Kucinich Grills N.Y.C. Officials Over Creative Stadium Financing

New York City officials claimed Friday that their land appraisal for the new Yankee Stadium was accurate, while a House subcommittee chairman and a state assemblyman charged that the value of the land was artificially inflated to allow for the issuance of more bonds backed by payments in lieu of taxes.

The officials made their case at a hearing, the fourth on stadium financing and the second exclusively devoted to the Yankees' new ballpark, before the House Oversight subcommittee on domestic policy chaired by Rep. Dennis Kucinich. The Ohio Democrat contends that PILOT bonds should not be used for stadiums because these sports facilities benefit private parties more than the surrounding areas.

The hearing came as a report issued by Standard & Poor's the previous evening indicated that the new Yankee Stadium is currently 30% over budget, which will likely lead to the issuance of even more PILOT bonds. The city has already issued $942 million of PILOTs for the team, and is expected to request an additional $360 million.

Martha E. Stark, commissioner of the New York City Department of Finance, which conducted the appraisal of the land, testified that her department values land without considering whether it will be exempt from taxes. She also emphasized that the land is valued not at its current condition, but with the new stadium sitting on top of it.

Stark claimed she had never been pressured by city or Yankee officials to increase the value of the land, which would have driven up the taxes due on it and would have, in turn, allowed more PILOT bonds to be issued.

"Our assessors take this very, very seriously," she said. "We have insulated ourselves from any influence."

However, Kucinich insisted that the Department of Finance acquiesced to the Yankees' interests and produced a higher-than-normal land assessment, citing e-mail exchanges between city officials.

"It has become clear that from the very beginning of the assessment process, top city officials made it known to the [DOF] that they should be mindful of the Yankees' interest 'in seeing that the assessed valuation be high enough to generate as much PILOT for tax-exempt debt as is lawful and appropriate.' And DOF buckled," he said in his opening statement.

Kucinich also pointed out that on March 21, 2006, the department had reached a valuation of the 17-acre site of $26.5 million, which he said was roughly comparable to nearby Bronx locations and previous independent appraisals of the site.

However, the next day, DOF revised the valuation from $26.8 million to $204 million, he said.

Stark said that the original number was produced when the assessors valued the land as a vacant parcel, but that when her department is evaluating a developed property, the overall land value is obtained by taking between 15% and 25% of the overall final property value after the new stadium and other infrastructure-related projects are developed on the site.

The DOF realized the original assessment was incorrectly determined, she said.

"Finance had been asked to value the property, including the land, as it would exist if fully completed. This value did not reflect that," Stark told the lawmakers.

She said that to obtain a new, more appropriate value, her assessors selected 11 lots in the city that "reflected land in similar neighborhoods ... which are less than a half a mile away and had an enhanced land value because of significant government investment."

They took the median sales price per foot of those properties, she said, and multiplied that by the 17-acre site, reaching the $204 million figure.

Stark added that in 2007, the planned site for the stadium was reduced from 17 to 14.56 acres, bringing the overall value for the land down to $175 million.

New York Assemblyman Richard Brodsky, D-Westchester, testified that he thinks the city employed "extraordinary, and I believe, illegal methodology" in determining the new value of the land, and noted that the city selected sites in Manhattan as having comparable value to the Yankees' South Bronx site, a move he called "laughable."

However, Stark said her department's actions were "absolutely consistent," with city and nationwide standards and practices, adding: "I believe the Assembly member is just mistaken."

Seth Pinsky, president of the New York City Economic Development Corp. and chairman of the NYC Industrial Development Authority, which issued the bonds, testified that the differing land values should not be seen as a sign of foul play.

"Claiming that a marked disparity between these valuations is a sign of malfeasance is no more logical than drawing the same conclusion from an assertion that the canvas on which a work of art is painted would be worth less if it instead contained a portray by an artist with far lesser talents," he said.

Pinsky added that activity on the project has been transparent and approved by public officials from the city council to the Internal Revenue Service and the Treasury Department.

New York Yankees president Randy Levine joined Pinsky, Stark, and Brodsky on the panel.

At the conclusion of the hearing, Kucinich pressed for the city to provide all the documents he has requested. He said that the city has refused to give 70% of the requested documents, citing attorney-client privilege. Kucinich said that privilege does not apply to congressional hearings.

"We're going to continue our work here," he said. "Make no mistake about that."

For reprint and licensing requests for this article, click here.
Tax
MORE FROM BOND BUYER