If Mets Go Under, Who Pays for Citi Field?

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If the last ten days in the life of Mets owners Fred and Jeff Wilpon were a baseball game, they would have been shut out, made 17 errors, and hit into a game-ending unassisted triple play. (That last feeling, admittedly, is one that they're already familiar with.)

First, Irving Picard, the court-appointed trustee for Bernie Madoff's Ponzi scheme victims, announced he was suing the Wilpons for as much as $1 billion in ill-gotten gains. Since then, it seemed like not a day has passed without a Wilpon-related bombshell: The Times reported that the Wilpons' bank could pressure them to start selling off their assets; Moody's downgraded the Citi Field bond ratings; David Wright admitted it's going to be tough for the team to ignore the financial mess; and legal experts said the resulting subpoena paper trail could end up exposing MLB's internal finances for all to see. When the high point of your week is Larry King offering to testify as a character witness, you know things aren't going too well.

At this point, barring a miracle victory over Picard of the sort that hasn't been seen in Flushing in a long while, the two options for the Wilpons seem like either selling off the Mets and SNY to pay off their Madoff debts, or — if they decide that a billion dollars is more than they can possibly pay — taking the Texas Rangers route and filing for bankruptcy. It's clearly not the course of action that Major League Baseball would prefer, after last summer's bankruptcy court spectacle involving Nolan Ryan and Mark Cuban battling for control the Rangers. But given that one estimate of the Wilpons' net worth has it at only $800 million and change, it can't be entirely ruled out.

For those who don't particularly care who owns the Mets — unless, presumably, it's Cablevision — the more interesting question at the moment could be: If the Mets did go bankrupt, what would happen to the Citi Field bonds? The Mets' new home, Voice readers will remember, was built with the help of $547 million in tax-exempt bonds that, for arcane tax reasons, were sold by the city's Industrial Development Agency yet are being paid off in annual installments by a subsidiary of Sterling Mets (the Wilpons' company) called Queens Ballpark Company LLC.

If Sterling Mets suffers total existence failure, then the annual payments disappear as well. So on top of having one of our two baseball teams dragged through the mud of the Madoff scandal, do New Yorkers also need to worry about an angry mob of bondholders showing up at the door of City Hall with a half-billion-dollar invoice?

Probably not, though with the emphasis on "probably." The IDA attempted to protect itself by making sure it wasn't on the hook for any of those payments; according to the official bond documents, in ALL-CAPS BOLDFACE for good measure:

The tax exempt pilot bonds are special limited obligations of the issuer payable solely from and secured by PILOT revenues (as defined herein) derived from PILOTs (as defined herein) made by Ballpark LLC pursuant to the PILOT agreement and certain funds and accounts held under the PILOT bonds indenture. Neither the State of New York not the City is or shall be obligated to pay the principal of or interest on the tax exempt PILOT bonds and neither the faith and credit nor the taxing power of the State of New York or the City is pledged to such payment. The issuer has no taxing power.

To get people to nonetheless buy these bonds backed by nothing more than the promise of the Wilpons, the Mets took out bond insurance with a company called Ambac Assurance Corporation, which pledged to pay out if the Mets defaulted. Which would have worked great, except that Ambac — like so many of the financial insurers caught up in the economic meltdown — filed for Chapter 11 in November, and doesn't actually have $500 million to pay out to anybody. And after Ambac, there's nobody: Anyone who bought Mets stadium bonds thinking that their money was safe with the nation's third most valuable baseball team would be left holding worthless paper.

At that point, the IDA would be faced with a choice: Tap the city treasury to make good on the bonds, or risk future bond buyers growing wary of city-related bond offerings. Disclaimers about "faith and credit" be damned, it'd be a tough call for an agency already facing one high-profile stadium-related default. (City officials didn't return phone calls asking for comment on the Mets bond situation.)

All of this, needless to say, would only come to pass if the Wilpons go bankrupt; if they merely sell the Mets, the new owner would end up committed to making the bond payments. Still, it's not an impossible scenario that the battle over the Wilpons' Madoff money could end up pitting hapless Ponzi scheme victims against hapless bond buyers against hapless taxpayers for the right to be the most screwed. Which would, if nothing else, be the first time in ages that that title didn't go to Mets fans.

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