Oct
22

IRS grandfathers tax-exempt bonds for NYC stadiums

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While Yankee officials are set to appear before a Congressional subcommittee this week to discuss land-valuation concerns, the IRS has paved the way for the team to wrap up the financing of their stadium construction. The Times reports that the IRS will allow the teams to float tax-exempt bonds. The politicians won’t like it, but the new rule should limit this practice of doling out money to rich entities in the future.

Categories : Asides, Yankee Stadium

11 Comments»

  1. KW says:

    I’m not sure if characterizing this situation as doling out money to the rich is completely accurate. The Yankees (and other wealthy clubs like the Nets, etc) will be able to raise money more easily and at better rates if the bonds are tax free, which carries a lower interest rate. The investor will benefit as well from the lack of taxation as well. The only people who lose is the state, but there’s arguments for that as well (stadium benefits locals, creates jobs, keeps the yankees in NY state for tax revenues, etc).

    • The Honorable Congressman Mondesi says:

      There are a multitude of studies out there that show that the economic rationale used to convince municipalities to fund new sporting venues (i.e. the supposed economic benefits to the local community and to the larger, statewide community as a whole) are without merit. You can very easily find others, I just picked a couple out for ease of reference:

      http://www.cato.org/pubs/regul.....coates.pdf
      http://www.brookings.edu/artic....._noll.aspx

      As far as your other argument – that you’re building a new stadium to keep the team in the state, keep tax revenues, etc. – it’s completely based on conjecture. There is no evidence that the Yankees, in particular, would have left New York if not for the building of the new Yankee Stadium. In fact, I believe a more convincing argument could be made that they would not have left New York if the new Yankee Stadium were not a reality, but I don’t even think it’s necessary to get into that.

      • Agreed. Giving the organization the tax break on the bonds was a unnecessary corporate gift. There was no real shot of the team moving to Jersey or Connecticut, IMO. It was either Manhattan, across the street, or stay put and refurbish (all acceptable), and now the city and state are instead deprived of considerable tax revenues they could have had as the biggest financial crisis since the near bankruptcy of 1975 lurks around the corner.

        • KW says:

          They might leave, and they might not. This decision to grant them a tax subsidy is a business one – on one hand, you can offer the local sports team assistance in capital raising in a very tough environment. On the other hand, they leave and take with it all the revenue the state gets from that. The question is, would they leave? Probably not, but there have been a lot of sports teams that were once thought to be sacred to their cities – the Browns, the Colts, Dodgers, Rams, heck the Sonics even.

          This isn’t to overstate the importance of athletics, they really can drain on a state and city’s finances. But there’s a reason why states and cities fight like mad to get a team – the potential benefits to the localities outweigh the potential costs in most cases. Teams know this, the leagues know this, and the governments do too. It’s not always about the “Oh I want that shiny new sports team” mentality.

      • KW says:

        Not sure if you’re assuming that I’m supporting this – if you’d actually read my comment instead of making assumptions, you’d see that I never defended the move or agreed with it – or disagreed, for that matter. I simply stated that there is a case for doing so. And would the Yankees leave for another state? Not too long ago (before the dynasty years) they were considering a move to NJ, and it was a very real scenario. Would they now? Who knows? You’re right about that, it’s pure conjecture.

        Secondly, the studies you provided provide no support for this instance, in which tax free bonds are used. Sure, public money given to build infrastructure and stadiums are probably negative for the state and local economies overall. The idea that building a stadium would support local economies is suspect for sure. However, the majority of the money given to the stadium is through tax breaks for investors and the issuer, ensuring easy financing in this climate. This probably costs the state perhaps 2% of the actual cost of the stadium (assuming marginal tax rates of 15% on the interest paid on this issuance). Do you think the Yankees could afford to build the stadium now? That would most certainly mean less temporary job creation and a loss for the city and state on taxes paid for that matter.

        Please find a study on tax-free bonds and the consequences on economic development, and then we can have a discussion.

        • The Honorable Congressman Mondesi says:

          “Not sure if you’re assuming that I’m supporting this – if you’d actually read my comment instead of making assumptions, you’d see that I never defended the move or agreed with it – or disagreed, for that matter. I simply stated that there is a case for doing so.

          …And I provided arguments against the “case for doing so” that you raised. I read your comment and didn’t make assumptions, so there. If YOU’D actually read MY comment “instead of making assumptions,” you’d see that I never attacked your reasoning nor assumed that you are some dolt who can’t have an intelligent conversation. I argued with a couple of points you made in your comment – I responded to arguments, not the person making them. Take a deep breath.

          You also accuse me of not addressing your argument. I’d like to point out that you wrote: “there’s arguments for that as well (stadium benefits locals, creates jobs…)” My comment contained counterpoints to specific items in your comment.

          I will agree that I should have started my second paragraph with “as far as THE other argument” instead of with “as far as YOUR other argument.” That was the only time that I imputed, to you, the arguments you stated. Quite careless of me, and I sincerely apologize.

          • KW says:

            Look let’s both step back and take a look at things. I’m not defending this move morally, as the Yanks should probably have to pay up because they make a boatload of money. From a business sense, this makes a lot of sense for everybody.

            My beef with your comment is that it makes it seem as if I’m taking a side – I’m not. Oftentimes no one looks at the other parts to this deal, the financing, stadium, and state budgetary and economic considerations. All I’m doing is pointing it out. Pointing out studies unrelated to this situation doesn’t prove a point, especially if that person isn’t making a point!

            At the end of the day, we’re all fans and would never like to see the Yanks move. Let’s hope they don’t and that we can enjoy seeing the games in the future.

            • The Honorable Congressman Mondesi says:

              “Pointing out studies unrelated to this situation doesn’t prove a point, especially if that person isn’t making a point!”

              Again, and I quote, “The only people who lose is the state, but there’s arguments for that as well (stadium benefits locals, creates jobs, keeps the yankees in NY state for tax revenues, etc).” And again, as I said above, I argued with the points you made (whether you believe in them or not), and not with you personally. You seemingly took offense to my comment because you thought I was attacking you personally, and I responded because I don’t think my comment was a personal attack but instead a response to certain things you wrote. And, to top it off, you accused me of not reading your comment and of making assumptions, and I responded to that statement by pointing out that I responded to specific statements you made (again, whether you believe in them or not is irrelevant because I responded to an argument and not the person making it).

              So, whatever. I’m not even arguing with the substance of your post but rather with your response to me personally, and this is tedious. I just didn’t appreciate being accused of not reading or understanding your comment and of somehow attacking you personally. If you’re going to put an argument out there someone might respond and disagree with portions (or all) of what you say. It’s called a conversation.

      • Steve says:

        One from Cato and one from Brookings.

        Nicely done, my friend.

    • radnom says:

      “The only people who lose is the state”

      Ok let me get your argument here. The New York team owners and high profile investors benefit, and this is at the expense of the state funds (aka tax payers’ money).
      And you would not characterize this as doling out money to the rich? How exactly is someone living in Buffalo significantly impacted by a new Yankee Stadium

      • KW says:

        Because they get state funds from the state of new york, from which a large part comes from NY city? Besides, to characterize this as an expense of the tax payer’s money isn’t being fair. That money never goes in state coffers, and so they can’t spend it, so it can’t be an expense. The argument that it WOULD have been the state’s money doesnt work as well because the Yankees may or may not have elected to build a stadium without that financing. Who knows?

        And is Buffalo a direct beneficiary? For sure they are not. But everyone has skin in the game in this situation. I’m not saying people should be supporting this, but there’s a case to be made for it. Has anyone done a direct study on this very funding proposal and its effects on local and the state’s economies?

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