October 31, 2008
Updated NYC stadium subsidy estimates
For those interested, I've updated my spreadsheet estimating the total cost of the new New York Mets and Yankees stadiums, to take into account the latest data from the city's Independent Budget Office. The upshot: The public cost of the Yanks' stadium goes down about $50 million (thanks mostly to slightly lower estimates of the cost to taxpayers of tax-free bonds), while the Mets' price tag goes up about $40 million (largely because of increased city infrastructure costs). The new totals:
- YANKS: $1.916 billion, with $646 million provided by the team, $864 million by the public ($431 million city, $102 million state, $45 million MTA, $304 million federal), $136 million by private garage developers, and $270 million by other MLB teams
- METS: $883 million, with $306 million provided by the team, $485 million by the public ($261 million city, $96 million state, $128 million federal), and $92 million by other MLB teams
Please correct your scorecards accordingly.
October 29, 2008
Pinsky to stadium critics: You crazy
Yesterday, New York City Economic Development Corporation president Seth Pinsky wrote an op-ed in the Daily News defending the Yankees stadium project, saying, "Nobody in his or her right mind would criticize [its] benefits." He'd have a better case if he hadn't, for example, cited a two-year-old economic impact study to claim that the city will make $40 million on the deal, without accounting for (among other things) the fact that the city's parkland costs alone have risen $100 million since then. More on this in my article on the Village Voice blog.
Only 300 people splurge on Jets PSL auction
Looks like Wallace Matthews wasn't totally wrong about high-priced ticket demand in the post-bubble economy: The New York Jets ended their personal seat license auction on Monday after selling just 620 of the 2,000 seats they'd made available. That means that while the average PSL sale price was $26,000 (with the top bid coming in at a staggering $82,000), demand dropped off quickly, with no more than 310 people - since winners were required to buy at least two seats apiece - willing to meet the $5,000 minimum bid.
The Jets say they'll now put the remaining 1,380 seats up for sale at a fixed price, once they've analyzed the results of the auction. If they try to charge more than $5,000, they're likely to hear more crickets.
October 26, 2008
"Outside the Lines" tackles Yanks stadium financing
This week's ESPN "Outside the Lines" opens with a segment on last week's New York Yankees stadium developments, which includes a few comments by a certain blogger and book co-author. (Caveats: I never claimed to them that I'm "an economist," and that's not how you pronounce my name.) If you don't plan to be in front of a TV any weekday this week at 3 pm Eastern (2:30 pm on Monday for some reason), you can check out the episode on the "Outside the Lines" website.
UPDATE: It looks as if "Outside the Lines" runs different episodes during the week, so if you want to see the segment, the web video is your only option.
October 24, 2008
Kucinich hearing liveblog
For those of you who want a guided tour of today's Congressional hearings on the New York Yankees stadium deal, I'm liveblogging the hearing over on the Village Voice site. For those of you who want to watch for yourselves, there should be streaming video on the subcommittee's website starting at 10 am.
UPDATE: They moved the streaming video page - it's now here.
October 23, 2008
MLB: Rays to turn back into pumpkin without stadium
Carrying forward a baseball tradition, MLB stadium hatchet man Bob DuPuy celebrated the Tampa Bay Rays' first World Series appearance last night by declaring that the team needs a new stadium. "I think they need a new ballpark here," DuPuy told reporters. "I'd like to see their success this year be a catalyst not only for increased attendance next year but for a renewed discussion about a new ballpark."
Rays owner Stuart Sternberg chimed in that his team "is unlikely to be successful if it's still in Tropicana Field in 10 years," in the words of the Wall Street Journal's Matthew Futterman. Of course, you could argue that the Rays are unlikely to be successful with a new stadium either - as Futterman notes, the Tampa economy is a disaster, and the team's fan base is tiny by baseball standards, both of which are going to make it hard to keep their young players once they're eligible for free agency. But it's a lot more fun (and potentially more lucrative) to blame the 18-year-old stadium than to blame MLB's skewed economic system.
October 22, 2008
More on the IRS ruling
It appears that my article on the IRS tax-free bond ruling didn't actually make it over to the Voice - they still haven't worked all the bugs out of this "email" thing - so I instead post it here, for your edification:
Dennis Kucinich's hearing on the legality of the Yankees stadium project may be only days away, but apparently the Internal Revenue Service waits for no man. The T-men have already finalized their long-awaited new regulations (PDF here) governing the use of tax-exempt bonds for development projects, and the Yankees appear to have come up winners, while for the Nets and their Atlantic Yards project, the consequences are less clear.
The story so far: Back in 2006, Mayor Bloomberg and the Yanks' owners put forward a plan to make the team's $1-billion-or-so stadium project eligible for tax-exempt bonds, which are normally not allowed for private projects. The trick? Even though the Steinbrenner clan will be paying for all construction costs for the stadium itself (the city gets to pay for a few hundred million in exciting stuff like underpasses and sewer lines), they're calling those expenses "payments in lieu of property taxes" (PILOTs) in order to meet the feds' requirement that tax-free bonds be paid for with public tax revenues. (The Mets used a similar scheme for Citi Field.) While many tax experts looked askance at the dodge, the IRS (after lobbying by Charles Rangel) okayed it, and the Yanks broke ground a few weeks later.
Since then, the Yankees have asked for another $350 million in tax-free bonds (to pay for, among other things, a snazzier scoreboard), while Nets owner Bruce Ratner has proposed floating $800 million in tax-exempt bonds for his planned Brooklyn arena via the same PILOT dodge. The IRS, however, has spent the last two years trying to concoct new regulations that would reconcile the PILOT scheme with existing law.
The final regulations, obtained today and provided to the Voice by Norman Oder of the Atlantic Yards Report, require that stadium PILOTs float with the property's tax assessment - which makes sense, since for IRS purposes they're supposedly really property taxes operating under deep cover. That would significantly reduce the benefits to teams, since bondholders tend not to be thrilled about having their bond payments fluctuate with the real estate market. The IRS does, however, include a couple of outs for projects already in the works:
- The new regs provide "broader flexibility for phased adjustments to PILOTs during the development, construction, or initial start-up period of the property." This could be used to justify the Yanks' use of additional bonds under the same rules as they got in 2006, as an "adjustment" of their previous PILOTs.
- The old anything-goes rules remain in place for any project that meets two criteria: The project got "preliminary approval," with PILOTs planned for the financing, by October 19, 2006; and "significant expenditures were paid or incurred with respect to the project" (or a contract was in place to do the same) by the same date. This would only help the Yanks if their new scoreboard and such is considered part of the original stadium project, though they weren't announced until early this year. The Nets, meanwhile, would likely clear the first hurdle (Ratner signed a Memorandum of Understanding with the city and state in early 2005), but the latter would depend on how the IRS defines "significant expenditures," given that very little work has taken place to date on the site. (Oder, for his part, thinks the IRS means to give its blessing to the Nets plan, though an agency spokesperson wouldn't comment directly on it.)
In any case, none of this affects the questions raised about whether New York City cooked the books on the Yankees' land valuation, which could make their whole PILOT scheme illegal under either the old or new IRS regs. It should make for quite the hearing on Friday - tune in on the committee website for the webcast, or on the Voice website for my live-blogging of the proceedings, if I can get the technology working.
October 21, 2008
IRS issues new tax-free bond rules
The IRS - not waiting for Friday's Congressional hearings on the matter - has issued its long-awaited revised regulations governing tax-exempt bonds. (PDF here, thanks to Atlantic Yards Report.) In a nutshell: The agency will still outlaw the use of bonds with fixed annual payments, it initially proposed two years ago (and which developers don't like, as it makes their bond payments more pricey); however, it is also grandfathering in the old anything-goes rules for projects that are already underway.
As for what this means for sports teams, the Associated Press reports that this will allow new tax-exempt bonds for the New York Yankees, New York Mets, and New Jersey Nets (actually only the Yanks and Nets are seeking new bonds). I'm less sure, however - the regs' grandfather clause is limited to projects where "significant expenditures were paid or incurred with respect to the project" by October 19, 2006, which may not be the case for the Nets' Atlantic Yards project, depending on how you define "significant." At the very least, the vagueness of the language seems likely to lead to still more lawsuits.
I've gone into a bit more detail in an article for the Village Voice website, but it's not posted just yet, so keep an eye on their blog.
MSG renovations delayed?
That $500 million Madison Square Garden renovation plan may not start next summer after all: As I report over at the Village Voice blog, the New York Liberty have announced that they'll be playing their 2009 summer season at the Garden, which would seem to rule out any substantial renovations taking place until 2010. (MSG can't do major reconstruction during the wintertime, as that would displace the Knicks and Rangers - you know, boys' sports.) Scheduling tweak, or another victim of the economic collapse? Your guess is as good as mine.
Jets PSLs selling like gold-plated hotcakes
"If ever you had any doubt that there are two Americas, the one that can afford to go to games and the other, larger one that can only sit home and watch, doubt no more," Wallace Matthews writes in today's Newsday. This in response to news that an online auction for personal seat licenses for the new New York Jets stadium have sold for as much as $65,100 - more than triple the top PSL price for the Super Bowl champion Giants in the same stadium. And that's before the $700 per ticket those fans will have to pay to attend each Jets game.
Like the Wall Street bailout, fans can conceivably make some of their PSL purchase price back, by selling their licenses to other fans once they can no longer stomach watching the Jets play. Still, you'd have thought that with many people's life savings disintegrating faster than Iceland's, fans would be loath to plunk down what's left on a gamble that premium Jets tickets will appreciate in value. Apparently, you'd have thought wrong.
Back to Matthews:
Until this week, I had held out hope that, prompted by the economic slowdown, some form of sanity might return to pro sports in this town, that maybe the Jets' auction would attract nothing but minimum bids, that the Yankees would find themselves stuck with a bunch of unsold luxury boxes and that the Mets would relent on their "season-tickets only" policy at Citi Field to reach out to their partial-plan holders, who as of now are shut out of the new park.
I thought they might do that not out of the goodness of their hearts but through necessity and the harsh reality of an economy that no longer has the kind of mad money I thought these teams were crazy to demand.
Turns out the crazy one was me.
October 17, 2008
Vikes give thumbs down to college stadium share
Apparently Sid Hartman was off the reservation on this one: Minnesota Vikings VP Lester Bagley told reporters yesterday that his team wasn't going to share the University of Minnesota's football stadium, no way, no how. "It's not an NFL stadium and does not meet the program requirements for a basic NFL venue in terms of suites, club seats, signage and sponsorships," said Bagley.
The MinnPost's Jay Weiner further notes that even just adding an extra tier of seats to the Gophers' stadium would be no easy task and carry an unknown price tag. Weiner's verdict on yesterday's Hartman column that started this whole rumor: "Silly, silly, silly."
October 16, 2008
No Nets groundbreaking until 2009
New Jersey Nets owner Bruce Ratner has admitted what everyone else already figured out: He won't be breaking ground on a new Brooklyn arena until next year, meaning the Nets wouldn't move in until the 2011-12 season at the earliest. And that's if it happens at all: Former Nets president Michael Rowe tells the New York Post, "I think he missed the curve on when that project was financially viable and now he has to wait for it to come back." Even sports talk radio icon Mike Francesca says the Atlantic Yards arena plan is "about down the drain" - though project critic Atlantic Yards Report is less sure about that just yet.
Hack, flack: Vikes could share expanded U of M stadium
Former Minnesota senate leader Dean Johnson, now a University of Minnesota regent, says he has an idea for the Vikings if their bid for a new stadium keeps going nowhere: Expand the university's new football stadium to 80,000 seats, and let the Vikings share it. Making this more notable is where the idea was floated: in the column of Minneapolis Star Tribune writer Sid Hartman, who has long been a mouthpiece for local teams' stadium demands. Hartman even mentioned the "uncertain economy" as a possible obstacle to a new Vikes-only stadium - could team owner Zygi Wilf be floating a fallback option in case the economy continues to tank?
Kucinich to Yanks: How about it, already?
U.S Rep. Dennis Kucinich has sent another letter to New York Mayor Michael Bloomberg, stepping up the pressure for the city and the Yankees to produce documents relating to the divergent land assessments that were done of the team's new home. (You'll recall that the city told the state that it was worth just $21 million, less than the value of replacement parkland being created; and simultaneously told the IRS that it was worth $200 million, to justify the Yanks' convoluted tax-free bond deal.) "As of today - more than two months after the [August 6] deadline - the City has still not complied with the Subcommittee's request for these documents," writes Kucinich.
Kucinich's subcommittee has scheduled its next round of hearings for Friday, October 24, and this time the witness list includes both city development chief Seth Pinsky (who skipped last month's hearing at the last minute) and Yankees president Randy Levine. (Kucinich is requesting that city finance commissioner Martha Stark, whose department conducted the assessments, testify as well.) This one should be worth watching - I'll post webcast details when they become available.
October 14, 2008
Another reprieve for Tiger Stadium
The Detroit city council apparently won't need to vote today on the fate of Tiger Stadium, as the Old Tiger Stadium Conservancy and the city-run Detroit Economic Growth Corp. agreed on a five-month stay of execution for the surviving part of the ballpark on Friday. Next step for the Conservancy is to come up with a firm funding and construction plan, plus another $150,000 for maintenance of the site, by December 1; and then to come up with a financing plan for the entire $15 million preservation project by March 1. (U.S. Senator Carl Levin has proposed a $4 million federal earmark toward the project.)
Best part of the Detroit News article on this, meanwhile, is the statement: "The city has decided to tear down most of the stadium to make way for new development." Decided to? Sounds like somebody needs to look out the window.
October 10, 2008
Bring on the scavengers
The New York Yankees have scrapped plans for a "closing ceremonies" concert at Yankee Stadium on November 9, meaning the Yanks' last game there in September will remain the final event in the ballpark's history. (Though the New York City Parks Department owns the structure, the team's lease there runs through next April, so don't expect any city-sponsored public snowball fights or anything.) Next up for the House That Ruth Built: the auction block, though that's so far been held up by a disagreement between the Yanks and the city over how to split the proceeds. Once that's settled, expect it to look a lot like the Mets' auction of Shea Stadium items, where you can grab a Bud Light sign from a hot dog stand for the low, low price of $335.
In Detroit, meanwhile, even as the debate continues over what to do with what's left of Tiger Stadium, the Associated Press cheerily points out that the part that was demolished earlier this year is set for the recycling heap: "Bits and pieces of the old stadium may soon turn up in the body of a new Ford F-150 truck or underneath a freshly paved Wal-Mart parking lot in the suburbs." A scrap metal processor tells the AP that "the beauty of metal" is it doesn't remember where it's been, but maybe they should consider tracking where the Tigers' former home ends up: "Game-used SUVs" might be the only way to save GM.
October 07, 2008
Tiger Stadium not quite dead yet
The Old Tiger Stadium Conservancy didn't meet their fundraising goal by today's deadline, but did convince the Detroit city council to give them another week to raise $219,000 toward saving the last surviving section of Tiger Stadium. (The full cost is expected to be between $3 million and $5 million.)
The council will now vote next Tuesday on whether to preserve or demolish the section of grandstand around the infield, which is all that's left of the historic ballpark. At last word the Conservancy was still short about $40,000, so if you have, say, some money sitting around after you pulled it out of your Icelandic bank, get out your credit card.
October 06, 2008
Mersey beat: Credit crunch stalls Liverpool stadium
It's on the other side of the Atlantic, but the U.S.-spawned credit crisis has apparently claimed one stadium victim: The Liverpool F.C. soccer club reports that it's suspended work on its new stadium thanks to the "turmoil" in the financial markets. "It is a case of a delay while things settle down," club chief executive Rick Parry told BBC News. "It is still a very, very good long term project. The economics of it still make underlying sense."
At least two British rugby stadiums are reportedly kaput for now as well. You'd have to think similar economics would be at work in North America, but so far mum's the word.
October 01, 2008
Wall Street crash to say nyet to Nets?
With the economy in freefall a wee pickle and bank credit nearly impossible to get, people are starting to consider what this will mean for the sports-stadium biz. On the hot seat today: the New Jersey Nets' planned Atlantic Yards arena project in Brooklyn, for which Goldman Sachs had promised that $950 million in financing would be in place by today. Yesterday, asked by the Newark Star-Ledger about the status of the Nets financing, the former investment bank issued a terse "no comment."
Even if the credit crunch eases, though, and Nets owner Bruce Ratner gets his loan, the project could be facing other problems. A recent court ruling in one of the many lawsuits against the project is likely to delay groundbreaking until 2009, which could open the door for Barclays Bank to back out of its $20 million a year naming-rights deal. (Barclays so far says it plans to remain on board.) Meanwhile, the disintegration of Lehman Brothers and other major New York firms is expected to flood the commercial real estate market with vacant space, casting into even more doubt the likelihood that Ratner can build his not-Miss-Brooklyn-anymore office tower - without which Ratner almost certainly wouldn't have enough money to pay off a nearly $1 billion arena, Barclays or no Barclays.
It's things like this that are more likely to have a lasting impact on stadium and arena projects: Banks will start lending money again eventually, but the lousy economy is likely to last for years. If there's less spending money out there for everything from club seats to ad boards, that means less revenue for team owners - which both reduces the amount of money they have to help pay for new buildings, and cuts into their incentive for demanding them. If everybody's broke, suddenly spending half a billion dollars to build more luxurious luxury suites suddenly looks like less of a good gamble.
ESPN.com's Tom Keown even goes so far as to suggest that the economic crisis could spell the beginning of the end of stadium blackmail:
Maybe one of the positive outcomes of the current financial crisis -- someone has to be positive, right? -- could be the unlikely awakening of the taxpayer when it comes to subsidizing the mega-wealthy who own professional sports franchises.
That, frankly, seems like a reach - the start of this stadium boom, after all, took place during the down economic times of the early '90s, when empty municipal treasuries were no obstacle to finding funding for sports facilities. And for that matter, "the taxpayer" is already pretty darned awakened, which is why most sports projects try to evade any public referenda. But I guess it's nice to have something to look forward to other than working until you're 80.
Tiger Stadium deadline looms (again)
The deadline for the Old Tiger Stadium Conservancy to raise $219,000 toward a plan to save what's left of Tiger Stadium is six days away, and the group tells the Detroit News they expect to beat the buzzer. If you want to contribute to the cause, or just check out the Conservancy's plans, you can do so here.
