"Yankees’ Deal May Have Violated Law, Report Says" NY TImes 9/16/8

Yankees’ Deal May Have Violated Law, Report Says

By CHARLES V. BAGLI
Published: September 16, 2008

New York City and the Yankees may have violated federal tax regulations and state laws in using $943 million in tax-exempt bonds to build the baseball team’s new stadium, according to a report issued on Tuesday by Assemblyman Richard L. Brodsky.

Saying the taxpayers are footing the bill for the $1.3 billion Yankee Stadium in the Bronx and are getting little in return other than higher ticket prices and the loss of parkland, Mr. Brodsky, a frequent critic of the deal, said that the report stems from a review of thousands of pages of previously unreleased documents.

Although city officials and the Yankees hotly disputed many of the findings, the report concluded that the city and the state invested as much as $850 million in cash and tax breaks in the new stadium, which sits across 161st Street from the team’s historic home in the South Bronx.

“This stadium is being built by the people of the city and the state of New York,” Mr. Brodsky said during a press conference at the north end of the new stadium, at 164th Street and Jerome Avenue. “In return, they’re getting almost nothing. This deal does not serve the public’s interest. It serves the Yankees’ interest.”

Mr. Brodsky and other critics have argued that the city violated federal tax regulations by manipulating the assessed value of the land beneath the stadium so that the team’s annual payment in lieu of taxes would effectively equal the annual payments to bondholders, or debt service, of $56.7 million beginning in 2010.

Mr. Brodsky’s 34-page report previews testimony he plans to give on Thursday at a Congressional subcommittee hearing sponsored by Representative Dennis J. Kucinich of Ohio that is looking into public financing for sports complexes. The Yankees plan to testify next month, while the Bloomberg administration is negotiating a date.

The release of the report ignited a rancorous exchange with the city and the team. In a spirited defense of the city’s position, Seth W. Pinsky, president of the Economic Development Corporation, suggested that at this point Mr. Brodsky may be “willfully choosing to ignore” the documents and information the city provided during the last year.

“This is a project that is in fact privately financed,” Mr. Pinsky said. “It’s creating thousands of union jobs, spurring city and state investments in the area and relieving the city of the ongoing cost of maintaining an aging stadium. It’s a project that went through numerous hearings, almost 20 public hearings, and was approved at every level, including by the assemblyman himself.”

Despite the report’s heavy use of footnotes referring to project documents, the Yankees also took Mr. Brodsky to task for using “inaccurate facts” for personal aggrandizement. Alice McGillion, a spokeswoman for the Yankees, said in a statement released on Tuesday that stadium construction had had an enormous impact on the Bronx, both in terms of hiring construction workers who live in the Bronx and by providing 30,000 tickets a year to neighborhood organizations.

Although stadiums generally have mostly low wage, seasonal jobs, Yankees executives said that they will employ an additional 1,000 people, not the 15 listed in project documents. A large Yankees team store and restaurants like the Hard Rock Cafe will be open year round, they said.

The Yankees are aiming to complete the stadium by February 2009, in time for the new season. Next month, workers will lay down sod on the infield and the outfield, which has been designed using the same dimensions as the current stadium.

The Yankees and the Bloomberg administration have always insisted that the team is paying for the new stadium, unlike almost every other professional sports team. The use, however, of tax-exempt bonds, will provide the team with savings of about $181 million over the life of the bonds, according to the Independent Budget Office.

Mr. Brodsky contends that because the Yankees will pay the city an annual sum in lieu of taxes, that money, in turn, is being diverted from city coffers to pay the debt service on the bonds.

There is no question that taxpayers are making a sizable investment in the new Yankee Stadium, as well as a new stadium for the Mets in Queens. The city and the state agreed to provide the Yankees with more than $300 million in cash subsidies for garages, a Metro-North train station, replacement parks and road work. But the teams do not pay rent for playing on city land, nor do they pay property taxes.

The Bloomberg administration successfully lobbied the Internal Revenue Service to approve the use of the tax-exempt bonds for the stadium, which did not initially qualify. But the I.R.S. later issued a proposal that would tighten the rules governing such bonds so it would be nearly impossible for this kind of financing to be used again by a profitable sports franchise.

The Yankees are awaiting a ruling on whether they can issue a second bond offering of about $250 million.

“We do things for professional sports we wouldn’t do for any other business,” Mr. Brodsky said. “When it comes to professional sports, we become socialists; for everyone else, we’re capitalists.”