Smith College sports economist Andrew Zimbalist has written his latest defense of New York’s proposed stadium deals in a column for the Sports Business Journal, writing that “compared with the typical deal in the sports industry and previous proposals in New York, the new facility plans for the Yanks, Mets and Nets are good news indeed.” That Zimbalist is backing the deals is unsurprising – he serves as a paid consultant to Nets owner Bruce Ratner, after all, and has been a proponent of a Brooklyn Nets arena even before being hired to work on the project. However, Zimbalist’s article is also rife with factual errors about the projects’ public cost; those interested can read my response to Zimbalist here.
Zimbalist does, however, provide one useful piece of information for determining the stadiums’ true cost to the public. Discussing the plan to have the teams use “payments in lieu of taxes” to pay off their own stadium debt, Zimbalist writes:
Some may object that if the teams cover the debt service instead of paying taxes, then, in effect, the public treasury is paying for the bonds and the facility through forfeited tax collections.
This objection was valid in the case of the vetoed West Side stadium for the Jets. However, it applies only to a small degree for the Yankees, Mets and Nets.
The difference for the latter three is that the Bronx, Queens and Brooklyn are all in tax-abatement zones. (Manhattan is not.)
Under a commercial incentive program, all commercial developers in these boroughs do not have to pay real estate taxes on new projects for 15 years. After that, the tax is phased in at 10 percent a year for 10 years, and only in years 26-30 are full taxes assessed.
I estimate the present value of the taxes that are being replaced by the PILOTS for the Yankees, Mets and Nets at $44 million, $39 million and $21 million, respectively. Thus, for instance, it could be argued that the Yankees are paying $756 million out of the $800 million for stadium construction and the Mets are paying $661 million out of the roughly $700 million for their new ballpark.
George Sweeting of the city Independent Budget Office, while neither confirming nor disputing Zimbalist’s figures – there’s no way to know exactly what the PILOTs would be worth until the property value is assessed – did confirm to FoS that Zimbalist’s reasoning here is correct. However, Sweeting also points out that Zimbalist left out two additional public costs: the “opportunity cost” that comes from not using the land for a purpose that would generate higher property taxes; and the teams’ savings from using triple-tax-exempt state bonds to finance the projects, which he says “could exceed $100 million for the Yankees and Mets and are estimated at $75 million for the Nets.”
Adding the new figures from Zimbalist and Sweeting to previously published figures, then, we can now make new estimates of the total public subsidies required for New York’s new stadium projects:
- YANKEES: $469 million ($160m in city funds, $75m in state funds, $90m in Metropolitan Transportation Authority capital expenses, $100m in tax-exempt bond savings, $44m in property-tax savings)
- METS: $419 million ($105m in city funds, $75m in state funds, $100m in forgone city parking revenues, $100m in tax-exempt bond savings, $39m in property-tax savings)
- NETS: $296 million ($100m in city funds, $100m in state funds, $75m in tax-exempt bond savings, $21m in property-tax savings)
TOTAL: $1.184 billion
And that’s before any calculation of opportunity cost, and not counting the
Nets pay-your-tax-and-deduct-it-from-land-costs plan or any of several other possible hidden subsidies. Add
those in, and the three new sports facilities could end up costing taxpayers more than $1.5 billion, or $500 million apiece – more than any stadium or arena in U.S. history (though the planned Indianapolis Colts stadium would shatter that record).
Funny, “Bloomberg” doesn’t sound Greek.
LATE NOTE: Some of my math was off in the initial calculations, so I’ve revised this from $1.3 billion to $1.2 billion.