Ballpark figures

Money | Did a public-funding deal for construction of the new Yankee Stadium violate federal tax regulations?
by Emily Belz
Posted 9/19/08, 12:00 am

WASHINGTON, D.C.-The new Yankee Stadium going up in New York City is a $1.3 billion project, funded in part by public money, but not just from the people of New York. Federal taxpayers, thanks to the Internal Revenue Service providing tax exemptions, are indirectly tossing some dimes in the hat through lost property-tax revenue.

Thursday, the Congressional Oversight and Government Reform Committee met for the third time in the last year and a half to discuss whether the issuing of public funds for sports stadiums is ethical. In a report released Wednesday, New York State Assemblyman Richard Brodsky argued that the public-funding deal for the new Yankee Stadium may violate federal tax regulations.

In testifying before the committee, Brodksy said, "The tax system was manipulated to make the deal financially viable."

Rep. Dennis Kucinich of Ohio, who chairs the congressional committee, stated that the City of New York and the Yankees had abused public dollars in the construction. He estimated the subsidies would cost federal taxpayers almost $200 million. No representatives from either of the accused were present at the hearing.

Specifically in the State Assembly report, which is replete with citations, Brodsky found that the new stadium would not create significant new permanent employment or economic activity in New York. He also found that the assessment of the stadium property might have been misleading. If the stadium has a high-assessed value, then the owners will be paying more taxes, balancing the debt-service fund and justifying the tax exemption.

The report shows that the city's development arm, the New York City Industrial Development Agency, ignored data that would significantly lower the assessed value of the stadium property, making the deal less justifiable.

Public funding of sports stadiums is no new controversy. When Major League Baseball officials were considering where to move the Montreal Expos in 2004, Washington, D.C., agreed to build a new stadium entirely funded by taxpayers to lure the team, which became the Washington Nationals, to the city. At the time, D.C. Mayor Anthony Williams argued that the team would bring vast public benefits, justifying the public expense.

Similar arguments have been used for other sports stadium projects, and for Yankee Stadium the City of New York argued that taxpayers would see a tangible return on the investment.

"The benefit is all intangible," said Professor Brad Humphreys at the congressional hearing. Humphreys is an economics professor at the University of Alberta and has done a series of studies on the matter. "It sets up community," he said. "The tangible economic benefits are not there."

Alice McGillion, a spokesperson for the Yankees, said in a statement released on Tuesday that stadium construction did have tangible benefits, providing jobs for construction workers who live in the Bronx. She added that Brodsky was "grandstanding."

Rep. Elijah Cummings of Maryland said at the hearing he had questions when public money helped fund the Oriole Park at Camden Yards in Baltimore.

"I was trying to figure out what the public benefit was coming to the city," he said.

Representatives from the Yankees and the City of New York will testify at "a later date," Kucinich said.

Emily Belz

Emily is a senior reporter for WORLD Magazine. She is a World Journalism Institute graduate and previously reported for the The New York Daily News, The Indianapolis Star, and Philanthropy magazine. Emily resides in New York City. Follow her on Twitter @emlybelz.

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