A few weeks back I outlined some of the reasons why stadium
cost numbers aren’t always what they appear. Today, let’s take a look
at a case study, one that’s been largely flying below media radar: the New
York Mets’ plan to knock down the House that Marv Throneberry Built and
replace it with a new, modern facility in what’s currently the parking lot
beyond the Shea Stadium outfield wall.
The Mets revealed the expected price tag on their dream home last week,
and it was surprisingly modest: a mere $444.4 million for the stadium
itself, $600 million counting land and infrastructure. (By comparison,
Boss Steinbrenner’s Yankee Stadium Mark III carries a sticker price of
$1.2 billion.) And as the press release from the state’s Empire State
Development Corporation proudly proclaimed, the “Shea Stadium Area
Revitalization Plan” will have all stadium construction costs paid for by
the Mets’ owners.
Let’s just see about that, shall we?
The first discount the Mets will be getting on their stadium costs is the
revenue-sharing deduction that I’ve previously
written about in this space. One can debate whether this is a clever
dodge of baseball’s attempts to level the playing field for low-revenue
teams, or a way to reclaim money that’s rightfully theirs–judging from
some of my e-mail, it seems a fair number of folks consider
revenue-sharing to be an evil on a par with the diabolical
progressive income tax–but the fact remains that by building a
stadium, the Mets will get a discount on their revenue-sharing payments.
Fair or foul, it reduces their effective costs.
For high-revenue teams like the Mets, the revenue-sharing rate is about
39%, so deducting $444.4 million–actually deducting annual bond payments
over the next 30 years, but it comes to the same thing–will recoup Fred
Wilpon $173.3 million.
$444.4 million -$173.3 million --------------- $271.1 million
On top of this, while the Mets may not be getting up-front stadium cash
from the public, they will be getting plenty of help on the back end to
defray their expenses. For starters, the team currently pays about $3.9
million a year to the city in rent; those payments would be waived under
the new stadium plan, for a net present value of $54 million for the team.
(If the idea that “not paying rent on a privately owned stadium” can be considered a subsidy seems odd to you, let’s try a little thought experiment. Say I
went to my landlord with an offer: I’d like to tear down the house he
owns, and build a new one myself in the backyard–and instead of paying
him monthly rent, I’d pay him nothing for the privilege. Anyone care to
guess his response? Bonus points for incorporating colorful Guyanese curse
Wilpon & Co. would also collect rent rebates of $5 million a year for the
next three years, to ease the pain of playing in Shea Stadium while the
new building is going up next door. And while most development projects in
New York’s outer boroughs get off-the-rack 15-year property tax breaks,
the Mets would pay no property taxes on their new Queens home for twice
that long, for a present-value bonus of about $39 million.
$271.1 million -$54 million -$15 million -$39 million --------------- $163.1 million
Finally, one last item. One of the advantages of building the new stadium
next door to the old one is you can still use the same parking lots. (The
spaces newly occupied by the stadium would be replaced with new acreage
opened up by the demolition of Shea.) The revenue from these lots,
however, would be dealt with differently: The Mets would get to keep the
first $7 million a year in parking revenues, money that currently goes to
the city. After revenue-sharing, this would leave the ballclub with an
extra $4.3 million a year, for a present value of $58.6 million.
$163.1 million -$58.6 million --------------- $104.5 million
Suddenly, what looked like a $444.4 million expense for the Mets–which
would have been a larger private contribution than any prior stadium in
baseball history–has become a far more manageable $104.5 million,
right in line with what other teams have
paid of late. The public, even by the state’s own
optimistic economic projections, would be left with a minimum of $178
million in red ink after paying for land and infrastructure, plus all
those tax and rent breaks.
I think we can officially call this a trend. Back in the bad old days of
the 1990s, spending public money on stadium construction was relatively
uncontroversial, with debates limited mostly to who exactly would get
stuck with the tax bill. (Cigarette smokers and car renters were two
popular targets, mostly because it’s hard to tax child molesters and
puppy-kickers.) But more recently, as the general public has started
picking up on the “stadiums are bad investments” meme, sports team owners
and their political allies have increasingly started looking for ways to,
if nothing else, make the transmogrification of public dollars into
private profit less obvious. In the latest example (non-baseball
division), the New York Times‘ Charles Bagli revealed last week that the
two local teams in that other sport with the pointy ball are expecting
windfall profits from their new “privately built” stadium in New Jersey;
the state, meanwhile, will be giving up 20 acres of free land and getting
shut out of parking, luxury suite and ad revenues.
The obvious exception is the stadium melodrama currently enveloping
Washington, D.C., but there Bud Selig has his own reasons for wanting a
traditional city-pays-the-full-bill deal–among other things, there’s not
much benefit to sticking the other 29 teams with stadium costs when you
are the other 29 teams. Even while holding out for the jackpot in
the Nats deal, though, Selig hasn’t hesitated to play hide-the-subsidy
games at the margins: MLB’s only concession so far has been to kick in $20
million toward D.C.’s ballooning stadium bill–in exchange for future
revenues from non-game-day parking.
With the dawn of the back-loaded lease deal, we clearly need to start
subjecting stadium figures to greater scrutiny before determining winners
and losers. Unfortunately, that’s going to be a tough task given the
current state of sports business journalism. Very few papers today have a
Bagli, who’s spent years unearthing the details of city development deals,
sports-related and otherwise; mostly, the task will fall to beat reporters
who will be dumped into the stadium story cold, and will have little
patience to do more than dutifully report the news release handed to them
by the team PR flack or mayor’s press secretary.
And it’s not only wet-behind-the-ears sportswriters who are getting
snookered, either. Just turn to yesterday’s New York Times op-ed page,
where renowned sports economist Andy Zimbalist lauded the Yankees deal as
“a winner for the Bronx and all of New York” because “the public share is
only about 21 percent.” The actual figure, after accounting for all the
Yanks’ hidden lease subsidies: about 58 percent public, 42 percent
If PECOTA had an error rate like that, Nate Silver would be out of a job.
Let’s hope the next generation of saberconomists can
figure out a better way of evaluating–and explaining–the true winners
and losers of stadium deals.
Thank you for reading
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