"A tale of two new Stadiums" SI.com 4/27/9

Click the title to read the article at the SI.com site.

"Judge pressures Yankees to show stadium documents" 4/22/9 NY Newsday

Judge pressures Yankees to show stadium documents

By MICHAEL GORMLEY | Associated Press Writer
April 22, 2009
ALBANY, N.Y. - A New York judge is ordering the Yankees to give him a catalog of financial records sought by state lawmakers investigating the use of public funds to help build the team's new stadium, or prove the data should remain private.

Two Assembly committees subpoenaed the records in January in the escalating fight with the team, but the Yankees withheld some key documents involving ticket prices and why some city officials received luxury box tickets.

The Yankees will seek to continue to deny those records to the Assembly members, the team's attorney, Jonathan D. Schiller, said Wednesday

Schiller said the deal to attract private purchases of bonds to build the stadium has been thoroughly reviewed by governments and their agencies, including the state Legislature. He said further release of records to Assemblyman Richard Brodsky is unnecessary and a waste of money when the state government and Brodsky should be dealing with a fiscal crisis.


Schiller contends Brodsky was denied much of what he sought from the judge, including a request to produce all the documents and to find the club in a contempt of court and ordered to pay costs of the proceeding if the team doesn't comply. Schiller noted those were among the requests struck out by the judge's order.

"Brodsky is grandstanding and using Yankee Stadium to get himself in headlines," Schiller said.

State Supreme Court Justice John Egan Jr. says the Yankees must produce "a catalog of all documents and materials" sought in the subpoena within a week unless he's persuaded they shouldn't be released. After his review, the judge could order the documents turned over to the Westchester assemblyman and James Brennan of Brooklyn.

"In the end, people will wonder why they can't afford to go to a stadium that their tax dollars built," Brodsky said.

His affidavit to the judge stated the total public subsidy to the Yankees is approaching $4 billion, when schools, hospitals and mass transit lack enough funding. He also claims that few jobs will be created by the public subsidy, ticket prices will still be "well beyond the reach of average taxpayers," and the club participated in an illegal manipulation of property tax assessments.

Brodsky and Brennan also seek data on luxury box tickets given to elected city officials involved in the public funding deal.

Brodsky said forcing the issue into court, where the Yankees could be held in contempt of court, is a "sad necessity."

"We've been patient," Brodsky said. "This has been going on for well over six months."

"Is This Seat Taken? In Front Rows of New Ballparks, Not Yet" NY Times 4/21/9

Click the title for a nice helping of schadenfreude.

"Displaced by the Yankees, Some Bronx Athletic Teams Go Homeless" NY Times 4/18/9

Displaced by the Yankees, Some Bronx Athletic Teams Go Homeless

By MANNY FERNANDEZ
Published: April 18, 2009

The roar of the fans could be heard for blocks on Saturday as the New York Yankees played their third regular season game in their new $1.5 billion stadium. Hours earlier, the junior varsity baseball squad from All Hallows High School sprinted onto the field for their fourth game of the season.

It was technically a home game for All Hallows, a Catholic school in the Bronx that is down the street from the new Yankee Stadium. But home no longer means home for the student athletes. Their game was played on Staten Island.

For years the home baseball field for the All Hallows Gaels was at Macombs Dam Park. But the field and the park were demolished to make way for the new stadium. Without a home field, coaches have held baseball practices in the cafeteria and the gym, and the school had to spend $75,000 to buy two buses and is planning to buy a third for $25,000 because of the increased travel to and from games.

Early in the game on Saturday, played on the home diamond of the opposing team, St. Joseph by-the-Sea High School, Luggi Batista, a sophomore at All Hallows, made a solid hit to give the team a 2-0 lead, but not a single All Hallows parent was in attendance to watch it happen. The team met at All Hallows at 9:15 a.m. and squeezed into a 15-seat bus for the one-hour trip to Staten Island, where they looked sharp in the familiar pinstripes of their major-league neighbors.

“That’s the ironic thing,” said the All Hallows principal, Sean Sullivan. “We’re wearing Yankee pinstripes, and they’re the ones that threw us off the field. And I’m a die-hard Yankee fan. And, boy, am I dying hard here.”

The official opening of the new Yankee Stadium last week was greeted by rave reviews from many fans. But some parks advocates, community leaders and neighborhood residents have been less enthusiastic, frustrated by the loss of ball fields as well as the construction delays and rising costs of replacement parks.

The new stadium was built across the street from the old one on Macombs Dam Park and a portion of John Mullaly Park. State and federal law dictates that parkland removed from public use must be replaced by parkland of equal or greater value. The city’s Parks and Recreation Department originally said seven of the eight replacement parks planned for the area would be completed in time for opening day at the new stadium. But the agency later pushed back the schedule for some of the parks, and a report in January by the city’s Independent Budget Office found that the cost to replace the two parks had climbed to nearly $195 million, up from a 2005 estimate of $116 million.

Shortly before the Yankees game against the Cleveland Indians on Saturday, several dozen men, women and children packed a small interim park at East 161st Street and Jerome Avenue in the shadow of the two stadiums. People jogged along a track as groups hit baseballs and threw footballs on a green synthetic turf.

About a dozen young men from a local youth sports organization, the Bronx Colts, practiced football pass patterns. A coach, Joey Allen, 28, and the group’s founder, Leroy Freeman Jr., 54, said the interim park was too small for a regulation game and too crowded for a smooth practice. A few weeks ago, a 7-year-old boy on a Bronx Colts team was hit in the face with a wayward baseball, Mr. Freeman and Mr. Allen said.

“It’s congested,” Mr. Freeman said. “It’s really unbearable. The replacement parks should have been built first.”

The new seven-acre Macombs Dam Park, with four handball courts and a soccer and football field, among other amenities, is under construction and scheduled for completion in the spring of 2010, although a portion of it will open later this month, said Adrian Benepe, the city’s parks commissioner. A nine-acre park called Heritage Field will be built on the site of the old stadium and is set to open in 2011. And a 10-acre park on the Harlem River waterfront will open in the winter of 2009-10, he said.

Mr. Benepe said he was sympathetic to All Hallows High School and others in the neighborhood who used the old Macombs Dam Park, but he described the situation as a natural consequence of rebuilding the parks. “By the time all of the construction is done, this neighborhood will have one of the finest collection of parks and sports facilities anywhere in the city,” he said, adding, “In a crowded city like New York, when you do public works, there’s always going to be inconvenience.”

The total acreage that will be replaced remains a point of dispute. The nonprofit group NYC Park Advocates issued a report last year saying that the neighborhood would lose nearly four acres of parkland when the eight replacement parks were completed, but Mr. Benepe said their calculations were wrong. The civil rights lawyer Norman Siegel said he was considering filing a lawsuit over the four-acre loss.

“There needs to be an apology to this community for the promises unkept,” Mr. Siegel said.

Last year, All Hallows applied for a $40,000 grant to purchase a bus from a community benefits fund financed by the Yankees as part of the new stadium deal. Paul Krebbs, the president of All Hallows, said the school was turned down. The Yankees gave All Hallows a pitching machine, but it is too big for the school’s facilities, and sits in storage in the gym, said Mr. Sullivan, the principal.

A Yankees spokeswoman said the team controlled neither the timing of replacement parks nor the distribution of grants, but added that it gave the city $10 million for parks. Brian Smith, senior vice president of corporate and community relations for the Yankees, said the team had been a good neighbor, with its nonprofit foundation giving nearly $1 million a year to Bronx community groups. He said the team pays for bus service for the baseball and other athletic teams at Cardinal Hayes High School, and it was interested in working with All Hallows but had not received a request for transportation assistance.

“We would love to help our neighbor,” Mr. Smith said. “The only thing we need is a request from the organization.”

On Staten Island, in the dugout at the All Hallows home game, Roger Ramos, 16, a third baseman and sophomore, said he did not like to make excuses, but he thought the team would be better if it had a home field. All Hallows lost, 8-4. The Yankees did too, 22-4.

"The Yankees' Field Of Screams" The Huffington Post 4/16/9

The Yankees' Field Of Screams
Thomas B. Edsall
Edsall@huffingtonpost.com

"Wall Street bankers supposedly back the Yankees; Smith College girls approve of them. God, Brooks Brothers, and United States Steel are believed to be solidly in the Yankees' corner... but, as they say, who can fall in love with U.S. Steel?"
- Gay Talese in "There Are Fans... And Yankee Fans"

On Thursday afternoon, some 48,271 New York Yankees fans took a break from the drumbeat of lost jobs and looming tax hikes to take in the season opener, forking over anywhere from $95 to $2,625 for a seat with a view.

As these good folks tried to get relief from endangered paychecks and rising property assessments, at least a few suffered envy and anger as they thought about the millions, perhaps even $1 billion-plus, in public subsidies that went into building the brand-new stadium.

The beneficiary of all that cash is one of the most lucrative sports operations in the country, Yankee Global Enterprises LLC, the franchise George Steinbrenner bought for $8.7 million in 1973 and turned into an empire with a value pegged, last year, at $1.2 billion.

Mayors Rudy Giuliani and Michael Bloomberg did not blink at this transfer of money to the deserving rich - George Steinbrenner and his two sons, Hal and Hugh.

Not everyone shares the Giuliani-Bloomberg view of how to spend taxpayer dollars.

Westchester County Assemblyman Richard Brodsky, the Don Quixote of sports politics, has been conducting a one-man assault on the financing of Yankee Stadium, but, so far, has little or nothing beyond few headlines to show for it.

In a series of lengthy, detailed and footnoted reports, Brodsky has tried to prove that the construction of the new stadium is, as he told the Huffington Post in characteristically moderate New York language, "the most outrageous and dishonest a deal as has ever existed," engineered by Yankee executives who are nothing more than "bullies and thugs."

Brodsky, chair of the NY Assembly Committee on Corporations, Commissions and Authorities, found that "inappropriate and secretive lobbying by highly paid and politically connected procurement lobbyists, inappropriate hiring of politically connected former government officials, disposition of public property for less than its true value, [and] interference with investigations of such behavior" produced a deal with a "total cost to taxpayers and savings to the Yankees [of] between $585 million and $826 million."

The Mayor's office, the New York City Economic Development Corporation (NYCEDC) and the NY City Industrial Agency (IDA) dispute Brodsky's calculations, and, using different accounting methods - method some challenge -- argue that the city emerges from the deal a net $59.7 million ahead.

In fact, as the baseball season starts in earnest and the basketball and hockey seasons wind down, New York got what might be described as one of the "least bad" deals in negotiating who will pick up how much of the tab for new facilities -- in the face of team owners armed with a single trump card: the threat to leave town.

Smith College economist Andrew Zimbalist, a critic of most public spending on stadiums and other sports facilities, wrote a January 22, 2006, New York Times op-ed in which he declared, "the crucial public policy question here is whether there will be a net benefit for residents of the Bronx and the other boroughs. The answer is yes."

Neil deMause, author of "Field of Schemes," a book which weighs in against sport arena financing, strongly opposes the Yankee Stadium plan. On his Website, deMause calculates that the new stadium will cost the city $691 million, NY state $115 million, the NY Metropolitan Transit Authority $53 million, and the federal government $327 million -- for a combined taxpayer bill of $1.19 billion, nearly double the $671 million cost to the team.

"The Yankees deal actually manages to be both the largest team expense on a stadium in history, and the largest public expense on a stadium in history, somewhere in the neighborhood of $1 billion," deMause told the Huffington Post. "The city gets no part of the new revenues the Yankees will reap from the stadium; the jobs created are virtually all part-time, and largely cannibalized from other stores and restaurants in the surrounding area; Bronx residents lost their only large neighborhood park [until the old Yankee stadium is demolished and replaced by a park], for at least five years; and fans got more expensive seats with a lousier view of the field. All this, so that the Yankees wouldn't move out of New York - something that was never going to happen anyway, since the entire value of the Yankees franchise is wrapped up in where they play. I'd call that a pretty lousy deal."

The New York Times, in turn, has become increasingly skeptical of the deal: "Seats for $1,500 a game? Suites fit for the royal family? A scoreboard fit for the Big Board? A fabulous steakhouse and granite ramps (no ordinary cement for this crowd)? This $1 billion-plus pavilion and park financed with a lot of taxpayer help is beginning to sound like something fit for the Wizard of Oz," the paper editorialized on January 14 .

"Mayor Bloomberg has - rightly - had to cut city budgets and increase property taxes and explain to residents how times are bad and how we all will have to share the pain. It is time for Mr. Bloomberg to make that same pitch to the Yankees. If the Yankees can sign megamillion-dollar contracts (C. C. Sabathia just landed one for $161 million over seven years), they should be flush enough to contribute more toward their new stadium and to the parks for people living nearby."

The political facts of life, however, dictate that the stadium is a done deal. Property taxes are going up, jobs are down the chute, and the Yankees will play in their new palace. If the team wants to retain support in brutal economic times, their performance Thursday afternoon is not going to help.

The Cleveland Indians crushed the richest team in baseball 10-2.

"Yankee Stadium Is Opening but Not the Parks" Gotham Gazette 4/9

Click the title above to read this excellent report, including maps and hyperlinks.

Another New York Times FAILURE

Click the title above to be taken to the New York Times website, where you can read YET ANOTHER ARTICLE about YET ANOTHER SCANDAL involving the construction of the new Yankee Stadium. And YET AGAIN the Times reports the news JUST AFTER it is too late to do a thing about it.

Thanks, New York Times!

"Bronx kids still waiting for new fields" NY Daily News 4/10/9

Bronx kids still waiting for new fields
Friday, April 10th 2009, 4:00 AM

The baseball season officially begins next week for All Hallows High School - a wonderful Bronx Catholic school in the shadows of the new $1.5 billion Yankee Stadium.

The varsity team's home opener will be against Iona Prep on Wednesday, but the game will not be played in the Bronx. It will not kick off a few blocks away at Babe Ruth field in Macombs Dam Park, where All Hallows played all its home games for so many decades.

Babe Ruth field is gone.

All Hallows, which opened its doors on E. 164th St. 80 years ago, and which every year graduates virtually all of its students and sends them on to college, is suffering through its third consecutive year of its sports teams being homeless. So are the track and soccer teams. So are teams at many other neighborhood schools.

Next week, All Hallows will "host" the visiting Iona team on Iona's field up in New Rochelle.

For this scandalous state of affairs, we can all thank the legendary Yankees organization and the Department of Parks.
Both have failed to address the problem they created for neighborhood kids when they grabbed 22 acres of public parkland to make way for the new stadium and its assorted parking garages.

If you go to the All Hallows Web site, you will find the letters "TBA" (to be announced) as the site for most baseball home games this spring.

Back in 2006, when the City Council approved the stadium plan, the Parks Department assured neighborhood residents that temporary alternate fields would be provided.

It said new replacement parks, including a new running track, would be built quickly, some to open as early as this summer. The Yankees even promised $800,000 a year for the community and its sports teams.

The past three years have been a nightmare for the school's sports programs to pin down sites for their home contests, Principal Sean Sullivan said.

"I can get an answer from the Pope in Rome faster than I can from the Parks Department," said Sullivan, who doubles as assistant baseball coach.

Only a few days ago, the Parks Department finally offered the baseball team a rundown field at Pelham Bay Park - a 40-minute trip to the other side of the Bronx.

"The field looks like a lunar landscape," Sullivan said. "When I'm standing in the third base coaching box, I can't see my shortstop completely because he's playing in a ditch."

To accomplish all this additional traveling for the varsity and JV teams, even for practices, the school has been forced to buy two small buses and order a third. The total cost, says school President Paul Krebbs, has been more than $100,000.

Krebbs figured that since the new stadium made them homeless, the Yankees should help bear the school's additional cost.
He applied for a $40,000 grant from the Yankees Community Foundation to pay for one bus. That amounts to less than one inning's pay for CC Sabathia.

"We were rejected," Krebbs said. "They told us they don't pay for vehicles."

The Yankees did give the school a huge second-hand pitching machine from the old stadium, but it's far too big to be used indoors - and there's no way to get it to Pelham Bay Park.

So what about the new baseball fields that were supposed to replace the ones the neighborhood lost? Well, the construction cost has since skyrocketed, and the city has set back the openings until 2011.

That's because most of the fields will be on the site of the old Stadium, which is still standing.

No one has explained how the Mets managed to tear down Shea Stadium as soon as the season ended, but demolition of old Yankee Stadium hasn't even begun.

Somehow, the new stadium has opened on time, the Yankee garages are on schedule and the new Metro-North station is done.

Only when it comes to replacing the community's lost parkland are huge delays acceptable to the Yankees and Mayor Bloomberg's people. After all, its just thousands of poor blacks and Hispanics who will suffer.

There are student athletes at All Hallows who will go through all four years of high school being treated like gypsies by their city and the big, rich team down the street. What a way to play ball with our kids.

jgonzalez@nydailynews.com

"From the House That Ruth Built to the House the IRS Built" The Tax Foundation 4/6/9

From the House That Ruth Built to the House the IRS Built

by Travis Greaves and Joseph Henchman

New York City and New York Yankees Abuse PILOTs to Finance New Stadium

Fiscal Fact No. 167

Executive Summary
Baseball season is finally here, and thousands of baseball fans are heading to the ballpark to cheer on their teams and enjoy America's national pastime. One baseball club that is always discussed during this time of year (for better or for worse) is the New York Yankees. The Yankees are widely known for spending large sums of money to attract top baseball players. It was thus no surprise when it became known that the new Yankee Stadium would be expensive; priced at approximately $1.3 billion,[1] it will in fact be the most expensive stadium ever built. Tickets will also be pricey, with seats behind home plate selling for $2,500 per game.[2]

The stadium's construction costs have been publicly subsidized in the form of $942 million in tax-exempt bonds issued by New York City.[3] Seeking tax-free status for the bonds to ensure a lower interest rate, New York structured the deal to ensure it didn't run afoul of a federal tax code provision which requires that such bonds not be "private activity bonds." This serves as a huge benefit because the bonds are exempt from city, state, and federal taxes, and have an interest rate about 25 percent below that of taxable bonds.

There are two parts to this financing scheme which seem "foul." First, the new Yankee Stadium will be city-owned and thus exempt from property taxes. Meanwhile its primary tenant, the Yankees, will pay no rent. This clearly brings up the issue of whether such tax-exempt bonds should have been issued at all, and especially when the city is so far in the red.

Secondly, to pay off the bonds over time, New York City will receive payments theoretically equivalent to the property taxes that Yankee Stadium would otherwise pay. The city claims that these payments in lieu of taxes (PILOTs) equal taxes that would otherwise be owed. In reality, these payments are inflated by overvaluing the stadium property by three times that of comparable property. By inflating the payments in lieu of taxes, the City can say to taxpayers that the Yankees are paying a significant part of the stadium's cost, while telling the IRS that the City is paying for almost all of it.

While the IRS signed off on the deal, it has subsequently approved a regulation prohibiting such shell games in the future. The regulation applies only to bonds sold on or after October 24, 2008, leaving previously issued bonds for the Yankees project and even newly issued bonds to pay for cost overruns in the clear. (However, the project's alleged use of inflated assessments remains the subject of public debate and congressional hearings.) Going forward, local governments will still be able to use tax-free status for private projects, but only if public benefit is convincingly demonstrated by meeting a more rigorous standard.

Tax-Exempt Financing Is Extensively Used, Increasingly Abused
In order to completely understand how the City of New York and the Yankee organization have truly taken advantage of the tax code and taxpayers, it is essential to have a basic understanding of tax-exempt financing. Tax-exempt bonds are an important source of financing for state and local governments. Interest earned on bonds issued to support projects determined to benefit the public as a whole is exempt from federal income tax.[4] However, interest earned on bonds issued to fund projects partly or wholly benefiting only private parties (known as private activity bonds) are generally subject to federal income tax.[5]

A private activity bond will be taxed if it meets both the "private business use" test and a "private payment" test in the Internal Revenue Code.[6] The "private business use" test considers whether a private business uses more than 10 percent of the proceeds of an issue. Private business use generally arises when a private business has a legal right to use the bond-financed property. The "private payment" test considers the source of payment on the debt service in issue, taking into account whether the payments are directly or indirectly derived from property used by a private business. If 10 percent or more of the proceeds of the bond issuance are used for any private business use and if repayment is secured by private property or payments made on private property, the bonds cannot qualify for tax-free treatment.

Because Yankee Stadium and its associated projects are indisputably designed for private use by the Yankees organization, and because a private business will be paying rent for use of the bond financed property, they would ordinarily be classified as "private activity bonds" and not receive tax-free status under the Internal Revenue Code. However, due to the structure used to finance the stadium, such bonds were considered tax-exempt.

New York Relied on Tax-Exempt Financing to Sell the Stadium Project
In 2006, the City of New York and the New York Yankees' organization announced plans to build a new Yankee Stadium in the South Bronx. The financing of the stadium was meticulously structured in order to allow the Yankees to use tax-exempt bonds. The City agreed to own the land (thus exempting it from property taxes) and lease it to the New York City Industrial Development Agency (NYCIDA).[7] NYCIDA, a government entity with taxing and eminent domain power, would then lease both the land and the stadium to a special purpose entity created as an affiliate of the Yankees, which would, in turn, lease both to the baseball team. Rather than paying property taxes, the Yankees would make payments in lieu of taxes (PILOTs) to NYCIDA which would pay off the tax-exempt bonds. In addition, the initiative qualified for tax-exempt bond status since taxpayers, not the Yankees, would be paying for the project.

The cost savings provided by tax-exempt bond financing is immense. For the Yankees project, $942 million in tax-exempt bonds have been issued.[8] It is estimated that the tax-exempt status results in annual interest savings of approximately $7.7 million to $15.7 million for a period of thirty (30) years, totaling between $231 million and $471 million.[9] Without this generous subsidy, it is unlikely that such an expensive stadium could have been built.

It is, at the very least, debatable whether a new stadium for the Yankees benefits the public and serves a sufficiently broad public purpose to justify public subsidies. While financing with government bonds remains popular and attractive, studies have shown that publicly funded stadiums have no effect on the growth rate of real per capita income and may, in fact, reduce the level of real per capita income in cities that build them.[10] Congressman Dennis Kucinich, who chaired several congressional hearings held on publicly financed stadiums, warned, "Not only are other more important public safety projects ignored, such as repairing structurally deficient bridges and aging water distribution and treatment systems, but granting a federal tax exemption to bonds issued to build these stadiums means more and more expensive stadiums are being built than if there were no federal subsidy."[11] Kucinich also argues that the subsidy is a "transfer from the many to the wealthy."[12]

City officials, however, argue that the stadium will greatly benefit the community. Mayor Michael Bloomberg predicts that the stadium will "revitalize the South Bronx with thousands of jobs,"[13] including nearly 6,500 construction jobs and approximately 1,000 permanent jobs.[14] These projections have been criticized as overly optimistic.[15] With the projected ticket prices being out of reach for many people, some members of the community have likened the project to the creation of "a playground for Manhattanites." To assuage some of these concerns, the city has promised other development projects in the area, such as a new park, tennis courts, and other recreational facilities. However, these projects are far behind schedule and will probably not be ready until at least 2011.[16]

It is indisputable that the stadium and its associated projects are designed for private use by the Yankees' organization and that a private business will be paying rent for the use of the bond-financed property. Therefore, the issued bonds would ordinarily be classified as "private activity bonds" and be denied tax-free status under the Internal Revenue Code. However, the Yankees and the City of New York requested a Private Letter Ruling (PLR) from the IRS, seeking an exception to the private payments test.[17] They argued that because the rent payments are equivalent to generally applicable taxes, they are not private payments but rather payments in lieu of taxes and should qualify as a regulatory exception.

The city's claim that the Yankees' payments are akin to tax payments rather than debt service payments rests on the fact that the PILOTs are based on property tax assessments. A PILOT arguably satisfies the definition of "generally applicable tax" if the payment is not greater than the amount imposed for a tax of general application and the payment is designated for a public purpose.[18] For example, if $50 million was needed annually to pay off the bonds, but actual property taxes would amount to only $30 million, a PILOT that would qualify for tax-free status could not exceed $30 million.

The city was determined to ensure that the payments would cover all bond costs, and equally determined to receive tax-exempt status on the bonds. Consequently, it was important that the stadium property be assessed at a value greater than the bonds in order for the payments to equal the debt service and be at a value which would produce property taxes equal to or less than what the taxes on the actual property would have otherwise been. Three appraisals were conducted, each purportedly using comparable land and taking into account the size, location, and appreciation in value from the development.

Using Manhattan Land to Value a Bronx Stadium
The first land assessment was performed by the New York Department of Finance (DOF). The DOF chose eight parcels of land located in Manhattan as comparables for the assessment, rather than in the Bronx where the stadium was to be located. The Bronx is the poorest district in the country,[19] compared to Manhattan which has some of the highest real estate values in the world. The Manhattan-based appraisal was also calculated using 17 acres, compared to the 14.5 acres upon which the stadium is located. These two dubious assessment methods used by the DOF resulted in an inflated assessed value of $204 million.[20]

Two independent assessments provided significantly lower figures than the DOF appraisal.[21] One estimated the amount of money which would be required to replace park land lost by the stadium's construction. This appraisal evaluated comparable property in the Bronx and determined the land was worth $26.8 million. The third appraisal, performed by a private firm at the request of the New York City Industrial Development Agency (NYCIDA), assessed the land at $40 million. Not surprisingly, only the DOF appraisal for $204 million was submitted to the IRS.

In addition to the valuation of the land, DOF did an assessment of the stadium itself and, working with Goldman Sachs, valued the stadium at $1.025 billion.[22] The final dollar value of the assessment was $1.129 billion.[23] Typically, a project engineer will verify the assessment numbers in a certified cost schedule; however, no verification was provided in this case, which raised serious questions concerning a number of project costs which appeared to be overstated or counted twice.

Despite obvious concerns over these assessments, NYCIDA approved the issuance of $920 million in tax-exempt bonds and $25 million in taxable bonds, both to be repaid by the Yankees by PILOTs. City officials further contended that funding for the $800 million in construction would be fully provided by the Yankees.

The IRS Approved the Tax-Exempt Bonds But Has Moved to Tighten Standards
NYCIDA submitted only the DOF valuation when it presented its request for a PLR. These valuations indicated that the PILOTs would be sufficient to cover the debt service requirements of the bonds. City officials argued that the financing plan complied with IRS rules and that the Yankees did not receive special treatment beyond that which any other taxpayer would have received. In considering similar requests, the IRS does typically give great deference to state and local governments in determining if sufficient public benefits exist to justify tax-exempt financing for projects. In this case, the IRS deferred to the city's assertion that the PILOT payments and the property taxes were closely linked, and approved the stadium project bonds for tax-exempt financing. However, the IRS further stated in its private letter ruling that its opinion was strictly based on the figures provided by the NYCIDA, and any deviation from those facts and representations could cause the PLR to become inapplicable.[24]

The use of PILOTs approved by this private letter ruling issued by the IRS appears to be prohibited by two separate Treasury Department regulations. First, a PILOT should be treated as a special charge if it is "made in consideration for the use of property financed with tax-exempt bonds."[25] In the present case, the Yankees' PILOTs appear to be designed to be "made in consideration" for the construction and "use of property" (i.e. the stadium) "financed with tax-exempt bonds."

Secondly, the PLR explained that these PILOTs are not rightly characterized as "payments for a special privilege granted or service rendered"[26] because they "do not create a new charge separate and apart from the system of real property taxes that are due for use of the stadium."[27] Thus, the defenders of the Yankees' PILOT are trying to analogize PILOTs to tax abatements. By this reasoning, it would be difficult to imagine any application for a PILOT being denied because PILOTs are typically derived from "the system of real property taxes"—they are, after all, payments in lieu of taxes. The IRS fell short in this PLR of correctly applying the PILOT rule and other Treasury Department regulations and failed to demonstrate that the IRS was obligated by the regulations to allow the use of the Yankees' PILOTs.

It comes as no surprise that after issuing the ruling, the IRS proposed and finalized a new regulation narrowing the use of PILOTs. The new regulation applies to bonds sold after October 24, 2008, and therefore does not apply to Yankee stadium since all the bonds for that project had been sold prior to this date.

There is no doubt that the Yankees hit a home run to win the tax-exempt game in the final inning. For others not so fortunate, the new regulation requires that an eligible PILOT must represent "a fixed percentage of, or reflect a fixed adjustment to, the amount of generally applicable taxes in each year, based on comparable current valuation assessments."[28] This eliminates the ability of state or local governments to set PILOTs at fixed annual amounts that do not fluctuate with changes in the generally applicable taxes on which the PILOT is based. The regulation also requires periodic recalculation of any PILOTs based on current assessed value and provides a standard to determine whether a PILOT payment is "commensurate" with generally applicable taxes, as such term is used in section 1.141-4(e)(5). Clarifying the "commensurate" standard provides more certainty to issuers with respect to the application of PILOTs.

Conclusion
It is doubtful the city would have foregone the property tax revenue to build a new baseball stadium given the current state of its budget, which is looking at an approximate $4 billion shortfall for FY 2009-2010. However, putting aside the turbulence of economic conditions and whether $2,500 seats are likely to be sold, it is still debatable whether a new Yankee Stadium built with tax funds could be a benefit for the public. But because of the way the project is being financed, it is difficult to know what the actual cost to the taxpayer is, let alone whether it is the best use of scarce taxpayer dollars.

Here, New York City has tapped into taxpayer funds by shifting the financing through different layers of local government while essentially claiming that the stadium will pay for itself.

If there are justifiable uses for PILOTs, the Yankee Stadium project does not appear to be one of them. When taxpayers elsewhere hear that any project is being funded by PILOTs, they should remember the cautionary tale of the Yankee PILOTs and insist on strict transparency and accountability so that their taxpayers do not end up subsidizing private uses with public funds.





Notes

[1] "New Yankee Stadium to Cost $1.3 billion," Forbes (Feb. 7, 2008).

[2] "Seats Behind Home-Plate at Yankee Stadium to Cost Between $500- $2500," ESPN.com (Mar. 21, 2008) (accessed on November 18, 2008) http://sports.espn.go.com/mlb/news/story?id=3305979.

[3] Mark Giannotto, "Yankee Stadium Bonds Request Defended as Good for the Bronx," The New York Sun (Jul. 3, 2008).

[4] See 26 U.S.C. § 103 (a). Gains realized from the sale of exempt bonds are taxed.

[5] See 26 U.S.C. § 103(b)(1); 26 U.S.C. § 141. Even private-activity bonds which qualify for exclusion from federal income tax are taxed under the Alternative Minimum Tax (AMT), which denies tax preferences to many high-income taxpayers. See 26 U.S.C. § 7(a)(5)(C).

[6] 26 U.S.C. § 141(a).

[7] The House That You Built: Hearing Before the NY State Comm. on Corp., Authorities, and Comm. (2008) (testimony of Assemblyman Richard L. Brodsky).

[8] Gary Thorne, "Tax-exempt Bonds Part of Baseball's Growth Plan," USA Today (Nov. 4, 2008).

[9] See supra note 7.

[10] Dennis Coates and Brad R. Humphreys, "The Growth Effects of Sport Franchises, Stadia, and Arenas," UMBC Dept. of Economics Working Paper #97-02 (Sep. 27, 1997).

[11] Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York: Oversight and Gov. Reform Comm., 110th Cong. (2008) (statements by Rep. Dennis J. Kucinich).

[12] Id.

[13] August 16, 2006, NYC Press Release.

[14] Id.

[15] See supra note 7.

[16] See Tom Ferrey, "South Bronx Neighborhood Taking Hit From New Stadium," ESPN.com (Sept. 19, 2008), http://sports.espn.go.com/mlb/news/story?id=3598021 (last visited on Nov. 18, 2008).

[17] See supra note 7.

[18] Treasury Reg. section 1.141-4(e)(5).

[19] See supra note 16.

[20] See supra note 7.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Treas. Reg. § 1.141-4(e)(5).

[26] Treas. Reg. § 1.141-4(e)(3).

[27] See supra note 7.

[28] Treasury Reg § 1.141-4(e)(3).

"Breaking With History in the Bronx" NY Times 4/3/9

Breaking With History in the Bronx

By JIM DWYER
Published: April 3, 2009

The pharaohs would be at home in the new Yankee Stadium, if they could peel enough gold leaf off their sarcophagi to cover the costs of tickets. The monumentality of the place goes on display this weekend for the first games.

In dimensions and decor, the new stadium, handsome and comfortable, is meant to evoke the old one. But the resemblance is only concrete deep. This is not history, but a costume party, a rigging of familiar geometry. It disguises a radical departure from New York’s baseball history: the embrace of public subsidy — around a billion dollars when all the costs are added — for private wealth.

The first incarnation of Yankee Stadium opened in 1923. The owner, Jacob Rupert, bought private land, raised private funds for the construction, and maintained the place with money he made in ticket sales. Rupert and his successors paid taxes on the property: the land alone was assessed at $1.75 million in 1923. By 1970, the stadium and land were valued at $5 million.

If you were to page through the annual city tax rolls, you would find the valuation of Yankee Stadium — as well as the Polo Grounds in Manhattan and Ebbets Field in Brooklyn, the homes of the Giants and Dodgers — listed right alongside the other big properties in the city, like Rockefeller Center, the Metropolitan Life building and Loews Paradise theater.

What do those old tax rolls tell us?

They say that for much of the 20th century, baseball in New York was recognized by the government as another commercial venture, with all the opportunities and responsibilities of owning property.

Not at the new “cathedral of baseball.” In fact, the stadium is being treated by the government as if it were a house of worship, not a place to sell $10 cups of beer. The partnership that owns the team has a 40-year lease on what had been city parkland. The partners will pay neither property tax nor the “payments in lieu of taxes” that are made when a private business venture occupies public space.

Officials in the Bloomberg administration act as if the very notion that the team ought to pay property taxes is nuts.

Once upon a time, the city was warned about just these kinds of ventures — by none other than the chief spokesman for the Yankees, George M. Weiss, the general manager who ran the team at the height of its success in the 1950s.

After the Dodgers left Ebbets and the Giants left the Polo Grounds in the late ’50s, the city began planning to build a ballpark in Flushing.

“Every municipal stadium in the country is a white elephant,” Weiss said in 1960. The new stadium would “create a deficit that is, I believe, unfair to the public that will have to foot the bill, and to the Yankees, who go on paying the city $200,000 a year in taxes.”

In December of that year, the mayor and City Council approved what became known as Shea Stadium, even though the rent the city collected would not cover the payments the city would be making on the construction bonds.

In trying to stop the deal, the council’s minority leader, Stanley M. Isaacs, a Republican-Liberal, made a prophetic argument.

“He predicted that the Yankees would seek tax exemption for the Yankee Stadium on a threat to pull out of New York,” The New York Times reported on Dec. 21, 1960.

Isaacs was right about that. By 1970, CBS owned the Yankees. The executive in charge, Michael Burke, publicly threatened to move the team to New Jersey. Mayor John V. Lindsay agreed to buy Yankee Stadium, overhaul it, and lease it back to the team at very favorable rents. Over the years, the city lost tens of millions of dollars on the lease.

Soon after the Yankees had gotten their (first) handout, the owners of Madison Square Garden stepped forward to howl about their property taxes. The Garden had opened in 1968, a triumph of private enterprise, the owners said. In 1981, the city, under Mayor Edward I. Koch, agreed not to collect taxes for 10 years. Or at least that was what Mayor Koch said he thought the city had done. But the city ended up waiving property taxes on the Garden as long as the Knicks and Rangers play there — a deal that has cost the city at least $250 million in tax revenue.

During the debates on Shea Stadium nearly 50 years ago, Stanley Isaacs made another declaration.

“When Rome fell, the people were placated by circuses,” he said. “Our present administration has modernized the approach, but the lesson is still plain.”

E-mail: dwyer@nytimes.com

"Yankees, Mets Embalm Baseball at Stadiums Costing $2.3 Billion" Bloomberg 4/3/9

Yankees, Mets Embalm Baseball at Stadiums Costing $2.3 Billion

By James S. Russell

Read the whole review by clicking the title above, but here's a little taste:

"There are even fewer surprises at the new Yankee Stadium, a far haughtier enterprise over in the Bronx that cost a head- spinning $1.5 billion.

"The Yankees have replaced the supermax prison look of its old home with pompously self-regarding limestone, monumental archways, carved eagles, and the team name incised in gold leaf.

"A skylighted open-air Great Hall, bannered with heroes past and present, extends along the main 161st Street side. The peculiar choice of metal mesh as a wall finish suggests imminent arraignment, rather than an afternoon’s leisure."

"A Late Rush to Tidy Up the Yankees’ New Home" NY Times 4/3/9

A Late Rush to Tidy Up the Yankees’ New Home

By MATHEW R. WARREN
Published: April 3, 2009

In the days before the Yankees play their first game in their new stadium — an exhibition against the Chicago Cubs on Friday — an extensive beautification effort has been under way around the perimeter and in the neighborhood.

Inside the stadium, workers cleaned and polished metal railings. Outside, landscapers planted bushes and trees. City park workers picked up trash, painted benches and spread grass seed in nearby parks. Power washers were sent out to remove graffiti from neighboring buildings. Workers put down lines of fresh white paint on the crosswalks, and even a nearby McDonald’s was undergoing renovation.

Angel Dejesus, 59, a city parks worker who was picking up trash in Macombs Dam Park and lives in the area, said the neighborhood was regularly maintained, but he conceded that the pace of maintenance had been increased for the stadium’s opening.

“We’re really supposed to have this cleaned up before they play,” Mr. Dejesus said. “I guess we want people to come to the Bronx and say, ‘Everything is clean and nice.’ Of course, we clean regularly no matter if the Yankees play or not, but right now we are paying more attention because of all the activity around the stadium.”

He added that he thought the new stadium was unnecessary. “It’s nice, but I think they spent money for nothing,” he said. “They have the old one, which was still good.”

Jose Valle, 34, an employee of Harder Landscape Contractors who lives in Hempstead, N.Y., was planting juniper bushes. “I’ve been working on this for more than a month,” he said. First, we put in the dirt, then the trees, and now we are planting the bushes. By Friday, we have to be done with everything.”

Anthony Robinson, 50, a graffiti remover, was power-washing a building at 161st Street and River Avenue. “We’re doing a lot more right now in this area,” he said, adding that his company was usually called in when the Sanitation Department asked for them or in response to calls to the city’s 311 hot line.

Mr. Robinson took note of the effort to beautify the neighborhood, but said the effect would be limited. “At night it’s still going to look like the South Bronx,” he said.

Dortricia Grant, 54, a supermarket cashier from the area, said she was astounded to see renovations being done outside the McDonald’s eating area on 161st Street and River Avenue. “McDonald’s never had that much work on it the whole time they’ve been in the area.”

Wally Jimenez, 27, an audio engineer who grew up in the neighborhood, said the work was not primarily for the community’s benefit.

“They want to turn this into a commercial area, but they don’t think about the consequences for the people around here who don’t have the resources to get a new place when rents go up,” he said. “They are trying to push the community out.”

Mr. Jimenez said of the cleaning efforts, “I’ve never seen something like this, and I was born and raised in this area.” He added, “It’s good that they are cleaning up, but they are definitely not doing this for the community.”

Adrian Benepe, the city parks commissioner, said of the cleaning operations, “It’s sort of like cleaning your living room when you’re having people over.”

He added: “Without going too crazy, we’re going to spruce things up. Particularly this year, it’s going to get a lot of attention.”

Mr. Benepe said that the cleanup before a first game at Yankee Stadium was nothing new, but that this year there was an emphasis on putting finishing touches on new parkland and planting new trees.

“There were a few hundred large trees lost because of the new stadium,” he said. “We’re planting 8,000 new trees. About half of them have been planted so far.”

"Grand Stage for Yanks, but at a Cost" NY Times 4/2/9

Grand Stage for Yanks, but at a Cost

By HARVEY ARATON
Published: April 2, 2009

On the day the Yankees took the field in the gleaming new house that has already stirred debate about the real estate boom and bust, the sun broke through early-day clouds, Derek Jeter gave the new digs a firm thumbs-up and a Steinbrenner (Hal) answered the ceremonial first question about the manager’s job security.

“This is kind of an optimistic time right now; I haven’t even thought of it,” Steinbrenner, who inherited the title general partner from his dad, the Boss, said after a midafternoon workout. But he went on to mouth Big George’s organizational mantra: Anything less than winning the World Series would be considered a failure. That ought to make the seat in Joe Girardi’s state-of-the-art office feel familiarly hot.

Across the street from the hallowed grounds, inside the new ballpark, you couldn’t shake the feeling that the original had given birth to a genetically engineered child. The decorative facade stretches tastefully around the top of the soaring upper deck, as it did in the original stadium. The 31,000-square-foot Great Hall between the exterior wall and the stadium interior is almost spatially disorienting. An especially nice touch is the glimpse of the No. 4 train rumbling by in the small opening between the otherwise majestic decked stands and the bleachers in right in an enclosed outfield overloaded with corporate signage.

The only missing piece of franchise grandiosity was No. 13 at third base. Rest assured, Alex Rodriguez will return and, like the new Yankee Stadium, will be even larger than he was in his previous life.

Nobody was more attached to the old Stadium than Jeter, but he came into the interview room (more of an assembly, actually) after hitting his first batting-practice pitch over the fence, and called the new place a palace.

“It looks like the old Stadium unless you look into the stands — the stands are a lot bigger,” he said.

Is bigger necessarily better? Johnny Damon, whose best years were spent in the intimacy of Fenway Park, said that depends. “In Boston, there isn’t much land to expand, but it’s still Fenway, still a pretty incredible place,” he said. “We were fortunate to get those parks.”

He meant the centralized parkland that the less fortunate neighborhood no longer has, thanks to the cooperation of municipal politicians. But there is no doubt that the roughly 4 million fans who visit Yankee Stadium this season will appreciate the splendor of the throwback outer shell, the roomy concourses, the expanded cushioned seats, the multiple concession options that include calorie counts next to every item on the menu.

Factoring most prices ($10 for a beer in a souvenir cup), that may be the most reliable deterrent in maintaining some level of recessionary cost control. The other obvious choice would be an obstructed $5 seat on a bench in the bleachers, where television screens have been built into a dividing wall that will allow fans to follow the ball as it rolls between Damon in left and Brett Gardner in center.

No question, this is an impressive stadium. But when the broadcaster John Sterling told assorted guests outside the partnering Hard Rock Cafe to go take a look at the playing field because “it will take your breath away,” I thought, well, the old Stadium did a pretty fair job of that, too.

Mets fans walking into Citi Field for the first time should be bowled over by the conversion from dowdy Shea, but Yankees fans haven’t exactly been sitting in the city dump since 1923.

The new Yankee Stadium is not about improved atmosphere; it is about amenities — and there are many. But in the context of New York’s fiscal reality, are they worth what was taken from the neighborhood folk, the taxpayer subsidies and the unholy prices of the premium seats, a fair number of which remain available?

“I think if anybody in any business had known where the economy was going to go, they would have done things differently,” Hal Steinbrenner said. “There’s no doubt that small amounts of our tickets might be overpriced.”

While “no doubt” and “might” weren’t quite the right word match, at least Steinbrenner admitted to something. The unsold seats that stand to create pockets of blue reminders of overreaching are the Yankees’ problem. But the Steinbrenners have what they long wanted, while the players have computer screens at their dressing stalls inside a mall of a clubhouse that has a kitchen with two chefs, among places where reporters won’t roam.

When the Yankees rolled into the South Bronx by bus Wednesday night, the young lefty reliever Phil Coke couldn’t believe his eyes when he saw the two stadiums, side-by-side, lit up.

“I’ve never experienced anything like that before,” he said.

Of course, the demolition of the old Stadium is overdue. The neighborhood deserves at least some of its precious parkland back now that the house George M. Steinbrenner built with the help of the willing and the unwilling is officially open for business.

“I would have to think that it’s second to none,” Jeter said.

Or just what the Steinbrenners always demand of their Yankees.

E-mail: hjaraton@nytimes.com

"The Long Buildup Before Teams’ New Building" NY Times 4/2/9

The Long Buildup Before Teams’ New Buildings

By RICHARD SANDOMIR
Published: April 2, 2009

The Yankees announced their intentions in the mid-1980s, regularly and loudly demanding a renovated home in the Bronx or a new stadium — and threatening to leave for New Jersey if the city failed them. The Mets came next, nearly a decade later, quietly seeking a replacement for Shea Stadium.

Plans were drawn and financing schemes proposed.

Mayors — including the Yankees fan Rudolph W. Giuliani — entered and left office.

But recessions intervened. The era of financing ballparks with massive infusions of public money faded. Costs rose. And George Steinbrenner’s indecision — would he keep his Yankees in the Bronx, ship them to Manhattan’s West Side or cross the river to New Jersey? — not only delayed making a deal for his team, but one for the Mets as well.

Meanwhile, 19 baseball teams opened new ballparks starting in 1990 — and only one major sports facility was built in the five boroughs in that period: Arthur Ashe Stadium in Flushing Meadows-Corona Park, the legacy of a tennis-loving mayor, David N. Dinkins.

Before that, it was Madison Square Garden, which opened in 1968.

Building new stadiums in New York would prove to be as complex and difficult as developing other megaprojects, partly because of the scrutiny on high-profile ventures with public investment.

“Starting with the fiscal crisis in the 1970s, we starved the public sector in building all sorts of infrastructure except for the Javits Center,” said Mitchell L. Moss, a professor of urban policy and planning at New York University. He added, “Elected officials were afraid of them and communities were apprehensive of them.”

Still, there was no shortage of stadium plans, most of them for the fickle Yankees.

As the governor, Mario M. Cuomo proposed building a stadium and garage over the Long Island Rail Road yards on the West Side of Manhattan in 1993 and then, facing criticism, tacked weeks later to suggest a renovation of Yankee Stadium.

By 1996, Giuliani was pushing the West Side option as easy to finance, plus a new Mets stadium in Flushing — a double-barreled proposal that he felt would help a New York bid for the 2008 Summer Olympics. Over two terms, he offered three financing plans, all with the city paying about half the cost of the stadiums. None advanced.

Publicly, it appeared that satisfying the Yankees was the city’s and the state’s main priority. While Steinbrenner blustered about parking, safety, traffic and attendance in the Bronx, Fred Wilpon, the Mets’ principal owner, never looked to move beyond Shea’s parking lot.

“The Mets were on the radar,” Cuomo said. “I was talking to both teams, and it was my understanding that Fred should sit back and whatever the Yankees got would set a precedent for the Mets. He had nothing to lose. You couldn’t do them simultaneously, it would have been too much, so we concentrated on the Yankees.”

Jeff Wilpon, the Mets’ chief operating officer, said the Mets were not on a parallel track with the Yankees until the team submitted a proposal for a $457 million, 50,000-seat, retractable-dome stadium next to Shea, with an Ebbets Field-like rotunda, in 1995. “We weren’t looking for the same dollars as they were, but something equivalent,” he said.

In 1998, Giuliani’s plan to use the commercial rent tax to finance the city’s half-share in the stadiums — which died in a nasty political battle with the City Council speaker Peter F. Vallone — was followed days later by Fred Wilpon unveiling a model of his ballpark.

But neither Wilpon’s miniature stadium nor the Yankees’ second World Series championship in three seasons was capable of spurring ballpark construction.

Giuliani tried to leave office at the end of 2001 — three months after the Sept. 11 terror attacks — with a grand slam: a nonbinding proposal to split the $1.6 billion cost of two stadiums. But his successor, Michael R. Bloomberg, quickly canceled the plan as impossible during a recession, and once again the stadium issue turned dormant.

Jeff Wilpon said he is certain that absent the Sept. 11 attacks, Bloomberg would have proceeded with Giuliani’s plan and stadium construction would have soon begun.

Randy Levine, the Yankees’ president, said: “I realized the gravity of what was going on. There would be no direct city participation in the financing of the stadiums.”

The realization prompted the Yankees in 2004 to develop a financing plan that had as its centerpiece the shifting of revenue that would normally be shared with other major league teams to pay for largely tax-exempt bonds that would be issued by the city.

Here, the Yankees, in the city’s view, moved aggressively past the Mets. By the spring of 2005, Daniel L. Doctoroff, then the deputy mayor for economic development, said in an interview, “We were pretty close to a deal with the Yankees and nowhere with the Mets.” Wilpon said, “The Yankees kept moving on and we sort of held back.”

But the baseball stadiums needed a catalyst and got one unexpectedly through a third stadium: the $2.2 billion football complex that was being planned by the Jets on the same West Side site that Cuomo had once recommended to the Yankees.

The massive stadium was to double as an Olympic stadium if the city were chosen as the site for the 2012 Summer Games. But a state panel’s rejection of the stadium in June 2005 sent the Bloomberg administration and Olympic officials racing for an alternative to satisfy the International Olympic Committee before it named the 2012 host city.

They cast their eyes from Manhattan to Flushing, and, over a frantic few days, made a deal with the Mets for a ballpark that would expand to Olympic size in 2012 and contract afterward. The Mets had the deal whether the city got the Olympics or not.

“In three days we brought the Mets up to parity,” Doctoroff said. The Yankees got their deal done over the same period, partly because of how close it had been to completion, and also agreed to host the Mets during the Olympics, if necessary.

Levine said that even without the Jets/Olympic stadium’s demise, it would have taken little time to complete a Yankees deal. Wilpon agreed. “If they did deals for the Jets and Yankees,” he said, “what were they going to say, ‘You can’t have anything’? ”

The two stadium deals were announced in 2005 within three days of each other — and three weeks later the 2012 Summer Games were awarded to London.

Construction began in 2006 in Flushing and in the Bronx, and fans can now judge Bloomberg’s sports legacy: ballparks that cost their teams $2.3 billion but were made possible by almost $1.2 billion in city and state-funded infrastructure and tax breaks.

"Lawyer Who Was Hired by Yankees Sues the Team’s Bronx Community Charity" NY Times 4/1/9

Lawyer Who Was Hired by Yankees Sues the Team’s Bronx Community Charity

By FERNANDA SANTOS
Published: March 31, 2009
A lawyer hired by the Yankees to oversee the distribution of hundreds of thousands of dollars given by the team each year to community groups in the Bronx on Tuesday sued the nonprofit organization set up to divide the money, claiming that its chairman had mismanaged the funds.

The lawsuit opens a new chapter in the convoluted history of the new Yankee Stadium, which endured fierce opposition from many residents and neighborhood advocates and continues to face questions over its reliance on public money to finance much of the construction.

In papers filed in State Supreme Court in the Bronx, the lawyer, Michael Drezin, accused the nonprofit fund’s chairman, Serafin U. Mariel, of essentially shortchanging the charity by depositing $800,000 provided by the Yankees last year in a non-interest-bearing account at a bank that he co-founded and where he still works.

In addition, only a fraction of the deposit was insured, the lawsuit says — an “irresponsible and unnecessary risk” at a time of deep economic uncertainty, Mr. Drezin said in an interview.

“In my opinion, there’s absolutely no innocent explanation for this behavior,” he said.

Mr. Mariel hung up on a reporter when reached on his cellphone and did not return subsequent voice mail messages.

His lawyer, Irwin P. Underweiser, did not return calls to his office in White Plains.

The lawsuit also contends that Mr. Mariel awarded a no-bid contract to the company that developed the fund’s Web site, which goes against the organization’s bylaws, according to Mr. Drezin, whom the Yankees hired in December 2006 to incorporate and administer the charity, as well as to draft its rules. Mr. Drezin also says that the charity’s board of directors has never paid him. News of the suit was reported on Tuesday by The Daily News.

In his lawsuit, Mr. Drezin asks for Mr. Mariel’s resignation and financial compensation of at least $35,000 a year, which is what he says the Yankees had agreed to give the board to cover the cost of his services.

Known as the New Yankee Stadium Community Benefits Fund, the charity was created as part of an agreement signed by the team and city officials, including Adolfo Carrión Jr., then the borough president. It was seen as a way to placate opponents and make up for the inconveniences of a massive construction project in a busy swath of the South Bronx.

Under the deal, the group would receive $800,000 a year in grants and $450,000 in free tickets, merchandise and athletic equipment. It was not until several months after Mr. Drezin was hired that Mr. Carrión and three City Council members, Joel L. Rivera, Maria Baez and Maria del Carmen Arroyo, picked the charity’s seven board members, including Mr. Mariel.

The fund received its first $800,000 from the Yankees in February 2008, but there were delays in distribution because it had not yet set the criteria for distribution, Mr. Drezin said.

After about three months of reviewing bank statements showing that the first withdrawals had been made, Mr. Drezin said, he noticed that the account was not collecting any interest and that the funds had all been deposited in the bank Mr. Mariel founded, New York National Bank.

Mr. Drezin did not question the integrity of the distribution process, but he said that Mr. Mariel’s banking choice amounted to “a conflict of interest and a violation of his fiduciary obligations toward the fund.” He also said they had clashed over how the board should respond to reporters; Mr. Drezin said that he pushed for an open-door policy but that Mr. Mariel was against it.

Mr. Mariel is well respected in the Bronx, where he has built a solid reputation as a businessman. His bank opened branches in the South Bronx at the onset of the crack cocaine epidemic, when few others dared to do so.

“Perhaps much of this has unfortunately a lot to do with a clash of personalities,” said Assemblyman Rubén Díaz Jr. of the Bronx, who is running for the borough president seat left vacant by Mr. Carrión, now the White House urban affairs chief.

Mr. Rivera, for his part, described Mr. Mariel as a “sound individual.” Although he had a role in naming Mr. Mariel to the fund’s board, he said he was not familiar with its inner workings.

“I don’t know if there’s any internal conflict in the organization itself,” Mr. Rivera added. “As long as the $800,000 was distributed to the Bronx community, that no one is making money on the side, I’ll leave it up to the lawyers and the judge to decide on the merits of these allegations.”