How can you say it does not make sense.... if the money he should be paying in tax is effectively being used for running costs of the club.
No it doesn't. Money is fungible and there's no difference between dollars. You might as well say that the money he should be paying in tax is effectively being used to (a) pay Century City's staff's wages; (b) do renovations on his properties; (c) advertise for new tenants; (d) give advance fees to Indian scam artists; etc etc.
Jeff's position is that one can say, cynically, that the taxpayer's money was being used to run the Phoenix. Unless you're saying that a,b,c, etc. is the real use for the money (and no others are legitimate), you haven't defeated the charge.
But I think you're trying to deflate, rather than defeat, the position Jeff permitted. So the target is to say that a,b,c,etc. are just as much the use of this money as running the Phoenix. There's at least one reason for thinking that's not true, however: the outstanding tax bill from the Phoenix would not exist for Serepisos if he hadn't been running the club.
But I'm pretty sure I jumped the gun.