UPDATE 1-NY Yankees stadium runs 30 percent over budget - S&P

(Adds Brodsky comments, testimony; background details)

By Joan Gralla

NEW YORK, Oct 23 (Reuters) - The New York Yankees' new Bronx ballpark is about 30 percent over budget, a credit agency said on Thursday, underscoring the importance of new tax rules that let the baseball team benefit from more municipal bonds.

The Yankees are building a $1.3 billion stadium to replace their current ballpark, built in 1923. The city has already sold $942 million of debt for the team that they must repay.

Standard & Poor's warned the credit crunch might impede the city from selling more debt for the Yankees, who are expected to seek up to $360 million of new tax-free and taxable bonds.

But the credit agency added: "The parent of the stadium company can loan the project enough funds to support construction through the projected Opening Day in April 2009."

In 2006, the new stadium was expected to only cost $480 million. But that was before some local groups sued to block the plans and design changes were made by the team, some at the city's request.

The rival Mets, who are replacing their 1964 Shea Stadium with an $800 million ballpark next to it in Queens, want the city to sell more tax-free bonds on their behalf, which they will have to repay. The Mets have received $548 million of municipal debt and have not said how much more they want.

Developer Forest City Ratner Cos (FCEa.N) also wants the state to sell more than than $800 million of bonds to use in funding construction of a new $4 billion arena project, which includes a hotel and apartments in Brooklyn, for the Nets basketball team. The team now plays in New Jersey, which is still trying to keep it from moving across the Hudson River.

The credit crunch has made it hard for developers to get loans, making low-cost muni debt even more desirable.

Critics of subsidies for professional sports teams wanted the Internal Revenue Service to crack down on such funding. Instead, the agency included a transitional window in rules issued earlier this week and all three teams might benefit.

Criticism about soaring ticket prices could make it hard for New York City Mayor Michael Bloomberg to approve more bonds.

U.S. Rep. Dennis Kucinich of Ohio, who has criticized these subsidies, will hold his fourth hearing on Friday. One witness, New York Democratic Assemblyman Richard Brodsky, said on Thursday he will testify that the Yankees stadium project did not produce any "measurable economic benefit."

Brodsky charged that the land was overvalued so that enough debt could be sold to build such a costly stadium.

Urging the U.S. government to ban these public subsidies, his testimony added that: "the binding promises made to the Internal Revenue Service as a condition of receiving the (debt) tax-exemption were broken, that the assessments of the land and stadium were knowingly inflated, that the public interest in affordable ticket prices had been ignored."

Spokesmen for the mayor, the Yankees and the Mets had no comment. (Editing by Dan Grebler, Phil Berlowitz)