Comments on: Yanks seeking another $400M in public funds

By: River Ave. Blues | New York State Assembly questions Stadium bond requests

River Ave. Blues | New York State Assembly questions Stadium bond requests — Sat, 05 Jul 2008 16:45:57 +0000

[...] and a weak economy have sent the price tag on the new Yankee Stadium soaring, the Yankees have been seeking some $350 million in tax exempt bonds beyond what they’ve already secured for the stadium. New York State politicians, however, are [...]

By: River Ave. Blues | NY pols bemoan stadium subsidies

River Ave. Blues | NY pols bemoan stadium subsidies — Fri, 13 Jun 2008 18:42:25 +0000

[...] day after word leaked about the Yanks’ intentions to seek more money to fund their stadium construction, New York’s elected represented hopped up on their soap [...]

By: Ed

Ed — Fri, 13 Jun 2008 16:50:58 +0000

Assuming the $60 in taxes is a real figure, that’s not what it actually saves the Yankees.

Businesses only pay taxes on their net profit, not on their income, so if the Yankees paid out more interest on the loan, they’d be paying less in taxes.

Second, the money the Yankees spend on the stadium gets deducted from the revenue figures used to calculate MLB’s revenue sharing plans. More money spent here, less spent somewhere else.

So I’m sure the Yankees are saving money, it’s just not as much as you’d think at first glance.

And actually, this train of thought let me to another idea. Again, since businesses pay taxes on profits not income, the city gains if the Yankees have lower interest rates, as theoretically that would raise their net profit and result in higher taxes paid to the city. Whether that actually holds true after all the accounting games are played is another story though…

By: Neil deMause

Neil deMause — Fri, 13 Jun 2008 04:54:55 +0000

Sorry for the repeat post - I think my browser was getting weirded out by the non-linear threading on this site.

By: Neil deMause

Neil deMause — Fri, 13 Jun 2008 04:53:56 +0000

Right - a loan that the team couldn’t get on its own, and which saves the team $60 million in interest payments at the cost of reduced income tax revenues to the (mostly federal) government.

This is precisely why Congress tried to reign in tax-exempt bonds back in ‘86 - cities were throwing them around like candy, and the feds ended up losing tax money so that developers could get a discount on projects they were going to build anyway. Tax expenditures are just as real a cost as if it were bundles of twenties stuffed through Steinbrenner’s mail slot.

By: Neil deMause

Neil deMause — Fri, 13 Jun 2008 04:51:48 +0000

Right - a loan that the team couldn’t get on its own, and which saves the team $60 million in interest payments at the cost of reduced income tax revenues to the (mostly federal) government.

By: Rich

Rich — Fri, 13 Jun 2008 04:44:52 +0000

Yet bonds offerings for school and highway construction are often rejected.

Really, people? People whose fortunes should rise and fall based on profit and loss without government subsidization in any form.

That’s called capitalism.

By: Ed

Ed — Fri, 13 Jun 2008 04:06:42 +0000

Assuming the Yankees did private bonds or some sort of loan, the city and state wouldn’t necessarily receive taxes from the bond payments. Whoever bought the bonds would pay taxes to whatever state they live in.

With the city issuing the bonds, they could give priority to local investors. By doing so, they would increase the likelihood of the money earned being used locally, improving the local economy and eventually generating local tax revenue. I don’t know if that is the logic or not, but that’s all I can come up with.

By: Ed

Ed — Fri, 13 Jun 2008 03:48:18 +0000

The city gives the Yankees $400 million. The city also sells $400 million worth of bonds. At this point, the city is completely out of the picture, and has the exact same amount of money as it had before the deal started. The Yankees pay back the money to the bond holders plus interest.

Essentially the city just acts as a middleman in getting the Yankees a loan.

By: Neil deMause

Neil deMause — Fri, 13 Jun 2008 03:35:04 +0000

FWIW, I didn’t actually write on fieldofschemes.com that the bonds would cost the city $60 million in revenues; I wrote that “the estimated savings of $60 million would come out of the city, state, and federal treasuries.” If the same ratio applies as on the initial bonds, it’d probably be about $50 million federal, $6 million state, $4 million city. The reason is pretty much the way A.D. describes it above: If the Yankees sold higher-interest private bonds, the bondholders would pay taxes on the bond payments, so that’s money the government is giving up in order to save the Yankees money.

It’s not a huge cost to the city, though, admittedly. Still, I’m not sure why Bloomberg thinks it’s in the city’s interest to lobby the IRS to effectively mail a check for $50 million from the federal treasury to George Steinbrenner, just so he can pad his bottom line.