Friday, January 9, 2009

CNBC's interview with Randy Levine

Canadian Information Minister Pete Toms was kind enough to zip me the link to an interview that CNBC's Darren Rovell conducted with Yankees President Randy Levine. Of note:

Darren: A lot of talk as well about the tax-exempt bonds that the Yankees and Mets have asked for. The Yankees, in total, asking for more than $1 billion worth of bonds. You used to work in the Mayor's office. How does this make sense to the taxpayer?

Levine: We'll, I'd like to make this very clear. The way this stadium is being constructed and financed, every single penny, every single penny, is going to be paid for by the New York Yankees. There are no taxpayer funds that are being used to fund this stadium, which is different from 99.9 percent of stadiums all over the world. No taxpayer money will be used to fund this stadium. The Yankees are funding the entire bill of the construction and, unlike today, the maintenance and operation of the stadium. The Yankees are on the hook, there's no liability for the city or any governmental agency. So this is a $1.3 billion investment in the poorest congressional district in the country. It's the largest investment in the Bronx and, in these hard times, this has generated over 6,000 construction jobs by moving us across the street from the old Yankee Stadium to the new Yankee Stadium, we're going to create approximately 1,000 new jobs. So this is a good thing.
This explanation isn't exactly black-and-white, I believe. The team is using their status to avoid paying taxes to the City. So while he might be 100% correct in that "No taxpayer money will be used to fund this stadium", the City isn't collecting tax revenues where it should have been. I'm not a bond guy, so I welcome a more experienced voice out there to email me and either correct me or add some details.

I'm on record here saying that I don't trust Randy Levine OR any of the dealings with NYC. Levine is an ex-NYC government insider [Before joining the Yankees, Levine served as New York City’s Deputy Mayor for Economic Development, Planning and Administration. He also served as New York City’s Labor Commissioner. Prior to joining the mayor's office, he served as the chief labor negotiator for Major League Baseball and negotiated the 1996 MLB labor agreement]. We've seen some of the ugly details come out over the last year about some of the back-office deals and wink-wink, nod-nod agreements. I think Levine is the force behind all of this.

We like to joke about the Yanks being the Evil Empire. That might be true, but I don't think the guy behind the black mask and cap is a Steinbrenner; I think it's Levine. The Steinbrenners might push to control the on-field decisions, but it's Levine who is manning the helm with some of these other, more sketchy, dealings. Not to delve into a political debate, but here is my analogy, in SAT format:

Steinbrenners : Bush#43 :: Levine : Dick Cheney

UPDATE (1/9/09, 12:05pm): Got this email from friend-of-the-blog Zoolander:
The tax issue is mostly about the interest income paid to bondholders, not the Yankees. If you buy a tax-exempt bond, a/k/a a municipal bond, you do not have to pay income tax on the interest income you get from the bonds. NYC would issue these bonds to pay for roads, sewers etc. The IRS grants tax-exempt status to projects which are "public" in nature. If you buy a taxable bond, a/k/a a corporate bond, you report your interest income from the bond on your tax return. Corporations would issue these bonds to pay for new factories etc. The new Stadium is a hybrid project. The Stadium is public in nature but you have a private company financing it. In this case, the city is extending its non taxable borrower status to the Yankees via the NYC Industrial Development Agency. The IRS signed off on it. The Yankees benefit via a lower interest rate they pay on tax exempt bonds vs. what they would pay on taxable bonds. The city benefits by having the Yankees pay back the interest and principal on the debt and they will collect a ton of sales and income taxes. The cost to the City and State is they can not collect income tax on the interest paid to the bondholders.


tHeMARksMiTh said...

SAT's don't have analogies anymore. :)

Jason @ IIATMS said...

I'm old. Get off my lawn.

Jay said...

Ahhh, Jason you beat us to it. My buddy Cliff and I were sitting on a post about Levine's previous job with the city (in the same department that much of the Stadium shadiness went down). Well done sir, we are still going to post it at some point, and obviously give you some love for "scooping" us as well.