Orlando county official’s crazy idea: If we pay for part of stadium, how about we get equal share of revenues?

So Orlando’s latest plan to build an $85 million soccer stadium for Orlando City Soccer Club (currently a minor-league team, but hopeful of landing an MLS franchise) with $30 million from the team and the rest in city and county money is not necessarily the best deal in the world, as we’ve discussed here previously. But Orange County commissioner Pete Clarke thinks he has a better way:

“I do not want another example of the county expending millions of dollars watching from the sidelines, as our investment climbs in value without the prospects of our taxpayers benefiting,” Clarke wrote in a memo he sent out late Monday.

Clarke said he wants the county’s contribution to secure a share of the soccer team’s ownership, with any yearly profits or money made from a future sale to go to county athletic programs and facilities.

Deadspin calls this “the best idea for stadium financing I’ve ever heard,” and the Orlando Sentinel quotes me as praising it as making the public’s expense “an investment, not a gift.” So I feel really bad throwing just a bit of cold water on it.

The problem is if Clarke’s plan is actually to get “a share of the team’s ownership,” as the Sentinel describes it. This would be dicey not just because sports leagues traditionally hate the concept of allowing municipalities into their little owners’ club, but because MLS in particular is a single-entity ownership structure, where the league actually owns all the teams (and the player contracts), and team “owners” just control operating rights for each franchise.

Fortunately, Clarke’s actual memo seems to have anticipated that, and actually asks not for a share of the team, but for a share of its revenues:

Make Orange County a member of the partnership on a funding basis, which would be a percentage of the stadium costs and a percentage of the total stadium/franchise fee costs, of $155 million.
During the course of the agreement, with the City of Orlando (20-25 years), City Soccer would share with Orange County, a pro-rata share of the yearly naming rights, proceeds from stadium vending and other City Soccer sponsored events. These proceeds would go to Orange County Parks and Recreation for soccer specific expenses.
If all the projections we have seen and heard are correct, MLS and Orlando City Soccer will be successful, as is the case with the Magic. Furthermore, the franchise value will escalate in a similar fashion. Therefore, include a provision that when the franchise is sold, Orange County be treated as a partner and share in the profits.

This is a far better idea for several reasons, among which that it evades the whole question of sharing profits (which, especially in a single-entity structure, are bound to be a nebulous concept), and instead just demands a cut of stadium- and sale-related revenues, proportional to the public’s share of costs.

My complete comment that I sent to the Sentinel:

That looks like a great idea. As I’ve always said, the problem with the current stadium business isn’t that the public is putting up money, it’s that the public is putting up money without getting anything back. If Orlando could get an actual share of the stadium revenues – and it’d have to be gross revenues, mind you, not net profits, since it’s too easy for clubs to cook the books with the latter – then this could actually be an investment, and not just a gift.

No reply yet from the Orlando City team, or from MLS, but I don’t expect they’re going to be nearly as excited as mine (or Deadspin’s). Given that Orange County commissioners look like the main roadblock to getting this stadium built, though, maybe they won’t dismiss it completely out of hand. Maybe.


24 comments on “Orlando county official’s crazy idea: If we pay for part of stadium, how about we get equal share of revenues?

  1. It’s a good idea in theory, and probably as good a deal as this city will ever get in regards to a sports subsidy.

    Which, of course, means it doesn’t have a snowball’s chance in hell of happening.

  2. Would also make for great fun when the owners threaten to move in 20 years when they want another stadium.

  3. This is where you fail on principles, Neil.

    How do you take a line against public funding of stadia because it’s a gross misuse of tax money, but seemingly not have any problem with public entities owning private entities (or at least profiting alongside their enterprises)? Essentially, you’re saying that you don’t trust the government with tax money in one instance, but saying you trust them with it in another instance. That’s a duality paradox, and it makes your principles look pretty illogical. What makes them more trustworthy at one time than in another? Is it not the same entity, the same people, making the choices?

    Not only that, but if you’re in support of Clarke’s plan of revenue sharing with the county, I’d argue you’re a closet fascist that wants government to profit from private enterprise… which is really no different than what you argue against on a daily basis on this website. A “public/private partnership” is just another term for government subsidization of a company or industry. Again, what makes this acceptable in this instance? And where do you personally draw the line for government to be involved in ANY industry? The two concepts I’m talking about converge very early in the thought process, whether you choose to realize it or not.

    This smells of ill-thought-out concepts on your part, and it really exposes the fact that even if many people feel the State is inept that they still grant it a refuge of idolatry in some regards.

  4. I disagree with Neil’s comment…

    “As I’ve always said, the problem with the current stadium business isn’t that the public is putting up money,…”

    …because stadiums never need public money – leagues are very profitable, teams will exist, they need places to play, stadiums/arenas will be built without assistance. There’s nothing “ill-thought-out” about believing that certain forms of government involvement are worthwhile while other’s aren’t. But if you’re going to make an investment in a profitable enterprise, there’s nothing “fascist” about expecting a return, regardless of who/what is doing the investing.

  5. @Keith:

    The root of fascism is government being bed-partners with business and sharing in their profits. It’s what separated Mussolini/Hitler from Stalin/Mao. The latter simply took over the industries and eliminated the private enterprises.

    Also, if we’re talking pointedly towards MLS here, I’d argue that most teams WOULD NOT be able to build the stadia they seek to build without public funds. Nor would the league itself. Only a couple MLS clubs make a profit, let alone have sources of capital to invest fully privately into infrastructure. There are only so many Hunts, Anschutzs, and Krafts in the country. Most owners are small local personalities with maybe a couple hundred million net worth. IE, not enough to build stadia.

    But this is no reason to grant public assistance. I’d rather a league filled with private stadia on par with Crew Stadium in Columbus than some bastardized financing option that fills a league with Sporting Parks. There just isn’t that much capital in circulation to provide stadia for every single team in every single sport. Hence why cities, states, and the nation go into debt to afford such preposterous schemes.

    As long as the public trough remains open, groups will constantly be coming back to it to feed. And this applies to ANY industry. Making it just about the sports industry and stadiums in particular is diluting the real problem down to a special interest. No different than any other lobby group in Congress right now. Essentially, the argument will go “Do [not] give money to this group! [Instead] Use the money here!” It’s bickering over how best to use a resource that was stripped from the rightful owners, none of which have a true say in the matters at hand.

    Again, I say, Neil’s positions are unprincipled because his logic is not extended far enough to reach the real meat of the issues he talks about. It’s not just about sports organizations being able to fund their own houses without public assistance; it’s about an organization (the government, any level) telling its constituents that it knows how to better spend their money than they do. If you’re not going to settle for that being the case with stadia, then why settle for it being the case with anything else?

  6. Where was Pete Clarke when the city of Orlando was building new arenas for the Magic. And why not use his idea to own a part of that Nba team for the sweetheart land deal the city is in the process of making with the Magic in the near future. These hypocrites should be against all corporate welfare!

  7. Columbus Crew Stadium is HOT !
    http://www.sbnation.com/soccer/2013/4/27/4276486/scoreboard-fire-columbus-crew-stadium

    But they’re also a MLS team asking for a new stadium subsidy every so often (although they did use Ohio Stadium for several years, which certainly sounds better in my mind than building, but maybe it’s problematic beyond the temporary addition of lights for night games).

  8. “Also, if we’re talking pointedly towards MLS here, I’d argue that most teams WOULD NOT be able to build the stadia they seek to build without public funds.”

    Well, yeah, “seek” is the key word here. We’d all like to have somebody help us live beyond our means. Assuming there’s more than zero demand for their product, MLS would find places to play that fit their business model, just like any other business. They might not get the stadia they seek, but they’d get what they need.

    “If you’re not going to settle for that being the case with stadia, then why settle for it being the case with anything else?”

    Our points of view really aren’t that far apart. I’m against any forms of subsidies to profit-making enterprise, with some exceptions for national interest. But you can’t possibly believe that my arguments against sports subsidies are invalid just because I’m not making as much noise in opposition to other subsidies?

  9. @Keith

    I have to ask: what would the sports business model allow the teams in the way of stadia to house them? Do you know? Or are you merely assuming that because “demand > 0″ that there would just have to be multi-million/billion dollar properties built?

    Also, I’m not arguing your view on sports subsidies is “invalid”. I’m saying you (and Neil) aren’t going far enough with your logic. And this makes you unprincipled as it applies to the topic. As I said, it reduces your arguments down to being mere “special interests”, looking to get (or not get) money for a particular group.

    Our philosophies ARE further apart than you think, though. I think I’ve made it clear that I believe government should not be in the business of subsidizing anything (collectively or cooperatively), nor should they be in the business of making profits (through noble means or confiscatory means). If you take away all those roles from government, what is left of them? I’d say little to none.

    On the other hand, I think you’ve made it clear that you’re in favor of government assistance to select industries. But, as I’ve said, this equates to exceptionalism, which is highly subjective. And this is where we disagree. While you would make case(s) for your own personal interests (or what you think should be promoted above others), I’m making the case that the government NOT be used as a public feeding trough for ANYTHING. These ideas are diametrically opposed. Because you are in favor of one industry or group not being allowed to eat from the trough, this means you’re still in favor of the trough existing the in the first place. Do you see how our views differ?

  10. “I have to ask: what would the sports business model allow the teams in the way of stadia to house them? Do you know? Or are you merely assuming that because “demand > 0″ that there would just have to be multi-million/billion dollar properties built?”

    Holy crap, not assuming that at all. Don’t know, don’t really care. Just like I don’t really care if the office building you work in has granite floors or linoleum. But I’m pretty sure that the Big Three of NFL, MLB, NBA would do perfectly fine building very expensive buildings if that was part of the cost of doing business. Salaries would drop a few percent, owner profits would drop a few percent and they’d build what they need. For a less popular sport, the “need” might have to be satisfied by a local college or high school stadium. And that’s okay.

    “On the other hand, I think you’ve made it clear that you’re in favor of government assistance to select industries. But, as I’ve said, this equates to exceptionalism, which is highly subjective.”

    My “select” list would be very, very small and would have nothing to do with personal interest (see “national interest” above).

    What can I say? I’m an exceptional kind of guy.

    “And this makes you unprincipled as it applies to the topic. As I said, it reduces your arguments down to being mere “special interests”, looking to get (or not get) money for a particular group.”

    And so…what now? If I’m unwilling (or too “unprincipled”) to speak out in favor of the libertarian absolutist point-of-view, I should just…shut up? I seriously don’t understand the negativity toward what the site –is– devoted to.

    (fwiw, I can’t think of anybody who has posted here who was against sports subsidies but spoke out in favor of other corporate welfare.)

  11. wesbadia, I don’t think you fully understand the concept of fascism. According to Merriam’s, fascism is a “political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.” That goes a little beyond government and private enterprise working together. I don’t know what planet you live on, but there is not a country on earth where the government and private enterprise don’t work together in one form or another. We are always making choices as to how much or how little government contributes to private enterprise. Trucking companies cannot afford to build their own roads (what a mess that would be) but without trucking companies moving goods our economy would come to a halt so they get to use government built highways. There are millions of examples where the government is involved with free enterprise and it is usually to the betterment of society. True there are example of flat out corporate welfare (farm subsidies for example) that should be eliminated. This site is dedicated to the belief that government subsidies to millionaires/billionaires so that they can build palaces for their toys, should be eliminated. We understand that it is not a perfect world, that we don’t live in a philosophical vaccum, and that we do pick winners and losers. Other people may choose differently, but we don’t support corporate welfare for sports stadiums. If you don’t support corporate welfare for many other topics, I am sure there are other sites dedicated to fighting those issues also.

  12. Jeez, I go to a baseball game and a debate about fascism breaks out. I don’t know what’s happened to … okay, I guess the Internet has always been like this, actually.

    Anyway:

    “How do you take a line against public funding of stadia because it’s a gross misuse of tax money”

    Bzzt. I don’t take a line against public funding of stadia. I take a like against public *subsidies* for stadia. If the government wants to finance a stadium and have the team repay it via rent or a share of stadium revenues — say, the way Minnesota did with the Metrodome — I don’t have any problem with that at all. But given that the number of stadium deals like that since the Metrodome I can count on one hand with a few fingers left over, I still have plenty to complain about.

    I think there are tons of things wrong with government as it exists in this country today, but I don’t think that everything that the government spends taxpayer money on is wrong. (I’m an unabashed fan of libraries, for instance. Also subways. And running water.) “Government being involved in industry” isn’t a problem as I see it; “government being involved in paying the expenses of industry while someone other than taxpayers reaps the benefits” is.

  13. @Welkin: You need to re-read my comments. I didn’t and do not reduce fascism to strictly public/private partnerships. I made a comparison between it and how communism was run, ie, the collective ownership of industry. I never said, nor think, that fascism is limited to this.

    And, I might add, that the official definition you’ve provided for fascism paints the US of A in a different light than what many of you view it as in your heads, doesn’t it? Think about it.

    If we want this debate to devolve into strictly abstract philosophical arguments, then keep picking nits and twisting my words out of context. But if we want to get to the meat of the matter (that most people here seem not to take their logic far enough), then we should actually have a bit more on-point dialogue as Neil has done in his comment.

  14. @Neil: Your comment confirms my fears about you — that you’re not really about limiting what the government is involved in, just that you want to use the government for your own subjective valuations of what “should be”. And this goes to prove the concerns about your logic that I’ve listed above, namely that you don’t go far enough with it. You’re content with it being inside of a rather small box.

    Whether you choose to believe it or not, “public funding” IS “public subsidization”. It’s making the government the lender of last resort, which, economically speaking, leads to ruination. As I said previously, proof that the “public” cannot afford these hair-brained schemes is the fact that local and state debt is deferred largely to the federal level; and federal debt is magically whisked away via monetary inflation. If you think for a minute that government coffers can sustain multi-billions in spending for stadiums alone, even on a “lending” basis, you’re absolutely delusional. And I’d argue that you’re really only exacerbating the problem by giving our benevolent dictators such a loop hole for their pet projects.

    This whole idea of the State helping out the masses via some sort of “bread and circus” type system (ie, social programs and entertainment) is pervasive throughout our society. Even lending for sports stadia subsidization is on par with the State lending to individuals for education, business start-ups, and home purchases. And we’ve all seen what occurred with the last of these, haven’t we?

    The raw deal is that tax money is being extracted from producers and creators of wealth, used for funding things that help politicians to remain in office and/or hand out favors to select partners, and anything in excess of those amounts is inflated away by monetary creation out of thin air. As long as you give loop holes for this to continue, whether you think it’s a mere “loan” or not, you’re contributing to the overall problem at hand — the destruction of wealth, prosperity, and acceleration of living standards in our society.

  15. I need to add this as well because it better ties my argument together:

    Everything we’ve built in this society via “public subsidization” is actually “public funding/lending”. The government is merely the conduit of power that society is choosing to use for those ends because it’s the easiest to access due to its use of monopolistic force.

    If society wants to spend trillions or quadrillions of dollars on things like public transit, interstate highways, airports, utilities, unemployment, medical coverage, insurance, sports arenas, etc, and they want all of these things to be the best damned quality that’s in existence, then they arrive at the conclusion “we should let government pay for it for us!”

    Unfortunately, the funding used by government is just society’s anyway, and so society is really just using government as the lender of last resort (like I said above) because no other lender exists for such lofty aspirations to be achieved. Government, after promising to deliver on these dreams, uses its powers (like judiciary, legislative, and monetary) to hold up their offer. They set the dreams in stone by writing laws. They uphold the stone tablets by saying they’re “rights” or saying they’re “reasonable to society”. They fine or imprison those not wanting to assist in reaching these dreams, or those looking to subvert the government’s partners. And, lastly, the print the money that’s used to purchase these dreams and lift society to the stars.

    Government is the lender for everything society turns to them to build. If you keep going to government as a loanee, you’ll never be turned away… provided you argue long, hard, and with plenty of cash to sway them to your set list of dreams. However, the government isn’t capable of creating wealth of their own; you’re still the loanee, and, in the end, you need to pay for it yourself. It might be through physically paying off your loans on your dreams… or it might be through devalued currency due to rampant monetary expansion. Either way, you can’t exist outside of reality forever. Sooner or later things will become due… or the economy will come crashing down. If the housing sector can suffer losses like it did for the same reasons, then why not the sports sector, the education sector, the transportation sector… or even the “running water” sector, like Neil seemingly wants to tout?

    You’re living a dream, not attaining it. Wake up and see reality. Most things we’ve experienced should not be because it’s all on credit with no real way of paying it back other than destruction. This is the link between “subsidization” and “lending” by the “public”, Neil.

  16. Wes: If the underlying business of MLS was sufficient to justify the investment (which is the key word) of $200m for a stadium dedicated solely to an MLS club, then that stadium would find no shortage of capital available to fund it. The wherewithall of the individual owner is largely irrelevant to the business case for a stadium. IF such a building was capable of generating enough revenue to pay for itself and increase the profit the owners take, it should be built. If that is not the case, I would argue that the government(s) step into dangerous territory in providing tax dollars to “make it happen”. When discussions veer into “the owners can’t afford it so the public should help” territory, I’d suggest we are already some way off the rails.

    Either a capital investment in a business is supportable based on the projected returns or it is not.

    We can all certainly question the economic impact (if any) of many other type of building (museums, art galleries, rec centres are the usual targets), but as modern sports stadia largely seem to be custom designed for and effectively deeded to their main tenants (often for little or no rent in return), it’s hard to accept the argument of some that they are actually “public” buildings because the taxpayer paid for them.

    If these facilities remained owned by the public and controlled by the public, with the tenants paying market rate for use, I’d have much less of an issue with this type of ‘discretionary’ public spending. They aren’t needs. They are wants, in my view. And funding decisions should reflect that (if possible, through local plebiscite).

  17. Some info on chefjoe and the Columbus Crew stadium. That place was 100% paid by the late Lamar Hunt after a search for a public/private deal didn’t materialize. Although I believe it’s built on state land. Don’t know if the new owner is looking for money yet, but he is from out of state and Columbus just finished bailing out the NHL team and I believe are also subsiding that team with casino money if memory serves right. The city opened a can of worms.

  18. Going off on a total tangent here Neil, but remember a few months back when you linked to a Fox 35 report where they made subsidies for this stadium seem like a fait accompli? I don’t think anyone actually saved the screencap at the time, so I took the liberty of doing so myself: http://imgur.com/SZsdZZL

  19. Steven: Absolutely true. As I recall, Crew Stadium cost $28m when built (in 1999?). It was the first SSS in MLS.

    I understand the new owners have been talking with the city and state about tax dollars for upgrades, but I’m not certain what stage they are at.

  20. Oh, I’m familiar with the Columbus Crew… watched a couple of their games in Ohio Stadium.

    Here’s the last time they were talking about an upgrade, at least according to Neil and the search widget.
    http://www.fieldofschemes.com/2013/03/08/4683/columbus-crew-exec-says-team-needs-new-soccer-only-stadium-to-replace-old-new-soccer-only-stadium/

  21. Wesbadia: You have me dead to rights: I’m not a fundamentalist libertarian. The great thing about sports subsidies (or corporate subsidies in general) is that people of many different political perspectives can agree on how awful they are.

    Also, while we’re on tangents, every time I read Wesbadia’s name I picture my alma mater as populated only by a tire and a stop sign.

  22. Chef Joe: I particularly like it when the tenants of soccer only facilities line up for the whistle and you can still see the residue of the College/HS football lines on the pitch.

    Turns out even in SSS, some MLS clubs have to rent out their facilities to that “other” football to earn extra revenue. I’ve seen it in LA, Dallas, Columbus and a couple of others. Not often mind you, but often enough to put the lie to the “we need SSS and we can’t survive if we have to share facilities with other teams/sports” routine.

    Soccer is much better to watch when there aren’t any ‘extraneous’ lines on the pitch, I’ll agree. But it’s all about revenues, isn’t it?

  23. John B you are correct. The owners want control on game dates but also want the revenue stream from renting out to other events. However in Frisco and Houston the deals were based on allowing HS and or college football teams to use stadia free of charge. And in NE and Seattle stadia shared with NFL teams.

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