Arguing against more Stadium public funding

Open Thread: Tex announcement coming soon
On parity and the playoffs in baseball

One of my causes célèbres on this blog has long been some vocal opposition to way the Yankees have gone about seeking and securing money for the new stadium. While at this point, there is very little anyone can do about the way the stadium has been funding, I believe that it is important to understand why the funding process has been so flawed.

To that end, allow me to introduce a Daily News column by Paul Weinstein about the Yanks’ latest request for tax-exempt bonds. He writes:

According to an estimate by the New York City Independent Budget Office, the request for more bond authority will cost city, state and federal governments more than $80 million in lost revenues. This is happening, remember, at a time when the city can ill-afford to waste a single dollar.

It’s not just the literal dollars being spent that hurts; it’s the opportunity cost. New York City will lose $259 million in tax-exempt debt that could be used to fund other important projects – such as building more affordable rental housing or a new Moynihan Station. In 2009, according to the IRS, New York State will receive roughly $1.7 billion in tax-exempt bond authority for joint public and private ventures. If the Yankees’ request is approved, it will use about 15% of that allotment…

Worst of all, that $259 million in extra bonds will not create a significant number of new jobs at a time when New York is facing the worst economic crisis since the Great Depression.

Weinstein goes on to talk about how public support and financing for stadiums and arenas can be efficient as long as the proposed buildings are multiple-purpose venues anchoring distressed areas that serve as an integral part of the community. Considering that the Yanks have shouldered a significant portion of the construction costs, this is a prime example, he writes, of when public financing for a stadium should not be frowned upon.

Put he then takes the city to task for allowing the Yanks to return to the trough of public, tax-free bonds. “It is never a good idea to use public funds to cover costs not projected in the initial plan,” he writes. Doing so encourages government officials and sports franchises to hide the true cost of the projects and contractors to overcharge for their work.” That is, by the way, why New York has now changed its laws concerning the public financing of major construction projects.

I do take an issue with Weinstein’s central thesis. He claims that the Yanks’ spending on players — he throws out that misleading $420 million figure journalists love to throw around — means that they have the money to spend on stadium construction. That’s just a faulty claim though. The Yanks’ 2009 payroll should be marginally higher or the same as the one they had in 2008. That’s the number that counts, and it certainly doesn’t mean that they have $200 million lying around to cover stadium construction cost overruns.

In the end, I clearly do not support more public financing for the stadium. The City is already funding important infrastructure projects in the South Bronx area, and the team has received enough in tax-exempt bonds. The city has too many other important projects and not enough money to continue to dole out funding to the Yankees.

Open Thread: Tex announcement coming soon
On parity and the playoffs in baseball
  • huuz

    i can understand your frustration with this, but given that the government(s) in this country (state and federal) have demonstrated nearly zero ability to balance their budgets (ever) nor spend our tax dollars wisely, does this even matter?

    NY state is currently $2B in the hole. This, despite the fact that NY’ers are taxed more heavily than almost any other state residents in the US. High state income tax, (extra income tax if you live in NYC), *very* high property taxes, high cost of utilities, tolls on roads, etc. The list is endless.

    The government in this state should be embarrassed that with the current tax burden it imposes on its residents, that it is incapable of balancing the budget.

    So with all of my money that this state sucks away from me, and mis-spends, i won’t complain when my favorite sports team gets a new stadium. At least my tax dollars went for something for which that I can be happy.

  • ‘The’ Steve

    “According to an estimate by the New York City Independent Budget Office, the request for more bond authority will cost city, state and federal governments more than $80 million in lost revenues. This is happening, remember, at a time when the city can ill-afford to waste a single dollar.

    It’s not just the literal dollars being spent that hurts; it’s the opportunity cost. New York City will lose $259 million in tax-exempt debt that could be used to fund other important projects”

    First, the 259 figure is money that the City would have to be paid back, so lets just go with the 80 mil actual loss for financing costs.

    That’s the minus side of the ledger, what’s the plus side?

    New construction jobs, new permanent jobs for the parking, concessions, shops and restaurants attached to the new stadium. Yankee revenues are expected to go from 450 mil annually in the current facility to 750 mil in the new one, the additional 300 mil subject to all the state, city and federal taxes that apply. The employees will pay all of the taxes that apply to their wages, and the Yankees will pay all the benefits (Workman’s comp, Soc Sec, Disability, etc) that employers are obligated to pay into the system.

    If my accountant only looked at the minus side of the ledger, he would be very bad at analyzing my finances. This columnist exposes his bias by his complete omission of the benefits to the city, and is therefore hard to take seriously.

    • ‘The’ Steve

      BTW-The 80 mil figure would be over the life of the bond, so if its a 20 year bond, the annual cost to the city is 4 mil per year.

      • Ed

        The cost to the city is far less than that. The $80 million figure was city + state + federal tax dollars. Most of that money would be going to the federal government. The city would be the one with the smallest cut.

        These numbers are from a quick Googling, so they may be off…

        Top tax rates, which you’re probably paying if you’re buying bonds like these:
        NYC – 3.65%
        NY state – 6.85%
        Federal – 35%

        Run the math on that, and NYC would be taking 8% of the tax revenue from the bonds, or $6.4 million ($320k per year for 20 years). That’s the number the city has to look at when comparing cost/benefit.

  • Y’s Guy

    the public finanching of YS is outrageous. there should NEVER be any public funds spent on baseball stadiums. this is plain and simple a subsidy to an extremly profitable buisness, and on top of that the land it is being built on was a heavily used public park in a very congested neighborhood. there is no excuse for this.

    i have been a yankees fan all my life and would have hated it had george carried through on his threats to move to NJ, but still that would have been prefferable in my eyes to millions of dollars in public funds being spent to enrich the yankees.

    huuz: your opinions shows exactly why the state and city’s budget is out of control. you decry the waste of public funds but then say its okay to waste it on something I like. this is outrageous, every dollar spent by the state and city has some political aspect to it, and when people actually realize how wasteful a project is but then say, but its okay because its my project, they are supporting (and often voting for) that wasteful and politically motivated spending to go on.

    lastly i wish you guys had used this as your subject for your post on pete abe’s blog instead of the ridiculous and incomplete piece you did on johnny damon.

    • huuz

      i’m not saying it is OK. I’m saying i don’t care anymore. No matter how i vote or complain to my “representatives,” my tax dollars will be wasted. so what does it matter?

  • Mike

    With an unrelated note…does anyone know when the tickets for indivdual games will go on sale through the yankees and not stubhub? I went through a little sticker shock when I saw the price on them right now…

    Thanks

  • Bo

    The city and state should be paying to fix the infrastructure around the stadium. Why wouldnt they? They do it for every other public structure. Like they don’t get tax dollars from sport teams? Like people don’t use mass transit getting there? It would be a dif story if the teams didn’t pump millions into the city and state economy.

  • Januz

    The reality of the matter is that this Stadium will be completed and the additional items such as the advanced fiber optic network are worth the expense. One problem with construction, is that once a project is completed, in many cases, it becomes obsolete, because of stuff like wiring, and technological advances. The Yankees had the foresight to do it now instead of later.
    The plan was always to add the telecommunications upgrade and other “Bells And Whistles” to the project, but they had to keep it quiet, because there was no guarantee that it would ever be approved. And those kind of items would be the first things eliminated if they were not able to get funding.
    On a baseball level, having a first class facility helps recruit potential players to the Bronx, because these guys want to be in a top notch environment with every eminity possible.
    The thing that bothers me, is there is more outrage about the Yankees (Congressional Hearings and the like), than about $750 BILLION “Stimulus” packages, or $120 BILLION bank bailouts. That is simply picking on the Yankees instead of dealing with the real outrages being conducted by goverment.

  • Andy

    Yeah but think of all the money coming back to the city in tax dollars. Everything that they sell is going to go right back to the city so that is going to offset a lot of the costs. Plus, the Yankees create so many jobs, and they created a lot for the construction workers that are working on the new Stadium, not to mention the work to do on the old stadium tearing it down.

  • Januz

    There have been so many complaints about the Yankees since a guy named George Herman Ruth was sold to the Yankees, it is not funny. It started with John McGraw kicking the Yankees out of the Polo Grounds, because they were more popular then the Giants. Thru the Yankees buying Joe DiMaggio from the San Francisco Seals during the heart of the Depression. Through the complaints about the relationship with the Kansas City A’s. Through George Steinbrenner and his ownership. Right up to the New Stadium and Mark Teixeira in 2009.
    The funny thing is without the Yankees and to be fair, the Red Sox, baseball would have little interest in this country. Let me site a poll from last week. December 29, 2008
    Football Remains Runaway Leader as Favorite Sport Basketball’s popularity declining USA Baseball Basketball Football Sports Americas Northern America by Jeffrey M. Jones
    PRINCETON, NJ — The holiday season brings a bevy of college bowl games and the final determination of the National Football League’s playoff participants. That suits Americans just fine, because football is the runaway winner when Americans are asked to name their favorite sport to watch. Forty-one percent mention football, with baseball (10%) and basketball (9%) a distant second, and no other sport reaching the 5% level. http://www.gallup.com.
    At least, baseball is getting publicity during the offseason, and we have the Yankees to thank for that. All the Yankee haters and jealous people better think of that poll when wanting to take cheap shots at the Bronx Bombers.

  • toad

    I’m not sure I understand where the $80 million comes from. I think it means that bondholders will pay less income tax, because the interest on the bonds is tax-exempt. Of course that also means the Yankees have to pay less interest than if they simply issued bonds themselves, hence their desire for the tax-exempt status.

    But don’t the Yankees pay taxes? If they issued bonds privately their interest deduction would be greater, so they would pay less, while bondholders would pay more. Surely that needs to be taken into account.

    I’m no big fan of public financing of stadiums, but I am a fan of accurate accounting. All this “$80 million,” “$400 million,” stuff is nonsense and confuses the discussion.

    • A.D.

      I believe it assuming that the Yankees would issue taxable bonds…which is really no guarantee, they could just not do the work. That can be the problem with figuring out lost oppertunity

  • claremont

    It is ridiculous that sports teams get this kind of public financing aid or even direct spending in building new stadiums. The main effect of new stadiums are increased revenues for the team and an increased asset value of the team in the long run. Teams use local governments to directly socialize their costs and privatize the profits.

    Look at how the Sonics wanted more money from the city for stadium improvements, took the city hostage by threatening to leave, hoping that public opinion would force the city to give them what they wanted, the city dug in its heels and rightly refused to waste taxpayer money making the Sonics’ owner richer, so he took the team to another municipality that was willing to give them that money. The taxpayers are getting robbed whenever they spend money on these stadiums. There may be a minor increase in jobs and economic activity, but 1. it is not very large for the massive amounts being spent, and 2. if that was the goal of this spending it could be done much more effectively in other places. This argument is an excuse created by team owners. These owners are generally smart with lots of business savvy, and know how to use taxpayer money to increase their net worth.

    If a team has a stadium that is clearly way too old and falling apart to the point that fans don’t enjoy the games and won’t go, and the organization does not have the funds to build a new one without some taxpayer help, my opinion might change. But the yankees have an (although old and getting out of maintenance) perfectly good and lovable stadium which does the job a stadium should just fine. And they are not strapped for cash either, this is just a transfer of wealth from the city to the Steinbrenners and team. I love the Yankees and always defend their payroll spending, but this is not right.