Wednesday, July 30, 2008

"Congress probing whether city wildly inflated value of land for new stadium" Daily News 7/27/8

Congress probing whether city wildly inflated value of land for new stadium
Sunday, July 27th 2008, 10:03 PM

The new Yankee stadium under construction. The city faces a probe for giving two wildly differing estimates of the value of the land underneath it.

A Congressional committee has launched a probe into whether the city and Yankees wildly inflated the value of the site for the team's new stadium to float nearly $1 billion in tax-free bonds.

Rep. Dennis Kucinich (D-Ohio) last week demanded "specific documents and reports" that could show the city claimed the land beneath the new Yankee stadium was worth nearly seven times its true value.

The massive switcheroo allowed the city to sell $941 million in bonds for the stadium, which must by law be linked to a site's actual value.

That means taxpayers are getting rooked because bondholders avoid paying tax on the interest they earn - and it could jeopardize the financing of the whole project.

Kucinich, who heads the House Committee on Oversight and Government Reform, is zeroing in on dramatically different estimates the city offered for the stadium land - one of $275 per square foot and another of just $45. A hearing is set for September.

"There's no way vacant land in the Bronx is worth $275 a square foot," said a veteran city assessor, who asked not to be identified.

The issue is especially touchy because the Yankees have sought up to an additional $366 million in tax-exempt bonds as costs for the project have soared.

The conflicting figures were first put forward in April 2006, as the city prepared to approve building a new stadium, documents obtained by the Daily News showed.

City Finance Department officials said a large swath of Bronx parkland earmarked for the site of the new ballpark had a market value of $204 million. That comes out to a whopping $275 a square foot.

That preliminary assessment, given to the City Council, was crucial to the Yankees and their bond underwriters.

It established the amount of money under IRS regulations the team could use to pay in PILOTs - payments in lieu of taxes - to repay the debt.

The more the land was worth, the more bonds the city could float for the Bombers.

Less than a month later, in an application the city was required to submit to the National Park Service before it could convert the parkland for stadium use, the Parks Department gave a different estimate.

It said an independent appraisal concluded the land was worth just $45 per square foot.

Why such wildly different values for the same property?

"Our assessors jacked up the numbers and the comparables for the Council to justify the stadium bonds," said a Finance Department official familiar with the project.

Earlier this month, Assemblyman Richard Brodsky (D-Westchester), who heads an assembly committee reviewing the Yankee stadium project, requested copies of all records connected to the Finance Department's 2006 estimate.

"There are some obvious inconsistencies," Brodsky said.

In the 2006 report, former Assistant Finance Commissioner Dara Ottley-Brown said assessors used sales of seven small vacant parcels in Manhattan as comparables to estimate the value of the new stadium's land.

Most of those parcels were in Harlem, one was on the lower East Side and another was in Manhattan Valley, near Columbia University.

"Why use only Manhattan land for comparables when the stadium is in the South Bronx?" said the veteran city assessor.

The independent appraisal around the same time reached the $45-per-square-foot figure for the same parkland.

That appraisal, which the city commissioned from PATJO Appraisal Services, relied only on sales of big vacant parcels in the Bronx as comparables.

The watchdog group, New York City Park Advocates, obtained a copy of the PATJO appraisal under a Freedom of Information Law request and supplied it to The News.

Current sale prices for vacant land in the Bronx, according to Robert Von Ancken, the managing executive of Grubb & Ellis, a major real estate firm, are "between $100 and $125 per square foot."

Finance Department spokesman Sam Miller defended the city's valuation of the stadium land.

That estimate, Miller said, reflected an expected increase in market value of the new stadium site from a new Metro-North station and other infrastructure improvements slated for that area of the Bronx.

If so, that should mean the value of all land around the new stadium also increased.

A review of the Finance Department's latest assessments of an entire block across River Ave. from the new stadium shows an average market value of $36 per square foot for land.

Even more amazing, the city's 2008 assessment of the 10.7 acres of land under the existing stadium - the legendary House That Ruth Built - shows a market value of just $7 million! That's $15 per square foot, if you do the math.

The city would have you believe that when you cross the street to the new stadium site, land values suddenly skyrocket to $275 per square foot.

If that's not inflation, what is?


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