The New York Times, which treated the passage of the Atlantic Yards plan last Thursday as an event barely worthy of mention, much less scrutiny, today does some delving into a controversy about another sports facility.
Miami and Miami-Dade County have agreed to cover three-quarters of the projected $645 million cost to build the Marlins a home with a retractable roof and four huge parking garages. In return, the city and the county will receive no new revenue from the park, and the team can keep all the money from the 50 luxury suites, concessions and advertising, as well as from naming rights, which alone could generate more than $100 million.
Such generous terms were not uncommon during good times, before city and county officials faced yawning budget gaps, potential layoffs and cuts in social services. Yet they forged ahead, anyway, largely dismissing voter opposition and the lessons learned elsewhere that new stadiums sometimes fail to deliver the economic punch promised in forecasts and that the public financing for them can handcuff future generations.
The deal was a fresh reminder that even during a recession, sports hold sway over communities regardless of the potential costs.
This deal, unlike Atlantic Yards, was voted on by local elected officials. Still, it's notable that a poll last year showed that most voters opposed a stadium financed by hotel taxes.
Comparing the savings
NLG suggests:
Three-quarters of $645 million, roughly $484 million, is a whole lot less than the $726 million that New York City's Independent Budget Office estimates the taxpayers will be kicking in for Forest City Ratner's Barclays Center arena.
The situation in Brooklyn is both better and worse. The city and state are devoting $305 million in direct subsidies to Atlantic Yards, with--according to the IBO--about $250 million to the arena. The $726 million represents a combination of subsidies and tax breaks, including $194 million in federal tax breaks on tax-exempt bonds.
Arguably, however, Forest City Ratner is gaining even more of a benefit from opportunity costs--provisions that reduce the level of potential additional revenues--given that the state handed over all control of naming rights, a sum reported at $400 million.
Beyond that, the construction of an arena approaching $800 million would be paid by PILOTs (payments in lieu of taxes), which, according to Assemblyman Richard Brodsky--at least when describing a similar funding scheme for Yankee Stadium--counts as a public subsidy. (Sports facilities expert Neil deMause says instead that the property tax breaks are a subsidy.)
No new taxes
The Times reports:
Backers of the stadium, which is expected to open in 2012, say building it makes sense because it could create more than 2,700 jobs and $300 million in economic output without adding new taxes. Instead, existing hotel bed taxes that are earmarked for tourism-related projects and are often paid by out-of-town visitors are supposed to cover much of the debt for the 37,000-seat stadium and the parking garages. Lawmakers dismiss concerns that the general fund, which pays for public services like the police and schools, will have to be tapped if hotel taxes come up short.
...The economic benefits could also prove illusory, analysts say, because spending at new stadiums often replaces money spent at old ones or comes at the expense of spending at theaters, restaurants and other entertainment sites.
Either way, the hotel taxes that are supposed to pay for tourism-related projects would go to the stadium.
Lucky in Brooklyn?
The Times reports:
Eager to get the project rolling, Miami-Dade issued its bonds over the summer, when the municipal bond market was in flux. The county paid nearly a full percentage point more in interest to issue its bonds than if it had waited a few months. The Marlins agreed to buy the last $7 million of bonds that the county was unable to sell to the market.
...Construction costs are 10 percent to 20 percent lower than a few years ago, [Marlins president David] Samson said, and the team has not had to worry about crews leaving the job because of higher bids from competing developers, which happened during the housing bubble. The team received 6,000 job applications since work began in July.
“It’s not the best time to open a stadium,” he said. “But it’s a great time to build one.”
That must be good news for Bruce Ratner, who contemplates having bonds issued in a more stable market, while planning to build an arena after construction costs have declined.
The Miami Marlins got a MUCH better deal. The public bodies in Florida are propping up debt service on the bonds, meaning that the team owners keep the revenues from boxes, advertising etc, without having to share them with bondholders. Ratner's getting a lot of subsidies, and especially the reductions in interest expense from tax-exempt treatment. But he will at least have to pay back the bonds himself
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