Wednesday, April 05, 2006

"Stadium plan hinges on tax-free bond deal" in Newsday, 4/5/6

Stadium plan hinges on tax-free bond deal

By Ted Phillips
amNewYork Staff Writer

April 5, 2006

Bonds could come up big for New York's baseball teams -- and we're not talking about Barry Bonds.

Both the Yankees and the Mets could get huge financing breaks for their new stadiums if the city gets the go-ahead to use tax-free bonds to cut into the costs.

Furthermore, huge chunks of the cost to build new parking garages, parks and other projects to go along with the stadiums would also dip into millions in state and city funds.

"No one is saying [the Yankees] don't deserve to have a new stadium," said Bettina Damiani, project director of the watchdog group Good Jobs New York. "What we're saying is, 'Has the city done due diligence on whether this is a wise investment for the taxpayer?'"

The Yankees still don't have approval for the new ballpark, but they could get a step closer Wednesday when the City Council decides whether to approve the new stadium, which would be built on city parkland adjacent to the historic "House that Ruth Built."

Many residents oppose the proposal, saying the city's plan to replace the parks isn't good enough and would bring in a lot more traffic.

A new Shea Stadium would be built in a parking lot next to the existing one.

Both stadiums are to be completed by 2009.

An expensive, unusual deal

The financing plans were drafted by the city's Economic Development Corp. and will be considered by the City Council finance committee next week. The main source of money to build the stadiums would be tax-exempt bonds.

This type of bond is often used for economic development. But the size of the stadium bonds -- and the way they will be paid off -- are unusual.

In the case of the new Yankee Stadium, $866 million of the $930 million cost would be raised through these kinds of bonds, according to the EDC.

Tax-exempt status of the bonds would make the financing of the stadium cheaper for the Yankees, saving the team as much as $11 million a year in debt service, said George Sweeting, deputy director of the Independent Budget Office, a nonpartisan government watchdog agency.

For the $632 million Mets stadium, a large portion of the cost -- $528 million -- also would come from tax-exempt bonds, the EDC said. The Mets' financing could save the team $8 million annually, Sweeting said.

The teams would build the stadiums with the bond money, then make Payments in Lieu of Taxes, or PILOTS, to the city. Private businesses on tax-exempt property often make such payments for city services.

"When people look at this deal they say there's a property-tax exemption, and there absolutely is," Sweeting said.

The tax-free bonds would be issued by the city's Industrial Development Agency, which has asked the Internal Revenue Service to determine whether it's legal to issue these bonds. The city is still waiting for the IRS' ruling.

At issue is whether the proposed financing would conform to the 1986 Tax Reform Act, which restricted the use of tax-exempt bonds for sports facilities.

The city's financing plans are "either very revolutionary or very dubious," said Neil deMause, who runs the Web site, which examines the financing of stadium deals across the country.

The city defended its financing plan, saying the new stadium projects would bring needed economic boosts to the city through jobs and private investment.


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