Continued from previous item:
11:26 am: The questioning begins. Kucinich asks Stark if she was under any pressure to inflate the Yanks’ land value. She says no. Kucinich notes an email sent by city attorney Gunn to Stark and other city officials that requested a meeting with the Department of Finance and the Yankees to discuss the assessment – noting the team had “an interest in seeing the assessed value will be high enough to generate as much payments in lieu of taxes” to justify tax-exempt bonds. Is this typical and appropriate, asks Kucinich? Stark: “We were asked to do what was lawful and appropriate,” and says the email didn’t have any bearing on the assessment.
11:48 am: Pinsky acknowledges that without a high assessment of the land value, the stadium financing might not have gone through. “Fortunately, the number that came out of the Department of Finance, through no pressure on our part … was a number that was not that far off from what we were projecting.”
Brodsky retorts that the second assessment used “extraordinary and possibly illegal methodologies.”
Meanwhile, Allison Lack of Good Jobs New York emails to note that when Stark told Kucinich that it wasn’t unusual for her to get emails from city officials about other pending assessments, the example she gave was of a Department of Education building – one owned by the city, in other words, not by a private landholder. (Though the city will actually own the new Yankees stadium, the team will pay “property taxes” on it. To themselves, to pay off their own construction costs. Didn’t I say this was convoluted?)
12:08 pm: Kucinich again asks Stark if she knew about the Yanks’ need for a high land value for PILOT purposes before doing the assessment. Stark: “We did not.” Kucinich begins to say she might want to reconsider her testimony, at which point Pinsky whispers something to her at the witness table.
Kucinich is having none of this: “Excuse me, what did Mr. Pinsky just say to you? Mr. Pinsky, are you her counsel?”
Pinsky, it turns out, has correctly anticipated what Kucinich is about to introduce: Emails between Pinsky and his then-EDC boss Josh Sirefman, the month before the council voted on the stadium project, where Pinsky stressed that “apparently DOF is close to finalizing their preliminary assessement, and I’d like to understand what it is before it’s released publicly.” Stark says that while her office certainly knew that the PILOTs were at stake, and EDC wanted an assessment ASAP, “we value the real estate as we would value it typically.”
12:15 pm: Stark just gave the clearest explanation yet of why she made two different land assessments, using two different methodologies: The original low number, she says, came from an assessment of the land as it existed, as vacant land. (Well, not exactly vacant.) But, she adds, “once it is constructed, the value of the stadium actually enhances the value of the land.”
If this is true, it’s worth noting, this means it effectively blows a hole in federal restrictions on the use of tax-exempt bonds for private projects: If you’re building a more expensive building, that makes the land more valuable, which raises the assessment. That in turn allows you to pay more PILOTs (since PILOTs can’t exceed what you would be paying in property taxes, if you were paying them), which allows you to float more bonds to pay for your more expensive building. This hearing could end up having farther-reaching impacts than just for New York’s stadium projects.
12:26 pm: Kucinich is still hammering on Pinsky about his conversations with Stark during the assessment process. Pinsky insists that he didn’t influence her office’s assessment, just told her he needed a number soon. While these emails and such certainly could raise suspicions, it doesn’t look like there’s anything close to a smoking gun of tampering here.
12:36 pm: Brodsky, under questioning, thinks he’s found a smoking gun (even using the words “smoking gun”): He spoke with officials at the Department of Finance, he says, about the various adjustments that are expected to be made to a land value, based on time, geography, etc. “Where an adjustment required by standard practice raised the assessment, they did it. Where an adjustment required by standard practice lowered the assessment, they did not do it.”
Sadly, no one on the committee asked a followup.
12:51 pm: We are deep in property-tax-lingo hell here. (Stark just said “imputed.”) Kucinich is back on the “15-25% of overall value” assessment, wondering why Stark’s office used that method rather than comparing value per square foot to similar properties in the area. She replies that that figure was really just used to “validate” the regular assessment, which is based on comparable properties.
Kucinich then asks how come other neighboring properties in the Bronx are valued at per-square-foot rates far lower than the stadium site – lower, in fact, than even the original $32.50 per square foot rate used in the original, low stadium site assessment?
It’s a different between two types of valuations, says Stark: the “cost approach” – i.e., calculating values based on how much a project costs to build – vs. the “income approach” – calculating values based on how much revenue it can bring in. “The income approach is used for specialty projects like stadiums.” It’s for this reason, she continues, that her office used per-square-foot figures from places as farflung as Harlem and the Lower East Side: They wanted to compare it to other sites that had gotten huge investments of city infrastructure.
Kucinich is unmoved, accusing Stark of “cherry-picking” properties to drive up her assessment.
1:11 pm: And we’re done, but not before an interesting exchange about when a tax isn’t a tax.
It all starts when Brodsky goes on the attack again, charging that it’s not really private money paying for the stadium, but rather public money, since the Yanks are being exempted from paying property taxes. Levine pipes up for the first time in two hours, saying this is a ridiculous argument: The Yanks don’t pay taxes on their old stadium, and were never going to pay taxes on the new one – “There would not have been a new stadium if this mechanism were not put into place,” he says.
Cummings notes that the whole PILOT scheme is about telling the IRS that these are tax payments, not private payments. So which are they?
Pinsky, clearly choosing his words carefully: “They are a payment in lieu of generally applicable taxes, which is what we told the IRS.” But it was attractive to the city, he continues, precisely because “currently the city of New York receives no taxes from the Yankees.” What the city did, he says, is to “impose a tax on the Yankees that is a general applicable tax” in order to let them call their stadium payments PILOTs, at no cost to the city, which wasn’t getting any tax money anyway.
This is a clever sleight of hand that Pinsky is attempting: The city “imposed” a tax on the Yankees, but it’s not a special tax (which can’t be used for tax-exempt bonds), but rather a generally applicable tax that just happened not to be applied to the Yankees before now. So it’s not money the city would have gotten otherwise, but it’s still public tax money for IRS purposes.
And with this surreal logic, the hearing is adjourned. Whether legal action follows, as Kucinich and Brodsky have both hinted at, we’ll just have to wait and see.