Yankees, Mets Beat the IRS

Following up on The Politicker’s tip that the Mets-Yankees bond issues won The Bond Buyer‘s deal of the year award at a black-tie gala on Tuesday night, we called up the editor-in-chief, Nicholas Chesla, to ask why.

There seemed to be a demonstrated degree of cooperation among different levels of government in these two transactions. We had a New York City agency, the [Industrial Development Agency] involved, New York City itself involved, New York State making contributions, and the teams themselves. It was a really major public-private partnership. These deals had been on the drawing board for a while. We also liked the fact that all the parties involved had been able to get these private letter rulings. They had been able to chart their way through all the issues, both legislative and political, to get these deals done.

The reason the private letter rulings–which are letters issued by the IRS telling an individual party whether what they plan to do is legal or not–were so important is that the tax code generally discourages municipalities from issuing tax-free bonds (which are significantly cheaper to pay back) to finance stadiums.

For the Mets and Yankees deals, however, the city successfully made the case (with the help of a lobbyist or two) that using payments made by the team in lieu of taxes would not be the same thing as having those teams funnel private money through the city.

The I.D.A., which received the Bond Buyer’s award, had not nominated itself for deal of the year. That nomination came from the bond underwriters (including Citigroup and Goldman Sachs) and three or four bond insurers, Chesla said. The geniuses behind the bonds are said to be two lawyers, Joel Moser for the Mets and Bruce Serchuk of Nixon Peabody for the I.D.A.

This, of course, has everything to do with The Observer‘s story today about public subsidies for private entities.

- Matthew Schuerman