Wednesday, December 23, 2009

State Officials Help Ratner Set Himself Up For a Much Bigger Loss

With today’s reported closing on the issuance of bonds for Forest City Ratner’s proposed basketball arena, developer/subsidy-collector Bruce Ratner has, with the assistance of overly-cooperative state officials, set himself up for a much bigger loss when that project fails to go forward, all the better to drive his firm into bankruptcy thus ensuring that taxpayers of this and other states will be protected against his predatory raids on public assets in the future. The more than half a billion in bonds were expensive to issue.

It was a desperate move on Ratner’s part. Now, if anything prevents the mega-project from going forward Ratner will be that much more in the hole. As the Preliminary Official Statement selling the bonds set forth it could be as simple as the NBA not giving Mikhail Prokhorov league approval. It needn’t be so straightforward or simple. Ratner is vulnerable to a number of significant lawsuits, pending, coming and worth reinstating. Among other things Ratner sidestepped proper use of a public agency to issue the bonds. Instead, in a jury-rigged maneuver a private 501(c)(3) not-for-profit was set up to bypass various laws and procedures. The public officials who stepped outside their prescribed roles and public duties to assist him to take these risks have already been determined in court to have been acting in bad faith to implement pretextual schemes in almost exactly the same situation in the Columbia eminent domain case.

Of course Ratner should be considered a big boy who knows the risks he has taken. This should be clear because the Preliminary Offering Statement for the bonds had Ratner, rather than lawyers, provide an assessment of the litigation risks. Nevertheless, our government officials have never treated Ratner as a big boy who should be assuming his own risks. Instead, they have repeatedly stepped in with the merest of excuses to bail him out each and every time he wails about hardship. That’s because the game these public officials have been playing is finding excuses at every turn to give Ratner more subsidy. That’s why they can never disclose to the public the negative value of giving Ratner his mega-monopoly or the way that total net loss figure grows each time more subsidy is piled on.

Ratner is betting he can continue to succeed in these shenanigans despite the megadevelopment’s increasing unpopularity. What’s needed for the public good is for him to fail and we are betting he will.

Ratner and all his assisting public officials were fairly forewarned that this bond transaction should have been halted ahead of time. There should be no complaints about the pain that will be experienced by Mr. Ratner by virtue of the fact that it was so inexcusably rushed through nonetheless.

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