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City's role in Yankee Stadium financing deal probed

BY JULIANN VACHON AND CRAIG GORDON | juliann.vachon@newsday.com; craig.gordon@newsday.com

September 19, 2008

WASHINGTON - A top congressional critic of the Yankee Stadium deal charged yesterday that New York City may have engaged in "willful manipulation" of property values to win IRS backing for cut-rate financing that saved the team at least $150 million.

But the city and the Yankees are standing their ground defending the deal.

Rep. Dennis Kucinich (D-Ohio) told a subcommittee hearing yesterday his investigation found "substantial evidence of improprieties and possible fraud by the financial architects of the new Yankee Stadium."

Kucinich focused in on two widely varying assessments of land values where the new stadium would built in the South Bronx - and sharply questioned whether the city's figures were truthful. In one assessment, city officials found the land would be worth $275 per square foot. In the other, the land was $45 a square foot.

"Not only have we found waste and abuse of public dollars," said Kucinich, "but also we have discovered serious questions about the accuracy of certain representations made by the City of New York to the federal government."

Critics claim New York City inflated the property's value to more than seven times its actual worth to win IRS approval of the city's financing plan - and forced city taxpayers to, in effect, subsidize the construction.

The city sold tax-exempt bonds at lower interest rates, allowing the Yankees to borrow more cheaply. Under the IRS rule, the city could issue bonds based on the property's value.

But New York City officials yesterday defended the approach. The appraisals were varied in their method, one assuming there was a $1-billion stadium on the property while another evaluated just the property, said Seth Pinsky, president of the city's Economic Development Corp., which set up the financing deal.

"It's a project that has been initiated and undertaken in one of the most open and transparent processes in the history of the country," Pinsky said, calling it "a billion-dollar private investment in one of the poorest sections of the country."

But Assemb. Richard Brodsky (D-Westchester), a vocal critic of the deal, told the committee the new stadium would provide "little, if any, economic benefit to the public resulting from taxpayer subsidies."

The Yankees recently requested an additional $336 million in tax-free bonds to help complete the new $1.3-billion stadium. The IRS is considering a proposal that would block the Yankees from getting any more tax-exempt bonds.

Kucinich also made clear he wouldn't let up on the city or the Yankees - even suggesting at one point city officials could face perjury charges if it was shown they knowingly provided faulty information to the IRS. He said Yankee officials would testify Oct. 7 before his Domestic Policy Subcommittee, part of the House Committee on Oversight and Government Reform.