Houston could get an NHL team, or could just be used to extort other NHL cities for cash

If you’ve always wondered why Houston, the United States’ 10th largest media market, didn’t have an NHL franchise, this is your week. Starting last Thursday, when The Athletic (citing the ever-popular “multiple sources”) reported that NHL commissioner Gary Bettman and new Houston Rockets owner Tilman Fertitta had met to talk about putting a team in the city, there’s been increased blind speculation about the possibility, to the point where the Houston Chronicle ran an entire article about what the phantom team would be called.

Most recently, the Houston Press, a newspaper that recently canceled its print edition and laid off its entire staff except for its editor-in-chief, who now works solely with freelancers, reported that now that Fertitta owns the Rockets and their arena, bringing hockey to Houston is “just a matter of when.” And lawyer-by-day-sports-journalist-by-night John Royal, citing the less-popular “it’s become my understanding,” says that the NHL isn’t considering expansion for the moment, but instead would prefer to “stabilize” one of its existing franchises by moving it to a new city:

There are numerous candidates for relocation to Houston. No. 1 on the list is the Arizona Coyotes which is begging the Phoenix-metro area to build it a new arena after failing to attract fans to the taxpayer-funded arena built for the Coyotes in Glendale and which is currently playing on a year-to-year lease. Then there are the Carolina Hurricane which have been struggling at the gate. The New York Islanders are unhappy in a new arena in Brooklyn and are seeking to move, and the Calgary Flames are threatening to move if a new arena is not built by Calgary taxpayers.

(Yes, “the Arizona Coyotes which is.” Clearly they laid off all the copy editors, too.)

All of this makes sense, sort of, though for the Islanders and Flames in particular you have to wonder whether giving up strong media markets that are hockey hotbeds in exchange for a city in the South would work as well as … well, as the Coyotes and the Hurricanes, which let’s not forget are in this predicament because they used to be the Winnipeg Jets and the Hartford Whalers. The Coyotes, in particular, couldn’t really do worse than in Arizona, where they are about to have no arena lease and have never drawn well in any case.

On the other hand, when you see all the unnamed sources involved, you have to at least ask the question: Is all this sudden Houston talk in part an NHL whisper campaign to rattle move-threat sabers in other cities? So far nobody appears to be freaking out — Fansided’s Flames blog briefly mentioned and dismissed the possibility of Calgary’s team heading south, for example, despite Sportsnet’s John Shannon insisting that “Calgary’s name has been added to the list of teams facing possible relocation” — which is good, but nobody has yet hopped on a plane to Houston or anything.

And really, even if Fertitta’s interest in a team is real — and there’s no reason to think it isn’t, though it is a bit puzzling that former owner Les Alexander figured he made more money on concerts and the like than hockey, but Fertitta calculates otherwise — it’d be dumb for the NHL not to use this as an opportunity to shake down other cities for arena cash or other concessions. Houston as an NHL city would be somewhat valuable, if only for its market size, though again, it’s only slightly larger than Phoenix and that worked out spectacularly poorly; Houston as a bogeyman to frighten other cities (along with Seattle once that city’s arena deal is finalized) could potentially be the gift that keeps on giving. Watch the blogs and sports talk radio, I guess, to see how this will all play out.

Georgia Dome torn down at age 25, because that’s how we 21st-century Americans roll

The Georgia Dome got blowed up real good this morning, and let’s take a moment to watch that now:

If you’re thinking, “Man, future generations are going to wonder why we expended an enormous carbon footprint to build giant buildings just to knock them down again,” you’ll be pleased to know that the Georgia Dome’s entire existence on Earth was just slightly over 25 years, meaning it didn’t even live as long as all those rock stars who died young.

Which brings up the question: Where does the Georgia Dome fall on the all-time list of sports venues that were demolished while their paint was still dry? My first thought was the Miami Arena, since the Heat moved out after just 11 years, but it hung around hosting arena football and minor-league hockey until 2008, when it was put down at age 20. Another building from the late ’80s NBA expansion class managed to beat it out for planned obsolescence: The Charlotte Coliseum opened in August 1988 and was torn down in June 2007 (here’s its snuff video), which makes it the only sports venue I can think of that didn’t even make it out of its teens.

The commonality among all these buildings is … not much. They were all erected in the late ’80s and early ’90s, and the basketball teams griped that their arenas didn’t have enough in the way of luxury suites — but Georgia Dome had plenty of premium seating. If anything, the common thread is that team owners thought they could get away with demanding new buildings, and did. As sports economist Rod Fort told me shortly after Miami abandoned its old arena at age 11, “I don’t see anything wrong, from an owner’s perspective, with the idea of a new stadium every year.” He may yet live to see it happen.

Cincy mayor offers $37m in MLS cash plus full property tax break, team says “please send more”

So Cincinnati Mayor John Cranley came out with his funding plan for an F.C. Cincinnati stadium on Friday, and while it included tax-increment financing as expected, it also included a whole lot of other proposed subsidies:

  • $9.75 million from an existing tax increment financing district in Oakley
  • $7.38 million from Blue Ash airport sale (money is currently in reserved fund)
  • Up to $1.5 M from hotel tax annually will be used to pay off a $20 million loan for the project. But that will cost up to $45 million in hotel tax over 30 years to pay down.
  • The city will also give FC Cincinnati a tax break for employees through a 50 percent job creation tax credit. Under a job creation tax credit, companies receive a certain percentage of the city earnings taxes paid by their employees back as the jobs are created.

Oh yeah, and this:

Under the plan, the Cincinnati Port Authority — a government agency — would own the stadium. That means the city, school system or county would not collect any property taxes on the entire property, including the stadium.

So that’s $37 million, plus that kickback of city income taxes on any jobs “created,” plus a full property tax break. How much that second bit will come to is tough to say without knowing how much the team would pay its employees (or players, though under the single-entity MLS model where the players are technically paid by the league, can they count as F.C. Cincinnati jobs?), but basically a 50% credit means kicking back 1.05% of team payroll, so if anyone has access to a typical MLS team’s payroll documents, we can figure that out. It’s not going to be much, though — even if the team spent $10 million a year on payroll, which is unlikely, it’d only be present value of maybe $1 million and change.

As for the property tax break, going by this example, the commercial property tax rate is about 8.6%, and the assessed value of a property is about 35% of its market value, so if a soccer stadium costs $250 million, then it would normally be paying $7.5 million a year, which would make present value of a full property-tax break worth more than $100 million. That seems high — maybe I’m wrong in assuming that “market value” equals construction price in tax assessment — but given that Minnesota United‘s $150 million stadium is getting $54 million in property tax breaks, and Cincinnati has higher property taxes than St. Paul, maybe not all that high.

In any event, as noted last week, the county is willing to put up $12-15 million for a parking garage, so at this point F.C. Cincinnati has offers of $50 million in hand (assuming the Cincinnati city council okays Cranley’s proposal), and is seeking $70-75 million. I know I probably shouldn’t be saying “Why quibble over $25 million?” when I haven’t had that much money in my entire lifetime, but you know, when you’re spending $150 million just on an MLS franchise, it does seem like less of a huge sum. Or, you know, maybe it’s a sign that MLS should lower its fees some in order to get in on a hot soccer market, but we’ve been over that one before.

UPDATE: So I wasn’t far off:

 

Friday news: Phoenix funds Brewers but not Suns, brewers float crowdfunding Crew, and more!

So, so much news this week. Or news items, anyway. How much of this is “news” is a matter of opinion, but okay, okay, I’ll get right to it:

  • Four of Phoenix’s nine city council members are opposed to the Suns‘ request for $250 million in city money for arena renovations, which helps explain why the council cut off talks with the team earlier this week. Four other councilmembers haven’t stated their position, and the ninth is Mayor Greg Stanton, who strongly supports the deal, meaning any chance Suns owner Robert Sarver has of getting his taxpayer windfall really is going to come down to when exactly Stanton quits to run for Congress.
  • Speaking of Phoenix, the Milwaukee Brewers will remain there for spring training for another 25 years under a deal where the city will pay $2 million a year for the next five years for renovations plus $1.4 million a year in operating costs over 25 years, let’s see, that comes to something like $35 million in present value? “This is a great model of how a professional sports team can work together with the city to extend their stay potentially permanently, which is amazing, and we’re doing it in a way where taxpayers are being protected,” said Daniel Valenzuela, one of the councilmembers opposed to the Suns deal, who clearly has a flexible notion of “great” and “protected.”
  • And also speaking of Phoenix (sort of), the Arizona Coyotes are under investigation by the National Labor Relations Board for allegedly having “spied on staff, engaged in union busting and fired two employees who raised concerns about pay.” None of which has anything directly to do with arenas, except that 1) this won’t make it any easier for the Coyotes owners to negotiate a place to play starting next season, when their Glendale lease runs out, and 2) #LOLCoyotes.
  • A U.S. representative from Texas is trying to get Congress to grandfather in the Texas Rangers‘ new stadium from any ban on use of tax-exempt bonds in the tax bill, saying it would otherwise cost the city of Arlington $200 million more in interest payments since the bonds haven’t been sold yet. (Reason #372 why cities really should provide fixed contributions to stadium projects, not “Hey, we’ll sell the bonds, and you pay for whatever share you feel like and we’ll cover the rest no matter how crappy the loan deal ends up being.”) Also, the NFL has come out against the whole ban on tax-exempt bonds because duh — okay, fine, they say because “You can look around the country and see the economic development that’s generated from some of these stadiums” — while other sports leagues aren’t saying anything in public, though I’m sure their lobbyists are saying a ton in private.
  • A Hamilton County commissioner said he’s being pressured to fund a stadium for F.C. Cincinnati because Cincinnati will need a sports team if the Bengals leave when their lease ends in 2026 and now newspapers are running articles about whether the Bengals are moving out of Cincinnati and saying they might do so because of “market size” even though market size really doesn’t matter to NFL franchise revenues because of national TV contracts and oh god, please make it stop.
  • MLB commissioner Rob Manfred says the proposed Oakland A’s stadium site has pros and cons. Noted!
  • NHL commissioner Gary Bettman says the Calgary Flames‘ arena “needs to be replaced” and the team can’t be “viable for the long term” without a new one. Not true according to the numbers that the team is clearing about $20 million in profits a year, but noted anyway!
  • Cincinnati Mayor John Cranley is set to announce his proposal for city subsidies for F.C. Cincinnati today, but won’t provide details. (Psst: He’s already said he’ll put up about $35 million via tax increment financing kickbacks.)
  • The Seattle Council’s Committee on Civic Arenas unanimously approved Oak View Group’s plan to renovate KeyArena yesterday, so it looks likely that this thing is going to happen soon. Though apparently the House tax bill would eliminate the Historic Preservation Tax Credit, which the project was counting on for maybe $60 million of its costs, man, I really need to read through that entire tax bill to see what else is hidden in it, don’t I?
  • The owners of the Rochester Rhinos USL club say they need $1.3 million by the end of the month to keep from folding, and want some of that to come from county hotel tax money. Given that the state of New York already paid $20 million to build their stadium, and the city of Rochester has spent $1.6 million on operating expenses over the last two seasons to help out the team, that seems a bit on the overreaching side, though maybe they’re just trying to fill all their spaces in local-government bingo.
  • There’s a crowdfunding campaign to buy the Columbus Crew and keep them from moving to Austin. You can’t kick in just yet, but you can buy beer from the beer company that is proposing to buy the team and then sell half of it to fans, and no, this whole thing is in no way an attempt to get free publicity on the part of the beer company, why do you ask?

FC Cincy cuts subsidy demand to $75m in “infrastructure,” county and city offer $50m instead

A last-minute flurry of negotiations between F.C. Cincinnati and Hamilton County yesterday over subsidies for a new soccer stadium didn’t actually end up resolving anything, but it sure was a flurry:

  • FC Cincinnati president Jeff Berding said the team was no longer asking for $100 million to pay stadium construction costs, and was instead asking for $70-75 million in “infrastructure” costs.
  • Cincinnati Mayor John Cranley said the city would cover the balance from tax increment financing kickbacks if the county would put in about $40 million via $2.8 million a year in existing hotel taxes. “There’s no way for the city to finance it by themselves,” Berding said. “This should be a layup. It’s a layup in that it’s infrastructure and it’s a layup in that it’s a source of funds that no one is currently using and doesn’t raise anyone’s taxes.”
  • The Hamilton County Commission replied with two options: Either $12-15 million from existing parking garage revenues toward building a new garage by the stadium site, or the soccer team could play in the Bengals‘ Paul Brown Stadium.
  • Berding wrote back in a public statement that while “it was good to see the County Commission come to the table,” the team “will not be funding public infrastructure routinely covered by governments” and “the financial data that we transparently shared with the County proves to us that Paul Brown Stadium would not support an MLS team.”

That’s a whole lotta public haggling, with the promise of more to come. (Berding is out of town, but promised on his return to “be back at it working with elected officials” on a stadium plan.) If nothing else, Hamilton County’s hard line has gotten F.C. Cincinnati’s owners to knock off $25 million from their demands, which isn’t nothing. And if I’m calculating right, the combination of TIF money and county garage money would now come to around $50 million, meaning the two sides are just haggling over $25 million, a gap that seems surmountable.

Whether you consider $50-75 million still too much for Cincinnati area taxpayers to spend on a team that already has multiple other stadium options that the team keeps turning down will depend on what you consider government’s responsibility to build “infrastructure” — garages, for one, are not something governments normally build for just anybody, and team execs weren’t specific on what “roads and utilities” would include. It’s still a large chunk of change to throw at a soccer team — as large as Nashville approved for its proposed MLS expansion team — but maybe at least small enough now to be out of the running for Worst Stadium Scam of the year.

Phoenix city council tells Suns owner to take his arena demands and shove them

Remember last week when the two leading candidates for Phoenix mayor said they didn’t want to spend public money on a new or renovated Suns arena, and I said let’s wait until the Phoenix city council finishes its secret meetings on the arena plans and see what the actual decision-makers have to say about it? Well, the council seems to have finished its arena meetings, or at least have decided it’s had enough talking about it:

The City of Phoenix has suspended talks with the Phoenix Suns over a proposed $450 million renovation of Talking Stick Resort Arena, according to people familiar the City Council’s action Tuesday behind closed doors…

The two sides are reportedly far apart on the terms of the deal…

Councilwoman Kate Gallego said [last week] it wasn’t “in Phoenix’s best interest to invest in an arena.” Councilman Daniel Valenzuela followed Gallego’s statement with his own: “Taxpayers have been expected to foot the bill for sports venues. That practice must stop now.”

According to people familiar with Tuesday’s executive session, Valenzuela called in via phone, but hung up when it was his turn to state his position on the renovation.

Oof, that is cold. But not entirely unwarranted, given that Suns owner Robert Sarver is demanding $250 million in public cash for a building that’s only 25 years old by hinting he’ll “explore other options” if he doesn’t get it.

This seems likely to slam the door on any chances that an arena will get pushed through before current team-friendly mayor Greg Stanton leaves office in 2018, which means Sarver is going to have to make some tough choices on how to play that move threat card once either Gallego or Valenzuela is behind the mayor’s desk. Could this end up being the Arizona equivalent of the Calgary Flames-Naheed Nenshi public faceoff? One can only hope, because that has been the best, especially for unvarnished commentary on how the arena sausages are made.

If Madison Square Garden sells the Liberty, where are they going to play?

The owners of the New York Liberty, one of the WNBA’s three remaining original franchises still in the same city they started off in, are putting the team up for sale. That’s of interest if you’re a WNBA fan — I’m actually a former Liberty season ticket holder, so I qualify as one of the few and the proud even if I haven’t been to see a game in the last couple of years — but also for readers of this site in general, because of what it says about the arena industry.

In brief: The Liberty are owned by James Dolan’s Madison Square Garden Co., which also owns the Knicks, the Rangers, and its namesake arena. The team, and the WNBA in general, was launched in 1997 for a bunch of overlapping reasons: to take advantage of excitement over the 1996 U.S. women’s Olympic basketball team, to fill dates in the otherwise-slow summer months (which is why the league plays outside of the traditional wintertime schedule for basketball), to make the NBA look women-friendly and provide a more affordable product to rope in fans priced out or alienated by the men’s game, and to beat down an attempt by the independent American Basketball League to horn in on the NBA’s pro hoops monopoly. The ABL was gone within a year and a half, and the Olympians were soon forgotten, but the WNBA has burbled on for another two decades, with modest attendance and revenues but remarkable longevity for a startup league, in no small thanks to the NBA’s financial backing.

That’s starting to change, though: While originally all the WNBA teams were fully owned offshoots of NBA siblings — down to teams getting sister names, like the Sacramento Monarchs to complement the Kings and the execrably named Detroit Shock to go alongside the equally-terribly-named-if-you-think-about-it Pistons — that’s starting to change, with more and more teams independently owned and operated. And the Liberty would be the biggest independent team of all once cut loose from MSG, which clearly has decided that it would rather get out of the women’s basketball game and stick to its core business of crappy men’s teams and lots and lots of concerts.

The big question for a future Liberty owner, meanwhile, is: Where are they going to play? Renting out MSG is a possibility, of course, but unless there’s some sweetheart lease deal baked into the sale agreement, it would likely be prohibitively expensive, since you’d be bidding against all those concerts. The Barclays Center in Brooklyn is another option that might come slightly cheaper, but again it’s pretty busy with concerts, even in the summer. (One problem with a basketball schedule is that it seriously restricts your flexibility for hosting concerts, which are typically booked long after a team’s home games are set in stone.) When MSG was getting renovated in the summers a few seasons back the Liberty played in Newark’s Prudential Center, but attendance was pretty bad (I picked up Stubhub seats ten rows from the court for one game for $3 apiece); Nassau Coliseum desperately needs something to fill dates, but it’s way out on Long Island.

I suppose a new Liberty owner could try to demand a new arena of their own, but that’s not going to go far when your fan base is the size of a WNBA team’s. Maybe this could all be part of the plan to build a new arena for the Islanders out by Belmont Park, something that Dolan is a part-investor in, so … I dunno, we’re deep into the tea leaves here. It’s an interesting moment, though, one that could end up revealing a lot about not only the future of women’s pro sports, but how arena managers are thinking about the relative value of sports vs. other events. I’ll have more on this soon, I hope.

Handicapping Deadspin’s “Worst Stadium Scam” Vote

Deadspin is holding its second annual Deadspin Awards, and among the categories, you will be excited to know, is Worst Stadium Scam. And it’s set to be a tight race, with these candidates, not all of which are technically from 2017, but let’s not nitpick:

  • The Raiders robbing Las Vegas
  • The Flames trying to rob Calgary
  • The Falcons robbing Atlanta
  • The Louisville Cardinals robbing Louisville
  • FC Cincinnati robbing Cincinnati
  • The Pistons and Red Wings robbing Detroit

Even though these seem mostly selected by which stories were covered by Deadspin in the last year (Nashville SC robbing Nashville didn’t make the cut, nor did the Cavaliers robbing Cleveland), that’s a pretty solid selection. The Raiders and Falcons stand out for the scale of the subsidies — the Raiders will get $750 million in state cash while paying zero rent, while the Falcons will end up getting almost that much over time — and the Falcons have the bonus scamminess of hiding $400 million of their payday in a “waterfall fund” that will keep paying out long after the stadium’s opening. The Flames and FC Cincinnati haven’t been successful in their shakedowns yet, but are notable for trying (and failing) to get a more team-friendly mayor elected in the former case, and for demanding subsidies on the grounds that their owner has never asked for them before so he’s due in the latter. The Red Wings and Pistons are getting about $350 million in public money from a bankrupt city (or from a state that is otherwise starving a bankrupt city, at least), while the Louisville basketball arena deal is just a nightmare without an end.

I’m not going to reveal how I voted, except to say that it was a tough decision, and I won’t be unhappy at all if one of my second choices takes home the prize. Go cast your ballot now, and give extortionate corporate behavior and terrible public policy the shiny trophy it so desperately deserves.

It’s everybody threaten the Senators will leave Ottawa without a new arena week!

The Ottawa Senators story so far: Then-owner Rod Bryden built an arena in the suburbs in 1996 to be the anchor of a new retail district, then that didn’t work and he went bankrupt. Then new owner Eugene Melnyk decided in 2014 that what he really wanted was an arena downtown, blaming this on the suburban one not being “built to last,” and started angling for development rights to a plot of downtown land, which he got the rights to negotiate for last year. But Melnyk still needs to negotiate how much he’ll pay for those rights, plus whether he’ll get public money toward construction costs despite having promised that “no government money” would be involved, all of which means it’s high time for move threats! Levied by anyone other than Melnyk, because that’s the way this game works.

First up, NHL commissioner Gary Bettman:

“A new downtown arena is vitally important to the long-term future, stability and competitiveness of the Senators,” Bettman said. “The process is ongoing, but I think asking Mr. Melnyk or the Senators the status would be more appropriate than asking us.

“However, we believe there needs to be a solution for the long term.”

That’s a pretty oblique threat, admittedly — “vitally important” to the team’s “stability and competitiveness” could mean a lot of things, from the team leaving town to it just not making as much money as it might otherwise, I think? It’s a nice start, and why Bettman earns is salary, but really you want somebody to come right out and say — oh, hi, legendary hockey announcer Don Cherry:

“If they don’t put an arena downtown they’re gone,” Cherry said during Hockey Night in Canada on Saturday. “I think they’re just hanging on here in Ottawa, not drawing out, with a great team like that.”…

“If they’re not drawing out with that team… I say they’re gone, and I say they go to Quebec,” said Cherry.

The Senators are definitely not selling out despite a contending team, and the suburban location probably isn’t helping. Moving to Quebec, though, would require selling the team to Quebecor, the media giant that owns the management rights to Quebec’s arena and has said it wants to be the owner of any NHL team there. And Melnyk has been pretty adamant that the team is not for sale — even saying “the team is not for sale” and that he’s promised his daughter she can own it when he dies — so that doesn’t seem like a thing that is likely to happen.

More to the point, meanwhile, is that if the Senators need a new arena, they can build one right now: They have the land, and if a downtown venue would be so much more lucrative that it’d be worth the construction costs, then Melnyk can just go to a bank and borrow the money. Unless what Bettman et al are saying is that the only way it would pay off for the team is if Melnyk got public subsidies to help pay for it — either via a sweetheart lease or straight-up cash or tax breaks to pay for construction — in which case this isn’t actually “the Senators need a new downtown arena” so much as “the Senators owner is unhappy with how much money he’s making, and would appreciate it if someone would undo the previous owner’s mistake and build a new arena in a better location, please.”

As for how much money Melnyk is making, Forbes estimates the team turns a profit of a few million dollars a year, while the team is valued at $355 million, up from the $100 million that Melnyk paid for it in 2003 — an annualized return on investment of about 9.5%, thanks to the discounted sale price he got in part because of that whole bankruptcy thing and the lousy arena location.

Tl;dr version: Sports executives have a funny definition of “need.”

Nashville MLS study ignored cannibalized sales taxes, author says it’s still “modest”

Hey, the Associated Press actually asked some economists whether the $75 million in subsidies for a new MLS stadium that Nashville approved last week could ever pay off via increased sales tax receipts, and it turns out they’re split: The economist who did the city’s study says it will, and everybody else says it won’t.

  • “It doesn’t seem to be the kind of objective appraisal that the city would need to render a believable opinion on why they should spend public money subsidizing the stadium,” said Lake Forest College economist Robert Baade, noting that the city’s study failed to account for “substitution,” where people spending money at at a soccer match will then spend less on other entertainment options that they’re skipping in order to go to a soccer match.
  • University of Colorado economist Geoffrey Propheter says the idea that a sports team increases local area income “has been debunked.”
  • University of Tennessee economist Lawrence Kessler, who co-authored the city’s study, admitted he didn’t try to account for substitution effects but said “we tried to be as modest as possible” in projections. Which, it seems like being as modest as possible would actually involve trying to account for the fact that you’re relying on the Casino Night Principle to make your numbers work, but I’m not paid the big bucks to be an economics professor, so okay.

This seems like it could have gotten a stronger headline than USA Today’s “Cost study for proposed MLS stadium in Nashville questioned” — under the new rules of subjunctive journalism, you’d think it could at least warrant “Proposed MLS stadium could be massive money pit.” (The Tennessean, which ran a longer version of the USA Today article, used the headline “Nashville’s proposed MLS stadium may have hidden costs to city coffers,” which is a lot better.) But then, I’m not paid the big bucks to write headlines, so — hey, wait, I actually am. Props on fact-checking the city’s stadium claims, then, USA Today, but points off for not having the backbone to report what the actual evidence says: Friends don’t let friends count stadium sales tax revenue as new money, because it’s not.