Had there been an equal debate, Zimbalist would have been flattened. He continued to insist that the Yankees deserved praise for paying for their stadium, without acknowledging the host of special benefits to the team. He continued to insist that Forest City Ratner was using only as-of-right benefits for Atlantic Yards, despite ironclad evidence to the contrary.
And when challenged to resolve the inconsistency between his criticism of the West Side Stadium deal and his support for Atlantic Yards, he became defensive and suggested that the former might have emerged a decade ago, when it was actually several months after he issued his report for Forest City Ratner.
The action began at about 2:55 of the show.
Tax-exempt bonds for the Yankees
BL: What about this $300 million dollar… taxpayer bond… that George Steinbrenner wants, in addition to what he was already getting, to build a new Yankee Stadium? What would that actually mean to me?
Given that most of the burden falls on federal taxpayers, the answer was easy for Zimbalist.
AZ: Not much at all, actually. The Yankees have a deal that goes back to 2006 with the city, that the city will issue tax-exempt bonds and the Yankees will finance those bonds through PILOT payments, a PILOT is a payment in lieu of taxes, so the city does not have to finance the bonds... The Yankees in fact are paying the full freight of the $1.3 billion stadium that they’re building.
And this is very unusual because typical case over the last 15 years is that the city finances 70 percent of the cost and the team finances 30 percent. Here the team is spending 100 percent on the stadium costs and the city and state are kicking in somewhere in the neighborhood of $300 million for infrastructure, much of which is beneficial in general to the area, not to the stadium.
So that whatever you think about tax-exempt financing for stadiums, most stadiums that exist in the United States today have benefited from tax-exempt financing. The real issue, though, is that the Yankees are paying the debt service on that.
Shouldn't Zimbalist, as a sports economist, try to look at the reports by watchdogs like Good Jobs New York (Insider Baseball) and Field of Schemes's Neil deMause about the real cost of the stadium?
Paying via PILOTs
BL: But if they’re paying it as a PILOT... does that mean they’re getting off without paying taxes that they otherwise would be paying, so that they can get a loan from the taxpayers?
AZ: They wouldn’t necessarily be paying taxes. You’re talking about property taxes. The stadium is not owned by the Yankees… Most stadiums in professional sports are not owned by the team, they’re owned by the city. So there’s no property tax on that...
That's true, but you'd think a scholar like Zimbalist might point out that public ownership is a fig leaf to allow for tax-exempt bonds.
At about 7:02, Lehrer sounded a bit surprised.
BL: So you’re really a defender of the Steinbrenners, on these various controversies?
AZ: Well, I think the issues that you’re raising are issues where the Yankees have really gone beyond what is typical in professional sports.... The context is that each of the professional sports is a monopoly, they have a great deal of market leverage, they have a tremendous deal of cultural and political popularity. and they can take advantage of it. All the professional sports do that. So we do have tax-exempt financing for sports stadiums in the United States. Maybe that’s not a good thing.
Maybe? In 2003, he wrote that there was "no rationale" for such financing.
Dissing Brodsky's hearing
Zimbalist continued by criticizing Assemblyman Richard Brodsky for the hearing he held earlier this month and his public criticism of the Yankees.
AZ: And if it’s not, it’s something that should be approached and attacked in Washington and the U.S. Congress, not by Richard Brodsky in Albany. Because when Brodsky does that in Albany, all he’s saying is that it’s OK with me if the other teams in professional sports get tax-exempt financing. I don’t like it if the Yankees get tax-exempt financing. That to me doesn’t make any sense.
Zimbalist has a point: that you can't solve the problem in statehouses.
However, Brodsky is not necessarily taking on tax-exempt financing in general, but a variant of it that allows payment via PILOTs--a variant that the chief counsel of the Internal Revenue Service has called a "loophole," but the city and state want grandfathered in for the Yankees' and Mets' stadiums and extended for the Atlantic Yards arena.
In looking closely at the PILOTs deal, Brodsky was scrutinizing--as his Assembly committee should--the activity of unelected city and state bodies like the New York City Industrial Development Authority (NYC IDA).
Moreover, Brodsky's hearing raised an important question: was the Yankees' threat to leave the city a legitimate one? In other words, could the Yankees make the big bucks they seek at another location or did the NYC IDA cave?
The West Side Stadium example
BL: You took some hits from opponents of the Atlantic Yards project, because you did an economic report for the developer, Forest City Ratner and reading, for example, from the blog Atlantic Yards Report, it says your study was dubious because it dismissed a very big thing, the economic value of the tax-exempt bonds used to build the arena and when writing about a very similar financing plan for the West Side Stadium, you called such bonds the equivalent of a public contribution. Was there an inconsistency there?
AZ: First of all, when I was opposing the stadium on the West Side for the Olympics, it was probably about ten years ago, so you’re going to have to do more than just cite somebody else’s citation of something I wrote ten years ago for me to know exactly what I said.
Zimbalist's op-ed was in the 11/14/04 New York Times, some six months after his first report on AY was issued.
Zimbalist gave a not well-remembered defense of his Atlantic Yards study.
AZ: With regard to the Atlantic Yards project, what I said there was, in addition to whatever cultural value it has in bringing professional sports back to Brooklyn, the real economic benefit there was not the arena, it was not bringing the Nets to town, it was—at that point in time, a 3.5 billion dollar project, of which 500 million dollars was a stadium, the rest of it was construction, it was commercial, residential, and retail construction. That was going to be a net plus for the city, or for Brooklyn.
Well, it was both, because he argued that, unlike with most sports facilities, the arena would house a relocated team, so New York City and State would recapture revenue currently going to New Jersey. That's a plausible argument for cities and states to compete for scarce sports franchises, but, to quote Zimbalist's 2003 book May the Best Team Win, it shouldn't require tax-exempt bonds:
There is, however, no reason for the federal government to subsidize a process that picks one city over another.
Only as-of-right benefits?
Zimbalist sounded as if he'd done no further research since he signed Forest City Ratner's check, given that he's apparently unfamiliar with the Independent Budget Office (IBO) report.
AZ: New York City has had a longstanding policy in place to give various tax privileges and tax exemption status for economic development projects outside of Manhattan. Forest City Ratner was simply taking advantage of that. So I was not saying, look, this was a great example where an arena promotes economic development. I was saying that the project overall was going to be financially beneficial to Brooklyn.
That was so not true. To quote the Independent Budget Office's September 2005 report on Atlantic Yards:
Special Benefits for the Atlantic Yards Project. Under the MOU [Memorandum of Understanding], Atlantic Yards would receive several special benefits not available as-of-right to development projects: capital contributions from the city and state, low-cost financing for the arena, extra property tax savings, a low-cost lease, and property obtained using the state’s power of eminent domain.
(You could also add an override of zoning that allows a much bigger development than otherwise permitted--a huge key to increased revenues for the developer and tax revenues for the city and state.)
The MOU was signed in February 2005 and made public in March 2005; Zimbalist's report was updated in June 2005. Unfortunately, Scholar Zimbalist has again been trumped by Consultant Zimbalist.
Back to tax-exempt bonds
BL: Right, and somebody just wrote on our comments page… Zimbalist opposed tax-exempt bonds for stadiums in his 2003 book May the Best Team Win but hasn’t raised that point in the debate over Yankee Stadium and Atlantic Yards.
Zimbalist got a little testy.
AZ: Now, wait a minute--I didn’t realize that my entire writings from the last 20 years on stadiums was going to be the subject of this conversation.
Actually, the range is just about five years.
AZ: I did say that just now, Brian. I did say that, if you want to attack tax-exempt financing for sports stadiums, it needs to be done in Washington. It doesn’t make any sense for a legislator in one state to say, I oppose tax-exempt bonds, therefore I don’t want the teams in my state to benefit.... What I’m saying about the Yankee case is that the Yankees have contributed far more of the cost of building their new facility, a far higher percentage, than is done typically around the country.
BL: I understand. Do you think that something could be done, either at the federal level, or if localities-- I mean, this is an impossible, theoretical, hypothetical thing—kind of decided to stop the arms race and just--these are very wealthy entertainment companies that could and probably should fund their own investments like other private enterprise in the entertainment industry.
"Bogus economic impact studies"
Zimbalist then positioned himself as a white knight scholar, not the producer of a "promotional study" for Forest City Ratner.
AZ: I think it makes a lot of sense for there to be much less public financing of stadiums. The main point here is this: that a lot of the public financing has been done after campaigns were waged during which the pro-stadium people hired consulting firms that did essentially bogus economic impact studies that promised the people in the area that there would be a rise in per capita income and there’d be a significant rise in employment if they built the stadium or if they built the arena.
Zimbalist's AY study, while not making those same promises, made bogus ones of its own.
It's up to the public?
Zimbalist continued: All of the economic studies, the independent economic studies, on this, have found that, by themselves, stadiums and arenas do not promote economic development. Sometimes if they’re part of a larger plan, they can have a salutary impact.... So then it’s really up to the people in the area to decide, if now we know we can’t expect an independent economic plus to come from the stadium, do we want nonetheless to provide some support for the stadium, because we think that the stadium provides us with community value, cultural value, and social value, so they should be doing it on that basis, not on the basis of false economic promises.
How exactly would it be up to the people--as Zimbalist had suggested for the West Side Stadium? For Atlantic Yards, there was no referendum nor even a vote by the City Council. The decision was made by insiders--Gov. George Pataki's Empire State Development Corporation, then the Public Authorities Control Board: Pataki, Senate Majority Leader Joseph Bruno, and Assembly Speaker Sheldon Silver.
And one of the things used to placate the public, as in these editorials, was a bogus study by Andrew Zimbalist.