When TIFs go bad: the Reno Aces story

The Reno Aces, the Arizona Diamondbacks‘ Triple-A affiliate, are getting about a million dollars a year from the city of Reno to pay off their stadium construction debt, and it turns out every single person running for mayor of Reno thinks it’s a bad idea to keep making those payments. Or at least wouldn’t raise their hand at a candidate forum to commit to making the payments, which isn’t quite the same thing, but still.

So what would happen if Reno were actually to default on its stadium commitment? As it turns out, the original stadium deal was to pay off the stadium with the resulting rise in property tax receipts — so-called tax increment financing, or TIF — except that, as is so often the case, property tax receipts didn’t actually go up, leaving the city to fund the stadium debt out of its general fund. That means the city council must vote on making the payments every year, and there’s nothing stopping them from voting “no.”

If that were to happen, we’d enter uncharted waters: As the Reno Gazette-Journal puts it, “Well, baseball could leave. Baseball could also take the city to court.”

This is essentially the same scenario that Columbus was considering with the Blue Jackets last year, except that there it was a good-government group with a broken website that was pushing it, whereas here it’s actual people running for actual office who are threatening to play the default card. I’m kind of hoping they do, not because I have a particular interest in the fate of either the Aces or Reno’s budget, but because it would be extremely interesting to see how a court would rule on the legality of a city stopping payments on an already-built stadium. I suspect you’d see a lot of city attorneys — and good-government groups — poring over a hypothetical Aces v. Reno ruling for years to come. Though in the meantime, it’s still at least a good cautionary tale about the risky nature of TIFs, if anyone is listening.

Manhattan Jets/Olympic stadium plan: the cost that keeps on costing

The New York Jets Manhattan stadium plan may be long dead, but its legacy lives on in the form of “Hudson Yards,” the mixed-use development project that was supposed to surround it on Manhattan’s West Side. Back in 2005, you will recall, Mayor Michael Bloomberg succeeded in convincing the city council that key to getting tens of thousands people to shlep several blocks west of Midtown to see football, the Olympics, or whatever, was to build an extension of the #7 subway line west of Times Square. This would cost $2 billion (if you think that’s a lot, don’t get me started on the 1,500-foot tunnel in Queens that cost $645 million), but never worry, as it would all be paid off by increased property tax payments by new development on the site — that’s right, a TIF.

Except that the development still hasn’t happened, which as Juan Gonzalez reports in today’s Daily News has resulted in the inevitable consequences:

The Bloomberg administration paid $234 million during fiscal year 2012 to a city-created development group that oversees the huge new commercial and residential complex, one of the mayor’s most ambitious projects.

City Hall quietly earmarked most of that money — $155 million — to the Hudson Yards Infrastructure Corp. in late June, because the group has not been generating enough revenue to pay the annual interest due on $3 billion in bonds it issued.

Of course, there are still hopes that Hudson Yards development will one day take off as originally planned — as Gonzalez wryly notes, “Maybe it will in 50 years, when most of us are dead.” If only anybody could have seen this coming.

Sacramento proposes Atlantic Yards West for Kings

The NBA and city of Sacramento officially issued their plans for a new Sacramento Kings arena on the site of Cal Expo yesterday, and you sure can’t accuse them of thinking small: It includes a 350-acre “living village” with a new indoor fair space, and retail, office, and residential buildings, and a whopping price tag of $1.9 billion. If this sounds familiar, it’s because it’s a dead ringer for the similar office/residential/arena plan that is currently in the process of collapsing in Brooklyn, thanks to plunging demand for office or residential space.

All parties seem to be aware that this is not the best time to be looking for billions for a development project, with NBA arena consultant John Moag (formerly of the Maryland Stadium Authority, where he helped get stadiums built for the Baltimore Orioles and Ravens) calling it “not a shovel-in-the-ground project,” and saying the arena wouldn’t open until 2013, with the rest of the project following over the next 25 years. That will give them time to finalize such niggling details as finding an interested developer, and figuring out how to pay for it all — there’s talk of tax-increment financing, but no real details.

Economist Claude Gruen, a specialist in these kind of giant development deals, called the plan’s economic projections “too rosy,” and said it wasn’t reasonable to expect it could pay for itself. But at least it’s created some much-needed jobs for architectural sketch artists.

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