March 17, 2006

Re-crunching the numbers on the Yanks and Mets stadiums

Yes, it's that time again: Time to revise the ever-changing subsidy estimates for the New York Mets and Yankees stadium deals. If you're tired of slogging through the details by now, feel free to skip ahead to the totals at the end. For everyone else:

After yet another round of nagging various city agencies, it turns out that the city's original maintenance cost reports for Yankee and Shea Stadiums left out an important detail: The city also spends additional money on upgrading the two parks out of its capital budget. Over the past three years, this has averaged $7.5 million a year for Yankee Stadium, $7 million a year for Shea Stadium, for such items as electrical upgrades, elevator and escalator work, and bringing the two stadiums into compliance with the American Disabilities Act. Since we'd previously calculated $7.5 million a year in net Yankees rent and $3.9 million a year in net Mets rent, this means that the city is on average breaking even on Yankee Stadium, and losing about $3.1 million a year on Shea. Building new stadiums where the teams pay for all maintenance and capital costs but pay no rent, then, shouldn't add any city costs in the case of the Yankees, and should save the city $42.7 million (present value) over the next 30 years in the case of the Mets.

The above numbers may give the teams the benefit of the doubt, for several reasons: Rent payments, in the Yankees' case at least, are on the rise and could soon make Yankee Stadium a net money-maker for the city; some of the capital costs may be non-repeating, especially since it's unlikely that the federal government will pass another Americans with Disabilities Act anytime soon; and new stadiums, if the teams' arguments are correct, would be cheaper to maintain, meaning the Yanks and Mets could still be turning a profit by offering to pay maintenance instead of continuing to pay rent. But these are all unknowns, so for consistency's sake if nothing else, let's continue to assume that future rent and maintenance payments would continue about as they have in recent years.

This is good news, in that it means the city's costs would go down by about $100 million apiece for each new stadium. Before we get to the new totals, though, we need to include revised figures for the enhanced tax-exempt bond subsidies first revealed two weeks ago.

The purpose of tax-exempt bonds is to reduce borrowing costs for a project by having the city, state, and federal governments forgo collecting income tax on profits by bondholders; the bondholders, in turn, agree to accept a lower interest rate on the bonds. The net effect is to shift a bunch of money from the city, state, and federal treasuries to the developers of the project (the bondholders make the same as they would have made on taxable bonds) - which is why the U.S. Congress has made several attempts to rein in the use of tax-exempt bonds for for-profit enterprises like stadiums, which should be able to raise money by traditional channels.

How much is the bond subsidy worth to the Mets and Yanks? There's no way to say for absolute sure, since we'd need to know how many bondholders live in New York state and New York City, not to mention what income-tax bracket they'd be in in the year 2035. But with the help of an economist to be named later, I've come up with reasonable estimates of the lost revenues to each level of government from each stadium:

  YANKS: $140 million federal, $14 million state, $4 million city
  METS: $86 million federal, $9 million state, $2 million city

So what's the damage in total? With no further ado, here's the latest:

  YANKEES STADIUM
  ---------------

  CITY:
  Land/infrastructure            $136 million
  Rent rebates                    $13 million
  Net garage ground rent         -$43 million
  Forgone property taxes          $44 million
  Forgone construction sales tax  $11 million
  Forgone mortgage recording tax  $11 million
  Operational/reserve funds        $5 million
  Memorabilia sales              -$10 million
  Tax-exempt bond subsidies        $4 million
                                 ------------
                                 $171 million
                               
  STATE:
  Garage construction             $70 million
  Forgone construction sales tax  $11 million
  Forgone mortgage recording tax  $11 million
  Operational/reserve funds        $5 million
  Tax-exempt bond subsidies       $14 million
                                 ------------
                                 $111 million
                               
  FEDERAL:
  Tax-exempt bond subsidies      $140 million

  YANKEES:
  Bond payments*                 $695 million
  Rent rebates                   -$13 million
  Forgone property taxes         -$44 million
  Operational/reserve funds      -$10 million
  Revenue-sharing savings**     -$136 million
                                 ------------
                                 $492 million

  MLB:
  Revenue-sharing subsidies      $136 million

  PRIVATE DEVELOPERS:
  Garage construction            $250 million
  -------------------------------------------
  TOTAL                         $1300 million
  PUBLIC TOTAL                   $422 million


  METS STADIUM
  ------------

  CITY:
  Land/infrastructure             $85 million
  Rent rebates                    $13 million
  Future maintenance savings     -$43 million
  Forgone parking revenues        $96 million
  Forgone property taxes          $39 million
  Forgone construction sales tax   $8 million
  Tax-exempt bond subsidies        $2 million
                                 ------------
                                 $200 million

  STATE:
  Land/infrastructure             $75 million
  Forgone construction sales tax   $8 million
  Tax-exempt bond subsidies        $9 million
                                 ------------
                                  $92 million
                               
  FEDERAL:
  Tax-exempt bond subsidies       $86 million

  METS:
  Bond payments*                 $577 million
  Rent rebates                   -$13 million
  Forgone parking revenues       -$96 million
  Forgone property taxes         -$39 million
  Revenue-sharing savings**      -$92 million
                                 ------------
                                 $337 million

  MLB:
  Revenue-sharing subsidies       $92 million
  -------------------------------------------
  TOTAL                          $807 million
  PUBLIC TOTAL                   $378 million

  *based on weighted midpoint of figures from Bond Buyer
  **using lowest allowable revenue-sharing credit (40-year amortization)
  (all figures in current dollars, using 6% discount rate)

Some dollars have shifted around, most notably from the city column to the federal one. But the upshot is still the same: The Yankees and Mets would put in roughly the same amount as taxpayers, while reaping all of the new stadium revenues. It's better than the D.C. ripoff, certainly, but still not exactly a reason for applause - especially if you're a baseball fan in Kansas City or Miami whose federal taxes will be helping pay for new homes for your teams' rivals.

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