A bank and a municipal bond insurer are trying to compel the Westchester Industrial Development Agency and an affiliate of Kite Realty Group to sell part of City Center parking garage in White Plains to satisfy a debt.
Wilmington Trust, the representative of the investors who bought the bonds that financed the garage, and ACA Financial Guaranty Corp., Rye, the insurer, sued for partial foreclosure on the parking garage May 11 in Westchester Supreme Court.
The IDA owns the garage and borrowed funds to finance the bonds, according to the complaint. LC White Plains, a Kite Realty affiliate, is responsible for paying off the bonds.
Last year, LC White Plains defaulted on the garage bonds, according to an October 22 notice. It owed $1.67 million but paid only $791,639. Then Wilmington Trust used the last $197,519 from the debt reserve fund, leaving $680,842 to be paid.
As the bond insurer, ACA had to pay the balance to the bondholders.
Now the bank and ACA are seeking $934,569 for the shortfall and other expenses.
They are asking the court to order the sale of one of three sections of the garage, known as the air parcel, to pay off the debt. They also want authorization to sell the rest of the garage if LC White Plains continues to default on bond payments.
As of October, nearly $12.6 million in bonds were outstanding.
The garage is part of the City Center complex in downtown White Plains, including the Trump Tower and The Lofts, built by Cappelli Enterprises. In 2003, the IDA issued nearly $27.25 million in taxable revenue bonds to finance the garage and the City of White Plains issued a separate $24 million bond to finance construction.
Wilmington Trust and ACA have been warning the city for several years that parking revenues were insufficient and that the reserve fund was declining.
The city operates the garage and collects parking revenues for LC White Plains, but it is not obligated to pay off the IDA bonds. Nonetheless, ACA has implored the city to increase parking fees or refinance the garage to prevent a default.
Failure to do so, ACA has argued, would damage the city’s strong credit rating and increase borrowing costs for future projects.
“This is a moral obligation on the city,” ACA spokeswoman Maria Cheng told the Westchester County Business Journal last June, and she said municipalities that have walked away from moral obligations have seen their credit ratings worsen.
But Karen M. Pasquale, a senior adviser to Mayor Thomas Roach, responded then that the city has no responsibility for the bonds and “cannot allow its taxpayers to take on a burden that does not belong to them.”
The IDA and Kite Realty, based in Indianapolis, did not respond to emails requesting comments on the lawsuit.
White Plains attorneys Daniel G. Walsh and Joanna Sandolo represent Wilmington Trust. Manhattan attorneys Nathan Abramowitz, Brett Messinger and Chantee Nelson represent ACA.