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1 Travis Greaves & Joseph Henchman, From the House That Ruth Built to the House the IRS Built 1 (2009)

handle is hein.taxfoundation/ffbghxz0001 and id is 1 raw text is: FISCAL

April 6, 2009
No. 167


From the House That Ruth Built to the
House the IRS Built
By Travis Greaves and Joseph Henchman
New York City and New York Yankees Abuse PILOTs to Finance New Stadium
Executive Summary
Baseball season is finally here, and thousands of baseball fans are heading to the ballpark to
cheer on their teams and enjoy America's national pastime. One baseball club that is always
discussed during this time of year (for better or for worse) is the New York Yankees. The
Yankees are widely known for spending large sums of money to attract top baseball players.
It was thus no surprise when it became known that the new Yankee Stadium would be
expensive; priced at approximately $1.3 billion,' it will in fact be the most expensive stadium
ever built. Tickets will also be pricey, with seats behind home plate selling for $2,500 per
The stadium's construction costs have been publicly subsidized in the form of $942 million in
tax-exempt bonds issued by New York City.3 Seeking tax-free status for the bonds to ensure a
lower interest rate, New York structured the deal to ensure it didn't run afoul of a federal tax
code provision which requires that such bonds not be private activity bonds. This serves as
a huge benefit because the bonds are exempt from city, state, and federal taxes, and have an
interest rate about 25 percent below that of taxable bonds.
There are two parts to this financing scheme which seem foul. First, the new Yankee
Stadium will be city-owned and thus exempt from property taxes. Meanwhile its primary
tenant, the Yankees, will pay no rent. This clearly brings up the issue of whether such tax-
exempt bonds should have been issued at all, and especially when the city is so far in the red.
Secondly, to pay off the bonds over time, New York City will receive payments theoretically
equivalent to the property taxes that Yankee Stadium would otherwise pay. The city claims
that these payments in lieu of taxes (PILOTs) equal taxes that would otherwise be owed. In
reality, these payments are inflated by overvaluing the stadium property by three times that of


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