Nassau County and the owners of the New York Islanders have announced their lease plan for a new $400 million (or $350 million, or $430 million — accounts vary) arena, a little more than a month before an August 1 public referendum on the project. Previously, Nassau County Executive Edward Mangano had said only that the arena would be paid for by revenues from the team and taxes generated by the arena; now, we have some more details of how that would work. According to Forbes:
The Islanders will pay $14 million a year in rent and based on a study performed by Camoin Associates, the new arena will generate $1.2 billion in additional revenue for the county.
Only not exactly. That $14 million, it turns out, isn’t actually rent: Under the lease, the county would pay to build the arena, then would receive 11.5% of the revenue from it, including both Islanders games and other events. The minimum the county would be guaranteed to receive under the lease, even if the Islanders can’t sell tickets and arena rock bands stop touring, would be $14 million a year.
Debt service on the arena bonds, meanwhile, would be an estimated $26 million, so the county could lose up to $12 million a year in down years. That Camoin study, though (which is supposedly attached at the Forbes site, though it won’t load for me), projects $28.2 million in county revenue the first year, with receipts going up each year after that, which would produce a profit for the county.
Which brings us to problem #2: That county “revenue” includes not just money shared by the Islanders (which is already ill-defined — does it include sales of Islanders jerseys, if the Islanders ever get good enough for anyone to be seen in public wearing Islanders gear?) but “sales, hotel, and entertainment taxes generated from the new arena.” So yet again, it’s a form of TIF. Except that it’s worse than a TIF, because there you’re only kicking back the incremental new revenue over what you were getting at the old arena — here, it appears that all the taxes collected at the arena would count as “rent,” which is a neat trick if you can talk your landlord into it.
So the county would be paying to build an arena and handing over control of 77 acres of development rights to Islanders owner Charles Wang, and in return would get … somewhere between a $12 million a year loss and a $2 million (and rising) a year profit, assuming you count as “profit” taxes that any development on the site, including the existing Nassau Coliseum, would be paying anyway.
There are still tons of unknowns about this deal — among other things, I can find no public mention of whether the team or the county would be responsible for arena operating costs — but on first glance, it looks like Nassau County would be taking all the risk, in exchange for just 11.5% of the upside. There are certainly worse arena deals out there, but given the state of arena financing, that’s not exactly something to brag about.