Pawtucket developer slashes size of soccer stadium project, still wants same $70m in tax subsidies

The Covid economy has developers all over rethinking construction plans, especially office projects, since it seems pretty likely not nearly as many people will be going in to the office in our future. And so it goes with Fortuitous Partners’ soccer stadium project for a USL team in Pawtucket, which was going to involve $360 million in apartments, shops, offices, and a hotel and conference center to go along with the $40 million stadium, and which now will include something less than that:

Brett Johnson, one of the cofounders of Fortuitous told the Pawtucket City Council on Wednesday night that the project was being scaled back. The former Apex site — the centerpiece of the project due to its highway visibility — is now being eliminated.

Johnson, who is also owner of the Phoenix Rising USL team, told the Providence Journal that his new price tag was “likely in the ‘low $300 million’ range.” The pandemic, he explained, has reduced demand for office space, though he could still add more offices later if those become a thing again.

But at least if the project is slimmed down, it won’t need so much in public tax subsidies, right? Hahahahahaha, no:

The project is still looking for $70 to $90 million in public financing. The company has hired high-powered Rhode Island lobbyists to try and secure the funding.

Or as the Journal says, in a sentence that manages to contradict itself in a single clause:

Johnson said Fortuitous still intends to privately finance the project using Opportunity Zone investments aided by tax increment financing with the city and state.

Kicking back $70-million-plus in tax revenues to get a $40 million minor-league soccer stadium (and a pile of other stuff) never seemed like the best idea, but it’s singularly worrisome at a time when minor-league sports is reeling and may never fully recover. Here’s Holy Cross economist Victor Matheson back in April on Pawtucket’s USL plans:

“This is a league with 100 teams and different tiers. Minor league sports are above everything the sort of thing to get crushed by coronavirus — everything they do is about getting people into the stadium. That’s not going to be happening with this team,” said Matheson.

“And this isn’t Lucchino — this isn’t John Henry, or Bob Kraft. These are often shoestring operations. [Coronavirus] could bankrupt a reasonably large number of teams in that league and suddenly this isn’t the league it was before,” added Matheson.

The tax increment financing plan still needs to be approved — I think by the state legislature, though it already approved a Pawtucket TIF district, so maybe just the city or the governor needs to okay it, really the reporting on this has been terrible — so there’s still time for things like public hearings, if anyone believed in those anymore. Maybe I’ll see if I can ask Matheson about it when he and I join up as part of this big Zoom get-together on the Los Angeles Angels stadium deal tonight at 9:30 Eastern/6:30 Pacific. I’m told it’s going to be broadcast live on the Voice of OC’s Facebook page, so check that out if you’re interested — I anticipate being very active in the comments…

Share this post:

NYC to refinance Yankee Stadium bonds, give Steinbrenner more cash, still not require him to pay property taxes

And in bond refinancing news:

Fitch Ratings released a report saying the New York City Industrial Development Agency (NYCIDA) plans to issue approximately $923 million in PILOT (payment in lieu of taxes) Revenue Refunding Bonds, Series 2020, issued for the benefit of Yankee Stadium LLC. The 2020 bonds will provide significant debt service savings relative to the prior schedules, with the majority of savings related to the PILOT and debt payments in February 2022-2024.

If the words “bond refinancing news” didn’t already put you to sleep, that paragraph probably did. But there are a couple of items that make New York City and the Yankees refinancing their stadium debt to take advantage of low interest rates more interesting than when you do it for your mortgage:

  • First off, Forbes reports that while the Yankees will still be paying off their stadium debt with pretend property taxes in order to take advantage of a now-closed IRS tax loophole, they’ll now be able to pocket any excess PILOTs (payments in lieu of property taxes) that aren’t needed for debt service and use them to fund their own operating expenses — which Forbes’ Mike Ozanian notes “provides some mitigation on the pressure for a quick recovery in revenues from the coronavirus.” (Translation: Will help boost Hal Steinbrenner’s bottom line.) There’s no estimate provided for how much money will be redirected from the city to the Yankees under this new provision.
  • As you may recall, there’s a push on to make New York’s sports teams actually pay property tax, as opposed to paying pretend taxes to themselves (as the Yankees, Mets, and Brooklyn Nets do) or just having themselves declared entirely tax-exempt (the Knicks and Rangers). One snag there is that the PILOT agreements were already signed years ago, so it’s tough to undo them. But! In order to refinance the debt so that Steinbrenner can save money, the city and the Yankees are having to tear up the old PILOT agreement and sign new ones — and there is nothing stopping the city from saying, “And while we’re doing you this favor, how about you start paying some damn real taxes to the actual damn city treasury, what with New York so strapped for cash that the mayor is furloughing himself?”

Obviously if the city tried to demand more in tax payments from the Yankees than they’d be saving under the refinancing, Steinbrenner would walk away from this deal. Why that would be a problem for the city is left unstated, though — while the Forbes headline implies that New York will be saving money under this deal, it’s unclear how that will happen, since right now all the bond payments are technically on the Yankees’ dime, with the help of the $1.2 billion in public tax breaks and free land they’re getting on the back end. At the very least, you’d hope that Mayor Bill de Blasio — who just this week declared that in terms of sports tax breaks “everything should be reevaluated especially at a point when the city is going to need resources for our recovery” — would be, you know, checking to see if the city can get something in exchange for doing Steinbrenner this solid, instead of just giving the Yankees some extra cash to help pay their light bill.

Share this post:

Does MLB’s postseason bubble format make any damn sense? An investigation

After much speculation, it’s official: MLB will be going to a “bubble” format for most of its postseason, isolating players and staff at a handful of locations to try to avoid any Covid outbreaks like the ones that disrupted many teams’ regular seasons. After the first round of best-of-three series takes place at teams’ regular home parks, the National League Division Series will be held at Arlington and Houston and American League Division Series will be in San Diego and Los Angeles, followed by League Championship Series in Arlington and San Diego, then a World Series in Arlington.

Going to a bubble makes sense: It’s worked well for the NBA and NHL, and does seem to be the best way to prevent outbreaks. And baseball has even thought through some of the problems of starting a bubble on the fly — players will have to start self-quarantining at their homes and hotels as early as next Tuesday, with their families joining them then in quarantine if they want to enter the bubble with them, though given that players are already not supposed to be out on the town, this pretty much comes down to “try extra-hard not to get sick right before the playoffs, guys.”

Playing in Southern California and Texas is more puzzling, though. Sure, they’re both warm-weather sites, though pretty much all of North America is relatively warm in October now thanks to climate change, except when it’s not. But they’re also both relatively high-virus states: Texas has begun to see a major second spike after its huge outbreak that began in June, and California isn’t far behind.

(That’s one-week new-case averages, but if you check 91-DIVOC you can see similar trends underway for positivity rates, so this isn’t just a matter of more people getting tested — there really is way more virus afoot in Texas and California than in states like New York and Massachusetts. And while a bubble in high-virus Florida worked okay for the NBA, it also didn’t have players traveling between cities.)

On top of that, warm weather hasn’t exactly been good for California lately, given that Los Angeles County just saw a record high temperature of 121 degrees and, oh yeah, the whole damn state is on fire. Maybe the wildfires will have died down by October, but wildfire season in Southern California usually lasts till the start of November, and thanks again to climate change is basically all year round now, so baseball could be risking a repeat of this week’s games in Seattle that had to be canceled after the Oakland A’s and Seattle Mariners played a doubleheader in a cloud of choking smoke.

The first thing that comes to mind is MLB’s longstanding tradition of rewarding team owners who’ve built or renovated stadiums with getting to host special events like the All-Star Game. The Texas Rangers‘ stadium, of course, only just opened this year, after winning close to half a billion dollars in city subsidies so they could have air-conditioning, while Dodger Stadium just got a $100 million renovation (at team expense), and in fact was in line to host the All-Star Game this summer before that got canceled. And once you’ve picked those two, the Houston Astros and San Diego Padres stadiums are relatively close to reduce travel, and also relatively new, though, man, Houston’s is 20 years old already? I guess Enron was a long time ago.

Texas has another advantage, though. MLB commissioner Rob Manfred had this to say yesterday at a sports business panel:

“I’m hopeful that [for] the World Series and the LCS we will have limited fan capacity,” Manfred said during a question-and-answer session through Hofstra’s Frank G. Zarb School of Business. Manfred’s comments were first reported by the Athletic. “I think it’s important for us to start back down [that] road. Obviously, it’ll be limited numbers, socially distanced, [with] protection provided for the fans in terms of temperature checks and the likes…

“But I do think it’s important as we look forward to 2021 to get back to the idea that live sports are safe. They’re generally outdoors, at least our games, and it’s something we can get back to.”

Whether live outdoor sports are safe for fans to attend in the middle of a pandemic outbreak is, of course, a huge open question, one that the NFL is currently attempting to answer via a giant human test subject experiment. Also, the Houston and Texas stadiums aren’t entirely outdoors — they both have retractable roofs, and in fact the roof is the entire reason for the Texas stadium existing — and while they probably still have better air circulation than a totally indoor arena, if the principle here is “it’s safe to let in fans so long as its outdoors,” shouldn’t Manfred have picked entirely outdoor stadiums? Hell, New York City has two of ’em, plus oodles of now-vacant hotel rooms.

Ah, but New York City also has bans on fans attending live sporting events, and Texas notably does not. And even at 25% capacity, selling tickets for the World Series — the only tickets that would be available for any MLB games this year — would be massively hot commodities, something that Manfred said later in his talk was at the forefront of baseball’s thoughts:

“The owners have made a massive economic investment in getting the game back on the field [in 2020] for the good of the game,” he said. “We need to be back in a situation where we can have fans in ballparks in order to sustain our business. It’s really that simple.”

So, yeah, it really is that simple: If we can sell tickets, that’s the priority, we’ll figure out the risks later.

Prioritizing money over safety also explains perhaps the biggest hole in the MLB bubble structure: The first-round games, which will be held in eight different cities, with no bubbles, right before the embubbled postseason begins. This Round of 16 was announced abruptly at the beginning of the season, and doesn’t make any more baseball sense than public health sense — three-game series in baseball have essentially random outcomes, especially now that home-field advantage maybe means nothing without fans (though maybe it still does?), so you’re subjecting regular-season division winners to virtually the same odds of making it to the next round as sub-.500 teams lucky enough to play in weak divisions. But it does mean a whole lot more TV money, enough that MLB was willing to cough up $393 million in postseason bonus money to the players’ union to make it happen.

And as Marc Normandin points out in today’s edition of his newsletter (this one un-paywalled, but please send him some money if you like it!), even before seeing whether this results in a bunch of third-place teams on hot streaks battling it out in the playoffs, Manfred is already eager to make this the new normal:

“Manfred also said the expanded, 16-team postseason is likely to remain beyond 2020, adding that “an overwhelming majority” of owners had already endorsed the concept before the pandemic.

“I think there’s a lot to commend it,” he said, “and it is one of those changes I hope will become a permanent part of our landscape.”

Normandin also points out that letting a thousand playoff teams bloom has an important side benefit for team owners who are sick of shelling out big bucks to buy the best team possible:

If the league was already full of teams aiming to win 83 games because it’s cheaper than trying to win 90 and they might get lucky and win 90, anyway, what is going to happen when the threshold for making the postseason drops? A bunch of teams looking to win 75 games and occasionally being rewarded for it because a prospect hits their stride sooner than expected, or an inexpensive, low-end free agent has a surprise epiphany and subsequent breakout? We’re going to end up in a scenario where owners know they’ll be getting increased shared revenue from an expanded postseason, and more revenue than that if their teams manage to make it there themselves. And little incentive to spend any of that increased revenue, because why try when not trying might get you to the postseason, anyway?

In other words, if you loved the marginal revenue gap that has allowed owners to pocket even more money without having to collude about it, it’s about to get that much bigger.

MLB’s bubble postseason, in short, is one part profiteering and one part just enough concern for the public to seem reasonable without getting in the way of the profiteering. Which is how baseball — and pretty much all pro sports in the U.S. — has always been run, so it should come as no surprise. But it’ll be something to keep in mind while watching the Toronto Blue Jays and San Francisco Giants battle it out for the World Series in Texas in front of 12,500 very well-heeled and well-air-conditioned fans.

Share this post:

Friday roundup: San Diego gets arena developer (and vaportecture), horses play piano, and other stories

Happy Sebtembler! Things were a little quiet for much of the summer, what with the entire world shut down and it seeming like a bad time for rich dudes to ask for hundreds of millions of dollars for their new buildings, but as Josh Harris has shown, nothing lasts forever. Except rich dudes asking for hundreds of millions of dollars for their new buildings, that will go on until the world actually ends, which is at least a few more decades away.

Anyhoo, here are some other things that happened this week in the world of stadium-grubbing:

  • San Diego Mayor Kevin Faulconer has chosen a team led by Brookfield Properties and ASM Global to build a new arena and associated development, with the arena to be paid for by building more housing units, somehow? Is housing that profitable that it can spin off hundreds of millions of dollars in extra revenue to pay for a new arena? If so, shouldn’t the city just be charging more for the right to build all this super-lucrative housing? This all sounds suspiciously reminiscent of the Los Angeles Angels land deal, except no one in San Diego politics or journalism seems interested in investigating how the money will actually work, so I’m clearly going to have to do some more digging and report back. In the meantime, jam everything but the kitchen sink into your sports venue deals, kids, it’s the best way to make sure sports reporters get bored by the financial details and wander off!
  • Let’s also not let the moment pass without commenting on San Diego’s new arena vaportecture, which mostly features … people shopping? People wearing, I guess those are San Diego Gulls t-shirts, some with the logo on the front and some on the back, depending on whether the shopper in question is walking toward or away from the camera. Do you think they coordinated that somehow? Also the Ostro Brasserie appears to be a branch of a restaurant in New Zealand, Ungar’s is a wholesaler of packaged pizza bagels, and Migdal is an Israeli insurance company. This is a really weird mall!
  • Sacramento is short on tax revenue to pay off bonds on its Kings arena and convention center, but honestly that’s just another way of saying that it spent a bunch of money that it didn’t need to and now the chickens are coming home to roost when “don’t worry, there’ll be plenty of tax money” isn’t working out so well. Would it be any better if the city had spent the same money on the arena and then received enough tax revenue to pay it off but couldn’t then use that money for other needed things? Please submit your persuasive essays in comments.
  • Big arenas are joining with smaller music venues in support of the RESTART Act, which would extend the Paycheck Protection Program to help companies pay their furloughed workers, and also provide Small Business Administration loans that would be forgivable for the amount of any losses that venues had in 2020. That doesn’t seem too terrible — music venues are indeed getting creamed by the shutdown, and will likely be among the last things to reopen — but at the same time, there are lots of funny things you can do with your books to show “losses,” so this is worth keeping at least one eye on, especially given that no one in power seems much interested in doing so.
  • I haven’t actually been able to get myself to finish reading this item about the Philadelphia 76ers arena subsidy plan, because I can’t get past its opening line: “Josh Harris is like a horse trying to play the piano… he hits every wrong note.” Is that really what a horse trying to play the piano would do, though? Wouldn’t it fall over from trying to stand on its two hind legs? Shatter the keys with its hooves? Now I can’t think of anything other than how horrifying for all concerned it would be to watch a horse trying to play the piano — pass the RESTART Act now, or we may never see such a sight again!
  • I wanna read this new book on the perils of sports fandom, and not just because I’m in it!

Have a good long weekend, everybody, if that’s still a concept that means anything, and see you back here on Tuesday refreshed and ready to go.

Share this post:

NFL and MLS about to start letting fans in, is this a terrible idea or what?

So far, the restart of sports in the U.S. has gone reasonably well: Sure, there were a few embarrassing pratfalls like the Miami Marlins having to stop playing games for a week after they had a dozen players test positive for Covid when they played a game right after initial positive tests because their shortstop said it was okay, but overall, things are working out much better than one might have feared. No league has actually had to stop play entirely (yet) as the result of outbreaks, and leagues playing in “bubbles” like the NBA and NHL have avoided even interruptions for individual teams.

The one thing that major North American leagues haven’t tried yet, though, is allowing actual fans to attend games. That’s about to change big-time, though, as two MLS teamsReal Salt Lake and Sporting Kansas City — are about to join FC Dallas this week in holding games before limited-capacity crowds. (FC Dallas played its first home game before a reported 2,912 fans two weeks ago, though it didn’t look like no 2,912.) And then the floodgates are set to open September 10, when the NFL season kicks off with the Kansas City Chiefs, Indianapolis Colts, Dallas Cowboys, Miami Dolphins, and Jacksonville Jaguars all set to play before about one-quarter-capacity crowds, with a dozen other teams either considering letting fans in or not yet having announced plans. In each case, there will be rules in place to protect fans — staggered entry times, mask requirements (except when eating or drinking), buffer zones between groups of seats, etc. — or at least to make fans feel more reassured that they’re being protected.

The question everyone wants to know the answer to: Is it safe? The answer, unfortunately, isn’t easy to determine: Sure, lots of overseas sports leagues have readmitted fans without ill effects, but those were all in nations with very low Covid rates — if you collect 13,000 people in one place and none of them are infectious, that’s not much of a test of how fast the virus can spread at a sporting event. The new-case rate in the U.S. has fallen by about a third over the last three weeks, but it’s still higher per capita than anywhere other than Peru, Colombia, Brazil, Argentina, or Spain. And certain states remain far worse than that: Texas would have the third-worst numbers of any place on the planet if it were its own nation, yet the Cowboys are preparing to reopen to fans for their first game, and the Houston Texans possibly for their second home game starting in October.

The science behind viral transmission at sporting events remains the same as it’s been since the spring: The more time you spend near someone, the closer you get, the more indoors with poor ventilation, and the less effective mask wearing, the more likely you are to get sick. So in theory, all the measures being taken by sports teams should help reduce risk, though item #1 suggests that if the NFL is really serious about fan safety, it should reduce the length of games to one quarter.

Trying to determine the exact risk level from attending one of these games is impossible, and in any case kind of beside the point. Will you get sick from Covid by going to an NFL game, even if fans don’t strictly obey all the new rules? (Sporting K.C. is talking about a “three strikes you’re out” rule, which isn’t exactly reassuring given that security will have to be policing more than ten thousand people while also keeping track of their card count.) Probably not — even during the Atalanta-Valencia disaster plenty of people didn’t get sick.

But in epidemiology, what’s important isn’t whether you get sick but rather whether somebody gets sick, and sticking 13,000 people in one place, even one socially distanced place with masks on, is a whole lot of dice to roll at once. And the risk then isn’t even just if you go to the game — check out the Maine woman who died after a Covid outbreak at a packed indoor wedding that she didn’t even attend, after she caught the virus from one of the 30 people who caught it there.

Really the question, then, is less “Is it safe to go to an NFL game in the middle of a pandemic?” than “Is it safe for a nation in the middle of a pandemic to allow people to go to NFL games?” The only way to know for sure is to do a huge experiment, with human subjects — and for better or for worse, that’s what we’re about to get.

Share this post:

Friday roundup: Stadium news reporting hits rock bottom, don’t believe anything you read (except on this site, duh)

Hey look, it’s Friday again! The St. Louis Cardinals are maybe (assuming no positive test results today) going to start playing games again tomorrow for the first time in 17 days; if they pull it off, and no other teams have outbreaks in the meantime, it will be the first time in nearly three weeks that all 30 baseball teams will be in action, and every team in the four major U.S. sports that are in action. That’s way better than I expected, frankly, and shows that isolating players from the general public (and each other) can work — there’s probably a decent chance that most leagues can limp to a conclusion without shutting down entirely, though football remains an enormous question mark with such huge rosters and no bubbles. Still, glass half full, that’s what I always say! (Okay, I never say it, but I’ll say it now.)

In other newses:

Share this post:

Santa Cruz considering replacing eight-year-old arena with new one to “woo” minor-league basketball team

Move over, Knoxville — Santa Cruz is ready to take the lead in the “looking to build a new sports venue despite the Covid budget crunch” race. The Santa Cruz Warriors G-League team’s lease expires after next year, and the city is reportedly looking to “woo” the team into staying put beyond that, according to the Santa Cruz Sentinel. And what, precisely, do they mean by woo?

A city-sponsored market and arena project feasibility study by consultant Victus Advisors concluded in 2017 with support to build a permanent arena in an expanded footprint on the existing location, top among several preferred locations. [Santa Cruz economic director Bonnie, I’m assuming, the Sentinel article didn’t actually bother to give her first name or ID] Lipscomb said Tuesday that she recognized that right now was, “from a fiscal standpoint in the middle of a pandemic, the worst time to come forward asking for a public subsidy.” Lipscomb clarified she was not asking city leaders for that this week. City Manager Martín Bernal later further elaborated that building a new arena would be a public-private effort, not a “100% or primarily a public type of project.”

So nobody is asking for any kind of public subsidy, just a “public-private” effort that wouldn’t be “primarily” public. Got it.

As for the outmoded arena in need of replacement, it was opened way back in … I’m sorry, did you say 2012?

Okay, so technically this is classified as a temporary building: It’s a metal frame with an air-supported roof. (The city loaned the Warriors $4.1 million to help build the place, most of which has been paid back, according to Lipscomb.) Still, air-supported roofs have been used for plenty of permanent structures in the past, and nothing seems to be falling apart at the current arena. The Warriors owners — who are, let’s be clear, the same billionaires who own the Golden State Warriors) may want a snazzier place, but that wouldn’t seem to be Santa Cruz’s problem.

Except, of course, for that expiring lease, which gives the team owners that all-important leverage. Along with the fact that basketball is unusual among North American sports in having only a single 29-team minor league when there are hundreds of cities that could potentially support a minor-league basketball team — while Joe Lacob and Peter Guber would have been insane to move the Golden State Warriors out of the Bay Area, their G-League affiliate could probably do just fine in Fresno or Sacramento or Vacaville, which makes it way easier to get a bidding war going, or at least threaten your city with the possibility of a bidding war, which as we’ve seen time and time again is a great way to get local development officials talking about “public-private partnerships.”

And all this makes me wonder whether, even if the Covid recession causes a brief lull in sports subsidies, we could see a huge surge once it’s over, if not before then. We already have the likelihood of a large swath of minor-league baseball teams getting disappeared next year; and still more minor-league teams across several sports may go belly-up if they run out of cash while waiting for fans to return. And while that may be terrible for the sports industry as a whole, for the teams that survive, it hands them a convenient gun to hold to the heads of their current homes: With plenty of other empty stadiums out there to choose from, give us what we’re asking for, or else.

That’s going to be a tough call for city officials: Dip into recession-ravaged budgets to give money to the local sports team, or risk losing one of your few local businesses. (I almost wrote “major businesses,” but that’d be pushing it for a business that’s only open at most 70 days a year — though there is some evidence, at least, that minor-league teams are better at siphoning off spending from the next town over than their big-league counterparts.) Again, we’ve seen which way most cities tend to go on that decision, so it’d be crazy for minor-league sports owners not to at least try.

Share this post:

Rams stadium’s new artificial lake deemed “gentrification,” but that’s only half the story

Writing a post based on a news story based on tweets is not exactly my favorite way of doing journalism, but in this case, I think it’s warranted. Newsweek, which still exists after passing through a series of ownership changes that included a bizarre money-laundering scheme, reports that residents of Inglewood are increasingly griping on social media about how the Los Angeles Rams‘ new stadium is getting all kinds of fancy gewgaws while the city’s schools remain underfunded; one declared of the team’s new artificial lake: “This is gentrification.”

https://twitter.com/ch1chi_xoxo/status/1288718599532589056

https://twitter.com/d0ntpissmeoff/status/1288733252866330624?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1288733252866330624%7Ctwgr%5E&ref_url=https%3A%2F%2Fwww.newsweek.com%2Finglewood-residents-lash-out-rams-new-stadium-1521602

As someone who’s written books on both stadiums and gentrification, I think I’m uniquely qualified to nitpick this, or at least to delve a little deeper into the implications of stadium-led redevelopment.

One of the arguments often made by community members opposed to sports projects — or any kind of big development projects — is that they will price existing residents out of the neighborhood. The evidence that sports venues actually make a neighborhood a more enticing place to live is fairly weak: Stadiums bring excitement and crowds, but also public drunkenness and traffic problems. And while you can definitely find plenty of examples of stadiums that saw luxury housing rise up around them, luxury housing has been going up in cities all over America as part of the Great Inversion; as I noted a couple of years ago, the New York Jets having their stadium on Manhattan’s then-low-rent West Side rejected didn’t stop developers from coming in with a new plan that put up tons of new luxury housing, with the help of a few billion dollars in taxpayer funds. Sometimes the causality even runs the other way: Stadium builders target a neighborhood because they think it’s primed for gentrification and they can reap the benefits by speculating on land around their new venue.

If anything, what stadiums do to smooth the way for gentrification is what might be termed the bulldozer effect. As I discovered in researching The Brooklyn Wars, one of the biggest reasons why big development projects or rezonings can lead to hikes in housing costs and displacement of existing residents — even when you might think that building lots of new housing should lead to lower rents in simple supply-and-demand terms — is that they provide an easy excuse for the demolition of neighborhoods, or at least large stadium-sized parts of neighborhoods, that are standing in the way of rapid gentrification. With cities increasingly attractive places to live for people with money, for all the same reasons they grew so big in the first place (easy access to jobs and culture, mostly), the only real thing keeping them from gentrifying even faster is the distaste of many suburbanites for living next to the black and brown people with low incomes who settled there when their parents and grandparents decamped for the suburbs in the first place — at least if there aren’t a few local artists or white dads with baby strollers around to make the place feel like it has “potential.”

Which, finally, is where the artificial lake comes in. It isn’t receiving any public money that I can tell, but by carving out a chunk of Inglewood and repurposing it as a playground for the moneyed classes (or at least for people who can afford football tickets, who tend to be pretty well-off), it creates a bubble of perceived safety that allows other developers to market Inglewood to newcomers who might otherwise turn up their nose at living next to Inglewood residents. In fact, this is exactly what Inglewood Mayor James Butts said he was hoping for when he compared the stadium to the Genesis device in Star Trek: Wrath of Khan that turned a lifeless planet into a utopia, which really is an odd way to refer to the city of more than 100,000 human beings that you are supposedly representing.

New stadiums and artificial lakes, then, are less about directly luring people to cities, and more about rebranding them. Which surely must seem tempting to mayors who Google their own cities and are met with this:

All of which would be fine and great if Inglewood could be made less dangerous in a way that allowed current residents to benefit from the improvements, rather than risk being priced out as a result. (In fact, the crime rate in Inglewood has already been dropping pretty dramatically.) But in an America defined by massive and still-widening inequalities in wealth and income, that’s hard to pull off, at least not without freezing rents and banning evictions.

In the anthology New York Calling, labor historian and musician Philip Dray memorably recalled a time when he first moved to Manhattan’s Lower East Side (artist on the block! quick, tell your friends looking for cheap city apartments!) and went to a block association meeting about the city’s offer to install new street trees on the sidewalk:

All the white people want the trees, but the Hispanics are against it, saying that prettifying the block will just drive the rents up. The whites are kind of numb — how can anyone not like trees?

This is America: A land where people are afraid to have nice things because they’re afraid it will just make someone with more money want to take them away from them. That’s not the only reason why stadiums continue to get built while teachers have to make GoFundMe campaigns to buy books for their students, but that’s pretty much impossible to understand without it.

Share this post:

How Cleveland ended up with $230m in debt on a convention hotel it didn’t need

The Cleveland Hilton Downtown is still open, although largely empty. The few rooms that are occupied are largely filled by airline crews, the least financially rewarding part of the hotel business. It’s not surprising. Hotels and the entire travel and hospitality industry have been devastated by the coronavirus pandemic.

But the Cleveland Hilton Downtown isn’t just any hotel. It is owned by the government of Cuyahoga County, its bills and finances the responsibility of the county’s residents and taxpayers. And now they have to pay — more than $7.9 million immediately — to meet the requirements of a $230 million debt issue the county sold in 2014.

The $7.9 million is just the first installment in what is likely to be a continuing, expensive commitment to the debt service on the Hilton. The debt payment this year comes to $20.7 million. It’s another $20.7 million next year, and each and every year until 2029, when it drops to $6.6 million. And if — as appears likely — Cleveland’s convention business doesn’t come roaring back, and the hotel isn’t filled with convention attendees, the publicly owned Hilton will have to fight for a limited pool of downtown hotel business.

How did Cuyahoga County decide it made sense to get into the hotel business? Well, back in 2004, PriceWaterhouseCoopers did a feasibility study for a new convention center in downtown Cleveland. PWC declared, “it appears that a high-quality, 600-room headquarter hotel would be required in order for Cleveland to meet the demand estimates presented in this report.” And when no private developer appeared interested in building such a hotel in downtown Cleveland, the county decided to go into the hotel business. County officials assured the public that the combination of the hotel’s revenues and the taxes it generated would more than pay the annual debt service — there was nothing to worry about. And meeting planners, it was argued, didn’t want to spread their attendees across a number of smaller 200- or 300-room hotel properties. A big hotel, right next door to the new convention center, was critical to making Cleveland a competitive convention destination.

Even as county officials began to consider a publicly-developed hotel, the city’s convention and visitors bureau, Positively Cleveland, commissioned a feasibility study from PKF Consulting for a 600- to 700-room hotel. PKF’s Peter Edelman came back in May 2013 with an analysis that claimed to justify a 600-room property: A new convention center, in Edelman’s assessment, would generate new business amounting to 131,000 annual hotel room nights, about equal to what Positively Cleveland was forecasting. With that convention business, the hotel would operate in 2020 with an occupancy rate of 68% and an average daily rate of $185. That would yield net annual revenue of $7.8 million.

Those hotel revenues, plus the 5.5 percent county hotel tax on the new hotel’s rooms, would obviously not come close to paying the debt service on a convention bond issue. So rather than issuing debt for the hotel backed by the hotel’s revenues, the county used a lease arrangement, with the actual debt (“certificates of participation”) issued by the Cleveland-Cuyahoga Port Authority. The hotel, of course, had nothing to do with the port: The virtue of the debt arrangement was that it obscured the actual source of the funds needed to repay it, and equally obscured the performance of the hotel. The county government has since said that the hotel’s actual performance and finances are “proprietary,” thus sidestepping the question of whether the hotel is actually a profit-making enterprise.

The Cleveland Hilton Downtown and the adjacent Huntington Convention Center have clearly not delivered anything close to the forecasts of PWC, PKF, or Positively Cleveland. The 2004 PWC report had pegged the center’s annual hotel generation at 125,000 room nights; PKF used an assumption of 131,000 room nights a year, Positively Cleveland 130,000. In 2016, outside of the Republican National Convention, convention center events had produced 60,215 room nights. The next year the center’s events yielded 65,118. The room night total for 2018 came to 94,416, although 19,519 were attributed to “conferences and large sporting events.”

And with the convention center underperforming, there can and should be questions about the hotel, but the county government has refused to release it to the public. The county’s hotel asset manager did allow that the hotel made an $8 million payment towards the $20.9 million annual debt service in 2019, and it is supposed to make a $9 million payment this year. But the hotel will only be able to manage $3.7 million if that, leaving the balance to be paid from the county’s other revenues. The asset management firm offered no figures for next year, simply saying “additional support will be required.”

The future of the convention business is at the very least uncertain. Yet what is absolutely certain now is the Cuyahoga county’s taxpayers are on the hook for a great many more millions in the years to come.

Share this post:

Friday roundup: New Rangers stadium scam movie, Nevada arena petitions rejected over technicality, and many many dumb ideas for getting you (or cardboard cutouts of you) into stadiums this year

Welcome to the end of another crazy week, which seems redundant to say, since that’s all of them lately. I spent a bunch of it working on this article on what science (but not necessarily your local newspaper) can tell us about not just whether reopening after lockdowns is a good idea, but what kinds of reopening are safe enough to consider. And important enough to consider, since as one infectious disease expert told me, “It’s not ‘open’ or ‘shut’—there’s a whole spectrum in between. We need to be thinking about what are the high-priority things that we need to reopen from a functioning point of view, and not an enjoyment point of view.”

And with that cheery thought, on to other cheery thoughts:

  • If you’re a fan of either sports stadium shenanigans or calamitous public-policy train wrecks in general — and I know you are, or why would you be reading this site — you should absolutely check out “Throw A Billion Dollars From The Helicopter,” a new documentary about the Texas Rangers‘ successful campaign to extract half a billion dollars from the city of Arlington so they could play in air-conditioning. It’s a story that has everything: a mayor who was elected as a stadium-subsidy critic then turned around to approve the biggest stadium subsidy in local history, George W. Bush grubbing for public money and failing to do basic math, grassroots anti-red-light camera activists getting dragged into stadium politics, a trip back to the Washington Senators’ final home game before moving to Texas which they had to forfeit because fans ran on the field and walked off with the bases, footage of that 1994 Canadian TV news story I always cite about how video-rental stores comedy clubs in Toronto were so happy with extra business during the baseball strike that they wished hockey would go on strike too, plus interviews with stadium experts like Roger Noll, Rod Fort, Victor Matheson, Allen Sanderson (the man whose line about more effective ways than building a stadium for boosting your city’s economy gave the documentary its title), and me. Rent it here on Vimeo if you want some substitute fireworks this weekend.
  • Opponents of the publicly funded minor-league hockey arena for the Henderson Silver Knights got enough signatures to put a recall on the November ballot, but have had their petitions invalidated for not including a detailed enough description of their objections on every page. This will almost certainly result in lawsuits, which is how pretty much every battle for public oversight of sports subsidy deals ends — that, and “in tears.”
  • The San Diego city council approved the $86.2 million sale of the site of the Chargers‘ former stadium to San Diego State University, which plans to build a new $310 million football stadium there. Whether this is a good deal for the public is especially tricky, because not only do you have to figure the land value of a 135-acre site in the middle of an economic meltdown, but also San Diego State is a public university, so really this is one public agency selling land to another. It’s all more than I can manage this morning, so instead let’s look at this rendering of a proposed park for the site that features bicyclists riding diagonally across a bike path to avoid a woman who stands in their way with arms akimbo, while birds with bizarre forked tails wheel overhead.
  • You know what would be a terrible idea in the middle of a pandemic that has closed stadiums to fans because gathering in one place is a great way to spread virus? An article telling fans what public spaces they can gather in to catch a glimpse of game action in closed stadiums, and Axios has you covered there! And so does the Associated Press!
  • Sure, hundreds of thousands of people have died and there could be hundreds of thousands more to go, but won’t anyone think of the impact on TV network profits if there’s no football to show in the fall?
  • And speaking of keeping an eye strictly on the bottom line, the NFL is considering requiring fans (if there are any) who attend NFL games this fall (if there are any) to sign a waiver promising not to sue if they contract Covid as a result. But can I still sue if someone goes to a football game, contracts Covid, and then infects me? I’m not actually sure how easily one could sue in either case — since you can never be sure where you were infected with the virus, it would be like suing over getting cancer from secondhand smoke — but I always like the idea of suing the NFL, so thanks for the idea, guys!
  • New York Yankees owner Hal Steinbrenner says he wants to see fans at Yankee Stadium “in the 20-30 percent range,” a number and prediction he failed to indicate he pulled from anywhere other than his own butt. Meanwhile, the Chicago Cubs are reportedly planning to open rooftops around Wrigley Field at 25% capacity for watching games this year, something that might actually be legal since while would mean about 800 fans in attendance, they wouldn’t all be in attendance in the same place, so it could get around rules about large public gatherings.
  • If you want to spend $49 and up so a cardboard cutout of yourself can watch Oakland A’s games, you can now do that on the team’s website. If that sounds like a terrible deal, know that with each purchase you also get two free tickets to an exhibition game at the Coliseum in 2021 (if there are any), and if you pay $129 then you also get a foul ball mailed to you if it hits your cutout, all of which still sounds like a terrible deal but significantly more hilarious.
  • If you were hoping to make one last trip to Pawtucket’s 74-year-old McCoy Stadium to see Pawtucket Red Sox baseball before the team relocates to Worcester after this season — it was on my now-deleted summer calendar — you’ll have to settle for eating dinner on the field, because the PawSox season, along with the rest of the minor-league baseball season, has been officially called off. Also, the Boston Herald reports that the Lowell Spinners single-A team won’t be offering refunds to those who bought tickets for non-canceled games, only credits toward 2021 tickets — shouldn’t ticketholders be able to sue for not receiving the product they paid for? I want somebody to sue somebody, already! When will America’s true pastime be allowed to reopen?
  • Here’s a New York Times article on how new MLS stadiums are bucking past stadium trends by being “privately financed, with modest public support for modernizing infrastructure,” which is only true if you consider $98 million (Columbus) and $81 million and up (Cincinnati) to be “modest” figures.
  • I apologize for failing to report last week on the Anaheim Ducks‘ proposed development around their hockey arena, less because it’s super interesting or there is amusing vaportecture than because it’s supposed to be called “ocV!BE,” which is the best name ever, so long as you want to live in a freshly built condo in what sounds like either a randomly generated password or an Aughts rock band.
Share this post: