The chairman of a House subcommittee is demanding that New York City officials provide more cooperation to its investigation of whether inflated land values were used to artificially increase the amount of tax-exempt bonds the city could issue to finance a new stadium for the New York Yankees.
Ohio Democrat Dennis Kucinich, who chairs the House Oversight and Government Reform subcommittee on domestic policy, made the demands in a 16-page letter sent to New York City Mayor Michael Bloomberg on Tuesday.
In the letter, Kucinich said city officials have failed to respond to requests for documents showing how the value of the land for the stadium was appraised. The value of the land dictates the amount of bonds backed by payments in lieu of taxes that could be issued for the project.
"Despite repeated assurances that it would comply with the subcommittee's requests, the city has failed to produce many essential documents requested," he wrote, adding that the city's cooperation with the investigation has been "insufficient."
Kucinich said that the subcommittee still has not received the documents two months after they were due.
The subcommittee chairman also demanded in the letter that Martha Stark, commissioner of the New York City Department of Finance, travel to Washington, D.C., and testify before the panel at its next hearing on the stadium Oct. 24.
A spokesman for the NYCDOF said yesterday that Stark plans to testify at the hearing.
Seth Pinsky, president of the New York City Economic Development Corp., and Randy Levine, president of the New York Yankees, have already agreed to testify at the hearing, according to the subcommittee.
A spokesman for NYCEDC said the organization has met all of Kucinich's document requests.
"We have provided the congressman with all the documentation he has requested and will continue to do so," he said.
Kucinich's demands stem from controversy surrounding the $942 million of PILOT bonds issued by the city in 2006 to help finance the new stadium project. Kucinich contends that PILOT bonds should not be used for stadiums because they provide more benefit to private parties than the surrounding localities.
The city received a private-letter ruling from the Internal Revenue Service before it sold the bonds, but Assemblyman Richard Brodsky, D-Westchester, has claimed the city manipulated property value assessments to increase the amount of bonds that could be issued for the site.
One assessment of the land given to the IRS valued the Bronx park where the stadium is being built at $204 million, or $275 per square foot. But another assessment given to the National Parks Service that was used to determine the cost of replacing the park land valued it at just $21 million, or $45 per square foot.
Kucinich claimed in the letter that the city obtained the higher assessment by comparing the stadium location to city assessments of smaller lots in more expensive neighborhoods in pricier Manhattan.
Tax law stipulates that PILOT bonds can only be issued in amounts equal to what the area would normally receive in property tax revenue. Higher land value appraisals would yield higher tax revenues, which means more bonds could be issued.
Kucinich has argued in the past the Treasury Department should prohibit the use of PILOT bonds or other types of tax-exempt debt to build stadiums because they mostly benefit private parties and do not spur economic development in the surrounding areas.
He has called for Treasury officials to block the practice.
But Eric Solomon, Treasury's assistant secretary for tax policy, told Kucinich in a July letter that Treasury cannot block the practice through regulations. He said federal law provides state and local governments with the discretion and flexibility to determine which projects, including stadiums, to finance with tax-exempt bonds.
In other words, Congress would need to change the law to prevent tax-exempt financing for stadiums, according to Solomon.
