When the state of New Jersey made an agreement last fall with the Giants and Jets to build a stadium-retail development center in the Meadowlands, it was touted as a great deal. Former acting Governor Richard Codey, who was in office when the deal was consummated, called the stadium plan – set for completion in 2010 and paid for entirely by the Giants and Jets – “the best deal for taxpayers in NFL history.”

For its part, New Jersey is turning over the land, located in East Rutherford, to the two franchises, who will pay to build the stadium. The state, which still owns the land, will pick up infrastructure costs, including road improvements and the installation of sewer lines, among other things. The price tag for New Jersey? About $300 million.

The two franchises also agreed to relocate their corporate headquarters and pay the corresponding income taxes. The Giants and Jets would also pay a total of $5 million in annual rent to the New Jersey Sports and Exposition Authority for 75 acres of land, which would be used for the stadium and retail and commercial development. Still, with the expected boost to the local economy and the jobs therein, it seems like a sweetheart deal for everyone.

Everyone, that is, except East Rutherford Mayor James Castella, who thinks the borough should be getting more than $1.3 million in payments in lieu of property taxes.

Castella thinks the Giants and Jets will rake in huge money from luxury boxes, club seats, concessions, and stadium-generated revenue like naming rights and in-stadium advertising. The two teams are also going to make money from real estate development, and Castella thinks the teams should pay fair property tax value, which he thinks is somewhere between $10 million and $15 million annually.

But Castella’s state government has waived stadium and arena property taxes, much like many other local governments across the country, who think stadiums and arenas boost the local economy just by their mere presence.

Castella seemed alright with the prospect of having the Giants and Jets build a new facility near Giants Stadium that would replace the 30-year-old stadium, but he wants more than $1.3 million. That figure is what the New Jersey Sports and Exposition Authority (NJSE) currently pays East Rutherford for taxes on Giants Stadium.

Realistically, Castella should consider himself lucky to get anything. New York City gets nothing but bad basketball and, this year, decent hockey out of the Dolan family, which pays no property tax on Madison Square Garden – the home of the Dolan family-owned Knicks and Rangers. The Dolans didn’t broker that deal; it was done 24 years ago when Mayor Ed Koch offered then Garden owner Gulf and Western incentives to keep the Knicks from moving to Nassau County and the Rangers from moving to the Meadowlands.

These days, New York City doesn’t seem to be too concerned about losing as much as $14 million a year in property taxes, even though Dolan’s Knicks are seemingly always over the salary cap. The 1982 deal was cut out of desperation – neither Koch nor Governor Hugh Carey wanted to see the Knicks and Rangers depart, so they made a deal to relieve the Garden of the burden of paying property tax and the arena’s electric bill.

Similarly, the Giants-Jets joint enterprise would pay no additional property taxes on the new stadium, nor on the surrounding 520,000 square feet planned for restaurants, entertainment, and retail space. That’s the part of the equation that doesn’t quite add up for Castella. He wants to know how they can legitimately say all that retail can be built without somebody having to pay property taxes.

Castella brings up an interesting point and a dangerous precedent, one that should hit home on the other side of the Hudson River. How much money will Yankees owner George Steinbrenner pay in property taxes at his new Bronx ballpark when it opens in three years? How much will Mets owner Fred Wilpon pay in property tax at his new Flushing ballpark when it opens in three years? How much will Nets owner Bruce Ratner be paying in property tax if his planned Brooklyn arena opens in 2009 or 2010?

Will Steinbrenner, Wilpon, and Ratner get the same deal from mayor Michael Bloomberg as Dolan has at the Garden? Or might they put down annual payments in lieu of taxes like the Giants and Jets? To be fair, many companies are getting tax breaks and incentives like payments in lieu of taxes, so this is not just a sports issue. Cities and states believe that big companies will use the savings from not paying property taxes to create jobs, and that they will make up the difference in payroll taxes.

As it happens, East Rutherford and New Jersey have been battling over property assessments at the Meadowlands for a decade. A 1997 out-of-court settlement with the NJSE gave East Rutherford the tools to impose real estate assessments “directly to any private enterprise or developer of any new private facility on the sports complex site.”

East Rutherford, with the settlement in hand, recently concluded a deal with the backers of the Xanadu project, a $1.3 billion development of 4.8 million square feet of entertainment, retail, office, and hotel complex under construction that calls for payments in lieu of taxes of $1.85 million annually for the first two years of operation. The rate escalates to $9.85 million in the sixth year, plus an adjustment for the Consumer Price Index.

The Xanadu project is near the Continental Airlines Arena, while the Giants and Jets will build near the stadium. They are two separate projects.

The Giants and Jets still have a long way to go before the first shovel goes in the ground, though. First, the two franchises need to finance the venture. They might be able to get as much as $350 million from the NFL in loans, but that money will be delayed indefinitely if the league’s owners and players fail to come up with a Collective Bargaining Agreement in the very near future.

The Giants, Jets, and New Jersey will more than likely come up with some sort of deal to satisfy Castella and East Rutherford officials, because the two franchises want the stadium to increase their revenue streams and go in the real estate business, which will add to their bottom line and increase their value. There is too much money on the line for the franchises to walk away from the deal.

On the surface, Castella wouldn’t seem to have much leverage. But East Rutherford did win that court settlement with the NJSE nine years ago that allows the borough to impose real estate taxes. That might be enough of a bargaining chip to get East Rutherford more money out of the Giants and Jets when the new stadium opens in 2010.