Remarks of Neil deMause, journalist and author of Field of Schemes
First, a bit about PILOT, since Terri asked me to explain it in more detail. We're deep into Kremlinology here, trying to guess at what Deputy Mayor Doctoroff is going to do based on a handful of public statements, but if I understand him correctly, this use of PILOTs would be substantially the same as a TIF - the only difference would be that the
land would be owned by a public entity like the Economic Development Corporation or a West Side Development Authority, and the diverted payments would be called a "fee" instead of a "tax." But all the criticisms of TIFs would still very much apply to a PILOT.
Anyway, I'm here to talk about the elephant in the room, which is the football stadium, or Olympic stadium, or "multi-use facility," or whatever it's being called these days. Depending on who you talk to, and when you catch them, it's either being described as the centerpiece of this entire West Side plan, or completely irrelevant to it, with the development to happen whether or not the stadium does.
In almost eight years of reporting on stadium deals, I've spoken to every economist I can find about the impact of sports stadiums. And I've yet to find a single independent economist - by which I mean one not actually working for a sports team or league - who thinks that stadiums are any use as an economic engine. Especially football stadiums, which are active only eight or ten days a year - no one is going to open a restaurant or a hotel across the street from a building that's dark 355 days out of the year.
Instead, you have studies like that of Robert Baade of Lake Forest College. Baade looked at per-capita income in 30 cities that built new sports stadiums over thirty years. Controlling for other factors, he found that in 27 of the cities, there was no observable economic impact; in the other three, per-capita income looked to have gone down as a result of the stadium. As he wrote, "In no instance was the economic impact of professional sports -- either by building a stadium, attracting a team or losing a team -- measurably different from zero."
To look at it another way, in terms of job creation: I've looked at dozens of stadium deals now, and the per-job cost is invariably right around $250,000 per job - which is just about as bad as the infamous Dairy Queen boondoggle in Minnesota that Greg mentioned earlier. And the jobs aren't much better than the minimum-wage Dairy Queen job, since many of them are things like hot-dog vendors.
And not to get into it, but the numbers for the Olympics are even worse: hard figures are hard to come by, but independent audits of the last two summer Olympics, in Atlanta and Sydney, found that each lost about a billion dollars. And the 2004 Games in Athens are projected to lose at least $8 billion.
So with these sorts of studies becoming known, cities have been more and more doing two things: packaging stadiums with large non-sports developments, as with the West Side plan; and using things like TIFs that claim to be all "new money" generated by the project. The first major use of TIFs was in Pennsylvania, where after the state legislature had rejected several financing proposals for four new stadiums for baseball and football teams in Pittsburgh and Philadelphia, in 1999 the legislature passed a TIF deal. This was described as "a hybrid of a grant and loan," on the theory that the teams would be "repaying" the money with their taxes, though these are taxes that otherwise would have been going into the state's general fund in any case. As one legislative critic of the plan quipped, "It's not a grant. It's not a loan. It's a groan."
Since then, TIFs and similar financing plans have been used to help subsidize development around Dallas' arena, and the new baseball stadium going up in San Diego. In fact, San Diego has had significant problems there, because the ballpark costs were supposed to be paid back with hotel taxes from new hotel development - but with the economic slump, they had a hard time finding anyone who wanted to build new hotels, and had to scramble around to find developers.
In New York City, again it's extremely unclear exactly what the TIF would be financing. The Jets are supposedly going to build the stadium itself, but that won't include the concrete slab over the railyards that would hold up the stadium, or any of the other infrastructure. When I've asked Doctoroff about how much money total we're talking about, he's said "around $3 billion" - which would be ten times the size of the largest previous TIF on record.
And as I always tell people about stadium deals, the one you get in the end is never the one you start out with, and I'd be shocked if the Jets end up paying the full cost of a stadium. They're talking about it costing $600 million, not counting the slab, which would be two to three times as much as other teams, like the New England Patriots and Washington Redskins, have put into privately built stadiums. Even considering that a stadium in Manhattan would be more lucrative than one in Foxboro, Massachusetts, you're still talking about the Jets needing to make an extra $50 million a year or so over and above what they do now at Giants Stadium, every year for the 20- or 30-year life of the construction bonds, just to break even.
As for the dangers of TIFs, as Terri indicated, there are several. First of all, will the 20 million square feet of new office development happen? When I've spoken to TIF experts in other cities, they've all said, "That's not how you do it - the city should have the developers front the costs, and then be paid back out of TIFs if and when the development happens" - the pay-as-you-go approach. But here they're talking about having the city pay for everything up front, then hope the development takes place. So it's very risky.
Next, even if you get the desired development, what does it do to development elsewhere in the city? Does building office space on the West Side mean you can't find tenants in Lower Manhattan? If the city ends up losing property values elsewhere in order to pay for the West Side TIF, then it's a net loss.
Finally, there's the question of why, if the West Side is such a great location for development, you need to spend $3 billion to jump-start it. Isn't it possible that you could get similar development there for a fraction of the city subsidy? Every development expert I've spoken to says that for a TIF to work, you want projects that generate a lot of economic activity, are guaranteed to take place, and have little danger of cannibalizing economic activity from elsewhere in your city. On these counts, building a stadium and office buildings on the West Side looks like about the riskiest strategy imaginable for the city of New York.