June 16, 2010

Yankees garages not paying rent; could raise taxpayer stadium cost to $1.5B

Just when you think the New York Yankees stadium deal (current public price tag: $1.2 billion) couldn't get any worse, along comes word from Daily News columnist Juan Gonzalez that the private operator running stadium garages is losing money, thanks mostly to higher-than-expected expenses.

That wouldn't matter to city taxpayers, except that according to its lease with the city, which actually built the new garages, the garage operator doesn't have to pay rent so long as it's losing money. (Or as Gonzalez puts it in today's column, "the city is last in line to get its rent and property taxes.") The garage operator is supposed to eventually pay both back rent and accrued interest, but if it never turns a profit — and given that the Yanks are already drawing at near capacity, it's hard to see how more people are going to show up to park in the future — then the city could be left holding the bag. A bag worth $340 million in garage construction costs.

This is, of course, exactly what Metro New York's Pat Arden warned could happen back in 2007; and what I worried about two years before that. Not that that'll stop people from claiming it was nonetheless unforeseeable.

CORRECTION: David Lombino of the NYC Economic Development Corporation points out that the garage rent payments don't cover the $340 million in total garage costs, but are rather an additional revenue stream that the city was supposed to receive after garage bonds were paid off. So the total exposure to the city if the rent isn't paid is just $2.3 million a year, which after parking inflation and discount rates comes to around $43 million in present value. (My bad for not reading my own spreadsheet, which had the $43 million figure in there all along.)

Since that $43 million was being counted as an offset against the city's stadium costs, this means the total public cost would still rise, but not nearly as much — to $1.22 billion, not $1.5 billion as I'd previously indicated. Apologies for the confusion (and for subjecting you the readers to so much math).