"As Stadiums’ Costs Swell, Benefits in Question" NY Times 11/3/8

As Stadiums’ Costs Swell, Benefits in Question

By CHARLES V. BAGLI
Published: November 3, 2008

Days after taking office in 2002, Mayor Michael R. Bloomberg killed Rudolph W. Giuliani’s plan to spend $800 million in city funds to build baseball stadiums for the Yankees and the Mets, saying they were too expensive during a recession.

Three years later, Mr. Bloomberg unveiled his own plan calling for the two teams to pay the construction costs of their new stadiums, while the city would build public parks, parking garages and transit stations nearby. The cost to taxpayers, the mayor suggested, would be relatively small and the benefits to the city would be great.

“We don’t do subsidies,” Mr. Bloomberg said at the time. “The city is getting paid back at a profit.”

But as the two stadiums near completion, the cost to taxpayers is anything but small, a review of the projects shows. Though the teams are indeed paying approximately $2 billion to erect the two stadiums, the cost to the city for infrastructure — parks, garages and transportation improvements — have jumped to about $458 million, from $281 million in 2005. The state is contributing an additional $201 million.

Those totals do not include an estimated $480 million in city, state and federal tax breaks granted to both teams. In addition, neither team has to pay rent or property taxes, though they are playing on city-owned land.

The expanding public cost of the stadiums, coming in another downturn, has fueled debate about their economic benefits, and has become an issue in Congressional hearings in Washington into the use of tax-exempt bonds for stadium construction.

The Bloomberg administration says that keeping the Yankees in the Bronx and the Mets in Queens not only creates temporary construction and permanent stadium jobs, but also is crucial to the city’s image.

Seth Pinsky, the president of the city’s Economic Development Corporation, said the city estimates that its investment in Yankee Stadium alone will earn a net positive return of more than $40 million over 40 years. “Even without that, a billion dollar investment in the poorest Congressional district in the city is never a bad thing,” Mr. Pinsky said.

Critics of public investments in stadiums and arenas for professional teams say that the Bloomberg administration may have struck a better deal for taxpayers than those done in many other cities. But they say that the stadiums still carry an immense public cost and that 81 home games are not enough to create many permanent jobs.

“In general, stadiums are not engines for economic development,” said Ronnie Lowenstein, the director of the New York City Independent Budget Office. “Inflating the economic benefits associated with stadiums that typically have only part-time or seasonal employment is missing the point. A lot of New Yorkers wanted a new Yankee or Mets stadium. At the end of the day, that was what was driving the city’s decision to do this.”

Stadium building has been a long-running drama in New York. From 1986 to 1996, George Steinbrenner, the principal owner of the Yankees, kept politicians jumping on both sides of the Hudson River with threats to move to New Jersey. Mr. Giuliani spent years on an unsuccessful effort to move the Yankees to the West Side of Manhattan.

Shortly before he stepped down, Mr. Giuliani signed a nonbinding agreement with the Yankees and the Mets to pay half of he $1.6 billion cost of building two baseball stadiums. Mr. Bloomberg rejected that plan in 2002, but his own push to build a heavily subsidized football stadium for the Jets on the West Side also ended in failure.

Finally, in 2005 and 2006, the city and the state reached deals with the Yankees and Mets in which the teams agreed to pay the cost of constructing the stadiums on city-owned land, while Mr. Bloomberg insisted that the government would build only infrastructure around them.

In those early stages, city, state and team officials estimated that the Yankees project would cost about $1 billion, with the team paying 80 percent, or $800 million, for the stadium, while the city and state would contribute $208.6 million for parks and garages.

The total cost of the Mets’ project was put at almost $645 million, with the team paying about 65 percent, or $423 million, for the stadium and the public putting up $221.8 million in site preparation, pilings and mass transit improvements. The deal also allowed the Mets to keep revenue generated by the garages, money that in the past went into the city’s coffers.

In the world of stadium building, these were considered relatively good deals even by critics of public financing of private stadiums. By comparison, San Diego paid 67 percent, or $303 million, of the $449 million cost of a new stadium for the Padres that opened in 2004.

But in the past two years, the costs of the New York projects — the stadiums and the related infrastructure — have swelled substantially, with the current cost of the Mets’ project put at about $900 million and the Yankees project expected to be more than $1.7 billion, making it the most expensive ballpark in the country. The rising price tags mean public costs have grown as well.

Yankee Stadium is being built atop what were once two popular public parks; the city has agreed to replace them, as well as a soccer field, baseball diamonds, basketball courts and a track. The estimated cost of replacing those parks and fields has climbed to $177 million from $129.2 million in 2005. Officials expect the number to rise by an additional 10 percent when the city issues an updated capital budget in the coming weeks.

The city is also spending about $35 million for roadwork and sewer connections for the stadium and $30 million more on design and planning, items that were not mentioned when the project was announced in 2005.

City and state officials also did not discuss building a commuter rail station near the stadium at news conferences in 2005, although the Yankees had lobbied for it. The Metro-North Railroad is now building a $91 million station there, with $39 million coming from the city budget.

The Bloomberg administration has also extended for three years a $5 million-a-year rent rebate that was first granted by Mr. Giuliani to cover the team’s planning costs. The rebate has also been extended to the Mets.

The city is also responsible for the tens of millions of dollars it will cost to demolish both Shea and Yankee stadiums.

The state contributed $70 million toward the $240 million cost of building three garages with 3,610 spaces at the new Yankee Stadium. And the city issued $170 million in tax-exempt bonds on behalf of the private garage operator.

In addition, the city provided both teams with a variety of tax breaks, which the Independent Budget Office estimates amount to a public-sector loss of $313.4 million in revenues from the Yankees project and $166.4 million from the Mets project. Those benefits include tax-exempt bonds for stadium construction, which allows the teams to save tens of millions of dollars in financing costs.

City officials, however, dismiss the notion that they have lost revenues by extending those tax breaks, saying that the parks and parking lots where the new stadiums are being built do not currently generate taxes. They also say it is unlikely that the stadiums would have been built without the tax breaks.

Still, Assemblyman Richard L. Brodsky, a Democrat from Westchester, and Good Jobs New York, a private advocacy group, have been critical of the Yankees project for what Mr. Brodsky says are “massive subsidies” resulting in too few jobs. He has also said that the city may have manipulated the value of the stadium land in order to comply with federal regulations regarding tax-exempt financing for stadiums, an assertion that a Congressional subcommittee under Representative Dennis J. Kucinich, a Democrat from Cleveland, is investigating.

The Bloomberg administration and the Yankees have vigorously disputed those criticisms.

Mr. Pinsky of the Economic Development Corporation insists that the city’s investments in Yankee Stadium will be used by fans, neighborhood residents and commuters. He says that the projects have pumped hundreds of millions of dollars into the city’s economy, employed thousands of union construction workers and will eventually relieve the city of having to maintain the aging stadiums.

Randy Levine, the president of the Yankees and a former deputy mayor under Mr. Giuliani, testified at a Congressional hearing on Oct. 24 that the project will generate about “1,000 additional jobs,” mostly union, in restaurants, security, ticketing, marketing and maintenance. Two new restaurants — Hard Rock Cafe and N.Y.Y. Steak — and a Yankees museum would operate year-round, he said.

But the Yankees’ own 2006 application for tax-exempt bond financing indicated that the number of full-time and part-time jobs at the stadium would rise only modestly, to 140 from 120 for full-time positions, and to 950 from 879 for part-time ones.

“The notion that these restaurants will do much business during the off-season is hard to imagine,” said Andrew Zimbalist, an economist at Smith College. “That would require a tremendous renaissance in that part of the Bronx.”

Robert A. Baade, an economist at Lake Forest College in Illinois who specializes in sports, was more critical of the New York projects, saying that the public benefits are fairly meager in light of the large public investment.

“We know these claims are hyperbole,” Mr. Baade said. “Why would you expect that this would result in an increase in economic activity in New York when you’ve simply changed the locus of play, moving it across the street?”