Manfred drops R-word regarding Rays, sports world fails to freak out

I’ve picked on MLB commissioner Rob Manfred before for being really bad at levying relocation threats in order to shake loose stadium subsidies, one of the two main jobs of a sports commissioner. (The other, of course, is levying lockout threats in order to shake loose union concessions.) But maybe, just maybe, Manfred is starting to get the hang of it. When asked about the Tampa Bay Rays‘ stadium situation:

Manfred, during a Q-and-A session at the George Washington University School of Business, did not set any deadlines or issue any ultimatums, but said that at some point if there is no progress the potential of relocation would have to be raised…

“Ultimately, there has to be an end game. If in fact, there’s not a site or there’s not a financial arrangement that’s viable and we become convinced of that, our rules allow for the possibility of relocation.
“At that point of desperation, it’s possible a team would be allowed to relocate.”

That’s a little passive-voice, but not too bad otherwise! The real test, though, is whether it led to a flurry of frantic headlines about how Manfred is threatening to move the Rays if they don’t get a new stadium, stat:

screen-shot-2016-12-07-at-8-44-10-amWell, then. Maybe he should try speaking more from the diaphragm? I hear that helps.

Cleveland to Browns, Cavs, Indians: Everybody gets $57m in tax money, now play nice

And it’s official: The Cleveland Browns, Indians, and Cavaliers will get equal cuts of the “sin tax” extension voters approved back in 2014:

Each team will get $4.6 million per year for the next 20 years. The money can be used to upgrade the stadiums and arena where they play.

Via the magic of net present value calculators (even those that don’t know how to spell “principal”), we can determine that this revenue stream will be worth about $57 million in today’s dollars to each team. It shouldn’t be hard for each of them to find ways to spend that down — especially with the Cavs already asking for another $70 million to pay for a new super-spendy glass exterior wall — but if all else fails maybe they can just buy some IBM “Internet of things” gewgaws and call it “infrastructure.”

Atlanta mayoral candidates debate Hawks arena deal that they won’t get to decide anyway

Atlanta Mayor Kasim Reed is term-limited out of office after next year, which means the city is gearing up for the election of a new mayor in 2017. And, as befits a city that just spent almost $700 million on a Falcons stadium and saw the Braves leave for the suburbs in exchange for $355 million in stadium subsidies and is facing a demand for $142.5 million in arena renovations for the Hawks, sports subsidies are becoming an issue in the campaign:

Candidates Cathy Woolard and Vincent Fort have come out swinging against the proposal, calling it a giveaway to a billionaire. Councilwoman Keisha Lance Bottoms, a key negotiator in the deal, is a hearty backer, while competitors including Atlanta City Council President Ceasar Mitchell, Councilwoman Mary Norwood and businessman Peter Aman, have been more sanguine…

Bottoms, who threw her hat in the ring to run for mayor just days before news of the Hawks deal broke, is also head of the Atlanta-Fulton Recreational Authority that owns Philips and will recuse herself from voting. But she said the project would be a boon to Atlanta’s hospitality community.

“It’s not just about sports,” she said. “It’s an arena that has a lot going on. It’s about being a good steward of a city-owned asset.”

By contrast, Fort said recently, “This is another instance where billionaires are making out like nobody’s business and the citizens of the city are getting very little in return.”

Yep, those would be the two stock arguments. Not that any of the candidates — except Bottoms, Mitchell, and Norwood, since they’re on the city council — will actually have any say in this matter, since the council is expected to vote on it way before the mayoral election, but the public debate could help influence how that vote goes. Especially with candidates saying stuff like this:

Woolard said there was little risk of losing the Hawks after Cobb County Commission Chairman Tim Lee was ousted by voters following his deal with the Atlanta Braves.

“I’ll call that bet,” she said. “I’m not sure the NBA would let Atlanta not have a pro team. And what other jurisdiction in metro Atlanta is going to do this deal after Tim Lee lost [re-election] after the Braves deal?”

That’s a good point! Also not likely to carry much weight, especially when we just saw the Texas Rangers get $500 million in subsidies for a new stadium to replace their 22-year-old one in part by dropping hints that they’d move from Arlington to Dallas even though Dallas hadn’t made any moves to offer them a stadium. But it’s nice to see mayoral candidates using logic as an argument, just for a change of pace.

Pistons, Red Wings still not telling anyone how they plan to split their arena boodle

You know what I could really use this morning? A good article to read. Here’s a good article, from Sunday by Bill Shea of Crain’s Detroit. What makes it good: It’s that rare article about an important lack of information, which nonetheless informs readers about what the issues are, and why it’s important to know what certain parties are refusing to divulge:

The long-speculated on deal to relocate the Detroit Pistons from Oakland County to the Red Wings’ new downtown arena that will open in September was formally announced Nov. 22. What hasn’t been disclosed are any details about the upcoming financial relationship between the clubs.

Neither team is willing to discuss terms of the deal — which apparently still is being finalized — and a spokesman for Detroit’s Downtown Development Authority that owns the new arena said the Pistons-Red Wings contract has not yet been shared with the city. Terms of the deal between the teams do not have to be provided to the city or DDA.

There are plenty of ways to structure the deal, reports Shea, including Red Wings owner Mike Ilitch paying the Pistons to play in his arena but then keeping basketball club seat and suite revenue in exchange (as the Boston Bruins do with the Celtics). And what form it takes could have as much with trying to play revenue-sharing arbitrage with the NBA and NHL rules as with plain old sports bookkeeping.

And if you’re wondering why you should care how the Pistons and Red Wings owners divvy up their private revenue — the $334.5 million in public cash in the deal will remain the same regardless — this is not only likely to help determine the future fate of the Pistons’ old arena in Auburn Hills and how the two teams approach monopoly control of a region’s arena market, but should tell us a lot about what teams can get out of new arenas and why they want them. Other than the $334.5 million, obviously — it’s pretty clear why they want that.

Four out of five invisible people now say Chargers will move to L.A.

Another week, another batch of anonymously sourced reports that the San Diego Chargers are moving to L.A.:

ESPN’s Jim Trotter, a former Union-Tribune beat writer on the Chargers, livened up the Twitter universe Thursday with two bearish forecasts about the future of the Chargers and Raiders in their respective cities.

Tweet No. 1: “I’ve never been more pessimistic about Chargers staying in SD. Based on all I’m hearing I’d be SHOCKED if team isn’t in LA next year.”

Tweet No. 2: “Barring unanticipated miracle, I expect Chargers and Raiders to announce in January their plans to relocate – Chargers to LA, Raiders to LV.”

That’s just Trotter’s opinion, really — dare I say hot take? — which is fine enough. What’s not fine is news outlet after news outlet acting like this is actual, you know, news:

NFL insider sees Chargers, Raiders on move in 2017 (San Diego Union-Tribune)
Chargers Reportedly Almost Guaranteed To Move To L.A. In 2017 (LAist)
It reportedly will take a ‘miracle’ to keep the Chargers in San Diego (Washington Post)

What we have here is still a rumor — one that could be based on what actual NFL insiders are thinking, or on what actual NFL insiders want you to think, or on what a few people around the league are talking to a couple of well-connected sportswriters about over beers. It’s certainly possible that Dean Spanos will announce a move to L.A. next month, but it’s also possible that he’ll ask for more time to keep negotiating with Rams owner Stan Kroenke and/or the city of San Diego — or even that he’ll decide the L.A. deal is too second-fiddly for his blood and reject it entirely, though that seems less likely because why not just ask for an extension then to keep his options open? But trying to guess based on what some unknown “league sources” say is going to be about as accurate as a dart board — you’d probably do just as well selling prediction shares in the Chargers leaving or staying in San Diego, and going with the wisdom of the crowd.

Cash-starved Connecticut considering $250m arena renovation because millennials or something

The state of Connecticut is considering spending $250 million to upgrade Hartford’s XL Center (formerly the Hartford Civic Center) and everybody likes it except for the part about coming up with $250 million:

Supporters of transforming downtown’s aging XL Center arena lined up at a hearing Tuesday to back the $250 million project, but the uncertainty of whether the money will be there to pay for it hung over the meeting…

There is growing resistance to using bonds — essentially the state’s credit card — for big ticket projects when funding is being cut to social services, road improvements and school construction…

“The state simply can’t afford these kinds of projects at this fiscal moment,” Sen. Joe Markley, R-Southington, said, at the hearing. “Bonding and debt service has grown dramatically and terrifyingly … And $250 million or whatever the final price tag is, we can’t afford in these times.”

I’ve been to the Hartford arena, and I’m sure renovations would be nice (though the place is hardly falling down). But Connecticut already has plenty of other concert venues (the arena in Bridgeport, the Mohegan Sun and Foxwoods casinos, there’s no major pro sports team using the Hartford arena, and while the arena is currently losing about $3 million a year, spending $250 million to save $3 million a year is beyond stupid, so what’s the urgency, exactly?

The authority has said the renovations are necessary if the city hopes to bring major league hockey back to Hartford, absent since 1997 when the Hartford Whalers left…

“If we don’t take action and we leave the thing as it is, how can we attract new businesses, new people, millennials?” said Scott St. Laurent, secretary of the Hartford Whalers Booster Club, who was wearing a Whalers jersey. “How can we attract them to downtown if we don’t give them anything to do?”

There you have it: Connecticut is considering spending $250 million on arena renovations because millennials — who are already moving to downtown Hartford in droves — won’t go downtown unless they can watch an imaginary hockey team. At least this would make everybody forget about the Yard Goats fiasco, though I’m not sure in a good way.

Coyotes get developers to drop opposition to tax-kickback plan by promising not to do it again

An Arizona commercial real estate group has dropped its opposition to the Arizona Coyotes‘ demand for $200 million in tax kickbacks for a new arena because, apparently, the team is promising not to do it more than once:

“We were initially opposed,” [NAIOP Arizona president Tim] Lawless said.

But now the group is neutral.

That comes after meetings with Coyotes President, CEO and co-owner Anthony LeBlanc and assurances an arena tax district would not be applied to other projects and sports developments.

I guess technically this means that LeBlanc gave the commercial real estate developers assurances that any authorizing legislation would be narrowly written to just give him a giant whopping tax break, and not all sports team owners, which would have potentially drained an even large share of funds from the state treasury and left existing real estate owners holding more of the bag. That’s not likely to make the owners of the Diamondbacks and Suns happy if they’re hoping to ask for tax kickbacks for their own projects, but LeBlanc can worry about fighting with them later.

Anyway, none of this immediately changes the fact that top state officials sound cool to the LeBlanc plan, and supposed partners Arizona State University still haven’t actually signed on, and so on. But getting one less semi-powerful group hating on him has to be seen as progress of a sort for LeBlanc, anyway.

New MLB CBA should help spark new A’s stadium, but maybe not why you think

Of all the small changes in the new MLB collective bargaining agreement agreed on last week (which include the end of our long national World Series home-field nightmare), one that’s getting a bunch of attention is the decision to phase out the Oakland A’s exemption that’s allowed them to be the only team to collect revenue-sharing checks despite playing in a big market. The upshot, according to most sportswriters, is that this should turn up the heat on the A’s to build a new stadium:

Q. Sure, losing $35 million is one thing, but spending $800 million or likely much more to build a privately financed stadium is in a whole other category. Why does this force the A’s hands?

A. In absolute terms, it can’t. But the A’s want and need a new stadium and its revenue generating potential, so this is a strong push in this direction. Both executive vice president Billy Beane and general manager David Forst have talked about a future in which they can dial up the payroll to fit a new stadium.

That’s … not wrong, but wrongish. The implication here is that now that the A’s won’t be cashing annual revenue-sharing checks from the rest of the league no matter how crappy their balance sheet is, they’ll have to turn a profit some other way, so time to finally get cracking on that new stadium that’ll open up the money taps!

But that’s not how sports team owners think, or at least not how they should think if they’re remotely rational economic actors. (Which they probably aren’t entirely, but let’s overlook that for the moment.) If a new stadium is going to bring in more money than it costs to build, then you’re going to do it regardless of how much money you’re currently getting from other sources; and if a new stadium is going to be a money-loser, it’s not going to help you either way.

Where the new revenue-sharing rules can change the game is in how they effect marginal tax rates. Think about it this way: If you’re considering making an investment — moving to a new city, buying a car that allows you to commute to a new job, getting an advanced degree — and trying to figure out if the extra income it will allow you is worth it, the first thing you need to know is how much your net income will change after taxes, deductions, etc. So if you’ll be earning an extra $10,000 a year, but your bank balance will only change by $6,000, that’s a 40% marginal tax rate. (We can call it this regardless of whether it’s actual extra taxes you’re paying, or, say, credits you’re no longer eligible for.)

So back to the A’s. In past years, as an exempted “small market” team under MLB’s two-tier revenue sharing system, they’ve been subject to the leaguewide 34% tax on each new dollar earned, plus a 14% “performance factor” tax where both the size of the tax and the size of the benefit is based on how much money your team brings in (or fails to). (the effective marginal tax rate impact of this is largely the same regardless of whether you’re a high-revenue team or a low-revenue team, since either you’re paying out more and more into revenue sharing as your revenue rises, or you’re receiving less and less in checks, or both.) The new system eliminates the performance factor sliding-scale tax and replaces it with more flat tax — while the math is complicated, it won’t change things drastically in terms of how much of each new dollar the A’s get to keep.

What will have a significant effect is eliminating the huge penalty the A’s were previously going to face for building a new stadium. Before, a new stadium was going to make the team ineligible for any revenue-sharing checks at all, since it would kick them into the “big market” bracket; now, with the checks already shutting off, there’s no disincentive to go ahead and build. Getting rid of this penalty — a “benefit cliff,” in economic terms — should make building a new stadium a lot more alluring to the A’s owners, which is no doubt a big reason why MLB took this measure. (Though also probably because some owners were just sick of giving the A’s any money when they weren’t spending it — though that remains a problem with some other teams that remain designated “small market.”)

In other words, while losing that $35 million a year should be a huge incentive for building a new stadium, it’s not actually the loss of the money that matters, but rather taking away the threat of losing the money if they built a new stadium. MLB could just as easily have incentivized Lew Wolff and Co. by saying, “Hey, you’re small market either way, go ahead and replicate the Miami Marlins if you feel like it,” and it would have done largely the same thing.

If all that is too much math to swallow on a Monday morning — it’s almost too much for me — just hold on to the takeaway that the A’s might be building a new stadium soon with largely private money, though there’s still concerns they may try to make a grab for public land. Just also remember that revenue sharing works in mysterious ways, so what’s sauce for the A’s may not be sauce for, say, the Arizona Diamondbacks.

Oakland’s $1.3B stadium plan for Raiders: Get NFL to reject Vegas move, figure out details later

Finally, we have some details — sort of — for Oakland Mayor Libby Schaaf and former-NFL-player-turned-developer Ronnie Lott’s stadium plan to keep the Raiders in Oakland. And it looks like this:

  • $600 million from Lott’s investment group
  • $300 million from Raiders owner Mark Davis
  • $200 million in G-4 funding from the NFL
  • $200 million in “infrastructure” spending by the city of Oakland and Alameda County

That comes to $1.3 billion, and you can certainly build a respectable stadium for that. The unanswered question, though, is: Who would get the revenues from the place? The San Francisco Chronicle report indicates that the public money “would be repaid from revenue generated by the stadium project,” and further that “the city and county would share some percentage of non-football revenues at the stadium,” though that might be targeted for paying off the remaining $95 million in debt on the Oakland Coliseum’s 1990s expansion. And what about football revenues? Would Lott’s group want some of those (probably), or be content with proceeds from building a retail development project around the stadium (probably not, since they’d have to pay for that separately from their $600 million in stadium expenses)? Is there enough money in this whole thing that everyone could possibly be made whole? (I really doubt it, since there not being enough revenues to go around is what made the previous private developer’s plan crash and burn.)

All this isn’t really any more detailed that the rough sketch that had been floating around before Schaaf announced it last week, so it’s not really clear what she had to gain from—

The hope is that the show of support will be enough for the NFL owners to block the team’s move to Nevada and open the door to the locals talking directly with Davis, which he has refused to do as long as the Las Vegas deal is on the table.

Oh, right. So take this less as actual stadium plan, and more as “Hey, NFL owners who may be having second thoughts about this whole ‘put a team in Vegas and hope that tourists buy season tickets thing,’ don’t listen to Davis when he says Oakland doesn’t care about him, we’re giving you an out if you want to vote no!” Given that NFL owner votes are known to be swung by ridiculous things, it’s not the worst gambit, really.

County official proposes diverting one-third of tourist dollars to build Cavs a glass wall

It’s been almost eight months since the Cleveland Cavaliers asked for a $140 million expansion of their arena to add more public space and give it a glass exterior wall, and Cuyahoga County Executive Armond Budish said, “Let me get half of that for you.” Now, Budish thinks he may have found some of the money, asking the local tourism agency to use hotel tax money to pay for the Cavs’ renovations.

Destination Cleveland collects about $15 million a year in hotel taxes, and paying off $70 million in Cavs expenses would cost about $4-5 million a year, so this would clearly be a hefty chunk of change, unless Budish has other revenue sources in mind as well. The Cavs are already getting a cut of the alcohol-and-cigarette-tax extension that county voters approved back in 2014 — Budish recently proposed splitting the proceeds evenly among the Cavs, Indians, and Browns, as nobody bothered to work that out beforehand — and since that amounts to about $170 million in total present value, Cavs owner Dan Gilbert is effectively asking for $70 million on top of the $60 million he just got two years ago for renovations. But really, who can put a price on the enjoyment that local sports fans get from a glass wall?