Author Archives: Neil deMause

County approves $125m tax gift to Carolina Hurricanes, city approval next up

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Wake County, North Carolina yesterday approved $46.6 million a year in tourism tax spending — money from a 6% hotel tax and 1% restaurant tax imposed in 1991 — and the beneficiaries are set to include the Carolina Hurricanes and the Raleigh Convention Center, though not yet a proposed Raleigh soccer stadium:

  • The Hurricanes would get $9 million a year in tax money for the next 25 years, a present value of about $125 million. The NHL franchise has been looking at an arena renovation cost of up to $200 million, so this would pay for the bulk of that.
  • The convention center would get $3 million a year for maintenance, $2.2 million a year for parking and infrastructure, $19 million flat fee for renovations and new land acquisition, and $17.575 million a year starting in the mid-2020s for an expansion and new music venue.
  • The North Carolina FC USL team didn’t get its proposed $11 million a year stadium grant, but can still apply for part of the remaining funds, where it would compete against other arts groups.

I know that some of you are thinking about now, “But isn’t the whole point of a tourism tax to promote tourism, so the tax money should be spent on things that will bring tourists to town?” Sure, but then it’s important to ensure that the spending will bring tourists to town, and the return on sports and convention spending is historically really awful in that regard: Sports teams only bring in a tiny sliver of new spending compared to what they cost in subsidies, and conventions are equally dismal.

One solution, if you’re really determined to use tax dollars to encourage people to come to your town, would be to demand some kind of direct repayment from the beneficiaries: Sure, we’ll give you a pile of free cash, but then you need to share the resulting increased revenues with the public treasury. But that doesn’t appear to be what’s going on in Raleigh; rather, the Panthers and other operators will keep any windfall revenues, and local government will just sit back and hope that the rising tide lifts their fiscal boat as well.

This whole plan still needs to be signed off on by the city of Raleigh, but at this point it looks like all that’s left to decide is which private interests to funnel tax money to, not whether to do it at all. (It’s possible there are some ways that Wake County could use tourist tax dollars to displace other spending that would then be freed up for broader social goods like schools or whatever, as has been the case in other locales, but none of the coverage has addressed that.) If anyone was wondering why somebody would spend $420 million to buy an NHL team with attendance near the bottom of the league, you may have just gotten your answer.

David Beckham’s Miami stadium site is laced with arsenic, because of course it is

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It’s been a while since David Beckham’s Inter Miami stadium plans have appeared cursed, with the franchise moving ahead on both a temporary new stadium in Fort Lauderdale and a permanent one in Miami. The balance of nature requires that this state of affairs cannot last, however, so it’s about time for, hmm, how about the discovery of massive toxic contamination on the Miami stadium site?

The proposed site for a Major League Soccer stadium and mall in Miami is far more toxic than previously expected, with arsenic contamination levels reaching more than twice the legal limit and surface-level soil samples containing debris that poses a “physical hazard.”…

A report by a consultant paints an ugly picture of what lies beneath the golf course — and in some spots, the contamination is right near the surface, as shallow as a half-foot deep. Nearly the entire site is sullied by ash from an old municipal incinerator that was shut down decades ago.

There’s been speculation previously that the Melreese golf course site might have pollution problems, but this report — which prompted the Miami Herald to refer to the contaminants as “crud” and “grimy,” which must’ve been fun for the reporters — still has to qualify as alarming: Miami Mayor Francis Suarez said it “obviously causes great concerns.” Inter Miami officials have promised that they won’t seek public funds for cleanup of the site, but given that the city is still negotiating the terms of the golf course lease with the team, it could conceivably affect Beckham’s proposed $3.5 million a year ground lease price for the site, which would effectively mean taking money from taxpayers’ pockets. Stay very much tuned, in other words.

Charlotte Business Journal proposes ways to raise $2B for Panthers stadium before owner has even asked for it

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The Charlotte Business Journal has an article (paywalled, but you can find your way around it if you’re clever) speculating on ways that the city could help pay for a new Carolina Panthers stadium, and it comes down to:

  • Sales and property tax revenues are probably off the table, because the city needs those to fund basic services.
  • Hotel and rental car taxes are a possibility, but problematic because they’re already 8% and 16% respectively, and if you raise them much more, people might start booking their vacations (or conventions) elsewhere.
  • Doubling the restaurant tax from 1% to 2% could raise about $40 million per year, and would only hurt people who eat food, and totally wouldn’t reduce sales tax receipts because people would have less remaining spending money as a result or anything like that.
  • Tax-increment financing, because people still think tax revenues from a new project is not real tax money for some reason.

The entire article, of course, is right in line with the traditional local-newspaper tradition of treating team owner subsidy demands as a problem to be solved by looking under the sofa cushions to see where to find a few hundred million dollars, not as a proposal to be analyzed to see if it makes any damn sense. (There is exactly bupkis on what kind of economic impact if any Charlotte would see from gifting the Panthers a new stadium, though the writer did talk to the head of the local restaurateurs’ trade group, who predictably said they would fight against any restaurant tax hike.) You might think reporters should at least wait for the local team owner to actually make a specific ask beyond just saying “hey, the public really should buy me a stadium with a roof, my old one doesn’t have a roof, roofs are cool” before proposing ways to pay for it, but that’s been a problem for a long, long time.

Here’s how much money Miami taxpayers will throw at next year’s Super Bowl

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Miami is hosting the Super Bowl in February, and the Miami Herald has a rundown of how much local governments are paying for the privilege:

  • $4 million from Miami-Dade County to the Dolphins for hosting the game, as required by team owner Stephen Ross’s weird lease provision.
  • $3.8 million from the city of Miami for “police, firefighters, code inspectors, public works and solid waste workers to work Super Bowl-related events.”
  • $300,000 from the city’s Downtown Development Authority for “permanent LED lighting on the Baywalk.”
  • $1.2 million in fee kickbacks and $400,000 in cash from the city of Miami Beach for, you know, stuff.

That amounts to $9.7 million, but the Herald says the total public cost will be “nearly $20 million over time,” so clearly there are some costs the paper didn’t itemize. (Either that or the Herald cut its calculator budget.) Given that previous estimates of how much new tax revenue cities get from hosting the Super Bowl have ranged from zero to $5 million, this would appear to be a bad investment for Miami’s local governments, but don’t worry, they have ideas for how to earn it back:

“It also helps us attract other events,” [Greater Miami Convention and Visitors Bureau COO Rolando Aedo] said. “We’re going to be vying for the World Cup.”

Alrighty then. At least Miami’s expense has provided us with some truly awesome renderings, including a “fireworks extravaganza in the sky,” because don’t you just hate those boring old fireworks that sit on the ground?

Most Calgary citizen feedback was opposed to Flames deal, not that anyone cared

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The Calgary city council approved around $200 million in subsidies for a new Flames arena earlier this month only eight days after releasing the proposal, meaning there was no time to tell how the public felt about the idea of using tax money to help pay for a billionaire’s new sports home. There’s plenty of time now that it’s too late for it to have any impact, though, and it turns out Calgarians — at least, those who wrote in to the council during those eight days — were not so crazy about the idea:

An analysis of more than 4,000 individual public submissions found about 55 per cent of those who wrote to the City Clerk’s office did not support the deal approved by city council in an 11-4 vote on July 30.

In particular, reports the Calgary Herald, which requested the public comments — apparently in Canada public records requests move a lot more quickly than in the U.S. — people were upset about the rushed timetable (“The fact that the Flames made the timeline so tight that it disallowed for meaningful public consultation shows an utter disdain for democratic norms and should have been an absolute non-starter”) and the fact that Calgary was approving arena funding at the same time it was cutting its operating budget for things like transit and fire services (“Do not let [Calgary Sport and Entertainment Corp.] bully you into spending money that could desperately be used elsewhere”).

Sometime sports subsidy apologist Mark Rosentraub told the Herald that allowing public input vs. deciding behind closed doors each “has its ups and its downs,” and that “if people are dissatisfied, then they should vote the scoundrels out.” That’s way easier said than done — people vote on a multitude of issues, so it’s tough to punish elected officials for a single decision, especially if their opponents would have done the same thing — but given that the council’s approval ratings were already in the toilet before the arena move, this certainly isn’t going to help. Unfortunately, the next elections aren’t until 2021, by which time it’s extremely likely there will be something fresher in voters’ minds to use as a basis for their ballots — and if you suspect that that’s yet another reason why the council wanted to vote as quickly as possible, you’re probably not far off.

 

Friday roundup: Saints’ $300m subsidy moves ahead, St. Louis MLS announcement on tap, Richmond council votes no on democracy

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Sometimes I feel lucky to cover a topic with so many constant absurdities, and then this happens, and I realize that constant absurdities are just the new normal. Anyway, I did get to edit this this week, which is an excellent look at how this week’s absurdity is having potentially catastrophic impacts on people’s lives, so go read it!

But not before you read these:

  • The Louisiana State Bond Commission has approved selling $450 million worth of state bonds to fund renovations to the Superdome, in exchange for the New Orleans Saints signing a 15-year lease extension. As covered back in May, Saints owner Gayle Benson would cover one-third of the bond cost, leaving Louisiana to pay off $300 million, bringing the Saints’ five-decide subsidy total to a cool $1.442 billion. In exchange, the Saints will sign a 15-year lease extension — with another 15-year option, but there’s no way they’re going to extend their lease again without more subsidies the way this gravy train is rolling — which comes to state taxpayers ponying up $20 million a year for the presence of an NFL team, which is a hell of a lot of money, though not as much as Indiana pays the Pacers, because Indiana.
  • The St. Louis Post-Dispatch reported this week that St. Louis will be announced next Tuesday as the next MLS expansion city, bringing the number of teams in the league to a cool 154. (I think it’s actually 28, but honestly the number changes so fast it’s hard to keep track.) Deadspin read the announcement that there would be no public subsidies for the as-yet-unnamed team’s stadium and excitedly reported that the deal “might not completely fleece the city”; sadly, it will actually involve about $60 million in public subsidies, but since about half of that is coming from the state, not the city, that Deadspin headline is still technically correct, right?
  • The Richmond city council has voted 5-3 against allowing a referendum on the city’s proposed new $350 million city-subsidized arena on the November ballot, because voting is for elected officials, not regular folks. Though regular folks do still get to vote on electing elected officials, something that referendum sponsor Reva Trammell clearly had in mind when she said following the no-voting vote: “I hope the citizens hold their feet to the fire. Every damn one of them that voted against it.”
  • Two-plus years after the arrival of the Hartford Yard Goats in exchange for $63 million in public stadium cash — plus a couple million dollars every year in operating losses — the Hartford Courant has noticed that stadium jobs are usually part-time and poorly paid. Not included in the article: any analysis of how many full-time jobs could have been created by spending $63 million on just about anything else.
  • New Arizona Coyotes owner Alex Meruelo said he intends to keep the NHL team in Arizona, but that keeping it in Glendale is a “difficult situation,” at which point a Glendale spokesperson said that city officials would meet with Meruelo “to see how we can help him achieve his goals of success.” Which is all fine and due diligence and all, but given that helping Meruelo “achieve his goals” is likely to mean paying him money to play in Glendale like the city used to do, it’s not exactly promising; if nothing else, Glendale officials would do well to remember that Meruelo currently has exactly zero better arena options elsewhere in the state, so he’s not exactly negotiating from a position of strength.
  • Joe Tsai, who was already set to buy the Brooklyn Nets from Mikhail Prokhorov, has officially exercised his option to purchase the team, plus the Barclays Center arena to boot, for a reported $3.5 billion. Given that the arena is currently losing about $21 million a year, this seems like an awful lot of money even if the team does employ whatever’s left of Kevin Durant. Since Tsai already owns the New York Liberty, though, maybe it at least means that WNBA franchise will finally return to the city from its exile in the suburbs.

Anaheim plans public forums on sale of stadium land to Angels, but won’t tell public how much it’s worth

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The city of Anaheim finally got back its long-awaited appraisal of the Los Angeles Angels stadium parking lots that Angels owner Arte Moreno wants to develop to fund upgrades to the stadium, and is ready to open negotiations on a new lease. And that appraisal says:

The appraisal, which city officials say is an incomplete draft, has not been made public.

Say what? The city spent nine months getting the property appraised, now has in hand a report that’s good enough to start talks with the team on a development deal, but it’s not good enough to share with anyone outside the negotiating room? Are they still waiting for the soundtrack to be added?

This is, let us say, a disturbing trend. You’ll recall that the state of New York similarly negotiated a land lease to the New York Islanders as part of a development project to fund a sports venue while keeping its land value appraisals secret, only releasing them hours before the final state board vote and even then releasing only summaries that didn’t show how the appraisal figures were arrived at. As things like sweetheart land deals increasingly subsidize sports projects — since handing over piles of cash is increasingly unpopular with the public — it’s vital to know whether a city is getting fair market value or gift-wrapping development rights for a team owner, and it’s hard to do that when the government’s own assessment is kept secret.

Anaheim councilmember Jose Moreno has announced two community forums on August 21 and 29 to answer questions about the Angels’ lease renewal plan; it’s going to be interesting to see how he ducks all the inevitable questions about “So how much is this land worth that you want to give to Moreno, and how much will he be paying us?” (Assuming that the appraisal is still secret by then, that is. We can always hope!)

In related news, it turns out that when Anaheim extended the Angels’ existing lease through the end of 2019 last year, it actually extended it through 2029, while giving Moreno a new opt-out through the end of 2019. This is even stupider than the lease extension sounded at the time — hey, everybody, now that the team owner has opted out of his lease, let’s give him another year to try to extort money from us, but give ourselves no leverage because if it doesn’t work he can just stay put for a decade under the terms of his existing lease where he pays no rent — especially since Anaheim councilmembers apparently didn’t understand that that was what they were voting on at the time.

Anaheim still has some leverage here: Moreno’s only current alternative stadium option is a plan in Long Beach that no one knows how to pay for and is on too small a site to fit a major-league stadium, so if he opts out again this December, he once again will risk making his team homeless. Though if the city plans to keep responding to Moreno’s “send money or I’ll shoot my team” threats by giving him another year of rope, the threats could literally go on forever. I’m starting to think that the Anaheim council could really use some lessons in haggling.

New York state okays Islanders arena lease, still won’t say how much subsidies are worth

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The New York Islanders arena plan received its final(ish) signoff yesterday, from the obscure state Franchise Oversight Board, which approved the team’s lease with the state. It also revealed how much the project will be paying in payments in lieu of taxes (PILOTs) as part of its tax break deal with the state:

It also includes a payment in lieu of taxes agreement under which New York Arena Partners would pay $40 million to various municipalities. The PILOT would last throughout ESD’s lease for the arena, and for 20 years for a proposed hotel and 15 years for retail stores at the arena. An estimated $154 million would go to the Elmont and Sewanhaka school districts over almost 50 years, and the state would make at least $1 million per year from rent payments based on attendance.

That is a lot of numbers that don’t actually make sense together, so let’s explain them one at a time:

  • That $40 million PILOT payment appears not to be a PILOT payment at all, but rather the team’s lease payment for the state land it would be using, which we’ve covered previously. (And is also now supposedly up to $50 million.)
  • The actual PILOT payment from the arena will be that “at least $1 million per year” figure, which is certainly way below what an arena would normally pay in property taxes, though no one has revealed how much of a tax break it is.
  • Likewise, the PILOTs for the hotel and stores are actually tax breaks, not special payments to the state, since if the state insisted on the developers buying the land instead of leasing it, it would be subject to normal property taxes.

The upshot, then, is that the state is still giving the Islanders and their developer partners a sweet land deal, plus cash toward a new commuter rail station, plus tax breaks. There are so many moving parts to the financing plan, and so little transparency, that it’s pretty much impossible to put a number on the total public cost, but it’s certainly close to $100 million, and could be much higher.

As far as the approval process goes, I believe the state comptroller still needs to sign off on the deal, but that’s usually a formality. Then will come the inevitable lawsuits; whether the Islanders can meet their aggressive goal of breaking ground in September and opening the place in fall of 2021 will likely depend on whether opponents are able to get court injunctions, or if everyone will be left to calculate the public cost after the horse has escaped.

Why is somebody dropping hints the Orioles could move to Nashville?

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I missed this on Sunday — probably because it ran in something called the Baltimore Post-Examiner that is run by former daily-paper journalists and is a mix of news reporting, poetry, and song lyrics (?) — but former Baltimore Sun and Baltimore Examiner columnist Michael Olesker claims that unnamed sources tell him that with Baltimore Orioles principal owner (or, as the Post-Examiner spells it, “principle owner”) Peter Angelos now 90 years old, the team could be sold or moved to Nashville, Tennessee:

If the family were to sell, that means another complication: Would they sell to local investors, or to out-of-town owners who might move the team? The lease on Oriole Park, which helps tie the team to Baltimore, ends in 2021.

One rumor has the family retaining ownership but the club moving to Nashville, where [Peter’s son] John Angelos and his wife have one of their homes. That rumor takes on legitimacy mainly because of sinking attendance at Oriole Park.

Okay, so about that “sinking attendance”: While Orioles attendance is indeed in the toilet — third to last in MLB at present, ahead of only the two Florida teams — it was over 30,000 a game as recently as 2014, when the O’s made it to the American League Championship Series. The team currently has the second-worst record in baseball and is playing like it doesn’t even belong in the league, so it really shouldn’t be any surprise that fans are finding other things to do with their time.

A relocation to Nashville might not seem that crazy on mere demographic grounds — Baltimore and Nashville are about the same size in terms of TV households — but there are other benefits to staying put. In addition to a stadium that, at what now passes for the advanced age of 27, is routinely ranked as the most popular in baseball and continues to draw out-of-town fans, the Orioles were granted control of the Washington Nationals‘ TV rights when the former Montreal Expos moved to D.C. in 2005, and reportedly continue to take a cut of Nats’ TV profits before passing along fees to that club. (The issue is the subject of never-ending lawsuits.) Leaving Baltimore would not only mean giving up that tasty slice of TV money, but, as Maury Brown notes in Forbes, possibly paying a cut of Nashville TV revenue to the Atlanta Braves, St. Louis Cardinals, and Cincinnati Reds, who currently share the Nashville market as far as TV rights go.

The question then, as it always should be with unnamed sources, is what’s their motivation for leaking this news? It could certainly be people close to the Angeloses trying to drum up enthusiasm for a local buyer to step forward — buy the Orioles or we’ll shoot this team — or even conceivably for a new push for subsidies to improvements to Camden Yards, something that was rumored to be in the works back in 2015 when the Orioles still employed professional baseball players, but hasn’t been heard much about now that Baltimoreans don’t even want to give the O’s their ticket money, let alone cash for stadium upgrades. Or it could just be somebody speculating hey, John Angelos has a house in Nashville (among other places), maybe he’d move the team there? Really hard to say without knowing more about the sources, which is yet another reason why unnamed sources should be used only as a last resort.

Olesker does go on to write that “knowledgeable sources say the family would much rather sell — and keep the club in Baltimore, if a local buyer can be found,” so clearly even the sources are mostly just saber-rattling. Still, it’s something to keep an eye on, especially with that lease expiration coming up: Peter Angelos hasn’t been one to play extortion games with Baltimore, but that could certainly change if ownership passes to his sons or to a new buyer entirely. Stay tuned — but not to Orioles games, unless you like bleak comedy.

Oakland could sue county over sale of its half of Coliseum land to A’s

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The proposed $85 million sale of Alameda County’s half of the Oakland Coliseum site to the owners of the A’s is just getting weirder and weirder, with a possible lawsuit now in the offing:

In a letter delivered to county officials Monday, Oakland City Council President Rebecca Kaplan and Vice Mayor Larry Reid noted that the deal between the county and the baseball club lacked any provision for building a ballpark for community benefit to be included in the sale.

The letter ends with the request for the county to “clarify” whether it planned to go forward with the A’s sale, so that the city could “determine effective next steps.”

The city’s letter made no mention of what the “next steps” might be, but a separate Aug. 31 email to Oakland City Attorney Barbara Parker said the letter is for “the purpose of potential litigation.”

(Yes, “August 31.” Either that’s a typo, or Phil Matier has become unstuck in time.)

At issue here is that the city of Oakland wants a shot at purchasing the county’s half-share of the site as well, but hasn’t actually placed a bid, in part because the city of Oakland doesn’t actually have $85 million to spare. Also, some city council members are hoping to have the A’s build a stadium on the Coliseum site rather than their preferred Howard Terminal site, and are hoping that the county will hold off on its sale to help create leverage for that, or for a community benefits agreement, or for something.

The weird part is that the A’s owners’ plan is to develop the Coliseum site and use the proceeds to build a Howard Terminal stadium, which presumably can’t happen unless they control 100% of the land. (At least, that’s how I understand it from following the fairly half-assed media coverage; I’m sure you readers will correct me if that’s wrong.) So this may just be a weird proxy war being fought over the A’s stadium site plans, which could turn into a lawsuit between two government agencies over a financing plan that still no one quite understands. Nobody said this was gonna be easy.