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

                               __________

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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:]

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    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.]