Gentlemen, Start Your Bulldozers
The other shoe has dropped: The city's Industrial Development Agency announced at 4 p.m. today that the Internal Revenue Service has approved the convoluted tax-exempt bond scheme that would raise $1.56 billion to build new stadiums for the Mets and Yankees. Following the Yankees' successful National Park Service ruling last Friday, this means that, barring legal challenges, the way is clear for both teams to start construction as soon as the steam shovels can get in gear.
The issue in question involved an arcane section of the 1986 Tax Reform Act, which boiled down to this: Cities aren't supposed to use tax-exempt bonds, which bear federally subsidized lower-than-normal interest rates, for private projects. But while the New York stadium bonds would be repaid by the teams, city lawyers insisted that since these payments were "in lieu of" paying property taxesboth stadiums would sit on public land, and so be exempt from taxationin tax terms they really represented public dollars, not private ones.
At an April council hearing, Independent Budget Office director Ronnie Lowenstein called this strategy "a very, very aggressive interpretation of the IRS code," given that the bond payments would be significantly greater than the expected property-tax rate. (Indeed, an internal IRS document specifically notes "agreements to raise the assessed market value of the property" as a reason to reject tax-exempt financing.) Lowenstein declined to comment on today's IDA announcement, beyond noting that as it didn't provide a dollar figure for the amount of allowable tax-exempt bonds, "we still have to wait to see whether the Mets and Yankees will be able to do as much tax-exempt borrowing as they had planned."
Neither Mets nor Yankees officials would comment on the ruling, or speculate on when ground might be broken on the new stadiums. A spokesperson for the Bronx litigants expected to file suit against the Yankees plan said she did not know when a legal challenge would be filed.