Writing about stadium and arena economics in a way that’s easily digestible by a general-interest newspaper audience is hard — and doubly hard on newspaper deadlines. I get that. But the result is way too often stories that are only likely to confuse readers, and leave them with a false impression about how sports finance works and what’s important for economic success, and — you know, let me just skip to the Columbus Dispatch story itself:
Nationwide Arena reports small profit
That’s a great headline: Simple, direct, easy to understand. There’s some question about why the Dispatch replaced its more downbeat headline on an earlier version of the story (“Nationwide Arena to end fiscal year barely in black, with tax bill, debt looming”), but it’s two different ways of saying the same thing, really.
Except that neither way of saying it is really accurate, or at least doesn’t paint a full picture of what’s going on with the Columbus Blue Jackets arena following their $60 million(ish) public bailout in 2011. Here’s how the arena “turns a profit”:
- The city and county send the Franklin County Convention Facilities Authority, which took over the arena in 2011, about $4 million a year in casino taxes.
- The state provides the arena with a $4 million a year property tax exemption, though that expires this year.
- The state, which is owed $10 million on an arena loan, and former arena owners Nationwide Realty Investors, who are owed $44 million on their own loan, have never received any payments on these debts, though the casino taxes were supposed to cover loan payments.
- The county is deferring about $2 million a year in maintenance costs, which will have to be paid somehow eventually, but there’s no money for it now.
- After receiving all these breaks — figure about $14 million a year total in various tax subsidies and unpaid obligations — the arena is projected to end the year with about a $47,000 surplus in its bank account. Profit!
Much like the Sprint Center in Kansas City, in other words, Nationwide Arena is a financial success on its books, but only because its books are propped up by massive subsidies from other people (mostly taxpayers, but by Nationwide as well via that unpaid loan). So the entire premise of the news story is dumb — whether the arena is “profitable” is entirely about how much cash the state, county, and city has decided to send it this year, not about whether the arena can actually bring in more revenue from operations than it spends on expenses, which is the usual definition of “profit.”
This is especially important because the next battle is likely going to be over that $4 million a year property tax break, which is already being framed as a way to keep the arena from losing money, though really it’s just about who’ll be $4 million a year in the red, the arena or the Columbus school district. Economic literacy in journalism matters, not just for being technically factually accurate, but because big policy decisions end up being based on how the public perceives the issues — and even if it’s too late to undo the costly public bailout of the arena, there are still plenty of future mistakes that can be avoided by actually understanding how money works.