Manhattan Institute scholar Nicole Gelinas has an interesting column about a massive financially dubious parking lot at Yankee Stadium, which Bronx Borough President Ruben Diaz, Jr. claims requires a government bailout to prevent a local financial crisis:
If the Zuccotti kids want to protest Wall Street bailouts, they should go occupy the Yankees’ luxury parking garages in The Bronx. Borough President Ruben Diaz Jr. wants to give the garages’ private investors a fat-cat rescue at the expense of Gotham’s Main Street mice.
Four years ago, the Yankees wanted a souped-up parking “system” for their new ballpark, and Mayor Bloomberg obliged. City Hall helped a previously unknown outfit, the Bronx Parking Development Co., borrow $238 million to build and run a $300 million parking paradise on city land under a long-term lease. (The state supplied the balance of the cash.)
ut the mayor didn’t put the city’s credit on the line. Instead, the city’s Industrial Development Agency — which is not guaranteed by city taxpayers — sold the debt to bondholders.
No one ever said so outright, but bondholders were plainly supposed to assume that, because Bronx Parking’s board is stacked with city officials and city officials talked up the bonds, that the city was there should the deal run into trouble.
It sure didn’t make sense on the merits. The old parking lots generated $7 million a year, but the new lots were supposed to pay twice that in annual debt costs. And Bronx Parking can’t just raise prices to fill the gap. Not many folks will pay $35 to park when there’s a new Metro North station right there.
Reality has caught up. Last week, Bronx Parking made its payment to bondholders only by tapping an emergency fund. The firm must make two more payments by next October — and it doesn’t have the cash.
There’s no mystery about what should happen: The bondholders should take their losses.
But not if Diaz gets his way. Last month, the beep issued a call to build a “world-class” hotel and conference center where one of the garages stands. The hotel would pay Bronx Parking for the space — “stabiliz[ing] the financial situation we face so that we can ultimately meet our obligations to the bondholders,” the company said....
Diaz’s proposal relies on fear of a bond-market panic, which would force another 2008-style bailout of sophisticated investors. Apparently, such bailouts are OK as long as they come in the form of useful goodies, like the promise of taxpayer-subsidized construction jobs for Bronx voters.
But bondholders need to be taught a lesson. It’s bad enough national taxpayers have too-big-to-fail banks. Local taxpayers don’t need too-big-to-fail parking lots.
If the bailout does happen, it will add to the already record-breaking figure of over $1 billion in government subsidies for the construction of the new Yankee Stadium and related facilities.
Fortunately, there is an easier solution. Yankees’ co-owner Hank Steinbrenner has recently denounced “socialism” in baseball in very strong terms. It’s clear that he doesn’t want his business dealings tainted by even the slightest whiff of socialistic subsidies.
The parking lot situation gives the Steinbrenners an opportunity to live up to their own principles. They can take some of the $1 billion they got in public subsidies for the stadium and use it to bail out the parking lot project, which, as Gelinas notes, the Yankees helped instigate in the first place. That would obviate the need for further “socialistic” subsidies for the lot and also remove some of the taint created by the original government subsidies for Yankee Stadium.
Hank Steinbrenner, a lonely parking lot turns its eyes to you!