Wednesday, September 08, 2010

Times continues tough scrutiny of stadium deals in... New Jersey

Almost a year ago, on 10/11/09, the New New York Times Sports section offered a toughminded story headlined In East Rutherford, N.J., New Football Stadium, but at Whose Cost?

Only in the last paragraph did the article mention payments in lieu of taxes (PILOTs) used by the Mets and Yankees to pay off their stadiums, a highly questionable deal. The similar financing scheme for the Atlantic Yards arena was ignored.

Today the Times follows up with As Stadiums Vanish, Their Debt Lives On, which explains:
The old Giants Stadium, demolished to make way for New Meadowlands Stadium, still carries about $110 million in debt, or nearly $13 for every New Jersey resident, even though it is now a parking lot.

...New Jerseyans are hardly alone in paying for stadiums that no longer exist. Residents of Seattle’s King County owe more than $80 million for the Kingdome, which was razed in 2000. The story has been similar in Indianapolis and Philadelphia. In Houston, Kansas City, Mo., Memphis and Pittsburgh, residents are paying for stadiums and arenas that were abandoned by the teams they were built for.
The Atlantic Yards angle

The article doesn't mention Atlantic Yards, or the new baseball stadiums. However, even if they don't have taxpayers on the hook for bonds, they have significant infrastructure and land subsidies--about $300 million in direct subsidies for the arena--and highly questionable bond financing schemes, in which PILOTs are used to pay off the debt, relying significantly on federal tax breaks.

Indeed, the combination of subsidies and tax breaks, including $194 million in federal tax breaks on tax-exempt bonds, added up to what the New York City Independent Budget Office (IBO) calculated (using somewhat higher estimates for the total bond deal) as $726 million in savings on the arena for developer Forest City Ratner.

And that's without assuming--as did Assemblyman Richard Brodsky, in the case of the new Yankee Stadium--that the use of PILOTs to pay for a sports facility constitutes a full subsidy in itself.

To the city and state, the schemes are defensible--after all, the land is mostly, or completely tax-exempt, so the PILOTs are a win-win. But there's a hook. (There always is.) As the IBO said, explained, the tax-exempt status of the land was supposed to drive up the cost of the arena site:
This estimate of the cost to the city of the arena’s property tax exemption is considerably larger than we estimated in 2005. The MTA portion of the land is currently tax-exempt because the land is publicly owned. IBO’s latest estimates assume that if FCRC or any alternative developer operating solely with as-of-right benefits purchased the rail yard from the MTA, the exemption would expire. In our 2005 report we had assumed that the exemption would continue through a leasing arrangement—even if the arena site were transferred to another developer—because that would maximize the proceeds for the MTA. It is clear that the MTA’s ability to maximize its return from property sales has been constrained. Moreover, the latest modified project plan stipulates that FCRC must pay the equivalent of full property tax to the city for all but the arena portion of the project.
(Emphasis added)

The Times: only now are politicians looking


Today's article states:
How municipalities acquire so much debt on buildings that have been torn down or are underused illustrates the excesses of publicly financed stadiums and the almost mystical sway professional sports teams have over politicians, voters and fans.

Rather than confront teams, they have often buckled when owners — usually threatening to move — have demanded that the public pay for new suites, parking or arenas and stadiums.

With state and local budgets stretched by the recession, politicians are only now starting to look askance at privately held teams trying to tap the public till.
In New York, some, like Brodsky, have been looking for a while, even though he displayed a curious agnosticism toward Atlantic Yards.

And, unmentioned in the article, the state in the case of the Brooklyn arena simply gave away naming rights, another subsidy (worth more than $200 million) that even the IBO didn't calculate.

(Also see commentary from Eric McClure of NoLandGrab and Neil deMause of Field of Schemes, who points out that the issue is the loss of rent on "perfectly functional stadiums.")

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