Posted by George Sweeting, January 29, 2009
Much of the outcry over the recent vote to give the Yankees (and Mets) a second helping of tax-exempt bond financing for their new stadiums overshadowed the most important issue: would the public investment in the stadiums pay off? At times it seemed like a public policy version of an infielder holding the ball and arguing with an ump over whether a hit was fair or foul while base runners scored uncontested.
In the days leading up to the Industrial Development Agency’s vote on the financing, lots of attention focused on the question of the so-called PILOTs—payments in lieu of taxes— and if these dollars, which would be used to pay debt service on the tax-free bonds, should be counted as lost revenue to the city. It’s an important question, but not the one that ultimately determines who wins and who loses on the stadium deals.
In terms of the PILOTs, IBO concluded that since the current stadiums don’t pay property taxes, the fact that the new deals also leave the new stadiums tax exempt means there’s no new loss of revenue. The debt service payments are being called PILOTs in a creative dance around prohibitions against using tax-exempt financing for sports facilities that were enacted by Congress in 1986 under the sponsorship of Senator Daniel Patrick Moynihan. Absent the need to squeeze through a loophole in the IRS regulations—since closed—the payments probably wouldn’t have been called PILOTs and there would be little question that they are not really property tax payments.
What went largely unexamined leading up to the IDA vote was whether the tax revenues generated from the construction and operation of the new stadium would exceed the value of the public subsidies. Because such estimates are very dependent on the assumptions used, they should be accompanied by full disclosure so that decision-makers and the public can assess the reasonableness of the estimates. Unfortunately, we saw little evidence of such transparency.
When IBO asked the Industrial Development Agency for information about how the benefit estimates it cited were derived, we were told that the city’s staff was too busy. But they could get back to us later—after the vote.
Consider that the city’s Industrial Development Agency asserted that the benefits from the new Yankee Stadium will amount to $438 million, exceeding their estimate of the cost to taxpayers by $60 million. From the little information that was made public, it appears this might have resulted from some generous official scoring. The Yankees expect to draw the same 4 million fans in the new stadium as they did in the old one. And it’s unlikely that fans in 2009 will eat, drink, and buy Yankee regalia in much greater quantities than those who filled the stands in 2008. So besides the construction activity there’s little obvious reason to believe the new stadium will deliver much in the way of new jobs and tax revenue.
Spring training, a time when all fans are filled with hope for the upcoming season, is just a few weeks away. So let’s hope that consideration of future requests for taxpayer assistance for sports facilities and other big projects will provide greater detail on the claimed benefits. That detail will help all of us consider whether the public subsidies are a home run—or a strikeout—for the taxpayer.