Author Archives: Neil deMause

Friday roundup: What arena glut looks like, and other news of our impending doom

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Hey, I like this Friday news roundup thing! Let’s do it again:

  • A public hearing has been set for Elmont Public Library on July 10 to discuss the possibility of a New York Islanders arena near Belmont Park racetrack. Team owners Jon Ledecky and Scott Malkin won’t have to submit their actual bid until after that, so who knows what everyone will be commenting on, but I’m going to try to go and report back, if I can figure out what time the hearing is, a detail that none of New York’s myriad news agencies seem to have reported on.
  • There’s a thing called the Canadian Premier League, apparently, though it’s more destined to be a second-tier league (think USL of the North) that can serve as development for Canadian soccer players. Anyway, assuming this gets off the ground, Halifax has approved plans for a privately funded 7,000-seat “pop-up” stadium on a public soccer pitch, which will be taken down once the season is over so regular folks can use the field — park users are a little gripey, as you’d expect them to be, but all in all it’s a far cry from the kinds of demands that minor-league soccer teams in the States are issuing, and promises to be far less of a disaster than most of the other things Halifax is known for.
  • Two out of three Hamilton County commissioners agreed to sign non-disclosure agreements before receiving details of FC Cincinnati‘s soccer stadium proposal, because it was the only way they could find out about the team’s plans. Apparently being on the deliberative body that will be deciding whether to give your team gobs of money just doesn’t hold the same kind of sway that it used to.
  • The Atlanta Hawks owners are considering building a mixed-use project around their arena similar to what the Braves did around their stadium, which Mayor Kasim Reed says is the result of the city handing over $142.5 million in renovation funds, no, I don’t understand that either. The Atlanta Journal-Constitution further reports that a new state law would allow local governments to kick back sales taxes to help pay for development in so-called “enterprise zones,” and okay, now it all starts to make sense.
  • One of the Detroit city councilmembers who voted to approve $34.5 million in subsidies for a new Pistons practice facility says she’s considering changing her vote after being deluged with complaints from constituents, but also said she believes the objections are “based on misinformation that I plan on trying to address or clarify at this public meeting on Friday,” so, we’ll see.
  • And finally, here is a photo showing three past, present, and future NBA arenas all side-by-side, because this is what 21st-century America thinks is a rational use of land, resources, and carbon footprint. Future alien visitors who find this as a relic of the civilization that once was, we can’t really explain it either.

Portland ups Timbers tax break to $5.1m, says it’ll all work out because math and stuff

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The Portland city council voted unanimously yesterday to approve the proposed $50 million expansion of the Timbers‘ stadium that will be entirely paid for by the team owners except for $2 million in ticket taxes that the city will waive. Except now it’s really $5.1 million, what?

Peregrine has agreed to pay the $50 million cost of building the expansion. In exchange, the city has agreed to forfeit its share of ticket revenues, losing out on about $5.1 million between 2018 and 2025.

As this was explained previously, the city’s contribution is just kicking back its 7% ticket tax on the 4,000 new seats. There are 17 MLS home games per season, so over seven years that’s 119 games, times 4,000 is 476,000 tickets total — meaning the Timbers would have to charge $153 a ticket for this to make any sense.

The Oregonian offers a slight clue, indicating that there was a last-minute switch in the tax break, but not explaining what it was:

The city asked the soccer team to switch from a 10-year tax exemption it had granted the club in May to a seven-year exemption so that the city could ensure the team would resume tax payments by 2026. That way, the city could secure income for large debt payments on the stadium coming due then, officials said.

Okay, but how does seven years of tax kickbacks amount to more money than ten years of tax kickbacks? Unless now the city is kicking back taxes on all tickets, not just the 4,000 new ones? (Providence Park holds 22,000 seats currently, so that math would work out, sort of, if you squint.) And how does this make sense at all:

Although the new tax break is about $3 million more in the near term, it will result in the Timbers paying higher taxes after 2025, officials said.

“The exemption is basically similar value,” Portland’s Chief Administrative Officer Tom Rinehart said. “There is more money exempted up front for Peregrine” and the revenue flow is greater in later years.

But, but, exempting more money sooner is a greater cost, because present value decreases the farther you get into the future, and AAUGH!

Anyway, this is still a relatively small amount of money, albeit relatively larger than the previously reported relatively small amount of money. The question remains: Why? What possible reason does the Portland city council have for giving the Timbers owners $5.1 million just so they can have more tickets to sell? Does any large enough business get to ask for city checks just because “economic development”? If I agree to spend $50 in Portland, will the city council reimburse me $5.10? The people demand answers, already!

A’s owners say moving four miles to new stadium will create $3B in economic benefits, I’m done

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Okay, forget considering building a stadium on a site that’s really too small to fit one, because the Oakland A’s just trumped their own crazy yesterday, releasing a report that insists that a new stadium would generate $3.05 billion in economic impact over ten years for Oakland. That’s billion. With a B:

The study, conducted by the Bay Area Council Economic Institute, also concluded that a new stadium would boost annual attendance by roughly one million, up from the 1.5 million or so that the A’s drew in 2016. Building a new ballpark would also produce about 2,000 construction jobs…

The $3.05 billion in economic benefit is broken down into $768 million from construction and related spending, $1.54 billion from game-day spending and $742 million from ballpark operations.

Okay, let’s break this down some. The $768 million from construction is uncontroversial, since a stadium is going to cost close to that much to build, though whether it should be counted as a net win for Oakland is another question. (Are all the vendors providing steel for the stadium going to go out and spend their earnings at the local Safeway?) The rest of the study, though — which features a lovely opening photo of Ryon Healy about to be mobbed by teammates excited about all the new economic benefits he’s bringing to Oakland — relies on the assumption that “gate receipts grow by approximately 2x in the first year of operations of a new stadium while concession spending increases at an even higher rate.”

There are a couple of problems with this. One is, obviously, the substitution effect: If all those new fans would have been spending that money elsewhere in Oakland anyway, it’s not a net benefit to the city. The Bay Area Council Economic Institute study takes this into account by discounting new spending by 20% — a number they apparently got by seeing that a previous study for the Detroit Tigers used 25% as the amount of spending that was substituted, then arbitrarily reduced that to 20% because Oakland is likely to have more out-of-towners attending games.

Then there’s that doubling of gate receipts thing. The study actually calculates that MLB teams saw attendance increase an average of 40% in the first ten years of a new stadium — though it puts its finger on the scale by not counting the New York Yankees and Mets for “lack of applicability,” for which read “they actually saw attendance go down in their new stadiums, that’s not going to help our numbers.” I’m not going to re-run their calculations right now, but suffice to say that that’s a lot to expect from a stadium honeymoon period, and isn’t likely to be sustainable over the long term (cf. the Cleveland Indians, who sold out several seasons in a row after their new stadium opened and now can’t draw flies despite a shiny new league championship trophy).

So, in short: If the A’s move four miles down the road from the Coliseum to new digs, some unknown number of additional people might go to A’s games, and some unknown number of them might have otherwise spent that money eating dinner in San Leandro, and some unknown amount of that cash might end up getting recirculated in the Oakland economy rather than just getting pocketed by the A’s owners and players, and — hey, why don’t we just call it an even three billion dollars? And don’t be bothered by the fact that nobody who has ever tried to find evidence of one of these stadium-sparked public windfalls has ever found any — $3 billion! With a B!

Anyway, here’s hoping that the A’s owners are just using the clear plastic binder gambit because it’s available to them, and they’ll end up actually paying for stadium construction and land acquisition and accepting a site that works for the city of Oakland and not just for them, like they say they will. If that happens, I will forgive them all their silly economic projections, though I make no promises to stop making fun of them for them.

Hawks get their $142.5m in tax money, Atlanta mayor says public doesn’t appreciate his “heart”

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Atlanta officials already agreed a couple of weeks ago to throw $142.5 million in car-rental taxes at a renovation of the Hawks arena, but now it’s official, as the Atlanta city council has given its blessing to the deal:

The Council on Monday approved a deal between the city and College Park to extend car rental tax collections beyond their 2038 sunset to raise at least $110 million to fund a $192.5 million update of Philips, the city’s downtown Atlanta sports and entertainment complex.

Now the city and College Park will collect the tax through 2047. College Park was required to sign off on the deal because it is home to the car rental facilities at Hartsfield-Jackson International Airport, the source of the revenue.

So basically, instead of the car rental tax surcharge ending in 2038, or being available to be used for something else, it will go to repay the $110 million in bonds that will be a-moldering on the city’s books by then. (The Hawks will get another $32.5 million in cash from the city from other sources.)

Anyway, that’s that. The best part of this story comes at the end, where apparently Mayor Kasim Reed got into an argument with a college student, if I’m reading this Atlanta Journal-Constitution article correctly:

Georgia State University student Tim Franzen said he didn’t understand the city’s love of stadiums.

“It’s insane,” he said. “We are not in a crisis of resources. We are in a crisis of moral authority.”

An exasperated Reed pushed back, saying he was tired of the council and his administration being beat up for what he sees as a record of accomplishment, including cutting the unemployment rate in half and millions in investment in the city.

“You are not going to come in here and question our hearts,” he said.

Great moments in democracy, people. I so hope there’s a YouTube clip.

Court rules Detroit can spend tax money on Red Wings arena, because they already pinky-swore

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A federal judge has refused to impose an emergency injunction against Detroit using tax money to pay off construction debt for the new Red Wings and Pistons arena without a public vote, on the grounds of “OMG won’t anyone think of the city’s bond rating?!?”

In his opinion, federal Judge Mark Goldsmith said the plaintiffs ultimately failed to establish why an emergency injunction was needed.

“The loss of  anticipated commercial activity connected to the Detroit Piston’s downtown presence would be regrettable, but the loss of the city’s hard-won creditworthiness caused by defaulting on existing bond obligations would do catastrophic damage to the status quo,” Goldsmith said.

This is, needless to say, a dangerous precedent, since it would mean that cities could go ahead and sell bonds without being sure they’re legally allowed to pay them off, figuring that no one will stop them after the fact for fear of harming the city’s credit rating. (Which cities are already doing, of course.)

The plaintiffs can still continue with the court case, and have indicated that they will — as well as filing a state court action to stop the Detroit city council from approving funding for the Pistons’ practice facility, as it is expected to do today — but if the courts keep ruling, “Too late, the getaway car has already left and it would be too much of a mess to chase it down now,” it’s hard to see how court challenges will do any better down the road. There’s a long tradition of this kind of thing in Michigan — the Tigers‘ new stadium was funded in part by the governor funneling off state money without legislative approval and courts later ruling, “Enh, water under the bridge” — but that doesn’t make it any less disturbing when courts rule not on the basis of the law but on the basis of who will be most inconvenienced.

A’s owners said to prefer teeny-tiny stadium site at Peralta Community College

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There’s a new reported frontrunner in the search for a site for a new Oakland A’s stadium: The site of Peralta College’s administrative offices:

This is immediately south of the Laney College property that was previously considered (Laney is one of the four Peralta Community College campuses), but now seems to have fallen out of favor because Laney College wasn’t too thrilled with it. And, er, now that you mention it:

But there are challenges.

For one, Peralta Chancellor Jowel Laguerre says Laney’s faculty and students would probably put up a fight.

“I’m afraid of the aggravation we may create for ourselves and then nothing happens,” Laguerre said. “I am personally praying for one of the other sites to work out.”

Now that’s an endorsement!

The Peralta site definitely has advantages for the A’s — it’s right near both the Lake Merritt BART station and I-880, though it looks like it might need some highway ramp improvements to handle all the fans attending A’s games at once. More to the point, though, it’s tiny — only 13 acres and only about 500 feet wide north-to-south, making it even smaller than the Laney site that seemed arguably too small — which will present more of those challenges. That’s not necessarily a terrible thing — the San Francisco Giants have done great with a cramped site on the other side of the bay, for example — but it is a red flag to watch out for.

F.C. Cincinnati CEO: We want to start Ohio-Kentucky bidding war to build our new stadium

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As discussed last week, F.C. Cincinnati is considering stadium sites in either Cincinnati or Newport, Kentucky across the Ohio River, to the degree that its stadium renderings can’t seem to decide where they are relative to downtown Cincinnati. Now, though, owner Carl Lindner III has made clear that his intention isn’t so much to identify the best site as to get a bidding war going between the two cities in an attempt to shake loose $100 million in public money:

“It would be an exciting place, a transformational-type investment that would be made,” Lindner said of building a new stadium in neighborhoods such as the city’s West End.

But, he quickly added: “It’s ultimately going to end up being where we can get the support.”

This is a common gambit, and sometimes works — Minnesota United‘s owner playing off St. Paul and Minneapolis for tax breaks comes to mind — but sometimes doesn’t — think the Los Angeles Angels‘ owner’s failed attempts to shake loose money from Anaheim by threatening to move to Tustin, only to have Tustin turn them down for money as well. Best you can say is it’s worth a shot, though it’ll depend on elected officials in one city or another thinking that the presence of a soccer team will be worth more than $100 million in economic benefits, which isn’t likely. (Isn’t likely to be worth that much, I mean; what the officials will think I can’t say.) At that price point, for 19 home games of soccer, a reasonable response would be “Wait, somebody else will pay for this thing, and our residents still get to go see games just by going across a bridge? Don’t let the door hit you!”

Lindner’s best bet might be less playing the two cities against each other than shopping around his stadium demands around to every level of government — both states, both counties, both cities — in hopes of finding some group of politicians susceptible to the “If you build it, spending money will come” argument. That’s a lot of government bodies, and he only needs one to bite, so, sure, maybe — there have to be some politicians somewhere out there who can’t do math, right?

Stadium architects dream of holographic players, and other Friday news

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Hey, know what we haven’t done in a while? A Friday news roundup. Let’s do one of those now!

Happy weekend, everybody!

Ballmer, Inglewood enter “agreement” on new Clippers arena with pretty much no details at all

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Los Angeles Clippers owner Steve Ballmer has been talking for a while about wanting to build an arena of his own — with maybe some kind of L.A. Live–style entertainment district around it — in Inglewood, and now it looks like he’s taken a step closer, with the city voting today on opening talks for a new arena to be built adjacent to the new Rams and Chargers stadium:

The Inglewood City Council is scheduled to vote Thursday on an exclusive negotiating agreement with the Clippers to build a state-of-the-art arena on city-owned land. The 18,000- to 20,000-seat arena would be fully financed by Clippers owner Steve Ballmer, sources said. Ballmer, who is worth an estimated $31.8 billion, bought the Clippers for $2 billion in 2014.

So what does all that mean, exactly? “Exclusive negotiating agreement” means that Ballmer would have three years to work out environmental permits, which works well with his timetable in that he has a lease to play at Staples Center through 2024. As for how the financing would work, it sounds like Ballmer would pay for construction, while Inglewood would provide free land (some of which it may have to acquire, possibly by eminent domain), but there are many other variables — would Ballmer pay rent on the land? would this include land for the entertainment district as well? would he receive any tax breaks? who would pay to operate and maintain the building? — and the agreement itself doesn’t answer any of them, beyond a whole lot of legalese that comes down to “We’ll figure that stuff out later.” This is just the opening buzzer, in other words: Figuring out who’s actually winning, assuming this arena ever gets built at all, is still going to take a while.

County officials on Charlotte MLS stadium: If city won’t spend money, maybe we won’t either!

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When last we checked in with billionaire racetrack owner Bruton Smith’s demands for $100 million in stadium subsidies and free land for a new soccer stadium in Charlotte, the county had approved its half, but the city council was balking at the deal, so everything was on hold. And now … pretty much still the same thing, actually:

In a setback for Major League Soccer in Charlotte, the Mecklenburg County commissioners pushed back a decision on spending $120 million for a new soccer stadium until August – and some commissioners don’t want to invest unless the city also contributes…

Monday, Democrat Dumont Clarke said that he also wants the city to agree to spend $43.5 million before he votes for the county to spend anything.

“Why are we budgeting for this when our key partner isn’t willing to endorse it?” Clarke said in an interview Monday. “This gives the city a deadline to see what they will do.”

Okay, technically maybe this is a change of direction, from “we’ll approve our share of the money, but nothing is going to happen until the city approves its share” to “until the city approves its share, we’re not going to approve ours either,” but the upshot is the same: no stadium for now because the rich guy who wants it is demanding that more than half the cost be paid by taxpayers, and city officials aren’t crazy about that idea. Maybe that will change after city elections this fall, maybe not. Either way, it doesn’t sound like Charlotte will be a contender in the round of MLS expansion set to be announced later this year, but since MLS expands pretty much every Tuesday, that’s probably not a big deal — and certainly not a reason to accede to demands for $100 million in cash, if anybody on the Charlotte council was thinking that.