Tuesday, September 23, 2008

Brodsky: "nothing like professional sports to make public people nutty"

Probably the money quote at the Congressional hearing held last Thursday by Rep. Dennis Kucinich (D-OH) on Yankee Stadium financing came from Assemblyman Richard Brodsky (D-Westchester), who last week issued a tough report on the stadium deal.

"[T]here is nothing like professional sports to make public people nutty," Brodsky declared, aiming to explain why private sports teams get tax breaks and subsidies they don't deserve.

(Given that far more ink has been devoted to gushing over last days of the current Yankee Stadium than the apparent shenanigans behind its replacement, I'd say that the press is just as "nutty.")

A threat to leave?

The Domestic Policy Subcommittee of the Oversight and Government Reform Committee, chaired by Kucinich, held a hearing called “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York”. Brodsky was questioned by Rep. Elijah Cummings (D-MD), who reflected "we built two stadiums" in Baltimore because of a genuine concern that the baseball and football teams would move. Was that the key in New York?

"We established that was the legal reason the city of New York gave even though it could not substantiate it," Brodsky replied.

"So you don’t believe that to be true," Cummings queried.

"I don’t know," Brodsky said. "But I do know that the obligation of the public officials in charge of the public fisc is to check it out. I do know [Yankees owner] Mr. [George] Steinbrenner had said at some point they would not leave. Whether they would leave and the Mets would leave and the New York Nets [sic] would leave, I believe that would be a political impossibility."

(He must've meant the New York Knicks, a current team, rather than the Nets, now in New Jersey but aimed for a Brooklyn move.)

What's the benefit?

Cummings (right) mused about what benefit was coming to the city: "I couldn’t figure it out. It seemed like everything was going to the owners and, it was--I tell ya... so I kind of concluded that this was a rah-rah kind of thing, in other words, let’s do it for the good of the city, that is, having a cohesive element. There’s not a lot to bring people together, but teams seem to be able to do that, it was attractive for tourists, maybe, maybe."

He noticed Brad R. Humphreys, Associate Professor, Department of Economics, University of Alberta, shaking his head.

Humphreys, a former Baltimore resident, replied, "Your point is exactly right. The benefit is all intangible, according to the research evidence. It’s a sense of community. It allows people like me and you to bond about the Orioles or something like that, which other things in society can’t do. But the tangible economic benefits associated with tourism aren’t there, even if they’re claimed, so I think you’re exactly right."

Brodsky's formulation

Brodsky intervened. "If I may, Congressman, there is nothing like professional sports to make public people nutty. If you’ll recall the introduction by Justice [Harry] Blackmun in his decision on the Curt Flood case: unlike any case I’ve ever read, the entire first portion is a recitation of who his favorite baseball players are," Brodsky said.

"Now this was a distinguished jurist, and a figure of national legal repute," he continued. "When you start talking about sports in the context of government, you finally found something that we as public officials don’t have to force on the public and say be interested. They care. And that level I think of political and voter interest makes us do things we would do for no other enterprise in our society.

(Brodsky was referring to the 1972 case known as Flood v. Kuhn.)

Cummings asked, "Do you see any reason why we should have this type of situation, where they can take advantage of this tax exemption?

Brodsky said no.

New York University law professor Clayton Gillette (right) commented, "Congressman, I want to be a little more reluctant than my colleagues on the dais up here and say, it depends on who the ‘we’ is. That is, a particular municipality or municipal officials going through a process that reflects the true preference of their constituents, decides that the absence of economic benefits notwithstanding, the kinds of more ephemeral benefits that Assemblyman Brodsky and Professor Humprheys are referring to, warrant a particular use of public money, then I, a fan of local autonomy, say that’s just fine, but--that public money should be the municipality's public money, if that’s a municipal decision."

"So if you mean by ‘we’ is the municipality actually internalizing all the economic effects of the decision, I have less difficulty, even though I might disagree," he continued. "What I do disagree with is the notion that, simply because a municipality says, we believe that as local residents that this is in our local interest, that that necessarily entails the use of a federal tax exemption so that nonresidents of that municipality are required to subsidize the local decision. Again, I’m a huge fan of local autonomy... But I see nothing in our federalism, certainly nothing constitutionally, that says that, simply because a locality has decided to pursue a particular project it has a call on the federal treasury as well as the municipal treasury."

Humphreys (right) continued, "Your question, sir, is: should we allow tax-exempt bonds to be used to finance these projects? That means there's a subsidy coming from every federal, every United States taxpayer and I think that’s inappropriate, because you’re asking the entire country to subsidize the individual preferences of whatever the municipality is to build their palace of a sports stadium. That’s bad policy, any way you look at it. As Professor Gillette has pointed out, it should be the locals who should pay. If we’re talking about federal tax dollars, I don’t see any justification for it whatsoever."

What about integrity?

Cummings followed up. "Even in the scenario that you just gave, there’s something called integrity that you gotta have there," he commented. "And I think sometimes there's some smoke being blown all over the place. And when the smoke clears, maybe, just maybe the folks are believing that there may be some benefit other than the rah-rah effect.... I’m just curious, do you know of any situations where you think it was appropriate, in other words, where there was integrity with regard to what the taxpayers were getting out of it?"

"In my earlier testimony, Congressman, I did point out that New York exports revenues to the federal government to the tune of about 80 billion dollars a year," Brodsky noted. "There is an argument that says that anything that keeps the money back in New York is a good thing. So, to the extent we exclude the revenue export context and ask the simple question you ask, which is: is there any benefit that you see from these public expenditures, my answer is no, I do not."

Humphreys acknowledged, "I think there have been instances where taxpayers got their fair share. Those have been these instances where there was a referendum, it was on an increase in local taxes to pay for stadium improvements... Green Bay [Wisconsin] is a classic example of this... The residents of Green Bay voted themselves a tax increase that was about a thousand dollars a year in order to renovate Lambeau Field. I think that was a clear expression of local interests They were willing to pay, through higher taxes, and got a renovated Lambeau Field. Those instances are few and far between, though."

Gillette offered the bigger picture: "I think the way to ensure what you refer to as integrity is through fiscal transparency at the local level so that, if what are being used are taxes that flow through the normal budgetary appropriations process of the municipality... there I think you have the greatest likelihood that expenditures are going to be monitored by local residents to ensure that the expenditures is made in a manner consistent with local preferences. The problem with PILOTs is they are not necessarily funneled through that appropriations process. They may, as in the case of Yankee Stadium. be treated as off budget, essentially tax expenditures, where they're far less susceptible to monitoring. Therefore it’s by no means clear that it’s what residents want done with the tax dollars or with the opportunity costs of tax dollars."

At that point Kucinich (right) asked about the wildly divergent tax assessments Brodsky discovered regarding the land for Yankee Stadium, and Brodsky replied that Department of Finance personnel, when questioned about them, "literally fell silent."

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