Something smells funny around Yankee Stadium
Bloomberg covered an interesting story today about the bonds which financed the parking garages at Yankee Stadium in New York. The $237 million of securities are “revenue” bonds issued by the Empire State Development Corporation. They have no guarantee and no rating, and it looks likely that the bonds will default.
The main reason that the bonds face default is that attendance at Yankee games is off about 10% from last year. I don’t follow baseball so I’m not sure why that is happening (if you have ideas please leave in the comments below). But the revenue for these parking garages has declined much more steeply than baseball attendance. Bloomberg says this about the garage revenue:
Revenue from the garages and parking lots managed by the nonprofit is almost 40 percent below projections as the facilities face competition from public transportation and other parking at a mall near the stadium.
What happened: really bad planning, or something else? Something doesn’t feel right about this situation. The Bloomberg story is mainly about hedge funds buying up the debt as the real money offloads the bonds. Hedge funds have a lot more flexibility to own these bonds than mutual funds, for example. What caught my attention down deep in the Bloomberg story was this:
William Loewenstein, president of the Community Initiatives Development Corp., the nonprofit parent of Bronx Parking Development Co., based in Hudson, New York, about 100 miles (160 kilometers) north of the Bronx, didn’t return a call seeking comment.
“The nonprofit parent of Bronx Parking Development Co. based in Hudson, New York” — why would a nonprofit in rural Columbia County be in control of the parking garages at Yankee Stadium? Dig a little deeper and you’ll find the nonprofit is a husband and wife operating from their home. But the story gets much better. From the New York Daily News in 2008 (emphasis mine):
The group that received $237 million in city-sponsored bonds to build garages and parking lots at the new Yankee Stadium is hardly an all-star of public financing.
Bronx Parking Development LLC lists as its “sole member” the nonprofit group Community Initiatives Development Corp., which defaulted on two previous tax-exempt bonds in the past 10 years, records show.
The first default – on $7.7million in tax-exempt bonds issued in 2002 by the Syracuse Industrial Development Agency to finance a senior citizens home – was revealed by the Daily News in October.
The second default was not widely known. It involved $5.6 million in bonds the Monroe County Industrial Development Agency issued in 1998 for CIDC to build and own a parking lot. “Such bond financing was structured similarly to the structure of the bond financing described herein,” notes the bond document for the Yankees’ garages.
CIDC, the document states, “subsequently defaulted on payments on the bonds and also on payment in lieu of tax payments in connection [with the garage]” and “voluntarily transferred” its interest in the Monroe garage to the bondholders on Jan. 1, 2007.
CIDC operates out of the upstate Hudson home of its president, William Loewenstein. The group reported deficits of $260,000 in 2005 and $517,000 in 2004 on revenues of about $2 million annually, tax filings show.
Maybe someone can query the issuer of the bonds, the Empire State Development Corporation, about what criteria it uses to choose “nonprofits” to run projects. Something just doesn’t smell right around Yankee Stadium. Three strikes you’re out?