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Field of Schemes: Congress Probes How New Sports Stadiums Turn Public Money into Private Profit

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A congressional committee is investigating whether New York City and the New York Yankees wildly inflated the value of the site for the team’s new stadium to float nearly $1 billion in tax-free bonds. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ: A congressional subcommittee has launched a probe into the use of public financing to build sports complexes like the new Yankee Stadium. The Domestic Policy Subcommittee of the House Oversight and Government Reform Committee, chaired by Ohio Congressman Dennis Kucinich, will hold hearings this September on whether land for the new stadium in the Bronx was wildly inflated to justify nearly a billion dollars in tax-free bonds.

Congressman Kucinich is looking into whether city officials overvalued the stadium site by several times its actual price. The Yankees would have avoided — or the bond-holders would have avoided millions in taxes, because they would be exempt from paying taxes on interest they earn. Meanwhile, the Yankees have requested an additional $336 million in tax-free bonds to help complete the stadium.

In a letter sent earlier this month to Yankees president Randy Levine, New York Assemblyman Richard Brodsky noted that the tax-free interest earned on the stadium bonds “normally would go into the city’s coffers to pay for schools, police and health care.”

Today, we host a discussion on public subsidies for sports stadiums. Congressman Dennis Kucinich joins us from the Capitol Rotunda in Washington, D.C. I’m also joined here in the firehouse studio by two guests: Bettina Damiani is the project director of Good Jobs New York, and Neil deMause is a writer and the author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.

I’d like to begin with Congressman Kucinich. You have, as of last week, made a request to the City of New York and to the New York Yankees for a variety of documents as part of your continuing investigation into possible abuses of federal laws and IRS regulations relating to these kind of stadium projects. Could you tell us what you’re trying to do with that investigation and why you decided to focus in on New York and the Yankees?

REP. DENNIS KUCINICH: Well, this is a project that’s imminent, and we have — the thing that I think, you know, caught my attention is when you have an independent appraisal of the land that the Yankees want to get for their new stadium of $45 per square foot, and yet the city had an appraisal that appraised the same land at $275 a square foot. Now, what our committee is trying to find out is, does the city’s assessment represent a deliberate inflation of the value of the land so that there would be a greater number of tax-free bonds issued, thereby raising questions of, you know, an inappropriate increased diversion of federal tax monies for this kind of private project.

JUAN GONZALEZ: Now, you have been, for now several months, actually, questioning the IRS about the original waiver, in essence, that they gave the Yankees a few years ago and the New York Mets for the building of their hugely expensive stadiums. Could you tell our viewers and listeners what is the crux of the concern that you have with how the IRS is functioning?

REP. DENNIS KUCINICH: Well, in 1986, there was a change in the tax law which made it very clear that stadiums could not be using these tax-exempt bonds to construct these professional sports stadiums. The IRS had a ruling in a private letter that essentially gave the sports teams the ability to make payments in lieu of taxes, which was kind of a loophole that enabled them to get to the point of being able to participate in these tax-free financing schemes. And so, I’ve had a hearing where we talked to the IRS, asked them for an explanation. And from what I understand, as a result of our hearing, they’re reviewing their policies to see whether or not the 1986 Tax Reform Act has actually been compromised by the decision that they made.

I think that it’s important to understand that we’re not alleging, at this point, that there’s been any kind of criminal activity. We’re simply reviewing all the information that’s been presented to us, so that we can determine, first of all, the discrepancies in the appraisals, secondly, the public policy issue of using tax-exempt bonds for these stadiums, and third, if there is an inflated value of this project, the implication that it has for security laws with respect to the issuance of the tremendous amount of bond financing.

JUAN GONZALEZ: I’d like ask Bettina Damiani from Good Jobs New York, this whole issue of this thing called “PILOTs,” or payments in lieu of taxes, for use of repaying these tax-exempt bonds, is a very complicated issue that most the general public doesn’t understand. Your organization has been in the forefront of questioning these kinds of development deals by New York, but also, by extension, by many municipalities around the country. Could you break down how these PILOTs work generally?

BETTINA DAMIANI: Certainly. And it’s not just the average New Yorker, as we learned through the Yankee Stadium project. Most New York City and New York State elected officials don’t quite understand the issue of PILOTs, which is part of the crux of this issue.

Essentially, PILOTs are payments in lieu of taxes. Instead of paying taxes, the Yankees are paying back their tax-free bonds. So, there’s money that should be going into, as Assembly member Brodsky mentioned, the pot of money that would help pay for roads and schools and other services that New York City needs. Instead, it’s just going — it’s being completely diverted. And this, unfortunately, is a policy that is not done just with the Yankees but with a variety of other very large financial firms that have managed to make a special deal with New York City.

JUAN GONZALEZ: And in this particular case, it was actually in the interest of the New York Yankees to have a very high assessment of their land, because that would allow them to be able to float more bonds and pay more PILOTs, which is their main goal here, is to raise as much money as possible to build their stadium, right?

BETTINA DAMIANI: Exactly, and that’s the irony. And that’s one of the things that you mentioned in your article yesterday, is that in the South Bronx, the city was trying desperately to inflate the value of property, but not to benefit the larger community or the people that live in the neighborhood, but really for the sole benefit of the New York Yankees.

JUAN GONZALEZ: And, Neil deMause, you’ve been writing now for quite a while about these stadium boondoggles. Virtually every major city in America is building a new arena or a new stadium of one kind, and most of them are using some degree or other of public financing. Could you give us a sense of the overall national picture?

NEIL DEMAUSE: Sure. I mean, I think it’s absolutely correct that every major and minor city is either building a stadium or arena or being asked to estimate somewhere around $2 billion a year of public money going into these buildings, a very, very small percentage of which comes back in terms of, you know, tax benefits or actually benefits to the cities.

You know, when the Yankees and the Mets first announced their deals, Mayor Bloomberg said, “Oh, you know, we don’t make subsidies; we make investments, and we get our money back.” At the time, it was announced, well, the Yankees and Mets are going to be paying for, you know, all the construction costs of the stadium. As you look at it and break down where they’re getting tax breaks and where they’re getting sort of hidden subsidies, the taxpayers wind up paying most of the cost.

JUAN GONZALEZ: And, Congressman Kucinich, you originally had scheduled your hearing for this week but then decided to postpone it until September. Have you been in conversations with the City of New York and with the Yankees about them also testifying at your hearing? And what documents, specifically, are you trying to get from them now?

REP. DENNIS KUCINICH: Well, I could say that my subcommittee staff — and again, I’m the chair of the Domestic Policy Subcommittee, which has jurisdiction over this matter — and our subcommittee staff is in contact with officials of both the City of New York and the New York Yankees to discuss their potential appearance in front of our congressional subcommittee.

I think that it’s very important to understand that we’re looking at a public policy matter here that relates not only to New York and not only to the Nets and the Atlantic Yard project, but it also relates to the whole country, as your other guests have said, because it’s quite possible that there are billions of dollars in tax benefits that should be going to municipalities for the purposes of repairing their infrastructure and for schools and other things and that are instead being diverted for these private sports complexes.

And the question is one of public policy, one of the IRS, and in the case of the New York Yankees, questions of securities law, because of the various amounts of the appraisal, $45 a square foot versus $275 a square foot, which have a bearing on the overall cost of the project. And if the cost of the project is inflated, that’s going to be of interest to the SEC, as well as the IRS.

JUAN GONZALEZ: And in terms of the — you’re not, at this point, contemplating subpoenaing any records. You’re figuring that they are going to be — they will provide you the documents and the information that you requested to avoid that potential.

REP. DENNIS KUCINICH: Well, you know, we generally assume that we’ll get cooperation. I mean, certainly, as an investigative subcommittee, if we need to enforce that request with a subpoena, we have the ability to apply for that. But we’re not at that point yet. And, you know, we’re hopeful for cooperation on the part of all the parties involved.

And I think that, again, this is a matter of serious public policy. When you have New York City, a great American city, which has all these capital infrastructure needs, and when payments get diverted, essentially — payments are not going into areas where the city expects the tax revenues will be coming from, and instead they’re diverted in these payments in lieu of taxes, they’re intensely serious matters that need to be discussed. And so, that’s why the work that Mr. Brodsky is doing and your other guests are involved in is very significant. We’re going to continue with our work on the Domestic Policy Subcommittee, and we’ll be sure to keep you posted.

JUAN GONZALEZ: OK. We’re talking with Congressman Dennis Kucinich in Washington, and here also, Bettina Damiani of Good Jobs New York and Neil deMause, the author of Field of Schemes. We’re going to return in a minute and to continue the conversation. And before Congressman Kucinich leaves, we also want to ask him about the hearings in Congress, the potential impeachment hearings. We’ll be back in a minute.


JUAN GONZALEZ: We’re talking about the use of public subsidies for sports stadiums. We’re joined from Washington, D.C. by Ohio Congressman Dennis Kucinich. And here in New York, we have Bettina Damiani, the project director of Good Jobs New York, and Neil deMause, author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.

But, Congressman Kucinich, you’ve been leading the fight for impeachment, and I know you have to go very soon, so I wanted to ask you about an interview with House Speaker Nancy Pelosi that aired on The View earlier this week. She was asked about impeachment.

    JOY BEHAR: You’ve ruled against impeaching George Bush and Dick Cheney, and now Kucinich is trying to pass that. Why do you insist on not impeaching these people, so that the world and America can really see the crimes that they’ve committed?

    REP. NANCY PELOSI: Well, I think that it — I think it was important, when I became Speaker — and it’s, by the way, a very important position — President, Vice President, Speaker of the House — I saw it as my responsibility to try to bring a much divided country together to the extent that we could. I thought that impeachment would be divisive for the country.

    In terms of what we wanted — set out to do, we wanted to raise the minimum wage, give the biggest increase in veterans benefits to veterans in the seventy-seven-year history, then pass research for stem cell research, all of that. This week, we’re going to pass equal pay for equal work. It has been a long time in coming — pay equity. We’re going to pass legislations for product safety, for toys that children put in their — there’s an agenda that you have to get done. You have to try to do it in a bipartisan way. The President has to sign it.

    If somebody had a crime that the President had committed, that would be a different story.

    JOY BEHAR: Can they still do it after he’s out?

    BARBARA WALTERS: When we — when I interviewed you last year, you had just begun, and you were going to clean up the mess, remember?

    REP. NANCY PELOSI: And we did.

    BARBARA WALTERS: You look around this country, 75 percent of the country — forget George Bush — thinks that Congress is doing a lousy job.

    ELISABETH HASSELBECK: I think it’s 91 percent now.

    REP. NANCY PELOSI: Well, I don’t disagree with that, because largely it’s predicated on ending the war in Iraq. That’s the main question, and we were not successful. In our House of Representatives, I’m very proud of our members, because they voted overwhelmingly over and over again to bring the war to an end, bring the troops home safely and soon, sent it to the Senate, and it hits a dead end.

    But in terms of that particular standard, I would say I disapprove, as well. But we do — we passed some of the things I just mentioned, the energy bill. We worked in a bipartisan way, Innovation Agenda. We have to create jobs, expand healthcare, protect the American people and educate our children. And you can’t do that if you’re trying to impeach the President at the same time, unless you have the goods that this president committed crimes.

JUAN GONZALEZ: That was House Speaker Nancy Pelosi. Congressman Kucinich, your response to her take on the situation with impeachment?

REP. DENNIS KUCINICH: Well, now that I’ve heard that the Speaker is looking for evidence that crimes may have been committed, I certainly want to direct her attention to the thirty-five articles of impeachment that I presented, which assert quite directly that crimes have been committed, including taking this nation into a war, an illegal war, based on lies; including the deaths of over a million innocent Iraqis, which constitute a war crime; including wiretapping, rendition, torture, illegal detention. There are many examples of laws that have been broken.

And the reason why the Judiciary Committee should hold a hearing on the impeachment itself is because there needs to be a public airing of this. So, I have a great deal of respect for Speaker Pelosi, and I think that since she made that statement on The View, there’s an opportunity now for us to come forward and to lay all the facts out so that she can reconsider her decision not to permit the Judiciary Committee to proceed with a full impeachment hearing.

I just want to state this, that I appreciate that she consented to a hearing on Friday. It was a six-hour hearing, over a dozen witnesses. Twenty-four members of Congress attended. It’s being taken seriously.

I think the idea that nothing can be done right now because we’re on the eve of an election raises questions about our constitutional responsibility to be a check and balance to administration abuse of power. If in fact we’re in a war that’s based on lies, and we have thousands of troops whose lives are on the line every day, we owe it to them and we owe it to the American people to set straight the public record. And then, whether or not it results in the President being removed from office before the end of his term is another matter.

I want to further say that with the possibility of a war in Iran in the offing, a war against Iran, a war that would be a result of a pre-emptive attack, much like the one that the United States launched against Iraq, it becomes very important that we hold this administration to the highest standard of having to verify the statements they make to take us into one war and to try to take us into another.

JUAN GONZALEZ: Well, Congressman Dennis Kucinich of Ohio, thank you, once again, for joining us.

And we’re going to continue the conversation here on the stadium issues with Bettina Damiani of Good Jobs New York and Neil deMause, author of Field of Schemes. I’d like to — again, getting back to the stadium deal, this Yankee Stadium is the most expensive stadium in the history of the United States. The actual cost is very hard to get your hands around, because there are some public infrastructure subsidies. But we’re talking about a stadium that is going to be somewhere between one and two billion dollars, when you add up all of the actual costs, probably closer to two.

And, Neil, could you talk about this — how the public expenditures are being used, even though we’re being told that they’re not being — public money is not being used directly for the stadium?

NEIL DEMAUSE: Sure. I mean, it’s something I’ve been trying to track ever since this was first announced three years ago. There is, as you mentioned, this infrastructure cost, where the public is paying for building new parks to replace the ones that were torn down to make way for the new stadium, paying for moving a water main and other things like that.

JUAN GONZALEZ: And when you say parks that were torn down, because that was, itself, a big issue —-

NEIL DEMAUSE: Yeah, this -—

JUAN GONZALEZ: — this is public park land, about a — what was it? Twenty acres or at least —-

NEIL DEMAUSE: It was like twenty-two acres that was actually demolished. It was park that had been there even longer than Yankee Stadium that was demolished to make way for the new stadium. To make up for this, the city and state had to make sure that there was an equal amount of park land that was created. So they’re knocking down the old stadium completely. Originally, the team was talking, “Oh, we’re going to save it as a museum.” It’s going to be gone starting next year, and they’re going to put some ball fields there. And they’ve found some space down by the Harlem River where they’re going to squeeze in some tennis courts, and sort of little patchwork of parks around different places.

The public is paying for all that. The public is paying for the actual demolition of Yankee Stadium, is all going to be public. The public is paying a good chunk for building new parking garages for the Yankees, including one that will be used by the players and VIPs and various folks like that. And the team is getting all sorts of different tax breaks. As Bettina mentioned, they’re not going to be paying property taxes. They’re going to be getting mortgage-recording taxes. They’re going to be getting these tax-exempt bonds that we’ve been talking about, which is actually a tremendous amount of money, if they get the new $300 million in bonds they’re looking for. They’re going to be talking about getting more than $300 million worth of tax breaks just on the bonds themselves. So when you add it all up, you get somewhere around $900 million worth of public money that’s being spent just on Yankee Stadium.

JUAN GONZALEZ: Bettina, those who advocate these stadiums say, “Why not? This is economic development. It’s creating jobs. It’s keeping a sort of a -— the psychology of the city by having a professional sports team that the residents can root for.” What’s wrong with it?

BETTINA DAMIANI: All the subsidies that Neil just listed. You would like to assume that the city and the state made a clear path to making sure that there were going to be jobs, good-paying jobs for New Yorkers, on the other end. That was going to be the investment, right? We see nothing. There’s nothing that says a certain number of jobs has to be set aside for either local New York residents or local Bronx residents, or the number of jobs at all.

The city has really washed their hands of making sure there’s any accountability on jobs and clear benefits for New Yorkers on the other side of this project, which is very unfortunate. I mean, we’re grateful for Congressman Kucinich and Assembly member Brodsky to get involved in this issue. Neither represent New York City, by the way. New York City elected officials — they’re filling a void, because local elected officials in New York City have refused to get involved in this project. And we need them. We need them to make sure that the promises in the press releases actually turn out to be something that we can hold them accountable for.

JUAN GONZALEZ: And you have, generally speaking, on this issue of tax-exempt financing for economic development, raised numerous questions over the years. It’s been one of my favorite topics, how cities are siphoning off their tax bases to create special deals for developers, whether it’s sports teams or private companies, where they’re, in essence, siphoning off the existing tax base from the municipal government and using it to fund special projects. How rampant is this, not only in New York, but throughout the country?

BETTINA DAMIANI: It’s a terrible issue regarding not only the issue of financing, but making sure that there are quality jobs for Americans and, in our case, New Yorkers. There’s a thing called the economic war among the states, where it seems that so many municipalities and states are worried about fighting one another for the headquarters of a particular agency that they’re willing to set aside basic fiscal commonsense and not making sure that there are real quality jobs on the ends of these big deals.

Site consultants are prevalent throughout the country that have really manufactured this process, and they make it seem like if the Yankees didn’t get their subsidy or if the New York Stock Exchange didn’t get a subsidy, they were going to flee somewhere else, without taking into consideration or doing some real due diligence. Where were the Yankees going to go? The Yankees are famous because they’re in the Bronx. We have a large media here. We have an incredible fan base here. And it seems none of that was taken in consideration before this huge giveaway was done.

JUAN GONZALEZ: Well, that’s one of the things I think Assembly member Brodsky is trying to investigate, because the city agency that engineered this deal, the Industrial Development Authority, apparently said that the Yankees were threatening to leave New York, of course, the most expensive media market in the country, the most desirable media market in the country. Neil, your sense of whether that was real or not?

NEIL DEMAUSE: Yeah, I mean, and I think everyone knows that the Yankees were not going to move out of New York City, and it’s kind of been an open secret for decades now, as long as George Steinbrenner has been demanding a stadium. Where is he going to go? The Yankees are not worth the, whatever, billion dollars that they’re worth if they move to Charlotte, North Carolina. But that was the pretense. And the Yankees actually told the judge in a case trying to stop the demolition of the parks, “Well, if you try and hold up this case, the Yankees could move.” And, you know, they’ve been allowed to get away with this. And as Bettina was saying, elected officials never challenged them on this, until, you know, recently Brodsky is trying — been trying to track it down.

JUAN GONZALEZ: And, of course, the final irony of all of this is, in the new stadium, once it gets built, as with all these stadiums, the ticket prices for the average baseball fan go through the roof. The prices in Yankee Stadium for box seats now are astronomical —- they’re astronomical now, but what they will cost in the new stadium is unbelievable. Could you talk about some of the prices that they’ve released so far?

NEIL DEMAUSE: Yeah. I mean, they’re talking over, you know, $1,000, $2,000 a seat for some of the really premium seats. And I think what you’re going to see is -—

JUAN GONZALEZ: For one game?

NEIL DEMAUSE: For one game, yes. For one game, yes, absolutely. For a whole season, you know, all bets are off. But I think, you know, what you’re going to see the Yankees do, they’ve promised to keep bleacher tickets low. They’ve promised to keep a certain number of, you know, $25-or-less seats.

I think what you’re going to see them do is, especially with Brodsky and everyone else paying attention to the soaring costs, I think you’re going to see the Yankees keep ticket prices low for the first season or two and, you know, try to say, “OK, we’re holding the line.” And then, as everybody’s clamoring to get tickets, two, three years down the road, you’ll see those start to creep up. So, what I’m worried about isn’t, next year, is it going to be affordable, but three years from now, is anybody going to be able to get a ticket?

JUAN GONZALEZ: Right. And then, of course, the final irony with — because most of these stadiums have luxury boxes that are for corporations that go from $500,000 to $800,000, in the case of the Yankees, per year to rent these boxes, and of course, my newspaper, the Daily News, reported yesterday that in this deal, the City of New York arranged to have its own luxury box at Yankee Stadium available, presumably to city officials, as part of the deal for the financing. Bettina, your response to that?

BETTINA DAMIANI: It’s aptly coined the landlord suite. And it’s just another example of how local elected officials almost seem to be void of feeling that they have responsibility to the public, because they’re going to get nice seats, in the long run.

JUAN GONZALEZ: Well, I want to thank both of you for being with us, Bettina Damiani, the project director of Good Jobs New York, and Neil deMause, who’s a writer and the author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.

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