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My article
last week
on how the New York Mets are working a 75 percent discount
on their “privately funded” stadium unleashed a torrent of questions and
comments from the BP readership, so today I’ve commandeered the BP mailbag
to delve deeper into the Son of Shea books. Put on your economic
hip-waders, and let’s get started…


I support revenue sharing and payroll luxury taxes (and would support a
hard cap as well), but also think deducting the cost of new stadiums from
the sharing makes lots of sense. That’s because I think stadium
improvements provide the absolute most fan enjoyment when compared to all
the other ways that owners can spend money.

Don’t we want to encourage teams to pay for their own stadium improvements
or use the money from revenue sharing to make new improvements? If the
goal of the baseball tax regime is to maximize fan enjoyment (which is
what the goal should be) than providing upgrades to stadiums would go a
long way to that goal, I think. As someone who has endured watching the
Orioles perform over the last six years, I will tell you that I have
frequently taken sollace at about the 7th inning when I’ve looked around
and said ‘at least this is a beautiful ballpark.’ My colleagues feel the
same way–many only go to Camden Yards now because the stadium is
appealing.

And its not like teams enjoy a competitive disadvantage as a result of one
team spending lots on new stadiums. If a team spends its baseball revenue
on free agents and expensive trades (and boasts a payroll 40% higher than its
nearest competitor), then a team can win the AL East 8 years and counting.
But I would shift the tax burden on to that team and penalize it heavily
for every additional dollar that it spends on payroll. However, I have no
problem whatsoever if that team wants to use its money to improve its
ballpark and facilities–the fans enjoy a better atmosphere and the
competition is not affected.

What baseball really needs is not more overall revenue sharing, but revenue
sharing based principally on the amount of money that a team spends on
payroll. I would say to the owners “spend all you want on ballparks, scouting
and player development, but if you fuel this insane baseball salary
inflation where a relief pitcher is guaranteed $55 mil, then you are going
to pay heavily.”

B.G.

There’s definitely an argument to be made for the revenue-sharing
stadium deduction
, though it is odd that spending on one thing that
adds to fan enjoyment (stadiums) can be get deducted whereas spending on
another (decent players) cannot. In fact, your proposal–a heavy tax on
high payrolls–would make this equation even more inequitable, and
encourage the kind of sit-back-and-collect-revenue-sharing-checks behavior
that Twins owner Carl Pohlad (among others) has specialized in in recent
years.

The bigger problem here, though, is the assumption that new stadiums
always amount to improvement of “fan enjoyment.” For the Mets, who play in
one of the last surviving multipurpose concrete bowls, maybe so. For the
Yankees, who’d be moving from a historic ballpark with great sightlines to
one with an upper deck about 30
feet further from the action
, and where the city itself estimates
ticket prices would be $12 higher than in the current park (bleacher seats
would go from $10 to a projected $21), not so much. And if revenue-sharing
cash were used to tear down Fenway Park and build a cookie-cooker “retro”
mallpark, you’d see John Kerry calling for a filibuster.

New stadiums are very good for things like cupholders and having your
choice of salsa flavor on the nacho platters. As far as being able to see
a ballgame goes, though, they often leave
something to be desired
.


I am a huge Mets fan, and probably spend a higher precentage of my
(meager) disposable income on attending 7 to 10 games a year than is
rational. I’ve been to every major league Stadium on the east coast with
the exception of the new park in Philly, and so I feel fairly confident in
stating that Shea is the worst place to watch major league baseball in
America.

So what is a fan base to do when these owners just dig their heels in
and refuse to pony up?

E.M.

I grew up going to Shea (Sunday plan, 1971-1979, before I contracted
Doug Flynn poisoning and fled to the Bronx), so I
actually have a soft spot in my heart for it. But yes, it’s not the most
attractive stadium in the world. On the other hand, a new stadium in the
parking lot isn’t going to make the outfield view of Flushing any more
attractive, and I doubt the affordable seats at the new place will be any
closer to the action than at Shea, so I’m not overly optimistic about a
new building. Remember, the last stadium pre-sold as being modeled after
Ebbets Field was Milwaukee’s Miller Park, and look how that turned out.

Philadelphia is actually an interesting comparison–the city and state
spent a ton of money on Citizens Bank Park, and they certainly bought
themselves a nicer venue than Veterans Stadium. But then, that’s an
awfully low bar to set. Maybe it would be more cost-effective just for New
York City to spring for a paint job at Shea–hey, they could even bring
back those blue-and-orange corrugated-metal dealies that used to hang on
the exterior–and a pair of binoculars for every fan.

There have been plenty of fans in Boston, Detroit, Chicago, etc., who have
argued, with varying degrees of success, for improving fan amenities
without tapping the public purse. If Wilpon can’t (or won’t) consider
building a new stadium without public assistance, I’d be interested to see
what could be done with a really creative renovation of Shea. Heck, the
city wouldn’t even need the Mets’ permission to do that–they own the
place, after all, just like Yankee Stadium.

I’m probably not the first or the last to chime in with this, but I will
say it anyway. No way are the Mets actually going to pay $100 million to
build the stadium. They are going to sell the naming rights to the
stadium for $5 million a year over 20 years and end up paying absolutely
nothing for a brand new facility. Then they’re going to pass on
overpriced free agents because they can’t afford it with all the money
they are paying out for the new stadium. This underscores a point. Rich
people get that way and stay that way by getting very valuable money-making things for free.

I.B.

You make a good point, and one that I did note in a recent
article for the Village Voice website
. Spending naming rights money,
and so on, on a stadium is still a cost to the team since it does come out
of its profits–after all, in an ideal world, wouldn’t baseball teams be
financing stadiums out of these sorts of private revenue streams? But yes,
the Mets are looking at investing about $100 million and getting back tens
of millions a year; the public is looking at spending $400 million, and
getting back a thin trickle of new tax revenue, which isn’t exactly
equitable.

I’ve got a couple questions after reading your 1/23 article ‘Amazin’
Savings’.

1. One tricky part, depreciation of the ballpark, seems overlooked by
most related studies. If a ballpark is built by a team and owned by that
team, depreciation should be considered when you look at the longer span
of the revenue/cost structure. The reason why this is tricky is that the
ownership could change during the course of the existence of the ballpark.
For example, the Yankee Stadium was owned by the Yankees when it was built
but was sold to the city of New York in 1971. If Steve Swindal decides
he’s not that much a baseball person without George Steinbrenner looking
over his shoulder, same thing could happen to the new Yankee Stadium, too.
Could you share some of your thoughts on this scenario (not the special
case of the Yankee Stadium, but the situation in general)? What are the
consequences of the local revenue and other money issues regarding the
selling of a ballpark? Oh, let’s not forget the life of a ballpark varies
a lot. This can cause some trouble when evaluating the depreciation.

2. The figure you used for the total cost of the new Yankee Stadium is
$1.2 billion, which is different from the $800M + $220M used by most
people, including Andrew Zimbalist. I understand your logic to count the
public expense with the $385M – $475M figure instead of the widely
reported $220M, but shouldn’t you do the same to the Mets? A penny spent
is a penny spent, the money Mets can ‘save’ from the tax exemption won’t
reduce the amount of the money they will spend on the construction. To
make the logic consistent with that $1.2 billion cost of the new Yankee
Stadium, some of the money in your article should be placed on the expense
column of the tax payers, not to be deducted from the cost of the Mets.
Just my 2 cents.

BTW, love your work. The standard of the baseball business discussion
was set pretty high by Doug Pappas, you’re doing a great job here.

C.L.

1) It’s really hard to say, because the value of a stadium is owning its
revenue streams, not owning the stadium itself, which is just a tax and
maintenance burden. I’ve excluded whatever equity exists in the building
itself from my calculations, on the grounds that by the time the 30-year
lease is over, the stadium will likely have exceeded its shelf life and
have no value remaining.

2) Well, some money is both an expense to taxpayers and a savings to the
Mets–if you and I go out to lunch and I pay for your meal, it’s both a
savings to you and an expense to me. Basically, the money is being shifted
from one column on the expense ledger to another.

But in any case, the $1.2 billion doesn’t come from $800 million Yankees +
$400 million (and change) public, but rather $800 million stadium + $135
million infrastructure + $234 million parking garages, with another $77
million in city tax subsidies going to help keep the sticker price down.
The previously unaccounted-for chunk is an additional $164 million in
garage money that’s to come from the private developer, who’s slated to
get all garage revenues as a result. (Andrew Zimbalist insists that the
state would get this money, but both the New York mayor’s office and the
official Request For Qualifications for the garage project say otherwise.)

And finally, thanks for the compliment, which is the highest I can
possibly imagine. Thanks, and please keep questioning me wherever you
think you see gaps in my reasoning–it’s the only way I’m going to be
able to fill even one toe of Doug’s shoes.

Finally, I’d like to clarify something I wrote about the Yankees deal at
the very end of my article. As I explained on last week’s BP Radio, when I said
that the split of the Yankees project was 58% public, 42% private,
I meant 58% taxpayers, 42% Yankees–the Yankees being the private
partner in the stadium deal. The math, along the lines of what I
presented previously for the Mets deal:


PUBLIC COST:

      $135 million city money for land and infrastructure
       $15 million city rent rebates on current stadium
       $70 million state garage subsidies
       $55 million tax-exempt bond subsidies (federal, city and state)
       $44 million future property-tax savings (city)
       $22 million sales-tax breaks on construction materials (city
and state)
      $103 million forgone city rent revenues
     -------------
      $444 million

YANKS COST:

      $800 million bond payments
     -$312 million revenue-sharing deduction
     -$103 million future rent
      -$15 million present rent
      -$44 million property taxes
    --------------
      $326 million

If you count the third parties who are also involved, both shares go down
proportionately. For the entire $1.2 billion project, then, it would be
more like 36% public, 26% Yankees, 25% MLB, and 13% parking garage
developers. The point isn’t that the public would be paying for the
majority of the overall project–it wouldn’t–but rather that taxpayers
would be spending more on this “privately funded” stadium than the
Yankees.

Probably a better way of putting it would have been: The public will be
paying for 37% of the stadium and 30% of the associated parking garages,
while George Steinbrenner will be putting up just 32% of the stadium
costs, and getting the garages built for free. Meanwhile, the Yankees
would get all the new naming-rights money, concessions revenue, and the
like; aside from a small
amount
of sales and income tax money from out-of-town fans, the city
would get bupkis. As with the Mets scenario described above, this can
hardly be described as equitable.

Thanks to BP’s Derek Jacques for pointing out the potential confusion
here, and for helping check the above figures. This is what I get for
using shorthand like “public vs. private” in an article on how modern
stadium funding schemes are too complicated to be easily summarized in
pithy phrases.

(And as for Andrew Zimbalist’s
recent rebuttal to my article
, I’ll be running a reply shortly to
analyze the veracity of his claims. Watch this space.)

Thank you for reading

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