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April 28, 2006
Bloomberg on Stadium Bonds: It Depends What You Mean By 'Taxes'
Power Plays
Neil DeMause explains why Payment In Lieu of Taxes (PILOTs) have become au courant in NYC's arena-and-stadium-building boom and why the hidden tax break "might well be illegal":
At issue is the use of city-issued tax-exempt bonds, which are cheaper than traditional bonds: The city Independent Budget Office has estimated that the two teams would save a combined $216 million thanks to this device, mostly at the expense of the federal treasury. The U.S. Congress, worried that it would end up subsidizing every local development deal that came down the pike, specifically outlawed using tax-exempt bonds on privately funded projects, including sports stadiums, in the 1986 Tax Reform Act. But the Bloomberg administration has argued that by having the teams repay the bonds with "payments in lieu of property taxes"--PILOTs--it's met the IRS requirement that the bonds be repaid by general tax revenue.
The controversy takes an interesting plot twist when DeMause recalls how, just a year ago, Mayor Bloomberg was arguing that PILOTs weren't repaid by general tax revenues and therefore didn't require City Council oversight.
Posted by lumi at April 28, 2006 8:47 AM