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Yankee third baseman Alex Rodriguez has yet to swing a bat in the stadium known as "the house that Ruth built," but already many in the city believe that the highest paid baseball player in the world is worth every penny of his $252 million contract.
The Yankees have already surpassed their record for annual ticket sales. Modell's Sporting Goods can't keep Rodriguez's number 13 jerseys in stock. And television ratings and cable and advertising rates for Yankee games are expected to skyrocket.
But it isn't just Yankee owner George Steinbrenner who is seeing dollar signs.
When A-Rod made a visit to City Hall, even Mayor Michael Bloomberg began calculating what the city's newest millionaire resident might mean for New York.
"It is true that Alex's salary, the taxes on that, are going to balance the budget for the next seven years," joked Bloomberg.
Sports are big business in New York. A city comptroller's report estimated that the sports industry is worth as much as the entire construction industry. There is even a city agency dedicated to sports and a commissioner charged with growing "a healthy environment for professional, amateur, and scholastic sports activities."
Sports are also driving some of New York's biggest plans for the future.
City officials are already working to build a professional basketball arena for the Nets in Brooklyn. Last week, Mayor Bloomberg put his full support behind a controversial plan for a $1.4 billion football stadium on the west side of Manhattan for the New York Jets - that would also be a key part of a bid for the 2012 Summer Olympic Games. (Read articles by Jets President Jay Cross arguing for the stadium and Joe Restuccia against the stadium.)
Politicians claim that these enormous projects will bring tens of thousands of jobs and billions of dollars to the city.
But critics counter that such economic predictions are wildly inflated. Much of the money goes to developers, player salaries, and media tycoons. Stadiums cost taxpayers millions of dollars. And those authentic A-Rod jerseys that cost $199 are not even made in the U.S., let alone New York.
Sports, they say, can make us cheer or jeer, but they don't do anything for the bottom line.
While New York is often called the financial capital of the world and the media capital, the city can also make a case for being the sporting capital.
The city claims five professional sports teams within its borders:
Two minor league baseball teams:
And that is not including the teams associated with New York that play in New Jersey and on Long Island:
Each major professional league has its world headquarters in New York. The city is home to huge annual events like U.S. Open tennis tournament and New York City Marathon. And every year, the city plays host to dozens of smaller events, like the Millrose Games track and field competition, the Big East college basketball tournament, professional cycling, and even "Man vs. Machine" chess, which featured a match between the top player Garry Kasparov and a computer.
City Hall officials estimate that the sports industry generates $11.5 billion a year, or 2.5 percent of the city's total annual economy.
"It is just a fact that sports play a significant part in the city's economy," said city Sports Commissioner Kenneth Podziba. "The reason we can host so many successful events is that we have an international fan base. New Yorkers are the most passionate and knowledgeable fans."
The New York Yankees - with their 26 World Championships - are the most lucrative sports franchise in the city, and arguably the most recognized sports team in the world. On any game day, the Yankees employ about 2,000 people.
In the past, the city comptroller's office has estimated that each time the Yankees make it to the World Series, it generates between $60 and $90 million for the economy, based on ticket and concession sales, media payments, and other money spent on restaurants and merchandise. The Yankees have made it to the World Series six times in the last eight years.
This week, the Yankees will try to expand their international appeal and boost tourism by opening their 2004 season in Japan, which is the most lucrative foreign tourism market for New York, sending more than 300,000 visitors a year to the city.
However, some budget watchdogs and experts say that the economics of sports often don't add up.
The biggest expense for most professional sports teams is player and owner salaries. (The New York Yankees have the highest payroll in baseball at $156 million a year, or three times the payroll of the Florida Marlins, who beat the Yankees in the World Series last year.) But most players do not live in the city - with rare exceptions like Mets first baseman Mike Piazza - and so they do not spend that much of their salaries in the city or pay local taxes.
"When the commuter tax was abolished [in 1999], we even lost our ability to tax players from the suburbs and from visiting teams," said Doug Tureskey of the Independent Budget Office, who estimated that, when the commuter tax was still in place, the city earned $500,000 in annual tax revenue from Mets and Yankee players and their opponents.
Also when the average Yankee fan pays $45 for a ticket, it is not really additional money being spent in the city, economists say. That money would likely have been spent at a restaurant, clothing store, or Broadway play anyway.
Sports often cost taxpayers and the city government long after stadiums and arenas are built.
For the last 20 years, Madison Square Garden has received a property tax exemption worth $12 million a year. Under city tax law, the tax break is given because major league hockey and basketball teams play there, and without it, the law reads, the "loss of the teams is likely."
Since it was implemented in 1982, it has cost the city more than $200 million.
Critics argue that such taxpayer subsidies are a waste of money, given that Madison Square Garden, L.P. - , which owns the Knicks, Rangers, the MSG and Fox Sports New York television networks, and Radio City Music Hall is a profitable company that did more than $772 million worth of business last year.
When one adds up the billions of dollars in taxpayers' money that goes to fund stadiums and arenas, the cost of police and sanitation, and delays from traffic congestion, economists say, sports has little or no effect on the local economy.
"By having a sports team or a new stadium or arena, you don't increase the level of per capita income, and you don't increase the level of employment," said Andrew Zimbalist, a professor of sports and economics. "There's no direct economic development of communities."
Six dozen new ball parks, stadiums and arenas have been built in the U.S. in last 10 years. In many cases, the argument for funding the projects with public money was that they would help grow the economy, revive neighborhoods, and produce jobs.
But what often convinces the public and officials to spend the millions is the fear - one of the worst fears a sports fan can have - that their teams would repeat what happened in New York half a century ago.
In 1957, both the Brooklyn Dodgers and the New York Giants baseball teams left for California. Mayor Robert Wagner and other elected officials tried in vain to keep the teams in New York, even offering to build new ballparks. Many New Yorkers still mourn that day.
"When I was 12 years old I cried like a baby when the Dodgers left for la-la land," said Brooklyn Borough President Marty Markowitz.
In the 1990's, Mayor Rudolph Giuliani, a die-hard Yankees fan, pushed for a new Yankee stadium on the west side of Manhattan when owner George Steinbrenner said he might leave for New Jersey. Political opposition eventually killed the plan and the Yankees stayed anyway.
But Giuliani did not give up on his stadium quest, and he led the effort to build two minor league baseball stadiums, which opened in 2001. While the teams have been successful - the Brooklyn Cyclones have sold out 106 consecutive games - some in the neighborhood say they are still waiting to see the benefits on the local economy. (Read articles about the Coney Island and Staten Island stadiums.)
When asked why he did not put the minor league stadiums up for a public vote, Giuliani replied, "Because people would have voted it down. That's why you need a leader. Somebody who has some vision."
Mayor Bloomberg - who wrote in his autobiography that he didn't care much for sports - has continued Giuliani's stadium vision, but in a different way.
Bloomberg hired Daniel Doctoroff, founder of the Olympic 2012 bid and part owner of the New York Islander's hockey team, as his deputy mayor of economic development. He also appointed former Yankee executive Joseph Perello as the city's official marketing director.
In January, the mayor quickly backed real estate developer Bruce Ratner, who placed the winning $300 million bid for the New Jersey Nets basketball and has plans to build a new basketball arena in downtown Brooklyn on Atlantic and Flatbush Avenues. (Read articles for and against the Brooklyn arena.)
And last week, Mayor Bloomberg and Governor George Pataki officially announced a $2.8 billion development proposal for the far west side of Manhattan that would nearly double the size of the Jacob Javits Convention Center and include a 75,000-seat stadium for the New York Jets. Officials said the expanded convention center and new stadium would help create more than 15,000 jobs for the city and provide more than 500,000 days of additional hotel stays per year.
"We are bringing the New York Jets home where they belong, and capturing millions of dollars a year and thousands of jobs now lost across the river," said Bloomberg, "[It will] make all of New York more vibrant and economically sound for generations to come."
If the stadium helps lure the 2012 Summer Olympic Games to New York, organizers estimate that the New York-New Jersey region could expect tens of thousands of new jobs and a local economic impact approaching $11 billion. (Read more about the Olympic bid.)
But the plan has steep costs.
The stadium would be financed with $600 million from the city and state, which would pay for the retractable roof and the platform over the rail yards. The Javits expansion would be financed by $600 million from the city and the state, and $500 million from a $1.50-per-night hotel tax. The extension of the number 7-subway line from Times Square to the far west side would cost $2 billion.
Response to the west side stadium plan has been mixed.
Many business groups support the plan, in part because they have long wanted more convention space, which Kathryn Wylde of the Partnership of New York, called the "single most important public investment that the city and state can make."
Several union leaders have endorsed the plan because it means jobs for construction workers and others.
Some elected officials like City Comptroller William Thompson are still examining the proposal, while some area business and neighborhood groups like the Hell's Kitchen/Hudson Yards Alliance vehemently oppose the plan. (See links to websites of groups for and against these projects.)
A New York Times editorial argued that while extending the subway line, creating parks, and expanding the convention center are all good ideas, the west side plan could also "leave the city with nothing but a football team playing on the river, more traffic congestion and a pile of new debt."
While the economic affects of sports on the city may be debatable, some say that debate misses the point -- how can you price a beautiful jump-shot? Sports offer intangible benefits that tangibly add to the allure of New York.
"To say that it doesn't benefit an economy is different from saying it doesn't have any value," said Zimbalist. "It's a form of social and cultural enrichment."
And political enrichment too -- embattled Mayor John Lindsay is said to have won reelection in 1969 in some large measure because that was the year that the "Miracle Mets" won the World Series against very long odds.
Sports can offer a sense of community, instill civic and hometown pride, and even inspire historians, artists, and writers who contribute to the cultural life of the city.
When poet Walt Whitman saw children playing baseball in the streets of Brooklyn he urged New Yorkers: "Let us go forth awhile and get better air in our lungs. Let us leave our close rooms... the game of ball is glorious."
Gotham Gazette's Related Articles:
Stadium Fever
Olympics 2012 and New York
West Side Stadium
Netting the Nets by Marty Markowitz
Field of Schemes by Letitia James
Related Links:
New York City Sports Commission
New York City Department of Economic Development
2012 Olympic Bid
Websites for organizations advocating and fighting for new stadium plans in New York
Professional Sports Franchises Located in New York City:
Yankees
Mets
Rangers
Knicks
Liberty
Other Sports and NYC links:
U.S. Open Tennis
NYC Marathon
National Track and Field Hall of Fame
Brooklyn Cyclones
Staten Island Yankees
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Ever since the New York Jets temporarily relocated across the Hudson River in 1984, we have been trying to come back. It's been a long and difficult road. We will soon finish our journey home to where we belong, right here in New York City.
The New York Sports and Convention Center will be unlike any other facility in the world. And more importantly, it is not only good for the Jets. It is great for New York.
Some people argue - with almost religious fervor - that stadiums are uniformly bad investments for municipalities. But just like any other public/private partnership, every stadium is different, with several factors influencing whether it represents a sound investment:†the uses the facility will serve beyond sports, the amount of economic activity those uses will generate and the ratio of public to private investment.
Unlike facilities that are used solely for sports, the New York Sports and Convention Center is designed to be truly multi-purpose. It will only be used 15 to 20 days a year for stadium events. But it will be used another 100 plus days a year for conventions, trade shows and expositions, and at least one week for super events, like the Final Four, the Super Bowl and political conventions.
With its new, expanded convention corridor, New York City will finally have a first-class mid-size convention center of 200,000 square feet. It will work in tandem with Javits Convention Center, offering existing shows ancillary space to expand south, a major plenary hall and corporate hospitality facilities.
Let us also be clear: This stadium is not the long-awaited expansion of the Javits center; it is part of the long overlooked expansion of the convention business.
Javits is fully booked. But because the nationwide average size of a show is about 200,000 square feet, the sports and convention center is ideally suited to go after this mid-size market. There are approximately 1,600 of these mid-size events throughout the nation that could be accommodated in this facility, let alone thousands more in Europe. Right now, those shows are simply lost to other cities.
Being ultra-conservative, can't we assume that New York City can attract just 35 of those 1,600 events annually?
Although the New York Sports and Convention Center will be a revolutionary facility, it is not a revolutionary concept. There is precedent for the stadium/convention model, most notably the Americas center in St. Louis. Along with the Rams, it serves as host to 45 expo events a year, with the key to its success being the fact that it was conceived as both a stadium and a convention center.
Some people remain skeptical about whether the stadium can double as a viable convention center, but all of the leading show producers in New York have lined up in support of the sports and convention center. When taken together, these endorsements represent more than 30 events on the calendar - and we haven't even printed a single brochure.
The convention center component is critical because it generates so much economic activity around the city through booked hotel rooms, restaurant reservations - and even Broadway shows. Altogether, the New York Sports and Convention Center will generate $75 million a year in new tax revenue to the city and state. One Super Bowl alone would generate an additional $27 million.
As with any public/private partnership, the question remains the same: Does the increase in tax revenue, coupled with the private investment, justify the public investment?
City Council finance committee chair David Weprin answered that question in an analysis of the economic impact the sports and convention center would have. His conclusion was unmistakable: The sports and convention center is a great investment in New York's future. It will more than pay for itself, just like the Javits center does today.
The reason why this project is so different from others is twofold: the broad mix of uses the facility can accommodate, and the unprecedented $800 million private investment that the Jets are making. In order to take advantage of that private investment, a platform must be built. And in order for the facility to double as a convention center, a retractable roof must be incorporated, both of which are appropriate public investments in infrastructure.
So as Councilmember Weprin's analysis confirmed, for a $600 million city and state investment, the sports and convention center will generate a $1.3 billion return in tax revenue.†It will also create 18,000 construction jobs, and 6,800 permanent jobs.
Many of the benefits to the city cannot be measured in dollars alone. The New York Sports and Convention Center will stand as a new architectural icon for Manhattan's west side, its steel frame evocative of the George Washington Bridge. With its 34 wind turbines and solar collectors, it will set a new benchmark in sustainable design.
It will be an active, neighborhood-friendly facility, incorporating a museum, a community theater, several of the city's signature restaurants and more than 10,000 square feet of retail space along the avenues. It will breathe new life into the High Line as a pedestrian walkway and double the size of Hudson River Park between 30th and 33rd streets. And, it will serve as a bridge between the west side and the waterfront - over the highway that now divides them.
And should we realize the Olympic dream of playing host to the games in 2012, it will serve as an Olympic stadium, the envy of the world. The Olympics is not the sole reason to build the stadium, and none of the economic activity I have cited depends on what may happen in 2012. But our nation's bid to secure the Olympics does depend on whether we build the stadium - and if we don't build it, they will not come.
Jay Cross is the president of the New York Jets. This article was adapted from a speech given at the Crain's Breakfast Forum on March 16.
So many people are so optimistic about budget surpluses in the city’s budget both this year and next – the Independent Budget Office projects a $1.6 billion surplus for the current fiscal year, ending in June, and more than a $500 million surplus next year – that the mayor and the city council are bickering over not whether but how to cut taxes.
But in terms of basic city services, the budget prospect is far less comforting. City expenditures in the mayor’s current plan grow from $46.5 billion in 2004 to $52.3 billion, according to projections by the Independent Budget Office, which represents three percent a year. This, however, is misleading: Most city programs and services average only 0.4 percent growth per year. Several are actually losing funding over the next four years, among them youth services, aging, cultural affairs, children’s services, parks, and housing. Most of the growth in spending comes from mandated expenses for debt service, pensions, Medicaid, and fringe benefits.
This problem of flat or declining city-service funding is compounded by the persistence of longer-term budget deficits, an average of more than $2.2 billion a year from 2006 to 2008, according to the Independent Budget Office. One major cause of these shifting priorities and future deficits is the city’s roller-coaster approach to tax policy.
At the council’s preliminary budget hearing earlier this month, Ronnie Lowenstein, director of the Independent Budget Office, listed four uncertainties in the mayor’s four-year plan:
The campaign’s March 1 proposal for funding the schools(which they call a “work-in-progress”) suggests a statewide, fully-implemented plan to provide a sound basic education to all students would cost $9.5 billion more than is currently being spent, 49 percent of which ($4.7 billion) would go to New York City. The big unknown is how much of that $4.7 billion would come from increased city, not state, funding. The campaign’s own estimate (see page 27 of their proposal) would represent a 35 percent increase in city-funded per capita funding from the 2001-2002 year ($4,362 per pupil) to the fully-implemented year ($5,878).
Several other uncertainties revolve around Governor George Pataki, his many public authorities, and the state legislature. The good news in early March was the decision of the state appellate division to approve the legislature’ s $2.5 billion five-year takeover of the city’s Municipal Assistance Corporation debt, a move the Governor has blocked. ($500 million of that deal is still part of this fiscal year’s budget.) The bad news was a state authority’s appeal of the decision to the state’s highest court.
On another front, the projected $400 million in new state aid is, as always, a question mark at this point. The City Comptroller says half of the $400 million is at risk. But still another major uncertainty is how Governor George Pataki will help or hinder the city in a number of economic development and governance issues that, at least tangentially, can affect the city’s budget. A highly critical report on public authoritiesfrom the office of the state comptroller, Alan G. Hevesi, is a reminder of how secretive, self-serving, and unaccountable state authorities can be: “A culture of arrogance,” he says, “pervades these entities.”
Through one or another such authority, the governor controls the future of the World Trade Center site, the Javits Center expansion, Governors Island, and the Olympics/Jets/commercial West Side project. The style of such authorities was illustrated at a recent Baruch College Newman Institute seminar about the “Lessons of Battery Park City.” A founder and one of three current board members of the Battery Park City Authority proposed to fill in another 25 acres of the Hudson River at its north end and suggested the Authority take over all development in downtown Manhattan, including Governors Island.
The mayor’s bold fiscal strokes last year have had a very positive effect on the current plan. The large budget surplus for this year and the smaller anticipated surplus for next year stem in large part from the property, personal income, and sales tax increases that the mayor proposed and, with modest changes, the council enacted in the last budget cycle. On the other hand, the mayor and council made the increases temporary, ignoring the chance to achieve structural budget balance, i.e., a long-term balance between revenues and expenditures.
As the new tax rates are phased out, the city will lose over $1 billion a year in tax revenues, most of it from the progressive personal income tax, where the cancellation of two top rates (4.25% and 4.45%, for couples making over $150,000 and $500,000, respectively) will sharply narrow the gap between rates for lower- and higher-income New Yorkers. The 4.45 percent top rate, incidentally, was the prevailing top rate for most of the 1990s, through both bad and good economic times.
The balanced-budget news has prompted competing tax relief programs between the mayor and council. The mayor wants to give up $250 million in property tax revenues through a rebate of $400 for co-op, condo, and house owners’ property taxes. That leaves out any relief for renters and business owners.
Council Speaker Gifford Miller announced a $300 million tax-cut package in his February 25 State of the City speech, including property tax relief for low-income seniors and the two percent across-the-board property tax rate decrease. The relief for seniors is progressive, and the inclusion of renters in the plan is more broad-based than the mayor’s plan.
But the council rate decrease is only two percent, and therefore the bulk of the property tax relief will go to larger commercial owners. And neither the mayor nor speaker’s plan addresses the existing complexities and inequities in the property tax system. House owners on average have a better tax deal than co-op owners, and co-op owners have a lower burden than condo owners. Worse, the average renter, who earns less than the average owner, carries a much higher burden than the average owner.
The financial plan’s comfort with technical budget balancing and the lack of any vision in the 2004-2008 financial plan means that the increasingly smaller share of city funding devoted to basic services goes unattended. Beyond the bickering over a tax-relief package, the mayor and council will apparently spend the spring fighting, as usual, over “hidden service cuts” – the hundreds of programs funded by council and borough president initiatives that are simply left out of any four-year plan because the mayor calls them one-year-only programs.
So while the mayor and council bicker into June over perhaps $400 million of tax relief and budget restorations, the longer-term shift in budget priorities unfolds as if inevitable. Most service spending is flat or declining, while overall expenditures grow from $46.5 billion to $52.3 billion. IBO figures show Medicaid and pension costs skyrocket in dollars and as a share of the budget:
• In 2004, Medicaid costs $3.4 billion, or 7.4 percent of the total budget
• In 2008, Medicaid costs $4.5 billion, or 8.5 percent of the total budget
• In 2004, pension costs are $2.4 billion, or 5.2 percent of the total budget
• In 2008, pension costs are $4.2 billion, or 8.1 percent of the total budget
In contrast, basic services lose dollars and/or shares of the budget:
• In 2004, education spending is $12.7 billion, or 27.4 percent of the budget
• In 2008, education spending is $13.5 billion, or 25.8 percent of the budget
• In 2004, police spending is $3.5 billion, or 7.5 percent of the budget
• In 2008, police spending is $3.5 billion, or 6.6 percent of the budget
• In 2004, children’s services spending is $2.6 billion, 4.9 percent of the budget
• In 2008, children’s services spending is $2.2 billion, 4.1 percent of the budget
• In 2004, aging spending is $224 million, or 0.48 percent of the budget
• In 2008, aging spending is $199 million, or 0.38 percent of the budget
All in all, it would be good if the mayor and council could temper their bickering and publicly address some of the larger uncertainties that their own budget and their own governor pose for them in coming months.
Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.