Thursday, December 18, 2008

Smoking gun: emails show how Yankee Stadium valuation was "jacked up"

Daily News columnist Juan Gonzalez continues to look into the astounding inflation (from $26.8 million to $204 million) in valuation of the land under Yankee Stadium, apparently aimed to qualify for the amount of foregone taxes needed to pay off construction bonds via PILOTs (payments in lieu of taxes).

(Yes, Atlantic Yards watchers are waiting to see if something similar happens with the land under the planned $950 million arena.)

In a column yesterday headlined E-mails reveal how city went to bat for Yankee to inflate value of stadium land, Gonzalez describes how it took only hours for the Department of Finance's chief tax assessor to do an about-face and "jack up" the valuation.

Smoking gun

Gonzalez writes:
"This is the smoking gun," said Assemblyman Richard Brodsky, who has spearheaded a state probe into the stadium deal. "The professionals did their job. The political appointees then ordered them to change the assessment - and they did."

And Gonzalez points out that the emails contradict testimony from DOF Commissioner Martha Stark in October before the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee chaired by Rep. Dennis Kucinich (D-OH).'

Here's one from Michael Kalt, an aide to former Deputy Mayor Dan Doctoroff: "I don't want to get into this much further on e-mail, but we have to take into consideration that the AV [assessed value] is only so high because we're choosing a methodology to support the tax-exempt financing."

It's not over

Gonzalez observes that the city has refused to release to state and federal investigators hundreds more relevant e-mails. His conclusion:
That's why it's time for some prosecutor to step in, subpoena every document and figure out if the Bloomberg administration manipulated land assessments for the Yankees.


Potential impact

In the Village Voice, Neil deMause explains:
This wasn't just a matter of sloppy paperwork: If the IRS figure had been any lower, the Yanks' convoluted plan for getting tax-free bonds (involving setting property tax levels high enough that the team's private bond payments could be recast as public "payments in lieu of property taxes," or PILOTS) would have fallen apart; if the state figure were any higher, it would have been illegal to eliminate Macombs Dam Park without providing more new parkland to replace it.


More on the switch

The city's assessor, deMause reports, wrote a memo titled "Estimated Market Value for Proposed Yankee Stadium," that cited land values in the Bronx "growing by leaps and bounds," reaching $32.50 a square foot.

Twelve days later, a new paragraph cited comparables in Harlem, where "land sales north of 100 Street in Manhattan range from $200 to $323 per square foot."

deMause writes:
The "major revitalization" of Harlem over the past five years "has also spread across the river to the South Bronx," Kellman's memo now asserted, without explanation of why it concluded that Manhattan sale prices were considered a better means of valuing Bronx land than Bronx sale prices.

Beyond that, there's no mention in the Daily News, the Voice, or the memos of the astonishing inclusion of a vacant lot in Alphabet City as another comparable.

While deMause acknowledges that all the evidence is circumstantial, some is pretty juicy:
This past July, mayoral press aide Andrew Brent e-mailed a proposed statement to others in City Hall that concluded that the $204 million appraisal had been "made at the urging of EDC to satisfy the underwriters of the tax-exempt bonds that were to be used to finance the stadiums." Finance Department press officer Owen Stone e-mailed back, "I think you should skip that last sentence" about satisfying the underwriters, and suggested a more neutral replacement.

What next?

If the city cooked the books, the IRS could conduct an audit--and strip the bonds of their tax-exempt status. (Is there political juice for that?)

deMause adds:
And if nothing else, this should make for some fireworks when the IDA considers the Yanks' request for $259 million in new tax-exempt bonds -- now slated for a public hearing on January 15 at 10 am at 110 William Street.

That public hearing also involved $82.3 million in tax-free financing for the New York Mets. It was announced the other day via an ad on page 55 of the New York Post--and noticed by subsidy watchdogs Good Jobs New York.

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