NEW YORK (Reuters) - A Congressman said on Friday he was probing aspects of the tax-free bonds sold to pay for the New York Yankees baseball team’s new stadium in the Bronx, including whether land and buildings were accurately valued.
Dennis Kucinich, the Democratic Chairman of the House Committee on Oversight and Government Reform, said in a statement that he “has broadened the Subcommittee’s investigation of tax-exempt public financing of professional sports stadiums to include specific document requests relating to the valuation of the new Yankee Stadium.”
The Yankees, which have won 26 World Series titles and are one of the world’s richest professional sports teams, want a city agency to sell $350 million of extra bonds to help finance their new home.
But the Internal Revenue Service must approve the new debt. It stiffened its rules after $941 million of stadium bonds were sold for the Yankees in 2006.
The Yankees repay the bonds that were sold by making so-called payments in lieu of taxes. If the land and buildings are overvalued, the city agency can sell more debt because the payments in lieu of taxes can be higher.
After years of feuding with New York City and threatening to move out of the Bronx, the Yankees decided to stay put. Their new stadium, which will replace the 1923 building made famous by Babe Ruth, will open in 2009.
While the Yankees say 80 percent of the new tickets will cost less than $100, the high cost of seats near the infield and the stadium’s “lavish” design has prompted outrage from state lawmakers and civic advocates. Critics also note that the building has deprived Bronx residents of public park space for longer than expected.
New York state Assemblyman Richard Brodsky on July 2 held a hearing to probe the debt sales and demanded reforms.
Kucinich’s subcommittee, which held its first hearing in March 2007, has focused on how pro sports teams repay stadium bonds.
“The subcommittee is investigating the accuracy of representations made to federal agencies and bond investors about the property value of the land and buildings in the stadium construction project,” the Congressman said.
The bond issue has gained new currency because the New Jersey Nets basketball team, who plan to move to a new stadium in Brooklyn, New York, also want the IRS to let a city agency sell more than $800 million of tax-free bonds for them. The new arena for the Nets would anchor a big development now struggling in a cooling real estate market.
The New York Mets baseball club, currently replacing Shea Stadium in Queens with a new ballpark, also want more tax-free bonds. In 2006, $548 million of debt was sold for the team, which has won two World Series.
One technical but crucial aspect of Kucinich’s probe concerns whether the payments in lieu of taxes that the teams use to repay the bonds qualify as a generally-applicable tax, which would meet the requirement for public funding.
But if these payments are ruled a special charge, these stadiums could only be financed with taxable bonds whose much higher interest rates likely would bar any future deals.
Kucinich said he had written the Yankees, the city’s finance and economic development departments as well as the Internal Revenue Service and the National Park Service, seeking more information and documents by August 6.
A Yankees spokeswoman said a committee hearing into the matter had been postponed and declined further comment.
The hearing was set for July 30, and now likely will be held in September, sources familiar with the matter said.