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GAMING THE TAX CODE: THE NEW YORK YANKEES AND THE CITY OF NEW YORK RESPOND

TO QUESTIONS ABOUT THE NEW YANKEE STADIUM

HEARING

BEFORE THE

SUBCOMMITTEE ON DOMESTIC POLICY

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

OCTOBER 24, 2008

Serial No. 110–157

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.oversight.house.gov

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

JACKIE SPEIER, California

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

JIM JORDAN, Ohio

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

LAWRENCE HALLORAN, Minority Staff Director

SUBCOMMITTEE ON DOMESTIC POLICY

DENNIS J. KUCINICH, Ohio, Chairman

ELIJAH E. CUMMINGS, Maryland

DIANE E. WATSON, California

CHRISTOPHER S. MURPHY, Connecticut

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

BRIAN HIGGINS, New York

BRUCE L. BRALEY, Iowa

JACKIE SPEIER, California

DARRELL E. ISSA, California

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

CHRIS CANNON, Utah

BRIAN P. BILBRAY, California

JARON R. BOURKE, Staff Director

(III)

C O N T E N T S

Page

Hearing held on October 24, 2008 .......................................................................... 1

Statement of:

Levine, Randy, president, New York Yankees; Martha Stark, commissioner, New York City Department of Finance; Seth Pinsky, president,

New York City Economic Development Corp.; and Richard L. Brodsky,

assemblyman, 92nd Assembly District New York State ........................... 19

Brodsky, Richard L. .................................................................................. 49

Levine, Randy ............................................................................................ 19

Pinsky, Seth ............................................................................................... 29

Stark, Martha ............................................................................................ 40

Letters, statements, etc., submitted for the record by:

Brodsky, Richard L., assemblyman, 92nd Assembly District New York

State, prepared statement of ....................................................................... 52

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio:

Draft estimated market value for proposed Yankee Stadium ............... 70

Prepared statement of ............................................................................... 6

Levine, Randy, president, New York Yankees, prepared statement of ........ 23

Pinsky, Seth, president, New York City Economic Development Corp.,

prepared statement of ................................................................................... 32

Stark, Martha, commissioner, New York City Department of Finance,

prepared statement of ................................................................................... 43

(1)

GAMING THE TAX CODE: THE NEW YORK

YANKEES AND THE CITY OF NEW YORK RESPOND TO QUESTIONS ABOUT THE NEW

YANKEE STADIUM

FRIDAY, OCTOBER 24, 2008

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON DOMESTIC POLICY,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:06 a.m., in room

2154, Rayburn House Office Building, Hon. Dennis J. Kucinich

(chairman of the subcommittee) presiding.

Present: Representatives Kucinich, Cummings, and Cannon.

Staff present: Jaron R. Bourke, staff director; Charles Honig,

counsel; Jean Gosa, clerk; Charisma Williams, staff assistant;

Leneal Scott, information officer; Howie Denis, minority senior professional staff member; and William O’Neill, minority professional

staff member.

Mr. KUCINICH. The committee will come to order.

The Domestic Policy Subcommittee of the Committee on Oversight and Government Reform is now in order. Today’s hearing will

examine whether the city of New York and the New York Yankees

have gamed the Federal Tax Code to receive Federal subsidies for

construction of the new Yankee Stadium.

Without objection, the Chair and the ranking minority member

will have such time as they need to make opening statements followed by opening statements not to exceed 3 minutes by any other

Member who seeks recognition. Without objection, Members and

witnesses may have 5 legislative days to submit a written statement or extraneous materials for the record.

This is the Domestic Policy Subcommittee’s fourth hearing in the

last year and a half on the Federal Government’s subsidization of

the construction of professional sports stadiums through the Federal Tax Code and our second hearing focusing on whether the

New York Yankees have gamed the Tax Code to receive Federal

subsidies for construction of a new Yankee Stadium.

In our hearings, we have shown that the practice of providing

taxpayer subsidies to the building of sports stadiums is a transfer

of wealth from the many taxpayers to the few wealthy owners. The

new Yankee Stadium is no exception to this rule. Just like the current financial crisis, the story is similar: Businesses and government actors who by, law and practice, are not accountable to the

public are free to conduct deals to the public’s detriment. Here not

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only are the city and taxpayers on the hook for expensive infrastructure improvements provided for the Yankees, but also Federal

taxpayers are deprived of hundreds of millions of dollars of tax revenues because the bondholders will pay no Federal taxes on the

$950 million of bonds issued to construct the Stadium.

In our September hearing, we heard testimony from experts

about how the funding mechanism of the new Yankee Stadium, the

use of payments in lieu of taxes [PILOTs], as they are called, was

neither transparent nor democratically accountable. We also

learned that the Yankees could only extract the deal because they

operate as a monopoly, as do all professional sports teams. Thus,

their owners are threatening to leave unless they receive from the

city and State officials the use of more and more taxpayer dollars.

At the same time, they charge higher and higher ticket prices to

the fans.

Indeed, Mr. Levine, in his written testimony explicitly states that

without payment-in-lieu-of-taxes financing, the Yankees would

have left the Bronx. The Yankees and the city declined to testify

at the September hearing because they argued it was unfair to proceed before the subcommittee could complete its investigation with

the benefit of documents on the issue. No matter that the Yankees

and the city had withheld precisely these documents from the subcommittee for 2 months.

The timing and apparent coordination of the Yankees’ and the

city’s actions seem aimed to facilitate a favorable decision from the

Treasury Department on their request to have city projects grandfathered from new regulation that proposed to close with the Treasury, termed the payment-in-lieu-of-taxes loophole.

They got their wish. Today, regulations go into effect that allow

only in three New York City projects—Yankee Stadium, the new

stadium for the Mets, and a new arena for the Nets—to continue

to benefit from this loophole, which has now been partially closed

for everyone else.

The Yankees’ and the city’s continued attempts to stymie this investigation is evidence that they don’t want the truth to come out.

The Yankees and the city waited until Wednesday evening to provide many of the documents first requested on July 26th. Moreover,

the city development agency continues to withhold 70 percent of responsive agency communications by asserting attorney/client privilege, a privilege, I might add, that has never been binding on Congress. By waiting to the last minute to raise this meritless objection, the city has delayed the subcommittee’s review of these documents until after this hearing.

Even though the city has withheld many key documents from

this subcommittee, we have reviewed enough correspondence to

raise serious questions about how the city assessed the Stadium.

Yankee-great Yogi Berra once said, ‘‘A nickel isn’t worth a dime

today.’’ Well, the city of New York has turned Yogi Berra’s maxim

on its head. What they say is, ‘‘A dime today may be worth closer

to a nickel.’’

As outlined in a letter that I sent last week to Mayor Bloomberg,

our staff has uncovered a litany of serious questions about all aspects of the $1.2 billion Stadium assessment, including the accuracy of the inclusion of certain costs in the $1 billion valuation of

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the Stadium itself and the accuracy of the $204 million Stadium

site assessment.

Here I am going to focus on what appears to be the most clear

and egregious inaccuracies in the assessment, the possible inflation

of the Stadium site assessment. From evidence that subcommittee

staff has reviewed, it has become clear that from the very beginning of the assessment process, top city officials made it known to

the Department of Finance, that they should be mindful of the

Yankees’ interest, ‘‘in seeing that the assessed valuation would be

high enough to generate as much payment in lieu of taxes for taxexempt debt as is lawful and appropriate.’’ And the Department of

Finance buckled.

In an e-mail from Mr. Seth Pinsky to Mr. Josh Sirefman, an official in the mayor’s office, we learned that there was concern about

how the tax assessment would match up against the requirements

of the Yankees. Mr. Pinsky writes, ‘‘As I think you know, on the

Yankees and Mets, their financing structures rely on payment in

lieu of taxes, which are limited by what real estate taxes would be,

which, in turn, are limited by the assessments of the new stadia.

Apparently DOF, Department of Finance, is close to finalizing their

preliminary assessment, and I’d like to understand what it is before it is released publicly to make sure it conforms to our assumptions. Do you know the proper person at DOF’’—Department of Finance—to talk to about this?’’

This is an e-mail from Mr. Pinsky to Mr. Sirefman.

Later that afternoon, Mr. Pinsky sent another e-mail to the executive director of his agency, ‘‘I think that Josh Sirefman,’’ that’s the

City Hall official—‘‘is contacting Martha Stark directly. It would be

helpful to have a directive from the top that we should be cooperated with.’’

Knowledge of the estimated Stadium assessment before its public

release would provide City Hall and the IDA a further opportunity

to pressure the Department of Finance to adjust the assessment in

the direction that conformed to the city’s and the IDA’s assumption, provided Department of Finance would cooperate.

On March 21, 2006, the Department of Finance had arrived at

a valuation of the 17-acre Stadium site, $26.5 million. The Department of Finance reached this valuation by comparing the South

Bronx Stadium site to land parcels in comparable Bronx neighborhoods and other comparably low-value areas in Staten Island and

Brooklyn. At about $32 per square foot, this valuation was roughly

in accord with two roughly contemporaneous city-commissioned appraisals of substantial portions of the Stadium site, a $21-million

or $45-per-square-foot May 2006 appraisal of an 11-acre portion of

the Stadium site that was commissioned by the New York State Office of Parks and submitted to the National Park Service and a

July 2006 $40-million lease appraisal or $63 per square feet on the

14.5 acres of the Stadium site commissioned in conjunction with

State law requirements to proceed with the Stadium project.

The next afternoon, May 22nd, Mr. Pinsky made plans to call the

assistant commissioner of the Property Division, Ms. Dara OttleyBrown. We do not know the details of their conversation, either because the details do not exist or because the city has withheld

4

those documents from the subcommittee. We welcome the opportunity to hear directly from Mr. Pinsky and Ms. Stark today.

But one thing we do know is the result: The Department of Finance revised its valuation of the Stadium site upwards of 600 percent from $26.8 million to $204 million or $275 per square foot. Did

the city and the IDA pressure the Department of Finance to increase dramatically the land assessment for the benefit of the Yankees? Was it necessary to have a higher land assessment to support the amount of bonds that the Yankees wanted to finance the

construction of their new stadium? We hope to get to the answers

to these questions today.

In her written testimony, Ms. Stark attempts to explain the Department of Finance’s sudden methodological about face which led

to the adoption of the inflated Stadium site valuation. I look forward to asking Ms. Stark how these methodologies square with accepted principles of cost-based land assessment and Department of

Finance practice. One thing is already clear: To justify the inflated

Stadium assessment, the Department of Finance had to abandon

the comparables in The Bronx that it had previously used and resorted to comparables for property in comparatively high-value

neighborhoods in Manhattan. That is the basis for the $204-million

land valuation that the city reported to the IRS.

Now, why did this happen? The Yankees were happy to pay more

payments in lieu of taxes to finance the construction bonds as long

as the Federal Government and the Federal taxpayers would provide them with cheap tax-exempt bonds: Each additional dollar of

tax-exempt bonds that IDA was willing and able to issue to finance

the Stadium’s construction saved the Yankees from having to issue

a correspondingly high amount of higher-interest-rate taxable

bonds. For its part, the city’s investment in the Stadium was almost entirely the sunk costs of paying for infrastructure improvements, and they wouldn’t pay more if the bonds—if the amount of

the bonds was $600 million or $950 million.

As Professor Clayton Gillette testified at our previous hearing,

this is a problem with the incentive structures of payment in lieu

of taxes itself. In typical municipal finance arrangement for stadium constructions, a city raises taxes to pay the debt service on

bonds. If the city wants a more grandiose stadium built with taxexempt funds, its taxpayers would have to share the burden with

Federal taxpayers. With payments in lieu of taxes, the city reaps

the benefits of tax exemption while shouldering none of the burden.

Artificially inflating the Stadium assessment would be the next

step, albeit a more grave step and an illegal step down this path.

So where do we go from here? Well, it is not over. The Yankees

are seeking IRS approval of about $360 million of additional payment-in-lieu-of-taxes-backed tax-exempt bonds. It appears that the

city has already increased the Stadium assessment in conjunction

with this request. The Mets may also be requesting a more modest

sum to complete Citifield and Forest City Enterprises, the developer of the Atlantic Yards project in Brooklyn, seeks IRS approval

of $800 million of payment-in-lieu-of-taxes-backed bonds for the

construction of a new arena for the Nets.

I want to thank the city of New York and the New York Yankees

for coming here today to respond to questions about how the DeVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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partment of Finance arrived at the Stadium assessment, including

addressing the circumstances of the Department of Finance inflating the Stadium site assessment 600 percent in 1 day and helping

us determine if the inflation was a result of pressure exerted by

IDA or city officials. In general, we hope to shed some light on

whether the Department of Finance calculated the Stadium assessment pursuant to proper assessment methods designed to determine what the property was actually worth or reverse-engineered

the assessment to ensure that the IDA could issue the amount of

tax-exempt bonds sought by the Yankees to fulfill their vision of a

new stadium in The Bronx.

The answers to these and other questions will be helpful to Federal policymakers and help us understand whether the regulations

for the use of tax-exempt bonds work properly or whether they invite manipulation.

At this time, I’m going to yield to the distinguished ranking person for this hearing, Mr. Cannon, for such time as he may need to

deliver his opening statement; and then I will move to other members of the committee.

[The prepared statement of Hon. Dennis J. Kucinich follows:]

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Mr. CANNON. Thank you, Mr. Chairman. I appreciate the hearing. Is this speaker on? Can you hear me? It’s on but—hello. No.

OK.

Thank you, Mr. Chairman, for holding the hearing. If you have

another baseball hearing, I think the American people are going to

start worrying about whether Congress hates America’s favorite

pastime. In all seriousness, I think there are two questions here to

be asked. Can the New York stadiums be subsidized under current

law legally? And second, was there any misconduct in the way

these deals were done? I suspect that the panel will be able to give

us the details in such a way that the answers to those two questions become direct and simple.

Can New York stadiums be subsidized under current tax law?

Yes, of course they can. And now we have the ability to tighten regulations; the IRS has the ability to tighten regulations. But when

the negotiations of these stadiums were done, the tax law was

clear. In fact, Federal tax officials have ruled time and again in

favor of this and similar projects. Nothing illegal took place here.

Now, if we change the law in the middle of the deal, that would

be unfair to those who put the deal together. The IRS agrees; otherwise, they wouldn’t have OKed so many similar projects.

It is ludicrous that we are targeting New York City for entering

into an illegal deal. While the majority may have their opinions on

whether stadiums should be subsidized, that is different. Demonizing the city of New York for deciding to spur economic development

in one of the poorest congressional districts in the country seems

to me to be a decision that is appropriate for them to make.

Now the only question that remains is, was there any misconduct

in the way these deals were done? This project has gone through

more vetting than any other project in recent memory. This project

has undergone scrutiny from literally every level of government; no

substantial evidence of impropriety has been found.

I’m looking forward to giving the folks from the good State of

New York the opportunity to explain what has happened here to

clarify the record. I’ve read personally a number of articles and relatively wild allegations on this. I suspect that as we shine the light

of the truth on this, or have the opportunity to express the truth

on this, we’re going to find out that some of those extraordinary

statements are unfounded. I am certainly not referring to the

chairman’s concerns, which are quite technical, but which I think

also have clear technical explanations.

So with that as an introduction, Mr. Chairman, first of all, I’d

like to thank you for keeping your opening statement shorter than

some of the statements we have had in the past on the floor of the

House and even here. And I appreciate the fact that we join the

issue, and I look forward to getting some answers to some questions and some clear explanations. Thank you, and I yield back the

balance of my time.

Mr. KUCINICH. I thank the gentleman.

The Chair recognizes Mr. Cummings.

Mr. CUMMINGS. I want to thank you, Mr. Chairman, for holding

this hearing. And I want to thank our guests for being here this

morning.

17

As I was listening to Mr. Cannon, I couldn’t help say to myself

that, you know, when it comes to things that are unbelievable and

wondering whether people are telling—making statements that are

just way out of bounds. If somebody had told me before the last 2

days of hearings that we had with regard to this worldwide financial fiasco, that we would hear some of those things, I would have

never believed it. And I think we are at a time and a place where

the taxpayers, in many instances unfairly and unfortunately, are

being taken to the cleaners. And I think it is very, very important

that we look into this.

We may come up with and find—discover that there are no problems. And I would like to be frank with you, after what I have seen

in the last 2 days, I hope they are not. But the fact still remains

that there are questions to be answered, and we are the committee

that has been given the duty of looking into these matters.

I—you know, I enjoy baseball. As a matter of fact, I enjoy it very,

very much, and although the Baltimore Orioles aren’t doing too

well now, I try to give advice, as much advice I can, to Peter

Angelos, the owner, but he doesn’t seem to take it.

But when seven-time Cy Young Winner Roger Clemens came before our committee to answer questions about his alleged steroid

use, I told him that he was one of my heroes, and I truly meant

that. I also told him that—when he met me in my office prior to

the hearing, that I am not one of those politicians who believes

that athletes do not deserve the millions of dollars that they receive. Baseball is big business. And for the entertainment, joy and

pride that the game brings to so many families across our Nation,

I think it is worth every dime of it. But, again, American taxpayers

should not be forced to pay.

What we are seeing in New York with the development of the

new Mets and Yankees stadia, is a situation where I believe the

Federal Government was simply taken to the bank. We are essentially offering these teams interest-free loans by issuing tax-exempt

Federal bonds for the construction of stadia and allowing them to

pay them back in place of taxes. The IRS and the Treasury Department, after approving the deals, recognized that this practice is

highly problematic; and they have revised their regulations effective today to ensure that future deals are not similarly made. That

says something in and of itself.

My problem with the whole situation is that the IRS probably

should not have approved the tax-exempt status in the first place,

given that the stadia projects present a clear concern. However, we

are here this morning to discuss, among other issues, the alleged

misrepresentations made to the IRS and investors regarding the

assessment value of the new Yankee Stadium and whether these

alleged misrepresentations are an outgrowth of insufficient independence, transparency and accountability at the New York City

Department of Finance and other city agencies.

And I must say, Ms. Stark, I read your testimony this morning,

and I too have some questions—I’m sure, just as the chairman

does—with regard to how these assessments are done, because it

is a little confusing. But I look forward to all of your testimony.

Mr. Chairman, there is only one thing that bothers me. And I

know you’re trying to get to the bottom of all of this, and I’m hopVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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ing that we’ll be able to get to the bottom. I think that when you’re

talking about an issue of pressure, a lot of times that kind of information is hard to get out. But we’ll see.

And with that, Mr. Chairman, I yield back.

Mr. KUCINICH. I thank the gentleman. I would just like to respond to his direct statement by saying that this subcommittee is

going to continue to require the production of documents.

So thank you. If there are no other additional opening statements, the subcommittee will now receive testimony from the witnesses before us today.

I would like to start by introducing our first panel. First, Mr.

Randy Levine, welcome. Mr. Levine was named president of the

New York Yankees in January 2000. Before joining the Yankees,

Mr. Levine served as New York City’s deputy mayor for Economic

Development, Planning and Administration. Mr. Levine also served

as New York City’s labor commissioner, and prior to joining the

Mayor’s Office was the chief labor negotiator for Major League

Baseball.

Mr. Seth Pinsky—Mr. Pinsky, welcome—was appointed president

of the New York City Economic Development Corp. in 2008. Prior

to his appointment, Mr. Pinsky served as executive vice president

at the NYCEDC where he co-led the Financial Services Division.

Before joining the NYCEDC, Mr. Pinsky was an associate at the

law firm of Cleary, Gottlieb, Steen & Hamilton in the real estate

practice.

Ms. Martha Stark—Ms. Stark, welcome—was appointed in 2002

as New York City’s finance commissioner. She also serves as Chair

of the New York City Employee’s Retirement System and Teacher’s

Retirement System. Ms. Stark has held several senior management

positions at the Department of Finance and has served as the acting director of the Conciliations Bureau and assistant commissioner at Finance.

Prior to her appointment as commissioner, Ms. Stark was a portfolio manager at the Edna McConnell Clark Foundation.

Mr. Richard Brodsky, welcome. Mr. Brodsky represents the 92nd

Assembly District of the State of New York. Assemblyman Brodsky

serves as chairman of the Committee on Corporations, Authorities

and Commissions of New York State—of the New York State Assembly, which oversees the State’s public and private corporations.

From 1993 to 2002, Assemblyman Brodsky served as chairman

of the Committee on Environmental Conservation, and prior to

this, as chairman of the Committee on Oversight Analysis and Investigation.

I want to thank each and every witness for appearing before this

subcommittee today. It is the policy of the Committee on Oversight

and Government Reform to swear in all witnesses before they testify. And I would ask if now you would rise and raise your right

hands.

[Witnesses sworn.]

Mr. KUCINICH. Thank you very much.

Let the record reflect that all of the witnesses answered in the

affirmative. I’m going to ask that each witness here give a brief

summary of their testimony and to keep this summary under 5

minutes in duration.

19

Your complete written statement is going to be included in the

record of the hearing. So we’ll make—you know, everything that

you have on record will get in there.

Mr. Levine, I would like to start with you if we may. And again

we are pleased that you’re here. Thank you.

Mr. LEVINE. I just want to check—everybody hear me?

Mr. KUCINICH. Yes, sir. We are OK.

STATEMENTS OF RANDY LEVINE, PRESIDENT, NEW YORK YANKEES; MARTHA STARK, COMMISSIONER, NEW YORK CITY DEPARTMENT OF FINANCE; SETH PINSKY, PRESIDENT, NEW

YORK CITY ECONOMIC DEVELOPMENT CORP.; AND RICHARD

L. BRODSKY, ASSEMBLYMAN, 92ND ASSEMBLY DISTRICT

NEW YORK STATE

STATEMENT OF RANDY LEVINE

Mr. LEVINE. Thank you, Mr. Chairman. My name is Randy Levine, and I’m the President of the New York Yankees. While the

Yankees hope to be as helpful as possible in connection with this

committee’s study of stadium financing and the issuance of payment-in-lieu-of-taxes bonds. The specific government bond issuer,

the New York City Industrial Development Agency, and not the

Yankees, is best qualified to respond to the subcommittee’s questions regarding tax law, tax policy or the Department of Treasury

or Internal Revenue Service regulations.

As I will describe today, had this PILOT financing mechanism

not been in place, a new Yankee Stadium would not have been

built, and without any new stadium, regrettably, the Yankees

would have been forced to leave The Bronx. This would have been

a significant loss for the local community and its economy, not to

mention the Yankees.

Before attempting to give the Yankees’ perspectives on these

issues, I’d like to take a few minutes to discuss the number of

many, many misstatements and mischaracterizations of Assemblyman Brodsky, who is sitting here.

It is important to note that Mr. Brodsky voted twice for this

project and never raised any objections until well after the financing was closed. Even today, as he protests that he is against subsidies for sports, in the last year he voted to give a taxpayer cash

bailout of over $100 million to the New York Racing Association

and just a few months ago decided to provide tax breaks to Monticello Racetrack. That is not consistent. In a moment worthy of the

Grandstanding Hall of Fame, he released his report the day before

the historic final day of Yankee Stadium.

First, it is critical to note—as was mentioned by the ranking

member—the tremendous transparency that has been the hallmark

of this project from the outset. Since the inception of the project in

2005, it has been one of the most transparent transactions undertaken, and the details have been recorded in voluminous, publicly

available documents. The project has been subjected to extensive

scrutiny by Federal, State and local officials. There have been 16

public hearings, 20 separate governmental approvals, two lawsuits

and a plethora of media coverage. The New York State Legislature

approved this twice, the New York City Council, on three occasions,

20

and numerous other government agencies as well. This project has

been supported by three New York Governors on both sides of the

aisle and the mayor of the city of New York.

To truly understand what the Yankee Stadium project means to

the South Bronx, one of the poorest areas, I think it is instructive

to look at an example. I’m sure you’re familiar with the city of

Cleveland, Mr. Chairman, because in 1978, while you were the

mayor and on your watch, Cleveland became the first American

city to default on its bonds since the Great Depression. As a result,

the great city of Cleveland, where my owner comes from, experienced severe economic hardship throughout much of the 1980’s.

Through subsequent actions and policies, which include implementing tax incentives to spur economic growth, Cleveland ultimately

recovered, prospered, and is today a great city.

And, Mr. Cummings, Congressman Cummings, I think we would

all agree that the building of Camden Yards in Baltimore, which

was done on public subsidies, transformed that city.

In fact, Mr. Chairman, many commentators on that period believe that the building and opening of Jacobs Field, the home of the

Cleveland Indians, in 1994, was a key component of the city’s economic revival. It is critical to note that Jacobs Field was built with

the assistance of public funds.

As a New Yorker, I’ve heard promises to invest in the South

Bronx for decades. I remember President Carter visiting it in 1977

to promise its revival. It took decades. But in recent years, thanks

in large part to the leadership of New York’s elected officials, including Mayor Bloomberg, who is widely applauded as a leader in

creating jobs and managing tough economies, you see the South

Bronx pulling together as a community.

If you visit the area today, especially around the Stadium, you

see promising growth. The new Yankee Stadium is a key component of it. At a cost exceeding well over a billion dollars, it is one

of the largest economic development projects in the history of The

Bronx, and the benefits have flowed to local concerns. To date, approximately $440 million has been awarded to New York firms,

$305 million to New York City firms and $132 million specifically

to Bronx-based companies.

Construction of the Stadium has employed approximately 6,000

persons. We create jobs; we don’t just talk about it. The project is

using union labor and operates under a project labor agreement.

Pursuant to our community benefits agreement, one of the most

innovative, approximately 25 percent of all employees in The Bronx

are residents and 39 percent of those are minorities and women.

The Yankees have provided a million dollars in job training to very

respected institutions.

I want to emphasize that we believe when the new stadium is

built, approximately—at least over 1,000 new jobs will be created.

This is a much larger number, of course, that Mr. Brodsky—despite

being told his number isn’t true—continues to refer to. These jobs,

which are largely union jobs, include additional restaurant concessions, security, construction trades, ticketing, marketing, front office and maintenance positions.

Given the tremendous job creation the Stadium project has generated and will continue to generate, it has the unequivocal supVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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port of the leading unions, including the Service Employees International Union, New York building trades, UNITE HERE and

OPEIU. The project has allowed these union members who are the

hardest hit during an economic downturn, when jobs dry up, to

continue their employment and put food on their tables. In fact,

Mr. Chairman, just last evening, Bruce Rainer, the International

President of UNITE, told me to convey to you that this project is

exactly the type that is good for working people.

New investment is coming all over to the South Bronx. The Hard

Rock Cafe has opened at the new stadium. The new Gateway Mall

is just a few blocks away. New York Yankees steak restaurant, a

business center and museum.

The Stadium will be kept open 365 days a year. And only because of the Stadium, a Metro North train station that had been

sought for 50, 60, 80 years is being built.

Without the project being made possible, without the issuance of

these tax-exempt PILOT bonds, none of the millions of dollars that

I have talked about would have happened. None of that 443, 300

or 132 would have gone to those companies who employ people,

hire people and drive the economy. None of the thousands of jobs

would be awarded.

The 2008 All Star Game came to New York. It was a celebration

of The Bronx, brought tremendous economic activity to the city and

left over a million dollars in grants to Bronx and New York City

community-based organizations, hospitals and education programs.

In addition, we, the Yankees, provide over $2 million a year in cash

grants and commitment to community organizations in The Bronx

and provide over 30,000 free tickets.

Any concerns regarding affordability of tickets at the new stadium that have been presented are not accurate. Approximately 35

percent of all the tickets will be priced at $25 or less, approximately 50 percent will be priced at $45 or less, and approximately

80 percent at $100 or less. In fact, we expect that 25,000 seats out

of the little over 50,000 in the Stadium will have no ticket increase

at all, including the 5,000 bleacher seats, which will remain priced

at $12.

With regards to PILOTs generally, although I’m not an accountant or a tax attorney, and though it is New York City’s Industrial

Development Agency that issued the bonds, I will do my best to address quickly some of the concerns you have raised.

It is important to note that it was the city’s Industrial Development Agency that sought and received the private letter ruling

from the IRS that the interest on these bonds would be exempt

from Federal taxes; the purchases of these bonds relied on this ruling.

It is important to note that when the project was approved and

the initial bond financing closed, additional tax-exempt bond funding for the project was contemplated and disclosed in the official

statement—the disclosure document delivered in connection with

the sale of the bonds. So everybody understood the project was

going to change, and I will be glad to discuss with you the reasons

for the change that there was going to be an effort to get more.

Second, contrary to the assertions that service on the bonds to

finance the cost of the new stadium will be paid entirely from

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PILOT payments made by the Yankees: What I’m trying to say

here is, neither the full faith and credit of the State of New York

nor New York City has been pledged to the repayment of the

project findings. It is the New York Yankee’s PILOT payment that

is paying for it.

We don’t pay taxes in the present Yankee Stadium. If this agreement wasn’t put in place, there would be no new taxes, and as a

result, the payment in lieu of taxes services the debt. There is no

money coming from New York City or New York State. It is the

money that we are paying in payment in lieu of taxes.

And as I have mentioned, without any stadium, the Yankees

would have been forced to leave The Bronx.

Similarly, by doing this, Mr. Chairman and members of the committee, the Yankees are taking the responsibility for the maintenance and costs and expenses of the new Yankee Stadium. If there

was a new stadium, the city would be responsible for paying $40

million to maintain the old stadium, which is not in good shape.

Finally, with regard to all of the questions concerning assessments, it is the New York City Department of Finance and not the

Yankees that determines the values of real properties and the assessments, including the land and improvements compromising the

new Yankee Stadium and the methodology used for those. It is

then the City Council that fixes the tax rate applied to those values

in order to calculate the real estate taxes which are levied against

properties. Or in the case of the Stadium, the maximum amount

of PILOTs which can be paid under the PILOT agreement.

As normally occurs in the course of a Department of Finance assessment, the Yankees provided the department all of the information that they needed and everything that we had about the new

stadium. And I think you have most of it.

As I’ve outlined today, the Yankee Stadium project has created

jobs, has spurred economic development in the community, has

spurred growth, and guarantees the Yankees will be a continual—

will continue to be an invaluable fixture in The Bronx and in New

York.

One last thing, Mr. Chairman. I just want to correct the record,

unless there is something I don’t know. I don’t recall ever declining

an invitation on all of the previous scheduled matters to attend

here. I know the hearings had been postponed. I don’t recall ever

saying I couldn’t attend. I know there were scheduling issues being

worked out between your staff and my counsel. And I want to

pledge to you that I am here and the Yankees are here to try to

cooperate with you in moving forward.

Thank you.

[The prepared statement of Mr. Levine follows:]

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Mr. KUCINICH. I thank the gentleman for his testimony.

I want to point out that I indicated at the beginning that witnesses would have 5 minutes. I like being gentle with witnesses,

particularly since you said you wanted to be here. Your testimony

ran 12 minutes. I would ask the remaining witnesses to try to stay

within the remaining 5-minute period if you could. Thank you very

much.

Mr. Pinsky, you may proceed.

STATEMENT OF SETH PINSKY

Mr. PINSKY. Thank you, Chairman Kucinich and members of the

subcommittee. I’m Seth Pinsky; and on behalf of the New York City

Economic Development Corp. and the New York City Industrial

Development Agency, I thank you very much for the opportunity to

testify. I have been invited today to discuss the use of tax-exempt

bonds in connection with the financing and construction of the new

Yankee Stadium.

Across the street from ‘‘The House That Ruth Built,’’ a great new

monument is nearing completion. The Yankees report that the new

stadium will officially open on April 16th with a game against the

Cleveland Indians. The new stadium will allow millions of people

to enjoy the Nation’s pastime for decades to come. More importantly, by the first pitch, this project will have pumped hundreds

of millions of dollars into the city’s economy, employed thousands

of unionized construction workers and spurred substantial investments in new parkland, transportation and other infrastructure in

the South Bronx.

Recently, you have heard from opponents of the project, claiming

that it would not deliver on the public benefits promised, that its

cost to taxpayers was greater than disclosed, that it improperly

accessed tax-exempt financing, that the assessments that it used

are somehow incorrect, and that the process itself was somehow incomplete or opaque. Today, I am pleased to have the opportunity

to counter these assertions. Let me take a moment, though, for a

little history.

One of Mayor Bloomberg’s first acts upon taking office was to

terminate previously negotiated deals between the city and the

Yankees, deals that would have provided for a new stadium funded

almost entirely out of the city’s capital funds. Immediately following this, the parties entered into nearly 4 years of difficult, sometimes contentious negotiations before reaching an agreement in

2006 calling for a modified stadium project funded out of proceeds

from tax-exempt bonds backed by payments in lieu of taxes or PILOTs. Though some opponents of this project have implied that

structure is sinister or novel, the fact is, it is consistent with nearly

100 years of Federal tax policy.

In 1913, when the Federal income tax was introduced and thereafter, it has been recognized that interest income earned on bonds

issued by State and municipal governments and secured by State

and municipal tax receipts, including payments in lieu of those

taxes, would be exempt from Federal taxation provided that the

proceeds were devoted to a valid governmental or public purpose.

It is worth noting that both Congress and the courts have consistently recognized that the determination of what constitutes

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such a purpose has always been in the discretion of the applicable

jurisdiction. In the words of the Joint Congressional Committee on

Taxation in March 2006, ‘‘present law does not define the governmental or public purposes for which governmental bonds may be

issued.’’

Over the years, the governmental or public purposes to which

municipal tax-exempt bond proceeds have been devoted have run

the gamut from parks, roads and bridges to sewers and, yes, to economic development. In fact, our very cursory research indicates

that tax-exempt bond deals devoted to economic development

projects have run into the billions of dollars in the last few years.

For example, in the last decade, more than 1 billion dollars in

tax-exempt bonds backed by sales taxes have been initiated in Ohio

for a new stadium for the Cincinnati Bengals and Reds. In Indiana,

since 2005, more than $650 million in tax-exempt appropriationsbacked debt has been issued to construct a new stadium for the Indianapolis Colts. And here in Washington, more than half a billion

dollars in tax-exempt debt has been issued since 2002 for a number

of projects, including a home for the Washington Nationals, three

hotels and two shopping malls.

In fairness to the opponents of this project, there is one difference between these projects and Yankee Stadium, namely, unlike in these other cases, the Yankee Stadium project succeeded in

deploying this federally created tool to encourage economic development in what the 2000 Census determined was the single poorest

congressional district in the United States. And we are not just

proud of the project’s end; we are also proud of the means employed to get there.

As has been pointed out, the benefits of this project have been

validated in one of the most thorough and transparent approval

processes in history. It was vetted at nearly 20 public hearings and

has received approvals at virtually every level of government. And

I’m not going to go through the list again, because you’ve heard it

before, but it included the City Council of the city of New York, the

City Planning Commission, the Borough president of The Bronx,

the mayor, the Industrial Development Agency of the city of New

York, the State legislature, the New York Governor and the Internal Revenue Service.

Speaking of the Internal Revenue Service, in 2006, the IRS

issued a letter ruling affirming the tax-exempt status of the bonds

contemplated to be issued in connection with this project. Subsequently, the IRS proposed regulations that would make technical

changes to how the payments backing similar bonds could be structured in the future. However, we are pleased that this week the

IRS revised these regulations to permit the use of this structure for

projects already in the pipeline including, from our perspective

most importantly, the Atlantic Yards project in Brooklyn.

Here one fact needs to be emphasized. At no time has the IRS

or anyone else with appropriate authority said or implied that taxexempt bonds could not be backed by PILOT payment, could not

be used for economic development projects, or even could not be

used for stadium projects. And speaking of PILOT payment, in this

transaction, notwithstanding allegations to the contrary, these payments are properly being calibrated based on assessments of the

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Stadium property that followed precisely the methodology described in the IDA’s letter to the IRS, a methodology that, as Commissioner Martha Stark will attest, is both standard and appropriate.

Moreover, there should be nothing surprising to any observer

about the fact that these assessments are higher than earlier appraisals undertaken for totally different purposes and based appropriately on entirely different sets of assumptions, including different permitted uses, different levels of investment in the surrounding area, different-sized lots and even leased versus owned

interests. Claiming that a market disparity between these valuations is a sign of malfeasance is no more logical than drawing the

same conclusion from an assertion that the canvas on which a work

of art is painted by a great master would be worth less if it, instead, contained a work by an artist with far lesser talent.

The bottom-line is this: The new Yankee Stadium represents a

$1-billion-plus investment in the South Bronx, backed entirely by

payments from a private organization. The Yankees currently

project that it will catalyze many hundreds of new full-time and

part-time permanent jobs and more than 6,000 new unionized construction jobs. In addition, as President Levine indicated, to date

it has resulted in approximately $132 million in construction contracts let to Bronx-based companies and $305 million let to New

York City-based companies, sums that cannot be taken lightly in

this era of economic uncertainty. And to know that this era is one

that is serious, all we need to do is look at what the stock market

is doing today.

As importantly, the project has spurred complimentary public investment in parkland, open space, waterfront access, a modernized

sewer system and a new transit system.

Finally, the taxpayers of New York City will be served by the

new stadium project because the city will get out from under the

projected $40-plus-million net maintenance liability for which it

was responsible at the existing 85-year-old deteriorating facility.

In conclusion, I want to emphasize that the Yankee Stadium

project is a landmark accomplishment. Projects like this are the

reason that this type of financing exists. Absent the use of this tool,

this project would either have created substantially fewer public

benefits, not have happened in the South Bronx or simply not have

happened at all. We are, therefore, proud of this project, as well as

the process leading up to its construction; and I look forward eagerly to answering any questions that you may have. Thank you.

Mr. KUCINICH. I thank the gentleman.

[The prepared statement of Mr. Pinsky follows:]

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Mr. KUCINICH. Ms. Stark, we’re going to go to you. And given the

seriousness of this matter, I think what we’re going to do is—even

though we have this 5-minute rule that we try to enforce, if you

need more time, just go for it. OK? Thank you.

STATEMENT OF MARTHA STARK

Ms. STARK. Thank you, Chairman.

Good morning, Chairman Kucinich, and members of the Domestic Policy Subcommittee. My name is Martha Stark, and I am the

commissioner of the New York City Department of Finance. I want

to thank you very, very much for inviting me to testify today. It

is an honor to be back in Washington where I was privileged to

spend a year as a White House fellow in 1993 working in the U.S.

Department of State.

I have another connection to the District as well. I consulted on

a study published by the Brookings Institution called The Orphan

Capital, about this city’s fiscal challenges.

As I stated, I oversee the Department of Finance, and it is a

2,400-person agency. One of the functions is to value the city’s

more than 1 million properties every year, including Yankee Stadium. I am hopeful that my testimony will answer any questions

that still remain, so today I am going to do three things:

First, I will provide an overview of what my agency does as it

relates to valuing 1 million properties each year. Second, I am

going to explain how we arrived at the value of the new Yankee

Stadium. And, finally, I will be happy to answer any of your questions, privileged. Unlike most jurisdictions including parts of Westchester County in New York, where properties have not been reassessed since the 1960’s.

New York City values each of its 1 million properties every year,

from small homes to cooperative apartments to utility companies to

churches to major office buildings. We use one of three universally

accepted methods of valuation, depending on the property type: The

sales approach, the income approach, or the cost approach. I am

going to focus on the cost approach, because that is the one that

we use to value the Stadium.

We use the cost approach to value new construction, especially

for specialty properties such as stadia, utility properties, museums,

courthouses, and churches, to name a few. Owners, unlike when we

do the income approach, are not required by law to submit cost information to our agency; however, we do often receive it when

asked, and especially in connection with exemption application.

Finance assessors rely on information, actual costs submitted by

owners, and verify that information against industry cost guidelines.

The last point that I want to make about cost and appraisals is

that I think it is important for the subcommittee to understand

that Finance determines the value of a property regardless of

whether it will be exempt from taxes. Our estimated value does not

change because a property might receive a full or a partial exemption or tax exempt bond financing.

In late 2005, financiers asked to estimate the value for what

would become the newly constructed Yankee Stadium adjacent to

the current ballpark, if the Stadium were completed as of January

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2006. I cannot emphasize this point enough. We did not estimate

the value of the property in its current condition, but rather as it

would be once the Stadium was built.

As we do for other new construction and specialty property, we

used a cost approach. It required us to estimate the cost of constructing the Stadium as well as the value of the land that would

be part of the Stadium site.

In order to provide the estimated market value, Finance asked

for detailed information about the cost. My assessment team reviewed the data that was provided, and independently validated

the cost in two ways: First, by comparing those submitted costs to

industry published cost guidelines, and by comparing the cost to

other stadia that had been built in other cities, including Minneapolis, and the District. In these cases, we adjusted the reported

cost by two factors: When the Stadium was completed, time, as

well as the add-on cost of construction in New York City; location.

Labor, transportation, and overall construction costs are about 40

percent higher in New York City on average than in other cities.

This concept of adjusting for location is well recognized, including

by the Federal Government, as evidenced by the different locality

payments. For example, Federal workers in the New York region

earn almost 12 percent more than Federal workers in the rest of

the United States or in those States that are detailed on the pay

scales.

Our assessment team concluded that the reported costs were reasonable and comparable to the cost of new stadia in other cities

when adjusted for time and location, and we estimated the value

of the new Stadium at 1.025 billion if the Stadium were completed

in January 2006.

Next, as required, we estimated the value of the land under the

new Yankee Stadium. And when our assessors initially did that,

they looked at it as a vacant parcel. However, when Finance values

a developed property, the overall land value is actually arrived at

by taking a percent of the overall property values, and the land is

typically between 15 and 25 percent of the overall value. This is

consistent with appraisal practices around the country. For example, in Oakland, the land under the Stadium that was constructed

represented 30 percent of the overall value. As a result, the Finance team realized that they had not actually done the value correctly. 26.8 million was wrong. The percentage that it would have

represented of the total cost was too low. Remember, again, Finance had been asked to value the property, including the land, as

it would exist if the Stadium was fully completed. The assessors

identified lots that were more appropriate comparables because

they reflected land in similar neighborhoods, including Harlem,

which are less than a half a mile away, and where the land value

had been enhanced because of significant government investment

like the investment that would be made here. The average sales

prices for these properties was 304 per square foot, and the median

was 275 per square foot. We used the median figure, as we do

when we value properties, throwing out the kind of highs and the

lows, and that fact with the properties, and we multiply that by the

17-acre site lot that was under consideration at the time, arriving

at a land value of $204 million.

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When we added those two numbers together, the total Stadium

value was 1.229 billion. I just would note that in 2007, the configuration of the lot for the new Yankee Stadium was finalized, and Finance’s responsible for maintaining the city’s tax maps. In the last

year, the Finance Department fulfilled 21,810 requests for tax map

changes. Tax map changes for us are a regular occurrence.

The final acreage for the site was established and penned in late

2006 at 14.56 acres, and as a result, we lowered our market value

to reflect the new size and the finalized size of the stadium’s site.

Since our original estimate of the value for Yankee Stadium as

of January 10, 2006, we have revised the value each year, as we

do for all New York City properties. We estimated a new market

value for all property in 2007, and 2008, and we will do so again

in January 2009, 2010, and so on. It is important to keep in mind,

because New York City is unique in reassessing properties.

For us, the textbooks are clear. The cost method is the most appropriate method for valuing sports facilities. In fact, I provided a

study that concludes that cost is the only accurate way to value a

new Stadium.

I just would note that the Finance Department has an unmatched record of accurately valuing more than 1 million properties each year. In 2007, only 31,320 properties were granted assessment reductions by the New York City Tax Commission, an

independent agency. That record is a testament to the more than

100 years of assessing experience, not including my own, that the

team who reviewed the Yankee Stadium value bring to their job.

This concludes my testimony, sir. The estimated value for Yankee Stadium is accurate, it is consistent with standard appraisal

procedures.

I do want to say just again, it is an absolute honor for me to be

here. I do feel very much like Ms. Stark Comes to Washington, and

I can only say I wish my parents were alive to see this day, their

daughter from the housing projects, testifying before you.

Thank you. And I very much look forward to answering your

questions and making sure you understand how seriously we took

this job, and that we did it with the utmost sense of the right thing

to do in terms of valuing this property, and that there was no misconduct here. Thank you.

Mr. KUCINICH. Thank you very much, Ms. Stark. This subcommittee appreciates your attendance as well.

[The prepared statement of Ms. Stark follows:]

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Mr. KUCINICH. Mr. Brodsky.

STATEMENT OF RICHARD L. BRODSKY

Mr. BRODSKY. Thank you, Chairman Kucinich, Mr. Cannon, Mr.

Cummings. I am pleased to be again with you to share my views

on the Federal Government’s role on the new Yankee Stadium. I

acknowledge and appreciate the work of this new subcommittee,

as——

Mr. KUCINICH. First of all, is the mic on? There seems to be an

interest in having the mic on.

Mr. BRODSKY. Is that better? Thank you.

Mr. KUCINICH. Why don’t you just start over.

Mr. BRODSKY. I appreciate the opportunity to be back with you.

I acknowledge and appreciate the work of the subcommittee in inquiring into the facts as they surround the decision to subsidize the

construction of the Yankee Stadium. My committee is continuing

its inquiry. We have received, since I appeared before you last, additional information from the city of New York, which I will discuss

briefly.

The New York Yankees, after initially agreeing to provide information to the committee, have flatly refused to do so. We are examining that refusal, and will make decisions about that shortly and

we will issue a final report.

Based on the evidence then available and the evidence that we

subsequently received, the interim report of the committee concluded that there was no measurable economic benefit to the region

or the community resulting from the massive public subsidies of

the new Stadium, that the public not the Yankees were paying for

the new Stadium, that the actions of the New York City IBA were

at variance with the requirements and purposes of State law, that

binding promises made to the IRS were broken; these promises

being a condition of receiving the tax exemption, that the assessment of the land and the Stadium were knowingly inflated, and,

that the public interest and affordable ticket prices as a consequence of the public subsidy were simply ignored. That fundamental decisions about these subsidies were made in secret and

without effective participation by elected officials; that the

securitization of PILOTS is a dangerous practice, which has resulted in an explosion of public debt; and, that the provision of a

luxury suite and tickets to the city of New York was done in secret.

After reviewing whatever new data has come before us, we can

stand by those conclusions in every respect.

With respect to the additional information received, I wonder

whether it is best to defer discussions of the specific areas in which

the law and the promises were violated and perhaps in ways which

can answer Mr. Cannon’s questions as presented in his opening

statement, two questions that might be directed at me.

With respect to the question about cost methodology, I would

point out, however, that there are two kinds. There is reproduction

costs, and replacement costs. Reproduction costs, the standards

used by the city of New York, is not the preferred way because it

inflates value.

Consider, for example, if, God forbid, St. Patrick’s Cathedral

were to be destroyed and had to be rebuilt. To rebuild it in a reproVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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duction method would inflate the cost over a replacement method.

The city of New York asked that a replacement method be used.

The Department of Finance asked for that. The Yankees and the

city refused. And the Department of Finance agreed, under stress,

saying, don’t hold me to a firm—I want to get the exact term.

Mr. KUCINICH. Take your time.

Mr. BRODSKY. As long as we are not held to a strict interpretation. My point being that the Department of Finance knew about

this unusual and unacceptable practice, it argued against it, it then

accepted it in writing. And we have the document to prove it.

With respect to the square footage value of the Stadium land,

much of what I heard from my distinguished colleagues from the

IBA and the Department of Finance, I would simply characterize

as flat wrong. That is an argument we can get into as testimony

permits.

But with respect to the value of the land, let us just say that if

the value of Yankee Stadium were to increase the value of the underlying land at the Stadium, it would have a similar impact in the

neighborhood. If a percentage of value was the way you measured

underlying land, then the nearby developments, the Bronx Terminal Market, would have a similar land value. The problem here, of

course, is Yankee’s Stadium land is $275 a foot, while under the

Bronx Terminal Market, a few blocks away, it is $9 a square foot.

May I point out that the use of land in Manhattan as a comparable for land in the Bronx is unheard of. And although I appreciate the reference to the community of Harlem, which the Commissioner just made, they chose parcels on the Lower East Side.

You also heard the Commissioner mention that there were adjustments made for time and other elements in that appraisal. Those

are appropriate adjustments as a matter of practice. They didn’t

make them when it came time to do that for the Yankee Stadium

parcels; they did not make adjustments for the size of the parcel

or the location to the parcel. I know that, because I met with the

people who did the appraisal, and they assured me they had made

no such adjustments.

In the end, the evidence that the assessment of the Yankee Stadium is cooked is overwhelming. There may be good policy reasons

to subsidize stadiums; I don’t think so, but I can understand an argument for that. There can be no argument that when the city of

New York swears to the IRS that it will use the methodologies appropriate for every other property of a similar class and then it

does not do that, there is an issue of interest to the Congress and,

I would hope, to the IRS. The evidence is overwhelming, and how

it is to be treated is a matter for this committee and for the IRS.

Let me return finally to the fundamental question of the use of

Federal subsidies for these kinds of projects.

New York City has no way—and the region and the State, I

might add—of funding its mass transit system or schools, especially with respect to capital needs. You have $3 billion of tax exempt financing, plus close to half a billion to a billion, depending

on how you want to measure, of direct taxpayer money is going to

the creation of sports facilities.

While that is a local decision, I wish you would stop incentivizing

us to make those decisions. I wish you would stop incentivizing us

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with your tax policies to compete with other states to giveaways

that in the end benefit nobody but the private corporations who get

those giveaways.

We have seen a national collapse of financial markets based upon

a set of unchallenged assumptions about what constitutes economic

growth and development. We cannot afford everything; yet, you enable us or enable some people to prioritize sports facilities, when

schools and mass transit systems go unfunded. We need your leadership to end that.

Mr. Chairman, in my final 30 seconds, I want to just take a moment to acknowledge the personal comments made by Mr. Levine

about me. Our committee will continue with our investigation in a

fair way. We will continue to pursue information from the Yankees,

which they have so far refused to provide. Mr. Levine is entitled

to his views of me. That is not going to change the fairness of our

inquiry or the thoroughness of the inquiry. The bullying and blustering tactics of the Yankees and Mr. Levine are well known, and

it will be irrelevant to the work we do, but I have never found it

useful to allow personal attacks go to unanswered. Thank you very

much.

Mr. KUCINICH. I thank you, the gentleman, and all the witnesses.

[The prepared statement of Mr. Brodsky follows:]

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Mr. KUCINICH. At this point we are going to move to a round of

questions, and I ask unanimous consent that each Member here,

including the Chair, have for this first round of questioning 10

minutes to proceed with questions. Without objection.

I would like to start the questioning with questions of Ms. Stark.

Ms. Stark, are you aware of any instance in which IDA officials,

city officials, or representatives of the Yankees, put pressure on

you or any other member of your staff to inflate the value of the

Stadium or the Stadium site?

Ms. STARK. No, Chairman. There were no such instances.

Mr. KUCINICH. On July 15, 2005, you received an e-mail from

your Deputy Commissioner, Robert Lee, reporting a conversation

he had with Joe Gunn from the city’s law department. Mr. Lee

said, that an attorney for the Yankees wanted to know how the Department of Finance was planning to assess the Stadium site, because the assessment would be the basis for calculating the payments in lieu of taxes. Later, Mr. Gunn, the city’s lawyer, e-mailed

many Department of Finance staffers requesting a meeting with

the Department of Finance and the Yankees to discuss the assessment of Yankee Stadium for purposes of the payments in lieu of

taxes. He stated that the Yankees had, ‘‘an interest in seeing the

assessed valuation will be high enough to generate as much payments in lieu of taxes for tax exempt debt as is lawful and appropriate.’’ And said that the deal was ‘‘on the fast track.’’

Ms. Stark, as the Commissioner, do you think it is appropriate

for your tax assessors to be factoring, ‘‘an interest in seeing the assessed valuation will be high enough to generate as much payments in lieu of taxes for tax exempt debt?’’ And is that one of the

typical considerations your tax assessors use in determining property assessment?

Ms. STARK. Mr. Chairman, as I said in my testimony and as even

in the e-mail that you quoted, we were asked to do what was lawful and appropriate, and lawful and appropriate for us means we

value the property how we would value it regardless of whether or

not there was an exemption, and regardless of whether or not there

was any tax exempt bond financing. That is what my team did.

And the fact that they wrote that in the e-mail has no bearing at

all on how the team approached valuing this property. None, sir.

Mr. KUCINICH. Is it typical for the city attorneys to convey to the

Department of Finance officials that a property owner has an interest in a certain Department of Finance assessment? I mean, it is

one thing if the taxpayer himself expresses an interest through his

attorney. But in this case, the advocacy for the desired assessment

was coming from City Hall. Is that typical?

Ms. STARK. I wouldn’t say that it was coming from City Hall at

all, sir. What was going on is that because I believe the city was

preparing an application to put in, they needed to understand how

we would value the Stadium if it was completed. That is not atypical for people to ask us how will we value property when it is completed and when it is done. So, again, there was no pressure on us.

I just sort of note, I would note for the record here that our assessors take this very, very seriously. They do not feel any influence about how to value property.

57

I should just—again for the record, my first day in office as the

Finance Commissioner, 18 of our assessors were arrested. They

were arrested for charges of manipulating assessments. And since

the time that I have been in office, we have done everything to be

as transparent as possible, more information on our Web site, telling owners how we value property, and we have insulated ourselves, in fact, from any influence.

We did not value this property because it was exempt. We don’t

do that. Nor would we respond to anyone telling us how the value

should be high or low. That is just not what our assessors have

done. And I am pleased to say that they have done a fantastic job

trying to restore both the public’s confidence in how they do their

work by making clear how transparent it is that we did this. And

we shared our values and, again, more than 100 years of experience that the assessors who value this property has. I think their

reputation here is on the line, and they did a fantastic job.

Mr. KUCINICH. Thank you. Let me ask you this: We talked about

the people who were arrested just before you started. Did any of

those cases involve contact between assessors and City Hall?

Ms. STARK. They were actually being contacted individually by

owners, and actually accepting money for reducing the value of

properties in the city of New York.

Mr. KUCINICH. Can you tell me about any other cases that you

remember where the city attorneys conveyed to the Department of

Finance that a property owner has an interest in a certain assessment? Does that happen on a routine basis?

Ms. STARK. Again, a lot of times that we are contacted to let us

know if there is something going on. Again, the Stadium was a big

deal for the city of New York. We needed to know what the value

is going to be. But in no way did that contact lead to our assessors

doing anything out of the ordinary or anything different from what

they would have done.

Mr. KUCINICH. I am just interested, though. Is this kind of the

way business is done in the Department where City Hall picks up

a phone on a regular basis and tells you that they have an interest

in this particular case? Does that happen often?

Ms. STARK. Well, we are——

Mr. KUCINICH. Can you answer yes or no?

Ms. STARK. We value a million properties a year. And if there is

a property, sure, we will get a call that just says: We need to know

what the value is going to be, free and clear, again, of any wrongdoing or pressure. Just what will the value be on this property?

And when we get those inquiries, we will respond with what is lawful and appropriate and what is the value that might——

Mr. KUCINICH. Can you cite any other time that you have done

that? Does any come to mind at this moment, where the city contacted you concerning an interest, property owner interest in a certain Department of Finance assessment?

Ms. STARK. Sure. Actually, I can think of one off the top of my

head in Brooklyn, New York. This town where I grew up in and

still live, the Board of Education building was moved from Downtown Brooklyn into Manhattan. And at that time, we were contacted because the building was hopefully going to be redeveloped,

and we were asked what will be the value of that building if it

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were redeveloped. That is one instance that I can think of off the

top of my head. I can come up with several others as well during

the course of this.

Mr. KUCINICH. I think it would be useful if you could prepare a

list of those for this subcommittee. Don’t most taxpayers want a

lower assessment because they want to pay lower taxes? Isn’t that

usually the case?

Ms. STARK. Yes. Most taxpayers do want a lower assessment. Absolutely.

Mr. KUCINICH. Didn’t it seem strange to you that a higher assessment was being sought rather than a lower one?

Ms. STARK. No. It seemed to me that the appropriate assessment

was being requested, and that is what we provided. We provided

what was the value of this property based on, again, our 100 years

of experience in valuing property. So it didn’t seem odd to me that

it would be high or low. I mean, you know, owners—sure, everyone

would love to have their taxes be a dollar a year, if given. And

what my point is that we are not influenced by whether or not an

owner wants their taxes low or high; what we did here was come

up with a value that we both believed was lawful and appropriate

and consistent with widely accepted appraisal methodology.

Mr. KUCINICH. Were you aware that the reason the Yankees had

an interest in a higher assessment was to support a higher amount

of PILOT-backed bonds?

Ms. STARK. No, sir, I was not. I must confess that people on the

finance team do not at all get involved with how PILOT is calculated. We leave that to the economic development corporation

people. Our business, for these purposes, are actually twofold: One

is that we value real estate. That is what we are asked to do; that

is what we do for a million properties. We are not at all involved

with how the PILOT is calculated. And then, once the PILOT

amount is determined, we are also the billing agency.

Mr. KUCINICH. Before my time expires, are you saying that no

one in the Department of Finance was aware of the underlying connection between PILOTs and the assessment, that no one knew

that? Do you know that for a fact?

Ms. STARK. That is correct, sir. We were not aware of how the

PILOT would be calculated. Our task was to value the property,

and do that free and clear all sort of exemptions, as well as otherwise. We did not know how the PILOT was going to be calculated.

Mr. KUCINICH. OK. I thank the gentlelady for the responses.

We are going to move to questions, 10-minute rounds, to Mr.

Cannon.

Mr. CANNON. Thank you, Mr. Chairman.

Let me just say that although you all went over time, I think this

is probably the best set of opening statements I have heard from

panel. You guys were right on. You were very clear about your positions. And Mr. Levine, you took some shots at Mr. Brodsky, but

Mr. Brodsky is pretty tough and made his responses.

May I just suggest, or hope, that you will accept our adoption of

you as America’s Daughter, because we are proud of you getting

here. There has never been a country like this where anybody from

any circumstances can rise to the top of any field, whether it is academics or business or public service, like we are allowed to do in

59

America. So on behalf of America, welcome. I have been on the

other side where you are. I much prefer being here. With all due

respect.

Mr. Brodsky, you are from the 92nd District.

Mr. BRODSKY. That is correct.

Mr. CANNON. Does that include The Bronx?

Mr. BRODSKY. It does not. Westchester County. As you heard

Commissioner Stark discuss, the assessment practices, it is not in

The Bronx.

Mr. CANNON. The reason I ask is, Westchester County is a wonderful place. I have this sort of warm feeling for the Congressman

in the area that is from The Bronx, Jose Serrano. He and I were

subject to a front-page article on USA Today comparing our districts and our voting records. And we vote very differently; our districts are very, very different. And he has the highest number of

out-of-wedlock births and I have the lowest number, and also comparing, the fewest number of children, I have the largest number

of children by far. So where we are and who we represent makes

a huge difference on how we do our job as elected officials.

And there are a number of questions that I would really like to

ask. As I understand your testimony, you were very clear on the

positions Mr. Brodsky, including, you talk about incentivizing on a

Federal level, certain activities, mass transit, education versus

sports facilities. That is a perfectly reasonable distinction. But the

Federal Government creates the context for States to use untaxed

bonds. Isn’t it up to the State how to choose to use those bonds?

Mr. BRODSKY. It is. And my plea, Congressman, is that you put

some commonsense restrictions on that. There is no value to the

economy of the United States when the State of New York buys off

a corporation to move from Pennsylvania. There is no—and I think

this has been attested to quite powerfully—overall economic value

of these sports facilities that justify the subsidies.

Mr. CANNON. We have the, what we are calling subsidy, which

is a tax exempt process, and we limit that at the Federal level because the Federal Tax Code is the underlying context. But don’t localities, doesn’t New York have the right to choose, or the municipalities, based on an allocation to the State, have a right to choose

what projects they want to focus on?

Mr. BRODSKY. Within the Federal standards, yes. The Federal

standards, which were just changed to eliminate these deals, except in New York, New York City projects.

Mr. CANNON. Why should the Federal Government limit what

the States want to do?

Mr. BRODSKY. Well, because once in a while States would choose

to do things that are not a good use of national resources.

Mr. CANNON. But good use implies something or somebody is

much wiser than somebody else and can decide what is right.

Mr. BRODSKY. But that happens all the time. That is your job,

that is my job. And what has happened now is that the IRS has

said that these kinds of PILOT securitization deals will not be allowed in the form that would normally have been allowed previously.

So I am not suggesting anything exceptional. I am just suggesting that where you can see a good value investment of public dolVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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lars, do it. Where there is no public return, I would urge you not

to do it.

Mr. CANNON. I suppose that is a difference between our views

and philosophies. I think that we ought to have an open system of

where the choices are made at the lowest level of the governance,

as opposed to setting standards at the highest levels, because I’m

not sure we have human beings who have the wisdom to make

those kinds of decisions. So I suspect that is——

Mr. BRODSKY. Respectfully, Congressman, the Congress sets

standards for the expenditure of Federal dollars all the time.

Mr. CANNON. But these are not expenditures of Federal dollars;

these are tax exemptions that are applied for. And the only Federal

purpose you have here is to limit the number. They ought to be

able to do it without Federal interference or Federal caps, but that

is because I believe that local bodies make better decisions than

national bodies or State bodies compared to the city bodies.

Now, Ms. Stark, you have been under attack. I am not sure you

did anything wrong, but Mr. Brodsky talked about a new direction

versus replacement cost. Would you like to address that?

Ms. STARK. Sure. Just the cost approach requires that you calculate how much it would cost to rebuild a property, except you

don’t have to do that when it is new. When it is a new property,

you use the actual cost. So reproduction and replacement cost, as

you just say, the difference in what Mr. Brodsky sort of suggested

is pretty odd to me. The e-mails that he referred to, the person was

commenting on: We use replacement costs 10, 15 years down the

road if we had to value the Stadium as it is.

When you use reproduction costs, you have to take a calculation

off for depreciation, depreciation including economic obsolescence,

functional obsolescence. And what the assistant commissioner at

the time was saying, replacement cost is simpler. It is easy to say

if you were going to rebuild the U.S. Supreme Court building,

would you reproduce it in its current structure? And if you did, to

value it, you have to take off—its obsolete. It might not have

enough bathrooms; those bathrooms might not be wheelchair accessible and the like. Whereas, replacement costs is, what would it

take to build a new Supreme Courthouse with the same utility and

function?

The distinction is irrelevant for the purposes of this Stadium,

and the reason is because we had actual cost numbers that we

could use to estimate the value. Reproduction, replacement costs,

it is really absolutely the same as it relates to value for Yankee’s

Stadium. And, in all honesty, we have been having trouble trying

to understand why the assemblyman feels this distinction is so important. But the key thing is the assessor in charge was trying to

say, with reproduction there is a whole lot of additional calculations that have to be made that we would not be making for this

Stadium which was being based on actual costs replacement cost.

When you are doing assessments for a million properties a year,

is it an easier approach to use, and is more typical for what we

would do.

Mr. CANNON. Your use of the Supreme Court in comparison is

great, because that is one of the Federal projects that are way over

budget, way over, and short of time.

61

Mr. Brodsky talked about the quota used in his statement that

was in the event of, as long as you are not held to a strict interpretation. Do you know what that quote came from?

Ms. STARK. Yes. Again, the e-mail that he cited was the head of

the assessing unit, who was saying: A strict interpretation of reproduction costs would require us to calculate depreciation, including

economic and functional obsolescence. And, that when we are doing

mass values, we use replacement costs, because you don’t have to

make those adjustments. That is what she meant. And, again, that

was because the term ‘‘reproduction costs’’ was used. And my understanding is, reproduction and replacement costs are interchangeable in the IRS regulations. No distinction.

Mr. CANNON. You don’t see anything in that e-mail——

Ms. STARK. Absolutely not.

Mr. CANNON. Mr. Brodsky said that the value is $275, in your analysis, and that the area around it is $9 a square foot. Can you

explain that?

Ms. STARK. Sure. Again, The Bronx Terminal Market value,

which is what Mr. Brodsky cited, is not valued by the cost approach; it is valued by the one of the two other appraisal approaches, income and sales.

I just sort of would note for the record that, depending on what

kind of property it is, we value those properties using different approaches. The $9 a foot essentially, again, when we are valuing

property not via the cost approach, we take the overall value of the

property. And then what we do is estimate a land value as a percent of that. That is typically done.

Mr. CANNON. In the remaining moments I have, I focused on you

because I want you to have the opportunity to respond. Mr. Lipinski or Mr. Levine maybe want to respond to that as well. My time

has expired; but subject to being allowed. Thank you.

Mr. PINSKY. I would like to take an opportunity to respond to a

quote of mine cited by you, Chairman Kucinich. It is a great opportunity to be able to just——

Mr. KUCINICH. Speak closer to the mic.

Mr. PINSKY. I want to respond to a quote from an e-mail, just to

give you a sense for the context in which the e-mail was sent. It

is a great opportunity to have a chance to sit here before you and

respond to some of the accusations that have been made.

Just by way of background, my personal involvement in the question of the assessment only began around March 2006, which is on

the e-mail that you cited came from. And at the time, what we

were looking for was the projected assessment for the Stadium.

Just to be clear, this was not the actual assessment. This is not the

assessment on which the PILOTs are actually based. This was a

number that we were looking for so that we could underwrite the

deal, and also knew the IRS was seeking this. At the time, I was

asked to get involved in this solely because we needed to have this

number, and we were having trouble getting contact from the Department of Finance telling us when the number would be coming

out.

A number of time-sensitive issues. There was an April 7, 2006

city council hearing in which this number would be required. We

also needed the number for the IRS. We had submitted a private

62

ruling request in February 2006, and they had asked us to give us

the projection—had to give them the projection. And we were also

moving forward with structuring the bonds based on certain assumptions, and we needed to know if those assumptions, in fact,

needed to be changed.

Mr. KUCINICH. Would the gentleman yield?

Mr. CANNON. Certainly.

Mr. KUCINICH. I just want to ask you, you talked about the time

sensitive issue. And are you saying you needed a number, or you

needed the number?

Mr. PINSKY. We needed a number.

Mr. KUCINICH. A number.

Mr. PINSKY. Yes. Thank you.

My involvement was to contact City Hall to find out whom at the

Department of Finance was the proper person to speak to about the

matter. And what I was looking to do was to explain the number—

sorry, to explain why we needed a number given that this was obviously not the Department of Finance’s top priority. Their top priority is actually the collection of taxes. We needed to find out the

timing of when a number would be produced. And I also wanted

to make sure that we were coordinating on a public announcement

of the number so we weren’t blind-sided by whatever the number

turned out to be.

And is this—is where it is crucial to point out something which

I think was an error on your part, but you left out the last piece

of that e-mail. What you read was: I would like to understand what

DOFs projected assessment is before it is released publicly to make

sure it conforms to our assumption. Which may sounds suspicious

to some.

But what it says is: I would like to understand what DOFs projected assessment is before it is released publicly to make sure it

conforms to our assumption; and if it doesn’t, to understand what

the implications are. With the idea here being that I simply needed

to know if there were implications to a number.

Mr. KUCINICH. Let me ask you, as a followup, what would the

implications be?

Mr. PINSKY. The implications would have been that the PILOT

may have been lower than what we were projecting, and that

would have created an issue with the underwriting. Fortunately,

the number that came out of the Department of Finance, through

no pressure on our part but through the calculations that Commissioner Stark has described would comport specifically and entirely

with their normal procedure, was a number that was not that far

off from what we had projected.

Mr. KUCINICH. Did you—continuing the request of the gentleman

to yield. Did you or anyone working with you or at your behest

have any contact with anyone who was instructed to contact the

Department of Finance relative to the number that was needed to

correspond to the specific PILOT?

Mr. PINSKY. I am not aware of that. No. As I mentioned, there

was—let me be clear. There was contact with the Department of

Finance, absolutely.

Mr. KUCINICH. Would you describe that contact?

63

Mr. PINSKY. Sure. The contact, generally speaking—and I don’t

remember the specific phone calls, but I remember generally what

the conversations were. It was, again, to explain what it was that

we were looking for, which was that we needed a number for purposes of this financing to provide to the IRS and to the underwriters. It was to ask about the timing. It was to coordinate on the

roll-out of the announcement by the Department of Finance. It was

to provide certain information that was requested by the Department of Finance so that they could do their assessment. And that

was the extent of it.

Mr. KUCINICH. I would just say, luckily everything worked out.

Mr. PINSKY. I wouldn’t say call it——

Mr. KUCINICH. Mr. Cummings.

Mr. PINSKY. If I could respond to that.

Mr. KUCINICH. Mr. Cummings.

Mr. CANNON. Before I yield back, I would make one comment. That is I am thrilled you have so many tickets at $25, having sat

in that section a lot.

Mr. KUCINICH. If I may say this to my colleague, this is about

baseball. Mr. Cummings.

Mr. LEVINE. Excuse me.

Mr. KUCINICH. The Chair recognizes Mr. Cummings.

Mr. CUMMINGS. I am listening to all this, and I just—do you have

any comments about what you have heard?

Mr. BRODSKY. Yeah. I am just a——

Mr. CUMMINGS. Give me the things that seem to be—that concern you the most about what has been said. Maybe that will help

me. I only have 10 minutes. I want to just I am just curious.

Mr. BRODSKY. Sure. I can go down in detail any one of these individual matters with respect to the extraordinary deviance from accepted assessment practice that the Department engaged in. And

to the extent you want to know about the adjustments or the use

of comparables or the myriad of other elements, I can do that. But

at a certain point, you step back and you look, and this is what

happened today.

The documents the chairman has read into the record are a

smoking gun, and what they establish is that using the normal

methods of assessment, the Department came up with a value for

the land under the Stadium at around 26 million. That got reversed, and it got reversed by the use of extraordinary and, I believe, illegal methodologies, which include the use of land on the

Lower East Side to measure the value of land in the South Bronx.

At some point, if we are in an evidentiary hearing where there is

cross-examination, I am confident that we can carry the day as to

exactly what happened.

But in stepping back and looking at the big picture, they could

not generate enough money to pay the PILOTs with the assessment that was coming, so they changed it. That is a violation of

the sworn promise of the city to the IRS by the city IDA. And the

evidentiary basis for that—if you would like, sir, I will prepare a

brief.

Mr. CUMMINGS. Let me—no, you don’t have to prepare a brief.

You made some very strong statements. Do you realize what you

just said? Very strong.

64

Mr. BRODSKY. I am——

Mr. CUMMINGS. Let me finish. What you have basically done—

and maybe you have done this before, I don’t know, in other hearings in New York—is you basically said that somebody did something that was illegal. Is that—did I hear you wrong? Do you believe that?

Mr. BRODSKY. I said precisely, Congressman, what I said.

Mr. CUMMINGS. Was I accurate?

Mr. BRODSKY. And my committee is not charged with making determinations of legality. We investigate matters to determine the

need for additional legislation in the State of New York. I am not

a criminal investigator.

Mr. CUMMINGS. I understand.

Mr. BRODSKY. But——

Mr. CUMMINGS. I used to be a criminal lawyer.

Mr. BRODSKY. What we saw and what our inquiry showed, and

what the sworn document showed, is that the promise to use the

same processes to assess the Yankee Stadium project as were used

for other projects—other properties in the same class were not

used. Those facts, I am absolutely certain of.

Mr. CUMMINGS. Now, Ms. Stark, Commissioner Stark, as I listened to your answers, one of the things that you said which really

sparked my interest tremendously is, I think you said that the day

you came into your office, there had been some people who had

been arrested. Is that what you said?

Ms. STARK. Yes.

Mr. CUMMINGS. And they were arrested for? They were charged

with? Just generally.

Ms. STARK. Sure. Just for taking bribes to lower people’s assessments.

Mr. CUMMINGS. And so have they gone to court? Do you know?

Ms. STARK. They have.

Mr. CUMMINGS. And do you know whether they were convicted?

Ms. STARK. They were.

Mr. CUMMINGS. Now, so you came in and you—what day did you

come in?

Ms. STARK. I started February 25, 2002.

Mr. CUMMINGS. So you basically, I guess you walked in the door,

you had I guess a staff that was minus some people. Am I right?

Ms. STARK. Yes.

Mr. CUMMINGS. So you had to replace those people. Is that right?

Ms. STARK. Yes. Replace them as needed. Yes.

Mr. CUMMINGS. And so—and I take it that, did anything happen

with regard to—it seems to me that if you have a situation like

that, and you are coming in, does—did anybody come and say, look,

we have to tighten up here. This is not going to work the way it

has been working? And you talked about, you used the word transparency a number of times with the chairman. Was that—was

there a new order established that we are going to have this transparency, we are going to do things differently?

Ms. STARK. Absolutely, sir. And I would say, I had been at the

Department in the early 1990’s, and came back to Finance in large

part because I am a corporate tax lawyer who has expertise in the

property tax and was hired by the mayor to come in and actually

65

change the way that we did business. And so there were a number

of things that we did, sir, right away, again, with the goal of restoring the confidence for the public and how it is we did those values.

And one of the most important things that we wanted to do was

to make sure that everything that we did was open and transparent. So now, available on our Web site are all of the sales figures that are generated. So every sale is published. It used to be

in New York City that sales information was secret. In addition,

every property owner now gets a notice of value that details for

them how we arrived at their value. It doesn’t matter if they are

an income producing company, a regular homeowner. And we tried

to break it down into English. But lots of things that we did, we

organized how we structured the assessor’s office in terms of the

values that they were producing and put in lots of quality control

measures.

Mr. CUMMINGS. Got you. Now, you are sitting beside Assemblyman Brodsky. He just said something that was—basically, he said

that your office—correct me if I am wrong—did something different

with this assessment than, to his knowledge, would be normally

done with others. Is that a fair statement?

Mr. BRODSKY. That is a fair statement.

Mr. CUMMINGS. And you heard what he said. Didn’t you?

Ms. STARK. I did.

Mr. CUMMINGS. I want you to respond to that. And that, and

that—and when I get down to the nitty-gritty, when the rubber

meets the road, it seems that is where I want to get to. It seems

like that is where we need to be figuring out, was there a difference with regard to the way you, to your knowledge, the way

you all addressed this issue as opposed to others?

But let me ask you another question, too, before I get—hold that

one. I want you to answer them. How deeply are you involved in

the day-to-day assessing of things of that nature? And I understand

that this one has gotten a lot of spotlight placed on it. But—and

maybe you found out some things later on. But how much were you

involved in this process, and, this process right here, for this. And

if you can answer it, can you tell us, was there any difference, to

your knowledge—and if you don’t know, I want you to tell us that,

because he makes some very serious accusations, and I want to see

if we can’t get to the bottom. Was there anything different? I want

you to answer what he said.

Ms. STARK. Sir, let me answer the questions in reverse order. So

the first, you asked how involved was I in the process. That is the

last question.

I was involved to the extent that I let them know who on the

team would be able to answer the question about what the value

for the Stadium would be if it were completed as of January 2006.

I let them know that. I am an expert in the property tax. I let the

people who had called from the economic development corporation

know who was the proper contact at Finance to discuss how it is

we would value the property. So that was sort of my involvement

during the process.

Mr. CUMMINGS. So you told them.

66

Ms. STARK. I told them to contact my assistant commissioner for

the property division so that she could have her team estimate for

them what the value of Yankee Stadium would be, if completed.

Mr. CUMMINGS. Hold on. Let’s back up.

Ms. STARK. Sure.

Mr. CUMMINGS. So basically, what you said to him—who were

you talking to?

Ms. STARK. It was an e-mail exchange, who is responsible for valuing.

Mr. CUMMINGS. Between Mr.?

Ms. STARK. It wasn’t actually me and Mr. Pinsky. It came

through my head of Treasury, a gentleman by the name of Bobby

Lee. I said, Dara Brown is going to be the person who you should

contact as it relates to valuing Yankee Stadium.

Mr. CUMMINGS. Could you just——

Mr. KUCINICH. The Chair provided Mr. Cannon with some extra

time. You could have 2 more minutes.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Ms. STARK. And then, just again to the allocations that Assemblyman Brodsky has made about the use of comparables. He talked

about the Lower East Side. I am not certain he is as familiar with

the Lower East Side as he might be. The Lower East Side is not

a very wealthy part of the city. And, as a matter of fact, only two

of the sales came from there. The majority of the sales came half

a mile away from Harlem, right a half a mile away from the Yankee Stadium site. And that is absolutely consistent with, when you

are looking for values, you look first and foremost in proximation

to where the site of that property is.

He talked a little bit about adjustments that were and were not

made. Again, I can only assume that this somehow is borne out of

in Westchester County, where they make few to no adjustments

and have since 1960 made few to no adjustments to their values.

Every single year, my staff is revaluing property, taking into account any new information that is provided as a result of those, the

information that they gain. New sales prices, new cost information,

and adjusting those properties accordingly.

Mr. CUMMINGS. Let me ask you this, because you just said something. This will be my last question, and hopefully we will have another round. Just one question. You just said something that was

very interesting. You said that you talked about—you questioned

Mr. Brodsky’s—Assemblyman Brodsky’s knowledge of the Lower

East Side, and you said that prices are not that high there. So that

means that—and he’s saying to you, you used some of those properties. Is that accurate?

Ms. STARK. What he said was he was trying to make the point

it seems that Manhattan, because we used Manhattan properties—

everyone, when they think of Manhattan they think of Midtown

Manhattan, the high-rise buildings, very high-value buildings. He

specifically noted the Lower East Side. The Lower East Side in this

regard is much more analogous to Harlem and the South Bronx.

The reasons being that in order to generate any kind of investment

in those communities, the city had to step in and do infrastructure

improvements, whether it was by investing in housing, taking over

abandoned buildings, and the like. The Lower East Side is not one

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of the better neighborhoods in New York City. That was the point

that I was making.

It is more analogous to Harlem, more analogous to the South

Bronx, and, as a result, those were the sales prices that we used,

again, trying to come up with a land value that had been affected

by significant government improvement and enhancement in those

values. And, as a result of that, just like the metro north investment that the city was making and others, we felt those

comparables were appropriate, nothing at all inappropriate about

using those comparables, and I would dare say, sir, nothing illegal.

And I believe that the assembly member is just mistaken when

he thinks about the issue this way. And, again, I don’t know, when

his own district doesn’t revalue property on a regular basis and we

do, and we have experts on every aspect of this. And that is how

we do this.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. KUCINICH. I thank the gentleman.

We are going to have another round of 10-minute questions; and,

Ms. Stark, it is your testimony to this committee that these assessments were made without any knowledge of the PILOTs within

your organization; is that correct?

Ms. STARK. What I said was about the calculation of this PILOT.

We had no information about how that was going to be done.

Mr. KUCINICH. About how it was going to be done. But did you

have knowledge of the PILOTs themselves and the role the PILOTs

were playing in this?

Ms. STARK. We did not, sir. Again, we were asked to value the

property based on how we thought it would—what it would be

worth regardless of the PILOT. So we were not—again, if people

were told, oh, you know, the PILOT is going to be calculated, but

that is not what was relevant in terms of valuing the property. We

had no idea what part of it, you know, was going to be—the e-mail

that said, well, you know, what is going to be relevant for the

PILOT did not at all affect how we valued the property.

Mr. KUCINICH. And did anyone have any communication with

you, either Mr. Pinsky or Mr. Sirefman, relative to these financing

structures that rely on the PILOTs?

Ms. STARK. No, sir.

Mr. KUCINICH. OK. I’d like to give you a chance to reconsider

your answer in light of an e-mail that the—excuse me, Ms.

Stark——

Ms. STARK. Sorry, sir.

Mr. KUCINICH. What did Mr. Pinsky just say to you?

Mr. PINSKY. Excuse me?

Mr. KUCINICH. Are you her counsel?

Mr. PINSKY. No, I’m her colleague.

Mr. KUCINICH. What did Mr. Pinsky just say to you?

Ms. STARK. He was saying he thought there might be an e-mail

wherein they said that the PILOT was going to be calculated based

on something. But I’m assuming, Chairman, you’re going to read

to me what is the relevant portion of the e-mail; and I’ll look

through my files to see if I have it as well.

Mr. KUCINICH. We have an e-mail here from Josh Sirefman to

you, Ms. Stark, dated Monday, March 20, 2006; and the subject

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line is Quick Stadium Question. And it says, ‘‘Commissioner, not

sure who Seth should speak to about this, thanks.’’

And we have another e-mail from Seth Pinsky to Josh Sirefman

which says, ‘‘Josh, as you know, on the Yankees and Mets, their

financing structures rely on PILOTs, which are limited by what

real estate taxes would be, which in turn are limited by the assessments of the new Stadia. Apparently, the Department of Finance

is close to—DOF—Department of Finance is close to finalizing their

preliminary assessment, and I’d like to understand what it is before it is released publicly to make sure it conforms to our assumptions and, if it doesn’t, to understand what the implications are. Do

you know the proper person at DOF to whom to talk to about this?

I imagine that what we learn will also impact the teams’ schedules

with the council.’’

Now that you’re aware of this e-mail exchange and the one that

was sent to you, is there anything that you’d like to add to elaborate to this subcommittee about the nature of this e-mail and the

exchange? And were there any other contacts between you and Mr.

Sirefman or any contacts between you and Mr. Sirefman through

Mr. Pinsky or Mr. Pinsky directly?

Ms. STARK. Again, you read the full text of the e-mail and nothing in there tells us other than it relies on PILOTs which are limited to what the real estate taxes would be. That is absolutely

what, you know, we would assume. We valued the real estate how

we would value it typically, and this doesn’t change anything that

I said.

As to the full calculation and how the PILOT is done, my staff

does not know how that is done. What they said here is that we

were close to finalizing the preliminary assessment, understand

what it is like. And, again, as I think my colleague indicated to

you, and if it doesn’t, what the implications are.

And what I did was, as you connote, if you look at the rest of

that e-mail, as I said, the person, my assistant commissioner for

the property division and her staff had been working on the Stadium values and that Seth could at that time contact her directly

to find out where she was in terms of finalizing those.

Mr. KUCINICH. Ms. Stark, you know, essentially, there was a

communication where you learned that something was at stake

with the assessment.

Ms. STARK. Sir, I don’t agree with you. What it seemed to me

was at stake was they needed to know how we would value the

property and when we would be finished valuing the property. That

is all that was at stake, and that was all that was relevant to us.

They needed to know when we would have an estimate of the assessment. And, you know, that was all. I don’t really—I don’t see

from this e-mail anything to suggest that we knew what was at

stake. All we knew was that they were waiting to hear from us

how the property would be valued.

Mr. KUCINICH. I think it is important to clarify whether there is

any contact with an e-mail. I just want you to make sure for the

record that you did that.

Now, the Department of Finance provided the subcommittee with

five versions of a document entitled, ‘‘Estimated Market Value for

a Proposed Yankee Stadium,’’ prepared between March 10th and

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April 10, 2006. In the March 21st estimate, the Department of Finance valued the Stadium site at $26.8 million.

Now we have reproduced the relevant page of the March 21st estimate on the overhead, and some of the text has been enlarged for

clarity. While it is a little difficult to make out, the March 21st estimate uses as comparables for the Stadium site land sales in The

Bronx, Staten Island and Brooklyn. These properties are valued between $24 and $52 per square foot. For the purpose of the Stadium

estimate, the Department of Finance chose a value of $33.50 cents,

right in the middle of the range.

Now, the document at the right—and we have—the next slide,

please. This document on the overhead is the Department of Finance estimate of the land value from March 22nd, just 1 day later.

The estimated land valuation is now $204 million, or $275 per

square foot.

This is the estimate that the IDA reported to the IRS in May

2006. The comparable land sales in Bronx, Staten Island and

Brooklyn have been replaced with land parcels located solely in the

borough of Manhattan listed at a range of $231 to $430 per square

foot, much higher than the previous comparables.

Ms. Stark, can you tell this subcommittee what accounts for the

sudden dramatic increase in the site assessment? Around the time

of the change, there was a flurry of e-mail traffic among the city,

IDA and DOF. Could you explain this?

[The information referred to follows:]

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71

72

Ms. STARK. I can. Sir, as I indicated to you, that typically when

the finance department is doing its land values, there are two ways

in which you verify the accuracy of your land value over your sort

of building value. One way is that you look at your overall value

and you take a percent of that to arrive at land. That is what we

do for the approaches that we kind of use to value. And, again, if

you look in Oakland, 30 percent of the overall cost is ascribable to

land.

The second thing is, again, we were asked to value the property

as if it were completed on January 1, 2006. If that value of that

land was going to be vacant, there is a different value for it as vacant. Once it is constructed, the value of the Stadium actually enhances the value of the land.

We wanted to also look at properties that were enhanced by government investment and improvement; and these properties, most

of them, again, in Washington Heights, in Harlem, in Manhattan

Valley, which is basically the eastern part of Harlem, these sales

prices actually were more consistent with what we were asked to

value here for Yankee Stadium. Again, significant government improvement and investment as well as being asked to value the

property once the site was completed.

And we verified it two ways. One was, what is the overall land

as a percent of the total value? And typically for our agency that

number is between 15 and 25 percent, as well as looking at sales

of land that were enhanced by government improvement and investment.

Mr. KUCINICH. I thank the gentlelady.

I have a series of questions which derive from these documents

that we have and what we are going to do—my time has expired.

We’ll have a third round of questions.

We are going to go to Mr. Cannon now for 10 minutes. Mr. Cannon.

Mr. CANNON. Thank you, Mr. Chairman.

Mr. Pinsky, can I ask some questions about this project of you?

How many different bodies of government approved this project?

Do you know?

Mr. PINSKY. The project was brought before the borough president, the borough of The Bronx, before the city planning commission, before the City Council, the city twice. I think it was approved

46 to 2 and 47 to 3 or something like that. It has been brought in

several different forms to the New York State legislature. It was

approved unanimously with respect to the most important part,

which was the alienation of the park land for the new Stadium. It

was brought to the IRS for a private letter ruling as well.

Mr. CANNON. You are an employee of the city of New York, are

you not?

Mr. PINSKY. No. Actually, I’m an employee of the New York City

Economic Development Corp., which is technically a separate

501(c)(3). But we work very closely with the city. We are the economic development arm of the city.

Mr. CANNON. Does the city fund the 501(c)(3)?

Mr. PINSKY. No. The 501(c)(3) funds its operations through management contracts that it has with the city, and then excess

amounts are paid back to the city.

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Mr. CANNON. Could you explain that? In other words, you manage the process of economic development. You have a contract.

That contract is paid for by the city?

Mr. PINSKY. There is a contract that we have with the city to

manage certain properties and operations on behalf of the city. For

all intents and purposes, we act like an agency of the city in that

I’m appointed by the mayor. Our board is majority appointed by

the mayor. We have an ongoing contract to perform certain operations on behalf of the city. But we are technically a separate

501(c)(3).

Mr. CANNON. Thank you. How many jobs would be created by the

project?

Mr. PINSKY. By this project? This project has created 6,000 plus

construction jobs at last count and is estimated to create over 1,000

permanent jobs part time and full time, which are above and beyond what currently exists at the Stadium.

Mr. CANNON. You know, we—stadiums have changed over time.

I was just last night down near the Wizard Stadium here in town.

It is a great, robust area. I like going down there. It is better now

than it was before. Do you have a reason to believe that this Stadium is going to spur economic growth in the area?

Mr. PINSKY. Absolutely. It has had a number of very positive impacts on the area. First of all, it has pumped over $130 million into companies that are based in The Bronx. It has pumped more than $300 million

into companies that are based in New York just during construction. It has created, as I mentioned, the 6,000 unionized construction jobs, 1,000 new incremental permanent jobs.

It has also caused the city to invest in infrastructure in the area.

We are building 20 plus acres of newer, improved park land. We

are improving the sewer system in the area. We’ve created new garages which are going to take traffic off of the street. And we have

also built, most importantly, a new metro north commuter train

station in the area, which will be very useful for the people of the

area.

Mr. CANNON. And how will that affect the vibrancy of the economy in that area, do you think?

Mr. PINSKY. The largest single investment I believe in the history of The Bronx. And we’re talking here about the single poorest

congressional district in this country. And what we are talking

about is a billion dollar private sector investment in this district,

something that I bet is unprecedented in the entirety of the Nation.

Mr. CANNON. I take it The Bronx City Council approved the

project as well?

Mr. PINSKY. Yes.

Mr. CANNON. Was there anything about the financing of this

project that wasn’t consistent with current tax policy?

Mr. PINSKY. No. It was—there was a private letter ruling sent

to the IRS, and the IRS sent us back a letter saying that it was

properly structured.

Mr. CANNON. Thank you. I appreciate that, Mr. Pinsky.

It seems to me there is a compelling local and city interest in

this project. Mr. Brodsky, have you ever voted in favor of this

project?

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Mr. BRODSKY. I think the references being made, Congressman,

to alienation of parkland, that is a requirement of State law.

Mr. CANNON. Alienation of what?

Mr. BRODSKY. Parkland. The new Stadium was built on an existing park used by the residents of that community.

Mr. CANNON. And I take it you voted for the alienation of the

parkland?

Mr. BRODSKY. Yes, sir. And I’m going to explain the circumstances as to whether I voted for the project——

Mr. CANNON. Were there other votes that related to this project

in addition to the alienation of the parkland?

Mr. BRODSKY. There were no other direct votes related to the

project. But, if I may, Congressman, when we vote to alienate parkland, we explicitly do not vote on the merits of the use of the land.

It is an opportunity for a local government to make decisions as

long as equal parkland is replaced in the system, which is a matter

of great controversy in this case.

Mr. CANNON. But you did know this was in advance of a Stadium. And I note Mr. Levine is thinking or indicating by his facial

expression that there were more votes. Were there some that I’m

missing here?

Mr. BRODSKY. There were budget votes that went to general appropriations. But there was not a vote yes or no on Yankee Stadium, except for the parkland vote, which was not a vote on the

merits of the project.

If I had to do it again, I would vote yes in spite of the disastrous

consequences for both the economy and communities affected. Because it is not the legislature’s job to substitute its judgment for

the judgment of the local government as long as parkland is restored in equal measure to the community that loses parkland.

Mr. CANNON. One of the issues here is the transparency of the

process. Can you talk to us a moment about why you think this

was not a transparent process?

Mr. BRODSKY. Yeah. It is a fair question. It was a busy process,

and there were—all the meetings that Mr. Pinsky and Mr. Levine

refer to did occur. They were framed by public announcements that

were not true, and the vigilance that the community would have

normally applied because they accepted some of these at the beginning was not what it should have been.

But many of the elements of this—the PILOTs, the assessment,

the luxury suite, the ticket policy where the city chose to ignore the

fact that the Yankees were dramatically increasing ticket revenues

so that we were building a Stadium that the people whose tax

money was going to could not afford to attend——

The bottom line of this was, Congressman, that the processes

were formal and in many cases manipulated. I can go into detail

with respect to the IDA process. A deviation letter was signed. An

inducement letter was signed. There was no disclosure of the matters I have just raised with you in that process of any credible

kind.

Mr. CANNON. Do you think The Bronx would be better off without the Stadium?

Mr. BRODSKY. No, I don’t.

Mr. CANNON. Sir, you think it is actually a benefit to the area?

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Mr. BRODSKY. Is a net benefit to the area, yes. It is not, however,

a requirement to pour probably close to $2 billion of public money

into that to rebuild it when the primary issue was could the Yankees have afforded to do this without taxpayer money. This is socialism, Congressman, of a kind which you described in your district doesn’t strike me as they would easily take to. There has to

be a public return. There is no public return.

Mr. CANNON. If you start talking about public returns, that is socialism. That is when an individual substitutes his judgment for

what people want.

Mr. BRODSKY. No. Socialism is when the community pays for private enterprise.

Mr. CANNON. That is not. Socialism is actually a well-defined

concept that starts with the—what is that—the public contract—

what’s——

Anyway, the short of it is that the issue here is tax policy. And

tax policy gets used and brutalized, and we don’t disagree on some

of the points there. The question is, at what level do you allow that

tax policy to take place? Have you ever been opposed to public assistance to sports activities?

Mr. BRODSKY. Yup.

Mr. CANNON. Could you talk about that a little bit?

Mr. BRODSKY. Well, my first fight with the Yankees took place

15 years ago when drunkenness at public sports facilities was a

major problem. And I introduced legislation to restrict that at Yankee and Shay Stadium and was greeted with enormous hostility by

Mr. Steinbrenner and others who were resisting our attempts to

make the atmosphere at Yankee Stadium more family friendly.

I also became involved in matters dealing with subsidies using

electricity for Madison Square Garden and for other——

Mr. CANNON. Pardon. My time is about to expire.

Did you try to amend the bill that had as a budget item this

issue?

Mr. BRODSKY. No, I did not.

Mr. CANNON. Thank you.

Let me turn to Mr. Levine who did not have a chance to respond

last time I had control of some time. You’ve heard some things that

Mr. Brodsky said. You had some reaction in your seat there. You

have contained yourself well. Now if you’d like to express yourself,

we would love to have you respond to Mr. Brodsky and his history

with sports or other issues that were raised earlier in the discussion.

Mr. LEVINE. Thank you, Congressman Cannon.

The only thing I wanted to make sure you knew, because you

raised it, is that Congressman Serrano, whose district the Stadium

is in, is a very strong supporter of this entire project and has been

from the day and as are all of Mr. Brodsky’s colleagues from The

Bronx. All of them are strong supporters of the Stadium. Thank

you.

Mr. CANNON. Thank you, Mr. Chairman. I recognize my time has

expired and yield back.

Mr. KUCINICH. I thank the gentleman.

The Chair recognizes Mr. Cummings.

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Mr. CUMMINGS. Mr. Chairman, I’m going to yield to you just for

5 minutes and a second. But, you know, there has been a lot of discussion here about all the wonderful things that the Stadium is

doing, and that is nice, but that ain’t the issue, not for me, anyway.

What I want to make sure is that there has been integrity in the

process.

This Stadium could be raining million dollar bills, as far as I’m

concerned, from the sky. That is not the issue. That is nice, but

that’s not the issue. The issue is integrity of the process.

And so, Mr. Chairman, I’m going to yield to you for a few minutes; and then I’m going to wrap it up.

Mr. KUCINICH. I thank my colleague. And when you were out of

the room, we had announced there was going to be a third round

of questions. I just want you to be aware of that. Do you still yield?

Mr. CUMMINGS. Yeah.

Mr. KUCINICH. OK. I thank the gentleman.

On March 20th, Mr. Pinsky e-mailed to Mr. Sirefman at city hall

and explained, ‘‘as I think you know, on the Yankees and Mets

their financing structures rely on PILOTs which are limited by

what real estate taxes would be which in turn are limited by the

assessments of the new Stadium. Apparently, Department of Finance is close to finalizing their preliminary assessment; and I’d

like to understand what it is before it is released publicly to make

sure it conforms to our assumptions and that—it is in parentheses—and if it doesn’t to understand what the implications are.’’

Mr. Pinsky then asks Mr. Sirefman if he knew, ‘‘the proper person at the Department of Finance to whom to talk about this?’’

Mr. Pinsky’s e-mail set a chain of events in motion. Mr. Pinsky

learned from Commissioner Stark, who had been e-mailed by Mr.

Sirefman, that Dara Ottley-Brown, the Assistant Commissioner,

was primarily responsible for the Stadium assessment. Mr. Pinsky

told Maureen Babis of his staff that he believed, ‘‘it would be helpful to have a directive from the top that we should be cooperated

with.’’

Mr. Sirefman asked Mr. Pinsky whether he was, ‘‘getting what

you need from,’’ Department of Finance. Mr. Pinsky assured the

city official that the Department of—DOF, Department of Finance

had been, ‘‘helpful.’’

It appears that Mr. Pinsky called Ms. Ottley-Brown at least once,

the afternoon of March 22nd. That same afternoon, Maurice

Kelman, a Department of Finance assessor, forwarded Ms. OttleyBrown a list of land sales selected from sales north of 100th Street

in Manhattan and from Alphabet City. That evening, the estimated

land assessment was increased from 26.8 million to 204 million

using the new comparables compiled only hours earlier.

Now, Mr. Pinsky, do you remember speaking to Ms. OttleyBrown on March 22nd?

Mr. PINSKY. I have a recollection of the phone call, yes.

Mr. KUCINICH. OK. And what did you speak about?

Could you pull that mic a little closer?

Mr. PINSKY. Sure. Happy to, Congressman.

What we discussed was, one, the need for us to receive this number because it was a part of the Yankee Stadium transaction; two

was to ask about the timing of the issue and to explain what our

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timing concerns were; and, three, to make sure that we were coordinated on the announcement of the figure that was provided by

Department of Finance so that in the event that it was a number

that was different from what we had expected that we could react

accordingly.

Mr. KUCINICH. Do you have any explanation for the fact that the

estimate went up so substantially, that the land assessment was

increased from 26.8 million to 204 million using new comparables

compiled only hours earlier?

Mr. PINSKY. The two explanations, the two responses I would

give to that are, one, I think we heard an explanation from Commissioner Stark, mainly that the Department of Finance independently looked at the numbers that were coming out of its analysis

and realized that they didn’t make sense; and, two, I can also say

that the change had nothing to do with the conversation that we

had.

Mr. KUCINICH. When you were speaking to Ms. Ottley-Brown, did

you explain to her that to support the planned PILOT paid by the

Yankees and the planned bond issuance that the assessment had

to be revised upwards?

Mr. PINSKY. I have no recollection of the specific, but what I can

tell you for certain is that in no event would I have ever told her

or anyone else from the Department of Finance—let me just finish.

Mr. KUCINICH. I want to make sure I understand your response

because, on one hand, you said you had no recollection——

Mr. PINSKY. You asked a very specific question about how I

might have phrased something, And what I’m saying is I don’t recall exactly how I phrased it.

Mr. KUCINICH. That is fine.

Mr. PINSKY. I appreciate you asking that followup question.

Mr. KUCINICH. I just want to put that on the record.

Ms. Stark, do you have any knowledge of the phone conversation

between Mr. Pinsky and Ms. Ottley-Brown?

Ms. STARK. I don’t have any specific knowledge, sir.

Mr. KUCINICH. Other than the e-mail you received from Mr.

Sirefman, did you have any other communications with the city,

IDA or other participants in the deal in this time period where the

subject of the amount of tax assessment was raised or are you

aware of any such communications with Ms. Ottley-Brown or any

other member of your staff?

Ms. STARK. Sir, other than a communication again where we

were asked to coordinate on the announcement of the number because of the upcoming City Council hearing, I know of no other

conversations between my staff and Mr. Pinsky’s staff.

I also would like to note that we never financed—never released

the number that you cite, the $26.8 million land value. That number was not shared with anyone outside the agency. It was being

reviewed internally as we were finalizing the assessment number,

but there was no release of the $26.8 million land value figure. In

fact, that has been, you know, responded or provided to this committee based on your request. But that was not released publicly

to anyone else.

Mr. KUCINICH. Thank you.

The time reverts back to Mr. Cummings.

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Mr. CUMMINGS. Thank you very much.

I’m just listening to all of this, and this is what I want to know.

You had a figure in mind, didn’t you? Mr. Pinsky, you had a figure

in mind?

Mr. PINSKY. To be honest, I was not really working on the financing side. I knew that there was a figure that needed—that we had

projected would be the figure.

Mr. CUMMINGS. Well, that is the figure I’m talking about. The

one that you projected. You had a figure in mind.

Mr. PINSKY. We absolutely——

Mr. CUMMINGS. How did you come up with that figure?

Mr. PINSKY. I believe that it was projected by the underwriters

for the bonds.

Mr. CUMMINGS. OK. I see. And this is the question. Was that figure communicated to anybody in Ms. Stark’s office?

Mr. PINSKY. I don’t remember having communicated that.

Mr. CUMMINGS. Well, what about the conversation you had? You

apparently—this e-mail situation here, there was a figure that you

had in mind. You may have gotten it—wherever you got it from,

you had it. And, obviously, it was not this 28—26.8 figure. And, as

a matter of fact, whatever figure you had—by the way, did it match

up with the final figure that you got?

Mr. PINSKY. I don’t believe it was exactly the same, but it was

in the same——

Mr. CUMMINGS. How close was it?

Mr. PINSKY. I don’t remember. But I will say it shouldn’t be

strange to anyone that if we—if our underwriters were applying

the Department of Finance’s standard methodology to try to estimate what the value would be and then Department of Finance

went and applied that same methodology and came up with a number that was relatively close, that shouldn’t be all that unusual.

Mr. CUMMINGS. I understand. I hate to tell you this, but I was

also on a bond council.

So I’m trying to figure out—I guess what I’m trying to get to is

the chairman was asking some questions about the e-mail. And the

pieces that bother me—and I believe, Ms. Stark, and I don’t

know—you told me how deep you go with your staff, but there were

other people doing things. So I want to make sure there is nothing

where somebody says, you know, we are going to come up with a

26.8 figure and then somebody from your shop says, wait a minute,

that is just not going to work. It should be 10 times that. And because that—if it got to that, then that to me goes against the integrity piece that I said. Because then it sounds like there is almost

a negotiation.

At least let me finish. I think, based upon everything that I have

heard, that these are supposed to be independent types of situations, right?

Mr. PINSKY. Yes.

Mr. CUMMINGS. In other words, you have a figure, so you all keep

that in your head, and then when you find out—and you all come

up independently, based upon everything you said, Ms. Stark, and

I guess you would have been very upset if you knew that there was

some discussion, is that right, like the one I just described?

Ms. STARK. Yes, sir.

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Mr. CUMMINGS. So, to your knowledge, nothing like that happened?

Ms. STARK. That’s correct, sir.

Mr. CUMMINGS. So—let me go back to another thing. We talk

about this Lower East Side. Talk about that a little bit more because I’m still confused. You’ve got Lower East Side, and the prices

of this housing is not as expensive; is that right?

Ms. STARK. What I would say, the Lower East Side——

Mr. CUMMINGS. Not all of us are from New York.

Ms. STARK. It is a neighborhood in Manhattan outside the central business district. If you’re in downtown Manhattan and you go

east sort of toward the water, it is a part of town that has not done

as well as other parts of central Manhattan. Again, more analogous

in some respects to Harlem and the South Bronx, sort of area. So

a lot of times it is an area actually that gets overlooked because

it is in Manhattan and everyone thinks the Lower East Side is

similar to the, you know, rest of Manhattan.

Again, I’m responding because Assemblyman Brodsky mentioned

specifically the Lower East Side sales and the Manhattan Valley

sales. But it is a part of Manhattan. It is called Alphabet City. It

is east. It is kind of more of our bohemian sort of neighborhood.

It has kind of come back in large part because of the city’s investment in making sure that all of the abandonment of housing that

was happening down there has been much improved.

And just again for the record, we absolutely were not told what

was the number or any number. We had no idea what was being

asked for here in terms of the land value.

Mr. CUMMINGS. Are you referring to a particular part of Lower

East Side?

Ms. STARK. It is actually the part of Lower East Side down in

the sort of Sixth Street area and east, over in that district.

Mr. CUMMINGS. Assemblyman Brodsky, you look like you’re getting ready to fall over in your chair. So before you fall, why don’t

you tell us what is causing you to look that way?

Mr. BRODSKY. Well, you found me out, Congressman.

Mr. CUMMINGS. Oh, I can see.

Mr. BRODSKY. Look, I want to explain once for the record what

we found as to why the practices the city used were inconsistent

with the promises made and inconsistent with standard practice.

I will give you, first, the location of the comparables. The notion

that the Lower East Side of Manhattan Valley is comparable to the

area around the Stadium which you just heard referred to as the

poorest community in New York is laughable. It is not. It was chosen specifically for a reason and that reason is that the values were

higher.

Second of all——

Mr. CUMMINGS. The values are high?

Mr. BRODSKY. Much higher.

Second of all, if you look at that screen, you’ll see that the size

of the parcel, the lot size, are 4,000, 4,000, 8,000 feet, while the

size of the parcel of Yankee Stadium is 742,000. It is customary

practice to adjust for parcel size when doing this kind of assessment. When they did not do that—and I know that because I asked

Mr. Kelman if they had done that, Ms. Stark’s employee, and he

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said they had not. And it is also customary and required that they

adjust for location. OK, you’re going to take the Lower East Side,

but you adjust for location.

I asked Mr. Kelman, did you adjust for location? He said, no,

they did not.

It is also customary to adjust for time. That is, over time, until

recently, values have been going up. So if a sale was from 2004,

you adjust for time. That raises the value of the assessment.

I asked Mr. Kelman if they had adjusted for time. He said, yes,

they had.

So that the evidence before our committee is that where an adjustment required by standard practice raised the assessment, they

did it. Where an adjustment required by standard practice would

have lowered the value, they did not do it.

And if you want any other form of smoking gun with respect to

the reproduction cost and replacement cost issue with respect to

the use of uncertified numbers provided by Goldman Sachs as to

the actual value of the Stadium, with respect to cost categories in

the assessment of the Stadium and not the land and the published

statements by some assessors that they were pressured and the

other appraisals done by the city, one came in at 21, one came in

at 28, this one came in at 26. Bang, we are at 204.

Mr. CUMMINGS. Thank you, Mr. Chairman. I see my time is up.

Mr. KUCINICH. The gentleman’s time has expired.

I feel compelled here to make an announcement so members of

the committee can be aware of the limitations that this subcommittee has been working under. The city has asserted attorney/client

privilege from what the staff has told us, Mr. Cummings, Mr. Cannon. And the city further has contended that the scope of attorney/

client privilege in this investigation extends to communications between the city’s counsel and the New York City IDA, even though

the latter is not a government agency.

Now the result of this broad assertion of privilege is that, by city

estimates, the city will claim attorney/client privilege on and not

produce about 70 percent of the remaining responsive documents.

The documents withheld for privilege are the categories of documents that would most likely reveal if any improper inflation of the

assessment occurred and who directed or pushed for the inflation.

I just want to make that a matter of record so we know how we

are proceeding here.

I want to at this time start my—the last round of questions and

begin with questions again of Ms. Stark. I want to ask you about

the set of seemingly mutually contradictory explanations provided

in your written testimony about why the Department of Finance increased the land value from $26.8 million to $204 million on March

22, 2006.

First, you contend, Ms. Stark, that the $26.8 million assessment

was incorrect because it was based on the value of the vacant parcel but that instead it was proper to value the land differently because the Department of Finance values developed property differently, typically at 15 and 25 percent of the overall property

value. But this begs a number of questions.

The Department of Finance has repeatedly indicated to the IRS

and bondholders that it is following the cost approach for the StaVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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dium assessment. Pursuant to the cost approach, is it appropriate

to value property as a percentage of overall property value or does

it instead require that land value be derived from comparable

sales?

Ms. STARK. Sir, I just want to say we did not certify anything

to the IRS or the bondholders. Finance did not make any such assertions. The IRS ruling letter was made and requested by the New

York City IDA and Economic Development Corp.

Mr. KUCINICH. You’re saying that no one in Department of Finance made any representations to the IRS in any way or to bondholders in any way, shape or form relative to the conduct of your

office?

Ms. STARK. Finance was not responsible for sending anything to

the IRS.

Mr. KUCINICH. Didn’t you make it to the IDA and the IDA accepted it?

Ms. STARK. Sorry. We valued the property and then did send to

the IDA our estimated value of the property. However, we did not

make any assertions to the IRS or to the bondholder, but we did

let the IDA know what we thought and what we estimated the

value of the property to be as of 2006. That is what we did.

Second question that you asked was whether or not we valued

the property using standard appraisal practices which is to value

the land separate from the cost number. I was asked whether or

not—how do we validate that number. Again, we wanted to make

sure we had checks and balances in place to make sure that land

value as a percent of the overall value made sense and was consistent with how we do other properties. So in my testimony I said,

to you for other properties valued using the income as well as the

sales approach, the way that we do that is we value the property

overall and then we impugn a land value that is between 15 and

25 percent.

So for this value, to ensure that we were doing this again consistent with how we would other properties, we looked at sales of

land that were based on what had been enhanced and/or improved

by government investment. Separate and apart sales analysis, it is

the one that you have up on the screen. That is what we did.

And then, after that, we did a check to make sure that it was

falling in line with how we would do other properties, which is to

have a land to overall building value of between 15 and 25 percent.

So it was a check on that.

Mr. KUCINICH. Is this what you call a cost approach, permitting

the percentage?

Ms. STARK. No. Actually, sir, because we did a separate vacant

land analysis. You actually have it up on the screen.

I would also beg to differ with Mr. Brodsky saying that we didn’t

adjust on the lower Manhattan prices. The lower Manhattan price

on Alphabet City was $383 a foot, and we used $275 a foot. So, in

fact, we took the median price of those sales and arrived at a value

of those prices.

Mr. KUCINICH. Let me ask you this. As a matter of logic, how can

you even value the land as a percentage of the overall property

value whereas here you couldn’t possibly know the overall property

value until you calculate the value of the land?

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Ms. STARK. Sir, we knew what the building value was. Again, if

you read all of the appraisal literature, you’re in a jurisdiction that

revalues every year. You’re taking a percentage and looking at

what is the appropriate percentage, twofold. One is the total land

value to the building value. That is sort of a ratio that is looked

at and then to the overall value.

Mr. KUCINICH. Here’s what I’m trying to understand. How does

this percentage method, even if it is allowable under the cost approach and feasible without first knowing the total property value,

score with the fact that for both the initial and final assessment

the Department of Finance actually valued the land using comparable sales and not a percentage method and, in fact, there is absolutely no indication from the documents produced to the subcommittee that the percentage method was an appropriate methodology or that it was, in fact, used until we received your testimony yesterday.

Ms. STARK. Sir, I wish the comp on the property tax were not as

complicated as it is. I spent an entire lifetime actually working on

trying to make sure people understand it. What I did say to you,

chairman, is we arrived at the overall land value using a comparable sale approach and then, as a test of validation of that comparable sales approach, what you do is check it as a percent of the

overall building value and the overall total value. We did not use

that approach to value the property. We used it to validate the resulting land value that we got from using comparable sales.

Mr. KUCINICH. The second explanation that you provided was that the $26.8 million value was wrong because the Department of

Finance used vacant land rather than land that had benefited from

infrastructure improvements and investments. Now, what infrastructure improvements are you referring to here? And can you

provide me an example of when the Department of Finance has increased an assessment 600 percent because of infrastructure improvements? And if a sixfold increase in the assessment for infrastructure improvements is justified, why is commercial property in

the immediate vicinity of the new Stadium assessed at a much

lower than even the $32.50 rate at the initial assessment? For example, you have this nearby retail shopping plaza assessed at $9

per square foot.

Ms. STARK. Sure, sir. Again, for those other properties we are not

valuing them based on the cost approach. The cost approach is

used for specialty properties like stadiums, like utility property and

the like. We are not using the same approach. We are using an income approach.

And when you take the overall value of our income approach or

our comparable sales approach that we use for small houses, the

way that we come up with the land value is by taking a percent.

In those instances, we take a percent of the overall value and attribute that to the land.

Again, I really think it is an important thing for you to be clear

on. The cost approach is used for specialty properties, and that is

the approach that we use in those instances. The other nearby retail properties are valued using an income approach, and then the

land approach—the land value is imputed. So it is based on the

overall cost.

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Again, the $26.8 million value used sales from every single other

borough but was not specific to vacant land sales that had been enhanced by government improvements and investments. And the

ones that I would cite that you talk about is, if you’re in Harlem,

it was the fact that the city did a lot of work to get there to be

a new supermarket there, in addition took a lot of abandoned housing, put it in one of our really successful programs for renovating

housing, made the city investment to build back up the neighborhood. And we were looking at vacant land sales that had benefited

from that government improvement and enhancement.

Mr. KUCINICH. You mentioned Harlem. I want to pick up on that.

You state that the new comparables were more appropriate because they reflected land in similar neighborhoods, including Harlem, which are less than a half a mile away and where the land

value had been enhanced because of a significant government investment. This is what you just told us.

Well, first, why does distance have anything to do with the appropriateness of comparables and the value of properties? One of

the sad ironies of modern cities is that poor neighborhoods abut

wealthy ones. In fact, this is perhaps most true in New York. For

example, while throughout the 1990’s the stretch of 110th Street

and Lexington in Manhattan was notorious as an open air drug

market, only about a half mile downtown you couldn’t buy a loaf

of bread for less than $5 in fancy bakeries in the upper east side.

Moreover, if you’re talking about the comparables used were far

from the South Bronx in both distances and stages of economic development such as Manhattan Valley, the site of the Columbia University expansion, a new, trendy Alphabet City, do you really expect me or this subcommittee to believe with these shifting explanations that your staff use of these comparables was anything

other than cherry picking? And when did you become aware of the

May 2006, $21 million appraisal of the Stadium site and the July

2006, $40 million lease appraisal?

Your response, and then we will go to Mr. Cannon.

Ms. STARK. Two things. One is that everything in real estate is

location, location, location, sir; and I have never before heard it

said that the proximity to the Stadium site or to any site is irrelevant in valuing of property. That is the first I have actually heard

that.

As a matter of fact, if you and I were going to buy a house, we

would certainly look at sales of properties nearby; and the closer

they are to your existing house, the more likely it is that you believe that sales price tells you what nearby properties would sell

for.

So Harlem, yes, absolutely, there has been a boom in Harlem as

a result of government investment and enhancement in the Harlem

neighborhood. So the sales in less than a half a mile away from the

Stadium site are absolutely appropriate to use.

The second thing that I think you just closed with—sir, I’m sorry.

I forgot your second question or your last question, I should say.

Mr. KUCINICH. When did you become aware of the May 2006, appraisal?

Ms. STARK. Right. As a matter of fact, we knew nothing about

those other appraisals until Assembly Member Brodsky released

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his report. Those appraisals were neither relevant to us in terms

of valuing the property as no appraisal would be—we knew nothing

about any other appraisals and actually would defer to my colleague to explain what those appraisals were for.

My staff did not rely on them. Again, we are independent. They

were irrelevant to us in terms of how they arrived at value. We did

not learn of them until in fact they were brought to our attention

by the assembly member.

Thank you.

Mr. KUCINICH. Thank you very much. My time has expired.

The Chair recognizes Mr. Cannon for 10 minutes of questioning.

Mr. CANNON. Thank you.

I’ve been paying a great deal of attention to this. Let me just say,

Ms. Stark, you’ve been under lot of pressure and asked some pretty

intense questions. I haven’t seen any shifting in your position at

all. I think you have explained the questions, and they have been

asked well, and I think this is relatively straightforward, and I

don’t know that there is anything more that I can ask. But I think

you’ve been highly consistent.

Now, there may be disagreement with Mr. Brodsky, but your position has been very direct or very consistent. And this is a big

project. In fact, Mr. Levine, how much money are the Yankees

spending on this project?

Mr. LEVINE. So far, it has been well—through our PILOT payments, well over a billion dollars. When we get done, it will probably be close to, you know, $1.3, $1.4 billion.

Mr. CANNON. That is a big number.

Mr. LEVINE. It sure is. And it will be the largest investment in

a baseball stadium and a very unusual—most baseball stadiums

are done through direct taxpayer funding.

Mr. CANNON. I would like to just let the Chair know, by the way,

that there is no attorney/client privilege, as the Chair said earlier;

and I am supportive of the Chair’s view that documents should be

had when a committee of Congress wants those documents.

Mr. KUCINICH. If the gentleman will yield, the staff has notified

us that it was the city asserting attorney/client privilege. So this

is a discussion now between attorneys for staff and the city.

Mr. CANNON. Let me remind the staff, there ain’t no attorney/client privilege as it relates to Congress. That is a common law privilege. It relates to the courts and not to us.

Mr. Pinsky, you at one point, I think, were cutoff. You wanted

to explain—you were asked about a recollection of words. You

didn’t have an exact recollection, but you recollect the context, I believe. And I wondered if you wanted to go back and talk about the

context where you were not allowed to earlier.

Mr. PINSKY. Thank you very much, Congressman.

The question that was asked was, was there any sort of negotiation between EDC, IDA and the Department of Finance; and I just

wanted to say categorically there absolutely was not. We were not

aware of the $26.8 million number or any other number until the

numbers were presented to us as final.

And just as evidence of the fact that we have not in fact been,

as has been alleged, manipulating the numbers, the figure that was

derived and was sent to the IRS for the assessment of the property

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was $204 million. After that number was provided, when the Department of Finance went back and actually assessed the property

once the project—the deal was closed, it was noticed that there had

been an error in the calculation, that they had been looking at the

entirety of the tax law. Whereas in the process of the finalizing the

project, a certain portion of that had been split off into a separate

tax law for a garage. And, in fact, the assessment on the land was

lowered from 204 to $175 million. Nobody objected to that. That is

the number that is now on the books, and that is the number that

we are relying on and using for the calculations of the PILOT.

Mr. CANNON. Thank you.

This hearing seems to be about perfidy in the land valuation

process. Was there an inappropriately predetermined value?

This is a complicated project, as I see it. Lots of different views

about what we should do with these kinds of things. No impropriety has been suggested in any other way here.

And now we’ve been dealing with this quite complicated process

of valuation. You have a piece of property. You can buy it on the

market for X. You have a building on it which brings huge value

to the area. I don’t think anybody has disagreed with that. And

that makes the property different in nature.

And let me just say that I think you all have responded to these

questions. They are complicated questions. You have been very consistent.

Again, this hearing is not about whether or not we should have

a Stadium in The Bronx. It is not about the poorest area in the

country. If this hearing is about whether there is perfidy, I think

the laundry has been aired entirely. The answers have been very

direct, and I appreciate that.

And would anyone like to make final comments on anything?

Otherwise, I will yield back, Mr. Chairman.

Mr. BRODSKY. Congressman, only that the private payments that

you heard Mr. Levine refer to of $1.3 billion are the taxes they owe.

It is as though you built an extension on your house and said to

the local taxing authority, send my tax payments to the bank to

pay off the mortgage. The notion that this is being paid for by the

Yankees is——

Mr. CANNON. Let me clarify. The Yankees are putting money on

the table, and their tax bill is going to go down in the future; is

that right?

Mr. BRODSKY. No, the Yankees are taking their tax payment and

sending it to pay off the mortgage.

Mr. CANNON. Mr. Levine, are the Yankees putting money into

this deal?

Mr. LEVINE. The way it works—Mr. Brodsky, he really knows

better, and he continues to mislead both you and everybody. We

don’t pay taxes now. We are a tenant of the city of New York. We

don’t pay taxes at the old Yankee Stadium.

As I said before, there would not have been a new Stadium unless this mechanism was put into place. A classic, as intended, to

do something that the city of New York wanted to do. So this new

facility is going to be owned not by the Yankees at all. It is going

to be owned by an entity in effect owned by the city of New York,

and we are going to be a tenant there.

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And without there being a Stadium—remember, we don’t pay

taxes now—the money that we’ll pay this entity will go to service

the bonds. So as a result, no money is coming out of the Treasury

of the city of New York that could have gone to schools, could have

gone to hospitals or could have gone anywhere else. It is all going,

in effect, to the landlord in words to pay the bonds. The money is

coming, in effect, through our PILOT payments from the Yankees.

And Mr. Pinsky can add or disagree with me, but I don’t think

he will.

Mr. CANNON. Let me just say that, in the process, the city is

shedding some liability as the current landlord that you’re the tenant to, right?

Mr. LEVINE. Under the present system, the city is responsible for

the maintenance and repair of Yankee Stadium. That is a lot of

money and will continue to grow as the Stadium goes into disrepair. Under the new Stadium, that entire amount will become

the responsibility of the New York Yankees.

Mr. CANNON. Fundamentally, I don’t think taxes are owed. We

derive really interesting ways of rending cash out of the body of the

public. But to look at something as ripping off tax just seems to me

to be wrong.

I appreciate the fact that you guys came forward. I’m anxious to

get it done and get up there and watch a game.

With that, let me yield back, Mr. Chairman.

Mr. KUCINICH. I thank the gentleman.

The Chair recognizes Mr. Cummings for 10 minutes.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

I just again go into the integrity of the process. Where were you

all going to go, Mr. Levine? Where were you going to go? Were you

coming to Baltimore or what? We have one team.

Mr. LEVINE. And you have a great team. You have a great team.

Mr. CANNON. If the gentleman will yield, we don’t have a professional baseball—we have a team but not a top-tier team. We’d love

to have you in Salt Lake City if you decide that this deal is not

going to work out.

Mr. LEVINE. It has been no secret for many, many years before

this was done that the New York Yankees said if they didn’t have

a new Stadium, they would have to look elsewhere. And, believe

me, there were no shortage of suitors. We think of ourselves as a

paradigm in Major League Baseball and in professional sports. But

we said over and over again we wanted to go the extra mile to stay

in The Bronx, and we are happy we did. But it has been no secret.

Go back and look at the all the stories. There was no lack of suitors

for the New York Yankees.

Mr. CUMMINGS. I was really kind of kidding you, because I assumed that.

But, Mr. Pinsky, on a more serious note, as you’re aware, the

Federal law requires that a municipality seeking Federal taxes and

treatment for bonds issued—a bond—for bonds issued projects serving a private purpose like a sports stadium finance the bonds with

primarily public funds, which the Treasury Department interprets

as meaning the bonds must be financed with generally applicable

taxes. However, Mayor Bloomberg and you seem to want it both

ways. You tell the city and the State audiences who don’t want to

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hear that their tax dollars pay Carl Pavano’s salary, that the Stadium PILOTs are not, in fact, foregone tax revenues but are instead private payments as we just heard. Then you turn around

and tell the Federal Government that PILOTs are tax revenues

and, thus, public money.

For example, Mayor Bloomberg defended the Mets and Yankee

Stadium projects by contrasting tax-backed bonds with PILOTbacked bonds, stating that, ‘‘others build stadiums with public

money. We built these stadiums with private money, and the State

and the city put in a relatively small amount for infrastructure.’’

Similarly, at Mr. Brodsky’s State assembly hearing, you testified

that, ‘‘the entirety of each Stadium is being financed entirely by

payments from the teams themselves.’’

You further explain, ‘‘the specific structure involved charging the

Yankees a payment in lieu of taxes [PILOT], and then using the

PILOT stream to back the bonds to pay for the Stadium.’’ Though

at the time some mistakenly characterized this as a diversion of

city tax revenue to a private project. The fact is that because the

Stadium had always existed on city owned land, and I think you

just talked about this, Mr. Levine, it never had been subject to real

estate taxes. The structure therefore represented no net loss of expected revenue to the city because both before and after the project

the real estate taxes received by the city’s general fund from the

Stadium remain unchanged.

I have to commend you. Your elegant argument is precisely the

one that we have been trying in vain to get the Treasury Department to accept. PILOTs in this context aren’t taxes because they

don’t replace taxes. Economically, they function as private payments.

Of course, the IDA didn’t display such common sense when it requested a tax exemption from the IRS. Instead, you plainly stated,

‘‘the city has determined to use its property taxes—in this case,

PILOT—to finance the construction and operation of the Stadium.’’

Mr. Pinsky, which is it? Are the PILOT payments private or public money? Are they a private payment and therefore not generally

applicable tax—generally applicable tax? Or are they a tax payment and therefore not the Yankees’ money but the city’s?

Mr. PINSKY. They are a payment in lieu of generally applicable

taxes, which is exactly what we explained to the IRS. But what

made this project particularly attractive to the city of New York

was the fact that, currently, the city of New York receives no real

estate taxes from the Yankees. In this project, what we were able

to do was impose a tax on the Yankees which is a generally applicable tax and use that money to finance the Stadium. The net effect of that is that the city of New York ended up in the same place

it had been previously, which is that it wasn’t receiving into its

general fund the real estate taxes. But the Yankees were in a materially less profitable position in that they were now paying taxes

and that those taxes are payments in lieu of taxes, were financing

the Stadium.

Mr. CUMMINGS. In the final regulations, the Treasury Department tightened the use of PILOTs to finance taxes and bonds.

Among other changes, the regulations now prohibit a fixed PILOT

and require that the PILOT float at a fixed percentage of the anVerDate 11-MAY-2000 13:19 Jun 01, 2009 Jkt 000000 PO 00000 Frm 00091 Fmt 6633 Sfmt 6633 U:\DOCS\49622.TXT KATIE PsN: KATIE
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nual tax that they ostensibly replaced. Do you agree that if these

regulations were applied to the Yankees’ project, it could not have

been structured in the way that it was eventually was?

Mr. PINSKY. It could not have had a fixed PILOT, that’s correct.

But that doesn’t necessarily mean that the project could have happened. It would have had to have been structured differently.

The important thing to know, though, about the IRS regulations

is that the IRS isn’t saying that you can’t use PILOTs; and it is

also not even saying that you can’t use fixed taxes. And the reason

why the city of New York and the State of New York objected to

the proposed regulation is because in certain States you’re actually

able to fix the taxes, which would mean that you could do the exact

same structure even under the new IRS regulations in States, as

I understand it, like California and Minnesota; and because of the

way that the New York State and city Tax Codes were, you can’t

do it because we can only fix PILOT payments.

That is the only change. The IRS was not saying that you can’t

use PILOT-backed bonds. It is not saying that you can’t use

PILOT-backed bonds to finance economic development projects, and

it is not saying that you can’t use PILOT-backed bonds to finance

stadia.

Mr. CUMMINGS. So you are saying that if—let me make sure I

am sure what you are saying. So, if the Treasury Department did

not grandfather the Yankee Stadium project and exempt them from

the new PILOT rule, what are you saying that they had not done?

Mr. PINSKY. What I am saying is that the only option for the city

would have been to impose a floating PILOT rather than a fixed

PILOT.

And just to clarify one thing. The regulation that was imposed

and that was issued, in all due respect to Randy, although it helps

potentially the Yankees and the Mets, was most important to us

because of the impact that the new regulation would have had on

the Atlantic Yards project in Brooklyn, which is a major economic

development initiative of the city and the State; the issuance will

be through the State, not the city or the IDA, but a major economic

initiative that has not gotten underway.

Mr. CUMMINGS. Mr. Chairman, I am going to yield back the balance of my time.

Mr. KUCINICH. I think we have covered most of the questions

that this subcommittee has for the day.

I would like to state, once again, that it has been disappointing

that the city has not produced 70 percent of the remaining responsive documents.

This subcommittee is not in the business of ‘‘got you.’’ We have

provided time for—reasonable time for witnesses to be able to respond, to be able to tell their story, not to try to trap you in half

answers, but just to keep moving on so we get to what is happening here.

It would be more helpful if the city was ready to be more forthcoming than it has. And as Mr. Cannon points out, the attorneyclient privilege, which has been claimed, is really not relevant to

a congressional investigative committee, which is why you can expect that we are going to proceed with the inquiry.

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I do want to say that, on behalf of the subcommittee, that we are

grateful for the appearance of each and every witness here. And I

say this with great respect for the institution of the New York Yankees and for the work that Mr. Pinsky does, as well as for Ms.

Stark, who I think was forthcoming today in her answers, and we

appreciate that. And for Assemblyman Brodsky, who certainly is

working in public service in trying to have the opportunity to look

at this in the many different ways it can be presented. But we are

going to continue our work here, and make no mistake about that.

This is the Domestic Policy Subcommittee of the Oversight and

Government Reform Committee. Our hearing today has been

‘‘Gaming the Tax Code, the New York Yankees and the city of New

York Respond to Questions About the New Yankee Stadium.’’ And,

again, the subcommittee will continue its work.

Mr. Cannon, I want to thank you for your presence here and for

your work in the U.S. Congress. Mr. Cummings, thank you very

much for your presence here today.

This committee stands adjourned.

[Whereupon, at 1:05 p.m., the subcommittee was adjourned.]

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