the Jets West Side Stadium Proposal- Good Idea or Bad Idea?

Over the past year or so, the big debate has been over New York City building a new West Side Stadium for the Jets and for the proposed 2012 Olympics. While this drives the excitement of very many New Yorkers who dream of being able to host a Super Bowl and/or the Olympics, is it really a good idea? Before I explore that issue, let's look at some of the arguments that are made by the sides.

1. New York Jets, New York City, and New York State (their view)- They definitely want the stadium. New York State and New York City want it because they say that this stadium will be the only way that we get to host the Olympics. Another reason for it is that they feel that the new stadium will be a great new convention center that will replace the current Jacob Javitz Convention Center. Why do they want all of this? First of all, they want the Olympics because it has to do with pride. Ever since the attacks of September 11th, New York has been trying to get the world's sympathy in every way possible, so why not host the Olympics while we're at it? Second of all, they argue that the new stadium will bring in a lot of revenue as conventions, concerts, and international sporting events could take place in it.
The Jets want the stadium for one reason: to get rich. How does this happen? New stadiums get the fans excited, and it is also a chance for the owners to increase their earnings by selling and renting out luxury boxes. This is where they get most of their revenue.

2. Cablevision and Madison Square Garden- They don't want the new Stadium to be built because MSG has so far had a monopoly on the sporting market in Manhattan (hosting the NBA's Knicks and the NHL's Rangers) and they also have prestigious sporting events that are held there, such as the preseason and postseason NIT NCAA Basketball Tournaments. They also host a number of conventions boxing matches. Cablevision owns MSG, so they naturally don't want the stadium because the new stadium would create competition for them and cut into their profits.

- It can be said that both sides have different interests at stake, but what is the best course of action for the common taxpayer? Let's explore that.

1. First of all, the Jets proposed to pay $800 million for the construction of the new site while the taxpayers pick up the tab for the other $600 million. While it is true that no other sporting franchise in history has vowed that much for a building of a stadium to house their team, we should look more closely at it.
The Jets aren't really paying $800 million for it. Their payment of $800 million is really $450 million in a program called PILOTS (payment in lieu of taxes). What this means is that instead of putting down all the money for the construction, the Jets are actually paying $450 million while getting a tax holiday (meaning they don't have to pay tax on their revenues) until the stadium gets built. In essence, the Jets are paying far less than $800 million and are costing the taxpayers more than $600 million because since the Jets won't be paying the taxes they owe to the state, the regular people in the workforce will have to make up the shortfall by paying higher taxes in some form (whether it's income, property, or sales tax). Plus, there is no guarantee that the tax exemption will ever be lifted after the stadium is constructed.

2. There is even a higher cost involved with building a stadium. For one, if we hope to host an event such as a Super Bowl or the Olympics, it will require massive investment on new and improved infrastructure all over Manhattan (better highways and better mass transit systems and quite conceivably better sewer and utility systems). This will cost billions (not millions) of dollars. Who pays for this? The taxpayers do.

3. According to the Jets, building the stadium will bring in about $70 million in gross revenue to the city a year because it will lead to an increase of events being hosted there. New York City claims that this will be enough to money to be able to pay civil servants in the future. This number of $70 million is slightly flawed, because it accounts for $23 million in revenue that a Super Bowl hosting bid would bring in and no one city hosts the Super Bowl every single year, so the actual revenue numbers come out to about $45-50 million a year (Which means that if the implicit cost of building the stadium is $1 billion to the taxpayer, it can take up to 20 years to recover the cost nominally, but even longer since we need to take inflation into account).

So is this a good idea or a bad idea?
In my opinion, it is not just a bad idea, it is a terrible idea. First of all, we're at a time when New York City is mired with fiscal deficits and they use this as an argument not to raise the salaries of some crucial workers (particularly public school teachers). Building a stadium that will cost upwards of $1 billion dollars, plus the additional costs of added infrastructure improvements will send New York City deeper into debt (How will they make up this deficit? It's simple. New York City and New York State will have to hike taxes, cut government programs, hike fares for mass transit and tolls on bridges and tunnels, and those dreaded parking and traffic tickets will be completely inaffordable).

Secondly, the revenue numbers generated are too meager to undertake a project like this. When you cannot even break even until at least 25 years after the initial investment has taken place, it is definitely a sign of a bad investment. Most businessmen wouldn't touch a project of this sort if it took them that long to recover the money they first put in (But do the Jets and the politicians really care since they are not the ones really paying for it? I don't think so!).

Thirdly, look at all the cases where stadiums have been built around the country (either due to hotheaded fans or stubborn owners who threaten to move teams if they don't get their way) and tell me, have any of those stadiums created any financial benefit for the cities they represent? It is very rare that they do. The people of Milwaukee are up in arms that they built Miller Park for the Brewers (a major league baseball franchise) because it doesn't seem like they'll ever be able to break even. Even the most successful stadiums across the country such as Coors Field and Camden Yards have not yielded any financial benefits up to the standards that were first promised. The only people benefitting from a new stadium being built are team owners who make a large profit margin due to the new luxury boxes in the new stadiums. They are the only ones who stand to gain while taxpayers foot the bill for generations to come.

Fourthly, the worst idea of all is to put this structure in Manhattan. Manhattan has traffic nightmares to begin with, but can you imagine what would happen if you build a football stadium there? The capacity seating at the stadium is 75,000, so even if we were to estimate that 4 people ride in each car to a game, that would add 18,750 cars on the road. You can argue that many will take the subway there, but football fans have a tradition called tailgating (barbecue in the parking lot prior to games), and you can't do this on a subway car. Another point to be made here is that a stadium (and traffic) has a signifcant negative externality (an externality is an unintended effect that takes place due to a particular decision that was made) and that is air pollution. Barbecues, cars, and all the other wild stuff will lead to more pollution for sure.

Lastly, I think we can spend $1 billion in better ways. For instance, New York City school teachers have the worst starting salary of any public school system in the tri-state area. $1 billion can also go a long way towards reducing parking ticket fines and maybe cutting the price of bridge tolls. It's sad to see that there are schoolchildren who don't have textboooks to use because the city keeps saying that there is no money to buy new ones, yet the city is willing to pay upwards of a billion dollars for a building that will host 8 (that's right, only 8) NFL games a year! This is completely absurd.

In sum, the new stadium makes no sense in the financial and social aspect. While fans want this stadium to be built, New York City should do some more research as to what other benefits this building will be able to bring to the city. Here are some of my proposals if they decide to go through it:

1. Make the Jets sign a lease for at least 35 years to occupy the building. Also, put a provision that they will make all necessary repairs to the facility and not make the taxpayers foot the bill.
2. Put a tax on luxury box revenues that the owner will make. This will create a new stream of revenue for the city and increase the budget.
3. If the Jets won't agree to number 1, then let the Mets or the Yankees also use the stadium (those guys also want their own stadium, but we can't keep sending money don't the tube like that).

Okay guys... I know this post wasn't really that interesting, but I hope it has informed you in some way. You don't have to agree with me, but you can check the numbers for yourself (or lack thereof... if you go to the Jets web site, there is no detail as to how this revenue stream was calculated).