Vegas says it’ll cut public Raiders stadium cost to $500m, would actually be $950m, math is dead

The Southern Nevada Tourism Infrastructure Committee met yesterday to discuss Sheldon Adelson’s proposed $1.4 billion Vegas stadium for the Oakland Raiders as promised, and it … suggested cutting $250 million from the public subsidies? Maybe?

On Thursday, [committee chair Steve] Hill announced a new proposal for funding that reduces the tax money used from $750 million to $500 million and raises the cut for the Las Vegas Sands and Majestic Realty from $650 million to $900 million.

“I’ll tell you point blank we’re disappointed by what we saw today,” said Marc Badian, Raiders president.

Or maybe not?

The panel, along with representatives from the Raiders, developer Majestic Realty Co. and Adelson’s Las Vegas Sands Corp., heard again that the project won’t cost the public more than $750 million.

Thankfully, the committee has uploaded the actual proposal to their website, so we can check it out and try to figure out WTF is going on. The public funding in the “alternative” plan, as you can see, is actually listed as $550 million in stadium bonds, which would be covered by hotel taxes. (In Adelson’s plan, the hotel tax would pay for $750 million worth of bonds.) There would also be $7 million a year for operations and capital improvements, plus $3.5 million a year to repay UNLV for lost events revenue at their current stadium, for a present value of about another $150 million.

Then there is the tax increment financing portion, wherein sales, ticket, and business taxes on the stadium and practice facility would be kicked back to Adelson and Raiders owner Mark Davis, amounting to … it doesn’t actually say how much this would be, but I previously estimated it at around $250 million. So we’re at $950 million in public cost — or  $800 million if you don’t include the future operations and other expenses, though you really should — which either way is a whole lot more than $500 million.

In essence what the committee has proposed is to say to Adelson’s crew: Dudes, you’re getting almost a billion dollars, let the tax increment money be part of that instead of asking for it on top. This is enough to make the private partners “disappointed” (they were hoping to have their subsidies and eat them too), but not enough to stop this from being the most expensive public NFL subsidy in history. It would be pretty sweet, though, if the Vegas Raiders deal fell apart because a billionaire and an NFL owner turned up their nose at a mere $950 million subsidy, because they couldn’t be bothered to stoop down and pick it up.

SD councilman proposes “Fan-Lord” owners as Chargers stadium solution, is probably trolling us

Speaking of announcements that weren’t all they were cracked up to be, San Diego city councilmember Carl DeMaio declared yesterday that he has a plan to raise $1.4 billion or more to build a Chargers stadium with no public money required. And how would that work, exactly?

Private developers, the Chargers, and individual fans would all receive ownership shares in the facility based on their initial investment levels. Instead of Personal Seat Licenses, fans can invest in Fan-Lord Ownership Shares in the facility.

He’s trolling us, right? The idea that you can somehow raise $1.4 billion in private capital by dividing up ownership of a stadium pie that is going to be worth way, way less than $1.4 billion in future revenues is amusing enough, but Fan-Lord Ownership Shares? That isn’t even good Game of Thrones fanfic, let alone an NFL stadium finance plan.

You can read the Powerpoint of DeMaio’s proposal here, but the main idea seems to be to turn regular PSLs into these super-PSLs that would include a share of stadium revenues, of which there won’t be any because all stadium revenues are going to be rolled into a laundry list of rounded-off payments, none large enough that they seem totally unreasonable, but at the same time none actually justified by any included market analysis:

Screen Shot 2016-06-24 at 9.30.02 AMLook, I think everyone would be thrilled if it turned out that the Chargers owners could raise private capital from fans and investors (and fan-investors, which I guess is what “Fan-Lords” would be) to pay for a new stadium and still have money left over to increase their profits over what they’re getting at their current stadium. All evidence, though, is that the numbers don’t come close to adding up to do that. If DeMaio’s plan turns out to be a proof of concept that a Chargers stadium is a money-loser and what the Spanos family wants isn’t so much a new stadium as the subsidies that come with one, that will be a useful addition to the public discourse, sure. But don’t be shocked when this turns out to have all the financial sense of a plan developed by underpants gnomes.

Coyotes owner announces planned arena site, won’t tell you where it is

Arizona Coyotes owner Anthony LeBlanc made his long-awaited announcement yesterday about new arena plans, and it’s that: He’s picked a site, but he’s not saying where it is. Seriously:

Coyotes president and CEO Anthony LeBlanc said Thursday afternoon that the team has chosen a site for its new arena and is working through the legal documentation of the real estate agreement.

LeBlanc declined to provide any other details, or name the site.

This is officially the weakest non-announcement ever, especially since there’s no way even to know if he’s telling the truth about having settled on a site. (I suppose the people he’s working out the real estate agreement with know, but if he later switches to another site before revealing what it is, how will anyone on the outside tell?) Technically, it’s an announcement in advance of tonight’s NHL draft, which is what LeBlanc promised, but it’s still not much more than waving a piece of paper in the air and claiming it has specifics on it.

It’s still pretty likely that the report from earlier this week is correct and LeBlanc is aiming for a site in Scottsdale that’s part of the Salt River Pima Indian Reservation, but it’s also possible that he isn’t, or that he is but he’ll change his mind later if a better offer comes along. I’ve been saying for a while that LeBlanc’s best leverage here is to get a bidding war going among various Phoenix-area governments, and it sure looks like he’s trying to drag that war out as long as possible.

Yes, Arlington would pay for more than 50% of Rangers stadium, but not because of ticket tax

So I was sitting around yesterday, waiting for NHL commissioner Gary Bettman to go on TV and announce the new Las Vegas expansion franchise, when this story from WFAA-TV in Dallas about the new $1 billion Texas Rangers stadium plans suddenly blew up all over the Twitterverse:

City of Arlington officials have touted a “50-50” private-public partnership to build a proposed $1 billion retractable roof stadium for the Texas Rangers.

A WFAA-TV investigation, however, has found taxpayers may instead pick up to 80 percent of the tab, which amounts to hundreds of millions of dollars more than initially promised by city leaders…

Tucked in the agreement is a clause called the “admissions and parking tax” that allows for a 10 percent surcharge on event tickets and up to $3 additional surcharge on parking. State law allows cities to collect and use the taxes to build their stadiums. Arlington’s agreement, however, allows the Rangers to use the admissions and parking tax revenues to help pay their half of the construction costs.

“If it really is a tax and could be used by the municipality, then in essence it’s just transferring revenue from the public sector to the private sector,” said Rick Eckstein, a Villanova University professor who studies sports stadium economics.

“There’s a sleight of hand here. There’s verbal gymnastics going on,” Eckstein added. “It’s relatively unprecedented in terms of stadiums I’ve studied over the last 20 years.”

Not to disagree too strongly with Eckstein (co-author of one of the best stadium books out there), especially since he’s right that tax money is fungible and shifting it from public to private pockets amounts to siphoning it off from the public treasury. But these particular tax surcharges are kind of special, to the point where we arguably shouldn’t consider them an additional public subsidy.

What it comes down to is the difference between existing taxes and tax surcharges, especially on items that are under the monopoly control of team owners. Think of it this way: When a sports team owner sets ticket prices, they do so with an eye toward maximizing the amount of total revenue they’ll bring in — basically, they set prices as high as the market will bear without driving fans to stay home and watch on TV. (Technically we’re talking net revenue rather than gross revenue here, but since the marginal cost of selling an additional ticket is close to zero — you might have to hire an additional tiny fraction of a hot dog vendor, but the players are all being paid to play regardless — we can ignore it for our purposes.) That means if that break point is $50, they’ll charge $50 — regardless of whether that’s $50 they get to put in their pocket or $45 in actual ticket value plus a $5 surcharge.

A similar effect is at work regarding parking, which is why most economists consider surcharges like these to come out of the owners’ pockets, even though they’re technically taxes. The owners could accomplish the same thing just by “taxing” themselves, in other words, though there are likely some tax benefits they get from paying this via the tax system rather than voluntarily out of their own pockets.

There are additional problems with the WFAA analysis, starting with the fact that the station’s reporters estimated $300 million in admissions and parking surcharges over 30 years, and added that on to the city’s existing $500 million obligation — but $300 million over 30 years doesn’t cost $300 million now, but rather more like half that in present value. (It’s like figuring a house mortgage: You count how much you need to borrow from the bank now, you don’t add up all your mortgage payments into the future.) So we’re already down to $650 million, and much of that $150 million added cost would really come out of the Rangers owners’ pockets, so really this is much ado about not all that much.

Which isn’t to say that the proposed Rangers stadium doesn’t have hidden costs: It has tons of them, from about $15 million in future rent rebates to free land and property tax breaks for parking lots to the city being on the hook for any of the Rangers’ share of bonds if team revenues fell short of covering them. Whether this gets the public share up as high as 80%, I couldn’t tell you, but it’s worth investigating. Get to it, WFAA investigative team!

Bills owner: Fine, I’ll think about demanding new stadium, get off my case

Man, Buffalo Bills owner Terry Pegula really doesn’t want to talk about building a new stadium, no matter how many times NFL commissioner Roger Goodell encourages him to, does he? Pegula was asked about it again yesterday on WGR radio, and here’s the sum total of his responses, as reported by ESPN:

“We’ll look into that,” Pegula told WGR 550. “We’re a different market than [Los Angeles], right?”…

“I think they think we need a new stadium, that’s where they’re coming from,” Pegula said Wednesday of the owners’ comments. “You listen to that and you make your own judgment. Our stadium is one of the older venues in the league, if not the oldest.”…

“We’re not going to make any hasty decisions,” Pegula stressed Wednesday. “We’re evaluating.”

That’s a whole lot of “we’ll get to it when we get to it.” Either Pegula has an admirable distaste for demanding new stadiums for no better reason than because he can (yes, Ralph Wilson Stadium is among the oldest in the NFL, but it just got more than $200 million in renovations, funded by New York state taxpayers), or he’s just biding his time and waiting for the right moment to ask for new-stadium cash. Either way, it’s really unusual behavior for a pro sports team owner, and we should probably cherish it while it lasts.

Could Hansen seek a Seattle NHL team now that Vegas has one? Sure, but don’t hold your breath

Speaking of getting an NHL team by waving a $500 million check around, our old friend Geoff Baker of the Seattle Times suggests that Chris Hansen might want to do just that if he ever wants to get a Seattle arena built:

For now, with the NBA not expanding and the NHL needing another Western team to balance conferences, it might be worth giving that “NHL first” option another look.

Las Vegas built its arena with private funds, resulting in limited political delays. Of course, an all-private venture for a $500 million arena in Sodo would be tougher without public-bond money.

Yeah, it sure would be tougher: The finances of an NBA arena in Seattle looked difficult enough under Hansen’s original plan, and it would only be tougher with a hockey team (which is projected to bring in less money) plus paying off $200 million that was supposed to be covered by city bonds — though about half those bonds were going to be paid off by Hansen’s rent payments anyway, so presumably he could just replace those with plain old bank loans. Yes, an NHL franchise would probably be cheaper than an NBA one at this point, but you’d also end up with a less valuable asset for your money, so really the concern here is whether Hansen could turn an operating profit on an NHL arena after paying off construction costs — I’m guessing no, but if he wants to give it a shot, more power to him.

Of course, that’s the other thing: Hansen, like Fannee Doolee, loves basketball but doesn’t think much of hockey, so he might not be willing to risk his money just to become an NHL owner. Baker’s theory is that at least it’ll let him build an arena, maybe, so that down the road he can get an NBA team, maybe, which … sure, maybe. I don’t really expect to see Hansen jumping at this option, but stranger things have happened.

Las Vegas gets NHL team, clearly anyone with a $500m check can have one

As expected, the NHL announced yesterday that it will add an expansion franchise in Las Vegas in 2017, leading to celebration in that city and lots of derisive snorts from people who’ve noted that there are at least half a dozen bigger markets without NHL teams, most of which have a stronger history of hockey support than Vegas. (Seriously, Hartford has more TV households than Las Vegas.) What they don’t have, as I discussed last night in an article for Vice Sports, is a bunch of rich guys willing to sign a $500 million expansion fee check (at least not $500 million in U.S. dollars), and since the rich guys in question include one Florida financier and two Maloofs, there’s at least some suspicion that this is more an attempt to get into the NHL club than a long-term commitment to Las Vegas.

As for the arena angle, the new team (possibly to be called the Black Knights after owner Bill Foley’s financial company, but that’s yet to be decided) will play in T-Mobile Arena, which was privately built by MGM and AEG as part of Vegas’s arena land rush, and which is all new and shiny and apparently exciting to NHL bigwigs. What I haven’t been able to find any record of, probably because it’s a transaction between two private parties, is how much Foley and the Maloofs will be paying the arena as part of their lease, or how long the lease is for, all of which will have a huge impact on the team’s profitability, and on whether the Vegas franchise ends up there for the long haul or follows the Atlanta Thrashers into the long NHL history of failed experiments.

As for cities that didn’t get a team this time around, NHL commissioner Gary Bettman left the door wide open for further expansion, particularly citing the strength of the Quebec application, which was unfortunately undermined by the weakness of the Canadian dollar. Given the glut of billionaires compared to the limited number of major pro sports franchises, the NHL is clearly interested in following MLS’s lead and cashing in on expansion fees while the cashing is good — so if you have half a billion dollars burning a hole in your pocket and a desire to watch hockey from the owner’s box, give them a ring.

Tax kickbacks could increase public cost of Vegas Raiders stadium to $1B

The Las Vegas Review-Journal reports that the Southern Nevada Tourism Infrastructure Committee will meet again this week to finalize more details of a proposed NFL stadium that could host a relocated Oakland Raiders, and as befits a paper owned by the billionaire hoping to build the stadium, it totally buries the lede:

The committee has all but settled funding sources for stadium construction, [committee chair Steve] Hill said: an increase in the hotel room tax and a special tax district that includes the stadium and a football practice facility that would be used by the Raiders.

Hill explained that the tax district, as envisioned by the committee, would redirect revenue from sales taxes on goods sold on stadium grounds; the live-entertainment tax on tickets for stadium events; and the modified business tax on the payrolls of those employed at the stadium, including professional football players. Hill said the primary reason for imposing a special tax district on the practice facility is to capture payroll tax revenue from the Raiders.

That’s a whole lot of new specifics on how the previously floated tax increment financing district would work; let’s break it down:

  • “Sales taxes on goods sold on stadium grounds” is a potentially huge amount of money, especially if the stadium and practice facility includes any restaurants or other amenities open on non-game days. It’s tough to break out local stadium sales from Forbes’ figures, but if we guesstimate them at $100 million a year for the Raiders, plus a fraction of that for non-NFL events, at an 8.15% sales tax rate, that’s … how about we call it $10 million a year, for a present value of about $150 million.
  • The live entertainment tax is another 9% on ticket sales, which would normally go into state coffers. If it’s instead kicked back to the stadium builders, and we guesstimate $50 million in annual ticket sales, that’s another $4.5 million a year, for a present value of $70 million.
  • The modified business tax is 1.475% on wages, so if NFL team payroll is around $150 million (non-players add a trivial amount), that’s another $2.2 million a year, for a present value of $34 million.

Add all that to the $750 million in cash (from hotel-tax revenues) that Sheldon Adelson, Mark Davis, and their partners are asking for, and taxpayers would be putting up an even billion dollars toward a $1.4 billion stadium for the benefit of one billionaire and the most disliked owner in the NFL — who, in turn, after league money and naming rights were rolled in, would be on the hook for somewhere around bupkis. That would seem to be the headline to me, but I guess that’s why I don’t work at the Review-Journal.

Coyotes owner may be settling on Scottsdale arena site, who’ll pay for it still TBD

The Arizona Coyotes owners may finally be close to deciding where to try to build a new arena, if not how to pay for it:

The site is on privately-held tribal land at the northeast corner of the Loop 101 and 202, at McKellips and McClintock. It was home to the Scottsdale 6 drive-in for more than 30 years…

An announcement connected to the site could come on Thursday, I’ve been told. The arena would be part of a larger project at the site.

That’s from Brahm Resnik of KPNX, who doesn’t cite his source, though with the NHL draft starting this Friday and Coyotes owner Anthony LeBlanc having said he’ll have an announcement before then, it’s a fair bet he’ll announce something on Thursday, even if it’s only a front-runner in the arena site competition.

The site described is this one, which is actually in Scottsdale, and as you can see from Google Maps is currently a big ol’ pile of nothing. There’s certainly plenty of room for a “larger project” there, but that won’t necessarily help pay the bills for a pricey arena, especially when LeBlanc’s bottom line is he wants to be paid to play anywhere. I’ll be absolutely stunned if there’s no public subsidy demand attached to this, either in cash or tax kickbacks or both, though I won’t be at all surprised if that bit isn’t revealed this week, since “announce where to put it first, explain how to pay for it later” is tried-and-true sports owner strategy.

Quebec arena could cost public $370m after city pays half its operating losses

Quebec City is not getting an NHL expansion team today (Las Vegas is), but it still has the $400 million arena that taxpayers put up around $330 million to build. And quelle surprise, it’s already losing money:

The $400-million arena opened its doors to the public last September and ran an operational deficit of $1.4 million in its first four months.

That’s not good.

The contract states that the city has to pay 50 per cent of the operational deficit incurred by QMI Spectacles, an affiliate of Quebecor, up to the amount of the arena’s rent.

That’s even worse! CBC News says this will cause Quebec to have to pay the arena operators $730,000, but if you project it out over a full year, it’ll be a $2.2 million check, or a rebate of almost the entire $2.5 million annual rent payment from Quebecor. That would bring the total public subsidy for the new arena to around $370 million, which would be a crazy-high amount to get an NHL team (you could buy a slightly used one for less than that price), if they were getting an NHL team for that price.

The lesson here is … well, all the usual lessons about not spending so much public money on a sports venue and hoping you’ll earn it back on new revenues, and not building on spec, and so on. Mostly, though, it’s that when the mayor jokes that his cousin will be the main attraction at your city’s new arena, be afraid, be very afraid.