Yankee Stadium Financing Used for Private Benefit, Says New York Assemblyman

I am pleased to be able to transmit to you a copy of the Interim Report into Public Financial Assistance for the New Yankee Stadium, and to testify on the federal issues involved in the Stadium project.

The Report is based on previously secret and undisclosed legal documents, sworn testimony before Committees of the Legislature, and direct discussion with involved public and private persons. It sets forth the actions of various public and private parties as the New York Yankees and public officials sought and achieved a package of public benefits that total about one billion dollars. The Report concludes that, in spite of public claims by elected officials and the Yankees, there are almost no new permanent jobs, private investment, or local economic impact resulting from the taxpayer subsidies, the bonds were used for private benefit¹, and that the public is paying for the cost of construction of the new Stadium.² The Report further finds that the massive ticket prices announced by the Yankees, which will make Yankee games largely unaffordable to the very taxpayers who are paying for it, could have been mitigated if City officials had made affordable ticket prices a condition of the massive subsidies. The City refused to do so, instead, the using bond proceeds to acquire a luxury suite for its own use. City officials also manipulated state laws requiring that there be a measurable public economic benefit in exchange for taxpayer subsidies of private persons, state laws guaranteeing the integrity of our park system, and state and city laws that require the fair, professional and equal assessment of taxpayer property. I would be glad to cite the specific legal documents that are the evidence for these findings.

These serious failures of law and public policy are generally matters of state concern. I'm glad to further address them, and they do have some relevance to the federal issues before the Sub-Committee. But I now, in somewhat more detail, turn to issues of direct federal concern.

There is a growing national consensus that public financing of private sports facilities serves no useful public interest. The evidence we uncovered with respect to the Stadium deal is that there is little, if any, economic benefit to the public resulting from taxpayer subsidies. At a time when we are unable to fund our most basic infrastructure needs, the subsidization of sports facilities is not in the public interest and should cease. I urge the Congress, the Administration, and federal agencies to adopt this important reform.

There is a second concern about the proposed IRS regulation and its' impact on public financing of sports facilities. One caveat needs to be noted. As a citizen and representative of the State of New York, I'm keenly aware that the policies of the federal government result in my state receiving over $80 billion dollars less than our taxpayers send to Washington, while most other states receive more than they send. The only reason for the Stadium deal that stands scrutiny is that any arrangement that returns tax dollars to New York remedies the unfairness of the current system. The fact that these public dollars flow to the Yankees, a private, hugely successful and wealthy corporation not located in New York is a disturbing fact, but I must in fairness note the interests of my state in a fairer distribution of federal money. Notwithstanding these observations, the proposed IRS regulation should be adopted because it limits the transfer of public dollars into private pockets and because it begins to deal with the problem of use of PILOTs (Payments In Lieu Of Taxes) to create massive new public debt outside of existing debt restrictions. Public debt should be issued by public officials, with public scrutiny and control. IDAs and other "off-book" entities have created an explosion of public debt paid for by taxpayers with little legal foundation, in deals like the Stadium deal all across New York and elsewhere. The IRS and the Congress need to stop this.

The third federal concern has to do with specific evidence uncovered in our investigation with respect to the Private Letter Ruling issued by the IRS in 2006 permitting the initial bonds to be declared tax-exempt. The IRS repeatedly questioned the City to assure that the "Private Payment" standard would be satisfied. That standard requires that a PILOT payment used to repay tax-exempt bonds be no greater than the property tax payment it replaces. An artificially high PILOT is a device to get tax-exempt financing that the IRS will not permit.

The City swore to the IRS that the PILOT would not exceed the property tax bill otherwise owed, and that the assessment of the property would be the normal and customary assessment that any other taxpayer would receive.³

The evidence uncovered in our investigation shows that these promises were not kept. The New York City Department of Finance, at the request of City and NYCIDA officials, did an assessment that significantly inflated the value of the land and the Stadium itself. With respect to the value of the underlying land it assessed the value of the land at $204 million, or $275 per square foot and the Stadium facility at $1.025 billion, for a total assessed value of $1.229 billion. It used a number of questionable, unusual, and indefensible practices to do so.

First, it compared the value of the Stadium land to parcels in Manhattan, where land values are much higher than in the Bronx, and contrary to written assertions used Manhattan land from as far away as the Lower East Side where land values are astronomical. This substantially inflated the value of the Stadium land.

Second, although it correctly adjusted the Stadium land value upward because of the passage of time, it did not adjust the value down because of disparate parcel size, and parcel location. These are all standard adjustments, but the City used only the adjustment that increased value and did not use the adjustments that decrease value. This substantially inflated the value of the Stadium land.

Third, the City calculated the assessed value for the land under the Stadium based on acreage of 17 acres. The actual acreage is 14.5 acres. A correction was not done for over one year, and the IRS was not notified of the change. This substantially inflated the value of the Stadium land.

Fourth, the City accepted unverified numbers for the cost of the Stadium itself, provided to it by the Yankees investment adviser. It is standard practice to use only "certified" cost estimates provided by certified professionals, usually engineers. The use of uncertified numbers is unusual and inconsistent with the promise to treat the Yankees as any other taxpayer.

Fifth, the City accepted categories of Stadium cost not usually included in assessed value calculations. These included furnishing and fixtures not normally allowed, and apparently duplicated some categories of cost such as "Contingency' and "Project Escalation." If these prove to be duplicate categories it will have resulted in an inflated assessment.

Sixth, a review of land values in the area surrounding Yankee Stadium shows a per square foot value a tiny fraction of the value given the land by the City. These other parcels, which were ostensibly valued by the City using normal assessment procedures, include residential, parkland, commercial, retail and other public and private uses. Their assessed value ranges from $9 to $60 per square foot, with most parcels in the $15-$30 range. This contrasts with the $275 per square foot value given to the land beneath the Stadium.

Seventh, as part of the deal the City did two additional assessments of the land beneath the Stadium that valued the land at a small fraction of the value given to the IRS, and kept these appraisals secret.

The second appraisal⁴ was done because the National Park Service and the laws of New York require that the parkland taken to build the new Stadium be replaced by parkland of equal value. If the City had told the NPS or the State that it had valued the Stadium land at $204 million it would have to find $204 million to replace it. It apparently did not want to spend that kind of money, so it contracted for a different appraisal. Properly using comparable parcels in the Bronx, that appraisal showed the land to be worth $21-28 million, and that number was given to the NPS and the State as the value of replacement parkland. The IRS was not told of second assessment of $21 million, and the NPS and the State were not told of the City assessment of $204 million.

The third appraisal⁵ was done as a consequence of a state law requiring appraisal of property disposed of without public bidding. That appraisal, using slightly different methods showed the land to be worth $40 million. The NPS, the state, and the IRS were never informed of the existence of this appraisal.

These seven factors, taken separately or together, are powerful evidence that the assessed value of Yankee Stadium was artificially inflated by at least one-third, that this inflation was, contrary to sworn promise by the City to the IRS, the result of assessment actions that are not those applied to other taxpayers.

We were disturbed by the evidence of these assessment practices, and their ramifications for the existing tax-exemption, any future tax exemptions, the IRS proposed regulation, and the broader concern that must be felt by any taxpayer viewing the enormous disparities in value that appear embedded in the City's assessment roll. The Committee is continuing its investigation of these actions. Whether or not they are of interest to the IRS, the Congress, bondholders or other investigative bodies is not yet apparent.

Let me conclude with a final observation. There is a fundamental flaw in the decision by the Congress to allow for tax-exemptions that benefit private persons. The most obvious consequence of this policy is to create an economic development model that creates little new economic activity on a national basis. You have created a system that pits one state against another, that is marked by the elegant blackmail of private interests who receive subsidies and tax breaks not because of new investment, but because they threaten to leave one state for another. From a national perspective, it does the country no good when the Governor of New York gleefully announces that as a result of tax-exempt bonds he has persuaded an employer to move from Pennsylvania. The federal system was not envisioned as a vehicle for cutthroat competition for tax preferences between and among states and large economic interests. The Congress should stop the madness and restore fairness and equity to our tax system by denying tax-exemptions whose purpose is to move economic activity from one state to another.

Thank you for the opportunity to present the Interim Report and these other matters to the Sub-Committee.

The Committee on Corporations, Commissions and Authorities ("the Committee") has conducted a series of investigations into the activities of various State entities under its jurisdiction. This has included investigations of the Metropolitan Transportation Authority, the Thruway Authority, the Canal Corporation, the Long Island Power Authority, the Power Authority of the State of New York, the Hudson River Park Trust, the Empire State Development Corporation, Roosevelt Island Operating Corporation, local Development Agencies and Local Development Corporations, and others.

These investigations have uncovered a pattern of inappropriate and secretive lobbying by highly paid and politically connected procurement lobbyists, inappropriate hiring of politically connected former government officials, disposition of public property for less than its true value, interference with investigations of such behavior, failure to provide accurate and complete information to the public about authority activities and finances, and unfair and wrong decisions by authority personnel.

The Committee's investigations resulted in the first comprehensive statutory reform of public authorities, the Public Authorities Accountability Act of 2005. It enacted rules to eliminate conflict of interest in authorities, provide oversight and accountability over the process governing the sale of property by public authorities and created a statewide Inspector General to investigate waste, fraud and abuse.⁶

Although the Public Authorities Accountability Act created unprecedented oversight over authorities throughout the State, more needs to be done. The Committee has introduced legislation enacting further reforms in order to bring these massive bureaucracies back under control of democratic institutions; limit abuse and fraud; limit the issuance of public debt; and provide independent, outside oversight of authority actions.

As will be described in greater detail below, this Report sets forth facts surrounding the deal for the new Yankees Stadium, including but not limited to the economic and other incentives provided by New York City ("City") and the New York City Industrial Development Agency ("NYCIDA"). The Committee has jurisdiction over public authorities across New York and the City's use of the NYCIDA -- itself a public authority -- to drive the Stadium project raises serious questions as additional legislative reforms are advanced.

Working with the Committees on Local Governments, Cities, and Ways and Means, the Committee based this report on review of previously secret and undisclosed documents obtained by the Committee, sworn testimony taken at a public hearing, review of other public documents, meetings and discussions with City officials and other private and public parties; and numerous conversations with Federal, State, City and private persons. This is an Interim Report. As is its custom, the Committee will issue a Final Report after continuing its investigations and considering the views of interested parties.

II. Background and Chronology

Two fundamental justifications were offered support of the subsidies included in the Yankee deal.

First, it was alleged that the financial assistance provided to the Yankees would create enormous economic benefit, largely by creating thousands of new jobs in the Bronx. Job creation was repeatedly described as an essential benefit to the public resulting from the public subsidies.

As Governor Pataki said in support of this claim:

Second, the City has repeatedly asserted that the Yankees would themselves pay for the cost of construction, limiting the public subsidies to infrastructure, some direct funding, and the tax-exempt financing provided by the City, State and Federal governments. NYCIDA President Seth Pinsky stated:

Other active participants were Empire State Development Corporation (ESDC), the Mayor's Office, the Governor's Office, the National Park Service, the State Department of Parks, the New York City Office of Economic Development, the New York City Department of Finance (NYCDOF), the Internal Revenue Service (IRS), numerous lawyers retained by the parties, and others.

The final agreements created the following chain of ownership, authority, and benefit. The City would own the site of the new Yankee Stadium, and would lease it to the NYCIDA. The NYCIDA would directly own the Stadium itself. The NYCIDA would then lease both to a "special purpose, bankruptcy remote entity created as an affiliate of the Yankees,"¹⁵ which would in turn lease it to the Yankees. The Yankees would not pay property taxes that they were otherwise legally obligated to pay. Instead the Yankees would pay to the NYCIDA a "PILOT" (Payment In Lieu Of Taxes) which would use these quasi-tax payments to pay off tax-exempt bonds¹⁶ it would issue, originally said to be in the amount of $920 million¹⁷, for a term of 30 years. In other words, the cost of the Stadium would be paid by diverting tax payments otherwise legally owed to the City. The City has admitted the Stadium is being paid for by taxpayers, saying: "The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation. . .of the Stadium."¹⁸

The total tax-exempt bonds awarded had an issue price of $966,168,577.50¹⁹. The annual interest savings²⁰ to the Yankees amounts to "approximately $7.7 million to $15.7 million"²¹ for 30 years, totaling between $235 and $471 million.

It was also announced that there would be direct cash subsidies of around $235 million. The City and State, through ESDC, would also provide direct funding for infrastructure and other items in the amounts of $160 million from the City to replace parkland and make infrastructure improvements, and $70 million from the State for the construction of new parking facilities and $4.7 million from the State to a capital reserve fund.²² The amount of the cash subsidies eventually paid were substantially higher, about $350 million. According to NYCIDA President Pinsky in July 2008:

The plan for tax-exempt financing by the NYCIDA immediately raised two difficult legal questions. First, did the Yankee Stadium project meet the legal standards for NYCIDA approval; and second, did the Yankee Stadium Project meet the legal standards for IRS approval? In a short period of time both the NYCIDA and the IRS answered both questions affirmatively, allowing the project to move forward. The correctness of those answers is discussed below on pages 7 through 22. The State also enacted legislation to permit the taking of existing parkland for the non-park purpose of building the Stadium, requiring that replacement parkland of equal fair market value be added to the Bronx parkland system. A Community Benefits Agreement²⁵ was signed setting forth various benefits to communities in the Bronx that would attend the construction and operation of the Stadium.

On the basis of these actions the NYCIDA sold the bonds in August 2006, the other subsidies were provided, and construction of the new Stadium was commenced.

Early in 2008 the Yankees indicated that they would seek additional tax-exempt funding in the amount of $366.9²⁶ million for "completion" of the stadium projects. A preliminary application was filed with the NYCIDA. Action on the application has not taken place pending efforts by the Yankees, the NYCIDA, and others to reverse a proposed IRS regulation, which apparently makes the new bonding difficult or impossible. An analysis of the additional request is found below on pages 24 and 25.

III. The Committee's Inquiry

The use of public subsidies to build sports facilities is widely controversial. There has been deep interest in whether the public would benefit from the billions of dollars in financial assistance to the Yankees, an enormously successful and wealthy private entity, and whether the process used to advance these projects was transparent, truthful, and responsible. For these reasons, the Committees on Corporations, Commissions and Authorities; Local Governments; Cities; and Ways and Means began an inquiry into these matters. A public hearing was held, documents were requested and provided²⁷, meetings and discussions with City officials took place, and an analysis was begun. Parallel to these activities, a Congressional investigation was begun, which will include a public hearing on September 18. The Committees' work is not completed. This Interim Report is being issued to disclose what has been learned so far, and to focus our continuing work on the remaining unanswered questions.

• First, should there be measurable benefits to the public when government financial assistance is provided to a private entity?

• Second, what public benefits, if any, resulted from the substantial financial assistance provided to the Yankees?

• Third, was the process used to explain, examine, and approve the Stadium deal transparent and honest?

IV. The Actions of the NYCIDA

According to the UTEP, in making the decision to provide financial assistance the NYCIDA Board must consider: "the extent to which a proposed Project will create or retain permanent, private-sector jobs," "whether Financial Assistance is required to induce the Project," "whether the Project involves an industry or activity which the City seeks to retain and foster," "the estimated value of any other benefits that the City may be providing," and "the amount of private-sector investment to be generated by the proposed Project," among other factors.³¹

The UTEP also states that in order to qualify for financial assistance, it must be proven that without it, ". . .the Project would most likely not be taken by the proposed Recipient; or, if undertaken at all by such Recipient, the Project might occur at a substantially reduced level or outside of the State."³²

Also according to the UTEP in order to qualify for funding, it has to be shown that without this financial assistance ". . . (i) a Recipient would either not retain and/or attract a specified number of employees or a business function or unit for a specified period of time within the City, and/or (ii) the loss of a vital service to the City might occur . . ."³³

The City determined early in the process that the Yankee deal could not meet these requirements. The NYCIDA explicitly admitted this, saying ". . . the terms of the provision of financial assistance for the proposed project do not conform to the provisions of UTEP."³⁴

Some of the facts which led to this conclusion are:

There were a considerable number of temporary jobs, created largely in construction.³⁸ These are a measurable economic benefit. However, the law and common sense do not rely on these jobs to justify a public subsidy. If they did, any large project employing large numbers of construction workers would receive taxpayer assistance, even if no other public benefit resulted.

The NYCIDA is required to give a reason for the deviation and for the decision to provide the benefits in spite of the failure to meet the UTEP standards.

Also, in a sworn statement to the IRS, the NYCIDA explicitly set forth the threat of the Yankees leaving the State as the reason to enter into a PILOT agreement. PILOTs are a ". . . reduction from the amount of real property taxes that would have been imposed that the NYCIDA believed was necessary to induce the Team to remain in the City."⁴²

The threat to relocate from the City was the sole reason cited for the decision to give the Yankees financial assistance and was constantly repeated publicly and in legal documents.

NYCIDA President Seth Pinsky said:

The Committee requested documentation from the NYCIDA confirming its allegation that the Yankees would relocate without public assistance.⁴⁶ The only response from the NYCIDA to those requests was a packet of news clippings, largely containing speculation by reporters on the Yankees threatening to leave New York City, dating back to 1993.⁴⁷

These press clippings provide no evidence that, at the time of the NYCIDA negotiations, the Yankees had threatened to leave. There is nothing in the public record which backs up the public and legal assertions that the Yankees threatened to leave, no evidence of efforts by the NYCIDA to assess the actual threat, and no evidence that the Yankees had a financially and politically practical relocation site outside of the City. There is no evidentiary basis for the NYCIDA's assertion that relocation of the Yankees was a real issue in these discussions.

At the suggestion of the NYCIDA⁴⁸, the Yankees have been directly asked about any threats to relocate they may have made. They have failed to answer these questions.⁴⁹

The best that can be said about the Deviation Letter is that it is mere speculation. It may also be misleading. In any event, the decision to commit billions in financial assistance required more effort, more inquiry and more evidence of a public benefit than was provided by the NYCIDA.

Normally, this would include the UTEP findings of a public benefit. However, since a Deviation Letter was used in place of a UTEP finding, and since the sole reason given in the Deviation Letter was the Yankee threat to relocate, the Inducement Resolution should have included that threat.

It does not. The reason given in the Inducement Resolution is that the Stadium project "will serve the Agency's public purposes . . . by preserving or increasing the number of permanent, private sector jobs in the City and State of New York"⁵⁰ , contradicting the analysis of job creation by the NYCIDA when it decided to "deviate" from the UTEP. The Yankee NYCIDA application states that only 15 new permanent jobs would be created. It can be fairly concluded that in the eyes of the Mayor, the Yankees, and the NYCIDA, 15 new permanent jobs constitute "increasing the number of permanent, private sector jobs,"⁵¹ at a level justifying hundreds of millions of dollars in taxpayer subsidy. That is neither fair nor reasonable.

The Inducement Resolution also notes that the stadium is a "retail" project,⁵² which would not normally qualify for NYCIDA funding, but that it in fact is eligible because it is "located in a highly distressed area."⁵³ The Yankee employees do not seem to live in significant numbers in the community surrounding the Stadium, or in the City, or State. Whatever its physical location, Yankee Stadium has not been a major economic force in the lives of neighborhood residents.

The legal consequences of the inconsistent legal justifications are the subject of continuing Committee inquiry. It is unclear whether an Inducement Resolution can ignore the statutory requirement of the UTEP and Deviation Letter. It is also unclear whether NYCIDA counsel or Bond Counsel discussed or offered opinion on this matter.⁵⁴

V. The IRS Issues

The IRS did require such projects to pass highly technical legal tests, the "Private Business Use" test and the "Private Security or Payment" test. These were intended to identify transactions that benefited private parties and these became the focus of the IRS controversy, in a detailed, lengthy and often contentious exchange of letters.

The City addressed IRS concerns by first admitting that there was a private benefit in the Yankee transaction, saying that ". . . the transaction results in private business use of the proceeds of the Tax Exempt Bonds."⁵⁸ The IRS acknowledged this as well, stating that ". . . all of the Stadium is reasonably expected to be used for a Private Business Use."⁵⁹

However, the City argued that as long as the PILOT payments were not in excess of the real property taxes otherwise owed by the Yankees, the tests were met and the IRS should approve the tax exemption for the bonds. In other words, the IRS should not object to the use of PILOTs to pay off tax-exempt bonds floated to build the Stadium, if the PILOT payments were not artificially inflated to meet the debt service requirements. Again, if $50 million was needed annually to pay off the bondholders, but actual property taxes or PILOT payments generated only $30 million, the local government could not artificially raise the tax or PILOT payment the additional $20 million a year, even with the permission of the taxpayer.

That the PILOTs would be enough to pay the debt service on the bonds was a logical consequence of DOF assessment policy according to proponents of the deal: ". . . the fact that the PILOT comes close to actual taxes is not a coincidence. Even though negotiated, use of the same assessment methodology should make the PILOT 'commensurate' with NYC real property taxes."⁶⁰

If DOF, however, had artificially inflated the assessed value, the entire legal justification for the tax-exemption collapses and the tax exemption would be denied. It is noteworthy that this concern was publicly discussed. The New York City IBO specifically raised the issue in testimony by the New York City Council: "Given the large annual payments needed to service . . . tax exempt bonds . . . a regular property tax bill would be . . . considerably below the annual debt service payments."⁶¹

This warning was ignored by the City, the IRS, the Yankees, and the lawyers for all parties.

There is a significant question as to whether the IBO statement should have triggered additional due diligence by public officials and Bond Counsel on the issues of stadium and land assessments and the adequacy of the PILOT revenue stream. The role of Bond Counsel in this and other matters is an unresolved issue. Attempts to clarify these issues with certain Bond Counsel were unsuccessful on the asserted basis that ethical constraints forbade any discussion with the Committee.⁶²

The heart of the IRS policy is to stop manipulation of property taxes for the purpose of receiving tax exempt financing. In other words, if the Yankees were treated as any ordinary taxpayer would be treated, the bonds could be approved. There was intense and voluminous correspondence between the IRS and the NYCIDA, Yankees, and others largely responding to IRS concerns. The NYCIDA swore to the IRS that the Yankees would be so treated⁶³ and that the annual PILOT would be "commensurate"⁶⁴ with the actual property tax liability of the Yankees to New York City, and, in a key assurance by the NYCIDA, that the New York City Department of Finance, which sets the assessed value for each parcel in the City, would assess the property in accordance with normal and accepted procedures.

In a July 3, 2006 letter to the IRS, NYCIDA counsel asserted that ". . . the New York City Department of Finance ("Finance"), the City agency that is responsible for assessing any property located in the City subject to real property tax, will use the same assessment method for the Stadium is (sic) used for assessing properties of the same class within the City . . . In other words, the City's use of the actual assessed value, equalization rate, and tax rates . . . results in that PILOT being commensurate with the applicable real property tax."⁶⁵ The NYCIDA was legally obligated to make sure that the Yankee Stadium property was assessed as every other such property is assessed, and to apply the same tax rate applied to any other such property, and to not artificially inflate the tax payments. It did not keep that commitment, the DOF assessment was inflated, and the IRS was never informed.

On the basis of these assurances the IRS issued a "Private Letter Ruling" approving the Stadium project for tax exempt financing. The IRS made explicit its reliance on NYCIDA representations, saying, "the PLR [Private Letter Ruling] is based on the facts and representations as provided to the Internal Revenue Service by the Agency and as set forth in the PLR itself and that deviations from such facts and representations could cause the PLR to be inapplicable to the Bonds."⁶⁶ It added, "The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party."⁶⁷

The NYCIDA and the Yankees were caught in a bind. On the one hand they had sworn that the assessment would not be inflated and that Yankees Stadium would be assessed as would any other property. On the other there was a real question as to whether the assessed value of the new Yankee Stadium would be high enough to generate PILOTs sufficient to pay the debt service on the bonds.

The Department of Finance began assessing the Stadium property in early 2005 using the "cost" method of assessment, rather than any income or revenue based method.

The assessed value was the total of the assessed value of the land upon which the Stadium sat, and the assessed value of the new Stadium itself.

It is accepted valuation practice for the DOF to measure land value by determining the value of "comparable" parcels of land. Those "comparables" are then adjusted for a series of factors, including time (real property, until recently, has increased in value over time, so a sale price of two years ago is adjusted to reflect two years of price inflation), size (large parcels are much less common and more difficult to use, so smaller parcels tend to sell for more per square foot than large ones, requiring a size adjustment if small parcels are used to value a large one), and location (it is best practice to find "comparables" in the same geographic and political neighborhoods. If no "comparables" exist locally, then parcels far away can be used, but a location adjustment is made.)

The Committee's investigation has found significant failures on the DOF assessment, in the areas of the location of comparable parcels, acreage, a second appraisal, and the assessed value of neighboring land.

The decision to ignore Bronx land values has not been explained or justified. There are comparable parcels in the Bronx, there is no evidence of similarity of value between Harlem and the Bronx, and most disturbingly, despite written assurance, DOF used parcels in Manhattan which are not located in Harlem.⁷⁰ Parcels in Chelsea and the Lower East Side are included in the list of comparable parcels, again with no explanation.

The cumulative effect of these decisions is to substantially inflate the assessed value of the Stadium land.⁷¹

There were also a complicated set of redrawings of the boundaries of the Stadium parcel that are difficult to understand, and may or may not be related to the use of the erroneous acreage. It appears that both the Yankees and DOF were part of the process by which the lots were redrawn and the acreage calculated. The effect of these decisions was to inflate the assessed value of the Stadium deal.

The appraisal requirement was set forth in Chapter 238 of 2005, the State law which allowed parkland to be used for the new Stadium, as well as by federal law. The purpose of this appraisal was to assure that the replacement parkland added to the Bronx park system would be at least equal in value to the parkland lost to the new Stadium. This is the policy of the Legislature when it is asked to change the status of parkland, and well as a Federal requirement.

Chapter 238 sets forth the specific requirements:

If the DOF appraisal had been used, it would have required an addition of $204 million in new parkland. Rather than send the National Park Service and the State Department of Parks the DOF appraisal, the City, acting through NYC Citywide Administrative Services did another appraisal by hiring a known outside appraiser.⁷⁸ That appraisal, relying on parcels in the Bronx, valued the same property that DOF had valued at $204 million at $21 million, $45 per square foot, $1.5 million per acre.⁷⁹ The second appraisal was submitted to the NPS and the State Department of Parks. The existence of the DOF appraisal was not disclosed to Park officials.⁸⁰

Whether or not this constitutes a violation of federal and state law is a matter of continuing interest to the Committee.⁸¹

The methodology of this appraisal differed from the DOF appraisal in that it did not use a "cost" method, it used an "income capitalization" method. The reasons for this change, and the varying elements of the appraisal discussed in the e-mails are not yet clear. The appraisal valued the land at $40 million.

The existence of this third appraisal was also withheld from the IRS, the DOF, federal and state parks officials and the public. It is not clear if the appraiser was given copies of the DOF or parkland appraisals.

It can reasonably be concluded that given the wide discussion and dissemination of this appraisal, City officials in and out of the Mayor's Office were aware of the discrepancy between this and the other appraisals, and that the apparent failure to justify the profound differences among the three appraisals was not an accident or omission.

The apartments on the corner of 162^nd street are on a parcel valued at $14 per square foot, and the supermarket at 881 Gerard Avenue is on a parcel valued at $38 per square foot, and the parcel on which the McDonalds on 161^st Street is located is valued at $63 per square foot;. The average value of the land parcels encompassing the strip across from the current Yankee Stadium is $36 per square foot. Of particular note is the value of the land currently being developed by Related Companies into the Gateway Center at the Bronx Terminal Market, a "retail" shopping plaza which includes stores such as Target and Bed, Bath and Beyond; the average assessed value of this land is $9 per square foot. This parcel would seem to be closest in purpose, investment, and community impact to the Yankee Stadium site. Yet the land, according to DOF, is worth about 3% of the value of the Stadium land. There has been no explanation of these discrepancies, or the DOF policies and practices that create them. A more detailed list of neighboring property values is attached in Appendix A.

The evidence shows that the assessment was manipulated, that different agencies of the Federal government were given dramatically different values that in each case protected an economic interest of the City, that responsible officials were aware or should have been aware of these failures, and that the state and the IRS, which relied on the NYCIDA's assertion that the Yankees would be treated like any other taxpayer, have an interest in determining the actual value of the underlying land and whether the assurances given were actually carried out.

On April 10, 2006 DOF announced that the assessed value of the Stadium itself was $1,025, 283,187. This figure was the total of hard costs of $749,396,309 and soft costs of $275,886,878. These numbers were supplied in a letter to DOF Assistant Commissioner Dara Ottley-Brown in a February 27, 2006 letter from Mr. Gregory Carey, a senior member of Goldman, Sachs & Co. DOF admits it accepted without independent inquiry Mr. Carey's assertion of Stadium costs.⁸⁴ In the documents provided to the Committee, in response to questions at a meeting with DOF staff, and by DOF's admission in its April 10, 2006 letter, DOF did nothing to verify these numbers, or to seek an independent verification of them.

After seeking advice from reputable assessment professionals, the Committee has identified a number of areas of concern with the Carey/Ottley-Brown numbers.

First, it is not customary assessment practice to receive and accept such cost numbers from financial advisors to a taxpayer, without verification or inquiry. It is customary and best practice for these numbers to be certified by a project engineer or other construction professional in a "certified cost schedule". DOF's decision not to seek verification of Mr. Carey's numbers requires further inquiry and clarification.

Second, various categories of cost asserted by the Yankees and accepted by DOF seem unusual in both their nature and their value. The Committee has been advised that two categories of cost given to DOF by the Yankees, $25 million for "Equipment and Furnishing" and $17.5 million for "Audio Visual Systems", are not normally included in replacement value assessments. While they do have business value they are not usually associated with real property values.

Third, the same concern is raised by the inclusion in real property value of $53 million for "Luxury/Sky/ Boxes". While this description is inherently unclear, it would appear that aside from construction costs accounted for elsewhere, these costs are best understood as part of a category of costs known as "Furniture, Fixtures, and Equipment", again not normally part of real estate costs.

Fourth, it appears that the Yankees included two similar categories of cost, $36 million for "Escalation", and $34 million for "Project Contingency" It is unclear what is included here, and whether these costs overlap.

Fifth, certain soft costs seem unusually high. The Yankees included $119 million for "Architectural, Engineering, and Development Costs", and $122.5 million for "General Conditions and Fees (Financing Costs)". The Committee has been advised that this amount of soft cost is unusually high, amounting to over one-third of hard costs, and slightly under one-quarter of total costs. It is also unclear if elements of financing costs including certain reserve funds are properly included in a real property assessment.

Sixth, it appears that the Yankees included costs for the construction of property not legally part of the Stadium, particularly the cost of construction of a new police station. The new station is explicitly exempted from the ownership agreements governing the new Stadium: "Police Substation is neither part of the land or property leased to the Agency under the Ground Lease, nor the land or property leased to the Company under the Lease Agreement."⁸⁵ Since the police station is not legally part of Yankee Stadium, it appears that standard practice would be to reduce includable costs by the amount of the construction cost of the station. This was known to the City and attorneys for the Yankees. In an e-mail dated December 6, 2006, Robert LaPalme of NYCEDC said "The IDA excludes the substation parcel, but the tentative tax lot appears to include it."⁸⁶ Apparently, DOF was not made aware of the existence of this entire matter and took no action on it. DOF responded to the Committee's question about the police station by saying "Our records don't indicate a police station on the site."⁸⁷ In a second letter DOF admits "the lot estimates we received did not mention a substation, and our valuation did not take into account a substation." ⁸⁸ The DOF assessment includes the police station which appears to have inflated the assessed value of the Stadium.

These matters are highly technical, and no definitive conclusion on the legality or propriety of any individual cost can now be reached. The Committee did repeatedly seek all documents in the possession of DOF which might have explained these actions, and whether they constituted normal DOF practice. The Committee has been told they have received all documents in the file, and concludes that in the absence of any documents clarifying these decisions, having has sought expert opinion on these matters, and based on its own understanding of the law and accepted assessment practice, there is a need for further investigation of the actions of DOF in assessing the Stadium facility.

 "Building Cost Other Stadiums

VI. Luxury Suites

The NYCIDA and the Mayor's office decided to use bond proceeds to purchase a luxury suite for use by City officials at the new Yankee Stadium.⁹⁰ This decision illuminates the IDA and the City's failure to publicly address the wide range of issues raised by the Stadium deal. The decision to acquire the suite and additional game tickets, the failure to disclose it, the continuing failure to explain the reasons it was acquired, the initial denial by the Mayor's Office that it had been acquired, the failure to explain the funding source for the tickets, and the apparent lack of a policy for determining who gets the tickets or access to the suite are the kind of things that should have been publicly discussed and weren't.

VII. The Price of Tickets at the New Stadium

The price of tickets to the new Yankee Stadium is a matter of legitimate public concern, given the enormous public subsidies involved. Since the Stadium deal was announced the Yankees have announced massive ticket price increases. It is unlikely that average middle class New Yorkers, whose tax payments subsidize the new Stadium, can afford regular access to most seats.

One of the differences between a sports facility and the typical NYCIDA project is that public access to a Stadium is a function of the price to the public of event tickets. At a privately financed facility, the private owner charges any ticket price people are willing to pay. When the public subsidizes a sports facility, however, there is a public interest in assuring that the people who are paying for the facility afford to can attend events there. Unfortunately the public interest in affordable access to Yankee Stadium was never a concern of the City of New York, or any of the public entities that structured the deal.

The Committees are still seeking information from the NYCIDA and the Yankees on the total revenue generated by the ticket price increases. Although the information is still anecdotal, tickets that the Yankees sold for $100 to$150 per game are now being offered for between $850 to $2500 per game. Tickets in other price ranges are also being increased by five to ten times, at least. Whatever opportunity low or middle income families have of attending a Yankee game in any other than the cheapest seats has vanished, at the same time that these same taxpayers are pouring hundreds of millions of their dollars into the building of the Stadium.

It is difficult to understand why the City, the NYCIDA, ESDC, and other public decision makers failed to even consider whether the right of the public to access to the new Stadium was an interest that ought to be protected. When asked at the Committee hearing whether the NYCIDA knew of the price increases, or was concerned about their impact, or viewed them as a factor in deciding whether to provide financial assistance, NYCIDA President Pinsky said:

The Yankees, in a free-market system, have the right to charge whatever they wish. Once they accept large amounts of public subsidy however, they have or ought to have a responsibility to the public which funds their efforts. The inability of the NYCIDA to understand this is distressing. But Mr. Pinsky's assertion that the Yankees are operating in a system where the market sets the price is astoundingly wrong. The Yankees, along with all of baseball, benefit from an exemption from federal and state anti-trust laws. They are a legal monopoly. They can and have engaged in anticompetitive practices, and control the market for their tickets in ways that would violate the law for any other industry. The NYCIDA, the City and other public entities are subsidizing a monopoly. To compare it to IBM, which operates in a competitive market, illuminates NYCIDA's the failure to protect the public interest in almost every aspect of this deal.

It also appears that the NYCIDA failed to consider the huge increase in ticket revenue to the Yankees as relevant to whether or not they needed, or qualified for, public financial assistance.

The problem of huge ticket price increases after huge public subsidies has not gone unnoticed. Legislation to address this problem has been introduced by Assemblyman Brian Kavanagh of New York County and 25 Assembly colleagues.⁹³ Additional legislation to insure that NYCIDA subsidies of places of public access at least consider the ticket pricing policies is also being drafted.

VIII. Request for Additional Financing

When the initial agreement for subsidized tax exempt financing for the new Stadium was announced, it was in the amount of $920 million in tax exempt bonds.⁹⁴ There was no indication that additional financing would be sought or approved. To complicate matters, the IRS, which had expressed concerns about tax-exempt financing for sports facilities at the time of the initial approval, has issued a proposed regulation, which would make it difficult if not impossible to issue new Yankee Stadium-NYCIDA debt. Even with that obstacle unresolved, the Yankees are now seeking an additional $366.9 million⁹⁵ in tax-exempt financing, as evidenced by a "preliminary" application to the NYCIDA. The application itself, as redacted by the NYCIDA⁹⁶, does not make clear what the specific purposes of the new financing would be. They mention a vague category of "Scope Modifications" in the amount of $196 million, but do not specify exactly what these are.⁹⁷ The Yankees have asserted that the financing is for the purpose of "completion" of the project, something that was anticipated in the initial financing. Press reports, and some additional information supplied by the NYCIDA indicate the bulk of the money is for an expanded audio visual system, probably a large video screen, improved washrooms and vertical transportation, among others.⁹⁸ It is unclear if the audio visual and washroom costs are properly funded by tax-exempt construction bonds.

Several unanswered questions have arisen. First, are the purposes for which the funding is sought valid public purposes sufficient to justify the funding as both a matter of policy and as a matter of law? The most unclear issue is related to the NYCIDA Deviation Letter in the initial financing. In that letter the NYCIDA asserted that the threat that the Yankees would leave the state provided the justification for the financing. Although there is little evidence to back that assertion (see pages 9 through 11), there is absolutely no basis for a new threat to leave especially since there is now a non-relocation agreement. Accordingly, if the original Deviation Letter is to be believed, there is no legal basis for the second round of financing.

IX. Use of PILOTs to Create Debt

The use of PILOTs to back tax-exempt quasi-public debt is crucial to the Stadium deal.

PILOTS were created as a means of evading the constitutional requirements that all taxpayers be treated equally and that public funds not be given to private persons for their private benefit. While PILOTs can be granted directly by a municipal government, an NYCIDA may take ownership of a private asset and then simultaneously lease the asset back to the private owner, thereby relieving the private owner from any legal obligation to pay property taxes. Instead of those property taxes, the government/NYCIDA negotiates the PILOT at a lower amount than the tax that would otherwise be owed. That tax saving is a subsidy by the public to the private project that meets constitutional requirements: "The fixed amount of PILOTs represents a reduction from the amount of real property taxes that would have been imposed on the Stadium and Stadium Site . . ."⁹⁹

State law requires that PILOT revenues be returned to the government for general government budgetary purposes: "Payments in lieu of taxes received by the agency shall be remitted to each affected tax jurisdiction within thirty days of receipt."¹⁰⁰ The theory is that the government gets reduced revenue, but a project that creates economic growth for the whole community will be built.¹⁰¹ It is that latter benefit which provides the pretext for the public subsidy.

Recently, New York City, and perhaps others, have advanced a novel financing scheme. Instead of going into the municipal treasury for schools, transit, health care or other municipal purposes, the PILOT payments are pledged to pay off debt. Because this new PILOT debt is technically not municipal debt, it is off-budget, off-book, not subject to the usual requirements of disclosure and legislative control, and in the case of New York City, apparently not included under the municipal debt limit required by state and City enactments. This has resulted in an explosion of quasi-City debt, literally billions of dollars, that is little known, and which is actually repaid by municipal revenues.

Originally, the Mayor took the position that such debt could be issued directly by him, with no other approval. But, since the PILOT is a payment to the government and public property, there was no satisfactory way to explain how the PILOT funds made their way into the pockets of private citizens who owned the NYCIDA bonds. There was no approval by the legislative body, no budget action, no appropriation, and no public accountability other than the desires of the Mayor. In the face of this critique, the City Council, in 2005, passed Local Law 73 and later Resolution 259, which sought to give legislative approval to this debt creating scheme. It remains unclear if this Council action was legally effective, and unclear whether State law permits the use of PILOTs in this way.

A final judgment on the legality of securitized PILOTs is beyond the scope of this Interim Report. It is a matter of deep public concern as it resembles the private sector "off-book entity" machinations of recent years, which in the case of Enron and others showed the disasters that can result from unrestricted debt issuance backed, in this case, by public funds and institutions. The Committee is engaged in an effort to estimate the total public debt that has resulted from this new mechanism. If, as may be, there is no sound legal basis for such debt, than the Stadium deal, as well as many others, will be in difficulty.

X. The Role Of Elected Officials

From the beginning of its' inquiry the Committee have been seeking to determine the role of elected officials in the important decisions surrounding the Stadium deal. It seems obvious, and consistent with text book democratic theory, that decisions of this magnitude, including the issuance of billions of dollars of public debt, should be made by the elected representatives of the people. That is not the case. In this deal, as with a series of similar deals all over the state, executives' use of public authorities has created a parallel and all-powerful model of the decision to issue public debt. These executives, mayors, governors, county executives and supervisors, have sought and received legislative permission to create these new public authorities and although not legally empowered to do so, have controlled their decisions by appointing authority boards that see themselves as subordinate to the wishes of the Executive who appointed them. As a matter of law, the decision to provide billions of dollars of public financial assistance to the Yankees was made by the NYCIDA Board, whose current members are: Seth Pinsky, Derek Park, Amanda M. Burden, Michael A. Cardozo, Albert V. De Leon, Steven C. Devereaux, Robert C. Lieber, Joseph I. Douek, Kevin Doyle, Andrea Feirstein, Bernard Haber, Albert M. Rodriguez, Robert D. Santos, William C. Thompson.¹⁰² With all due respect to these public-spirited and well-intentioned citizens and government employees, it is unlikely many New Yorkers have heard of them, or wish them to be vested with the enormous power they now wield.

When asked about this issue, Mr. Pinsky replied that only the Mayor of New York City needed to be involved in such decisions:

It is not in the public interest for the decision to issue billions in public debt to be made purely by the executive, outside the constitutional system of checks and balances. The State Legislature, the City Council, and others concerned about the governance of public institutions, and the proliferation o public debt, need to address these complicated, formal and informal, executive driven, and secretive institutional arrangements. One can hardly expect enormously wealthy private entities such as the Yankees to avoid the riches showered on them by these deals if elected officials themselves do not examine and control them.

XI. Findings

The growing national evidence and the growing national public conclusion is that sports facilities are not sound economic investments for taxpayers.

The application the Yankees filed with the NYCIDA disclosed that only 15 permanent new jobs were to be created, and only 71 part-time jobs¹⁰⁶, the stadium was a "retail" project of a kind disfavored by the NYCIDA law, that and there was little of new permanent economic benefit to the host communities in the Bronx. The percentage of Yankee employees actually residing in New York City, and therefore the amount of economic benefit to New York City residents, is relatively low. Only about 50% of full time Yankee employees were New York City residents at the time, and only approximately 20% of part time employees.¹⁰⁷ (See page 8 above.)

The NYCIDA, and the Mayor, who are charged by law with assuring that public benefits do exists, took two conflicting official positions. In the required "Deviation Letter", the sole reason given in support of public financing was a purported Yankee threat to relocate out of the City. There is no evidence that the Yankees actually made such a threat. However, in the required NYCIDA "Inducement Resolution" the NYCIDA and the Mayor are silent about a relocation threat, and assert that "The Project will serve the Agency's public purposes by preserving or increasing the number of permanent private sector jobs in the City and State of New York", apparently referring to the 15 new permanent jobs described by the Yankees in their application to the NYCIDA.¹⁰⁸

This inconsistency not only raises substantial questions about the legality of the NYCIDA approvals, it illuminates the difficulty Stadium proponents had in meeting the traditional standards for economic growth and development. Whatever emotional or political benefits result from public financial assistance to the Yankees, the economic benefits are slight or non-existent, while the public costs, estimated at over $700 million, are enormous, at a time when other pressing capital needs go begging.

The decision to spend this public money on Yankee Stadium was not in the public's economic interest.

The best that can be said about the public assertions that the Yankees were paying for the Stadium is that they were politically necessary to keep the deal alive. But when it came time to describe the transaction in legally binding ways to the IRS, the truth had to be told. Simple common sense yields the same conclusion. No homeowner, no commercial developer, could build a new building, and then demand that the taxes owed to the locality be sent to the bank to pay off the mortgage, and then claim it was their money paying for the building.

Whatever other justifications exist for public support of Yankee Stadium, the assertion that the Yankees are paying to build it are untrue and should cease.

Both the NYCIDA and the State law governing IDAs are in need of fundamental overhaul and reform.

The securitization of PILOTs as a new way to create unrestricted public debt may not be legal. The Mayor's original assertion that he could create such debt through these new entities without legislative approval was clearly beyond the law. Whether or not the City Councils actions cured that defect in City actions is unclear. Whether or not state law permits such machinations is also unclear should be examined. If state law does permit such debt issuance it should be amended to contain reasonable standards protecting the public interest and procedures to assure transparency and fairness.

An immediate, thorough, and independent review of this assessment, and assessments elsewhere in the Stadium neighborhood, and perhaps elsewhere in the City, is required.

² "The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation. . .of the Stadium." (February 1, 2006 letter from Mitchell Rapaport and Bruce Serchuk (Nixon Peabody) to IRS. "NYCIDA -- Request for Private Letter Ruling Under Section 141 of the Internal Revenue Code." Page 47.)

³ ". . . the City . . . will use the same assessment method for the Stadium is (sic) used for assessing properties of the same class within the City . . ." (July 3, 2006 letter from Mitchell Rapaport and Bruce Serchuk (Nixon Peabody LLP) to Rebecca Harrigal (IRS). Page 2)

⁴ The "Appraisal Report of Vacant Land (Macombs Dam Park" done for NYC Department of Citiwide Administrative Services by Patjo Appraisal Services, Inc. find the land value to be $21 million.

⁵ The "Appraisal of Future Yankee Stadium Site" done for NYCEDC by Grubb & Ellis Consulting Services Company, effective July 1, 2006, finds the land value to be $40 million.

⁶ Chapter 766 of the Laws of 2005.

⁷ Announcements were also made for agreements for new stadia for the Mets, and the soon-to-be Brooklyn.

⁸ August 16, 2006 NYC press release: "Mayor Bloomberg, Governor Pataki and New York Yankees Break Ground on New $800 Million Stadium"

⁹ August 16, 2006 NYC press release, Ibid.

¹⁰ August 16, 2006 NYC press release, Ibid.

¹¹ January 18, 2006 ESDC press release: "Chairman Gargano Announces ESDC Board Approval for New Yankee and Shea Stadium's Infrastructure Plans."

¹² July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 65,

¹³ July 2, 2008 public hearing. Ibid. Page 34.

¹⁴ August 16, 2006 NYC press release: "Mayor Bloomberg, Governor Pataki and New York Yankees Break Ground on New $800 Million Stadium"

¹⁵ February 1, 2006 Nixon Peabody letter to the IRS. Page 4.

¹⁶ The NYCIDA decision to use the PILOT as security for tax-exempt bonds raises significant legal and policy questions which are discussed below on pages 25 and 26.

¹⁷ August 16, 2006 NYC press release: "Mayor Bloomberg, Governor Pataki and New York Yankees Break Ground on New $800 Million Stadium"

¹⁸ February 1, 2006 letter to IRS from Mitchell Rapaport and Bruce Serchuk (Nixon Peabody LLP). "NYCIDA -- Request for Private Letter Ruling under section 141 of the Internal Revenue Code." Page 47.

¹⁹ Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of The IRS Code of 1986. Exhibit A. Initial Issue Price Certificate.

²⁰ The interest savings are a combination of state, federal and local tax exemptions.

²¹ July 31, 2008 letter from Robert LaPalme to Chairman Brodsky. Page 2.

²² August 16, 2006 NYC press release. Ibid.

²³ July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 14.

²⁴ July 2, 2008 public hearing. Ibid. Page 13.

²⁵ The implementation of the Community Benefit Agreement has been the subject of controversy. The Committee is continuing to inquire into these issues.

²⁶ Yankees Core Application. Annex 2-6, "Completion Bond Sources and Uses Table."

²⁷ The NYCIDA produced voluminous documents with unfailing courtesy. It is unclear if all requested information was produced however. The DOF produced some documents. It is likely that all information requested has not been produced. The Committee is pursuing those documents.

²⁸ July 2, 2008 letter from Randy Levine (Yankee President) to Chairman Brodsky and July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 22: Pinsky: ". . . Some had recently claimed that this process occurred behind closed doors. This is simply wrong. In fact, the public was given the opportunity to offer input at approximately 20 hearings with review provided by government officials at the city, state, and federal levels."

²⁹ Article 18-A of the New York State General Municipal Law.

³⁰ The UTEP is required by Section 874 of New York State General Municipal Law: "The agency shall establish a uniform tax exemption policy . . . which shall be applicable to the provision of financial assistance . . ."

³¹ Second Amended and Restated UTEP of the NYCIDA. Page 1.

³² Second Amended and Restated UTEP of the NYCIDA. Page 2.

³³ Ibid. Page 2.

³⁴ NYCIDA "Deviation from Uniform Tax Exemption Policy for Yankees Ballpark Company." Page 1.

³⁵ Yankees Core Application to the NYCEDC, page 7. There was substantial temporary economic activity surrounding construction of the Stadium, with several thousand temporary construction jobs (Such temporary activity is usually a factor only when it can be ascertained that if the subsidy is not provided the work will not be done.)

³⁶ Yankees Core Application to the NYCEDC, page 7.

³⁷ NYC IBO testimony before the City Council Finance Committee on Financing Plans for the New Yankee Stadium. April 10, 2006. Page 4.

³⁸ According to the 2006 Environmental Impact Statement for the Stadium Project, construction job estimates totaled 3,600 construction jobs related to Stadium construction. August 5, 2006 letter from Robert LaPalme (NYCEDC) to Chairman Brodsky. Memo on "Yankee Stadium Area Project Employment."

³⁹ NYCIDA "Deviation from Uniform Tax Exemption Policy for Yankees Ballpark Company." Page 1. The letter is undated but was likely sent prior to the Inducement Resolution of March, 17, 2007.

⁴⁰ NYCIDA "Deviation from Uniform Tax Exemption Policy for Yankees Ballpark Company." Page 5.

⁴¹ NYCIDA "Deviation from Uniform Tax Exemption Policy for Yankees Ballpark Company." Page 4.

⁴² July 19, 2006 Private Letter Ruling for Yankee Stadium PILOT Bonds. Page 4.

⁴³ Page 52, July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City.

⁴⁴ Page 51, July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City.

⁴⁵ July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 50.

⁴⁶ July 11, 2008 letter from Assemblyman Richard Brodsky to NYC EDC President Seth Pinsky.

⁴⁷ In once such quote Metro reports Yankees' attorney Jonathan Schiller's statement with respect to litigation occurring well after the project had been approved that "'The Yankees will have to consider leaving the city." Arden, Patrick. "Yanks Threaten to Walk if Court Rules Against Ballpark." Metro. August 11, 2006.

⁴⁸ July 2 public hearing, Ibid. Page 52: Pinsky: ". . . you can ask the Yankees this question too. . ."

⁴⁹ The Committee has been verbally informed that the Yankees intend to answer these questions at an unspecified later date.

⁵⁰ Tax Certificate Ibid. Exhibit F. Page 2, Section 2.d

⁵¹ Tax Certificate Ibid. Exhibit F. Page 2, Section 2.d

⁵² Tax Certificate Ibid. Exhibit F. Page 2, Section 2.a

⁵³ Tax Certificate Ibid. Exhibit F. Page 2, Section 2.b

⁵⁴ Questions about the role of the Bond Counsel and other counsel are discussed on pages 13 and 14.

⁵⁵ Herbert, Keith and Michael Frazier. "Do Public Subsidies Pay Off?" Newsday. July 2, 2008.

⁵⁶ Washington Times Editorial. "No Point in a Subsidy." June 11, 2008.

⁵⁷ Most State Constitutions do not allow for gifts of loans for the benefit of private parties. A few examples are as follows: Pennsylvania State Constitution, Article VIII, Section 8; Washington State Constitution, Article VIII, Section 5, Arizona State Constitution, Article IX, Section 7; North Carolina State Constitution, Article V, Section 3.

⁵⁸ February 1, 2006 letter from Mitchell Rapaport and Bruce Serchuk (IRS) to the IRS. Page 47.

⁵⁹ Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of The IRS Code of 1986. Page 15, Section d.2

⁶⁰ E-mail from Steven Lefkowitz (Fried Fank) dated July 2, 2006. Included in Robert LaPalme (NYCEDC) submission to Chairman Brodsky of August 5. 2008.

⁶¹ NYC IBO testimony before the City Council Finance Committee on Financing Plans for the New Yankee Stadium. April 10, 2006. Page 4.

⁶² Peter White, counsel widely crediting with structuring the deal, declined by letter to speak with the Committee. September 3, 2008 letter from Robert Bernius (Nixon Peabody LLP) to Chairman Brodsky and September 15, 2008 letter from Chairman Brodsky to Peter White.

⁶³ Chairman Brodsky: Was the material provided to the NYCIDA certified, sworn, or in any way verified?

Mr. Pinsky: Yes.

July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 128.

⁶⁴ July 3, 2006 letter from Mitchell Rapaport and Bruce Serchuk (IRS) to Rebecca Harrigal (IRS). Page 2.

⁶⁵ July 3, 2006 letter from Mitchell Rapaport and Bruce Serchuk (Nixon Peabody LLP) to Rebecca Harrigal (IRS). Page 2

⁶⁶ Tax Certificate Ibid. Page 14, Section d.1

⁶⁷ Tax Certificate Ibid. Exhibit F. Page 12.

⁶⁸ Chapter 238 of the New York State Laws of 2005.

⁶⁹ July 24, 2008 NYCDOF meeting with Chairman Brodsky.

⁷⁰ April 10, 2006 letter from Dara Ottley-Brown (NYCDOF) to Gregory Carey (Goldman, Sachs & Co.). Page 2.

⁷¹ July 24, 2008 NYCDOF meeting with Chairman Brodsky.

⁷² This failure to make these adjustments was confirmed by DOF staff at a meeting with Chairman Brodsky on July 24, 2008.

⁷³ July 24, 2008 NYCDOF meeting with Chairman Brodsky.

⁷⁴ The later reduction of acreage reduced the total land value to $175 million: July 24, 2008 NYC DOF meeting with Chairman Brodsky.

⁷⁵ April 10, 2006 letter from Dara Ottley-Brown (Assistant Commissioner, NYCDOF) to Gregory Carey (Goldman Sachs).

⁷⁶ § 3. The authorization provided in section two of this act shall be subject to the requirement that the city of New York dedicate the site of the existing Yankee Stadium to park use, and acquire additional park lands and/or dedicate land that is currently inaccessible by the public for park or recreational purposes, of equal or greater fair market value in the Borough of the Bronx and/or perform capital improvements to park and recreational facilities in the Borough of the Bronx which are equal to or greater than the fair market value of those park lands being alienated by this act.

§ 7. The conveyance of parkland authorized by the provisions of this act shall not occur until the city of New York has complied with any federal requirements pertaining to the alienation or conversion of park lands, including satisfying the secretary of the interior that the conversion complies with all conditions which the secretary of the interior deems necessary to assure that the substitution of other lands shall be equivalent in fair market value and recreational usefulness to the lands being alienated or converted.

⁷⁷ Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of The IRS Code of 1986. Exhibit F. A-3.

⁷⁸ "Self-Contained Appraisal Report, Land Beneath Yankee Stadium." May 3, 2006.

⁷⁹ "Self-Contained Appraisal Report, Land Beneath Yankee Stadium." Cover letter. May 9, 2006.

⁸⁰ It should be noted that the State legislation setting forth these requirements also pertains to the land used for Yankee Stadium parking garages.

⁸¹ The Commissioner of the Department of Parks has been notified of these actions: September 8, 2008 phone call to Carol Ash, Commissioner, from Chairman Brodsky.

⁸² These costs are outlined in a February 27, 2006 letter from Gregory Carey to Dara Ottley-Brown.

⁸³ April 10, 2006 letter from Dara Ottley-Brown (NYCDOF) to Gregory Carey (Goldman, Sachs & Co).

⁸⁴ It slightly revised his assertion of hard costs, increasing it by about $2.5 million.

⁸⁵ Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of The IRS Code of 1986. Exhibit C -- Certificate of The City of New York regarding Stadium. Section 3.

⁸⁶ December 6, 2006 e-mail from Robert LaPalme (NYCEDC) to Steven Lefkowitz.

⁸⁷ August 28, 2008 letter from Sam Miller (NYCDOF) to Chairman Brodsky.

⁸⁸ September 15, 2008 letter from Sam Miller (NYCDOF) to Chairman Brodsky.

⁸⁹ April 10, 2006 letter from Dara Ottley-Brown (NYCDOF) to Gregory Carey (Goldman, Sachs & Co.)

⁹⁰ Tax Certificate. Page 16. Section ix, Use of Stadium: "Under the Lease Agreement, the Agency is entitled to use 1 luxury suite at the Stadium, which right is assigned to the City. The allocable cost of the luxury suite will be allocated to proceeds of the Taxable Bonds. The Lease Agreement also provides the Agency with certain other rights, including the option to purchase certain tickets for events at the Stadium . . ."

⁹¹ July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 74.

⁹² July 2, 2008 public hearing: Ibid. Page 76.

⁹³ New York State Assembly Bill 11692.

⁹⁴ August 16, 2006 NYC press release: "Mayor Bloomberg, Governor Pataki and New York Yankees Break Ground on New $800 Million Stadium"

⁹⁵ Annex 2-6 to Yankees Core Application to NYCIDA.

⁹⁶ The Committee does not support or accept the decision to redact this information.

⁹⁷ Annex 2-6 to Yankees Core Application to NYCIDA.

⁹⁸ July 17, 2008 letter from Irwin Kirshner (Herrick) to Robert LaPalme (NYCEDC).

⁹⁹ Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of The IRS Code of 1986. Page 16, Section d.3.v

¹⁰⁰ Section 874 (c) of New York State General Municipal Law

¹⁰¹ However, "Last year, discounted PILOTs amounted to $107 million in lost revenue to the city, with abatements averaging a whopping 60% per company." Juan Gonzalez. "Deals that Lead to Lost Property Taxes." Daily News. December 20, 2007. Figures are based on a Report of all PILOT revenues and expenditures sent from the City Office of Management and Budget to City Council Speaker Christine Quinn.

¹⁰² NYC IDA website.

¹⁰³ July 2, 2008 public hearing: The Request for Increased Public Financing for Construction of a New Yankee Stadium in New York City. Page 138.

¹⁰⁴ June 30, 2006 letter from Mitchell Rapaport and Bruce Sercuck (Nixon Peabody, LLP) to Rebecca Harrigal (IRS). Page 1.

¹⁰⁵ Herbert, Keith and Michael Frazier. "Do Public Subsidies Pay Off?" Newsday. July 2, 2008.

¹⁰⁶ Yankees Core Application to the NYCEDC, page 7.

¹⁰⁷ Yankees Core Application to the NYCEDC, page 7.

¹⁰⁸ Tax Certificate. Exhibit E. Page 2.

¹⁰⁹ This diversion of tax payments is done by the use of Payments in Lieu Of Taxes (PILOTs).

¹¹⁰ February 1, 2006 letter from Mitchell Rapaport and Bruce Serchuk (Nixon Peabody) to IRS. "NYCIDA -- Request for Private Letter Ruling Under Section 141 of the Internal Revenue Code." Page 47.

¹¹¹ February 21, 2006 letter, Ibid. Page 22.

¹¹² February, 1 2006 letter, Ibid. Page 47.

• The Washington stadium has 41,888 seats. Thus: $611 Million for the total cost, subtract $97,627,000 for land acquisition and you arrive at $513,373,000. Divide that number by the 41,888 seats and the cost per seat is $12,255.85 (http://www.jdland.com/DC/stadium.cfm#3)

• The Minnesota stadium has approximately 40,000 seats (as stated on site) with a total project cost of $517,529,185. Subtract the $40,840,790 for site acquisition and you get $476,688,395 for a project cost. Divide that cost by 40,000 seats and the cost per seat is $11,917.21 (www.ballparkauthority.com)

• The Oakland stadium site provides general numbers. There will be between 32,000-35,000 or 30,000-34,000 seats depending on where you look on the site and the cost will be between $400-500 million, excluding land cost. If this is the case and we take the two highest estimates, then $500 million divided by 35,000 seats will create a cost per seat of $14,285 (http://oakland.athletics.mlb.com/oak/ballpark/new/facts.jsp)