“The House That You Built”
Interim Report “The House That You Built” Reveals Massive Subsidies;
Inflated Tax Assessment;
Lack of Job Creation;
Questionable Actions by New York City Industrial Development Agency (NYCIDA);
Luxury Suite Acquisition;
Violation of IRS Requirements;
Excessive Ticket Prices, and Other Issues
Assemblyman Richard Brodsky (D-Greenburgh), Chairman of the Assembly Committee on Corporations, Commissions and Authorities, today released “The House That You Built”: An Interim Report into Public Financial Assistance for the New Yankee Stadium. The 31-page document is based on a six-month investigation into the decision by the New York City Industrial Development Agency and others to provide hundreds of millions of taxpayer dollars for the construction of the new Stadium. The findings of this investigation are detailed in the Report and include:
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* $550 - $850 million dollars in taxpayer investment resulted in the creation of only 15 new permanent jobs.
* The public, not the Yankees, is paying the cost of constructing the new stadium.
* A luxury suite was secretly acquired by NYCIDA and the Mayor’s Office with the proceeds from stadium bonds.
* The City manipulated the assessed value of the Stadium to meet the need for an IRS tax exemption.
* Sworn commitments to the IRS, the National Park Service, and state officials were not kept.
* NYCIDA may have violated existing law in its creation of massive amounts of public debt, and its failure to assure public benefits from the massive taxpayer investment.
* The City refused to protect the public from excessive ticket price increases by the Yankees.
* Independent investigations of the actions of DOF, NYCIDA, and other public and private parties must be undertaken immediately.
The Report is based on a review of thousands of pages previously secret and undisclosed document, sworn testimony by City officials, and meetings and discussions with City officials and other public and private parties. It uncovers in depth the actions and decisions that led to the Yankees receipt of cash contributions from the City and State of about $350 million, and additional subsidies of between $200 and $500 million in interest savings on IRS approved tax-exempt bonds, for a total taxpayer investment of between $550 and $850 million and how in exchange the Stadium project will create 15 new permanent jobs, and little in private investment. The Report will be presented to the United States Congress in testimony to be given by Chairman Brodsky this Thursday September 18, 2008, in Washington, D.C.
Excerpts from the Report:
A. The New Stadium Will Not Create Any Significant New Permanent Employment or Economic Activity
“In exchange for $500 million to $1 billion in public subsidies proponents of the new Yankee Stadium deal claimed there would be significant economic benefits to the people of the City and the State. Unfortunately as measured by permanent new job creation, new private sector investment, new local economic activity and other factors, the new Yankee Stadium will yield little if any public economic benefit, in spite of legal requirements otherwise.
The application the Yankees filed with the NYCIDA disclosed that only 15 permanent new jobs were to be created, and only 71 part-time jobs, the stadium was a “retail” project of a kind disfavored by the NYCIDA law, that and there was little of new permanent economic benefit to the host communities in the Bronx. The percentage of Yankee employees actually residing in New York City, and therefore the amount of economic benefit to New York City residents, is relatively low. Only about 50% of full time Yankee employees were New York City residents at the time, and only approximately 20% of part time employees.
These facts were well known and publicly discussed at the time the deal was made. The New York City Independent Budget Office (IBO) in testimony before the New York City Council on April 10, 2006 said, “…there is little reason to expect much gain in local economic activity beyond the three year construction period. The Yankees will generate additional revenues as a result of the higher average ticket and concession prices at the new stadium, but because a large share of sports business income flows to a relatively small number of players, and owners - few of whom reside in the city – much of these earnings will be spent elsewhere.”
Whatever emotional or political benefits result from public financial assistance to the Yankees, the economic benefits are slight or non-existent, while the public costs, estimated at over $700 million, are enormous, at a time when other pressing capital needs go begging.”
B. The Public, Not the Yankees, are Paying the Cost of Constructing the New Stadium.
“Despite repeated public assertions by the Yankees and City officials that the Yankees were paying the cost of building the new Stadium the cost of construction is being paid by diverting property tax payments the Yankees owe the City to pay construction costs. The City explicitly admitted this in official documents uncovered in the investigation
“The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation…of the Stadium.” PILOTs are tax payments negotiated between the City and the Yankees.
The best that can be said about the public assertions that the Yankees were paying for the Stadium is that they were politically necessary to keep the deal alive. But when it came time to describe the transaction in legally binding ways to the IRS, the truth had to be told. Simple common sense yields the same conclusion. No homeowner, no commercial developer, could build a new building, and then demand that the taxes owed to the locality be sent to the bank to pay off the mortgage, and then claim it was their money paying for the building.
Whatever other justifications exist for public support of Yankee Stadium, the assertion that the Yankees are paying to build it are untrue and should cease.”
C. The Actions of the NYCIDA Did Not Protect the Public Interest, and May Have Violated the Law.
“The IDA was created by state law to enhance economic growth and development, but only where a demonstrable public economic benefit resulted. No such economic benefit can be shown, and the City, in the same IRS documents admitted that the subsidies were for the benefit of a private business.
“…the transaction results in private business use of the proceeds of the Tax-Exempt Bonds….”
The gyrations of the NYCIDA as it sought to find any benefit, the conflicting reasons it has given for the subsidies, and its’ complicity in the dubious actions of other agencies are a matter of grave policy concern. The state law which governs NYCIDA actions should be amended to end these abuses, to require broader disclosure of key elements of its projects, to assure a real public benefit in exchange for public subsidies, to end the abuse of the UTEP process through “deviation letters”, and to limit the unfettered and explosive growth in NYCIDA sponsored public debt.”
D. The NYCIDA Should Not Be Used for the Creation of Massive Amounts of Public Debt. Such Use May Violate Existing Law.
“The NYCIDA alone has created billions of dollars of new public debt with little transparency or control by elected officials and outside of existing debt restrictions and the Stadium deals are a major part of that debt. This is not in the public interest. The use of public authorities, Local Development Corporations, and other “off-book” entities presents a clear and present danger to the fiscal health of the State City and region.
The use of PILOTs as a new way to create unrestricted public debt may not be legal. The Mayor’s original assertion that he could create such debt through these new entities without legislative approval was clearly beyond the law. Whether or not state law permits such machinations is also unclear should be examined. If state law does permit such debt issuance it should be amended to contain reasonable standards protecting the public interest and procedures to assure transparency and fairness.”
E. The NYCIDA’s Refusal to Consider the Issues of Ticket Prices and Public Access to the New Yankee Stadium Was a Failure to Protect the Public Interest.
“The NYCIDA refused to protect the public’s interest in affordable ticket pricing at the new subsidized Yankee Stadium and failed to consider the new revenue bonanza the Yankees will receive as a result of massive ticket price increases. The public has a real interest in affordable access to facilities it subsidizes. The Yankees right to charge any price they wish for tickets ended when the sought and received public subsidies. The NYCIDA and the Mayor’s Office should have insisted that ticket prices and public access be part of their negotiations over the subsidies, and that the enormous spike in revenues the Yankees will receive be considered in determining the level of subsides to be given to the Yankees, if any. The failure to consider the public interest in ticket prices and affordable access to NYCIDA projects, and many other concerns should be reviewed and, where needed, changed.”
F. The Tax Assessment Practices of DOF, for Yankee Stadium and Elsewhere, Need Immediate Independent Review.
“The NYCDOF inflated the assessed value of the new Yankee Stadium despite sworn promises by New York City that it would not. It did so, in all probability, to qualify the Stadium project for tax exemptions. The decisions and actions by DOF with respect to its assessment of the land and facility at Yankee Stadium are disturbing, and may have violated legal requirements. These actions include use of out-of-community comparables, failure to make appropriate adjustments, failure to accurately state the location of comparable parcels,, failure to accurately state the acreage involved, wide disparities in assessed value of land in the Yankee Stadium area, the existence of two other City appraisals of the property at much lower values, uncritical acceptance of information from the Yankees without certification or independent review, failure to exclude non-Stadium costs, and acceptance of unusual costs as part of the facility replacement cost.. The consequence of these actions is an assessed value for the Yankee Stadium project that is inflated by as much as one-third.
An immediate, thorough, and independent review of this assessment, and assessments elsewhere in the Stadium neighborhood, and perhaps elsewhere in the City, is required.”
G. The City’s Acquisition of a Luxury Suite and Yankee Tickets Was, at Best, Unwise.
The NYCIDA and the Mayor’s office decided to use bond proceeds to purchase a luxury suite for use by City officials at the new Yankee Stadium. This decision illuminates the IDA and the City’s failure to publicly address the wide range of issues raised by the Stadium deal. The decision to acquire the suite and additional game tickets, the failure to disclose it, the continuing failure to explain the reasons it was acquired, the initial denial by the Mayor’s Office that it had been acquired, the failure to explain the funding source for the tickets, and the apparent lack of a policy for determining who gets the tickets or access to the suite are the kind of things that should have been publicly discussed and weren’t.
H. There is an Immediate Need for Thorough, Independent Reviews of the Actions of DOF, NYCIDA, and Other Public and Private Parties.
“The Committee will continue its’ inquiries and issue a Final Report. That Report will contain specific recommendations for statutory, administrative and operational reforms of the various public and private entities involved, and may refer the Final Report to other investigative bodies for appropriate action. Btu the facts and conclusions contained in the Interim Report are sufficient to cause other independent investigations to begin immediately.”
 Yankees Core Application to the NYCEDC, page 7.
 Yankees Core Application to the NYCEDC, page 7.
 NYC IBO testimony before the City Council Finance Committee on Financing Plans for the New Yankee Stadium. April 10, 2006. Page 4.
 February 1, 2006 letter, page 47.
 February 1, 2006 Nixon Peabody letter to the IRS. Page 47.