Field of Schemes: Here come the lukewarm Jets

June 03, 2004

Here come the lukewarm Jets

After five hours of the New York city council's hearing on the proposed $1.4 billion New York Jets stadium - at which point the hearing was still going, though only three councilmembers remained and the press table stood empty - here are some of the high points of what we learned, or didn't:

First off, nobody, but nobody, understands Mayor Mike Bloomberg's financing plan, which includes $600 million in state and city money for the stadium, which would be owned by the adjacent Javits Convention Center but leased to the Jets, with revenues to be controlled by ... well, no one knows yet. Likewise, no one seems to know whether the city council or state legislature will get to vote on that $600 million expenditure, which as one speaker pointed out would be greater than the total cost of any football stadium in history. At one point deputy mayor Dan Doctoroff indicated that the city's share of stadium bond payments - about $21 million a year for 30 years - would come out of the general fund, which would seem to require a council appropriation; at another point he said that since "everything west of 11th Avenue" - the stadium and the convention center expansion - would be on state land, it wouldn't involve the council at all.

One thing's for sure: the city and state wouldn't get any direct revenues from the stadium. Instead, the public benefit would come entirely from increased sales and income tax revenues, which Doctoroff - citing an Ernst & Young study commissioned by the Jets - estimated would amount to $74 million a year, more than enough to turn a profit on the stadium bonds. (He also said it was "not tax increment financing," though it was financing using incremental taxes. See why nobody understands this?)

The city's reliance on a report paid for by the entity seeking government aid came under a fair bit of fire at the hearings. When state development chief Charles Gargano insisted that Ernst & Young's numbers are trustworthy because they're a "reputable firm," councilmember Eric Gioia snapped, "Arthur Andersen was a reputable firm at one time as well." University of Chicago economist Allen Sanderson (affectionately known around here as "the helicopter guy"), brought in by the new New York Association for Better Choices to analyze the Ernst & Young study, noted that E&Y's revenue projections included several dubious assumptions, including that the city would draw NHL and NBA all-star games to a facility without an NHL or NBA team (a league requirement), and that they city would get the Super Bowl every five years, though "only three times in the last 42 years has a Super Bowl been held in a cold-weather city."

Convention consultant Paul Sajovec noted other problems with the E&Y study: for one thing, it had credited the stadium with creating 100% of the tax revenues from any conferences that used it as a plenary hall, even if only for an hour or two out of a four-day-long event. (While stadium backers insist that these events wouldn't come to New York without the addition of a large plenary hall, he pointed out that eight of the 13 sample events listed in E&Y's own study had been held at convention centers without plenary halls.) Finally, Sajovec said that a survey he'd conducted of football stadiums in St. Louis, Indianapolis and Atlanta that double as convention center space found that they were used for very few non-sports events - just 11 total last year, "mostly religious assemblies, high school band competitions, and consumer shows."

As for the question of how much the Jets would pay for development rights to the rail yards where the stadium would be built - which, as readers of this website will recall, have been estimated to be worth somewhere between zero and three billion dollars - both Doctoroff and Jets president Jay Cross promised the team would pay "fair market value." Pressed by council speaker Gifford Miller (who, while backing much of the rest of the mayor's Hudson Yards development plan, was vocally skeptical about the stadium subsidy) as to how fair-market value would be determined, Cross answered that the Jets and city would hire independent appraisers. Doctoroff then added that the Jets would be allowed to deduct the $400 million expense of decking over the rail yards - a cost, one should note, that will be paid entirely by state and city taxpayers - prompting this exchange with the council speaker:

Miller: I would take issue perhaps with the notion that you have to take into account the amount of money for the platform. The MTA owns the rights. And it's not the MTA that's putting up the money to do the platform.

Doctoroff: I would think the city and state would want their money back for building the platform before the MTA were entitled to a share.

Miller: That would be great. That would be terrific.

Doctoroff: That's exactly what we're doing by building the New York Sports & Convention Center and getting that $70 million a year in taxes.

Miller: Yeah... I'm not sure we meant it in quite the same way there.

If today's hearing ever finishes, a second hearing is tentatively scheduled for June 14.

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