Jun
12

Yanks seeking another $400M in public funds

By

In February, when word came down that the new Yankee Stadium was nearly half a billion dollars over budget, Yanks COO Lonn Trost seemed rather sanguine about the whole thing. “We’ll make it up some way,” Trost said.

Well, four months later, the Yanks are attempting to make public funds that “some way.” According to numerous reports, the Yankees, via New York’s elected officials, are petitioning the IRS for some rule changes that would make the team eligible for another $350 million in tax-exempt public bonds. The Associated Press reports:

New York City officials confirmed on Wednesday that the Yankees might be interested in seeking more public financing to build their new stadium, pending a regulation change by the Internal Revenue Service.

“The effort on the completion bonds will not affect the completion of the stadium,” the team president, Randy Levine, said in a statement. “We are working under the strong leadership of the city and state along with other projects to seek relief from the I.R.S. regulation.”

Janel Patterson, a spokeswoman for the city’s Economic Development Corporation, which is working with the Yankees, said the project was not threatened. But, she said, the city is working to relieve a regulation that prohibits more public debt to be incurred for the stadium.

While the Yankees would not confirm just how much they’re seeking, Assemblyman Richard Brodsky said the club would like another $400 million. So at this point, can we just put to bed any shred of the notion that the public isn’t on the hook for a vast portion of this stadium plan?

Over at Field of Schemes, Neil deMause speculates that this move could cost the city as much as $60 million in anticipated revenues. At a time when budgets are tight across New York, city officials should probably not be supporting the Yanks’ push for more tax-exempt funding beyond the $941 million the team has already received.

Categories : Yankee Stadium

38 Comments»

  1. Mike A. says:

    Before everyone gets all bent out of shape about this, it’s worth noting that this happens all the time on large private projects. $400M is a ton of money of course, but this is not unprecedented.

    • A.D. says:

      Well if they didn’t have to jackhammer out Red Sox apparel on Sunday, maybe they’d be on budget….

      Just a joke, of course that’s not even a blip on the price tag

    • TurnTwo says:

      and it seems like a lot of money, but isnt this also a business investment for the city?

      i mean, between the yankees and mets, how much money do these teams bring into the NY economy for 81 games each a year?

    • Ed says:

      To say it’s not unprecedented is putting it lightly. NO ONE does a billion dollar construction project without massive tax breaks.

      And it’s a loan that’s paid back with interest, not a grant. It’s not like the city is just donating the money to the Yankees because they asked for it nicely.

      And the costing the city $60 million is bogus. It assumes the Yankees would’ve taken a non-tax exempt loan from the city instead. Realistically, if they couldn’t get a tax free loan, they’d be more likely to take a loan from Goldman Sachs or another large bank. I’d think Goldman Sachs most likely considering their strong ties to the Yankees.

  2. Steve S says:

    Who cares, everything in NY is overpriced and the local governments as well the state wide governments have no idea what they are doing anyway. Of all the things I have to pay taxes for, I really have no issue with paying for the NY Yankees.

  3. Rich says:

    I am against corporate welfare in virtually any form.

  4. Jon W. says:

    Wow, it’s shocking to me that so many people are okay with this. I love the Yankees as much as anyone, but I would never in my right mind support public financing for any sports stadium. They wind up costing the taxpayers millions (or billions) or dollars, with very little reward. If I have to hear Sterling say one more time that this stadium is being built for the fans, I’m going to throw up. This stadium is only being built for the fans from the standpoint that it will give the Yankees a new excuse to raise ticket prices to even more astronomical numbers. If this was really about the fans, the Yankees would not be bilking the people of New York for close to a billion dollars.

  5. Glen L says:

    How could ANYONE be OK with this???

    The government is subsidizing a private corporate project without even ASKING the people actually paying for it (the taxpayers)

    A lot of people bitch and moan about taxes being too high, and having to pay for welfare and other public assistance … but people are ok with the government acting as a CORPORATE welfare state??

    this is absolutely disgusting

  6. NC Saint says:

    I’m definitely against the move, but it’s worth noting that this is not just charity being thrown their way. The whole Concourse neighborhood is coming up in a big way, and the Yankees are obviously a big part of that. The city will have a lot more revenue coming from that area, so it’s not completely unreasonable that they throw a few bills in that direction. Still, I’d agree with Ben that they’ve already done more than enough.

  7. Sam P. says:

    Question here – how much, if any, of the public funds comes from New York State and not New York City? I’ve never taken a look at that … just wondering. Being from Syracuse, I can’t think that folks around the rest of the state would be OK w/ any tax dollars being used for the Stadium. Thanks for any info folks can provide.

  8. David Brown says:

    I am not shocked at this in the least. The truth of the matter is the prices of construction projects have went through the roof ($615 million for a new Willis Avenue Bridge is exhibit A), and you can look at other white elephants like the Fulton Street subway station, and the Bronx County Courthouse. The truth of the matter, is few municipalities can afford it anymore. I think we are seeing the END of construction of large scale sports facilities for quite some time (The new Penguins Arena will perhaps be the last of them). (There is still a chance for a new Nassau Coliseum, and facilities for Pro Football in San Francisco and LA, and baseball in Florida (Marlins and Rays), but time is running out on those projects (In California I have my doubts to the stadiums being finished).

    • Ben K. says:

      Ah, the good ol’ Fulton St. subway station. It’s not at all a surprise that construction costs on the stadium are up. I’ve written about that at Second Ave. Sagas quite a bit. But the Fulton St. disaster is of a different beast all together.

  9. Jon W. says:

    For anyone who uses the argument that publicly financed stadiums pay for themselves, take a look at this quote from a 2003 study by the D.C. Fiscal Policy Institue on whether or not D.C. should have paid for a new baseball stadium.

    “A study of 25 stadiums built between 1978 and 1992 found that none of them generated a net increase in tax revenue for the host city. Even Baltimore’s Camden Yards, which is considered a highly successful stadium, is a net loser for the state.”

    Let’s not forget the sweethear parking and ticket deals for countless members of the city council. This project has reeked from the start, and it just keeps getting worse. We may all be Yankees fans, but it’s time to call a spade, a spade.

    • Rich says:

      Right. The only entity that turns a profit is ownership, which is why taxpayers shouldn’t give them a handout.

  10. Adam says:

    why don’t the yankees just raise prices? oh, wait…..

  11. Mark B says:

    Maybe now the Yankees will realize that they need to start practicing some fiscal responsibility for once. Also beings back the topic of the naming rights to the stadium back to the forefront…..

  12. Chris says:

    There’s a difference between publicly funded stadiums and offering tax-free bonds. In this case, the Yankees get a break on the interest they pay on the bonds, and the bond holders get a break on taxes (I believe that’s the way this works…). This is very different from the city paying to build the stadium with public finds.

    Even the Yankees don’t have $1billion lying around, so they need a way to borrow the money. Municipal bonds like these are one way, private loans are another. If the Yankees were to go to Goldman Sachs to get a loan instead of these bonds, it’s not clear to me that the city would necessarily increase their revenues by $60M (let alone the $400M number).

  13. Todd says:

    None of them generated a net increase in tax revenue for the host city? Damn. I would not have guessed that. Kinda makes the petition seem a little obscene.

  14. A.D. says:

    As Chris and Ed have eluded to the 60M number is definitly high and takes a lot of assumptions (which makes sense given who’s saying it).

    Essentially the Yankees want the city to issue more bonds of which the money goes to the Yankees, the Yankees then pay this off for a period of time with interest back to the city. The “tax free” part is to whomever owns the bond, the interest they recieve on the bond (generally low on Muni bonds) is tax free, so they don’t have to pay anything (just like gainse on a Roth IRA) thus the “revenue” the city looses would be this tax.

    But this revenue isn’t guarenteed, the Yankees could take a loan out from a bank (in which they’d have to pay out higer interest rates) and presumably the city would get to tax the revenue the said bank made, but that’s a bit abstract, and if they just coughed the money up themselves the city would get no additional revenue.

    Net in net this really isn’t going to cost the city as much as some people say

  15. Schteeve says:

    Calling this “corporate welfare” is predictably uninformed and knee jerk. As has been pointed out already this is a bond offering not a handout. Furthermore, do you know who works for corporations? PEOPLE. Regular everyday people. When corporations benefit so do people who work for them, which is like, just about everyone in some shape of form.

    • Ed says:

      “When corporations benefit so do people who work for them” isn’t really true, and often is about as wrong as you can get.

      “When corporations benefit so do people who own stock in them” is far more accurate. Case in point, look at Microsoft’s attempts to buy Yahoo. Microsoft has no interest in Yahoo’s technology or employees, only it’s brand name and userbase. If that deal goes through, most Yahoo employees will lose their jobs.

      When you talk about large, public corporations, the people who have an interest in the company (whether it be as a customer, employee, or some other similar reason to care) are usually a very different group of people than the people who own stock in the company. Public companies are required to act in the interests of the latter group, not the former, which often means what’s good for the company is NOT good for the people who work for them.

    • Rich says:

      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.

  16. mustang says:

    I’m paying over $50 to fill my gas tank and the Yankees are looking for a tax break.
    Are you fucking kidding me?

    • Ed says:

      It’s not a tax break for the Yankees. It’s a tax break for whoever buys the bonds from the city.

      The Yankees do save a little money by doing it this way, but not as much as you’d think. Higher stadium construction costs have advantages when it comes to revenue sharing & corporate taxes.

      • mustang says:

        Is public money used or lost in anyway from this transaction?
        If it is then it’s wrong period.

        • Ed says:

          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.

          • Neil deMause says:

            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.

            • Ed says:

              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…

  17. mustang says:

    Anything that this team asks from the public right now is too much. They said that the parkland they used would be replaced. Last I heard that’s now been pushed back two years which means don’t hold your breath. This is another a great example of corporations fucking other the people whenever they get a chance.

    • mustang says:

      Anything that this team asks from the public right now is too much. They said that the parkland they used would be replaced. Last I heard that’s now been pushed back two years which means don’t hold your breath. This is another great example of corporations fucking over the people whenever they get a chance.

  18. Neil deMause says:

    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.

    • Ed says:

      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.

  19. Neil deMause says:

    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.

  20. [...] 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 [...]

  21. [...] 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 [...]

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