Skip to main content

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."


Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…