Cavs wait nine whole months after getting public money before asking for more public money

If you’ve heard me talk on the radio lately, you’ve probably heard me cite University of Michigan economist Rod Fort’s long-ago quote that “I don’t see anything wrong, from an owner’s perspective, with the idea of a new stadium every year.” Rod was being tongue-in-cheek, because of course no owner would have the chutzpah to get public subsidies and then come back one year later with their hand out for more, right? Right?

Representatives of the Cleveland Cavaliers have quietly inquired whether the Cuyahoga County government would provide public money – in addition to the sin tax dollars voters approved last year – to overhaul the publicly-owned Quicken Loans Arena, Northeast Ohio Media Group has learned.

There’s no price tag on the Cavs’ latest demands, and no timeline, but I think this still qualifies as the most shameless attempt at double-dipping since … well, at least since last year when New York Gov. (for now) Andrew Cuomo announced a task force on building a new stadium for the Buffalo Bills just four months after giving them state money to fix up the old one. Cavs CEO Len Komoroski issued a statement that carefully avoided saying anything about public money, but talked about how the Cavs’ arena helps “drive the vitality of our urban core” and how “any plan to enhance The Q would include great additional private investment.” When rich guys start saying, “Don’t worry, we’ll put in our own money, too,” it’s generally a good idea to put one hand on your wallet.

Two stadiums on Oakland Coliseum site wouldn’t leave much room for actual money-making development

If you want to see why many folks are skeptical about the Oakland A’s and Oakland Raiders both being able to build stadiums as part of a redevelopment of the current Coliseum site, check out these images, both courtesy of Newballpark.org. First, the original, now-discarded “Coliseum City” plan, which would have covered 800 acres on and around the current stadium site:

And now the latest 120-acre plan:

Notice what’s missing there? The vast majority of the housing development, aka “the stuff that you can actually make money on in the Bay Area.” As Newballpark.org’s Marine Layer notes, there’s still room for two stadiums on the smaller site, but you have to ask yourself: “If capital wasn’t biting at 800 acres and two stadia, why would they bite at 120 acres and two stadia?”

What about 120 acres and one stadium? That’s slightly more feasible, but we still need to see A’s owner Lew Wolff’s and Raiders owner Mark Davis’s actual financial plans for those — if it’s “120 acres of rent-free land and property tax exemptions and one stadium,” that’s not so hot a deal for Oakland. New city mayor Libby Schaaf has asked the two team owners for competing bids, anyway, so hopefully soon we can see if either is less craptacular than the other.

Milwaukee sportswriter says good thing Bucks owners are so rich, or we couldn’t give them tax money

I know that you guys must be tired of me harping on Milwaukee Journal Sentinel staff press statement transcriber Don Walker, but seriously, what’s with this guy? One day after writing an article on Wisconsin Gov. Scott Walker’s plans to give the Bucks owners $220 million that consisted entirely of quotes from one of the Bucks owners (he’s surprisingly in favor!), Walker followed up with an article arguing that giving the team only makes sense because they’re richer than ever:

The dramatic increase in the rights deals between the league and the broadcasting companies ensured franchises in the leagues that revenue would at least double over the nine-year term of the deal. That means both teams and their players are in line for fatter bottom lines and bigger paychecks.

The prospect of increased revenue gave Walker assurances that capturing the new income-tax growth from visiting NBA players, members of the Milwaukee Bucks and even the team’s employees would be enough to pay the debt service on state-backed bonds.

There is a kind of logic here, which is that because the Bucks are projected to be raking in the simoleons in coming years, Walker can point to all the income taxes they’ll have to be paying, call that found money, and offer to hand it right back to the team. But still, the crux of the argument remains: Good thing the Bucks owners are even richer than ever, or we might not be able to give them tax money!

This is a point that you would expect someone critical of the arena plan to make somewhere in the article, probably down around the 15th paragraph, but Walker doesn’t usually play that way. Here’s who’s cited in the piece, in order of appearance: the state’s chief economist (helped come up with the arena subsidy plan), the governor (helped come up with the plan), the state assembly speaker (helped come up with the plan), state finance committee co-chair (likes the plan), state finance committee member (calls the plan “somewhat of a good plan”) — and finally, in paragraph #20, we have someone actually critical of the deal:

Rep. Chris Kapenga (R-Delafield) acknowledged in a statement that salaries of pro athletes had increased dramatically. “As those salaries rise, so too does the income tax collected by the state from those players. These revenues currently go into the state’s general fund and are used to for general operations, which includes everything from education to roads.

“The governor’s proposal would divert these increased tax dollars, which are included in future revenue projections, away from taxpayers to the owners of the Bucks to help fund the Milwaukee arena.”

The practical impact, he said, “is that all state taxpayers would be funding the new arena. The total cost, using average assumptions and including interest payments, could range from approximately $300 (million) to $400 million.”

This is now the second time that a Walker article has had a tacked-on quote at the very end that subverts the main point of the article, and the second time that Journal Sentinel statehouse reporter Patrick Marley has been credited as “contributing” to the piece. Which makes me wonder why the Journal Sentinel doesn’t just assign Marley to write about the Bucks arena controversy, since he clearly knows how to use a telephone, but I guess we should just be happy he’s involved at all.

Bucks co-owner says sending him a $220m check is “a great deal for Wisconsin”

Fresh off possibly his first Milwaukee Bucks arena article ever that actually cited people who weren’t personally involved in the deal, what’s Don Walker done for an encore? How about calling one of the Bucks owners and asking him if he likes it that the governor wants to give him $220 million? I bet the suspense is killing you!

“It’s a great deal for Wisconsin, a great deal for the state,” [Wes] Edens said in a telephone interview.

Edens said he did not have all the details of Walker’s proposal, but said it was clear the governor wants the city and state to cooperate.

“They will, right?’ Edens said.

And that’s pretty much the entire article: Edens doesn’t know much about the governor’s plan, but he likes the part about him getting taxpayer money. The only way this could have been remedied would have been if Walker (or his editors, presumably) had gone with a headline like, well, the one on this post. (Instead they went with “Bucks co-owner Wes Edens calls Walker arena plan ‘a great deal’.”) Can someone please poke the Milwaukee Journal Sentinel and remind them what the first syllable of “newspaper” is supposed to refer to?

Quebec gets ready to open big empty hockey arena, mayor jokes that “my cousin Réjean” will play there

That Quebec City Mayor Régis Labeaume is such a card! Check him out talking about the hockey arena that he saddled taxpayers with between $270 million and $330 million in payments on, in order to get an NHL team, and which now persists in not having an NHL team:

“What are you going to put inside?” host Marie-France Bazzo asked the man who was the project’s biggest booster.

“Listen, we’ll have public skating,” Mr. Labeaume joked. “My cousin Réjean wants to play there too,” he added, struggling to contain his own laughter.

Hahahaha! Ha! Ha.

There will be a minor-league team playing in the new arena, but that’s still not exactly what Quebecois had in mind. (Though, you know, I did kinda tell you so.) But Quebec still might get an expansion NHL team, right?

In 2011, the average value of an NHL team was US$240-million, he said. By last year it had more than doubled to US$490-million. The huge investment required to acquire a team, whether through expansion or purchase of an existing team, would make it hard for owners to turn a profit in a small market like Quebec City. The plummeting Canadian dollar only aggravates the situation.

“I don’t see how it can be financially viable in a city of 700,000 people,” Mr. Richelieu said. “To make it past the first two or three years, when the novelty and enthusiasm of having the Nordiques back is past, will be hard. After that, people might find it hard to fork out the hefty ticket price to pay for a major-league-calibre show.”

Economics aside, the league is displaying little interest in returning to the Quebec capital. When possible expansion is mentioned, the names of Las Vegas and Seattle are at the top of the list as the league seeks to balance the number of teams in its Eastern and Western conferences. And NHL commissioner Gary Bettman reiterated on the weekend his opposition to moving an existing team.

Oh, well. Cue the “cold Kansas City” jibes!

New MLB commish tries to shill for Rays, A’s stadiums, lacks Selig’s flair for crazy-ass threats

With everything else that’s been going on (like me getting ready to be on the teevee), I utterly failed to welcome new MLB commissioner Rob Manfred, who officially took over from commissioner-since-the-last-millennium Bud Selig last weekend. (Yes, he’s finally gone. Yes, you are now invited to dance a bit on his grave.) And Manfred immediately showed that he knows what his job is, chiming in about how the Oakland A’s and Tampa Bay Rays need new stadiums, and he’s gonna help them get ‘em, by gum:

“I share your view that Tampa and Oakland are situations that need to be addressed, and believe me I will be making myself available to both owners, both clubs to play whatever role they want me to play in helping them get their situations resolved because I do think both of them are really important to the game.”

I’d give that about a B-minus as commissioner rhetoric goes — it hits all the usual points (teams need new stadiums, the league will throw its weight around to help get them) but without the flair of his predecessor: It’s no “Don’t make me come in there,” that’s for sure. Manfred should know that the job of a blackmailer commissioner is to always include at least an implicit threat, to let cities know who’s boss and

“I think Montreal helped itself as a candidate for Major League Baseball with the Toronto games that they had up there last year. It’s hard to miss how many people showed up for those exhibition games. It was a strong showing. Montreal’s a great city. I think with the right set of circumstances and the right facility, it’s possible.”

Well, it’s a start, anyway.

No, there’s still no Super Bowl windfall for cities, no matter what you read in the paper

If you haven’t gotten enough of me griping about media coverage of sports economic reports here — or just want to read about it all in one place — hie thee to FAIR.org’s newly expanded website, where I’ve written all about how the media all too often parrot claims of economic windfalls from sports without even checking if they have any basis in fact.

There are occasional exceptions, obviously (I cite several), but as one journalist who has done time fact-checking his peers says:

“For every one good article you see, there are ten others that don’t bother to do it, and the good ones just get lost,” says Noah Pransky of WTSP-TV in Tampa Bay, who also reports on sports economics at his own website, Shadow of the Stadium. “An industry joke is that reporters have always been mathematically challenged, but the problem has been magnified in recent years by the 24-hour news cycle and staff depletion at traditional media outlets.”

Remember, kids: Just because you read it in the newspaper doesn’t mean it’s true! Blogs, though, are 100% accurate. I read a study that said so.

Inglewood to hold public vote on NFL stadium this summer so Kroenke can evade environmental review

Citizens for Revitalizing the City of Champions — I swear, that is honest to god the name that St. Louis Rams owner Stan Kroenke and his development partners came up with for their astroturf citizens’ group to push for a new stadium in Inglewood, California — has delivered 20,000 petition signatures to put a vote on the ballot this summer to approve their development plan. That’s more than double what they needed, and nearly 20% of the entire city population, which bodes well for getting this thing actually passed.

As the L.A. Times’ Tim Logan explains it, approving the plan through a voter initiative “would avoid the need for time-consuming, costly and potentially legally-risky environmental review,” which would be required by the normal planning process. The exact finances of the plan are still a bit hazy — as you may recall, Kroenke is seeking tax kickbacks that could be worth anywhere between a few tens of millions of dollars and $180 million — but hopefully this will all be explained before the vote. Though not that that’s required or anything.

Meanwhile, Missouri Gov. Jay Nixon freaking out lawmakers in his state by asserting that he can sell stadium bonds without consulting them if he wants to. Not that he wants to:

At a state House budget hearing, Doug Nelson, Office of Administration commissioner, said a law passed more than 20 years ago allows the Nixon administration to issue such bonds. The law states that Missouri or any agency or department of the state can enter into a contract, agreement or lease to finance or develop a convention or sports facility.

“This is not an indication of what we’re going to do,” Nelson said. “This is an indication that we believe we have that authority.”

State Sen. Rob Schaaf immediately introduced a bill to say the governor does too have to ask the legislature’s permission before going and building a stadium. Today is truly a great day for democracy.

Wisconsin governor’s arena plan depends on future NBA players averaging $33m/year salaries

Wisconsin Gov. Scott Walker unveiled his Milwaukee Bucks arena funding proposal yesterday, and oh man, was there ever a last-second plot twist. Walker is not, as rumored previously, proposing to raise $150 million for an arena by kicking back all state income taxes on Bucks players and other employees and also possibly some arena sales taxes as well. No, he says he’s going to raise $220 million, and only from Bucks income taxes — and only from new income tax above what team employees already pay:

“There’s absolute security for the taxpayers,” Walker said. “No new taxes, no drawing on existing revenues, no exposure to the future…”

Well, except for the uncertainty of what happens if NBA salaries don’t soar to the point where enough new money pours into state coffers that the government can use it to pay off $220 million in arena bonds. How likely is that? I was all gearing up for some painful Excel crunching, but fortunately Walker’s office has made a handy-dandy chart for us:

That red block along the bottom is how much the Bucks (and visiting teams’ players, pro-rated for the days they play in Milwaukee) pay now in state income taxes, which is $6.52 million a year. The current Bucks player payroll is $62.6 million, and the top state income tax rate is 7.65%, so about two-thirds of that figure comes from the team’s roster, with the rest presumably coming from visiting players, team execs, hot dog sales people, and the like.

How much would salaries have to rise to make the green part of the above chart come true? Walker’s projected state revenue in the year 2046 is about $45 million, meaning at a 7.65% state income tax rate, we’re looking at $588 million in payroll. If two-thirds of that is the Bucks, then for a 12-player roster, the average player salary would have to be $33 million a year in order to make these numbers work.

Is that as crazy as it sounds? The average NBA player salary 31 years ago was $330,000, and it’s $4.1 million today, so it’s on pace with historic trends. (Salaries have leveled off the last few years, but they’re expected to take a big jump in the next CBA thanks to the league’s lavish new TV deal.) But past performance doesn’t guarantee future returns, and lots of things could torpedo that assumption:

  • The cable bubble could burst. In fact, it’s a near-certainty that nobody will be watching NBA games in 2046 by turning on a cable box — broadband Internet will have replaced it decades before then — but the issue isn’t really what pipe people use to get their sports fix but how much they’re willing to pay for it. Right now, sports on TV is a loss leader for cable companies to get viewers to buy their service at all; once everybody is watching TV on the web and companies don’t have to worry about cable cutters (because everybody has to have Internet service whether they want to watch TV on it or not), the economic calculations start to change. Unless you envision a future where a huge number of people happily pay $1000 a month for the right to watch sports on TV, NBA revenue — and salary — inflation is going to have to level off sometime soon.
  • Basketball could sink in popularity. The NBA has done great at expanding its marketing in recent decades, but who knows what the future holds? Competition from leagues in other nations? Kids defecting to watching e-sports? Not that this necessarily would mean plummeting salaries — baseball has lost market share for a while now, but continues to rake in more cash — but it wouldn’t help.
  • Jon Bois could seize control of the NBA and make it die an agonizing death.

If any of that comes to pass, it’s not altogether clear what happens to Walker’s arena bonds: I haven’t been able to find any indication of what the backup revenue stream would be if income tax revenues don’t balloon as expected. (There will have to be something, though, or else nobody’s going to buy these bonds.) But this is essentially an income-tax variant on a TIF — an iTIF? — and if the increment fails to materialize as they so often do, the only possible answers would be new taxes, drawing on existing revenues, or the Bucks paying of the debt themselves … okay, ha ha, that’s not very likely.

(I should also note that I’m slightly skeptical that Walker’s green triangle would be enough to finance $220 million in bonds — it looks like about $600 million in nominal dollars, but the bulk of that is pushed way back into the future, which is going to require tons of finance charges like Miami took on for the Marlins. But a more specific accounting is going to have to wait for someone with better Excel skills than me.)

And finally — finally — keep in mind that all of this is not actually found money, but rather income tax receipts that the state of Wisconsin would otherwise be able to spend on other things if they weren’t handing it over to the Bucks owners. Unless you assume that the Bucks would definitely leave without $220 million in subsidies, and that Milwaukee sports fans wouldn’t find something else to spend their money on that would increase income tax receipts elsewhere, neither of which is anywhere close to a sure thing.

What Walker appears to have done is to come up with a way of writing a $220 million check to the Bucks that is rationalized in the most politically acceptable way possible: It’s not new taxes, it’s not existing taxes, it’s just future taxes on future imaginary super-rich basketball players who otherwise wouldn’t be playing in future Milwaukee because the future NBA will have future teams everywhere but there unless the state subsidizes a new arena. (And the city or county — Walker assumes another $50 million from those taxpayers, though he doesn’t specify how.) That still may not be enough to win over the state legislature, whose leaders were making mildly skeptical noises after Walker’s announcement yesterday, but it’s got as good a shot as anything.

And okay, really finally, I can’t let the Milwaukee Journal Sentinel article on all this pass without noting that Walker’s plan was apparently so remarkable that it stunned Journal Sentinel writer Don Walker into actually calling some economists to ask what they thought of it:

Andrew Zimbalist, a sports economist at Smith College in Massachusetts, says studies have found there is no statistically positive correlation between sports facility construction and economic development.

“Bear in mind that this is an observation about the average case,” Zimbalist said via email. “It does not mean that in a particular case that there can’t be a positive or negative effect. I would say in individual cases one has to look carefully at the financing and lease terms, as well as elements of land use and the local economy.”

The Bucks will argue that plans for ancillary development near the arena site will bring new construction jobs, new dollars and new development to a revitalized downtown Milwaukee.

Mark Rosentraub, a professor of sports management at the University of Michigan, says the key for Milwaukee and the Bucks is whether the anticipated ancillary development is successful. The new Yankee Stadium in New York, he said, was a “complete wasted opportunity. One billion dollars was spent and it had no impact at all on the south Bronx.”

This is, so far as I can tell, unprecedented in the history of Don Walker reportage, which normally lends itself to this. Maybe he’s actually starting to realize that only citing the people proposing the arena plan isn’t the best way of doing journalism—

Patrick Marley of the Journal Sentinel staff contributed to this report.

Or maybe not.

Do Chargers have secret deal with Goldman Sachs to build L.A. stadium? (SPOILER: no)

So on a podcast on Friday, a St. Louis radio reporter who covers the Blues said this about a San Diego Chargers stadium, for some reason:

“Spanos from the Chargers has a deal in place with Goldman-Sachs to build a new stadium and the NFL has asked him to hold off from accouncing those plans,” Strickland said, citing St. Louis officials.

Whoa, that’s news! Strickland also said he thought the stadium deal was in L.A., not San Diego, and you know what, let’s stop right there, because though the Strickland report was soon all over the news, immediately thereafter this was:

[Chargers general counsel Mark] Fabiani told 10News Friday night, “The story is untrue. Nothing to it, except that we have worked for years with Goldman Sachs. But the rest of the story is incorrect.”

Now, team execs can lie, of course, but usually they temper their words a bit more when they do so. And the idea that the Chargers have a secret stadium deal in place that has gone unnoticed by everyone except a St. Louis hockey reporter is … let’s just say I’ll believe it when I see it.

Meanwhile, back on planet Earth, U-T San Diego actually does some reporting today that could be construed as critical of the Chargers’ stadium plans, or at least skeptical that the team can get them funded: Fabiani has talked of raising hotel taxes to help pay for a stadium, but the hotel owners hate the idea, it would take a two-thirds vote to approve it, and the last time a referendum was attempted on hiking hotel taxes, it only got 41.6% of the vote. And that was to hike hotel taxes to fund police and firefighters, not a stadium. I guess it’s pretty hard to find a “cheerleader” spin on facts like that.