Another "Potential" Lease on Life

I know that most of my content lately has been Lighthouse-centric and for good reason. It's simply the most important facet of anything going on in Islanders Country right now (and quite simply the most newsworthy story out there). So without further ado, I present to you the latest in the long line of small victories the Lighthouse Project has achieved in these past few months: a new "Lease on Life" as it were, from Nassau County!

It has been common knowledge for quite some time that the Lighthouse Development Group has been working with Nassau County on a new Lease Agreement for the Nassau Coliseum site in parallel to the SEQRA Environmental Review being conducted and voted on, by the Town of Hempstead. This is certainly not the end, however. Understand that the tentative Lease Agreement can only be approved once re-zoning and building permits are issued by the Town of Hempstead. That means that there is still work to be done. Here are some of the details of what the new lease will provide:

1. The New York Islanders will be required to play all regular season home games at the newly re-developed Coliseum until July 31, 2030.


2. The land lease for the entire 150 acre span (77 of that is the Coliseum site) is for a total of 99 years.


3. The Lighthouse Development Group will be required to pay $1.5 million to Nassau County to lease the land per year (remember how much Nassau County reported losing on the land in maintenance costs per year...$1.4 million anyone?)


4. The Islanders will receive all profits for ticket sales, parking and concessions (as of right now with the current lease, SMG, the arena managing firm based in Philadelphia, is receiving roughly 80% of the ticket sales, all of the parking and concessions. The only pure profit the New York Islanders make is on their merchandise sales **UPDATE: My buddy NYIsles1/IslesTigers corrected my numbers: SMG at this time receives 11% of Isles gate receipts, all parking and concessions and 40% of all the team's advertising revenue. Thanks for the help. I could have sworn the gate receipts (tickets) were higher though...**). The LDG will also be responsible for all maintenance and repair costs on the site that the County has been shouldering throughout the current lease.


5. The Lighthouse Development Group is allowed to procure monies from many different sources to finance the Project, including Industrial Development Agency Bonds.

Here are the advantages and benefits of IDA funding (directly from the Town of Brookhaven IDA website):

ADVANTAGES & BENEFITS OF IDA FUNDING

• The Company may receive 100% financing for the total project cost - including construction, equipment and planning costs and financial expenses.


• The Company pays a rate of interest generally lower than the rate on conventional financing.


• The Company may receive real estate Tax Abatement of Up to 100% on all new capital investment for Up to 10 Years


• The Company may save the sales tax on material and equipment purchased during the construction period from proceeds of the bond issue. This benefit may save a company Up to 5% of the total project cost. For accounting and federal income tax purposes, the Company is treated as the constructive owner of the project. Accordingly, it carries the project as an asset on its books and the total obligation under the lease or sale agreement as long term debt.


• The Company is entitled to the investment tax credit under Section 38 of the Internal Revenue Code, and is entitled to the depreciation allowance under Section 167 of the Code (Rev. Rul. 68-590).


• The Company may: (a) increase the size of borrowing to include an amount equal to the interest payable during the construction period, and (b) defer the first payment of principal during this period of time. As a result, the Company need not divert cash flow from other sources to make payments on the debt until the construction has been completed.


• Tax exempt bonds are generally exempt from the registration requirements of the securities laws and State "blue sky" laws and are consequently considerably less complex and time consuming than the public or private placement of corporate bonds. Bonds subject to federal tax will also be exempt from registration under most circumstances if the bonds are sold pursuant to the private placement exempt transaction rules.


• Cost applicable to an industrial development revenue bond issue include fee of bond counsel, Agency fee, fees to trustee or paying agent, other legal fees, and placement fees if outside bond placement is required. However, the fees and expenses incurred in connection with IDA financing, make questionable the feasibility of any project funding under $750,000.

So what does this mean for the Lighthouse approval process? It basically puts the puck back in the Town of Hempstead's end. With a tentative Lease Agreement and re-zoning hearing that occurred on September 22nd, it's the Town's turn to send a counter-offer to the Lighthouse Project possibly scaling back some aspects of the construction. That's how negotiations work until both sides get the concessions they want and reach a compromise.

It's my belief that the LDG and Nassau County tried to accommodate some of the demands of the Town of Hempstead (granted we won't know the details of the Lease Agreement until noon today). It is known that the Lease Agreement will still provide the LDG access to tax-exempt money but another one of the important issues being addressed was that the Islanders stay for more than the original agreement of 2025.

**Side Note: In the Newsday article in today's edition regarding the Lighthouse Project, the reporters only state that the Islanders will be required to remain in the Coliseum for 15 years. This number is not accurate. What the authors did not take into account was that the Lease Agreement for the Lighthouse Project would terminate the current lease on the property. If the Lighthouse is approved for zoning and permits this year or next, then the new Lease Agreement will take effect in 2010 and will provide for 20 years.**

**Side Note 2: Nassau County legislative Minority Leader Peter Schmitt (R-Massapequa) was quoted in the same article saying that the numbers provided in the Lease Agreement will be inaccurate without knowing what the LDG will build on the site. The only question I have to ask in regards to this line of questioning is, "Why then, would the Town of Hempstead send an open letter of suggestions/demands to the County, the LDG and the citizens of Long Island for the Lease Agreement if there has been no decision on what will be constructed on the site?"**

Any way you slice it, this is a big step forward in the process of getting the Lighthouse Project approved. Now is the time for diplomacy and compromise. Let's look forward to October 3rd, not as date for "certainty" on the Project but as the start of the future on Long Island and the Islanders hockey season.

Be on the lookout for my Season Preview post tomorrow!