Anatomy of a scandal

When a political scandal hits, you can always expect things to happen in this order:

1. Denials that anything happened;

2. Denials that that which happened was inappropriate;

3. Admissions, either tacit or explicit, that that which happened was inappropriate in an effort to minimize the damage; and

4. Heads rolling.

We’re now at step three in connection with the Bloomberg administration finagling a luxury box, food, and parking spaces out of the Yankees.

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Comments

  1. John McGuinness said...

    What about the denouncing of the media or overzealous prosecutors who are wasting everyone’s time investigating a trivial issue, creating a distraction from the real problems impacting people’s lives?

  2. MooseinOhio said...

    @John – Great point and I believe it falls into a subsection of #2 – that is the denial and deflection strategy.

  3. Grant said...

    Bloomberg disgusts me. First he railroads the term limit overturn and now this (well actually this happened first, but you know what I mean).

    The MTA faces a ridiculously huge deficit and the Yankees get out of paying their taxes. I never go to Yankees games but I sure as hell ride the G train they’re about to cut service on.

  4. Nevin said...

    Bloomberg’s likely truly not directly involved with acquistions of these seats, or most of the details of the financing of the stadium (though I’m sure that he did rubber stamp them, after some advisor with a law background told him yes, everything’s clean).  Seems to me he’s making a real honest attempt to do right by the issue, putting them up for sale and donating the proceeds to community projects in the South Bronx.  Certainly a more conciliatory showing than what’s coming out of Springfield, Ill. these days.

    It is criminal, though, that the Yankees got public financing for their new stadium and then dropped half a billion on 3 players.  Someone should have to go to jail.

    Weird web, though.  Public pays that money, which finances the stadium, which allows the team to bring in players at higher salaries, generating higher tax revenue for the city and state.  Over the life of the stadium, does the marginal boost that the publically financed venue adds to the payroll (versus what it would be if they didn’t rebuild at all, or financed themselves entirely) pay for itself (or more than pay for itself?) in increased taxes?  Have never thought about it that way, and would be striking if it does.

  5. Pete Toms said...

    @ Nevin.  I’ve been following this all along and…well, I think you’re wrong about Bloomberg.  If the reporters have it right, the many emails between the city and the Yankees clearly indicate that Bloomberg BADLY wanted a suite at the new stadium ( right down to haggling over the cost of grub and libations ).  He’s doin the right thing now because of what Craig likes to call the ” populist backlash ” against public dollars for private stadiums.

    And, I think you’re wrong about the 2nd point also ( sorry, don’t mean to be a prick ).  Players don’t pay all of their tax to the state where they work, they also pay tax to the state where they reside.  If you want a high profile and current example, see NY vs Jeter.

  6. Rob said...

    @Nevin – You can be pretty sure that the tax breaks do not pay for themselves.  As a back-of-the-envelope calculation, say the Yankees never rebuild and stay in the original Yankee Stadium.  Would they be able to afford Messrs. Sabathia, Burnett, and Teixeira?  Maybe not, but they’d certainly be able to afford at least one or two.  That means the marginal impact of the new stadium is the ability to sign one or two of those players.

    Ballparks.com says that the Yankees got $220M from NYC in public financing, not including the sweethart tax breaks the team got on the bond deals that constitute their private financing portion.

    Let’s say that the new stadium gives them the ability to sign both Sabathia and Teixiera for their $340M of contracts.  That’s about $48M/year for the two of them.  To pay off the $220M of direct public funding, those two players would have to pay $31M/year.  Even if they lived in NYC year-round (and thus paid taxes on 100% of that income), they would have to be paying 64% of their salary in taxes.  No one comes close to paying that much in income tax, not federally and definitely not to New York State.  (The top federal tax rate in the U.S. was 35% in 2007.  The top tax rate in New York is 7.7%.)

    Even if you said that the new stadium allowed the Yankees to sign all three players, they’d still have to pay 50% of their salaries in income tax.

    Or looked at another way, the extra $64M/year that the Yankees are spending on these three would take 44 years to pay off the $220M of public financing.

    Considering that the players probably reside in some other state like Florida (and therefore only pay New York taxes on the days they “work” in the Bronx), they actually only pay New York State income tax on about 42% of their salary.  That means it would take 106 years of paying 7.7% income tax to pay off the $220M of public financing.

    For comparison, had the city instead invested that $220M in something that returned a modest 3% per year, they would have $5 billion after 106 years.

  7. Glenn said...

    Step 2a: Claim that the transaction is so complicated that the uneducated masses can’t possibly understand it -

    “It’s nothing wrong. It’s just another part of a very complex deal.” – Bloomberg, Newsday 9/17/08

    Bloomberg won’t take the fall for this, his lackey Pinsky will. He’s the Mayor’s attack dog on this issue and has made most of the outrageous statements regarding the cost/benefit analysis:  “I’d like to think that Assembly Member Brodsky is simply misinformed, but after all of the public hearings, questions and analysis, it is becoming increasingly difficult to explain his blatant and fundamental errors and omissions.”

  8. DGL said...

    Aren’t steps one and two merely subsets of the standard criminal defense of, “My client didn’t do it and you can’t prove that he did and it wasn’t illegal anyway!”

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