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Friday, March 11, 2005

Giants Stadium Was Always A Bad Deal For Taxpayers

We have written numerous times (here, here, here, here, and here) about the negations between the State of New Jersey and the New York Giants over a new stadium in the Meadowlands. We reached the conclusion that the best possible outcome for New Jersey taxpayers would be for the Giants to break their lease and let the team move out of the state.

Now that the Giants are threatening to do just that, New Jersey is suing the Giants to prevent their move out of the State.

With the New York Giants dangling the possibility of leaving New Jersey for the proposed West Side stadium in Manhattan, state officials went to court on Thursday to show that they will not allow the team to break its lease in the Meadowlands, which runs through 2026.
On a more positive note, the State has finally figured out that our current agreement with the Giants, calling for the taxpayers to maintain Giants Stadium in “state of the art” condition, is onerous and unfair. We wonder why the State hadn’t figured that out when they agreed to those terms in the 1995 deal that extended the Giants lease to 2026.

Lawyers for the state filed papers in Bergen County Superior Court, saying the Giants' proposal for the new stadium was "onerous and unfair" to taxpayers and asking a judge to clarify the extent of improvements necessary to make the Giants' current stadium state of the art, as the lease requires.

Giants officials have said that to meet that standard, the state must make $300 million in improvements to build luxury boxes, club seats and other amenities. State officials say less than $100 million in renovations will be required. In its filing, the state asked the judge to clarify the meaning of "state of the art" and asserted that the team and the National Football League should pick up part of the cost of any renovations.
Apparently the State has taken our advice. We wrote, “If the Giants raise the scepter of the cost for stadium updates, put your lawyers to work. The government finds a way to get around every promise and agreement with taxpayers, there must be a way to void agreements with tax receivers.”

We wish the State had taken the position that the cost of upgrading the stdium, at any cost to the taxpayers, was onerous and unfair. The improvements the Giants seek are not in the intrest of public safety, but are aimed to increase revenue for the teams’s owners.

A contract is a contact, so the State is now going to haggle over the meaning of “state of the art” and whether it will take $100 million or $300 million to achieve this standard. State of the art is ever changing, with each new or improved stadium setting that standard, the Giants will be able to come back to the State year after year until 2026 demanding taxpayer financed improvements. The only hope for the taxpayers to get out from under this burden is to let the Giants break their lease.

The negotiations come at an important time for Mr. Codey, who has had to propose a harsh series of program cuts and tax increases to cope with a projected budget deficit.

In the State Legislature, some lawmakers are leery about the state cutting deals that will benefit wealthy sports team owners at a time when Mr. Codey has proposed eliminating popular property tax rebates.
Note that the Acting Governor and the State Legislature are leery about the stadium deal because of budget deficits and the proposed elimination of the popular property tax rebates. The original Giant’s stadium deal, the 1995 extension deal and all the deals floated for a new stadium were lousy deals for New Jersey taxpayers. A bad deal is a bad deal regardless of New Jersey’s financial position.

Even at the New Jersey Sports and Exposition Authority, some board members said they believed that the current proposal benefits the Giants at the expense of taxpayers. The Giants would cover the cost of demolishing the existing Giants Stadium and building the new one, and the new stadium would relieve the state of the expense of renovating the existing stadium. But the state would agree to spend $30 million to extend sewer lines and make other infrastructure improvements.

And state records show that the $6.3 million rent the Giants would pay for the land beneath the new facility is $10 million less than New Jersey now receives annually from the operation of Giants Stadium.
Keep in mind the State of New Jersey was willing to go along with those terms. Not to mention the burden of paying off the $117 million dollars in debt the taxpayers still owe on the “old” Giants stadium; $700 Million to build a new stadium financed through tax-exempt bonds issued by New Jersey Sports and Exposition Authority; building and maintaining 30,000 surfaced parking spaces; giving the Giants 90% of the parking revenue from those spaces; full control over all events held at the stadium, including all stadium revenue generated for all events; and control over the companies that may advertise at the new stadium, Continental Airlines Arena and the Meadowlands Racetrack. The details may be found here.

Sounds like a pretty good deal for the Giants doesn’t it? So what caused the deal to break down? Read on.
State officials refused to guarantee that there would be no special taxes imposed on stadium revenues in the future. The state also insisted that the team give its immediate approval to the Xanadu entertainment and retail complex to be built near the stadium.
Apparently the Giants are familiar with New Jersey’s tax policy and history. The Giants have every reason to be fearful. The State has shown it is more than willing to force people that benefit from only the most basic government services, law enforcement and roadways, to pay ever higher taxes and an ever increasing portion of the State’s tax burden. Imagine the tax treatment the Giants would receive given the fleecing the State would suffer if the deal went through. The Giants owners saw the likely tax scenario and backed away from the deal. Smart move.

So to the State of New Jersey we say, don’t waste taxpayer dollars suing the Giants to stay, send them over to talk to NYC’s Mayor Bloomberg. Let the Giants break their lease and be thankful we are only stuck with the $117 million in old debt.

Now as to suing on the basis of proposals and programs being “onerous and unfair to taxpayers”, we’d like to see that role taken on by our proposed Department of the Taxpayer Advocate. We’re happy to see New Jersey officials finally recognizing the concept that State spending can be onerous and unfair to taxpayers. It’s a start.


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