David Uberti, who you will remember from his long, excellent article for Columbia Journalism Review on why sports stadium coverage sucks, has an even longer, equally excellent article up for the Guardian about why public stadium subsidies suck. (Yes, both articles quote me, but that’s not why they’re excellent. Not the only reason, anyway.) I’d quibble with a couple of points — yes, public funding of sports facilities took off in the 1950s, but since team owners actually paid rent back then, the actual public subsidies were far lower than today — but it’s overall a good overview with lots of useful numbers and examples: Go read it, I’ll wait here.
Lincoln arena losing money even after taxpayers cover construction costs, because most arenas are terrible ideas
I know this site is turning into Media Crit 101 some days, but 1) that is one of the things I do, and 2) the media coverage really deserves it lately. Like, try on for size the article from yesterday’s Lincoln Journal Star on Lincoln’s new arena (no pro teams present, just concerts and University of Nebraska basketball) that begins thusly:
Pinnacle Bank Arena has a mixed report financially for its first year.
And what’s the mix, exactly? The good: The restaurant, hotel, and car rental taxes that are going to pay off the arena bonds are coming in faster than expected so far. That’s reassuring in that not having enough money to pay off sports construction bonds can have dire consequences, but it’s not exactly a good financial report on the arena itself: It just means that people are renting more cars in Lincoln, which has nothing to do with the arena’s books per se.
And how are the arena’s books doing? That’s the bad news:
Run by a national management company under contract with the city, the arena did not meet its first year budget expectations, needing a $465,000 boost from the [West Haymarket Joint Public Agency] to break even.
The JPA already was providing $285,000 in pouring rights revenue — money beverage distributors pay to sell drinks at arena concession stands — to the city for arena operations, bringing total JPA contributions to $750,000 for the fiscal year…
In addition, the city gave the area a $500,000 cash advance, which it must repay by 2016.
So actually running the place is losing so much money that the city has had to kick in more than a million dollars just to keep it breaking even — and that’s even if you don’t count the cost of building the arena in the first place, which is being covered by taxes on all those restaurant-eaters and hotel-renters.
This is, frankly, not a “mixed” report, but a pretty dismal one. It’d really be nice if someday, someone other than me would lead off a story on an arena losing money hand over fist with a line like “The new arena is losing money hand over fist,” but I guess that’s not the kind of thing one says out loud in the polite society that is journalism.
If you’ve been staying up nights trying to understand how the latest Las Vegas MLS stadium financing plan works, you can probably stop, because it looks like the entire project just ground to a halt:
A proposed publicly subsidized soccer stadium in downtown Las Vegas appears doomed as Councilwoman Lois Tarkanian, the swing vote on the deal, said Thursday she would vote against the proposed financing plan if the council vote were held today…
“I don’t feel like spending a lot of taxpayer monies on it. People do want a stadium, but they don’t want the use of public money,” Tarkanian said.
There are still two weeks to go before the council’s October 1 vote on whether to kill the soccer plan dead, which means lots of time for proponents to see if they can get Tarkanian to pull a Michelle Spence-Jones and name her price for switching her vote. Given that “use of public money” is an integral part of the plan, though, it seems like Tarkanian has drawn a line in the sand that’s going to be hard to erase. Not impossible to erase, mind you, since it’s local elected officials we’re talking about here, but still I wouldn’t go investing in any Vegas MLS season-ticket futures just now.
The revised AECOM report on a proposed Las Vegas MLS stadium is out! And the answer to how it deals with that mysterious double-counting of $4 million in rent is that it just omits the entire $4 million from operating revenue, which it absolutely should, because it’s not. (It would go to pay the city’s construction debt.)
With the $4 million gone, the projected $1.7-2.8m in net operating income turns into … $2.4-3.5m in net operating income. Whaaaaaaa?
Here are the relevant tables from the original report (above) and revised report (below). Care to play One of These Things Is Not Like the Other?
First off, there’s a new $2.7 million a year item called “tenant reimbursement,” which further down is defined as:
We assume that the MLS team will pay a share of the facility’s overall expenses, based on its share of stadium usage (as a percent of total attendance). This line item represents a payment to the stadium from the team, and is assumed to be approximately $2.7 million per year.
I have no frickin’ clue what this is. (Nor do the Las Vegas Review-Journal or Sun, apparently, since neither mentions it in their coverage.) Is the MLS team suddenly agreeing to share more revenue than the $4 million a year in rent plus $500,000 a year in non-soccer revenue that was previously proposed? Would an MLS team make enough profit to afford all this? And if not, would the city have to cover any fees that would otherwise leave the team running losses, as was previously reported? Reply cloudy, ask again later.
All that’s still not enough to turn a profit for the city, though, so AECOM then lops off about $1 million a year in “management fees” (money that the city would pay the MLS team for running the stadium, because why would they run their own stadium for free, jeez?) and $800,000 a year towards a “capital maintenance account” (because why account for future maintenance costs now, when that will just make the numbers look bad).
So either the would-be Vegas MLS team is proposing to increase its contribution by $3.7 million a year (good!) or it’s juggling numbers around randomly to make sure that the economic analysis shows the city coming out ahead (less good!). Tomorrow’s public hearing is going to be some kind of fun.
Last night marked the first “town hall” meeting on Las Vegas’s beleaguered MLS stadium plan, and the economic consultant’s report that was supposed to be reissued by Friday to fix that $4 million a year typo … still is nowhere to be seen. What Vegas residents got instead is what the Las Vegas Review-Journal called a “pep talk” from city officials and soccer boosters about just how great a new stadium would be. Check out how the Las Vegas Sun described it:
City staff along with developer Justin Findlay, managing partner of Findlay Sports and Entertainment, fielded questions. They explained the stadium would be paid for using a combination of city room tax dollars and rent from the soccer team. If the team is successful and stays in the stadium for 30 years, the city’s share of the project costs would shrink to $82 million, 41 percent of the total.
City Manager Betsy Fretwell acknowledged that if the soccer team struggles and has to shut down, the city would be on the hook for the estimated $8 million annual bond payment. She downplayed the chances of that happening and said there would be time to fix problems if the team struggles to draw big enough crowds.
Not to tell Findlay and Fretwell what to do, but “If the team does well we’ll only lose $82 million, and if it does poorly we’ll be on the hook for much more — but don’t worry, we’re sure it’ll all be great!” isn’t much of a pep talk in my book. But there are five more public meetings to go in the next nine days, so they have plenty of time to work on their material.
Meanwhile, the Review-Journal reports that the AECOM consulting report is due to be discussed at today’s city council meeting, so maybe we’ll actually get some answers then about how the consultants managed to double-count the proposed MLS team’s rent, once as arena bond payments, once as city operating revenue. Stay tuned.
How to soft-pedal affronts to democracy, New York Times edition:
Tim Lee, the Cobb County chairman who steered negotiations with the [Atlanta] Braves, said Tuesday a vote had been considered for the 700,000 residents of a county historically cautious about government spending. Ultimately, there was no referendum, just an agreement that the county chip in about 45 percent of the actual construction cost, with the Braves picking up the rest.
Not mentioned in this story of a county considering a referendum but “ultimately” having one quashed by the passive voice: The Cobb commissioner who said that a referendum on a $300 million stadium subsidy would be too expensive because it would “cost taxpayers 300, 400 thousand dollars.” Not to mention the part where any public agitation for a referendum was avoided by having county commissioners hide in hallways so that the deal could be announced just two weeks before the commission’s vote. The Times really should have gone with one of the alternate slogans.
With the vote coming up on whether to withdraw Oslo’s 2022 Olympic bid — because, really, who among us is not transfixed by the Norwegian legislative calendar? — I take a look today for Vice Sports at why cities keep bidding on the Games, despite overwhelming evidence that they are a multi-billion-dollar money suck. Because while a bunch of cities have pulled out of the 2022 bidding for holy-crap-that’s-a-lot-of-money reasons (Krakow, Stockholm, Munich), and some have already done likewise for the 2024 Summer Games (Philadelphia, New York), there are still a ton of cities still eagerly in the running, even if “running” doesn’t necessarily describe their efforts at this early date in the 2024 bid process:
In the U.S. alone, we have Los Angeles, whose bid revolves around rehabbing the 82-year-old L.A. Coliseum into a “state-of-the-art” facility; San Francisco, which has a glowing recommendation letter from Mayor Ed Lee and little else in actual specifics; Boston, which is trying to sell the IOC on a “New England Olympics” with events stretching as far as Maine; and Washington, D.C., the only bid that includes an initial price tag — $4 to 6 billion—and whose website offers a helpful graphic that lists “things you didn’t know about the capital region.” (Sample: “175 embassies.” I think I could have guessed that one.)
(And yes, that $4-6 billion would probably include a stadium that would probably end up hosting Washington’s football team when it was all over. Also, would probably end up being more like $7-10 billion, given past performance.)
There does appear to be a mild trend toward pushback among cities, which shouldn’t be surprising after the last Olympics cost an estimated $50 billion. The problem is, there are a hell of a lot of cities in the world that think they can host the Olympics — especially the summer version, which doesn’t even require a particular climate — and only one winner chosen every two years. With that big a discrepancy between supply and demand, the IOC can demand a hell of a lot of velodromes.
AECOM, the architecture and engineering firm that presented that disputed Las Vegas MLS stadium economic projection, has spoken! Not to the press, but to city officials, and their explanation for why their report appears to have double-counted $4 million a year in rent payments is a doozy:
AECOM explained the problem that [city councilmember Bob] Beers raised by sending a letter to City Manager Betsy Fretwell saying the company mistakenly forwarded portions of a previous draft of the feasibility study to city officials, according to Las Vegas spokesman David Riggleman. Fretwell then informed City Council members of the mistake, he said.
“They blended tables and data from earlier in the process. They will send us the corrected version,” Riggleman said. The city expects the correct feasibility study from AECOM later this week, Riggleman said.
This is pretty incredible: Apparently AECOM is saying that when it included $4 million in annual rent payments as part of the stadium’s benefits, even though it was already committed to pay off the city’s bond payments, that was something copied from the wrong version of the file. You know, the kind of error that anyone could make — the kind that represents almost half of the entire revenue projected from the stadium, and which when corrected would turn a $2 million a year city profit into a $2 million a year city loss. A little oopsie.
(The other possibility, of course, is that AECOM isn’t saying that the $4 million a year is in error, which means they still haven’t explained what it’s doing in there. I can’t wait to do a Compare Documents on the original and corrected versions of this report.)
No word, meanwhile, from the would-be stadium developers, Cordish Cos. and Findlay Sports, that hired AECOM (and in Findlay’s case, that gave a completely different explanation for the mystery of the $4 million yesterday that turned out, apparently, to be complete gibberish). If you’re in Vegas, though, you’re in luck, because starting next Tuesday, Cordish and Findlay representatives will be at a series of town hall meetings to take your questions, which may or may not include “What were you smoking when you decided to hire an engineering firm to draw up an economic impact study?”
Tuesday, Sept. 16 at 6:30 p.m. at Centennial Hills Community Center, 6601 N. Buffalo Drive
Wednesday, Sept. 17 at 6:30 p.m. at Doolitle Community Center, 1950 N. J. Street
Thursday, Sept. 18 at 6:30 p.m. at Rogich Middle School, 235 Pavilion Center Drive
Tuesday, Sept. 23 at 6:30 p.m. at Durango Hills Community Center, 3521 N. Durango Drive
Wednesday, Sept. 24 at 6:30 p.m. at City Hall Council Chambers, 495 S. Main Street
Thursday, Sept. 25 at 6:30 p.m. at the Development Services Center, 333. N. Rancho Drive
For those not in Vegas, there are a bunch of online options, but it doesn’t look like Cordish or Findlay reps will be there:
From Sept. 11 through Oct. 1, residents can share their thoughts in an online town hall called Crowd Hall. It will be available at https://crowdhall.com/h/303/
Las Vegas City Manager Betsy Fretwell will hold a Twitter chat on Sept. 18, beginning at 4 p.m. Use #stadiumchat to share feedback. Follow Betsy Fretwell on Twitter @BetsyFretwell
Las Vegas Mayor Carolyn Goodman will hold a Twitter chat on Sept. 22 at 8 a.m. Use #stadiumchat to share feedback and follow the mayor on Twitter @MayorofLasVegas
The city will host a Google Hangout on Sept. 30 at 11 a.m. Use #stadiumhangout to ask questions. Follow the city of Las Vegas on Google+ at google.com/+cityoflasvegas
Vegas MLS developer: We’re not double-counting rent, we’re single-counting imaginary non-soccer revenues
One of the would-be soccer stadium developers in Las Vegas has responded to Las Vegas councilmember Bob Beers’ claim that a report on the proposed stadium double-counted rent payments from the team. According to the Las Vegas Review-Journal:
Justin Findlay, managing partner of Findlay Sports & Entertainment, addressed Beers’ concerns this way: The stadium’s expenses do not include the required $3.5 million in annual rent because it’s the team and not the stadium that will pay the rent.
And the stadium’s annual “rent” revenues of $4.4 million listed in the feasibility study do not include the $3.5 million rent payment to the city because that line item refers to the rent revenue generated from non-soccer games like football games and other events staged at the stadium.
So the roughly $4 million rent in the report isn’t the actual roughly $4 million rent that the team would pay towards construction bonds; it’s the $4 million in “rent” that the city would earn from non-MLS events at the stadium.
Which all makes sense, except that the Review-Journal previously spelled out that $4 million is the total of team rent payments plus non-MLS revenues:
The term sheet said the bonds issued by the city will be repaid from three sources — the private partners paying $3.5 million annually in team rent; the partners contributing annual non-soccer revenue of $500,000 in year one through year 10, and then $1.5 million annually in years 11-30; and the city contributing $3 million a year in room tax revenue distributed to the city from the Las Vegas Convention and Visitors Authority.
Maybe Findlay means that the first $500,000 in non-soccer profits will go to pay off the bonds, and the next $4 million will go toward the city’s operating budget? Except that there’s no reason to believe that non-soccer events will generate $4.5 million a year in profits (or even $500,000, really). Plus the term sheet doesn’t say anything about the team paying anything extra in rent over the first $500,000 a year.
The latest Review-Journal article notes: “This is a developing story. Check back for updates.” I hope answering this question can be one of them.
[UPDATE: At 12:21 pm Vegas time, Alan Snel's Review-Journal article was edited to remove Findlay's quote, presumably because it doesn't make a damn bit of sense. The article now notes that "it’s unclear why the stadium revenues would include the $3.5 million in rent when the proposed stadium deal calls for the $3.5 million in rent to be paid to the city to help pay off the bond debt" and says "the Las Vegas Review-Journal has contacted representatives from the city, Cordish and Findlay for an explanation Tuesday and is waiting for a response."]
Would-be Las Vegas soccer stadium developers Cordish Cos. and Findlay Sports & Entertainment have released a feasibility study on the proposed $200 million project … several days after the Las Vegas council was set to vote on the plan. (The council ended up putting it off until October.) Also, the study was dated August 20, which raised some eyebrows on the already eyebrow-raised council:
“Cordish didn’t turn it over to us. The question is why didn’t they?” a frustrated [councilmember Bob] Coffin said of the delay…
City spokesman David Riggleman said the feasibility report was dated Aug. 20, but was received by Mayor Carolyn Goodman and the other six council members on Sunday because Cordish spent all that time scrubbing proprietary information.
Port Telles, development director of The Cordish Cos., said he could not comment because of company policy.
I cannot tell you how much I really really hope this becomes a thing: “I’m sorry, officer, I can’t comment on whether I’ve been drinking. Company policy.” “I wish I could tell you whether I saw that video, but I can’t. Company policy.” Quick, somebody start a cat meme.
Anyway, here’s the study itself, and if you don’t feel like reading all 103 pages, here’s councilmember Bob Beers’ analysis of it, which is pretty long itself. The most damning piece of Beers’ analysis is that the report includes $4 million or so in annual rent payments by the team as part of the stadium’s operating budget (resulting in a roughly $2 million a year projected profit) — though those same rent payments are also being earmarked for repaying part of the city’s stadium construction bonds.
The pro-forma proposes to spend the same $4-million per year two times, once (shown on the pro-forma) for operating expense and profit, and a second time (not shown on the pro-forma) for debt repayment.
I’ve emailed Cordish asking what’s what, but I’m guessing I won’t hear back, what with the company policy and all.