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.