|
|
Speeches
Thank you, Chairmen Weprin, Sanders, and Liu and my colleagues in the City Council for allowing me to testify today.
To put it bluntly, Mayor Bloomberg and Deputy Mayor Doctoroff’s financing plan for the proposed Jets stadium is wrong for New York City . They claim that stadium will pay for itself, but they refuse to level with the Council or with the people of New York City about the true costs and how they intend to pay for them.
For the past year, I have said that this plan fails to protect the City’s resources and the people’s interests. I have spoken and testified extensively about its many flaws, and I will restate them briefly here today.
First, the stadium is likely to cost New York City far more than the $300 million the Bloomberg administration claims. Last November, my office analyzed the financing for the stadium and opened a Pandora’s box of unaccounted-for expenses:
The Empire State Development Corporation (ESDC) has given the State Legislature the option of shifting the State’s $300 million commitment to the City, an option it will have no qualms about exercising. If it does so, the cost to City taxpayers will double.
The City’s West Side redevelopment plan includes a number of costs associated with the stadium that are not part of its budget. A platform over the West Side Highway connecting the stadium to the waterfront will cost $55 million, according to the Javits Center Development Corporation. An area called the “game porch” consisting of a park, stairs, elevators, and other structures will cost $66 million. A pedestrian tunnel linking the stadium to the Javits Center will cost $30 million. The total cost of these projects is an additional $151 million. That brings the potential cost up to $751 million.
Construction costs for the stadium are rising every day. According to a New York Building Congress document, construction costs have climbed an average of 3.25% each year since 1995. By this measure, the stadium currently costs $150 million more than the original 2001 estimate. That pushes the potential cost over $1 billion. But there’s more.
The architects of the stadium have a history of going over budget on major projects. Most recently, their vertical campus for Baruch College came in at 120% of the original estimated cost. If the Jets stadium goes 20% over-budget, it will cost an additional $280 million. That pushes the potential cost over $1 billion. So in four steps we went from a $300 million price tag to a nearly $1.2 billion price tag.
The Jets can promise in the press to pick up rising construction costs and cost over-runs, but those promises are worthless without a commitment in black-and-white. The Memorandum of Understanding between the Jets and the City must include an assurance that New Yorkers will not be left on the hook for these major unaccounted-for expenses.
But even if the Jets make a binding commitment to pick up these costs, the City will suffer an economic body blow because the financing plan for the stadium forfeits untold millions in potential revenue and takes scarce resources away from more deserving projects:
Four hundred million of the Jets’ $800 million contribution will be funded with the City’s city revenue bonds. These are tax exempt bonds that are supposed to be devoted to projects that further the public good, and there is a ceiling on how many the City can issue. Not only is the City forfeiting the tax revenue it would receive by issuing taxable bonds to the Jets, it is giving up a significant portion of its tax exempt bonds, which could otherwise fund critical public projects such as affordable housing and other economic development.
Similarly, Mayor Bloomberg and Deputy Mayor Doctoroff plan to divert a major funding stream from the general fund and use it to pay off the City’s contribution to the stadium. The City will finance its contribution by issuing bonds. To pay the debt service on those bonds, the Mayor and Deputy Mayor want to siphon off the excess revenue generated by Payments in Lieu of Taxes, or PILOTs.
In order to promote development in New York City , the Industrial Development Agency ( IDA ), a division of the Economic Development Corporation (EDC), sells City-owned property to developers and issues them tax-exempt bonds to finance their projects. Rather than paying property taxes, the developers make payments known as PILOTs to the IDA . The IDA uses the PILOTs to pay off the debt service on the developers’ bonds and puts the excess in the general fund to help balance the budget. It is these excess funds that the administration wants to siphon off for its stadium plan.
Paying off the debt service on the stadium will take thirty years, and each year the City generates roughly $50 million in excess PILOT money. Depending on the ultimate size of the City’s commitment, as much $1.5 billion could be diverted from the general fund over the coming decades in order to pay for the Jets stadium—$1.5 billion that would otherwise go into the general fund, which is subject to City Council oversight, $1.5 billion that could help pay the salaries of teachers, police officers, and fire fighters.
It is possible that this scheme is illegal; what is certain is that it is an abuse of power that sets a terrible precedent. Historically, no mayor has ever abrogated this stream of payments. The Mayor and the Council have always decided jointly through the annual budget process how these funds should be allocated.
Mayor Bloomberg’s flouting of the Council’s authority is a sign of bad faith. The administration jumps at every opportunity to eliminate checks and balances and to make the process of spending public money less transparent. They know that the vast majority of New Yorkers don’t want a stadium if it’s going to be built with public funds, so they do everything in their power to make the process secret and convoluted and to take it out of the hands of the people’s elected representatives in the Council. Their plan to funnel PILOTs into the stadium is just the latest example of the shell game they’ve been playing since day one. “This isn’t costing you a thing,” they say, hoping we won’t notice as hundreds of millions disappear from the general fund.
In recent days, the MTA has given us another vivid example of how efforts to accommodate the Jets are undermining the public interest. Despite a desperate need for revenue, Chairman Kalikow has appeared ready and willing to give away the air rights to the Hudson Rail Yards for a fraction of what they’re worth.
Rather than soliciting competing bids, then accepting the highest offer, the MTA has sole-sourced the bidding process, giving no one but the Jets a chance to participate. Rather than basing its asking price on the value of the entire property, which its own independent appraiser pegged at $1 billion, the MTA is offering the Jets the air rights for $300 million.
Now that Cablevision has stepped forward with an offer six times higher than the Jets’, Chairman Kalikow must give it equal consideration. It is his responsibility to protect the interests of the riders, save the fare, maintain service, and upgrade technology. It would be a clear-cut breach of fiduciary duty for him to give the land away to a lower bidder, yet he will certainly be under intense pressure to do so.
It is long past time to ask why good sense, sound fiscal judgment, and the City’s most critical needs are taking a back seat to a project that will primarily benefit a sports team and its private owners. While the Mayor is so intent on looking out for the Jets, who is looking out for the people of New York, the vast majority of whom say they don’t want a stadium if it’s going to conflict with higher priorities?
This discussion is about more than what we do with public resources like land, money, and tax-exempt bonds. It’s also about what we can’t do once those resources are committed to the wrong goals: the housing we won’t be able to build, the subway system we won’t be able upgrade, the new teachers we won’t be able to hire. The New Yorkers of tomorrow who will have to live with the commitments made today. We must protect their interests.
Thank you.
|
|
|
