    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

      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

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     HENRY A. WAXMAN, California, Chairman
    EDOLPHUS TOWNS, New York             TOM DAVIS, Virginia
    PAUL E. KANJORSKI, Pennsylvania      DAN BURTON, Indiana
    CAROLYN B. MALONEY, New York         CHRISTOPHER SHAYS, Connecticut
    ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
    DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
    DANNY K. DAVIS, Illinois             MARK E. SOUDER, Indiana
    JOHN F. TIERNEY, Massachusetts       TODD RUSSELL PLATTS, Pennsylvania
    WM. LACY CLAY, Missouri              CHRIS CANNON, Utah
    DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
    STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
    BRIAN HIGGINS, New York              DARRELL E. ISSA, California
    JOHN A. YARMUTH, Kentucky            KENNY MARCHANT, Texas
    BRUCE L. BRALEY, Iowa                LYNN A. WESTMORELAND, Georgia
    ELEANOR HOLMES NORTON, District of   PATRICK T. McHENRY, North Carolina
        Columbia                         VIRGINIA FOXX, North Carolina
    BETTY McCOLLUM, Minnesota            BRIAN P. BILBRAY, California
    JIM COOPER, Tennessee                BILL SALI, Idaho
    CHRIS VAN HOLLEN, Maryland           JIM JORDAN, Ohio
    PAUL W. HODES, New Hampshire
    CHRISTOPHER S. MURPHY, Connecticut
    JOHN P. SARBANES, Maryland
    PETER WELCH, Vermont
    JACKIE SPEIER, California

                          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         DARRELL E. ISSA, California
    DIANE E. WATSON, California          DAN BURTON, Indiana
    CHRISTOPHER S. MURPHY, Connecticut   CHRISTOPHER SHAYS, Connecticut
    DANNY K. DAVIS, Illinois             JOHN L. MICA, Florida
    JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
    BRIAN HIGGINS, New York              CHRIS CANNON, Utah
    BRUCE L. BRALEY, Iowa                BRIAN P. BILBRAY, California
    JACKIE SPEIER, California
                        Jaron R. Bourke, Staff Director

                                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

      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 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 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 tax-exempt 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
    Ottley-Brown. We do not know the details of their conversation,
    either because the details do not exist or because the city has
    withheld 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 tax-exempt 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 Department 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:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.
        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 hoping 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.
        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, 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
    support 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 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 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 appropriations-backed 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 tax-exempt 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 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:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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 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.
        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 reproduction 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 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:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.
        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 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 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 dollars, 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.
        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 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?
        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.
        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 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.
        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 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
    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 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:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        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.
        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?
        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?
        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.
        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. Ottley-
    Brown 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. Ottley-
    Brown 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 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.
        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.
        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 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 Stadium 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?
        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.
        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 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 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.
        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 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 PILOT-
    backed 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 annual 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
    attorney-client 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.
        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.]