Let me first get my conflict of interest out of the way. As a former U.S. Navy man, I was honored to take part in “reserve duty” in the Kingsbridge Armory in the late 1970s and even more excited, taking part in spending my money at the Armory watching many closed circuit boxing fights in the 1980s back before pay-per-view was in vogue. I also protested for the city to bring “schools to the Armory” after it closed in 1997, after it was re-purposed into a women’s homeless shelter that was so bad it had closed. And 20 years later, the Armory is still closed.
But now they talk “ice skating at the Armory!”
A community organization has tag-teamed with a private developer to make the Armory “a National Ice Center,” with promised jobs and a Community Benefits Agreement agreement that was agreed upon in 2012.
Since then, many things have “morphed.” Among them is Kingsbridge National Ice Center Partners LP to use a state loan instead of private development money to build the ice center.
New York City, who is holding the lease until “a down payment” can be guaranteed, is doing the right thing before turning over the key.
So three weeks ago, New York State held a hearing at Lehman College to receive public comment on a “business loan” to KNIC– a 30 year, 7 percent loan plus a commitment fee of one percent.
While my first thought was to attend as an activist to bring back schools to the Armory I decided to ask New York State a simple economic question instead: Why?
Why would New York State put together a 30-year loan package, of taxpayer money, to New York City, at seven percent when as of this writing, economic rates for 30-year business loans are at 2.8 percent?
Why would New York State make a 140 percent profit and where would that money go?
What is a 140 percent profit to $1.00? It’s about $2.80! How much of taxpayer money they want to give the city for this project, which by the way is only phase 1? About $100 million. The payback: $280 million!
The new Kingsbridge National Ice Center is scheduled to have 9 rinks, a wellness center, retail space, food and beverage space and community space. The general outline sounds like it will be:
*37 percent skating rinks
*34 percent retail, food and beverage
*29 percent community space
This seven percent loan, 140 percent higher than current interest rates, is equivalent to paying a 20 percent credit card rate–during this historic time of low interest rates. Still paying over 20 percent? Then you know, you are getting both ripped off and you need to seek debt consolidation. For the ones that are not, I presume you made your smart decisions already!
I tell my clients, after consolidation, to rip up that credit card. For the Kingsbridge Heights community–they should rip up this “agreement.” I say this, but not because of my history with the Armory but out of pure economic sense. This will put the city, especially the Kingsbridge Heights residents–more in city debt! And what has to happen with debt eventually–we have to pay it back. While that might be fine with some, no one at the Lehman College hearing could answer my simple question: Why would the State charge Kingsbridge Heights residents 140 percent more for a loan?
Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving financial problems.