Bloomberg mulling $100m-plus in tax breaks, dubious tax-exempt bond plan for Bronx soccer stadium

When Rudy Giuliani finished up his time as New York mayor, his parting gift to the New York Yankees and Mets was a last-minute deal for new stadiums to be built with the help of public money alongside their old homes in the Bronx and Queens. And though his successor Michael Bloomberg immediately tossed out those promises, saying it was “just not practical this year,” he ultimately agreed to new deals that were just as lucrative — and the Giuliani deal allowed the two teams to cash in $50 million in city kickbacks to pay for executive salaries, hired lobbyists, and other stadium “planning” expenses along the way.

With Bloomberg now one foot out the door at City Hall, we could be seeing a repeat of sorts, at least of the last-second stadium announcement that gets dumped in the next mayor’s lap. Reports Capital New York:

The New York City Football Club, a consortium backed by the Yankees and Manchester City owner Sheik Mansour bin Zayed al-Nahyan, has been working with the Bloomberg administration to hammer out the broad outlines of an agreement to build a soccer arena just south of Heritage Field, the site of the old Yankee Stadium…

According to the terms of the rough-hewn agreement, the New York City Football Club would pay to purchase the elevator-company building and relocate the business to a new site. The team would also pay an unspecified sum to the unlucky folks holding $240 million in underwater debt on the underutilized, city-subsidized parking lots built in conjunction with the new Yankee Stadium…

The city, in turn, would demap a portion of 153rd Street, take over the GAL site and give the team a 99-year lease. Only after 38 years would the team pay the city fair market rent. The city would also agree to issue tax-exempt bonds to finance the $350 million project, and it would grant the team $21.5 million in other tax waivers.

Capital New York says the city wouldn’t lay out any cash, but this would still be a significant non-cash gift. If the city takes over the site, that presumably means it wouldn’t pay property taxes; a similar exemption for the earlier proposed NYCFC soccer stadium site in Queens was estimated to be worth about $100 million. Add in $21.5 million in other tax breaks (probably exemption from construction sales tax and the like) and 38 years of free rent, and you could easily be talking about $150-200 million in city subsidies.

Then there are those tax-exempt bonds, which have been a Bloomberg specialty for sports projects. Longtime readers of this site will recall that while tax-exempt bonds are not usually allowed for private projects, New York City used a clever workaround to exempt sports teams from property taxes, have them put their bond payments in a box marked “property taxes” (or actually “payments in lieu of property taxes,” or PILOTs) and then claim that the bonds were being paid off with public tax funds, as the tax law requires.

The IRS later partly closed this loophole — requiring, for starters, that the box marked “property taxes” contain an amount that varies year to year like property taxes do, making the bonds less alluring to buyers. But the New York Post reports that NYCFC thinks it has a way around that:

The club would make pilot payments through a 35-year deal and guarantee bondholders revenues from suite sales, naming rights and the like, a source said.

BZZZZZZT! That’s not legal under tax law: suite sales, naming rights, etc., are private payments, which means the entire bond offering would be ruled taxable. Unless NYCFC is talking about selling some tax-free bonds to be paid off with PILOTs and some taxable bonds to be paid off with venue revenues, which would be kosher. If the entire $400 million cost of the stadium ends up getting tax-exempt bonds, that could easily cost taxpayers another $80 million or so in lost tax revenue — though most of that would end up hitting the federal government, so it’s really folks in the rest of America who’d end up stuck with that bill.

In any event, it seems like we can expect some kind of announcement in the last two weeks of the year, probably on New Year’s Eve from the tarmac of whatever airport Bloomberg is about to take off to Bermuda from. That will leave the ultimate decision in the hands of incoming mayor Bill de Blasio, who has a reputation as a nemesis of the rich but who notably endorsed the Brooklyn Nets‘ arena subsidies (which included a similar PILOT tax dodge) and is tight with Bronx borough president Ruben Diaz Jr., who is likely to be endorsing this soccer project because he’s all about building stuff in the Bronx, whatever the public cost. It’s gonna be an interesting new year.


13 comments on “Bloomberg mulling $100m-plus in tax breaks, dubious tax-exempt bond plan for Bronx soccer stadium

  1. The only surprising thing about this whole development is that an MLS stadium will apparently cost upwards of $400 million.

  2. Any reason Americans are subsidizing not just a foreign owner but one of the richest sports team owners on the planet?

    I mean a good reason.

  3. “…it’s really folks in the rest of America who’d end up stuck with that bill…” wether it’s big league sports owners, King Bloomie of Bill the Red they all act as mafia don’s and the suckers (sheep sports fans) will be left holding the bag.

  4. Paul: I’d have no problem if it was just sports fans left holding the “bag”. IF new stadia were paid for entirely by user fees or ticket taxes (or even mostly paid for by same), the argument can be made that that is as it should be. The problem is that increasingly it is the general public, many of whom let us not forget do not earn enough to ever hope to buy one of the prized seats inside these new sports palaces, that pays for the majority of these facilities.

  5. I haven’t been following the New York media as much as I perhaps should have…. can anyone tell me where the Yankees, Mets, Nets or Giants threatened to move to if they didn’t get massive stadium subsidies? Glendale maybe? Cincinnati No? San Antonio?

    Interesting that the city so often cited as the “justification” for other cities stadium subsidies (‘we gotta compete with them…’) is now fully committed to giving them out in record fashion.

  6. Rudy Giuliani once said that if the Yankees didn’t get a new stadium, they’d never be able to compete with the Baltimore Orioles.

  7. The Yankees don’t need a stadium to compete with the O’s, just a field and spots for the TV cameras.

  8. John, you’re right it’s everybody who are the suckers.
    The abandonment of any oversight by the American sheep has led to the mob mentality that will sink us all.

  9. The owner has a history of using soccer to “launder” his unspeakable human rights record as the deputy prime minister. Here’s a link to Human Rights Watch’ s report on the man about to receive all these tax breaks
    http://www.theguardian.com/football/2013/jul/30/manchester-city-human-rights-accusations

    Why are we doing this?

  10. John Bladen – New jersey is where the teams threaten to go… That’s why the NY superbowl is being played out in NJ. Even the f1 race that chairman Bernie Ecclestone has wanted for 20 years is scheduled to be in NJ.

  11. And:

    NJ works for once a week football games and a soccer team no-one much cares about. The Yankees have threatened to move there several times since the 90’s as I recall, but would never have actually done so. There’s a world of difference between expecting fans to schlep out to the Meadowlands for a Giants game on a Sunday afternoon and asking them to make the journey daily for the Yankees.

    The F1 Race (which may never happen, like it’s predecessor scheduled for Flushing Meadows in the 1980s…) is supposed to be in NJ for a couple of reasons:

    1. You can’t shut 3-4 miles of New York streets down easily/economically.

    2. You get excellent views of the NY skyline as a backdrop from NJ, not so much from within NY.

    The only common matter would be that building anything in NJ should be much cheaper than Manhattan/the Bronx… one of the major reasons the Giants/Jets have been at the Meadowlands since the 70s/80/s respectively.

  12. Bob: Dunno.

    Maybe it’s in the hope he will be a nicer guy if “we” give him a couple hundred million more than he already has.

    You know, kind of like that “to make the rich work harder we pay them more, to make the poor work harder we pay them less” thing… That said, I’m pretty sure the Sultan’s concept of work is quite a bit different from the ours…

  13. Hey it’s New York – a tarpaper shack would cost at least $5 million, even if it were located in the south Bronx

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