Mets Bonds Well Below Projections, Strong Season Will Help a Little

October 19th, 2015

This week we look at the baseball playoffs from a municipal finance angle.

Mets Bonds Well Below Projections, Strong Season Will Help a Little

The strong performance of the New York Mets this season, which resulted in their appearance in the National League Championship series this week, has lead to an increase in attendance at their games.


During the ’15 season, attendance at Mets games increased by 20%, compared to an unchanged league average.  Attendance at Yankee games was down by -6%, highlighting the impact of the strong season on Mets attendance.

Both the Mets stadium (Citi Field) and Yankee Stadium were financed by municipal bonds.   New York City subsidized the construction of the stadiums by allowing the teams to redirect certain taxes which would normally be paid to the City and allow the money to be used instead to secure bonds issued to fund the construction.

This “Payment in Lieu of Taxes” structure was somewhat controversial and the U.S. Treasury department subsequently tightened restrictions on the use of PILOTs for stadium funding (but allowed the Citi Field and Yankee Stadium transactions to proceed under a “transitional provision”).

Like many project financings, the deal documents were complex and included numerous legal agreements among many parties (the Mets Official Statement is nearly 400 pages long). Unlike many project financings however, the deal documents included little operational or financial data.

The Mets OS includes a single table with 5-year projections for attendance, as well Revenues and Expenses for the Queens Ballpark, L.L.C.  The Yankee’s OS does not include any operational or financial data.

The projections included in the Mets OS have proven to be very optimistic.  These deals were done in 2006 and the stadiums opened in 2009. Attendance at Mets games peaked in ’08 and declined steadily through ’14.  Even after the ’15 increase, attendance remains 16% below ’13 projections.


Not surprisingly, the overly optimistic attendance projections lead to overly optimistic financial projections.   During ’13, the last year projections were available; Queens Ballpark coverage of PILOT payments was less than half of the projection.


Unfortunately a similar analysis is not possible for the Yankee Stadium project due to lack of disclosure.   The Continuing Disclosure Agreement for the Yankee Stadium bonds promised to annually provide a) data of Yankee Stadium LLC consisting of an unaudited statement of cash receipts, Ticket Sale and Suite License Proceeds and b) if available, audited financial statements of Yankee Stadium LLC.

The Yankees have disclosed Ticket Sales and License Proceeds information, but no audit.


As we would expect, revenues from Ticket Sales and License Proceeds have been trending down along with attendance.

Like several higher education institutions who borrowed in the municipal bond market (Yeshiva, Brandeis, Bard), the Mets suffered financially from exposure to Bernie Madoff’s Ponzi scheme.

The Mets owners had invested heavily with Madoff.   A recent Bloomberg article pointed to the need of the Mets to recover from these losses as a contributing factor in their recent good performance.  According to the article, “…the team’s Madoff-related financial losses and related lawsuits forced them to abandon their penchant for high-priced superstars in favor of cheap, young talent. “


While the payroll numbers are not included in the finances of the stadium LLC’s, if the Bloomberg thesis is accurate, this is another interesting case of how the impact of Bernie Madoff has rippled through the municipal bond market.


Have a great week,

Michael Craft, CFA