I am publishing a series of posts on the Destiny USA Debacle — the federally sponsored Green Bonds project that has failed to incorporate promised green building features. To read all of the posts at once, you can download a PDF version now. Or you can select the Destiny USA tag to review all of the published posts on this topic.
This is the seminal post in the Destiny USA Debacle series because we cover the big issue — did the Destiny USA project deliver on its Green Bonds promises? As a brief recap:
- The Destiny USA project received $238 million in tax-free investments created by the federal Green Bonds program.
- In exchange, the Destiny USA developer made promises related to LEED certification, renewable energy systems, and brownfield redevelopment.
- The Destiny USA developer reportedly will not deliver the promised renewable energy systems, and the project’s ability to obtain LEED certification is in doubt.
- The IRS must decide whether the project complied with its Green Bonds promises. An adverse ruling could mean the developer would face forfeiture of a Reserve Account containing $2.38 million, the revocation of tax exemptions, and angry bond investors looking for recourse.
- The Green Bonds issuer, the Syracuse Industrial Development Agency, had to submit a report to the IRS by the end of February describing whether the project has met its Green Bonds promises.
On February 21, 2010, Syracuse Post-Dispatch reporter Rick Moriarty published a story that disclosed the contents of a draft letter addressed to the IRS by the Syracuse Industrial Development Agency. In the letter, the Agency and developer first divulge that many of the green building and renewable energy features that were promised as part of the Green Bonds program will not be included in the completed project. The letter blames the economy for changes to the project.
The Agency and developer argue that other environmentally-friendly features have been included, like LEED-Gold certification. This last claim is curious since construction is not completed and the US Green Building Council confirmed that the project had not actually received certification.
The letter then moves to the crux of the compliance argument. The Agency and developer assert that actual installation of renewable energy systems was not required. Instead, the letter claims the developer was only required to make promises related to renewable energy and LEED certification in order to qualify for the bonds. They conclude that the financial benefits of the Green Bonds program and the forfeiture of the Reserve Account do not depend on actual achievement of the green building and renewable energy goals.
If you would like to review the IRS Code requirements for Green Bonds, please see my post “Why the IRS is the Key Player.”
How do you think the IRS will rule?