Atlantic Yards Gets Favorable Ruling

Updated tax rules issued Tuesday limit the way tax-exempt bonds can be used to pay for sports facilities but don’t block the New Jersey Nets, New York Yankees and New York Mets from using billions of dollars in bonds to help pay for their new homes, state and city officials said.

The Internal Revenue Service issued its long-awaited regulations two years after it proposed tightening rules governing the use of tax-exempt bonds. It did so after the state and city had approved plans to build new stadiums for the Yankees and Mets and issued more than $1 billion in tax-exempt bonds to help pay for them.

Both teams have indicated they would seek additional bonds to pay for the stadiums.

The Nets’ owner, Bruce Ratner, had considered the tax ruling crucial to plans for a new Brooklyn arena, the centerpiece of the Atlantic Yards development. Ratner has said he wants to pay for the $950 million arena by raising up to $800 million in tax-exempt bonds.

The IRS limited the way tax-exempt bonds could be used in the future but said the rules would not apply to “certain projects substantially in progress,” including those with preliminary government approval and with significant expenses.

Ratner spokesman Joseph DePlasco said the tax-exempt financing was always part of the plan for the development of the arena and the IRS regulation released Tuesday “acknowledges that.”

“The regulation will help us move forward with a project that is critical to the ongoing economic vitality of Brooklyn and the city,” he said.

The state’s economic development agency plans to issue the tax-exempt bonds for the arena by the beginning of next year. Ratner is still facing opposition lawsuits and uncertain financing for the rest of the $4 billion Atlantic Yards project.

The city also had lobbied the government for the tax changes and would be responsible for issuing any new bonds for the Yankees or Mets.

The Yankees and Mets’ stadiums are to be finished by next spring. More than half of the stadiums’ budgets ? $1.3 billion for the Yankees in the Bronx, about $800 million for the Mets in Queens ? have already been financed by the tax-exempt bonds. A congressional hearing is set for Friday on tax-exempt stadium financing.

A Yankees spokeswoman declined comment, and the Mets did not immediately return a message seeking comment Tuesday.

A leading critic of the use of bonds to pay for stadiums said the IRS had created a loophole for the city’s sports projects.

“This is another example of powerful special interests getting access to public dollars under this administration,” said Assemblyman Richard Brodsky, D-Westchester. “The rules don’t apply if you’ve got enough juice.”

Department of the Treasury spokesman Andrew D’Souza said the regulation that applies to projects already under way was not targeted to New York sports teams.