FROM THE OFFICE OF PUBLIC AFFAIRS

Secretary of the Treasury John W. Snow today spoke with New York Governor George Pataki and New York City Mayor Michael Bloomberg by phone to deliver the news that President Bush’s FY 2005 budget request includes an extension of the New York Liberty Bonds program until 2009. 

“New Yorkers have stood strong in the face of terrorists and have made great progress in their efforts to rebuild and recover.  The President’s request to extend the Liberty Bonds program for five more years will help make further revitalization a reality,” said Secretary Snow.

New York Liberty Bonds were created as part of the economic stimulus package that President Bush signed in the wake of the terrorist attacks of September 11, 2001.  The Liberty Bond program allows the State of New York and New York City to issue up to $8 billion in special tax-exempt private activity bonds to help finance capital projects in the newly-designated Liberty Zone, located in lower Manhattan. 

Approximately $2 billion in Liberty Bonds have been issued or authorized to date.  There is currently a backlog of applications for financing that may not have been processed by the program’s original expiration date at the end of 2004. 

Fact Sheet:
New York Liberty Bonds

What are Liberty Bonds?

New York Liberty Bonds are special private activity bonds that can be used to finance capital projects primarily in the Liberty Zone, the area of Manhattan south of Canal Street, East Broadway and Grand Street.  Interest on the bonds is exempt from federal income tax. 

When was the Liberty Bond program created?

The Liberty Bond Program was part of the economic stimulus package that was signed by President Bush in the wake of September 11, 2001, attacks on the World Trade Center and the Pentagon.  The program was established to help New York City rebuild and recover by spurring economic development in the areas hardest hit by the attacks.

How big is the program?

The economic stimulus package authorized up to $8 billion dollars in Liberty Bonds.  At this point, New York has issued or authorized approximately $2 billion of these bonds.  There are many pending applications that would not have been processed by the program’s original expiration date at the end of 2004.

How can Liberty Bonds be used?

Liberty Bonds can be issued for certain housing, office, utility, and retail development in the Liberty Zone and surrounding areas.  First priority is given to projects in the designated area in lower Manhattan. New York Governor George Pataki and New York City Mayor Michael Bloomberg have each been allocated $4 billion for the program.  Up to $800 million of the $8 billion total may be issued for retail development, up to $1.6 billion for residential rental projects in the Liberty Zone, and up to $2 billion for commercial projects in New York City but outside the Liberty Zone.

How do Liberty Bonds work?

Liberty Bonds are sold to private investors to provide capital for designated development projects.  The bonds are not obligations of the State or City, but are instead obligations of the entities established by the State or City to issue the bonds.  The bonds are secured by pledged project revenues, typically with no recourse to the issuer. Interest on the bonds is exempt from federal, State, and City income tax, and these savings are passed on to the borrower in the form of a lower interest rate. The interest rate available to a borrower under the New York Liberty Bond Program will depend on the individual project's credit worthiness and financing structure, as well as general market conditions.

The New York Liberty Development Corporation, a local development corporation formed at the direction of the Empire State Development Corporation, and the New York City Industrial Development Agency will issue bonds for commercial and utility projects. The State's issuer for residential facilities will be the New York State Housing Finance Agency; the City's residential issuer will be the New York City Housing Development Corporation.

Why does the program need to be extended?

New York City has come a long way in the last two years, but President Bush knows there is still more opportunity and potential in the Liberty Zone and surrounding areas.  New York City has utilized approximately $2 billion of the $8 billion that was allocated to the program.
 However, it has taken longer than expected for the City to be in a position to utilize the full potential for these bonds.  Therefore, President Bush has proposed an extension in the program until 2009.