August 29, 2003

Article at The New York Sun

Developers Saved the U.S. Open

New Yorkers pretty much take the celebrated U.S. Open, held each fall at the National Tennis Center in Flushing Meadows-Corona Park, as their birthright. Yet like the many heirs in history who lost their legacy through neglect or stupidity, we almost lost ours during the dark days of the mid-1970s.

In 1976 the city government narrowly averted bankruptcy - in part by refinancing mountains of debt, raising taxes, and cutting services. The streets were filthy and crime-ridden, whole neighborhoods were burning, and many landlords were simply walking away from their buildings, abandoning them to the city rather than paying taxes. People and corporations were fleeing in droves. As Senator Goodman told the New York Press Club, prostitution seemed to be the only business that wasn't leaving the city.

Then a wildcat oilman from Mississippi, Slew Hester, who was president of the United States Tennis Association, stepped forward to announce that the USTA would not be renewing its contract with the stately West Side Tennis Club in Forest Hills, which had been home to the open since 1924. Cheerfully accepting his role as public villain, Hester said he would be touring the country to look for the best site for the U.S. Open.

At the time, the city was presided over by Abraham Beame, perhaps the most under-qualified mayor of the 20th century - which had several. But Beame had a good friend, Lewis Rudin, the real estate developer, who was also a tennis fan. Rudin offered to join Hester in the search for a new site. Flying low over Queens in Hester's private plane, they spotted the derelict Louis Armstrong Stadium - originally called the Singer Bowl - in Flushing Meadows park. A leftover from the 1964 World's Fair, the Armstrong Stadium had seldom been used since.

Of course, seeing value where others don't is what a good developer does. That's how the Rudin fortune was made in real estate and the Hester fortune in oil. They went together to the Parks Department in January 1977, proposing to reconstruct the old stadium under a 15-year lease. With Rudin as the broker, the USTA signed an agreement with the city four months later - an extraordinarily short period of time for anything to get through the city bureaucracy.

In exchange for leasing 16 acres to the USTA, the city got a $10 million reconstructed stadium, seating 26,500 people and providing both indoor and outdoor courts. The stadium would be available to the public 305 days a year. The city also got an annual minimum payment of $125,000 or a percentage of minor fees, whichever was greater. The "greater" never turned out to be the fees, since Hester excluded the USTA's major fees from city participation. Thus the city could receive

10% of the fees from renting tennis courts to the public, 50% of rental and concession fees for all non-USTA events, which would be grubby and few, and 50% of food and beverage receipts for non-USTA events. The city also got $175,000 or so annually from parking fees at adjacent Shea Stadium, which it owned.

The first USTA lease was negotiated in the days before the Parks Department learned to ask for a percentage of the fees that really mattered to any lessee - such as a percentage of big event admission fees and concessions.

When the lease expired in December 1993, the Dinkins administration agreed that the USTA could build a new stadium, and negotiated a 99-year lease for 46.5 acres, requiring the USTA to pay a base rent of $400,000 plus 1% of its gross revenues, including admissions, television earnings, and concessions. Thus the city now gets a percentage of the open's famous $10 hamburger and other pricey food as well as a cut of admissions tickets bought by the open's 600,000 attendees. Last year, the new lease yielded $1.8 million to the city, according to the chief accountant for revenue in the Parks Department, Michael Leonetti.

While the U.S. Open is spectacularly successful, no one regards its new home as beautiful. "Ticky-tacky metallic Flushing Meadows," wrote sports writer George Vecsey, who continues to miss "the ivy and the grass and the manners" of Forest Hills. "Once a garbage dump," announced the New York Access Guide. "Now a triumph of reclamation!"

In 1997, the USTA opened the $250 million Arthur Ashe Stadium, named for the athlete who was the first African-American man to win both Wimbledon and the U.S. Open. The world's largest tennis stadium, the Ashe stadium regularly opens to capacity crowds filling its 23,000 seats. Offering the largest purse of any Grand Slam in the world, the Open attracts the most renowned athletes and most rabid fans.

It is also a jewel in the city's economic crown. The mayor's office says that "the U.S. Open has the greatest economic impact on New York City of any sporting event." The Sport Management Research Institute calculates that the Open produces an annual economic impact of $420 million in New York, New Jersey, and Connecticut.

The permanent presence of the U.S. Open in New York is living proof that private-public partnerships can pay off in immense public benefits that couldn't be won by either sector alone.