Wednesday, December 17, 2008

Who Gets Clipped? Bloomberg Radio Clip on Stadium Financing

Following up another of our very recent posts (Monday, December 15, 2008, Stadium Finance: Mayor, Professing to Know Numbers, Should Know He Can’t Have It Both Ways (Unless He’s Keeping Two Sets of Books)) we want to take issue with a recent quote from Mayor Bloomberg advocating that the city issue more tax-exempt bonds (another $370 million) for the new Yankee Stadium. He tries to sell the bond sale by promoting the notion that the expenses all just wind up on the federal governments tab.

Here, courtesy of radio station WNYC, is the clip the station ran as part of its local news this past Friday (12/12).

WNYC NEWS READER: Mayor Bloomberg says the city should issue another 370-million dollars in tax-exempt bonds for the New York Yankees. The tax-free bonds are cheaper for the team...because investors don't have to pay taxes. And since federal tax rates are higher than the city's...Bloomberg says it’s really Washington that will be subsidizing the new bonds.

BLOOMBERG : (in audio clip) It's a trivial amount of money and it's basically federal money or forgone interest taxable income.

WNYC NEWS READER: A spokesman for the city's Industrial Development Agency...says the city would lose about 16-million dollars...because the bonds are tax-exempt. But the Yankees have agreed to pitch in about 11-million...and there would be other that the city would more than break even. The extra bonds would allow the team to add extra features to its new stadium...which is supposed to open in April. The Yankees will pay back the bonds...but won't pay rent or property taxes.
We take issue with Bloomberg’s sales pitch to benefit the Yankees at our expense for the following reasons:

1. As we analyzed in our previous post linked above, the expense is not just on the Fed’s tab. The bulk of the expense, 85%, is paid for by the city. In the case of the extra $370 million in bonds, it should be considered that the entire amount, and then some, is the expense the city will bear.

2. Selling the idea that if it is just federal money, not city money, is an irresponsible and cynical ploy that also doesn’t pan out. Here is some of what we wrote in our previous post:

. . . it is possible to detect that Bloomberg is trying to sell NYC residents the unattractive notion that the heavy government expenditures subsidizing the stadiums might be all right if it is “not city money” and the expenses are instead being footed by a higher level of government, federal or state. But how would that work? We are all of us, as New York City residents, part of each level of government and we should be expecting responsible conduct from every level of government of which we are a part. Even allowing that taxing the many to benefit a certain few might have a cynically selfish attraction, that attraction is completely dependent upon the identified few to whom such benefit will flow. Certainly benefits do not flow to the average New Yorker or even to the average sports fan: for one thing, these construction projects have only boosted ticket prices. (New Stadiums: Prices, and Outrage, Escalate, by Richard Sandomir, August 25, 2008) Who are the few to whom the benefit flow? . . . Atlantic Yards Report provides the answer with this quote from Rep. Dennis Kucinich:

the practice of providing taxpayer subsidies to the building of sports stadiums is a transfer of wealth from the many taxpayers to the few wealthy owners.
3. Also, as covered in our previous post, it is far from clear that even the previous bonds issued to finance the new Yankee Stadium are legitimately tax-exempt. The exemption is in jeopardy because of collusive activity on the part of city officials when they established the real estate tax assessment figures upon which the exemption of the bonds is founded. It is quite possible that bonds already issued, plus any of the proposed additional stadium bonds issued, will retroactively be declared taxable. If that happens the city will be liable for substantial additional attendant expenses the mayor is not mentioning.

No comments: