In January 2005, the City Council approved a plan to transform the industrial blocks and rail yards of the Far West Side into a high-density, mixed-use neighborhood. The Far West Side was rezoned to accommodate 25 million square feet of office space, tens of thousands of residential units, new hotel and retail properties, and acres of new open space. (Initial proposals also called for a new stadium for the New York Jets football team that would double as an extension of the neighboring Javits Center, though those plans were later abandoned.)

As part of its vision, the city proposed $3 billion in new infrastructure projects to make this new development feasible. The lynchpin was the extension of the 7 train from its terminus in Times Square to a new station at 11^th Avenue and West 34th Street. The city would also build a park-lined boulevard from West 30th Street to 42nd Street between 10^th and 11^th Avenues.

Despite the Bloomberg Administration’s advocacy for the subway project, the Metropolitan Transportation Authority (MTA) had not prioritized the extension of the 7 train in its capital planning prior to the rezoning. Rather than let the infrastructure projects fail due to lack of financing by the MTA, the Bloomberg Administration made an unusual, if not unprecedented, proposal: the city would pay for nearly 100 percent of the subway improvements and other investments necessary to catalyze development in the Far West Side. (Normally, improvements to the transit system are funded by MTA capital proceeds and federal transportation grants. Given the priority of other projects like the Second Avenue Subway and East Side Access, it could have been years before the MTA committed to funding the 7 train extension.)

The financing plan that the Bloomberg Administration pursued is one of the few examples of a value capture financing strategy ever employed in New York City. (For background on the plan, see IBO’s West Side Financing’s Complex, $1.3 Billion Story") The theory behind the plan is that the rezoning of the Far West Side and the extension of the 7 subway line would vastly increase the development potential of land within the neighborhood. Rather than finance the project through its capital budget, the city could instead capture the tax and fee revenue generated by the new developments induced by the infrastructure investments and issue bonds backed by that revenue. The potential increase in value was substantial. According to the November 2006 revenue forecast prepared by Cushman & Wakefield for the city, new developments were expected to generate $283 million in revenue through 2012 and more than $34 billion by 2050.¹ (Unless otherwise noted, all years refer to city fiscal years.)

The Bloomberg Administration and the City Council created two new local development corporations to implement this plan. The Hudson Yards Development Corporation (HYDC) is charged with managing the planning, design, and development of the Hudson Yards area, with the exception of the extension of the number 7 train, which is overseen by the MTA. The Hudson Yards Infrastructure Corporation (HYIC) is authorized to issue bonds to finance capital improvements in the Hudson Yards area. HYIC’s bonds are backed by revenue generated by new development projects in the Hudson Yards financing area (generally the blocks of West 30^th to West 42^nd Streets between 8^th Avenue and the West Side Highway). The corporation has had two bond offerings to date: $2 billion in 2007 and an additional $1 billion in 2012. (HYIC can issue an additional $500 million worth of bonds with approval from the City Council.)

Given the expected lag between the start of infrastructure construction and the completion of the first new buildings, the City Council also agreed to make interest support payments to the Hudson Yards Infrastructure Corporation should its revenues fall short of its annual debt service payments. Over time, as new buildings are completed, the Bloomberg Administration expects that the corporation will be able to pay 100 percent of the debt service on its bonds using project revenue. Once HYIC begins generating surpluses, it will begin to buy back bonds and to set aside money to pay principal that is scheduled to come due when its bonds mature.²

Revenue collected to date, however, has fallen short of the corporation’s initial forecasts. Through the end of 2012, HYIC has collected $170 million in tax and fee revenue, compared with the $283 million projected by Cushman & Wakefield. In addition, the corporation realized $252 million in interest earnings on its unused bond proceeds. HYIC’s interest expenses over the same period totaled $478 million.

Since 2006, public financial support for HYIC has totaled $374 million, including both foregone tax revenue otherwise due to the city’s general fund and direct appropriations from the city’s budget to make up the difference between HYIC’s revenue and its interest obligations. During that time, the city has provided $137 million in subsidies for so-called interest support payments to HYIC, with annual payments rising to more than $79 million in 2012. The city prepaid all of its 2013 and part of its anticipated 2014 interest support payments to HYIC from its 2012 budget surplus.³ In addition, the city has funded $22 million in capital improvements to date from its capital budget and spent $12 million from the expense budget on demolition of buildings in the area.

Given that recurring payments in lieu of taxes (PILOT) revenue from office properties is unlikely to start until 2017 at the very earliest, and tax equivalency payments (TEP) from residential and hotel properties will increase slowly over the next few years, IBO expects the city will continue to make annual interest support payments to cover any shortfall at HYIC for the near future. Moreover, the city plans to commit an additional $79 million in city capital dollars through 2022.

This report updates IBO’s previous analyses of the Hudson Yards financing plan to reflect new developments over the last eight years. The brief is divided into three sections. The first provides an overview of what the Hudson Yards Infrastructure Corporation and the city have spent on the Hudson Yards project to date. Next, we summarize the financing plan that backs the corporation’s bonds, as well as the subsidies the City Council has appropriated to date. Finally, we provide a short-term forecast for the corporation’s recurring revenues.

Through the end of 2012, the Hudson Yards Infrastructure Corporation has spent nearly $2.0 billion on project-related expenses, which include the costs to acquire land and to design and build its capital projects. Most of that total ($1.58 billion) has been spent on the extension of the 7 train. HYIC has spent another $390 million on what it classifies as Land Acquisition and Public Amenities. The remainder has gone towards funding the Hudson Yards Development Corporation’s design and construction management work. Non-project expenses, which include interest payments, financing costs, and HYIC’s administrative expenses, have totaled $528 million.⁴ HYIC also used $200 million in bond proceeds to acquire transferrable development rights from the MTA, with the intention of reselling them to developers. Though not technically an expense, the acquisition reduced the funds available for capital projects.

Subway Extension. The budget for the design and construction of 7 train extension is currently $2.42 billion, of which $2.37 billion will be funded by HYIC’s bond proceeds. HYIC has spent $1.58 billion on the subway extension through the end of 2012. Service is expected to begin in June 2014.

When the project was first announced in 2006, the city and MTA budgeted $2.1 billion for the extension, including a 5 percent contingency allowance to cover potential cost overruns. In September 2008, bids to excavate the first phase of the extension came in higher than expected. In order to save $450 million and keep the project on budget, the city chose not to fund the construction of a shell for a second station at 41^st Street and 10^th Avenue.

By 2011, despite the earlier round of cuts, the total budget had risen to more than $2.4 billion, including the contingency allowance. Since the city was responsible for funding these overruns, HYIC and the Mayor’s Office chose to finance the $267 million shortfall through a combination of cutbacks and additional city capital spending.⁵ The city identified $235 million in savings by tapping into a portion of the project’s contingency fund and taking advantage of savings found in other aspects of the project, including lower than expected costs for both land acquisition and HYDC’s operating expenses. The remaining $32 million in overruns is being funded through the city’s capital budget. (Actual and planned city capital spending on the 7 train extension currently stands at $55 million. See page 5 for more information.)

According to the transportation authority, HYIC has spent $1.58 billion on the subway extension through 2012. The majority of that, $1.3 billion, has been for construction and construction management, with an additional $107 million spent on design. Another $149 million were spent on design, construction, and management work not related to the subway. This category includes construction work related to public amenities that had to be coordinated with the work on the subway, though was not directly related to subway operations. The MTA also funded $53 million for work related to the Environmental Impact Statement.

If the project stays on budget, the remaining construction work will cost up to $786 million, which is expected to be paid from the remaining bond proceeds. Construction costs account for $565 million of the remaining budget, with an additional $117 million in nonsubway work that will be funded by HYDC. Construction management is expected to cost $21 million. The budget includes a $76 million reserve for subway expenses that may or may not be spent, depending on final project costs.

If project costs exceed the budget, the city will either have to find savings elsewhere in the project, appropriate additional city capital money, or tap into HYIC’s remaining $500 million of bond capacity, which would require City Council approval. At the time this report was prepared, HYIC has no plans to issue additional debt.

Land Acquisition and Public Amenities. Through 2012, HYIC reports that it has spent $390 million to acquire land and to design and build the project’s public spaces. This figure does not include the $200 million that HYIC paid to the MTA to acquire a 50 percent interest in over 4 million square feet of transferrable development rights (TDRs), also known as air rights, from the MTA’s Eastern Rail Yard. HYIC records the TDRs as an asset because they are intended to be resold to developers at a later date. As such, the $200 million payment to the MTA is not classified as an expense, even though the funds came out of HYIC’s bond proceeds. Until the TDRs begin to be sold, however, this represents a reduction in the total funds available for capital projects.

Of the $390 million in spending on land acquisition and public amenities, $378 million represents money paid to property owners to acquire the land necessary to complete the project. According to the city, HYIC has no plans to acquire additional property for the Hudson Yards project. The full list of properties acquired, either in full or in part, was not made available to IBO at this time, though public documents state that HYIC and the MTA have condemned property necessary to build the subway extension and the first phase of public open space improvements in the Hudson Yards area.⁶

The remaining $12 million was spent on the public amenities. This lines up with what is reported in the city’s capital plan, with $10 million in private funds (from HYIC) committed through 2012 for city capital projects related to the reconstruction of West 33^rd Street and the park and boulevard, discussed below in more detail.

The city is also spending $12 million to demolish buildings in the Hudson Yards area. The demolitions are funded through the Department of Housing Preservation and Development’s expense budget.

Culture Shed. The city has also proposed a 170,000 square foot multipurpose arts facility on the site of the Eastern Rail Yards. The building, known as the Culture Shed, will be administered by Culture Shed, Inc., a nonprofit organization whose board is appointed by the Mayor.⁷ The city plans to acquire the land under the proposed Culture Shed and lease it to Culture Shed, Inc. to build and operate the facility. HYDC has also received a $100,000 grant from the National Endowment for the Arts to help fund the project’s design.

As of this report, the city has not announced how much the project will cost or the share of costs that the city will bear. One media report suggested that the project will be funded by a combination of city funds and private donations.⁸ It is expected to open in 2017.

When it created the Hudson Yards Infrastructure Corporation, the city pledged that it would redirect all tax and fee revenue generated by new projects in the Hudson Yards area to repay the $3 billion in bonds issued by the Hudson Yards Infrastructure Corporation. The borders of the Hudson Yards Financing District are shown in the map below. Though the project was initially centered on the MTA’s Eastern Rail Yards, the financing area covers dozens of blocks in the West 30s and 40s. The irregularly shaped area also extends east to include Madison Square Garden and Penn Plaza, north to include portions of the blocks between 42^nd and 43^rd Streets, and south to 29^th Street between 11^th and 12^th Avenues. It includes the Port Authority Bus Terminal, but carves out the Javits Convention Center and the piers along the Hudson River.

SOURCE: Hudson Yards Development Corporation

Currently, the corporation receives two different types of revenue. The first type, called project revenue, is revenue generated directly by new development projects in the Hudson Yards financing area, while the second type, called non-project revenue, is revenue that does not stem from new development.

HYIC receives two different kinds of project revenue: development rights that the city sells to developers at the time of construction and recurring, annual property tax revenue (or the equivalent) paid by owners of new buildings in the Hudson Yards area, including payments in lieu of taxes revenue collected by the Industrial Development Agency (IDA) and tax equivalency payments (TEP) appropriated to HYIC by the City Council.

HYIC’s non-project revenue represents the revenue it receives from sources other than the taxes and fees paid by new development projects. To date, HYIC has received two kinds of non-project revenue: the earnings it collects from investments of its unused bond proceeds and interest support payments (sometimes paid in advance as grants) from the city, which the City Council appropriates each year if HYIC’s other sources of revenue fall short of its annual debt service payments.

Upfront Fees and Bonus Payments. The rezoning of the Hudson Yards neighborhood dramatically increased the amount of space that developers can build within the district. Rather than simply increasing the amount that developers could build as-of-right, however, the city created what is essentially a layer cake of development rights, in which developers pay bonuses or purchase transferrable development rights from other sites in order to assemble the maximum development potential of their properties.

The exact composition of this layer cake of development rights differs for commercial and residential properties. For all buildings, the first layer is based on the floor-area ratio that developers can build as-of-right under the zoning code. (Floor-area ratio, or FAR, is the ratio of a building’s square footage to the square footage of the lot on which it is built. For example, on a 2,000 square foot lot with a FAR of 5.0, a developer could build a 10,000 square foot building.)

For commercial buildings, the second layer is added by paying a district improvement fund bonus (DIB) for each incremental square foot developed up to a specific FAR threshold. Depending on a building’s location, developers can acquire additional density on top of the district improvement fund bonus by purchasing transferrable development rights from the Eastern Rail Yard.

For developers of residential buildings, the second tier of development rights comes from the purchase of DIBs and the use of inclusionary housing bonuses. Developers must add six square feet of inclusionary housing for every five square feet of FAR increase added through DIBs, up to a specific threshold. Developers can fulfill their inclusionary housing obligations either by providing affordable units on-site or by paying for the construction of affordable housing elsewhere in the neighborhood. Once a building has reached this threshold, developers can add additional FAR by paying for additional district improvement fund bonuses.

Developers of residential and commercial properties located adjacent to the second phase of the Hudson Boulevard and Park are also eligible to add FAR to their sites in exchange for building a portion of the boulevard or park. Developers can substitute development rights from these Phase 2 in-lieu contributions for development rights that they would otherwise have to purchase from the District Improvement Fund.

District Improvement Fund Bonus. The Hudson Yards Infrastructure Corporation has collected more than $88 million in revenue from the sale of District Improvement Fund Bonuses through 2012, though collections have slowed dramatically since 2008. DIB payments are made when developers apply for a building permit and payments flow directly to HYIC. In January 2005, the Department of City Planning set the initial price at $100 for every square foot of development rights acquired through the program. The city planning department updates the price each August based on the percentage change in the consumer price index for the previous 12 months. As of August 2012, the price of DIBs had increased to $120.61 per square foot.

Developers can elect to build a portion of the Phase 2 section of boulevard and park in exchange for additional development rights. These air-right bonuses come in two forms. First, developers can acquire a lot designated as a Phase 2 site and transfer its development rights to a nearby lot along the boulevard that they intend to develop. In addition, they can also apply to the City Planning Commission to receive a second floor-area bonus in exchange for building the public park land. Since these contributions can be substituted for rights that developers would otherwise purchase from the District Improvement Fund, the Phase 2 financing plan could reduce DIB revenue flowing to HYIC. No developments have used the Phase 2 bonus or transferrable development rights to date.

As part of its December 2006 agreement with HYIC, the city agreed to assign all DIB revenue paid by Hudson Yards projects to HYIC. This means that DIB revenue does not appear in the city budget.

Eastern Rail Yards Transferrable Development Rights. The Hudson Yards Infrastructure Corporation purchased a 50 percent interest in 4.56 million square feet of transferrable development rights from the MTA’s Eastern Rail Yards for $200 million using proceeds from its 2007 bond offering. Under the terms of the agreement between HYIC and the MTA, the Hudson Yards Development Corporation has the authority to market and sell the development rights to developers of new commercial buildings along the proposed boulevard between 10^th and 11^th Avenues north of West 33^rd Street, which is the northern boundary of the Eastern Rail Yards. According to the zoning resolution, the rights cannot be sold within the Eastern or Western Rail Yards or to developers building on the Amtrak rail yards located between the Eastern Rail Yard and the Farley Post Office. (The zoning resolution restricts the sale of the Eastern Rail Yard TDRs to property owners located in zoning subareas A2, A3, A4 and A5.) Since these TDRs are part of the third layer of benefits, developers must maximize development capacity added from the second layer of development rights before they can purchase additional development rights from the Eastern Rail Yard.

SOURCE: NYC Zoning Resolution Article IX, Chapter 3, Special Hudson Yards District, Appendix A

The price of the transferrable development rights will be set at the lesser of the price of the district improvement fund bonus at the time of the sale or 60 percent of the per square foot value of the development that is receiving the bonus as determined by an independent appraiser.

The terms of the agreement also set out how HYIC and the MTA split the proceeds. HYIC will receive all of the proceeds from the sale of the development rights until it has collected $200 million, plus the interest it has paid on the $200 million up to that point. ^12,13 After that milestone is reached, the MTA will receive all of the proceeds earned on the remaining sales.

Through the end of the 2012, the Hudson Yards Infrastructure Corporation has not sold any of the 4.56 million square feet of development rights. No commercial construction has begun in the areas eligible to receive the air rights, and no projects in that area have announced plans to begin construction in the near future.

Interest Earnings on Bond Proceeds. The Hudson Yards Infrastructure Corporation has earned more than $250 million from investing its unused bond proceeds. These earnings helped cover its structural deficits during the first years of its existence, but the earnings have fallen over time. By 2012, revenue from investment earnings had fallen to $1.4 million. (Some portion of the earnings are available to pay debt service, though the city has not said how much of these funds were available and used each year to help HYIC make its interest payments.)

Through the end of 2011, HYIC’s investment earnings came almost entirely from a series of flexible repurchase agreements it entered into after the sale of its first bonds in 2007. Under the terms of the agreements, the city invested its unspent bond proceeds in investment vehicles that paid fixed rates of return ranging from 4.635 percent to 4.835 percent and that allowed it to withdraw money as needed to pay for capital expenses. The agreements expired in March 2011.

As of June 30, 2012, HYIC had nearly $938 million in investments, including the unspent proceeds from its 2012 bond offering. These proceeds are now invested in a combination of high-grade commercial paper, Treasury bills and money market funds, and notes from the Federal Farm Credit Bank and Fannie Mae. Given that the yields on these investments are substantially lower than what the city earned on its now-expired repurchase agreements, it is unlikely that HYIC will be able to use investment earnings to significantly reduce the city’s interest support obligations in the future.

Interest Support Payments and Grants. The final source of revenue backing the HYIC bonds is interest support payments from the city’s debt service budget. The City Council is not legally obligated to support HYIC, but it has agreed to subsidize the corporation should its revenue fall short of its annual debt service payments on up to $3 billion worth of bonds. This support comes in the form of interest support payments, which are appropriations from the city’s budget for interest due on HYIC’s outstanding debt in the current fiscal year.

In some years, the Mayor’s Office of Management and Budget opts to prepay interest support payment from the budget surplus available at the end of the year. Using the budget surplus to prepay debt service expenses is a common practice. Because the city must end the year with a balanced budget with revenues equaling expenses, the city uses any available surplus to prepay certain expenses that would otherwise be due in the following year. The most common items to prepay are debt service expenses and subsidy payments to the Metropolitan Transportation Authority or the city’s libraries. HYIC shows the prepayment as a grant from the city in the year the payment is made, even if it is intended to cover interest payments in a later year.

The city’s first payment came at the end of 2009, when it made a $15 million prepayment (or grant) to HYIC out of its surplus in that year, which was used to cover HYIC’s interest payment shortfall in 2010. In 2011 and 2012, the city appropriated the interest support payment during the year it was due, making a payment of $43 million in 2011 and $79 million in 2012. The city has also made a prepayment of $156 million from the 2012 surplus. According to city budget documents, the $156 million is expected to cover the entire interest support payment for 2013 and part of the interest support payment for 2014.

Summarizing Revenue Through 2012. Project revenue has fallen short of the corporation’s annual debt service payments. Through the end of 2012, HYIC collected $170 million in project revenue (revenue from development), while interest payments over the same period totaled $478 million. The city did not expect the project to be self-sustaining in its early years, even in a best case scenario. But the $170 million in project revenue through 2012 fell well short of HYIC’s initial forecast of $283 million.

Through 2010, HYIC subsidized its operations and obligations primarily using the money it earned by investing the bond proceeds it had yet to spend. However, total earnings fell as the corporation began spending money on projects, interest rates fell, and the composition of its portfolio changed, declining from a peak of $127 million in 2008 to $1.4 million in 2012. As a result, the corporation has had to rely increasingly on interest support payments from the city’s debt service budget to close the gap between its revenue and its annual debt service obligations.

According to Cushman & Wakefield’s November 2006 forecast, interest support payments through 2012 were expected to be between $7 million and $228 million, depending on the amount of projected development that took place. In its conservative cyclical forecast, Cushman & Wakefield estimated that the city would need to make $205 million in payments through 2014, with $119 million coming through 2012. A more conservative estimate at 60 percent of the cyclical scenario projected interest support payments of $804 million through 2023, with $228 million through 2012. In its baseline forecast, Cushman & Wakefield predicted that the city would make only a single $7 million payment in 2008. While the city’s actual payments are in that range, development has been far slower than projected and the city has not had to compensate with higher interest support payments because of HYIC’s significant investment earnings, which were not included in the 2006 forecast.

Cushman & Wakefield updated its interest support payment forecast in 2011, when it estimated that the city would be required to make $295 million in interest support payments for 2012 through 2018, beyond payments that had already been made by the city totaling $58 million.

Using property tax data on buildings completed to date and building permit data on projects likely to be completed in the near future, IBO created a forecast of HYIC’s revenue from PILOT and tax equivalency payments in 2013 and 2014. The forecast focuses on the recurring revenue sources for two reasons. First, payments from upfront development fees, bonuses, and the sale of transferrable development rights are difficult to forecast because they are not paid until a developer files for a building permit. Second, the refinancing covenants in the Hudson Yards Infrastructure Corporation’s bonds are based on the recurring revenue sources, which the bond market considers to be a better indicator of the Hudson Yards Infrastructure Corporation’s fiscal self-sufficiency.

PILOT Revenue. Even though the Related Companies began construction on its first office tower in the Eastern Rail Yard during 2013, that building is not likely to begin generating PILOT revenue for HYIC until 2017 or 2018. Related will also not pay any upfront fees other than its payment in lieu of the mortgage recording tax (expected in 2013, once the loan closes). Based on the zoning of the Eastern Rail Yard, Related does not have the option to purchase additional development rights from the DIB fund. Additionally, due to its location in the Eastern Rail Yard, Related cannot purchase any of the rail yard’s transferrable development rights.

At the time of this report, no other properties have applied to the Industrial Development Agency to enter into a PILOT agreement.

Developers have assembled a number of commercial development sites in the Hudson Yards area. If these buildings are constructed, the developers will ultimately pay PILOTs, though probably not until 2019 at the earliest. At least six sites comprising 11.4 million square feet of development rights are actively competing for tenants:

• Coach, Inc. plans to occupy 740,000 square feet of The Related Companies’ 1.7 million square foot south tower, which is currently under construction. L’Oreal is leasing 402,000 square feet and SAP, a German technology company, is leasing 115,000 square feet.Related has yet to secure tenants for the remaining portion of the building.

• Related also continues to seek tenants for its 2.5 million square foot north tower in the Eastern Rail Yard.

• Brookfield Office Properties controls development rights on the Amtrak rail yards located between the MTA yards and Farley Post Office (covering the blocks from 8^th Avenue to 9^th Avenue). It has announced plans for two office towers totaling 3.2 million square feet and a platform over the yards.

• The Moinian Group is expected to break ground in 2014 on a 1.7 million square foot building on the west side of Hudson Boulevard between 34^th and 35^th Streets that could contain offices or a mixture of offices and residential or hotel development.

• Extell Development Company has released designs for a 1.3 million square foot office building along the west side of the Hudson Boulevard between 33^rd and 34^th Streets.

• Alloy Development has proposed a 1.1 million square foot building on the east side of the boulevard between 35^th and 36^th Streets.

With the exception of Related’s south tower, none of these projects have announced that they have signed tenants or secured financing. If all of these buildings were completed and all the square footage was dedicated to office space (rather than residential, retail, or hotel), office development would total 11.4 million square feet. This would represent 45 percent of the 25.3 million square feet that Hudson Yards was rezoned to accommodate. 

Tax Equivalency Payments. In addition to the 36 buildings already being counted for TEPs, four other new properties are scheduled to have their property taxes count as tax equivalency payments beginning in 2013. Included are two hotels and two residential buildings: the OutNYC/Axel on West 42^nd Street, the TRYP by Wyndham on West 35th Street, a rental at 446 West 38^th Street and a condominium at 433 West 37^th Street. The estimated 2013 TEP for the four buildings is $1.2 million, with 88 percent coming from the two hotels. The remaining 36 properties that currently have their property tax revenue transferred to HYIC in the form of TEPs are estimated to have combined tax payments (including payments for prior years made in 2013) of $32 million in 2013. With the four new projects, the total TEP in 2013 is estimated to be $33 million.

Based on the tentative tax roll for 2014, these 40 properties are scheduled to see their taxes rise to $44 million in 2014. Their final property tax liabilities for 2014 will likely be slightly lower than that amount due to routine exemption processing, corrections, and reductions by the Tax Commission. Abatements and additional tax reductions via the Tax Commission may also reduce the property tax liability beyond the final tax roll.

Based on a review of new building permits issued between 2009 and 2012 and press accounts, IBO has identified 7 additional buildings that are currently under construction and will likely begin contributing TEP revenue in the near future, possibly 2014 or 2015, depending on when they receive a temporary certificate of occupancy. Because the timing of the temporary certificate of occupancy is uncertain, we did not include these buildings in the TEP projection at this time. The buildings are: two hotels on West 37^th Street, one hotel on West 33^rd, and four new buildings expected to be residential developments, including the 750,000 square foot residential tower being developed by the Extell Development Company on 41^st Street and 10^th Avenue. Additionally, the first building at the Brookfield Office Properties’ Amtrak Yards site is now expected to be a residential tower that would ultimately qualify for a TEP; however, completion is likely to be later than 2015.

Through 2012, the Hudson Yards Infrastructure Corporation (HYIC) spent almost $2 billion on the 7 subway extension, land acquisition, and public amenities in the Hudson Yards area. Additionally, HYIC spent about $480 million on debt service for $3 billion dollars worth of bonds. Completion of the subway expansion is expected to cost up to an additional $786 million, while the city’s capital plan includes another $77 million from HYIC for the public amenities. The city has committed $22 million in city funds for capital projects related to Hudson Yards and plans to commit another $79 million through 2022.

HYIC revenues for 2006 through 2012 have included $252 million in investment earnings, $137 million in interest support payments from the city, $88 million in district improvement bonuses, and $82 million in tax equivalency payments. Additionally, the city paid $156 million in interest support payments in 2012 that are intended for 2013 and part of 2014. Transfers from the city budget to HYIC total $374 million, including the interest support payments and tax equivalency payments.

IBO expects that additional interest support payments from the city will be required to cover annual HYIC shortfalls. One-time revenue, from the sale of development rights or district improvement bonuses, is particularly difficult to forecast because of the uncertain timing of major development projects. Given projected construction dates for office buildings in Hudson Yards, IBO expects recurring PILOT revenue will begin in 2017 or 2018 for the Related south tower and may increase beginning in 2019, if other office buildings under development begin construction in the near future. IBO forecasts that tax equivalency payments will increase to $33 million this year and $44 million in 2014.

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