The New York Yankees last week acknowledged that they may be joining the New York Jets and New Jersey Nets in asking local taxpayers to help them pay for new homes. Under the preliminary plan, the City and State will contribute $300 million in infrastructure improvements, which the Yankees say will be more than made up by increased tax receipts from the new stadium.
Surveys have indicated that a majority of New Yorkers opposes spending any public money on the new stadiums for the New York Jets and New Jersey Nets largely because they doubt proponents’ rosy economic claims for the projects.
Mayor Bloomberg could help sway public opinion -- and do the right thing for taxpayers -- by asking the teams to guarantee those predictions.
The City is planning to finance its contribution to the Jets’ stadium on Manhattan’s West Side and the Nets arena in Brooklyn’s Prospect Heights through a technique called Tax Increment Financing (TIF). Under TIF, the City would sell bonds to be paid off by the ‘incremental’ tax revenue that the facilities are projected to generate.
Yet, if the Mayor and the team owners are so sure that new buildings will generate more new revenue than the City subsidy ($300 million for the Jets, still to be determined for the Nets), they should be willing to insure it. Under this scenario, if the facilities do not create the predicted revenue, the teams would be liable for the shortfall. An independent body (ie the Citizens Budget Commission) could make the eventual determination. Ultimately, taxpayers should not be the party assuming the financial risk on sports stadiums.
There is now a precedent for this type of ‘stadium warranty’. San Diego Padres owner John Moores agreed to revenue targets in order to secure government financing for the brand new Petco Park. As part of the deal, Moores guaranteed that $5.3 million a year in hotel taxes would be generated to repay city bonds and that at least $311 million in private projects would be built near the ballpark.
Since repeated studies have found stand-alone stadiums usually fall short of economic projections, locals are understandably skeptical about both New York facilities. But supporters say these projects will be different as both are lynchpins of bigger real estate developments. The West Side stadium is part of an expansion of convention space that officials say is necessary to keep the City competitive. The Brooklyn arena would be the centerpiece of a $2.4 billion commercial, residential, and entertainment complex.
Besides the financial concerns, both projects have run into opposition for their potential impact on their neighborhoods. However, each would have far more City-wide support if residents could be assured that the projects would be a net economic positive. In fact, while 60% of respondents to a Quinnipiac University poll of registered voters were against spending any tax dollars to finance the buildings, 75% would support the Nets arena if it received no public money. And 54% would favor the Jets stadium if the facility generated enough money to cover the $600 million. Yet New Yorkers are dubious about the TIF scheme -- 58% said it was "not likely" that the added business taxes would equal the development subsidy.
As a rabid fan of both the Jets and Nets, I think it would be terrific for each team to have their own home after a decades-long exile in the Jersey swamplands. But it would be wrong to ask fans of other teams -- not to mention those New Yorkers who don’t even know what sports the Jets and Nets play -- to subsidize the new facilities unless there is a net positive impact.
That’s why the Mayor and the owners of the Jets and Nets – and now the Yankees -- should be willing to make the most important guarantees in New York sports since Joe Namath's at Super Bowl III.
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