D-Backs get official okay to break lease and build new stadium to replace decrepit 20-year-old one

The Maricopa County board of supervisors voted 4-1 yesterday to sign off on the revised agreement with the Arizona Diamondbacks, allowing the team to break their lease five years early in exchange for not suing the county for stadium upgrades:

Under the agreement, if the Diamondbacks found a new location in Maricopa County, the team could leave Chase Field without penalty in 2022, five years earlier than the team’s current contract.

A new stadium built on tribal land, an idea that has been rumored, would have to charge the same taxes as currently charged at Chase Field, according to the agreement.

That last bit initially sounds intriguing — especially since building on tribal land, which is free from property taxes if the reservation owns it, is an option the D-Backs owners are likely to pursue. But Chase Field, being owned by the county, currently pays no property taxes either, so that’s really not much of a promise of anything.

Really, this whole mess seems to be mostly Maricopa County washing its hands of the Diamondbacks, and saying to municipalities and reservation officials, Here, you guys figure this out, just leave us out of it. I mean, just listen to county supervisor Denny Barney:

“We don’t have the ability to put more money in the stadium nor will we build them a new stadium. If they can find something that will take them the next 20, 30, 40 years in Maricopa County outside of Chase Field, great. As long as they’re here — that’s our goal.”

And then finally, the Arizona Republic article on the board hearing includes this memorable tidbit:

One resident spoke publicly in support of the deal at the meeting. Diane Barker urged the Diamondbacks, other downtown businesses and the city of Phoenix to cooperate on improving the stadium.

“I’d like to see these corporate oligarchies put their money in it to make it a great project,” Barker said.

Apparently either Maricopa County resident Diane Barker, or the Arizona Republic copy editors, think that the city of Phoenix is a “corporate oligarchy.” Either way, fear for the future of what’s left of our democracy.

How cities haven’t actually fallen out of love with funding sports stadiums

The May issue of Governing magazine has an article with the provocative headline, “How Cities Fell Out of Love With Sports Stadiums,” though it’s really mostly about why St. Louis balked at throwing money at an MLS stadium and fought back against paying for arena upgrades for the Blues after getting burned when the Rams got the most sweetheart lease deal in history and then used a lease loophole to move back to Los Angeles just 21 years later.

All that is good and fine, as is the article’s discussion of how “the economic impact reports singing the praises of sports development have largely been discredited.” But in the service of trying to make the story into “regular folks used to fall all over themselves to hand money to sports teams, but now they’ve smartened up,” writer Liz Farmer oversimplifies or just plain gets wrong a number of things about the stadium subsidy game and how it’s played, which is going to be a problem if any people in the business of actual governing take it as gospel. Let us count the ways:

“When [Rams owner Stan] Kroenke came along and had the gall to start making demands for a football team that hadn’t had a winning record since 2003, the city was — quite literally — spent. St. Louis was suffering under the same socioeconomic and fiscal pressures as Cleveland, Detroit and most other Rust Belt cities. Its population was declining rapidly, and it was stuck paying off debt for the existing stadium until 2022. Residents were increasingly skeptical when it came to investing in gaudy entertainment amenities the lower-income population couldn’t afford to use.”

St. Louis’s population has been declining since 1950 — if anything, it’s leveled off some in recent years — though its county population has soared as more people moved to the suburbs. And residents were pretty darned skeptical before, too: Way back in 2002, St. Louis citizens approved a referendum requiring that all public subsidies for sports facilities would need to go to a public vote. Unfortunately for voters, courts ruled that the target of that referendum — the Cardinals stadium deal that had just been approved prior to that — was grandfathered in, but it’s not like public resistance in St. Louis is anything new.

“The era of taxpayer-financed stadiums came about almost by accident. Seeking to limit the use of government bonds in stadium financing, the federal Tax Reform Act of 1986 included a provision that capped at 10 percent the direct stadium revenue — mostly from ticket sales and concessions — that could be used to pay for the cost of the facility. That meant that governments would have to raise broad-based taxes, such as on sales or business, to cover the rest of the cost.”

Not quite. What the 1986 tax reform law was attempting to do was to rein in cities’ use of federally tax exempt bonds for private projects — not just stadiums, but all kinds of development — by saying, “Look, only really public amenities, okay? Don’t just offer discounted bonds to anybody who asks and then stick federal taxpayers with the bill.”

Unfortunately, the way that Congress chose to address this was by defining public amenities as things that were paid for by the public — if more than 10% of the cost was paid off by private funds (or special taxes that were just private funds masquerading as public dollars to get eligibility), low-cost federal bonds were off the table. Unfortunately, what that did was to increase the leverage of sports team owners, who could now say, “Yeah, sorry, we would love to put in more money of our own, but then it would increase the financing costs, and we can’t have that, can we?”

This is by no means what started the era of taxpayer-financed stadiums, though: Team owners were already demanding new stadiums and arenas left and right, using the usual playbook of methods to do so (move threats, claims of economic benefits, etc.). The tax reform law further titled the scale toward bigger demands, but it didn’t create the demands in the first place — and while getting rid of tax-exempt bond subsidies would be a nice step, it wouldn’t put an end to stadium subsidies in the slightest.

“But Congress didn’t account for the fan loyalty and pride that — at the time — made raising local taxes more acceptable.”

Fan loyalty and pride are still on full display, but sports fans are taxpayers, too, and have been resisting handing their tax dollars over to sports team owners as much as anyone since the beginning. Just ask Frank Rashid.

“The boom was driven in part by demand from teams and fans for a more sophisticated sports experience than the drab concrete coliseums they were used to.”

If by “more sophisticated sports experience” you mean “more pulled-pork sandwiches and nicer cupholders,” sure. But plenty of sports venues have been torn down in recent years to make way for new facilities that are arguably even drabber than the ones they replaced.

“The Washington, D.C., soccer team, D.C. United, spent years negotiating with the nation’s capital over a new soccer-specific stadium. Those talks effectively shut down once the economic downturn hit in 2008, and the team spent another seven years shopping around in the surrounding counties — even going as far as Baltimore — trying to find a local government that would pay for the facility. None would bite. Ultimately, the team stayed in D.C. and is paying to build a stadium on land the city spent $150 million acquiring. The deal includes a non-relocation agreement.”

In addition to that free land, D.C. United is also getting $43 million in property tax breaks, making it the most expensive MLS soccer stadium subsidy in history. The tide is turning!

“Kiel Center Partners, the firm that owns the NHL Blues, had asked the St. Louis City Board of Aldermen for $64 million to finance upgrades to the Scottrade Center. Had the city’s voters not been distracted by the soccer stadium proposal and by a heated mayoral election, the financing might have met more resistance. Some aldermen did question whether the city’s 1994 lease with the team required it to pay for upgrades, but still the proposal narrowly passed. If it had been submitted to a popular vote, it most likely would have failed.”

Again, “if voters had been asked, they would have voted it down” is likely true of all of St. Louis’s past sports subsidy deals. (Possibly not the original Rams deal, though if they’d known that it would allow the team to move away by claiming their two-decade-old stadium was no longer “state of the art,” they might have balked at that, too.) And voters didn’t get to vote because the city council just up and decreed that they wouldn’t be allowed to, despite that 2002 referendum, so it’s tough to see how this is a sign of increased political resistance.

“So the hockey team got its way. Things like that still happen. But they don’t happen easily, and they don’t happen with broad public support. Several years ago, for instance, when the NFL’s Minnesota Vikings wanted a publicly funded stadium, the state legislature rejected the proposal. Eventually the team got its money, but with a state law capping public contributions to the $1 billion project at $498 million.”

OMG, the Vikings owners actually had to ask for stadium subsidies multiple times! And then they had to settle for a mere half-billion dollars in cash, except counting tax breaks and other hidden goodies it’s actually costing taxpayers more like $1.1 billion, so, uh.

In the end, the Governing article isn’t a terrible one, and it does touch on a lot of details of the stadium scam that Governing likely wouldn’t have been caught dead discussing 20 years ago. (Now there’s some progress.) But if the takeaway is that the general public loved sports stadium plans, but now have realized they were duped, that’s not the story at all: Actually it’s been a battle from the beginning between team owners trying to extract as much public money as possible, and taxpayers and some of their local representatives trying to push back. And while maybe a few more elected officials are pushing back harder, there’s pushback against the pushback, too. So this whole mess isn’t ending anytime soon, much as I wish it were so I could retire this blog and go back to treating sports as the purely apolitical, fun pastime that it never really was.

Flyers to spend $250m of own money (we hope) on arena renovations

Here’s one data point for Roger Noll’s optimistic view of the sports subsidy future: Comcast Spectacor, the cable TV giant that owns the Philadelphia Flyers, has announced it will spend $250 million on renovations to the team’s arena, because building a whole new one would have cost $750 million:

The bulk of the upgrade will come over the next three summers, with about 21,500 seats being replaced so as to not disrupt Flyers and Sixers games. Concerts will continue through the construction…

First up for the upgrade: the mezzanine (200 level) this summer. Here, Comcast Spectacor will carve out two lounges by tearing out cinder block walls on the southeast and northeast corners, adding about 7,000 square feet for fans to drink and talk. Both were “void spaces” without public access, and one has served as the employee gym for years.

“Folks want a more social experience when they go to the game,” Phil Weinberg, executive vice president and general counsel at Comcast Spectacor, said. “They want to get up and go back and text and show photos. They want it more open.”

Assuming that there are no public subsidy demands involved, this is all as it should be, at least if your notion of “as it should be” includes a sports business model where you spend more money to renovate a 22-year-old arena than it cost to build it in the first place. If the Flyers think they can make more money by investing in renovations that will boost revenues, more power to them.

Of course, given that the Atlanta Hawks, Charlotte Hornets, Cleveland Cavaliers, Indiana Pacers, Florida Panthers, and Tampa Bay Lightning have all gotten public money to pay for arena renovations in recent years, either Comcast Spectacor has decided not to demand the same out of the goodness of their hearts (pause for Comcast customers to laugh bitterly here), has decided that they wouldn’t be able to talk Philadelphia or Pennsylvania elected officials into giving them public cash, or are just starting with their best foot forward (we’re spending $250 million on arena upgrades!) before dropping the other shoe (we’re spending $250 million on arena upgrades for you, the people of Philadelphia, wouldn’t it be only fair if you’d help us?). I have zero inside information as to which is the case, but we should all be watching closely.

MLS picks four expansion finalists, only two (or three!) will win the prize

Major League Soccer announced four finalist cities for expansion franchises yesterday, and the results are both unsurprising and kind of intriguing, for reasons I’ll get to in a minute. The four remaining contenders:

These are the four frontrunners predicted by Soccer Stadium Digest last week, so no shockers there. It’s an interesting mix of candidates, though: two with stadium plans in place, one with strong fan support but a funding gap, and one with a prominent ownership group but only an NFL stadium to play in, which the league has said previously it would consider, but it seems kind of suboptimal if your goal is to extract as many new stadiums as possible. Only two winners will be chosen later this month (December 14 will reportedly be the vote), so one would think that this will come down to Sacramento and Nashville, with Cincinnati and Detroit getting a “thanks for your efforts, try again next year once your stadium plans are more firmed up.”

Unless MLS could actually pick three winners. Because don’t forget, David Beckham’s previously announced franchise still doesn’t have a home, and his stadium partner Tim Leiweke told the Toronto Star on Tuesday that he’s not super optimistic:

“I’m helping any way I can with David,” Leiweke told the Sun. “I hope it gets done, but it’s not done. I have my fears as to whether it’s going to get done because things like this that drag on this long that’s always tough on a process. But for David I hope he lands somewhere.”

So, Cincinnati and Detroit could be in there as fallbacks in case MLS needs a last-minute sub for Miami. Or, Leiweke could just be saying this as leverage to get the final hurdles cleared for a Miami stadium, and this really is still a four-to-get-two situation. In which case the final verdict will say a lot about MLS’s business model: If it’s Sacramento and Nashville, we know that anybody with a $150 million check and a soccer-only stadium deal will get the nod; if it’s Sacramento and Cincinnati, we know that MLS is looking to where there’s the most established fan support; and if Detroit is involved at all it’s either because of the allure of a more major media market, or the allure of some big-money owners who can increase the league’s ties to the NBA, or who knows.

A lot is likely to depend on how things play out the next two weeks in Cincinnati, where both the city council and the county commission approved $50 million in public stadium subsidies yesterday, but still nobody’s saying how that additional $25 million would be paid for. (Or even what the total stadium cost would be; the gap could end more than that.) And also in Nashville, where the group Save Our Fairgrounds filed suit yesterday to block construction of a new stadium at Fairgrounds Nashville. Maybe hedging with four finalists isn’t a bad idea, in other words, but picking a final two (or three) two weeks from now is going to be anything but an easy task — I guess asking the four bidders to throw money on the table until two have emptied their pockets would be too unseemly?

Friday roundup: Too much nonsense to fit in one headline

On a super-tight schedule this morning, so super-quick lightning round:

  • A judge in El Paso has confirmed that its new arena can only be used for concerts, not sports, because that’s the way their wrote the bond proposal for voters. Copy editors are important!
  • North Carolina withdrew a plan to explore whether to sell a bunch of government building in Raleigh and give the land to a new MLS soccer franchise because it would be “premature,” whatever that means, but it sure doesn’t sound like a ringing endorsement.
  • At a panel on whether Calgary should give a ton of money to the Flames, National Post columnist Jen Gerson asserted that while Edmonton may have been suckered into funding an arena for the Oilers, “we’re just not that pathetic, as a city.” I really really hope that “How pathetic can we be?” becomes somebody’s campaign slogan in the upcoming mayoral election.
  • Nashville councilmember Jeremy Elrod is questioning the city’s plan to include a private development on public land as part of a soccer stadium project, noting, “I thought we were building an MLS stadium out of wanting to get a team here and not necessarily to help the team owners make more money.” Ah, but wanting to help the team owners make more money is always the reason why they demand stadium subsidies. I’ve got a whole book you can read about that if you want, Councilmember Elrod.
  • Inglewood Mayor James Butts is surprised and steamed that Madison Square Garden, which owns the Forum and rehabbed it as a concert venue, is fighting against Los Angeles Clippers owner Steve Ballmer’s proposed arena because it would compete with theirs. Somebody doesn’t know his history.
  • Russia is ensuring that a new stadium in Ekaterinburg is big enough for World Cup games by building extra seats outside the stadium.
  • Phoenix is selling off its Sheraton hotel for $255 million (great!), $50 million less than the city owes on it (not great, but better than continuing to only get a thin trickle of revenue from it), and will also give the buyer $97 million in tax breaks and $13 million in cash to use for renovations (hey now…) If the city now turns around and spends the money on a Suns arena, this will be the trifecta of badness.
  • The Washington Nationals are again fighting with D.C. officials over who’ll pay for added late-night train service to postseason games, as this is what happens every time the Nats make the playoffs, at least for the couple of days before they’re elminated again.
  • The San Francisco 49ers keep hosting concerts at their Santa Clara stadium that blow past the 10 pm curfew, and it turns out the $1,000 fine per infraction isn’t much of a deterrent. Never could have seen that one coming.

San Antonio Triple-A team threatens to leave without new stadium, two years before moving in

I tend to leave minor-league stadium shenanigans for the Friday roundups, but it’s not every day that a local elected official declares that a stadium named for his own dad is obsolete and needs to be replaced in order to keep its team from leaving town:

When the San Antonio Missions start playing Triple-A baseball in 2019, it’s still unclear if Wolff Stadium will be the team’s long-term home.

“What I worry about is that after they’re here for a year and playing in a Double-A stadium, is when the ownership group comes back to the city and the county and says, ‘Hey, look, if we don’t get a Triple-A stadium, we are going to have to move,'” said Bexar County Precinct 3 Commissioner Kevin Wolff.

The stadium was named for Wolff’s father, County Judge Nelson Wolff.

Let’s back up for a second. Wolff Stadium was built all the way back in 1994 — that’s a different century! — and renovated in 2006, as part of a deal that saw the Double-A Missions take over operations of the ballpark. The county still owns it, though, so Kevin Wolff is presumably suggesting that the public should take on the cost of expanding or replacing the 9,200-seat facility to keep the team happy. (The team’s owners have already released a statement declaring the unthinkably 23-year-old stadium to be “not the long-term answer for Triple-A baseball in San Antonio.”)

Wolff indicated that Wolff Stadium needs an extra 1,000 seats to be considered Triple-A compliant, but that’s not exactly true: While 10,000 is the “recommended” minimum seating capacity, six stadiums in the Pacific Coast League hold fewer fans than San Antonio’s does currently.

In any event, San Antonio just got awarded Triple-A baseball in late June — after major-league teams decided that it was too hard to evaluate young players in the thin air of Colorado Springs — so you’d think two years before the team even moves in would be a bit early to start levying threats to relocate, but clearly not. Here’s hoping that Bexar County officials come back with “You’re welcome to pay for it yourself, and if not we’re fine with going back to Double-A ball,” or at the very least, “Quit saying mean things about the stadium named for my dad.”

Cincy mulls convention center redo to lure new visitors, since that worked so well last time

Cincinnati tourism officials are pressing for a major renovation of the city’s Duke Energy Convention Center, and construction of a big new hotel next door, arguing that the city would otherwise see a big drop in visitors. Mike Latsch of the Cincinnati Convention & Visitors Bureau says without the project, the city could lose 100,000 annual hotel room nights by 2022.

But the last time the city expanded the convention center, it literally had to scrape up the $140 million cost, using naming rights from Duke Energy and millions in contributions from local corporations in addition to local hotel tax revenues. The 2006 expansion actually did little to boost the city’s convention business. And in the decade since, Cleveland opened a new center, Columbus expanded its center, and Indianapolis opened a major expansion, increasing competition for scarce convention dollars.

Now, any expansion plans will have to compete for hotel tax dollars against renovations to the US Bank Arena — proposed in order to ready the venue for hosting the NCAA men’s basketball tourney in 2022 — as well as plans for a new Major League Soccer stadium. All this in a city and county that have already managed to pour an immense amount of public money into stadiums.

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 mayor announces that Raiders stadium plan framework concept is mumble mumble something

Oakland Mayor Libby Schaaf announced a thing yesterday:

The mayor of Oakland announced that the city has reached a framework agreement with the Ronnie Lott group for a new stadium, with the hopes of keeping the Raiders in Oakland.

“It is exciting that we have reached a conceptual framework agreement with the Lott group,” said Mayor Libby Schaaf.

So what exactly would that be, a “framework agreement” with a developer to build a stadium for a football team that isn’t actually party to the agreement? Schaaf’s office hasn’t actually announced anything — and her press spokesperson didn’t respond to my queries — but NBC Bay Area’s Ray Ratto sums up the state of things as follows:

That stadium is considered by most experts, including Oakland mayor Libby Schaaf, to run in the neighborhood of $1 billion, with the city and county’s contribution limited to infrastructure improvements that are loosely estimated now at around $190 million, to be generated by some new tax or taxes as opposed to access to the general fund.

So: The city and county will put in maybe $190 million for infrastructure, which it will get from somewhere, while the developers will put in $1 billion, which it will earn back by charging the Raiders something. Or maybe getting an equity stake in the team. None of which has been worked out yet with team owner Mark Davis.

Maybe someone on the board of supervisors or city council, who would have to vote on this, can shed some light?

Alameda supervisors discussed the proposed deal behind closed doors Tuesday morning, but Supervisor Scott Haggerty, the president of the board, downplayed Schaaf’s comments that the county was close to voting on Lott’s proposal. Haggerty said the city has not released information supervisors have requested. He would not say what that information was.

Well, then. Maybe Schaaf and Lott have actually agreed on something, but if so, they aren’t saying what it is, and even then, it may not matter unless Davis agrees to have the Raiders play there. She got her name in the paper under “getting things done” headlines, though, so I suppose that’s a short holiday work week well spent if you’re a mayor.

Unapproved Braves vendors will still face arrest but maybe not jail, now quit your griping

The Cobb County Commission, having somewhat walked back plans to arrest anyone near the new Atlanta Braves stadium who offers parking spaces to Braves fans, is now backing away from restrictions on unapproved vendors around the stadium, too, saying they won’t necessarily face jail time:

Earlier this year, the county amended its anti-peddling ordinance to essentially grant an exemption for the Braves to control vending at the stadium and The Battery, a mixed-use development under construction next to SunTrust Park. It included what the county described as “standard misdemeanor language,” including fines and jail time for violators.

Following pushback, the county suspended the ordinance to remove references to specific penalties, effectively leaving the matter in the hands of the magistrate court.

Braves fans who want to buy peanuts for less than eight dollars, rejoice! Vendors will now be free to sell them to you and maybe escape jail time if they can talk a judge into a lesser penalty! That’ll be something to celebrate while running across the highway next year to watch the National League’s best last-place team.