New York City, Yankees Abuse Tax-Exempt Financing to Build New Stadium
April 8, 2009
New York City has tapped into taxpayer funds by shifting the financing for the construction of a new ball park for the New York Yankees through different layers of local government, while wrongfully claiming that the stadium will pay for itself, according to a new Tax Foundation study released during Major League Baseball’s opening week.
In Tax Foundation Fiscal Fact No. 167, Tax Foundation law clerk Travis Greaves and tax counsel Joseph Henchman analyze the subsidization of the new stadium’s construction costs in the form of $942 million in tax-exempt bonds issued by New York City. Seeking tax-free status for the bonds to ensure a lower interest rate, New York structured the deal to ensure it didn’t break a federal tax code provision which requires that such bonds not be “private activity bonds.” This serves as a huge benefit to both New York City and the Yankees organization because the bonds are exempt from city, state, and federal taxes, and have an interest rate about 25 percent below that of taxable bonds. Greaves and Henchman explain why the financing scheme seems “foul.”