City greenlight's stadium cash plan.

New York City Council voted to approve the use of PILOTs to finance the new Yankee stadium last week.

PILOTs will allow the team, which has pledged to pay for its own ballpark, to finance the bulk of the stadium's $933 million projected cost with tax free bonds, a benefit that Economic Development Corporation president Andrew Alper estimated could save the Yankees tens of millions of dollars.

PILOTs, which stands for payment in lieu of taxes, were created to compensate local governments in cases where it is losing tax revenue because of the nature of ownership or use of a particular piece of property. The new Yankee stadium will be owned by the city's Industrial Development Authority, which is exempt from real estate taxes, but as part of the Yankees' deal, the payments will not be used to recoup the lost tax revenue, but rather to service the roughly $860 million of tax-free government bonds that will finance the bulk of the project.

According to IRS rules, tax-free bonds can't be serviced by a private business or with private funds. PILOTs however aren't considered private payments and are the essential element in the Yankees' deal that will allow them to not only avoid paying real estate taxes but to service the bulk of their debt at favorable rates. Alper has stated that without the benefits of the current arrangement, the Yankees likely wouldn't be able finance their own stadium.

Although the EDC has said that the structure for the financing doesn't violate the restrictions imposed on tax-free government bonds, it is currently seeking a letter ruling from the IRS as assurance. Alper indicated that it is highly probable the IRS will approve the financing structure.