Financing
Hudson Yards Infrastructure Corporation
Hudson Yards Infrastructure Corporation (HYIC), a not-for-profit local development corporation, was established to provide financing for infrastructure improvements to facilitate economic development on Manhattan’s far west side. Improvements include the extension of the No. 7 subway line west and south, construction of a park, as well as the acquisition of development rights over the MTA rail yards.
In December 2006, HYIC issued its first series of bonds in the principal amount of $2 billion. HYIC completed its second issuance of $1 billion of bonds in October 2011. Debt service on the HYIC bonds is being repaid from revenues generated by this new development, notably payments-in-lieu-of-property taxes (PILOT) on the commercial development, tax equivalency payments on residential developments, and various developer payments. To the extent these revenues are not sufficient to cover interest payments, the City has agreed to make interest support payments (ISP) to HYIC subject to appropriation. ISPs have not been required to be made since 2015.
After the initial bond issues funding the capital improvements mentioned above, HYIC has undertaken two refinancing transactions. In May 2017, HYIC issued approximately $2.1 billion of refunding bonds which refinanced all of its initial $2 billion bond issue and a portion of its second bond issue under a new legal structure. This refinancing allowed HYIC to remit approximately $110 million of accumulated revenues for City benefit in 2017. Moreover, the refunding enabled HYIC to transfer to the City excess revenues over and above amounts needed for HYIC debt service. Subsequent to the initial remittance mentioned previously, HYIC has remitted $750 million to the City to date. In October 2021, HYIC issued approximately $450 million in refunding bonds which refinanced the remainder of its second bond issue. This refinancing generated over $50 million of savings during the period fiscal years 2022-2025 and additional annual savings thereafter. After the transaction, all of HYIC’s bonds are under the legal structure established in the 2017 refunding transaction mentioned above. Although the economic impact of COVID-19 had an initial negative impact on certain of the credit ratings on HYIC bonds, ratings are now at pre-pandemic levels. Moody’s rates the HYIC bonds Aa2 with a stable outlook. S&P rates HYIC bonds AA- with a positive outlook. Concurrently with its upgrade of the rating on City GO bonds, Fitch now rates HYIC bonds AA- with a stable outlook.
The No. 7 Subway extension was constructed by the MTA and began service in September 2015. The secondary entrance to this station located at W. 35th Street and Hudson Boulevard East opened in September 2018. Phase I of the Hudson Park and Boulevard opened to the public in August 2015 and is managed by the Hudson Yards Hell’s Kitchen Alliance Business Improvement District. A second phase for the park (“Phase II”) will expand the park north to 39th Street. Phase II is being financed through a term loan agreement which permits HYIC to draw up to $380 million for project costs. HYIC has drawn approximately $10 million on the term loan to fund costs of Phase II.