Totaling the Yankees bill

My latest communique in the ongoing skirmish with economist Andy Zimbalist over the New York Yankees stadium plan is up at Baseball Prospectus today. You need to be a BP subscriber to read it in all its glory, but I’ll summarize a couple of the new findings here:

Annual city rent receipts from the Yankees are going up, not down. Here are the official rent payments by the Yankees, along with deductions for stadium maintenance and for “planning costs,” over the past ten years for which the city has figures:

1995-99       2000-04
Gross rent                        $32,400,000   $60,900,000
Maintenance deduction             $21,000,000   $23,500,000
"Stadium planning" deduction               $0   $10,970,000
Net rent                          $11,400,000   $26,430,000

While Zimbalist and Yankees president Randy Levine might argue that the team’s maintenance deductions will grow to the point where it’s paying zero rent, that’s not where things have been headed of late. Rather, while maintenance costs have edged slightly upwards, the Yankees’ gross rent has nearly doubled, thanks to soaring attendance and ticket prices, and a rent formula that charges the team more when it’s doing well at the box office. In this light, my estimate that the Yanks would keep on paying $7.5 million a year in rent for the next 30 years – money that would be lost to the city if the team gets rent-free new digs – seems conservative if anything.

Baseball’s revenue-sharing deduction may not be worth as much as everyone has thought. While all previous reports have been that stadium costs are fully deductible as expenses – which would result in teams getting back about 39 cents in reduced revenue-sharing payments for every dollar they spend on construction – Zimbalist asserts that teams actually have to amortize their costs over anywhere from 10 to 40 years, which would reduce the value of the deduction by anywhere from 26% to 62%. I’ve been unable to independently confirm this – the experts I’ve asked, both inside and outside of baseball, have given me a little bit of “it might be” and a whole lot of “beats me” – but I hope to have a definitive answer pinned down in coming weeks.

Meanwhile, I’ve managed to compile the most comprehensive estimates yet of just who would be paying what for the Yankees’ new pleasure palace. Some of these numbers I’ve covered here before; others were newly uncovered by the recent Good Jobs New York report:

PUBLIC COST:

$136 million city money for land and infrastructure
$13 million city rent rebates on current stadium
$70 million state garage subsidies
$5 million operational fund (city)
$5 million operational fund (state)
-$62 million city garage ground lease
$19 million lost city garage revenue
-$10 million memorabilia sales (city)
$55 million tax-exempt bond subsidies (federal, city and state)
$44 million future property-tax savings (city)
$11 million sales-tax breaks on construction materials (city)
$11 million sales-tax breaks on construction materials (state)
$103 million forgone city rent revenues
$8 million forgone city mortgage recording tax
$14 million forgone state mortgage recording tax
$1 million present value of additional reserve fund in year 2039
-------------
$423 million

YANKEES COST:

$800 million bond payments
-$117-311 million revenue-sharing deduction
-$103 million forgone future rent
-$13 million present rent rebates
-$44 million future property-tax savings
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$329-523 million

GARAGE OPERATORS COST:

$164 million garage construction
$62 million ground lease
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$226 million

MLB COST:

$117-311 million revenue-sharing deduction
--------------
$117-311 million

So there you have it: Taxpayers would be stuck with about $420 million worth of costs (not counting “as-of-right” property tax breaks that apply to all of the Bronx), while George Steinbrenner, depending on how the revenue-sharing break works out, could end up putting in less of their own money than the public. The team, meanwhile, would reap all the stadium revenues like naming rights and luxury suite sales; taxpayers would be left with a thin trickle of new tax revenue that wouldn’t even come close to paying the public costs. As bad deals go, that’s Buhner-for-Phelps territory.

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4 comments on “Totaling the Yankees bill

  1. If this stadium is not built the public will not save $423 million. You think the things like tax-exempt bond subsidies (like $500 mil tax-exempt bonds for an American Airlines terminal or $650 million for One Bryant Park or $417 million for Terminal One Group or $161 mil for Airis Corp) won’t be used elsewhere?

    Any why even list the MLB cost (which you do twice)? MLB made the decision to create incentives for teams to build new stadiums because they thought it was good for their business.

  2. The MLB cost is listed twice because once it’s a positive, the other it’s a negative; it’s a subsidy from MLB to the Yankees, so it has to come off one side’s ledger and go onto the other’s. As for the rest, I guess I’ve never found “The government’s going to blow the money on something, it might as well be this” a very convincing argument, especially when that same government is using budget shortfalls as an excuse to raise fees and cut services.

  3. If the stadium is not built, the public will still conservatively save:

    * $136 million city money for land and infrastructure

    * $70 million state garage subsidies

    * $5 million operational fund (city)

    * $5 million operational fund (state)

    * $19 million lost city garage revenue

    * $103 million forgone city rent revenues

    ————-

    for a total of $338 million.

    It’s saving more than the $225 million that the project is supposed to generate in tax revenues over 30 years.

  4. Zimbalist writes on BP:
    “Since the average amount of public funding for new stadiums over the last 15 years hovers around 70 percent, the Yankees’ plan to pay 75 percent themselves is prima facie fair.”

    How is a historical pattern prima facie evidence of fairness? It’s a record of poor performance that has shaped the current negative public opinion – not a measurement of fairness. The public does not support new construction. Supporting new construction against the wishes of the people is about ego, not policy. Give people a choice of the Peter MacGowan model or the MLB/Nationals model and they will take the MacGowan model EVERY TIME. So who exactly is making the argument for public funding? Because It sure ain’t the public.

    Nationals:
    Ipsos poll of DC voters 10/04
    “Would you favor or oppose building a baseball stadium with public funds?”
    66% oppose
    32% favor

    Twins:
    9/30/97 – A new public-opinion survey reports that Minnesotans oppose construction of a new Twins stadium by nearly two to one (via U. of Minn stadium timeline)

    Cardinals:
    4/02 – Nearly 65 percent of voters polled statewide objected to the team’s request for financial help from the city of St. Louis, St. Louis County and the state, according to the poll, released Saturday. That opposition was solid across the state, among urban and suburban voters.

    Marlins:
    3/05 – A general question about using public money to build sports facilities drew opposition from 76 percent of those polled. And there’s steep opposition to spending tax money on a Miami stadium for the 2003 World Series champion Marlins as well: 84 percent polled statewide oppose it, as well as 68 percent of Marlins fans. (Sun-Sentinel)

    People don’t want to pay for stadiums.

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