Press release from New York City Comptroller William C. Thompson, Jr
THOMPSON: CITY MISMANAGED COST ESTIMATES FOR STADIUM FINANCING
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Comptroller Cites Lack of Oversight and
Financial Competency as Cause of Inflated Expenses
New York City Comptroller William C. Thompson, Jr. today accused Mayor Bloomberg and the New York City Industrial Development Agency (IDA) of financial incompetence during negotiations for a new Yankee Stadium, saddling City taxpayers with astronomically steeper costs.
Speaking at a news conference, Thompson highlighted the upcoming IDA Board of Director’s vote on a new stadium financing plan as an opportunity for the City to rectify earlier oversights and errors.
“While our financial review cannot determine intent, this incredible mismanagement begs the question: Was this plain old incompetence or a blatant attempt to mislead the public?” Thompson said. “Either way, New Yorkers now have a box-seat view of fiscal mismanagement.”
In July 2006, the IDA approved a financing package with the Yankees to allow for construction of a new stadium. The debt package totaled $967,555,000: $942,555,000 in tax-exempt bonds and $25 million taxable. Direct capital costs to the City for related infrastructure projects, such as new parkland, were estimated at the time to be $129.2 million. These costs do not include the construction of new parking facilities, for which the City is also responsible
“The original City capital contribution now has ballooned to $325 million, two-and-a-half times the amount we were told in 2006,” Thompson said. “With this deal, New Yorkers lose. At a time when we can least afford it, the Administration is bending over backwards to subsidize an enormously profitable corporation, one that just signed three players to contracts worth a total of $423 million.”
Thompson cited the following as examples of faulty cost estimates:
· The demolition of the existing Yankee Stadium was estimated at more than 50% less than the true cost.
· Failure to conduct environmental reviews, which would have taken into account the existence of, and necessity to remediate, oil tanks on the waterfront site of a planned new park.
· Underestimation of the cost for a rooftop park and retaining wall resulting in cost escalations of 30%; the price tag now stands at $44.5 million.
“We cannot continue to let New Yorkers lose in order for the Yankees to win,” Thompson said. “Next season, more and more families will be priced out of the very stadium they helped to build, as the minimum cost of a box seat alone will at least double from $250 to $500.”
Thompson’s review also examined the City’s lost revenue, such as an agreement to surrender use of 250 parking spots to the Yankees as part of its negotiations for a luxury suite, resulting in a loss of $500,000 in revenue per year. These ongoing negotiations likely will result in an additional loss of $750,000 in annual revenue from three billboards, on which the Yankees want the rights to advertise.
Similarly, the cost to the City for a luxury suite will total $1,250,000 annually, while other luxury suite purchasers will pay between $600,000 and $850,000. Under terms of the new agreement, the City has agreed to let the Yankees market the suite with a minimum payment of $100,000 per year.
“Anybody can see that this is simply a bad deal for New York,” Thompson said. “Yet it is the kind of financial incompetence that the Administration has consistently demonstrated when it comes to the new Yankee stadium. And incredibly, the Yankees are asking for more money and the Administration wants to give it to them without getting anything in return.”
Thompson’s office has held meetings with IDA staff to discuss the new financing plan and the status of related projects. This Thursday, the IDA Board of Directors will hold a public hearing regarding the proposed issuance of $371.8 million of new bonds, including both tax-exempt and federally taxable, together with a $60 million refunding of the existing bonds to move debt service out to later years. The IDA Board will vote on the plan Friday.
Some elements of the $371.8 million are said to include:
· $40 million in extra costs to accelerate construction.
· $60 million additional security costs at the behest of the New York Police Department.
· $92 million in scope modifications.
· $75 million in true cost increases.
· $65 million in “soft costs.”
“For all these reasons, I am calling for the vote to be postponed so that the City can negotiate a better deal,” Thompson concluded.
In November 2008, an audit conducted by the Comptroller’s office found that the Yankee’s underpaid the City more than $11 million in rent over a two-year period. As a result, the Yankees have since paid the City $7,352,519 plus interest of $635,132. The Yankees still owe the City another $4,035,636.
The full audit report can be viewed at www.comptroller.nyc.gov.