July 31, 2004
Le grand retarde
It's official, according to the Washington Post: MLB is again postponing a decision on the fate of the Montreal Expos, this time until late August or early September. Baseball officials did not indicate late August or early September of what year.
July 30, 2004
Yankees update
After further analysis (in other words, reading it again after getting some sleep), it appears that the New York Times' take on the Yankees' stadium finance plan wasn't entirely accurate. The Times, you will recall, reported:
The league's rules allow teams to subtract annual stadium costs from their revenue-sharing obligations. So the Yankees would pay, say, $40 million a year to repay the bonds, rather than handing it over to Major League Baseball.
Only one problem: While George Steinbrenner could possibly deduct this amount from the team's shareable revenues, he couldn't deduct it from his payments. (Think of it in terms of tax deductions and the check you write to the IRS, and it should be clearer.) So the maximum benefit of $40 million a year in stadium debt would be 37% (the revenue-sharing "tax rate") times $40 million, or $14.8 million. Still nothing to shake a fungo bat at, but not enough to wholly pass off stadium costs onto the other 29 MLB owners, either.
And there's another potential pitfall to this scheme, one that I haven't yet seen discussed in the media. The deduction for "stadium operations" costs is contained in the collective bargaining agreement with the players, which expires in 2006. If the other MLB owners decide they'd rather not help buy their richest competitor a new playpen - hello, Larry - then they could easily rewrite this provision in the next CBA, before the Yankees have gotten the chance to deduct a dime. If Steinbrenner goes ahead with this plan, there could be some very interesting bedfellows before it's all over.
Expos D-Day: Take the over
A decision on where to put the Montreal Expos is now "unlikely to be announced at the owners' meetings in Philadelphia on Aug. 18-19," according to USA Today baseball columnist Hal Bodley. All those who are surprised, please do your remedial reading.
It's raining stadiums!
First the stadium snowball effect hit New York, now it's Washington, D.C.'s turn: With the district considering plunking down the Montreal Expos in RFK Stadium until a new home can be built by taxpayers, RFK's current tenants, D.C. United, are demanding a new soccer-only stadium for themselves. "We can't continue to play back seat to baseball and have to figure out our future based on what Major League Baseball decides is going to happen," MLS commissioner Don Garber told reporters. "We've been here since 1996; we've been the major tenants at RFK. We've got a great relationship with the mayor and with the sports commission, but we've got to get a deal done as quickly as possible."
D.C. mayor Anthony Williams has previously expressed support for a soccer-only stadium, though no serious discussions have taken place as to who would pay for it. Not entirely unlike the mayor's baseball stadium proposal.
Yankees stay home?
Mass confusion strikes the New York media, as the mad scramble begins to cover the Yankees' new $1.2 billion stadium-plus-conference-complex proposal:
The New York Times reports that rather than the $450 million in subsidies reported by Crain's, "the city and state would probably have to spend around $100 million, officials said. Primarily, the city would be asked to create a string of ball fields and parks nearby." Furthermore, writes the Times' Charles Bagli, "the existing stadium, which opened in 1923 and has been the site of 33 World Series, would not be demolished, at least not most of it. It would be converted, possibly, to a multilevel parking garage with a soccer field on top, while retaining the ball field and the most recognizable elements of the structure." (At least somebody's getting their money's worth for that $5 million a year in design fees.)
Bagli further adds a possible explanation for why Yankee owner George Steinbrenner would suddenly be willing to pay $750 million of his own money towards a new stadium. The surprising answer: MLB's increased revenue-sharing.
The league's rules allow teams to subtract annual stadium costs from their revenue-sharing obligations. So the Yankees would pay, say, $40 million a year to repay the bonds, rather than handing it over to Major League Baseball.
"The team can shoulder most of the costs," said one person who has seen the Yankees' plan. "The beauty of this transaction is the fact that money spent towards stadium construction is viewed as an operating cost and isn't subject to revenue sharing."
(Well, maybe. According to an e-mail earlier this year from the late Doug Pappas, who was the expert in these things, "ordinarily I don't think construction debt would fall under 'Stadium Operations Expenses.'" If he was wrong, it means that the other 29 teams would be helping pay for a new stadium to make the richest team in baseball richer. I wonder what Larry Lucchino would have to say about that?)
Over at Newsday, meanwhile, the report is that the Yankees "are preparing another public plea for public funds. And New York City is preparing another rejection." The paper quotes a spokesman for Mayor Mike Bloomberg as saying: "The city has been talking to the Yankees about a new stadium for years, but a new facility will have to be built completely with private money. If there is accompanying investment in public infrastructure, it would have to pay for itself and wouldn't cost taxpayers a dime."
Of course, Mayor Bloomberg said similar things regarding the proposed Jets and Nets facilities, which combined are scheduled to eat up well over a billion dollars in public cash - justifying the expense by arguing that new fans following the teams across the Hudson would bring new city revenue. A Yankees stadium, by comparison, would merely move a team across the street, so the alleged economic benefits would be even more minimal than usual.
And finally, while I don't like to say I told you so: Did I tell you so or what?
Friday's Wrigley game in jeopardy
The Chicago Cubs say they've put up protective netting to catch any more falling chunks of concrete at Wrigley Field, but city officials say they're still waiting on clarifications to the team's inspection report before deciding whether to force the Cubs to cancel Friday's game. An announcement is expected Friday morning, at which point we should know if the city has genuine safety concerns, or was just (ahem) grandstanding.
Loudoun County gets loud
Sounds like Northern Virginia residents are starting to get hep to the notion of opportunity cost: At a small demonstration against the state's plan to build a $442 million stadium to lure the Montreal Expos, Arlington resident John Antonelli charged that because all new tax revenues from the stadium would be diverted to pay back construction costs, "If I put a Popsicle stand on that site, it will generate more money for this county than that stadium." The PR man representing the development consortium that would build the stadium complex responded by calling opponents "carpetbaggers." Because, you know, they're from Arlington County, Virginia, and the stadium would be in Loudoun County, Virginia. And the real-life carpetbaggers ... on second thought, I think somebody should have been paying closer attention in PR school.
Hope springs eternal in the swamp
New Jersey sports czar George Zoffinger was in Houston for the baseball All-Star Game earlier this month, schmoozing MLB officials with this counterintuitive come-on: "I am the last guy anyone should come to if they want a good deal on a stadium." Zoffinger insists that getting a piece of the New York media market would nonetheless make it worth a team's while to build their own home in the Jersey swamps; if you're a baseballprospectus.com subscriber, you can read my take on why Zoffinger could be right, but only if the incoming team didn't mind a giant helping of lawsuits from the Mets and Yankees.
Observer disses Jets stadium
Another New York newspaper has come out against the proposed Jets stadium, with the weekly New York Observer writing that "a stadium would have a negative impact on the cityís tourism business and quality of life" and calling instead for "measured residential and commercial development." The Observer is a long way from influential, but it's still one more in the growing chorus of Jets stadium skeptics.
July 29, 2004
Yankees to drop stadium bomb
This just in: Crain's is reporting that the New York Yankees will announce "within the next two weeks" plans for a new $750 million stadium, to be built across the street from Yankee Stadium in what's currently Macombs Dam Park. Yankee sources say the team would pay for replacing the most popular ballpark in baseball with their own money, with two caveats:
- The Yankees would seek tax-exempt Industrial Development Authority bonds, which are normally restricted to public and non-profit projects, and which could run afoul of the same tax-exempt bond rules as the Jets are currently grappling with.
- Taxpayers would have to spend $450 million on a hotel and conference center, a new Metro-North commuter train stop, and a ferry landing, as well as new parks elsewhere in the Bronx to replace Macombs Dam, as required by state law.
The Crain's story leaves more questions than answers: Where would the $450 million would come from? Who would get to run (and collect the revenues from) the hotel and conference center? What would happen to the House That Ruth Built? (Presumably it would be demolished to make way for either parking or the hotel.)
It seems an odd time for the Yankees to make a push for public funds - they're easily the richest team in baseball, and New York is already facing stadium-subsidy demands from both the Jets and Nets - but then, it's not like George Steinbrenner to sit by idly while other sports moguls rake in public dollars. If he can't latch onto the coattails of the Jets and Nets gravy train, The Boss would no doubt be satisfied if he can make damned sure that no one else is getting rich aside from him.
Late note: Astute reader Andrew Ross reminds me that the Mets lease with the city guarantees them the next new major-league baseball stadium built in New York. While it's possible the Yankees are hoping to get around this by avoiding public money for stadium construction - "No, really, your honor, that $450 million went into the other pocket!" - this could trigger a renewal of the Mets' demands for a new retractable-roofed stadium in the Shea Stadium parking lot. In 1998, a new Mets stadium was estimated to cost $500 million - lord only knows what that would come to in 21st-century dollars.
Kind not so Wunderful
William Somerindyke Jr. and Jason Osborne, the 20-something entrepreneurs spearheading Norfolk's run at landing the Montreal Expos, have embellished their work histories, according to an investigation by the Virginian-Pilot. The pair claimed to be officers of an investment banking firm, but beyond brief stints as brokers at Merrill Lynch, there's little evidence they ever worked in investment banking. Meanwhile, Summit Broadcasting and Efirms.com, the companies they supposedly run, are apparently not in operation. (Summit was "folded into" another firm, says Somerindyke, that currently boasts a whopping three employees.)
Combined with the pair's persistent reluctance to reveal the big-money investors they say are behind Norfolk's Expos bid, it raises the question of whether these guys are trying to become the John Spano of the 21st-century. "I have a passion for baseball to the point where people think Iím crazy," Somerindyke told the Virginian-Pilot. You got that half-right, William.
July 28, 2004
Another Horrow show
Already on board Norfolk's quixotic campaign to lure a baseball team, stadium Music Man Rick Horrow has hired on (at a modest $15,000 a month) to help Kansas City negotiate its proposed arena deal with Anschutz Entertainment. Horrow, who spent the better part of the '90s trying to sell small cities on sports facilities funded by a 1% sales tax hike, summed up his philosophy to the Kansas City Star:
"My facility-development business life has always been about overcoming the presumption of failure and the perception that a community is not major league. To me, regions like Oklahoma City, Charlotte, Jacksonville and Columbus have made that leap. I'm hoping the Kansas City region sees the vision, embraces it and benefits from it over time."
All those who think of Oklahoma City (a former Horrow client, incidentally) as "major league" and not Kansas City, please raise your hand. No, just one hand at a time, Mr. Horrow.
July 27, 2004
Soccer-stadium-of-the-month club
This week in the MLS stadium-go-round, it's the Colorado Rapids' turn, announcing plans for a 20,000-seat soccer-only stadium to be built on undeveloped land in Commerce City. As for who will pay for it, the local papers either don't know or don't care: News reports so far have echoed the Rapids' press release in stating that a $64 million bond issue will require "no tax increase to Commerce City residents," without saying how the bonds would then be paid off - elfen magic, perhaps? Commerce City voters will be asked to approve the bond plan, whatever the heck it is, in a November referendum.
Jets stadium-finance FAQ
Since last week's item on the New York Jets' stadium finance plan was, shall we say, a bit on the obscure side, here's an attempt to answer some of the questions that have been raised by puzzled readers:
Q: I'm confused. Is using tax-exempt bonds for a privately funded stadium legal or what?
What do I look like, a bond attorney? (Don't answer that.) The short answer is no, it's not supposed to be - but there are plenty of loopholes, some of which are known only to bond lawyers, or are being invented by bond lawyers as we speak.
As for this particular Jets PILOTs-for-phantom-property-taxes plan, after talking to various development and bond experts (including one known as "the bond god"), I can safely say that: No one knows. The IRS, which has the ultimate say, is prohibited by confidentiality rules from commenting on specific future projects, and no one else was willing to hazard a guess beyond calling it a "creative" financing mechanism. "One can never be sure what the IRS will do," notes Dennis Zimmerman, the Congressional Budget Office's tax-exempt bond expert. "Political pressure is always on to give liberal interpretations, and this may have enough of a veneer to give them the cover they need to say sure, this is okay."
Q: So the Jets are going to use naming rights and luxury box receipts to pay off their $800 million share? Can they afford that?
That's a fine question, and one that the Jets' current landlord, George Zoffinger, has himself raised. The New England Patriots and Washington Redskins recently financed the lion's share of their new stadiums with such things as suite revenue, but those each cost less than half as much as the Jets' behemoth. Until the team releases its own finance plan, that $800 million "private" contribution remains a black box, and worrisome for those who fear that the public may yet be asked to sweeten the pot.
Q: If stadium revenues really do pay for the Jets' portion, how much does that leave for the public to pay?
The same $600 million ($300 million from the city, $300 million from the state) that has been proposed all along. Getting tax-exempt bond status, though, would effectively pass along another $90 million to federal taxpayers. (Can you imagine how Dolphins fans will feel about helping pay for the Jets' new stadium?) And there are so many details to be worked out - remember, the finance plan looks like this - that there could easily be more subsidies hidden in the profit-sharing arrangements with the Javits Center, say, or the ground rent paid to the MTA. As with all stadium projects, but especially for one as complex as this, until there's a lease agreement, there's no way to exactly determine the public cost.
Cowboys court Arlington
If at first you don't succeed, just ease on down the road: The Dallas Cowboys, stymied in attempts to get the city of Dallas to pay $425 million toward the cost of a new $650 million stadium, are now wooing nearby Arlington instead. Billionaire team owner Jerry Jones has reportedly proposed splitting the cost 50/50 with Arlington taxpayers - which, if the Dallas price tag holds, would mean a $325 million bill for the public.
The Cowboys say they'll negotiate exclusively with Arlington until August 17, at which point the city council will decide whether to put a stadium plan on the November ballot. Arlington mayor Robert Cluck admits that funding a Cowboys stadium could be "a hard sell," especially after voters raised sales taxes by 0.5% in 1992 to increase George W. Bush's net worth.
Sydney Games still bleeding money
With the Athens Olympics due to begin soon, the Sydney Morning Herald notes that that city's Games in 2000 continue to cost taxpayers money, with the New South Wales state government spending about $46 million a year (in Aussie dollars) to maintain white-elephant venues. (The privately run Sydney SuperDome, meanwhile, built to host gymnastics and basketball, has filed for bankruptcy.) And that's on top of the estimated $2.2 billion that New South Wales spent to subsidize the Games themselves.
Of course, Sydney still got off easy compared to Athens, where the public bill is expected to near $10 billion. And cities actually compete to host these things?
Wrigley Field falling down?
After two chunks of concrete fell at Chicago's Wrigley Field this summer, Mayor Richard Daley the Younger threatened to shut down parts of the Cubs' home park unless it could be proven safe. Engineering experts note, however, that while crumbling concrete is a concern, it's common at older stadiums, treatable with routine maintenance, and not necessarily a sign of deeper structural problems at the 90-year-old ballpark. "There's no reason to tear down Wrigley," engineer Dallas Williams told the Chicago Tribune, which owns both the Cubs and Wrigley. "It's not going anywhere."
N. Va. hasn't landed land
More roadblocks in the Montreal Expos relocation saga: The Washington Post has revealed that Northern Virginia's Loudoun County, which has proposed a $442 million stadium surrounded by a 450-acre development called "Diamond Lake," doesn't actually have an agreement to buy most of those 450 acres. Virginia Baseball Stadium Authority director Gabe Paul, who wrote to MLB executives in May that "most of the land parcels comprising this stunning 450-acre site are now under the control of the development group, including the property where the ballpark will sit," now says: "In any statements I've ever made, I don't think I've been deceptive at all."
Virginia stadium backers point out that Washington, D.C., hasn't even picked a stadium site, and doesn't own several of those proposed, either. All of which is more evidence that if Bud Selig goes ahead with picking a new home for the Expos at the August owners' meetings, he'll be gambling on a work-in-progress - which wasn't the original shakedown scheme at all.
July 24, 2004
Louisiana gov floats new Saints stadium
Coulda seen that one coming: Louisiana Gov. Kathleen Blanco has asked state officials to look into building a new stadium for the New Orleans Saints. This after the state ran into trouble paying its yearly rent payments to the team, which former governor Mike Foster agreed to in order to, er, avoid having to build a new stadium. Yeah, that worked out well.
And in other predictable news, Blanco's proposal would - wait for it - combine the Saints stadium with expansion of New Orleans' convention center. This is now officially a trend.
Standing on the shoulders of Giants
Contra Costa Times columnist Eric Gilmore points out what we did yesterday about the giant funding hole in the A's latest stadium plan:
The price tag for a new stadium at this site is around $400 million. Even if Schott and Hofmann fork over $100 million, someone else will have to pay $300 million.
Where's that money going to come from? Oakland's schools are broke, sending out pink slips as if they were pieces of junk mail. The city has higher priorities: public safety, housing and education, to name three.
Gilmore's solution? "[A's owners] Schott and Hofmann should follow the Giants' lead and recruit an entire team of investors to own the A's and build a new stadium."
It's a tempting idea - and it's one reason why the Giants' self-financed ballpark gives Bud Selig fits - but it probably wouldn't work: the proposed Oakland stadium would be $100 million more expensive than the Giants' $306 million Pac Bell Park, for one thing. For another, the Giants didn't get "investors" in the team to fund their stadium; they sold $75 million in personal seat licenses (taking advantage of the dot-com money that was flooding the region in the late '90s), and took out loans for much of the rest, leaving the team with $18 million a year in mortgage payments for the next two decades.
If a new Oakland stadium can't bring in enough new revenue to pay off its construction costs - and almost no new stadiums do - bringing in extra investors to sink money into a losing proposition wouldn't help much, as the St. Louis Cardinals discovered last year. Has anyone thought of just paying off the Raiders to let them tear down Mount Davis?
July 23, 2004
Scuttling the Expos' butt
Remember yesterday, when we reported that baseball players union officials were predicting that the Montreal Expos would be moved to Washington, D.C. next year? Well, now those selfsame officials say it ain't so: "Nobody gave them assurances that they will be going to any location as opposed to anyplace else," union chief Don Fehr told the Washington Post. "People can make their own judgments on that, but we didn't make it for them."
Meanwhile, D.C. mayor Anthony Williams is gearing up for a possible Expos ruling by trash-talking his rivals across the Potomac, telling a local radio station: "How could Northern Virginia just presume that they're going to play in RFK?" (Either a D.C. or a Northern Virginia team, it's been reported, would play at D.C.'s RFK Stadium until a new stadium is built.) "If I can get a very good price for it, then obviously I want to do that. But we shouldn't just go around, trampsing around, presuming anything."
If you vote against it, will they spend anyway?
St. Louis' Coalition Against Public Funding for Stadiums is nearing its goal of 24,268 petition signatures to get a referendum on the November ballot to block the use of county money for a new Cardinals stadium, but it's still an open question as to whether such a vote would have the desired effect. Here's the scenario:
Last December, St. Louis County approved a $45 million loan - to be paid out annually out of hotel/motel taxes - to the Cardinals' owners, to be used in funding a planned $387.5 million stadium. (Another $85 million is coming from the city and state.) The Cards must pay off the loan, with interest, in 30 years - unless they choose instead to turn over ownership of the stadium to the county, which, given the book value of 30-year-old stadium, they almost certainly will do.
The planned referendum would amend the county charter to say that "no financial assistance may be provided by or on behalf of the county to the development of a professional sports facility" without voter approval. The referendum's backers say this would block the county from making its annual payments to the Cardinals without a public vote every year; county officials contend that the money was already "provided" last year, and the annual payments are just the county living up to a prior commitment. Regardless of what happens in November, this one seems destined to be decided by the courts.
A's leak stadium pitch
According to a "confidential team report" obtained by the Oakland Tribune (presumably from team sources), the Oakland A's are looking at building a new stadium in the Oakland Coliseum parking lot, and offering about $100 million to the cause. Since a 2001 city study found that a new stadium at that site would cost $399 million, and costs only go up with time, that would mean at least $300 million in public money would be needed. "Obviously, the financing of this will be the trick because nobody wants to put any more taxpayer dollars into a stadium," said Alameda County supervisor Gail Steele, a woman with a knack for understatement.
If the report is to be believed, the A's appear to have ruled out moving to a South Bay city such as San Jose, no doubt because it would cost too much to buy out the San Francisco Giants' territorial rights. And in a classic deployment of the move non-threat threat, the report indicated that if a new Oakland ballpark isn't forthcoming, the team's owners would look to sell to someone who would take the team elsewhere, since finding a new local owner is "not logical, given current venue." Andy Dolich and Robert Piccinini weren't immediately reachable for comment.
Sacramento council to take up arena debate
The Sacramento city council held its long-awaited meeting to discuss building an arena for the Kings last night, and the verdict was: They'll keep talking. Rejecting a proposed November referendum as too soon given the nebulous information about a proposed arena (as in, no one yet knows where it would be built or who would pay for it), the council instead passed an "intent" motion that calls for the city to enter into negotiations with the Kings, and says the council will begin discussing the issue next month, with the goal of a voter referendum next March.
The motion also sets the arena's price tag at $350 million (earlier estimates had been as high as $750 million), and says the costs will be split evenly between the Kings and the public. Though this language doesn't appear to be binding, Kings owner Joe Maloof nonetheless expressed outrage, telling the Sacramento Bee: "Weíve tried to negotiate for three or four years and have gotten nowhere. We're not in favor of this...we were never consulted."
Colts stadium linked to convention center expansion
Indianapolis mayor Bart Peterson has quietly hired three architectural firms to do feasibility studies of building a $450 million, 70,000-seat stadium for the Colts. According to the Indianapolis Star: "Talk of a new stadium, kept under wraps for months by city and Colts officials, is now directly linked to developing plans to expand the Indiana Convention Center - a necessary move, the city has said, to stay competitive in the convention industry." What, are the high-school band competitions threatening to go across the border to Kentucky?
July 22, 2004
Expos watch, cont'd
More rumors of the impending death of the Montreal Expos: Jayson Stark of ESPN.com reports that baseball union leaders Don Fehr and Gene Orza met with Expos player reps Brian Schneider and Brad Wilkerson this week, and told them that they'd most likely be playing next year in Washington, D.C., unless Northern Virginia is picked as a compromise candidate to placate Baltimore Orioles owner Peter Angelos, who has reportedly been resisting agreeing to a buyout of his territorial rights to D.C. There's still a "small chance," Stark added, that Las Vegas will be selected, while Portland and Norfolk as "extremely unlikely."
All such predictions should be taken with a large grain of salt - Stark is, after all, the guy who predicted the Red Sox beating the Cubs in this year's World Series - but if the tale of the union visit is true, it does sound like MLB is at least stepping up attempts to move the Expos in time for the 2005 season. If so, the league would likely be leaving the questions of where they'd play long-term and who would pay for it for a later date - which could either be a good bargaining tactic if the anointed city passes stadium legislation in all the excitement, or not so much if city officials try to cut a hard bargain, knowing that MLB has just given up all its leverage. Stay tuned, this could get very interesting.
Now batting: Wichita
Okay, it's official now: Every city in the U.S. wants to build an arena. The latest is Wichita, Kansas, where voters will go to the polls in November to decide on raising sales taxes by 0.75% to fund a $141.5 million, 15,000-seat arena. (The Kansas legislature would have to also approve the plan.) Building the arena, which would apparently be home to no particular sports teams, would be, according to backer George Fahnestock, "a defining moment in the history of our city." Yeah, or words to that effect.
July 21, 2004
Feds: Soldier Field landmark no more
The National Park Service has recommended stripping the Chicago Bears' Soldier Field of its standing on the National Register of Historic Places and as a National Historic Landmark, following a $660 million state-funded reconstruction project that left it looking like, well, this. "It's about time," Preservation Chicago president Jonathan Fine told the Chicago Tribune. "If you destroy the landmark, you should be punished for it." It's hard to argue with that.
All-Star punishment for SF?
On the baseball All-Star Game carrot-and-stick tip, reader Chris Tate writes:
There was some chitchat on Gary Radnich's morning segment on the Giants station (KNBR, www.knbr.com) recently about new parks and the All-Star Game. The selection of Pittsburgh for the '06 ASG is seen as quite a snub by some folks hereabouts, and the rumor is that the ASG is being withheld from San Francisco - which as you know full well has rather a nice park [ed. note: opened in 2000, and 90% privately funded] - because Selig and MLB are angry at the Giants for having set an example of teams being able to buy their own stadiums.
This conspiracy theory has apparently been kicking around for at least a year, and it's got friends - like the one about how Bud Selig keeps passing over Arizona because he's pissed at the Diamondbacks for buying a World Series winner and then turning around and asking MLB for a loan. Whether it's conspiracy to blame or just Kevin McClatchy's relentless autodialer, though, the whole mess is a great reminder of why competitive bidding rules were invented in the first place.
NYers still don't like stadium plan
Another week, another poll showing opposition to the New York Jets' stadium plan. In the latest Quinnipiac poll, 57% of registered voters opposed building a Jets stadium on Manhattan's West Side, compared with 38% in favor. (The numbers were 47% opposed and 45% in favor in a similar poll in April.) In a new twist, Quinnipiac also asked voters' opinions of the project if construction costs were to be paid off by new stadium revenue: respondents backed the plan 54%-41% if it were, opposed it 78%-19% if it were not.
"The stadium argument comes down to tax dollars," said Quinnipiac director Maurice Carroll. "If the claim is correct that the stadium will generate enough income, New Yorkers say, 'Build it!' If taxpayers have to pick up the tab, 'no way,' they say." And, presumably, given the poll results if no tax-revenue info is provided, if the stadium is a crapshoot, New Yorkers think it should be given a miss.
July 20, 2004
Selig: New parks to get All-Star Game priority
It's long been a tradition for baseball's All-Star Game to rotate each year between American and National League parks, but what's tradition in the face of rewarding taxpayer largesse? MLB supreme leader Bud Selig has indicated that, with the N.L. sporting five new parks that haven't yet hosted the game to the A.L.'s one, he might ditch the rotation to award more games to new stadiums. "In a perfect world, you would alternate NL and AL, but it's more important to reward franchises, I think, that really need to have the game because of their venue," said Selig. "There are so many great new ballparks, and that's the nice part." If hosting the game is a "reward," then presumably the people of Kansas City (last All-Star Game: 1973) and New York (1977) are being punished for their failure to build new facilities in the last 25 years.
Jets bond mystery solved?
The enduring mystery of how the New York Jets would be eligible for tax-exempt bonds for a privately built stadium - normally a big IRS no-no - may be solved. According to notes buried deep in Citigroup's proposal to underwrite the stadium bonds, stadium revenues such as naming-rights fees and luxury suite sales would be funneled through a "trustee or lockbox agent," which would then pay PILOTs (payment in lieu of taxes) to pay off the bond debt. (As explained in this simple diagram.)
While using private stadium revenues like this would normally be illegal, Citigroup continues:
The applicable regulations provide that payments in lieu of taxes are not private payments if (a) the payment is commensurate with and not greater than the amount that would have been paid under the applicable tax of general application. ... The first requirement will be met if the PILOT does not at any time exceed the amount that would be imposed on the related property if it had been subject to New York City property taxes.
And there's the gimmick. Sales and income taxes from the stadium have already been pledged to compensate the state and city for their $600 million share of the construction cost. Property taxes, though, haven't been - because the stadium, being built on state-owned land, wouldn't be paying any property taxes. According to Citigroup's bond attorneys, however, the Jets could claim their bond payments were "in lieu of" these phantom property taxes, and so qualify for a tax-exempt bond rate.
None of the economic development experts I reached could say for certain whether this sort of dodge would be legal, though the Congressional Budget Office's Dennis Zimmerman had earlier implied that it wouldn't be. (Zimmerman appears to be out of the office this week.) Assuming it is legal, though, what sort of dollar figures are we then talking about? Yankee Stadium has a current assessed value of $50 million, according to the invaluable Propertyshark.com; Madison Square Garden's assessed value is $76 million. Let's be generous, and give the new Jets stadium an assessed value of $150 million. Since MSG is currently ducking $11.7 million a year in property taxes thanks to a 20-year-old tax break, according to the city Independent Budget Office, applying the same tax rate to a Jets stadium would result in ... let's see ... about $23 million a year. And given that the stadium's valuation (and so its phantom property taxes) would rise over time, over the course of 30 years that would likely be enough to cover $600 million in stadium bonds.
Props to Citigroup's number-crunchers for their math skills, then. As for their tax-law skills, that may be for the IRS - or the courts - to decide.
Too rich for Sacramento's blood
Looks like Sacramento won't be building the world's most expensive arena after all. A report by city downtown manager Wendy Saunders says that demolishing part of the K Street Mall to make way for a new Kings arena "does not appear to be feasible," because of "extraordinary" costs; moreover, the mall couldn't be designated as blighted (necessary under California law in order to use eminent domain and to get possible tax-increment financing), and the city would lose too much sales tax revenue from stores that would be displaced.
The Sacramento city council is set to vote Thursday night on placing an advisory question on the November ballot as to "whether the public supports raising fees, taxes and/or contributing otherwise" to a new arena, but without a site in place, several councilmembers told the Sacramento Bee they were uncertain about how to proceed. "I've said that if we go on the ballot we have to do the wording ourselves and it cannot be vague," said councilmember Robbie Waters. "Thursday night is going to be very interesting."
July 19, 2004
RPA slams Jets stadium
Guess all those phone calls didn't work after all: The Regional Plan Association has released its official position paper (PDF file here) on New York's proposed multi-billion-dollar Hudson Yards project, and it calls for axing the Jets stadium from the plan. The $1.4 billion stadium, writes the RPA, would be a "suboptimum use" of a key waterfront site that would "stifle its long-term potential by limiting waterfront access, adding congestion and looming over the adjacent streets and Hudson River Park." Instead, the RPA suggests the site be used for a mixed-use development centered on high-rise apartment buildings. Hey, now there's an idea.
NYC comptroller: S.I. park a bad deal
The $79 million stadium that New York Mayor Rudy Giuliani built for the Staten Island Yankees minor-league club in 2001 - the most expensive minor-league park ever built - is "not a good deal for the city" so far, city comptroller William Thompson told the Staten Island Advance. The Yankees drew just 163,000 fans last year, a little over 4,000 per game in the 6,500-seat park, which cuts into the city's rent receipts: according to the team's lease with the city, rent payments are linked to ticket sales, with the mini-Yanks paying no rent at all if attendance drops below 125,000. Given that this is only the team's fourth season, that attendance at Staten Island games has declined each year so far, and that the team's lease has another 16 years to run, this doesn't bode well for New York taxpayers recouping the investment that Giuliani made on their behalf.
July 18, 2004
Safeco 'hood sees little development
The alleged "catalyst" effect of sports stadiums isn't in evidence in Seattle, where five years after it opened, the Mariners' Safeco Field hasn't seen much new development on surrounding streets. There has been development in the M's pocketbook, though: with the state picking up three-quarters of the stadium's $517 million cost, the team has become the fifth-most valuable in baseball, with the biggest profits of any team in baseball in 2003, according to Forbes.
July 17, 2004
Sac'to eyes crazy-expensive arena
Sacramento city planners are now saying that a new downtown arena for the Kings could, including the price of buying and demolishing existing buildings, cost a staggering $500 million to $750 million, which would be easily the most expensive basketball arena ever built. (Unless, of course, Brooklyn beats them to the punch.) Of that, arena boosters are hoping to get about $518 million in public money, with possible revenue sources including a tax surcharge on downtown restaurants, surcharges on city-owned parking spaces, surcharges on car rental fees, hiking the county hotel tax, adding a surcharge to sports tickets, and increasing the ticket price at the Sacramento Community Center Theatre. The Sacramento city council is expected to soon discuss putting an arena referendum on the ballot in November.
July 16, 2004
Jets and taxes
More tea-leaf reading on the never-ending New York Jets stadium finance saga. In today's Newsday, staff writer Graham Rayman reports that Jets president Jay Cross downplayed the significance of tax-exempt bonds, saying that (in Rayman's words) "the proposed use of PILOT payments would not reduce the revenue the city and state would get from sales tax revenue at the stadium."
Attaching PILOTs as a surcharge to existing tax payments, though, and using the proceeds to pay off a stadium would be illegal. So either Cross was being disingenuous, or he's misinformed about tax law, or Newsday misquoted him.
On a separate front, Cross told amNewYork's Michael Clancy regarding the Jets' rent payments to the Metropolitan Transportation Authority: "We are going to be paying million of dollars a year in ground rent, I'm pretty confident of that. Not tens of millions, but millions." Even assuming the most generous interpretation of Cross' estimate - a first-year rent payment of $9 million, and that payments would rise with inflation - for a 30-year lease that's still a present value of only $270 million, less than one-tenth the $3 billion estimate put forth by former MTA chief Richard Ravitch, and significantly lower even than the $600 million current MTA head Peter Kalikow has hinted at. Clearly those appraisers are going to have their work cut out for them.
Pens getting casino discount?
In his weekly Q&A with readers, Pittsburgh Post-Gazette sportswriter Dejan Kovacevic notes that the Penguins' projected take from a slot-machine casino is a staggering $168 million a year, far more than enough to pay off a proposed arena should the Pens get the one available Pittsburgh-area license. (No decision on this is expected until mid-2005.) If Kovacevic's numbers are right - and he himself notes that the Penguins have been mum so far on this matter - the state of Pennsylvania appears to have severely underpriced its slots licenses, since even at half that level of revenue they'd have applicants beating down the door to run slots parlors. Not all subsidies are tax subsidies.
July 15, 2004
Jets stadium to cost some damn big number
Critics of the New York Jets' Manhattan stadium plan held a press conference on the steps of City Hall this afternoon, to call attention to the possibility, as raised here last week, that the team could be seeking to pay for part of its "private" share of stadium costs with public tax dollars. Holding an oversized check marked "$600 million," which was crossed out and had written in "$1.2 billion," which was in turn crossed out and marked "Whatever," state assemblyperson Richard Gottfried noted that if the Jets use tax-exempt bonds backed by PILOTs (payments in lieu of taxes), as they were reported to be considering last week, "of their $800 million, three-quarters of it is going to be paid back by city funds. So it's at most $200 million from the Jets, and $1.2 billion from state and city taxpayers."
At a competing press conference held immediately beforehand on the City Hall steps, however, Jets president and stadium czar Jay Cross insisted that the team was not actively seeking tax-exempt financing, saying they would take the lead from the city and state. The city and state, in turn, both referred calls seeking clarification to the Jets; the team referred all questions back to Cross' previous statements.
The mere fact that no one in city or state government seems willing to clarify who's going to pay for the stadium or how was especially galling to those at today press conference, with state senator Liz Krueger calling it an "atrocious lack of transparency." Added Krueger, the ranking Democrat on the state senate's housing committee:
"We are desperately trying to get $50 million more in bonding authority for affordable and low-income housing. And we are told we can't do that because we're bonding out too many other projects. We are trying to get additional money for capital construction of schools in New York City. And we are told that we don't have the money."
One more data point that John Avlon is on crack.
K.C. arena opponents form group
Opponents of Kansas City Mayor Kay Barnes' proposed $250 million downtown arena have formed the Coalition Against Arena Taxes to work to defeat the plan, which comes up for a public referendum on August 3. The group includeslocal car rental companies, which are fuming about being hit with a $4-a-day surcharge on rentals to help pay for the plan. "I'm confident we can match the pro-tax crowd dollar for dollar," Enterprise Rent-A-Car general manager told the K.C. Star; if he's right, history says he has nothing to worry about - it usually takes at least a 100-1 spending margin to win an arena spending referendum.
Ohio to stiff county on stadiums?
More bad news for Ohio's Hamilton County, which is already facing a tax shortfall of as much as $285 million on the stadiums built for the Cincinnati Reds and Bengals: Now there's a question as to whether the state of Ohio will be providing $14 million in state funds still due to pay down stadium debt. "I think they've just kind of moved on," state rep Tom Brinkman told the Cincinnati Enquirer. "That's a past General Assembly's promise, tough luck."
In related news, earlier this week a federal judge ruled that Hamilton County can go ahead with a lawsuit against the Bengals, charging that the team illegally used its monopoly power to coerce the public into providing stadium funds and generous lease terms. The suit will now enter the discovery phase, with a trial possible early next year.
July 14, 2004
Block that moniker!
San Francisco's Board of Supervisors is considering a public referendum on whether the city should be allowed to sell naming rights to public buildings, such as Candlestick Park. (Mayor Gavin Newsom has proposed selling the name of the park, which briefly had a corporate handle for a few years in the 1990s, and splitting the proceeds between the city parks department and its tenants, the 49ers.) 49ers spokesperson Sam Singer retorted that if such a referendum were to pass, it would doom sports in San Francisco: "No professional sports team would come to San Francisco. Naming rights are the mother's milk of sports teams." Now there's an image you don't need first thing in the morning.
Viva Westway?
In a long essay in yesterday's New York Sun, columnist (and former Rudy Giuliani speechwriter) John Avlon goes full-tilt after opponents of the proposed $1.4 billion New York Jets stadium, lashing out at preservationists and opponents of Westway alongside Cablevision's anti-stadium ads, about which Avlon charges:
The ads show firefighters and coffee shop waitresses opining that the city and stateís combined $600 million investment in the stadium and convention center [ed. note: including the convention center it'd actually be more like $2 billion] could better be spent on education.
The problem is that budgets donít work that way. When money is saved in one area, it is not automatically transferred to another budget column. Money not spent on the stadium will not magically relieve school overcrowding or buy kindergarten supplies from here to kingdom come - it will be absorbed into the bureaucratic ether, $300 million in city dollars never heard from again, gone to finance debt services or pension costs.
Actually, budgets do work that way, at least in New York City, which is constitutionally mandated to have a balanced budget. The only way to send $300 million into the "ether" of debt service or pension costs would be to sell more bonds or raise pensions - say, by increasing the school construction budget or hiring more teachers?
Economists call this "What else could we have done with the money (or land)?" question the "opportunity cost," and it's one that it usually willfully ignored by developers seeking public subsidies. Similarly, Avlon writes that for Westway, the multi-billion-dollar highway project that was killed by lawsuits in the 1980s, "the city would not have paid a dime" (a sentiment echoed by a recent New Yorker essay comparing the Jets stadium to Westway). Except that Westway would have borne a tremendous opportunity cost: once the highway was scrapped, the city was able to trade in the federal funds for $1.4 billion in mass transit money. Those new ether-driven subway cars sure do ride smooth...
Bud: I solemnly swear...
In an mlb.com online chat today, MLB strongman Bud Selig promised: "We are going to make a decision this summer. The Expos will have a new home and a new owner from the 2005 baseball season." And surely Bud would never lie to us.
Among the other highlights from Bud's chat, conducted in his patented patois very similar to English:
"The idea of contraction came from the owners, all 30 of them. I know as the Commissioner, I took a pretty good flogging, particularly up in Minnesota, but the fact of the matter is, that the thing that set off contraction was revenue sharing, the very subject a lot of people have talked about, because if you're a big market club sending money to a team, you have the right to ask what are their revenues, how much are we sending them in revenue sharing, and what are they doing about it?
"Minneapolis is a wonderful market, Major League market in every way. They need a new ballpark. The Twins say they need a new ballpark, the Vikings say they need a new ballpark; they have just got to address that problem. It's a marvelous market and the Twins have done a great job. But the Twins themselves are the leading advocate for a new ballpark there, and I hope they are going to be successful."
Selig also told baseball writers in a separate interview that he may want to stay on as commissioner beyond the end of his term in 2006. No, that sound you heard wasn't thunder, just Doug Pappas screaming in the afterlife.
July 13, 2004
DuPuy: Any day now
MLB COO Bob DuPuy is making predictions again, telling reporters that picking a new home for the Montreal Expos by the owners' meeting scheduled for August 17-20 is a "good working goal ... the sooner we get it done, the better. ... It's just a matter of making a decision and getting things done. ... When the decision is made, it will be made." He added: "I believe it will happen this summer. ... I think it's very important that we get it done this year." Fortunately for DuPuy, the news conference ended before he could backtrack to "sometime in this geological epoch."
New lease for Chargers
The San Diego city council approved a new lease for the Chargers yesterday, finally eliminating the notorious ticket guarantee that has cost the city $36.4 million since 1997, but also cutting the team's rent payments and allowing it to leave town as soon as 2007. The new lease is likely to turn up the heat on discussions for a new football stadium, which the Chargers want to put on the ballot next year, no doubt thinking that "Vote for this or we move to L.A. in January" will make a fine campaign slogan.
July 12, 2004
Silver blitzes the end run
So much for the New York Jets getting a new stadium without legislative approval, as New York deputy mayor Dan Doctoroff had promised. State assembly speaker Sheldon Silver, who can effectively block any stadium legislation, has introduced his own bill that would fund a $1.4 billion expansion of the Javits Convention Center but not the accompanying stadium. The proposed Jets facility, insists Silver, must be considered separately, vowing that the assembly would not approve any stadium funding unless it first goes through the standard municipal oversight process (ULURP, for any city policy wonks reading this), including city council approval.
Meanwhile, the New York Times yesterday editorialized that it was "dubious about the stadium plan," calling for more public oversight (including just the sort of separation-of-stadium-and-convention-center plan that Silver proposed today) and concluding:
Using what it called an ''optimistic scenario'' - and without factoring in the possibility of tax-exempt financing - the city's Independent Budget Office found a Jets study on possible benefits from the stadium too rosy. It said that the project would create only about 3,600 jobs - half the number promised by the study - and generate $28.4 million annually in new city tax revenue, $6.7 million less than the team calculated. The mayor's office notes that the expected revenues in the report would still cover the annual debt service. But that assumes that the city can beat the historical odds when it comes to the generally dismal record of football stadiums' helping to draw large events and conventions.
That's a gamble, one that could prove awfully costly for the public.
While it's too soon to be talking about nails in coffins, the momentum certainly seems to be shifting on the West Side stadium plan. It'll be interesting to see how Doctoroff and the Jets respond to this latest move.
Utah gets MLS team, stadium demand
Another day, another soccer team looking for public money. The latest MLS club to come seeking stadium subsidies is the Utah... well, we don't exactly know what they'll be called, except that it almost certainly won't be the Boom. With MLS set to announce this Wednesday that it's granting an expansion team to Salt Lake City, team owner (and former Utah Jazz and New York Knicks president) Dave Checketts has already been meeting with Salt Lake City and Salt Lake County officials to discuss using tax money to help build a soccer-only stadium. "They plan on putting in substantial private dollars, so it's not like they were coming to us with their hands out," city council chair Jill Remington Love told the Salt Lake Tribune. "They were exploring tools available to them to cover any gaps."
Players dig old digs
So much for the notion that baseball players are only interested in creature comforts, not historic buildings: a poll of Major League Baseball players ranked Chicago's 90-year-old Wrigley Field as their favorite ballpark, with the equally geriatric Yankee Stadium and Fenway Park also finishing in the top five. (Seattle's Safeco Field and San Francisco's SBC Park rounded out the leader board.) Guess baseball players don't eat a lot of chef's salads.
July 11, 2004
Don't worry, it's just a threat
In an attempt to calm the firestorm over rumors that the Kansas City Wizards will be moved elsewhere next year, Clark Hunt, son of Wizards principal owner Lamar Hunt, told the K.C. Star that while "I think every market has to hope it has a soccer-specific stadium ... I don't think it's necessarily a make-or-break. ... Lamar's statement was intended to quiet the concerns. Just reading some of the headlines, I'm not sure it did that." Added Wizards fan club leader Sam Pierron: "They're not going anywhere. ... I think it's all an attempt to help garner public monies to build a soccer-specific stadium."
D.C. councilmembers pan stadium subsidies
D.C. Mayor Anthony Williams may have said that he can get a stadium-funding bill passed "in a snap," but two city councilmembers have gone on record saying that's not so. Noting that Washington is the likely front-runner to land the Montreal Expos, Adrian Fenty and David Catania write to the Washington Post that this "puts the District in a strong bargaining position, a position that should allow it to compete for a team without offering substantial stadium subsidies. Unfortunately, the mayor is moving in the other direction. Last year, he proposed spending $275 million toward stadium costs. This year, he raised that offer by more than $100 million. ... Bringing a major league baseball team back to Washington would be great for the District, but not if the price is a huge public subsidy." Of course, D.C. is the front-runner in part because of Williams' promises of free stadium money, but given the lackluster proposals by the other candidates, it does appear right now that Williams is effectively bidding against himself.
In any case, this further indication that Williams' stadium finance ducks aren't in anything resembling a row is only likely to mean further delays in MLB's much-delayed decision on what to do with the Expos. While Bud Selig's ruling junta hasn't yet officially admitted that a decision won't be made following this week's All-Star Game, as had been promised, given that MLB has scheduled negotiating meetings with D.C. and Northern Virginia officials in late July, it's a fair bet we won't be hearing anything on the Expos' fate until much later in the year, if at all.
July 10, 2004
A's say stadium proposal is near
Oakland A's stadium czar Lewis Wolff says he'll give the team's owners a report on possible new stadium sites in the East Bay within the next two months. Wolff didn't say anything about finding someone who'd pay to build the thing - a 2001 study by the city of Oakland estimated a price tag of between $385 million to $565 million - but city council president Ignacio De La Fuente did tell the Oakland Tribune, "I am a strong believer that it is possible for the A's to build a new home in Oakland. It could be part of a major development of commercial retail and housing."
The last time the A's proposed a kitchen-sink plan like this, it's worth noting, a city official replied: "It's not really a plan, it's a bunch of pretty pictures. To me, it's not a plan until you have a financial strategy, but as far as I know, there has been nothing presented for how it will be financed." A city official named Ignacio De La Fuente.
Now everybody'll want one
In a break from the incessant news about the proposed New York Jets stadium in Manhattan comes word that the New York Giants are "taking a look" at a new stadium in New Jersey. New Jersey Sports and Exposition Authority president George Zoffinger estimates a new stadium would cost $600 million; given how long it took Zoffinger and the Giants to find half that much money for planned renovations to Giants Stadium, it doesn't seem likely to be more than a brief look.
July 09, 2004
Curiouser and curiouser
The case of the New York Jets and the tax-exempt bonds just keeps getting weirder. The whole brouhaha, you'll recall, started on Monday, when Newsday ran a front-page story asserting that the Jets were considering tax-exempt financing for their $800 million share of a $1.4 billion stadium project. That story, in turn, was drawn from a Freedom of Information Act investigation of documents produced by Wall Street firms bidding to become underwriters for the project; one typical passage, by Lehman Bros., goes:
Debt issued to pay for the privately funded Jets Stadium may qualify for tax-exempt status through the use of PILOT payments and other payments that serve as proxies for generally applied taxes. So long as these payments constitute the source of repayment for all or a specific series of the bonds used to finance the Jets Stadium, the bonds would qualify for tax-exempt status.
Oll korrect, as far as it goes. The catch is that the PILOTs ("payments in lieu of taxes," for those playing guess-the-acronym) need to be collected in place of "generally applied taxes." That means either property, income or sales taxes - a special Jets ticket tax, say, wouldn't be considered "generally applied."
It's already been established that the Jets wouldn't pay property taxes on their stadium, being that it would sit on land owned by the state-run Metropolitan Transportation Authority. That leaves sales and income taxes. Here's what New York Deputy Mayor Dan Doctoroff said about them at the June 3 city council hearing:
"The City will earn its return through the new taxes that are generated out of the activity in the building, which is, we've estimated, roughly $70 million for the City and State together."
Added state development czar Charles Gargano:
"The state income tax on the players, sales tax, other taxes, when you add them all together ... the added revenue annually will be $32 million to the State."
The city's Independent Budget Office says that $70 million figure is overstated by at least 20%, but never mind that for the moment. The upshot is that we're left with two possibilities: Either the Jets will be paying off their $800 million with other revenues, in which case tax-exempt bonds would be illegal; or the city and state will be kicking back sales and income taxes to pay off the bonds, which would increase the public subsidy by hundreds of millions of dollars - and would mean that both Doctoroff and Gargano lied to the council.
The bet here is that the Wall Street firms just threw in the tax-exempt business without knowing the full details of the stadium financing, and it sat around in the paperwork for months until Newsday dug it up - though that still leaves the question of why the Jets haven't disowned the prospect of tax-exempt bonds, as well as why Gargano's office issued a statement this week noting that "stadiums have often been constructed as public arenas with public financing along with tax-exempt debt." More info on this as it becomes available, but don't get your hopes up that it'll clarify any of the increasing murk that swirls around this project.
Making use of old stadiums
One of the lesser-appreciated problems of the stadium game is what to do with your old one once the new one opens its doors. In Detroit, where the Tigers got a new taxpayer-subsidized home in 2000 after more than a decade of bitter public battles, the Detroit Free Press reports that the city is paying the team $500,000 a year to maintain the privately owned stadium. "Sooner or later, we'll have to make a decision," city development director Henry Hagood told the Detroit Free Press. "We are doing everything we can to try to attract something credible to that site." Critics note that the city might be doing better if it considered such proposals as locating a minor-league baseball team in Tiger Stadium, not to mention stopped paying Tigers owner Mike Ilitch for such items as extra telephone lines and unused elevators.
In Houston, meanwhile, the Rockets' old Summit (it had a corporate name at one point, but who cares anymore?), replaced last year by a publicly funded $235 million arena, has been leased by the county for $12.3 million over 30 years to Lakewood Church, which will reopen it next spring as the nation's largest house of worship. (The L.A. Lakers' former home, the Forum, is also now serving duty as the Faithful Central Bible Church.) "You have to change with the times," Lakewood pastor Joel Osteen told the L.A. Times. "If Jesus were here he'd change with the times. He couldn't ride around on a donkey. He'd drive a car." Yeah, but what kind of car?
July 08, 2004
Footying the bill
Major League Soccer, the only sport where most teams don't have new taxpayer-funded facilities, is working hard to remedy that situation. Last week, the New York/New Jersey MetroStars put forward a plan for a $160 million soccer-only stadium in Harrison, N.J. (across the Passaic River from Newark), all but $30 million of which would be paid for by the town. Under the plan, which still must be approved by Hudson County officials, the public costs would be "repaid" by tax revenues from an accompanying privately built $300 million complex of stores, offices and apartments - sound familiar?
Meanwhile, Sports Business Journal was reporting that both the Kansas City Wizards and the San Jose Earthquakes would be relocated for the 2005 season. Lamar Hunt, owner of both teams (the MLS, unlike other sports leagues, smiles on multiple ownership, with developer Philip Anschutz alone owning five teams and a share of a sixth), promptly issued a written statement that fanned the flames, stating only: "As has been the case since the start of [MLS], we will each year evaluate the progress of the league and its member teams." Soccer-only stadiums, wrote Hunt, "represent the future for Major League Soccer, and we will study every possible way to encourage such projects all across America." Including, apparently, leaking rumors of planned moves to the Sports Business Journal.
July 07, 2004
The Ten-Percent Solution
Yesterday I glossed over the illegality of the New York Jets' plan to use tax-exempt bonds for their $800 million share of stadium costs, passing along along $77.4 million of its costs to taxpayers. Given the widespread media confusion over this, though, here's a fuller explanation, in part drawn from chapter three of Field of Schemes:
By the early 1980s, use of tax-exempt "private activity bonds" to finance for-profit development projects was out of control, soaking up as much as 80% of all government bonds issued, and leaving little money left over for genuine public projects. With this in mind, the 1986 Tax Reform Act ruled that private activity bonds would always be subject to taxes - and specifically ruled that sports stadiums were to be considered private-activity.
Congress, however, had left a loophole: the 1986 law ruled that any bond where more than 10% of the use would be by a private entity, and where more than 10% of the bonds would be paid off by revenue from a private project, would be subject to taxes. The solution that many cities promptly used was to cut team rent payments to the bone, ensuring that more than 90% of costs would be borne by the public, thereby meeting the new law's requirements. "In other words," the tax-reform law's principal author, Sen. Pat Moynihan, told Congress after the loophole became clear, "non-stadium governmental revenues (i.e., tax revenues, lottery proceeds, and the like) must be used to repay the bulk of the debt, freeing team owners to pocket stadium revenues."
For the Jets, though, that option isn't available: the team has promised to pay the entire $800 million nut, likely though payments in lieu of taxes (PILOTs) to a state authority. And as Congressional Budget Office tax-exempt bond expert Dennis Zimmerman explained two years ago, while generally applicable taxes aren't counted toward the 10% private-revenue limit, "A payment in lieu of taxes is not a generally applicable tax. ... On its face, you're prohibited either directly or indirectly from using stadium-related revenues. So, for example, you could not have the public sector paying this out of general revenue, then having stadium revenues replace that general revenue. In the same way, I think it also would apply to this scheme."
Zimmerman was talking about a previous PILOT scheme, floated by then-Mayor Rudy Giuliani to build a new stadium for the Yankees, but the same problem would arise here. Newsday is reporting that "tax-exempt bonds can be used only for public purposes, but firms claimed the stadium, which would also be used for conventions, would offer public value." The 1986 law, though, makes no concessions for buildings that offer "public value" - if it's used at least 10% of the time by a private entity, and that private entity repays at least 10% of the bond costs, tax-exempt bonds are verboten.
Zimmerman is always quick to note that he never underestimates the ingenuity of bond lawyers. But they don't always get away with it: In 2001, the Memphis Redbirds minor-league baseball team had to pay a $1.6 million penalty to the feds for trying to use a non-profit shell corporation to evade restrictions on tax-exempt borrowing. If the Jets are serious about this, their counsel are likely to be having some interesting conversations with the IRS.
MLB: Still no decision on Expos
Man, a measly 974 days into the Montreal Expos relocation saga, and already some people are getting cranky. After MLB president Bob DuPuy revealed last week that a decision likely won't be forthcoming after next week's All-Star Game, as had been previously promised, a spokesperson for D.C. Mayor Anthony Williams has lashed out at MLB for foot-dragging.
"We need Major League Baseball to make a decision," said Tony Bullock, Williams' communications director. "We've been waiting a while. We're hopeful, but every time they get ready to make a decision, they push it back. ... There's a tremendous demand for downtown property in Washington. These sites just aren't going to sit here endlessly, waiting for Major League Baseball. ... They got the message pretty loud and clear from the mayor that we wanted a decision by the All-Star Game."
USA Today reported last week that D.C. and Northern Virginia are the likely finalists, though each locale's stadium plan faces legislative hurdles. D.C.-area stadium-tax opponents have begun to organize as well, under the banner of the NO DC Taxes for Baseball! Campaign, which notes: "The DC area is the largest metro area without a team and one of the wealthiest in the nation. Major League Baseball should be begging to come here rather than making outrageous demands." But where would Bud Selig be without making outrageous demands?
July 06, 2004
More hidden subsidies for Jets?
The New York Jets are looking into using tax-exempt bonds to finance their $800 million share of a stadium on Manhattan's West Side, a mechanism that would reduce their costs substantially while reducing the government's tax revenues. "If tax-exempt financing is used, clearly someone is grossly exaggerating that there is an $800 million private contribution on the table," Fiscal Policy Institute economist James Parrott told Newsday. There's also the small matter that paying off tax-exempt bonds with private stadium revenues would be illegal.
Penguins plan slots-for-arena swap
Pennsylvania Gov. Ed Rendell yesterday signed into law a bill authorizing up to 61,000 slot machines at 14 gambling parlors, which would give Pennsylvania more slot machines than any state other than Nevada. Most of the state's proceeds are slotted to be used to fund $1 billion in property-tax cuts - effectively shifting the tax burden from the rich to the poor, since the wealthy are more likely to own property and less likely to play the one-armed bandits.
You could care less about the poor in Pennsylvania, though - what you want to know is: What does this mean for the Pittsburgh Penguins? As you'll recall, the team was hoping to snag some of the slots-tax proceeds to help fund a new arena. Now, with that money targeted for property-tax cuts, the team has a new plan: give them one of the 14 slots parlor licenses, and they'll build an arena with the profits. (The slots law allows parlor operators to keep 48 percent of revenues.)
State legislators, who will appoint the commission that awards the slots licenses, seemed generally favorable to this plan, with state senator Sean Logan, a vocal arena-funding opponent, telling the Pittsburgh Post-Gazette: "I think that's a great idea. Having a venue like that, where they could have shows, hockey games and other events connected with the slots parlor ... if the Penguins and Mario Lemieux are serious, that's something we all should look into." Because, you know, it worked out so well for Edwin Edwards and Eddie DeBartolo.
Back of my neck feeling dirty and gritty
I'm back in the New York groove (I know, I know, different song), and resuming your normal broadcasts of stadium minutiae. Huge thanks to Neal S., Darren D., Erika T., Ken F., Herschel K., Stephanie G. and everyone else who helped keep this site going while I was on the road in the great untracked broadband-free American wilderness.
July 02, 2004
Reports: Nets, Jets plans not so hot
Man, go away for a couple of days to visit a volcano, and all hell breaks loose. (Okay, not that kind of hell.) Two new studies are out this week questioning the claims of the New Jersey Nets and New York Jets on the economic impact of new publicly subsidied sports facilities; both say they're not all they're cracked up to be, though to widely varying degrees.
On Monday, the Brooklyn community group Develop Don't Destroy released an extensive critique (PDF file here) by Jung Kim and Gustav Peebles of developer Bruce Ratner's Nets arena economic impact study, charging that author Andrew Zimbalist had overestimated the incomes of both tenants and workers in the project, underestimated the degree by which Brooklyn office space vacancies are largely filled by government agencies, underestimated the value of the Long Island Rail Road yards where the arena would be built, and failed to account for the cost of educating the estimated 931 public school students who would live in the complex. The upshot: Zimbalist's $800 million profit for the city would turn into a loss of between $100 million and $500 million.
(Zimbalist, who hadn't yet read the report, told the Daily News: "I don't think any of the data I used is incorrect, so I obviously disagree with that point.")
On Thursday, the New York City Independent Budget Office followed with its own report on the proposed $1.4 billion Jets stadium on Manhattan's West Side, which would get $600 million in public subsidies. (This is different, by the way, from the promised IBO study on the broader $5 billion Hudson Yards plan, which is still in the works.) The Jets had estimated $35.1 million a year in new city tax revenues, and 6,971 jobs created; IBO countered that their figures showed $28.4 million a year in fiscal impact and 3,586 jobs created.
While this would still be enough to pay the city's $21 million a year in bond payments on its share of the stadium, it's worth noting that the IBO did accept at face value some assumptions that other economic experts have questioned: for example, that the facility would draw two sports "mega-events" and numerous expositions (the Jets say 35; IBO assumes 20) each year. Without such events, football games alone at the facility would amount to only $9.2 million a year in city tax revenue, according to the IBO - making for a nearly $12 million a year loss for the city treasury.
In related news, Metropolitan Transportation Authority chair Peter Kalikow has now agreed to hire outside appraisers to determine the value of the railyards where the Jets and Nets facilities would be built. Both teams have agreed to pay "fair market" value, but estimates of those values have varied widely. If the land appraisals go up, it's unclear whether the teams or taxpayers would pay the additional costs; if the latter, all the economists will have to go back and recrunch all their numbers.
