The Big Blue Screw
By Jet Moses
Recently the NY Giants announced fees for “Personal Seat Licenses”. The Giants will charge one-time fees of $1,000 to $20,000 for the right to buy season tickets at the new stadium they are sharing with the NY Jets. The Jets have yet to announce any PSL fees, but you know it’s coming. The stadium, said to cost approximately $1.3 billion dollars, is scheduled for completion for the 2010 season. The co-owner of the Giants, John Mara, said that PSL’s are “necessary for paying down the debt and adhering to lender requirements.”
$1.3 billion dollars is a lot of money to borrow, especially in today’s highly volatile securities market. I wanted to learn more about the financing of this stadium, so I went to Bloomberg.com and did a word search. According to the Jets official website, the stadium is being “privately financed” by Jets Stadium LLC and Giants Stadium LLC, but that left a lot to be desired by way of information.
I searched “Jets Stadium LLC” and all the links were to Giants Stadium LLC (do you still think we wont continue to be second class citizens under this “new” arrangement?).
The story has it that both teams were allowed by the NFL to borrow about $750 million dollars. Former Jets President Jay ‘Flanders’ Cross, remarked that the financing will be bonds, “some combination of floating and fixed.”
Jay didn’t mention that there was also “some combination” of bonds that were tax-exempt, and backed by state appropriations. Indeed, no spokesperson from either team went into detail about the financing of the stadium.
Goldman Sachs Group Inc. is the underwriter for the transactions on behalf of Giants Stadium LLC.
Citigroup– their stock has dropped by more than 50% in the last year—represents the financing of Jets Stadium LLC. Combined, they issued seven series of bonds for $650 million dollars, at an interest rate of 11.5%.
Since the underwriters could not sell the bonds in their entirety, the Giants had to purchase the remaining $53 million dollars worth at a penalty rate of 22%.
The Giants are starting to feel a squeeze. As a result, they just redeemed $100 million in bonds, which means the money they borrowed only one year ago, they have already given back to the lenders. Which begs the question– where are they going to come up with the money they need to build this stadium? The Giants are counting on at least $20 million a year for naming rights. That’s the amount the Mets got from Citigroup; Their stadium, being built in Queens, will be named Citi-field.
Now keep in mind, the financial managers for Jets Stadium LLC is Citigroup. Citigroup stock a year ago was trading at 52.97 a share; today it is trading at 16.91. That’s not exactly a vote of confidence for anyone who has a vested interest in this billion-dollar venture. And if you are a fan confronted with purchasing a PSL, you have a vested interest.
Remember the ‘Big Dig’? That was the unofficial name of the Central Artery/Tunnel Project, in Boston, Massachussetts. The approximate costs of the tunnel was $2.3 billion dollars, but by the time the project was complete, it cost $14.6 billion dollars, all at the expense of state and federal taxpayers.
According to NJ Governor John Corzine, ex-Chairman and CEO of Goldman Sachs, this stadium is going to cost NJ taxpayers “over $300 million dollars”. How much over? If I had to venture a guess right now, I would say way over. NJ is building a new rail line, and financing road improvements that will triple the current amount of access roads to and from the stadium.
Corzine says that this will “create 12,000 new jobs” But how many will be low-paying dead end or part time jobs? How many will be state jobs? NJ is already going bankrupt from obscene retirement pensions and entitlements for state employees, and now the taxpayer is going to be gouged even more.
At this point, I wish I could put lipstick on this pig, but this situation is only going to get worse. NFL owners have opted out of the labor agreement with players. That’s definitely something fans have to think long and hard about while they are currently hearing all the happy talk about what “great investment” a PSL is. The Bond market, once considered “safe”, is the latest in a line of markets made toxic by the manipulation of banks. If they can woo sophisticated financial managers like Giants Stadium LLC and Jets Stadium LLC away from traditional fixed rate bonds, and to sign on with debt products like taxable auction-rate bonds, the average Joe Six-pack who’s entire retirement income depends on a 401K managed by these very same banks, doesn’t have a prayer.
The negative implications of this venture run far deeper than just the level of Jets and Giants fans—it includes all citizens of NJ who could care less about the NFL. But that doesn’t matter to Goldman Sachs, or Citigroup, and it certainly doesn’t matter to Giants Stadium LLC or Jets Stadium LLC. Everybody who pays taxes in NJ will get screwed, and any fan who buys the PSL will get screwed.
Unless of course you believe that Woody Johnson and John Mara are going to be left holding the bag?
Don’t make me laugh.