private sector unions counting on 3,300 new construction jobs, proponents could win the get-out-the-vote campaign, Levy suggested.
No obvious, well-organized opposition to the project has surfaced, but there are still few details to oppose.
"They are saying, 'Build it and they will come,' " said the legislature's minority leader Diane Yatauro (D-Glen Cove). "But without the details, it's an unknown tax."
County Executive Edward Mangano said he expects to have that information by mid-June.
Islanders owner Charles Wang said he wants voters to have full disclosure about the details. "We'll do everything we can to make it work, get the information out, make people understand what the alternatives are, and we'll keep working at it," he said.
Even without a well-funded opponent, Levy suggested general voter ire toward public sector borrowing -- the county is already $176 million in the red -- could drive a grassroots anti-stadium campaign.
"If Mangano cannot come up with unassailable numbers that prove this is not a dollar loser, people will find their way to the voting booths to stop it," he said. "There is a lot of anger out there. The question is, can they capitalize on it at this time of the year and for this issue?"
But voter approval is only the first challenge.
Counting the political yeas
The Democrats on the county legislature that would have to approve the plan have made it clear -- they're not on board yet. And neither are all of the Republicans. At least 13 members of the 19-member Legislature would have to approve the borrowing plan even after the Aug. 1 vote.
Democratic county lawmakers, at least two of whom will be needed to approve the measure, argue they need more answers from Mangano about the deal before voters and the legislature can approve it. "We are not saying no. We are just saying, 'How much and how will it work?' " Yatauro said.
Even Mangano's allies haven't given unequivocal support. Presiding officer Peter Schmitt (R-Massapequa) said that if the measure passes, but his constituents vote against it, he would consider following suit when the legislature casts its final vote. "I am guided by the wishes of people in my district," Schmitt said.
Other supporters of the plan are anxious for details.
"If you're asking the public for a vote, there should be absolutely full disclosure of the consequences of what they're voting on," said Stuart Rabinowitz, president of Hofstra University, which is located near the Coliseum. "If I thought that wasn't going to happen, I would have real reservations. Certainly the public is entitled to know."
Mangano has said that sales tax revenue, coupled with a revenue-sharing agreement, where team operators and property owners would pay the county a share of each dollar generated, would offset the costs of the financing.
But even county Comptroller George Maragos, a Republican, is asking for an analysis to back that up.
"We don't need to have a contract in place," Maragos said. "We just need a good understanding of the revenue sharing and why it is beneficial to the county."
And whatever happens with the Coliseum, experts say development of the surrounding area for mixed uses is critical to providing enough revenue to make the plan work. "Once you get past the Coliseum and the ballpark, what about the rest of the property? asked Desmond Ryan, who heads the Association for a Better Long Island. "We must take that into consideration as well."
The NIFA factor
THE Nassau Interim Finance Authority represents perhaps the biggest hurdle. The authority, which controls the county's finances, must approve all contracts over $50,000. And the NIFA board has already asked for more information, saying it has substantial questions.
"I have a fiduciary obligation to examine and study the proposal and make sure the assumptions are based on reality and not pie in the sky hopes," said NIFA board member George Marlin. "And if it does not meet reality, then as a fiduciary, I have no alternative but to seriously consider not approving such a project."
In a letter to Nassau County on Thursday, NIFA asked for documentation, legal clarification and the potential percentage increase in taxes that would come if the revenue does not.
"Absent a guaranteed income stream to support the debt service on the proposed financing, we assume the county will be required to increase property taxes as a result of the proposal," NIFA executive director Evan Cohen wrote.
"NIFA hangs over the county like the sword of Damocles," said Ryan. "That's going to be the biggest hurdle the county has to face."
How to pay for it
IF the Coliseum and ballpark don't produce enough revenue to cover the debt, Nassau County taxpayers will have to make up the difference.
The cost of paying off up to $400 million of taxable bonds the county contemplates using for the project is estimated at $30 million a year for 30 years, including interest, said Tim Sullivan, deputy county executive for finance.
Even with all hopes of revenue-sharing and sales-tax boosts, proposed legislation would create a dedicated property tax levy to pay the debt service. Mangano said the cost of the bonds amounts to about $48 per household -- which covers about $20 million of the $30 million. The rest would be covered by commercial owners' property taxes.
Municipal bond industry professionals greeted the proposal with skepticism.
"Who is doing that kind of thing anymore?" said Matt Fabian, a managing director at Municipal Markets Advisors. "This is the kind of transaction that has gotten numerous cities into difficulty across the country."
Fabian pointed to the money-losing, 4,300-seat Town Toyota Center in Wenatchee, Wash., that has left that town contemplating borrowing millions to pay for debt it guaranteed on an arena that was largely supposed to pay for itself.
And Herman Charbonneau, head of public finance for underwriter Roosevelt & Cross, asked, "Given the state of the county, and the NIFA takeover, how do you make this work?"
Using Nassau's credit rating rather than creating a bankruptcy remote corporation to borrow the funds, as the Yankees and Mets did with their stadiums, would lower the costs of borrowing by reassuring bond investors that the county would repay them if the Islanders had a bad season financially. That scenario happened in Glendale, Ariz., with the Phoenix Coyotes hockey team.
"It shifts the risk from the bond holder to the taxpayer," said Andrew Zimbalist, a noted sports economist at Smith College. The question, he said, is whether it's realistic that "they are going to generate enough revenue from the sharing agreement to actually cover that."
Another question is the impact of adding debt for the project on the county's credit rating. Moody's Investors Service last year downgraded Nassau's credit rating, which increases its cost of borrowing. "Our hope is it would be positive," Sullivan said, adding that the revenue-sharing deal that Nixon Peabody attorney Christopher Melvin is negotiating would "far surpass any prior agreement."
Moody's declined to comment.