Though the Yankees’ and Mets’ new stadiums are ‘privately funded,’ the tax breaks they receive keep New York from funding more important services.
In 2006, before the financial crisis, New York City finally reached an agreement with the New York Yankees and the New York Mets that allowed both teams to build their new, sparkling stadiums in the Bronx and Queens, respectively. The New Yankee Stadium is a palace, a technological wonder that blends the history of the Yankees with the capitalist progress of the 21st century. It is a testament to everything baseball used to be, and all that it is now. The total project cost was an estimated $2.3 billion.
The Mets modeled their new stadium after the old Ebbets Field, and by all accounts it’s a marvel. It boasts some of the best concessions in the league, and has character the New Yankee Stadium lacks. The total project cost was an estimated $830 million.
These figures might be higher than any estimates you’ve heard before. That’s because these estimates take into account tax breaks the teams received, which the city was more than happy to offer. New York City deserves some credit. They avoided the pitfall many other cities have succumbed to and did not provide any subsidies for the stadiums themselves. That allowed the teams to proclaim that their stadiums were “privately funded.” But tax breaks are just as significant—if not more so—than direct subsidies.
For example, the Yankee Stadium tax credits include:
- Forgone $416.6 million in future property taxes
- Forgone construction sales and mortgage recording taxes of $30.5 million
- Forgone rent credits of $25 million
Between the two baseball stadiums, the city is forgoing roughly $1.08 billion (yes, billion) in basic taxes. This figure takes into account the supposed economic “benefits” of having two baseball teams in the city, like sales tax on merchandise, tickets, and parking revenue (which has its own bankruptcy story).
Remember, this is not money given to the teams. This is money owed to the city by tax law, but the city allows the teams to keep it in order to entice them to do business in their jurisdiction. There is nothing inherently wrong with this practice, and it is indeed common within professional sports, and big business in general.
The problem begins when the city doesn’t have money to pay for firefighters or teachers.
Like most other cities, states, and the country as a whole, New York City is in serious budgetary trouble. Their $66 billion budget proposal includes cuts in virtually every area, including firehouses. Mayor Bloomberg’s initial proposal featured 20 firehouse closings across the city, despite the fact that 2010 was the busiest year in the New York Fire Department (FDNY) history.
According to an FDNY report, most of the closings mean a delayed response time of 30 to 45 seconds across the city, with some areas seeing delays of over five minutes. As any firefighter will tell you, the first few minutes of a fire are the most critical. It’s hard to affect the most critical point of a fire when you’re stuck in Manhattan traffic 10 blocks away.
Combine the proposed closings with the hiring freeze on new firefighters, and more engines will be responding to more fires further away than ever before. There were few people who understood precisely how this would affect the average New Yorker, other than the basic understanding that should a fire start, it would be more likely to spread.
Luckily, the city was able to avoid closing the firehouses with last-minute budget tweaks. But it is imperative that we don’t fall into the “No harm, no foul” logic trap.
Just because the firehouses weren’t closed doesn’t mean there were no effects to the stadium tax breaks. Instead, the firehouse closings should serve as a public reminder that there are always effects to tax breaks, especially massive ones to multi-million dollar private companies like sports enterprises.
There is an opportunity cost to everything we do. When I go out to dinner, I’m forgoing the purchase of some other item with that money, perhaps an item I would have derived long-term enjoyment from, like a poster or a pair of headphones. Everything we buy comes with a hidden cost, because it prevents us from buying something else we might need or want.
Governments are no different. They have a fixed budget and cannot spend money on everything—although sometimes it may seem like they can—and must make tough choices as to what deserves funding and what doesn’t.
Sometimes, the choice is quite clearly in front of them: they have $1 million and need to decide whether to build a new elementary school or repair Main Street. Other times, the choices are less evident, but still present. If they give tax breaks to an enterprise, what won’t they be able to pay for in the future?
When considering the Yankees and Mets tax breaks, the city council likely never debated, “Will we have to close firehouses or lay off thousands of teachers in order to meet our budgetary restraints?” More likely, they failed to consider the consequences—because if they actually considered and approved this tradeoff, their ignorance would become criminal—and are left with tough decisions years down the road.
Stadium subsidies and tax breaks are often extrapolated concerns. Economists speak of terms like “opportunity costs” or “substitution effect,” and it alienates the general public and politicians from the issues themselves.
Whether the local government should even be concerned with keeping professional sports teams is a separate matter entirely. What constitutes a legitimate government function will differ from person to person. However, even considering the worst-case scenario—New York lost both its teams because they couldn’t build new stadiums—most would still agree firehouses are more important. As New York firefighter and union delegate Kenneth Hettwer said, “What is more important, the lives of New Yorkers or an entertaining pastime put on by multi-million dollar corporations?”
This question may seem like hyperbole from a biased source, but it’s not. It is a legitimate summary of cost considerations that politicians and the public alike have ignored for decades. A hidden cost does not equal a false cost. There are real consequences to corporate welfare, and even greater consequences to ignoring them.
–Photo Johan Lange/Flickr