Stadium Status: Federal Subsidy for Private Development
This stadium no longer exists. Credit: flickr user wallyg
Stadium Status from Internets Celebrities on Vimeo.
The Internets Celebrities, a duo of New York based hip-hop bloggers turned documentarians Dallas Penn and Rafi Kam, recently released their longest, most in-depth video to date: Stadium Status. The title refers to a Kanye West lyric, but as they explain, Stadium Status is the unique position that professional sports teams find themselves in: feeding at the trough of taxpayer dollars whenever they want to build a stadium.
Stadium-centered revitalization has become quite popular among urban boosters in recent decades, as cities try to figure out how to attract people back to somewhat abandoned downtowns. Time and time again, the public is told that these things pay for themselves, by bringing new jobs and foot traffic to the neighborhood. Never mind that both the jobs and the foot traffic are seasonal, and otherwise irregular, which economists like to point out. This doesn’t stop planners, city officials, developers, and voters from being fooled.
New York City, as Stadium Status shows, was fooled three times over in one year. Starting in Queens, our hosts Dallas and Rafi take a look at Shea Stadium’s replacement, Citi Field, which uses the old Shea Stadium’s footprint as a parking lot. Then, they go uptown to The Bronx to see The House that Ruth Built reduced to rubble directly across the street from a shinier version of the same, only this time with a Hard Rock Cafe built into the ground level, and prohibitively expensive tickets. About half of each stadium’s cost was covered by taxpayer subsidies. In the case of the new Yankee stadium, the taxpayer bill was about $1 billion. And yet, in interviews with fans in and around the stadiums, no one seems upset. Everyone, after all, likes a new ballpark.
The main event of the video is Dallas and Rafi’s examination of the controversial Atlantic Yards project in Downtown Brooklyn. The project, which will receive twice the amount of subsidy that the Yankees received, is a basketball arena for the New Jersey Nets, and 16 high-rise residential buildings. As Dallas and Rafi point out, the only thing worse than the Nets was the use of eminent domain to remove so-called “blight” from the neighborhood, clearing out a few hundred residents to make room for the project’s massive footprint.
Despite all the destruction, the development got most of its political support because of Ratner’s promise of 2,250 units of affordable housing, which that particular area or Brooklyn lacks. But, even that is dependent on a great deal of public subsidy, and some critics fear Ratner won’t deliver. Even if he does, the Internets Celebrities point out, he only has to deliver a fraction of those units in the first decade of development.
In my mind, the most bizarrely postmodern aspect of the development—Bed-Stuy-bred rapper Jay-Z’s involvement—is also the most telling of the true motives of the project. Jay-Z owns a small chunk of the New Jersey Nets, and hopes to bring them back to Brooklyn. His friendship with LeBron James fuels the rumor that, perhaps, LeBron will move on to the Nets when they move to Brooklyn, making them a halfway-decent team, and bringing much-needed revitalization to Downtown Brooklyn.
But the issue here is that Downtown Brooklyn all the way up at Dean Street is not in need of revitalization. Atlantic Avenue, and the old train yards act as an unfortunately ugly divider between Fort Greene and Prospect Heights, two of Brooklyn’s most picturesque neighborhoods—made up of nothing but brownstones, tree-lined streets, and tin-ceilinged restaurants. Nearby Fulton Street in Fort Greene was the center of Brooklyn’s early 90’s “black bohemia,” and both neighborhoods are excellent examples of affluent, integrated neighborhoods in New York City—an unfortunately rare sight.
Jay-Z, on last year’s hit single “Empire State of Mind”, raps about how used to live nearby, at 560 State Street, but he doesn’t mention that it’s right around the corner from the Atlantic Yards site he was involved with at the time of recording. He claims it was his “stash spot”, but New York Magazine reports that it was more of an “enclave for black artists at the time.” Since then, most artists have been priced out of the area. And now that Jay-Z lives in a massive Tribeca loft with Beyonce, he eschews the street hustler image that made him famous for that of a business mogul, lunching with the mayor and fellow Atlantic Yards investors at Gracie Mansion. Jay-Z, like the developers he works for, will definitely claim that he cares about Brooklyn’s future, but he probably cares more about the money that he stands to make. But I digress.
Getting back to the economic side of things, it is the seasonal and unskilled nature of the work offered at stadiums—tearing tickets, food service, security—that make any claims to public benefit incredibly dubious. The NBA season, at 82 games long (not including post-season, which shouldn’t really be a consideration for the Nets in their current state anyway), only offers 41 nights of guaranteed employment to anyone working at the stadium, per year. Sure, the Globetrotters will make an appearance to trounce the Generals, maybe the circus will pass through, but these events are few and far between. In this sense, Ratner and Jay-Z’s claim to be bringing jobs to Brooklyn makes even less sense than the Yankees and Mets’ argument.
But despite all the obvious reasons why this sort of large-scale, disruptive development is not actually in the public interest, stadium developers continue to receive massive subsidies, even from the federal government. Neil deMause, author of the book Field of Schemes, is featured prominently in Stadium Status. He points out that technically speaking, due to the federal subsidies developers of new Yankee stadium received, Red Sox fans helped pay for the ballpark. The mechanism is somewhat roundabout; the city issues the teams tax-exempt city-issued bonds, a transaction that was made illegal in 1986, because it robs the Federal Treasury of tax dollars for private development. But, because the city has the teams pay back the loans in the form of PILOTs—Payments In Lieu Of property Taxes—they claim that they are collecting tax revenue, even if the federal government is not. According to Neil deMause, this mechanism amounted to about $60 million in (mostly) federal subsidy for the Yankees alone. Aside from the fact that this is questionably legal, it’s troubling that the federal government is unwittingly lining the pockets of developers who claim to work in the public interest, but don’t.
Back in October of 2008, right after Lehman Brothers tanked, and the realities of the banking crisis were becoming clearer, federal tax officials approved the use of tax-exempt bonds to Ratner’s development group, for the Atlantic Yards project. With that decision, millions of dollars of future tax revenue disappeared from our nation’s coffers, and Downtown Brooklyn will get 16 new skyscrapers and a few hundred jobs selling peanuts for 41 nights a year. What a trade.
Willy Staley is an Urban Leaders Fellow, sponsored by the Rockefeller Foundation. He writes the Urban Nation column for Next American City, which will cover and comment on federal urban policy throughout 2010. Contact him at willy@americancity.org
Terry on Tue, Jun 15, 2010 at 3:20pm
How do you, in one sentence complain about “prohibitively expensive tickets” and in the next complain about “2,250 units of affordable housing.” Would you rather that the tickets were subsidized but the housing was not?
And finally, doesn’t the fact that “in interviews with fans in and around the stadiums, no one seems upset” put the whole argument to bed? If the voters want to spend money on stadiums, what is the problem?
Willy Staley on Wed, Jun 16, 2010 at 1:13am
I suppose my short answer would be that I did not do what you described, and I certainly didn’t do it two consecutive sentences. The expensive tickets are at Yankee Stadium, and the affordable housing—about which my only complaint was that it might not get delivered in a timely fashion—is at Atlantic Yards, two boroughs away in Brooklyn.
As for the fans, the point of the video, I think, is to show how people get duped into liking new stadium developments because they are blissfully unaware of the real costs associated with them; officials and developers claim that they bring lots of jobs and foot traffic to neighborhoods, and make up for their cost in this fashion. In Dallas and Rafi’s video, they show that this is not the case.
The problem is that voters don’t know they are spending money on stadiums. And when the federal government starts to subsidize this form of development—even in a roundabout way—people who could never even be able to pay for the privilege of seeing a game at the stadium are still forced to cover some of the costs.
Albert in Da Bronx on Wed, Jun 16, 2010 at 5:05pm
Of course the *fans* like a new stadium, Terry, but what about New Yorkers? The new Yankee Stadium and the Atlantic Yards project have both been massively unpopular. Bronx Community Board 4 even rejected the Yankees plan by a 2 to 1 vote, but the mayor ignored its opinion. (Atlantic Yards never went through any community review process.) If you talked to people on 161st Street a block away from the new Yankee Stadium, you’d catch an earful. Even people who like the Yankees hate what its owners did.
The problem, Willy, is that “voters” don’t matter—no one asked them if the government should spend billions on new stadiums. You can guess why.
Matt Mulligan on Sun, Jun 20, 2010 at 11:26am
In the case of the Nets, you have to factor in new tax revenue as well. While it may not completely cover the subsidies, the tax revenue that would be generated by the formerly out-of-state basketball team is not insignificant. A conservative estimate of the sales tax on tickets alone would be around $3-4 million a year. Players salaries (for the games they play at home) would also add around $3 million to state and city coffers. Add in the taxes on vending sales, income taxes on salaried home office employees, and corporate income taxes, and you can start to see value even before the stimulative effect of getting people to spend a night out in Brooklyn is considered.
Albert in Da Bronx on Wed, Jun 23, 2010 at 7:59am
So glad you brought up taxes, Matt. All of these new stadiums in New York City are being financed with triple tax-exempt bonds, and the teams—or the developer, in the case of Atlantic Yards—are paying off their bonds with payments in lieu of taxes. No one is fully paying their taxes here, not the investors, not the teams. In effect, everyone in the United States is subsidizing these stadiums. Fans are never going to make that up. They’re not going to spend the night out in Brooklyn—they’ll spend money at the stadium with all the fancy amenities and jump on the train. All of the businesses around Yankee Stadium have already seen their revenue go down—the New York Times had a story on that (even though, overall, the Times—and the Daily News and Post, as well—has been terrible on the Yankees and Atlantic Yards stories). Sports teams add prestige, I’ll grant you, but they have always been terrible economic development tools.
Matt Mulligan on Wed, Jun 23, 2010 at 1:45pm
I understand that these bonds will be tax exempt, and that they will be paid back in lieu of taxes. However, while the state and city won’t be collecting as much as they would without these exemptions, they will be collecting more than they do now on that derelict property. New York will have more money in it’s coffers because of this. If the team were already the Brooklyn Nets, than I would agree that the state would lose money on the deal, but they aren’t. NY currently gets no tax revenue from the team at all, reduced by exemption or otherwise. The big loser here is NJ, not NY.