A federal expenditure of $400 million for New York City housing projects is reported in today's New York Post, whose reference to an unnamed "financial institution" sent me scrambling for more details. The HUD press release makes reference to a "complex, multi-step process" by which the New York City Housing Authority received $423 million in stimulus funding. According to the release, "New York Housing Development Corporation" will "issue bonds on the private market to raise capital that will be combined with the Recovery Act funding to accelerate the rehabilitation of these units. Citibank, N.A., a limited partner in one of the two transactions, will invest approximately $209 million to purchase low-income housing tax credits awarded to the development."
President Obama's secretary of housing and urban development, Shaun Donovan, had served as commissioner of housing preservation and development in the Bloomberg administration, so he knows the situation in New York intimately.
A press release from the Housing Authority, after quoting 12 different government officials, explains, "Of NYCHA's 334 housing developments, 21 of them, accounting for 20,139 housing units, were built by the City and State – with no Federal funding – after World War II. Unlike NYCHA's other developments, the 21 City/State buildings received no federal funds, although they were operated and maintained as public housing." Now they will get federal funds.
The housing authority press release goes on: "The transaction is one of the largest tax credit bond deals in the nation's history. New York City Housing Development Corporation will issue tax-exempt and taxable bonds to finance the acquisition and rehabilitation of the units. The bonds, which will be issued over the next three years, will be backed by credit support from Citi Community Capital."
Near the bottom of the press release comes the quote from Citigroup CEO Vikram Pandit: "This is one of the largest affordable housing transactions in history and highlights Citi's commitment to helping our neighbors in the communities in which we live and work and to supporting the economic recovery locally and around the U.S."
Citi's involvement raises some interesting issues. If this is a good business deal for Citi, why aren't any other banks involved in it? If it's a good deal, did the government send it Citi's way because the taxpayers still have a significant ownership stake in Citi? And if it's a bad deal for Citi, but accomplishes some other political or public policy goal of the Obama administration, is the government using its ownership influence on Citi to make the deal happen? What are the risks or rewards of this deal for Citi, and why are they being borne by Citi shareholders rather than taxpayers? Is Citi going to earn fees on these bond offerings? How much?
The Times had an article last week that referred to the deal as "labyrinthine" but didn't answer any of the above questions. I have an email in to a Citi spokesman and will update if I hear back. Update: Citi says it won the business through a "request for proposals" process, and that it won't discuss its fees.