"Muni Bonds for Yankee Stadium Would Break Law, Legislator Says" Bloomberg 1/14/9
Muni Bonds for Yankee Stadium Would Break Law, Legislator Says
By Henry Goldman
Jan. 14 (Bloomberg) -- New York City’s Industrial Development Agency would break the law by approving $430 million in taxable and tax-exempt bonds for a new Yankees baseball stadium, state Assemblyman Richard Brodsky said.
“Everything is being done in a bum’s rush,” Brodsky said of IDA hearings set for tomorrow and Jan. 16 at which the agency is scheduled to vote on the financing. “The actions of the IDA on Friday are patently illegal.”
The administration of Mayor Michael Bloomberg, which supports the project, should have to win City Council support for the bonds, said Brodsky, a Democrat from Westchester County who heads a committee on public authorities. The new debt would supplement $968 million approved by the IDA and council in 2006. Yankees President Randy Levine and IDA Chairman Seth Pinsky were sent subpoenas requiring them to appear at the hearing.
City Comptroller William Thompson and U.S. Representative Anthony Weiner, two Democrats seeking their party’s nomination to run against the two-term mayor this year, have said Bloomberg didn’t obtain the best deal for the city.
Brodsky has said the administration and the team misled the public and the U.S. government over the stadium’s economic benefits to get the Internal Revenue Service’s approval in July to use municipal bonds to reduce the team’s construction costs. That would make the Jan. 16 IDA vote unlawful, he said.
“Whatever emotional or political benefits result from public financial assistance to the Yankees, the economic benefits are slight or nonexistent, while the public costs, estimated at over $700 million, are enormous, at a time when other pressing capital needs go begging,” Brodsky wrote in a report for the hearing.
Sharing the Costs
Although the team is paying for the stadium facility, the state and city have agreed to fund about $700 million in supporting infrastructure, including a new Metro-North rail station, 28 acres (11 hectares) of new recreation areas, parking and street improvements.
The Yankees will cover the cost of the $1.5 billion, 52,325- seat open-air stadium in the city’s Bronx borough, scheduled to open in April, by paying off the proceeds of about $1.3 billion in municipal bonds, Pinsky and Levine said. The team will invest $225 million of its own money in the project, Levine said.
The Yankees will retire the bonds with payments in lieu of real estate taxes to the city at a rate of $60 million to $70 million annually over 43 years, Pinsky said. The city will transfer those funds to the IDA, which will pay the bondholders, he said.
“From the city’s bottom-line position, the Yankees end up paying amounts that they weren’t previously paying,” Pinsky said.
The team never paid real estate taxes on the old stadium, which sat on city-owned land, so the city isn’t giving up any revenue, Pinsky said.
The agency calculates a net benefit of about $60 million to the city, according to a cost-benefit analysis the IDA prepared for this week’s public hearing and financing vote.
The Yankees have also agreed to take over the $35 million-a- year cost of maintaining the facility, a city obligation in the old stadium, he said.
Uncertainty in the credit markets “would cause serious problems” for the team’s ability to complete the stadium should the lawmakers shut the Yankees out of the municipal bond market, Levine said.
Yankee Stadium bonds set to pay 5 percent and mature in 2046 traded at 73.6 cents on the dollar this week to yield 7 percent, compared with 4.51 percent at issue with insurance from FGIC Corp. in 2006.
Cost overruns, which Thompson criticized yesterday, resulted from construction delays due to a lawsuit, security changes ordered by the city’s police and parks departments and possible wrongdoing in concrete testing on the site, Levine said.
Other added costs have come in an effort to improve the stadium’s safety railings, access and broadcasting facilities, Levine said. The team had to pay more to revise its scoreboard and sound system, and it wanted to increase year-round use by adding a museum and conference center, he added.
“The only way for us to grow our way back to economic health is by ‘priming the pump’ through a combination of public infrastructure investment and targeted governmental assistance to encourage private investment,” Pinsky told the committee members. “The new Yankee Stadium is a textbook example of this.”
In approving the original financing in 2006, the City Council acknowledged the teams might have to return for more money and didn’t make council approval a requirement in the event of a second request, Pinsky said.
The New York Mets are building a new $800 million ballpark in the borough of Queens and are seeking $82.3 million in additional financing at the same hearing. That request hasn’t been criticized, and Thompson said yesterday the amount was much less than the Yankees are asking for and appeared reasonable.
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To contact the reporter on this story: Henry Goldman in New York City Hall at email@example.com.
Last Updated: January 14, 2009 17:08 EST