What? This stadium just isn’t good enough?
Next time you’re tempted to conclude that New York’s state legislature is entirely useless, remember this: State Assemblymember Richard Brodsky broke the news on Tuesday that the Yankees are looking to get an additional $350 million in city tax-exempt bonds for their new stadium, currently under construction in the Bronx.
“The explosion of public debt issued by obscure semi-public and private institutions is reaching unmanageable proportions,” declared Brodsky, chair of the committee overseeing public authorities. “The Yankee Stadium financing may or may not be a good thing, but it certainly should be done in the light of day.”
In the interest of daylight, then: The $350 million the Yanks are seeking would be on top of the $940 million in city bonds the team already got in 2006; presumably, the added cash would help pay for the $300 million in extra costs (for such things as a larger scoreboard) that team officials first reported in February.
The Steinbrenner clan would pay off the bonds, but by using city-backed tax-exempt debt, could save beaucoup bucks — about $60 million, according to the city Independent Budget Office.
In effect, the city would be arranging a low-cost loan to the Yanks, with the savings coming out of the city, state, and (mostly) federal treasuries. The big question is whether it’s legal. Since 1986, tax-exempt bonds have been mostly off-limits to teams if they’re paying the bulk of stadium construction costs. The trick the Yanks (and Mets) used to get around this restriction: officially designating their stadium costs as “payments in lieu of property taxes,” or PILOTs, magically transforming their private money into tax dollars as far as the feds were concerned. (The new stadium, like the old, will be publicly owned and pay no property taxes.) Though IBO director Ronnie Lowenstein warned that this was “a very, very aggressive interpretation of the IRS code,” the IRS okayed the deal in July 2006, paving the way for the Yanks’ groundbreaking the next month.
The resulting flurry of questions led the IRS to tighten up the new loophole slightly, requiring that for all projects going forward, any PILOT payments be adjusted year to year to reflect the actual assessed value of the land — a provision that’s expected to reduce the value of the bond subsidy slightly, since bondholders like to know that their money’s coming regardless of what the real estate market is doing.
Another potential obstacle for the new Yankee bonds: The IRS still insists that PILOTs can be no more than the total property taxes that would be due on the site; as the IBO was already skeptical that the existing payments fell below this threshold, tacking on another $350 million is sure to raise more questions as to whether the IRS is bending the rules to please a powerful taxpayer. (Janel Patterson, a spokesperson for the city Economic Development Corporation, issued a statement that the city would be “working with the State in Washington to seek relief from the applicable IRS Regulation,” but didn’t provide specifics.)
For Bettina Damiani of Good Jobs New York, which has issued several reports analyzing the Yankees deal, the latest news was déjà vu all over again. “It’s like Groundhog Day,” she says. “At a time when gas prices are through the roof, property taxes are increasing, water bills are getting higher, they say they’re going to raise the subway fare again, all of this so we can cater to Steinbrenner? Misplaced priorities is an understatement.”