Baseball Musings: I'm Shocked, Shocked!

January 13, 2009

I'm Shocked, Shocked!

A couple of people pointed me to this article today about an investigation into the funding for the new Yankee Stadium. What? Corruption in a billion dollar New York construction project? Who would have thought it possible! Rodney Dangerfield explained it best:

Here's Randy Levine's explanation of the deal:

The New York Yankees, not the taxpayers, are paying for the construction and operation of the new stadium. All of the money to finance the construction of the stadium is from the Yankees. Those who keep repeating that the city is paying are either deliberately misrepresenting the facts or simply do not understand the financial mechanism that is available to build large scale projects.
The mechanism is: An entity controlled by the city issues bonds to build a new stadium. Those bonds are purchased by private investors, not taxpayers. The Yankees have a long-term lease with the city entity that owns the building. That city entity pays no taxes. The Yankees make a payment-in-lieu-of-real-estate taxes (called a PILOT) and this amount - and only this, and nothing from the government or the taxpayers - pays back the private bondholders. Since the city entity, not the Yankees, owns the stadium, this use of PILOTs does not cost the city anything. The city does not lose anything because city entities do not pay property taxes; the city does not collect property taxes now, and without this financing the Yankees would not have built a new stadium, and thus no taxes would have been received.

In addition, the city saves money because in the old building, the city was responsible for tens of millions of dollars in maintenance costs, an amount that grew as the stadium aged. In the new stadium, the Yankees have that obligation. Under the deal between the city and the Yankees, the city is receiving a building it does not have to pay to construct or maintain.

What the Yankees are getting from the city is a sweetheart financing deal. Corruption? No doubt, but what are they going to do, tear down the stadium? Make the bond holders pay taxes on their investments? The worst thing that will happen is some scape-goat goes to jail, and the deal continues as is. If people want this to stop, leave government out of the building process entirely.

Posted by David Pinto at 05:56 PM | Stadiums | TrackBack (0)

Comments

"Corruption? No doubt,..."

Actually, quite the opposite. The use of PILOT programs in New York is not a new issue nor is this the first use for the financing of a complex to benefit a privately held entity. Being a large scale development in a major city, I tend to agree that there is is a high likelihood of corrupt behavior somewhere in the process, but the use of the PILOT program is not the crux of it.

Great clip from a movie full of great clips. Sam Kennison's cameo is a classic.

Posted by: thumble at January 13, 2009 10:15 PM

The city does not lose anything because city entities do not pay property taxes; the city does not collect property taxes now, and without this financing the Yankees would not have built a new stadium, and thus no taxes would have been received.

If I didn't have a job the government wouldn't be able to take income taxes from me, but that doesn't mean that the government isn't losing out if I don't pay income taxes on the job that I do have.

In addition, the city saves money

So with this stadium deal the Yankees are actually doing the government a favor. Aren't they just great big philanthopists?

Under the deal between the city and the Yankees, the city is receiving a building it does not have to pay to construct or maintain.

With the Yankees' giving away money like that, you'd have to wonder how they can continue to maintain that payroll.

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Posted by: world of warcraft gold16 at January 14, 2009 04:18 AM

Hei Lun Chan,

I am in the process of refinancing my house. By getting the new mortgage I will save lots of money. This does not imply that the bank that's going to give me the mortgage is a philanthropist, or that it is giving away money.

David is right that the city is saving money in the deal. You certainly misunderstood the situation, and you've apparently misunderstood what David said, too.

Posted by: James at January 14, 2009 06:55 AM

I will point out that the purpose of a legislative investigation and hearings is not the same as a criminal inquiry, though they can have overlapping purposes. One purpose of a legislative inquiry might be to decide that while a deal is legal, it shouldn't be, and revise law and/or policy for the future. (I will also point out that both legitimate and illegitimate legislative inquiries have a large dose of grandstanding involved -- the grandstanding comes with the territory, but does not of itself mean there isn't potential worth to the hearings.) I have no opinion on whether this particular inquiry has any merit or not.

Posted by: Capybara at January 14, 2009 01:07 PM

Best reference ever!!!

Posted by: C6H6 at January 14, 2009 05:18 PM