Ballard Spahr Team Helps NYC Housing Authority Close Historic Deal
In 2010, Ballard Spahr housing attorneys worked closely with the General Counsel's Office of the New York City Housing Authority to close one of the largest public-private partnership tax credit bond deals in U.S. history. Working under a tight deadline, the team of attorneys from NYCHA and Ballard Spahr closed this complex financing only three months after HUD's initial approval. The result? NYCHA received federal, state, and private funding to modernize and maintain more than 20,000 public housing units.
The unprecedented transaction, which closed in March 2010, provides approximately $400 million in initial public and private funding for the modernization of the public housing units and an additional $65 million to $75 million each year for ongoing operations. Previously, NYCHA operated the units without any dedicated federal, state, or city funding.
The American Lawyer signaled the significance of the transaction by naming Paul K. Casey a 2011 "Dealmaker of the Year." Mr. Casey, co-partner-in-charge of the Housing Group, led a team of nine other Ballard Spahr attorneys who worked closely with NYCHA's General Counsel's Office to structure and close the extraordinarily complex deal in just six months.
The race began in August 2009 when the legal team worked with a little-known provision in the American Recovery and Reinvestment Act of 2009 (ARRA) that would enable NYCHA to gain federal funding for 21 public housing developments. The developments had been built by the city and state and were never federally subsidized. After the state and city severed funding for the units in 1998 and in 2003, respectively, the NYCHA began diverting dollars from its federally supported buildings to cover costs.
NYCHA learned that if it were to modernize the units through a public-private financing arrangement, the 21 developments could join those other buildings on that roster of federally supported public housing. The legal team had about six months, until March 17, 2010, to forge the complicated deal.
Along with the General Counsel’s Office, the Ballard Spahr attorneys orchestrated a collaboration of federal, state, and local government agencies and Citibank. They assisted in preparing and reviewing complex real estate, debt, bond, and equity documents; obtaining approvals and necessary waivers from the U.S. Department of Housing and Urban Development; addressing numerous legal and financing issues; and structuring use of the ARRA funds. NYCHA and the firm's lawyers had additional issues to consider: not-for-profit status, real property taxes, insurance, and rights of NYCHA in the future with respect to the projects.
The result: NYCHA was positioned to receive $108 million from the ARRA, $42 million from New York State, $209 million from tax equity investor Citibank, $50 million from long-term bonds secured by Section 8 payments, and $360 million in additional bond issuances. As part of the deal, it agreed to sell the 21 developments to two limited liability companies, which it would create and manage. NYCHA retained ownership of the land beneath the developments.
The deal received Novogradac's annual Journal of Tax Credits Award of Distinction for Innovation in Finance.
Click here to read The American Lawyer article about "Dealmaker of the Year."