Consultant that’s never been right about anything tells Knoxville to build $200m minor-league hockey arena

As I frequently point out, I don’t have the bandwidth to cover all of minor-league sports, but occasionally a venue deal there stands out as especially noteworthy. And that’s the case with the proposal to replace the Knoxville Civic Coliseum, home of the Knoxville Ice Bears, with a new 10,000-seat arena for a whopping $205 million.

The price tag is alarming — I’m almost certain this would be the most expensive minor-league hockey arena ever, and it’s not close — but even more so is the consultant who made the proposal:

“It’s not state-of-the-industry, at all,” Bill Krueger, principal of Conventions, Sports and Leisure International, said in his presentation on the coliseum and auditorium during a public meeting.

Yes, it’s our old friends CSL, the venue consultant arm of the Dallas Cowboys/New York Yankees-owned concessions company Legends Hospitality, the same consultants who had to withdraw its own economic impact projections for a D.C. United stadium after it admitted screwing them up, overestimated the impact of the San Diego Padres‘ new stadium by including attendees at an unrelated convention center, and cited approvingly a study of LeBron James’ economic impact that the study’s own author had said didn’t mean what CSL said it meant. These are the guys that Knoxville called in to tell them what to do with their arena.

Really, shouldn’t there be some truth-in-labeling requirement that anyone who has been proven to be so spectacularly wrong on previous occasions should have to be presented as such? (I’ve been thinking about this ever since Iran-Contra co-conspirator Elliott Abrams started showing up as a TV pundit, and I thought one of the conditions of his plea deal should have been that he be IDed as “Elliott Abrams, convicted liar.”) The Knoxville News Sentinel can’t be bothered, apparently, so it’s left to me to mock them on my blog instead. I mock thee, Knoxville News Sentinel! How do you like them apples?


20 comments on “Consultant that’s never been right about anything tells Knoxville to build $200m minor-league hockey arena

  1. And it really would be almost entirely for the hockey team. Downtown has a couple of performance venues, plus UT’s 21,000 seat arena and 100,000+ seat football stadium within walking distance. Contrary to one comment in the News-Sentinel article, doing nothing really is a viable option.

  2. I propose the Ollie North International Truth Index, with rankings ranging from 0 – 1, where 0 means not at all credible and 1 represents pretty much not at all credible.

  3. So, three well-publicized issues out of the company’s hundreds of recommendations for cities around the world constitutes “never been right about anything”? Blog on!

    Also, it really wouldn’t be all for hockey. The city loses millions in revenue from concerts and other events that go elsewhere because of the insufficient seating or structure of the current coliseum. Thompson Boling and Neyland are frequently not viable options due to no alcohol, venue size, scheduling conflicts or just not being able to come to terms with UT.

    Doing nothing would result in the eventual closure of the entire facility and the loss of the sports and other events that call it home – including the one successful professional sports franchise the city has.

  4. Okay, I haven’t actually looked at every single recommendation that CSL has ever made in its history. But I’ve yet to find an example of it being right about anything (in more than just those three cases — there’s only so many links I can inflict on people at once), so I think at this point it’s fair to say that they’re wrong until proven otherwise.

    As for the Ice Bears moving if the arena isn’t replaced, 1) that isn’t necessarily true, since they knew where they’d be playing when they started there in 2002, and 2) even if they did move, I don’t think even the most rose-colored economist would dare to say that the Ice Bears are worth $200 million to the Knoxville treasury. Okay, maybe an economist at CSL, if they have any.

  5. ” The city loses millions in revenue from concerts and other events that go elsewhere because of the insufficient seating or structure of the current coliseum”

    Those may or may not be the only reasons that the city loses those “millions”. If there was a business case for those events, however, somebody would build a private facility that would attract them.

    Finally, even if it is true that millions in revenue are lost, why is it we only talk about the revenues, not net profits? Would/do those events make a profit or not? If not, what is the justification for capital investment?

    To illustrate the point a little more obviously, a city could lose millions in hotel tax revenues by not staging a give away of free cars to every person who stays at least two nighst in a city hotel (a promotion which would cost the city billions).

  6. Has there ever been a case where CSL *HASN’T* recommended building a new stadium/arena at tremendous expense, promising a vast economic windfall to come?

    “That sports team ya got there is a bunch of whiners. Just slap a new coat of paint on the old stadium, and you’ll do fine.”

  7. You’re starting to sound like Paul Krugman, which is not a bad thing, since he is a Noble Prize winner. Save some space in your trophy case.

  8. I like Krugman a lot, though I’d have to say Gail Collins has been more of an influence on my writing style. I will always remember her Newsday column about how the city was having to spend millions on repairing East River bridges because it had skimped on spending a few tens of thousands on rust-proof paint, in which she suggested that if anyone spotted former mayor Ed Koch on the street, they should greet him with, “Hey, Ed! Forgot to paint the bridges!”

  9. Steve A,

    First of all, minor-league hockey is only a professional sport insofar as the players receive a salary. The team has little to no flexibility on roster decisions or even in some cases playing time. The “franchise’s” job is to run promotions and sell tickets to subsidize the provision of practice games. It basically is a combination of pro wrestling, JV hockey, and the circus.

    Off the top of your head, do you know who the league champion was two years ago?

    Plus, UT varsity sports are likely more professional than minor league hockey.

    I always find the concern by “sports” fans about the availability of proper concert venues when tax dollars are being discussed to be quite amusing.

  10. Neil, you’re just dead wrong with what you’ve written in this blog. You’re doing a disservice to the citizens of Knoxville who want to understand these issues more clearly. You obviously didn’t even look at the study report and the hundreds of pages of supporting information that the consultant team delivered to the City. It’s been on the City’s website for weeks. You made broad assumptions based on what was reported (incorrectly in the Sentinel). The consulting team has estimated that hard costs for a new state-of-the-art arena to replace the Coliseum could cost between $100-125 million, not $205 million. The figure you cited represents the high case hard cost estimates for a new arena ($125 million) PLUS $33 million for a major renovation of the Auditorium (to bring a 55 year old facility to state-of-the-industry standards) PLUS total project soft costs. The full study report provides plenty of research and discussion of uses for the facilities that go far beyond simply minor league hockey. We know you and Heywood have a long-standing agenda, but let’s get the basic reporting facts correct first.

  11. Daniel: You have a link to the CSL report? That would help readers here examine it for themselves.

    “Soft costs” are still costs, so if we’re talking $125-150m for the arena alone, that’s still rather high for a minor-league facility. But either way, the issue is that taking arena advice from a company that has an incentive to build buildings that will generate more profits for its concessionaire arm — let alone a company with a track record of horrific errors like CSL — is sheer lunacy.

  12. Found it:

    http://www.knoxvilletn.gov/UserFiles/Servers/Server_109478/File/PublicAssemblyFacilities/kcacstudy/KCACReportFINAL.pdf

    Like most CSL reports, it’s awfully light on apples-to-apples comparisons, but my favorite part is where it shows on one page that the arena complex is currently losing about $800,000 a year in net operating costs, but says on another page that if the city spent up to $200m on its new-arena-and-renovated-auditorium plan, the new complex would … lose about $800,000 a year in net operating costs. Now there’s an offer that’s too good to refuse!

  13. The Knoxville Complex is presently being managed by SMG on in interim basis before the City issues a management RFP later this year. SMG has its own concessionaire arm. Legends doesn’t operate buildings like this, nor does it normally pursue food and beverage contracts for municipally-owned event venues like this. They get involved with larger pro sports and university projects. Implying that there’s any vested interest in this case with the consultant, other than providing information for the City and its citizens to make their own decisions, is tenuous at best.

  14. I’m not saying that Legends would necessarily want to operate a Knoxville venue. But as an affiliate of two pro sports franchises and a concessionaire, you can see where CSL’s approach to venue development might not be “Is this the best deal for the city?” but rather “Is the best for the sports industry?”

    Also, note that one of CSL’s partners in the report is the architecture firm Populous, who clearly have a vested interest in more new venues being built.

    There are plenty of people who can perform an economic analysis of a sports construction proposal, though inevitably it’s going to be somewhat guesswork. Starting by hiring the guys who have a record of being wrong and are owned by people who are in the business of trying to get you to subsidize their profits is just about the worst way to go about it, though.

  15. Neil, is everything so black and white for you? Three negative stories and they’ve never succeeded? Who says they have to be right or wrong? They were hired to do a study and they did. What the city decides to do with that is up to them and remains to be seen. Your further “analysis” and comments only further display your tendency to cherry pick a few details and make overreaching assumptions from them.

    Kevin, actually, yes they have recommended not building on several occasions and said so more than once at the presentation. And it’s not the sports team whining, it’s the fans that don’t attend because the 60 year old seats aren’t comfortable and the building is on its last legs. And it’s the artists and other events that pass the city by because it doesn’t have a suitable venue.

  16. I stand guilty of cherry-picking the part of the study where CSL recommended an up-to-$205-million arena-and-theater project while simultaneously saying the net operating revenue the city would get from this would be $0. You got me there.

  17. “The city loses millions in revenue from concerts and other events that go elsewhere because of the insufficient seating”

    Any independent research backing that claim? That one has been trotted out for every stadium proposal ever. Presumably, every concert and event on earth is destined for your city except for the lack of seating.

    And if the real concern is millions from concerts and events why build a hockey stadium and not a dedicated concert/event venue?

  18. “actually, yes they have recommended not building on several occasions and said so more than once at the presentation.”

    Steve A.: So please tell me, then — when/where has CS&L ever recommended a ‘no build’ alternative (or even a ‘modest refurb’ alternative)? If you’re a local real estate oligarch/sports team owner/other moneyed interest who’s looking to make bank by raiding the public treasury to build your development-scheme-cum-sports-complex, it sure looks like CS&L are the people you hire to write the justification — I’m looking for the counterexample. Any counterexample.

  19. The consultant Conventions Sports & Leisure presenter, Bill Krueger, was not a public policy analyst, MBA or CPA as one might expect.

    His training and education was in marketing. He was intent on selling us a $300+Million facility.

    The actual costs of the recommended facility was carefully avoided. A thumb-nail estimate, utilizing CS&L rosy estimates, in which we include expected financing and capital costs, brings the monthly loss/cost to roughly $1.6 Million.

    The $19+Million annual loss/cost assumes they predicted attendance figures accurately, estimated costs within reason, and the nearly doubling of major events actually occurs.

    How accurate is the study? Are the study findings reliable? Not very.

    We know as CS&L tells us: “This report, its findings or references to CSL or its subcontracted team members may not be included or reproduced in any public offering statement or other financing document.”

    “Furthermore, all information provided to us by others was not audited or verified and was assumed to be correct.”

    And, gosh they were not kidding.

    Repeated we-can’t-be-held-responsible caveats tip us off to the fictional or questionable nature of the report: “…actual results achieved will vary…the variations may be material.” Then the hints concerning the limited scoping and City direction of the report begin.

    Well, yes CS&L we will take you at your word.

    We understand your assurances as to the general unreliability of the study.

    Got it.

    The report exhibits bits of schizophrenia concerning the site:

    Abundance of parking, in three city owned garages containing 2,500 spaces, is identified as a primary strength.

    Option Three surprisingly recommends tearing down one of the three garages identified as adding value to the site.

    Surface parking on the parcel currently occupied by KPD is suggested as a possible replacement for the parking garage.

    The report provides no cost benefit analysis of the expense of building a new police headquarters to make way for new surface parking required by the demolition of the parking garage.

    The report offers tantalizing suggestions the parking garages may have structural issues. It notes potentially serious cracking issues common to all three garages. Further structural investigation and specialist analysis is called for.

    To top that all off, the report draws repeated attention to the idea the new arena need not even necessarily be located on this parking rich site.

    Locating elsewhere would increase the project costs as parking lots or garages would have to be built.

    Parking garages are extremely expensive to build. Wise planning wrangles revenues from such assets nearly around the clock. Lots/garages in distant out lying locations lack the demand to produce significant revenues when the venue is not in use.

    Airports are primarily funded via the suprisingly low-tech function of parking fees. Uber and Lyft car service is placing many airport parking revenue streams at risk. Serious risk.

    The CS&L report is silent on the changing downward trends in parking revenues due to Uber and Lyft. It is an unacknowledged and unidentified risk to which the report is blind.

    A death spiral in airport parking revenues is underway: the more arrivals and Uber/Lyft airport drop-offs the more parking revenues decline. To combat parking revenue loss airport authorities increase parking fees. Increased fees drive more Uber/Lyft drop-offs. The death spiral of parking revenues accelerates.

    Patron Uber/Lyft drop-off areas are not even suggested in the report. Nor is increased public transportation as a possible arrival and departure mode seriously explored.

    But I guess you can only do so much to acknowledge current trends in a paltry $100,000.00 dollar study.

    A study taxpayers were first assured would only cost in the mid to high $40,000.00 range.

    Learn a valuable lesson from that. Whatever cost numbers are thrown out you can count on more than doubling.

    “They say” Option Three will cost roughly $280 Million.*

    *Not including financing costs of capital, operating or maintenance reserves, new police headquarters, parking, etc., etc., etc.

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