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September 8, 2010
As Stadiums Vanish, Their Debt Lives On
The New York Times
by Ken Belson
Shocker! The Times discovers that stadiums are a money-suck for taxpayers. Double-shocker! They focus on New Jersey, with nary a mention of business-partner Bruce Ratner's super-colossally expensive basketball palace.
It’s the gift that keeps on taking. The old Giants Stadium, demolished to make way for New Meadowlands Stadium, still carries about $110 million in debt, or nearly $13 for every New Jersey resident, even though it is now a parking lot.
The financial hole was dug over decades by politicians who passed along the cost of building and fixing the stadium, and it is getting deeper. With the razing of the old stadium and the Giants and the Jets moving into their splashy new home next door, a big source of revenue to pay down the debt has shriveled.
New Jerseyans are hardly alone in paying for stadiums that no longer exist. Residents of Seattle’s King County owe more than $80 million for the Kingdome, which was razed in 2000. The story has been similar in Indianapolis and Philadelphia. In Houston, Kansas City, Mo., Memphis and Pittsburgh, residents are paying for stadiums and arenas that were abandoned by the teams they were built for.
...How municipalities acquire so much debt on buildings that have been torn down or are underused illustrates the excesses of publicly financed stadiums and the almost mystical sway professional sports teams have over politicians, voters and fans.
Rather than confront teams, they have often buckled when owners — usually threatening to move — have demanded that the public pay for new suites, parking or arenas and stadiums.
...With more than four decades of evidence to back them up, economists almost uniformly agree that publicly financed stadiums rarely pay for themselves. The notable successes like Camden Yards in Baltimore often involve dedicated taxes or large infusions of private money. Even then, using one tax to finance a stadium can often steer spending away from other, perhaps worthier, projects.
Unless those economists, like Andrew Zimbalist, are paid by the developer.
“Stadiums are sold as enormous draws for events, but the economics are clear that they aren’t helping,” said Andrew Moylan, the director of government affairs at the National Taxpayers Union. “It’s another way to add insult to injury for taxpayers.”
Related coverage...
Atlantic Yards Report, Times continues tough scrutiny of stadium deals in... New Jersey
The article doesn't mention Atlantic Yards, or the new baseball stadiums. However, even if they don't have taxpayers on the hook for bonds, they have significant infrastructure and land subsidies--about $300 million in direct subsidies for the arena--and highly questionable bond financing schemes, in which PILOTs are used to pay off the debt, relying significantly on federal tax breaks.
Indeed, the combination of subsidies and tax breaks, including $194 million in federal tax breaks on tax-exempt bonds, added up to what the New York City Independent Budget Office (IBO) calculated (using somewhat higher estimates for the total bond deal) as $726 million in savings on the arena for developer Forest City Ratner.
And that's without assuming--as did Assemblyman Richard Brodsky, in the case of the new Yankee Stadium--that the use of PILOTs to pay for a sports facility constitutes a full subsidy in itself.
...And, unmentioned in the article, the state in the case of the Brooklyn arena simply gave away naming rights, another subsidy (worth more than $200 million) that even the IBO didn't calculate.
Field of Schemes, Times fumbles ball on Giants Stadium debt
Neil deMause weighs in on the problems with The Times's conclusions.
Whether the debt on an old stadium is paid off before it's demolished doesn't matter one whit. While "Whattaya mean, we're still paying for that pile of rubble?!?" is a natural reaction, it doesn't make much economic sense. Stadium debt is, when you come down to it, a bookkeeping measure — the construction expense is sunk the moment you sign the contract to build the thing. The rest is just a matter of (in a manner of speaking) what kind of mortgage your municipality wants to take out.
If the state of New Jersey had chosen to pay off Giants Stadium by selling 20-year bonds, in other words, it still would have represented the same expense to the public — but since the bonds would have been retired faster, suddenly it wouldn't make Belson's hall of shame. That's nonsensical. If cities shifted to paying for their stadiums with suitcases full of twenties, would that make them better deals?
...The real scandal here isn't how debt service is financed, but rather that cities and states are tearing down perfectly functional stadiums just so that teams can stop paying rent, costing taxpayers millions. Now there's a headline I'd like to see in the Times.
Posted by eric at September 8, 2010 11:36 AM