"As Stadiums’ Costs Rise, City Agrees to New Bond Offerings" NY Times 12/8/8
As Stadiums’ Costs Rise, City Agrees to New Bond Offerings
By CHARLES V. BAGLI
Published: December 8, 2008
With opening day for the city’s two newest baseball stadiums only four months away, the price tag for taxpayers continues to rise.
The Bloomberg administration has issued fresh estimates for utility work, lighting and the cost of replacing the parks and ball fields that once stood where the new stadium for the Yankees is being erected.
The city also plans to issue $341.2 million in additional tax-exempt bonds on behalf of the Yankees and Mets to complete the stadiums, whose combined cost is about $2.2 billion.
The teams are responsible for paying off the bonds, but they pay tens of millions of dollars less in interest because payments to bondholders are exempt from city, state and federal taxes.
The city and the state are also investing more than $660 million in parks, garages and transportation improvements around the stadiums and are providing the teams with an estimated $500 million in tax breaks related to construction materials and other items. The city had planned to issue a public notice of the latest bond offering and a required public hearing on Monday but decided to wait at least a week until it completed a cost-benefit analysis. With public costs mounting, critics of the deals say the city will be hard pressed to demonstrate that the economic benefits of the stadium projects outweigh the cost to taxpayers.
“We are conducting our analysis of the applications for additional bonds from the Yankees and Mets,” said David Lombino, a spokesman for the city’s Industrial Development Agency, which would issue the bonds. “Upon receipt of the remaining information that we are awaiting, we will be positioned to make decisions about initiating I.D.A.’s formal review process.”
Mayor Michael R. Bloomberg has insisted that the city will earn a profit on its investment. And based on the city’s 2006 cost-benefit analysis of Yankee Stadium, the city would earn a net return of slightly more than $40 million over the bonds’ life.
Since then, however, project costs have swelled considerably. For instance, the city says it will cost $194.7 million to replace Macombs Dam Park and the ball fields now covered by the new Yankee Stadium on 161st Street, up 50 percent from the 2006 estimate of $129.2 million.
The city is also contributing $39 million toward the $91 million cost of building a Metro-North rail station nearby, an item that was not part of the 2006 cost-benefit analysis.
In one bright spot, city officials said that the cost of infrastructure and street work at the stadium had declined by $2.7 million, to $32.3 million. But that was more than offset by a $10.4 million increase in the cost of street lighting, as well as increased design, engineering and construction-management costs.
Economists generally take a skeptical view of public investments in stadiums because the costs are so great, while most of the jobs they generate are seasonal and part-time. George Sweeting, deputy director of the Independent Budget Office, said, “The additional costs that have emerged make it quite likely that that the city’s net benefit number is now negative.”
In 2006, the Yankees raised $967 million, including $942.5 million from the sale of tax-exempt bonds, while the Mets raised $612.8 million, including $547 million from tax-exempt bonds. The Mets want to raise an additional $82.2 million in tax-exempt bonds, while the Yankees want to raise $259 million more in tax-exempt financing, as well as $111 million in more conventional debt, for what will be a $1.3 billion building.
City officials said that they were weighing the loss of tax revenue associated with the new bond offering against the cumulative benefits, including construction jobs. The Bloomberg administration recently asked the Yankees to contribute $11.5 million toward the cost of infrastructure and the parks.
“While some costs have increased, there are also a number of benefits that were not anticipated when the project was approved,” Mr. Lombino said. If the Industrial Development Agency “opts to move forward on an additional bond issuance, the updated analysis will be released to the public.”
Some critics have complained about the loss of a heavily used park in the middle of Yankee Stadium’s neighborhood. But city officials say they are creating more parkland than was taken for the stadium and building better playing fields.
The Yankees have been stung by persistent criticism of their new stadium. Both they and the Mets are paying a far greater share of the total costs of the ballparks than other professional teams have paid for stadiums in recent years. But the projects are also far more costly than those in other cities.
The Yankees have pointed out that their new stadium has generated thousands of construction jobs. There will be about 1,000 additional positions at the new stadium, they said, most of them union jobs in restaurants, security, marketing and maintenance. Economists, however, say that most will be part time.