Yes, Arlington would pay for more than 50% of Rangers stadium, but not because of ticket tax

So I was sitting around yesterday, waiting for NHL commissioner Gary Bettman to go on TV and announce the new Las Vegas expansion franchise, when this story from WFAA-TV in Dallas about the new $1 billion Texas Rangers stadium plans suddenly blew up all over the Twitterverse:

City of Arlington officials have touted a “50-50” private-public partnership to build a proposed $1 billion retractable roof stadium for the Texas Rangers.

A WFAA-TV investigation, however, has found taxpayers may instead pick up to 80 percent of the tab, which amounts to hundreds of millions of dollars more than initially promised by city leaders…

Tucked in the agreement is a clause called the “admissions and parking tax” that allows for a 10 percent surcharge on event tickets and up to $3 additional surcharge on parking. State law allows cities to collect and use the taxes to build their stadiums. Arlington’s agreement, however, allows the Rangers to use the admissions and parking tax revenues to help pay their half of the construction costs.

“If it really is a tax and could be used by the municipality, then in essence it’s just transferring revenue from the public sector to the private sector,” said Rick Eckstein, a Villanova University professor who studies sports stadium economics.

“There’s a sleight of hand here. There’s verbal gymnastics going on,” Eckstein added. “It’s relatively unprecedented in terms of stadiums I’ve studied over the last 20 years.”

Not to disagree too strongly with Eckstein (co-author of one of the best stadium books out there), especially since he’s right that tax money is fungible and shifting it from public to private pockets amounts to siphoning it off from the public treasury. But these particular tax surcharges are kind of special, to the point where we arguably shouldn’t consider them an additional public subsidy.

What it comes down to is the difference between existing taxes and tax surcharges, especially on items that are under the monopoly control of team owners. Think of it this way: When a sports team owner sets ticket prices, they do so with an eye toward maximizing the amount of total revenue they’ll bring in — basically, they set prices as high as the market will bear without driving fans to stay home and watch on TV. (Technically we’re talking net revenue rather than gross revenue here, but since the marginal cost of selling an additional ticket is close to zero — you might have to hire an additional tiny fraction of a hot dog vendor, but the players are all being paid to play regardless — we can ignore it for our purposes.) That means if that break point is $50, they’ll charge $50 — regardless of whether that’s $50 they get to put in their pocket or $45 in actual ticket value plus a $5 surcharge.

A similar effect is at work regarding parking, which is why most economists consider surcharges like these to come out of the owners’ pockets, even though they’re technically taxes. The owners could accomplish the same thing just by “taxing” themselves, in other words, though there are likely some tax benefits they get from paying this via the tax system rather than voluntarily out of their own pockets.

There are additional problems with the WFAA analysis, starting with the fact that the station’s reporters estimated $300 million in admissions and parking surcharges over 30 years, and added that on to the city’s existing $500 million obligation — but $300 million over 30 years doesn’t cost $300 million now, but rather more like half that in present value. (It’s like figuring a house mortgage: You count how much you need to borrow from the bank now, you don’t add up all your mortgage payments into the future.) So we’re already down to $650 million, and much of that $150 million added cost would really come out of the Rangers owners’ pockets, so really this is much ado about not all that much.

Which isn’t to say that the proposed Rangers stadium doesn’t have hidden costs: It has tons of them, from about $15 million in future rent rebates to free land and property tax breaks for parking lots to the city being on the hook for any of the Rangers’ share of bonds if team revenues fell short of covering them. Whether this gets the public share up as high as 80%, I couldn’t tell you, but it’s worth investigating. Get to it, WFAA investigative team!

San Diego put down sharp rocks to keep homeless from sleeping near All-Star Game

When San Diego city officials installed jagged rocks under a highway overpass near the Padres‘ Petco Park in April to prevent homeless people from sleeping there, many locals assumed it was an attempt to clear out homeless in advance of July’s MLB All-Star Game. City officials countered that the rocks were there at the request of local residents. The news site Voice of San Diego filed a public-records request to find out the truth, and duh, it was all about the All-Star Game:

Sherman Heights is never mentioned in dozens of emails exchanged between city staffers discussing the rock installation. Rather, the rocks were part of a larger effort to clean up the area prior to the July 12 All-Star Game and improve the flow of traffic to and from Petco Park. Early plans, emails show, called for rocks not only along Imperial Avenue, but also along two blocks of a wall lining Petco Park’s Tailgate Park as well as outside the New Central Library, all in an effort to deter camping and loitering near the ballpark during All-Star Game festivities…

John Casey, the city’s liaison with the Padres until March, took the lead on getting price quotes for the rocks. In multiple emails, he urged city staff to move the project along. “Any breakthroughs?” he wrote in a November email. “The Padres and SDPD are asking me when we can see the curbs painted red as well as the rocks at the underpass and Tailgate Park wall.”

In early January, Casey emailed City Traffic Engineer Linda Marabian and laid out a checklist of remaining work to be done before the All-Star Game.

“Back to the vision of Imperial as a Gateway to East Village,” he wrote. “The wrought iron fence has been installed on the wall at Tailgate Park and works well at discouraging loiterers. Remaining work in anticipation of the All Star game is: Rip Rap rocks under the I-5 overpass at Imperial on both sides of the street. Rip Rap rocks at the base of the Tailgate Park wall from 12th to 14th.”

The VoSD didn’t report on where the homeless went who have been displaced from their camp under the overpass. Wherever it is, one hopes that they appreciate it as one of the ancillary benefits of their city getting to host an All-Star Game.

Braves stadium deal may not be worst ever, but that’s grading on a pretty steep curve

In my latest for Vice Sports, I take a look at the ever-sadder Atlanta Braves stadium mess, and ask whether it’s the worst stadium deal ever. Fans of Betteridge’s Law, let alone regular readers of this site, will know how that turns out, but suffice to say it’s an honor for them even to be part of the conversation. Not an honor in the good sense, mind you, but there’s no such thing as bad publicity, right?

Anyway, it also features amusing observations from Victor Matheson and J.C. Bradbury, so go read it now!

Tim Lee steamed at reports he siphoned off parks money for Braves stadium (but yeah, he sure did)

Cobb County Commission chair Tim Lee has spoken out about yesterday’s report that the commission diverted money from a public parks project approved by voters to the Atlanta Braves stadium deal, saying it’s all a load of hooey:

“Contrary to several unsourced and wholly fictitious news articles, Cobb County didn’t choose the Braves stadium over buying green space and it won’t need to raise taxes to do so,” Lee said, in a statement. “We have cut taxes for three straight years in Cobb County because we’ve focused on policies that promote economic growth — and they’ve worked.”

I went back to the original Atlanta Journal Constitution article detailing the parks bond controversy, and checked in with its author Dan Klepal as well, and I’m comfortable saying that Lee’s statement is a case of he who smelt hooey dealt it. The story is a bit complicated, but it goes something like this:

  • In 2006, Cobb County voters approved a property tax hike to pay for $40 million in bonds for public parkland. The tax was raised, and the parks were bought.
  • Two years later, Cobb County voters approved another $40 million in park bonds, to be funded by the same property tax surcharge. Cobb County Commission’s then-chair Sam Olens, however, never issued the bonds, because he worried the tax hike would have to be extended to pay for it.
  • In 2013, Lee and his fellow commissioners, needing money to shovel at the Braves for their new stadium, realized that the 2006 park bonds would be paid off in 2017, and that property tax hike cash would just be sitting there for the taking. So he took it, extending the tax surcharge for another 30 years, just like Olens didn’t want to do, but taking the money away from the parks budget, just like Cobb voters didn’t want him to do.

Lee now says he can come up with about half the money to pay for the voter-approved parks purchase without raising taxes, which I guess he sees as justifying the statement that “Cobb County didn’t choose the Braves stadium over buying green space.” (We can do both! If you don’t mind the green space being a bit less, uh, spacious.) But as far as taking a tax hike that was approved in order to fund public parks and instead funneling it into a private baseball stadium, yeah, he totally did that. You’d think he’d at least have the courage to wear it with pride, but politicians on the verge of getting voted out of office will do some desperate things.

Rangers stadium to cost Arlington well over $500m, local paper more concerned about its code name

The Dallas Morning News has published a “six things you didn’t know” listicle about the proposed new $1 billion Texas Rangers stadium, most of which are more “six things you didn’t care about.” (Its secret code name, really?) Item #1, though, could be a moderately big deal:

The city announced that the Rangers would continue paying $2 million rent annually under this new agreement. But after the baseball stadium bonds are paid off, the $2 million annual rent would be diverted to pay for stadium improvements. Rangers had originally wanted that cutoff point to be 11 years or when the bonds were paid, whichever came first.

How much is this worth, potentially? Let’s say the bonds are paid off in 10 years, and the Rangers stay at their new stadium for another 20. That’d bring the rent rebates (which is what they are) to a net present value of $15 million, which, okay, when you’re already giving the team owners $500 million isn’t a huge difference, but money is money.

Add in the city’s costs from providing free (and property-tax-free) parking lots for the new stadium, plus possible costs from any shortfall in revenues that the Rangers would use to pay off their own share of stadium bonds (which will actually be sold by the city, presumably to get around paying income tax on things like naming rights and PSL sales), and the projected public cost is headed well north of half a billion dollars, though how far north is hard to say. When I have more time I’ll dig through the fine print of the stadium agreement to see if there’s anything in there to help clarify things; if you want to do the same, you can now find it here.

Cobb County spent all its money on Braves stadium, doesn’t have enough left for public parks

In 2008, voters in Cobb County, Georgia, approved a $40 million bond issue to acquire and build new public parks. The money still hasn’t been spent yet, though, because at first it was delayed by the Great Recession (are we still calling it that?) and now by certain other spending priorities:

County officials say only $20 million will be available to buy park land.

Many of those public speakers at the commissioners’ meetings have wondered why the full amount could not be made available through the debt service fund, requiring no tax increase, since the commissioners were able to fund nearly $400 million for the Atlanta Braves to move to Cobb…

Commission Chairman Tim Lee has said a tax increase would now be needed to pay for the $40 million Park Bond 2008.

This guy is really trying hard to lose the election, isn’t he?

It’s worthwhile to note that this isn’t just a case of the county spending general revenue on the stadium and having none left over for parks, which would be bad enough; rather, the county actually redirected tax revenue that had been earmarked for public parks to pay for the stadium bonds, even though the park project was approved by voters, and the stadium never was. I’d say something snarky here about Cobb County’s attitude toward democracy, but Lee has already managed that quite nicely himself.

No, the Nationals stadium isn’t a success just because business tax receipts are up, sheesh

Of all the examples of economic innumeracy that are brought to bear around stadium deals, confusing tax revenue raised for a project and tax revenue raised by a project is one of the most common. You’d think the concept would be simple enough: If you raise sales taxes, say, and they come in faster (or slower) than expected, that doesn’t make whatever you do with those sales taxes any better or worse of a deal, whether it’s building a stadium or setting the bills on fire to see if the Secret Service arrests you.

In his Washington Times column on Tuesday, sports columnist Thom Loverro starts out almost getting it right, declaring that thanks to the business tax, ticket taxes, and ballpark sales taxes on the Nationals stadium coming in faster than expected, “if city officials wanted to, they could pay off the 30-year mortgage on the $691 million ballpark — a $585 million debt now down to $395 million — 10 years early.” Then he wrote:

The cries of financial ruin and tax nightmares that ballpark opponents carried at the time into the debate against paying for the new ballpark ring hollow now, as the city’s coffers are overflowing with ballpark revenue.

I don’t actually recall anyone predicting financial ruin as the result of tax revenues falling short — and, besides, they easily could have, if the Washington economy had zigged instead of zagged. But, yes, better for the money you expected to arrive to actually arrive, instead of ending up with an e-pulltab fiasco that requires additional taxes to make up the shortfall. “Overflowing with ballpark revenue” isn’t quite accurate, but surely Loverro doesn’t literally mean—

The ballpark has been a gold mine for the city

Okay, that’s just plain wrong — or at least, plain wrong if all you’re doing is describing tax receipts. Let’s examine why:

  • By far the biggest portion of the Nats stadium debt — more than half the public total — is being paid off by that tax on large D.C. businesses. D.C.’s local economy is booming, and that’s good! But that’s still money that, if the tax surcharge had been passed for any other purpose, could be going to pay for something else — the fact that D.C. is collecting money faster to turn over to the Nationals isn’t a plus.
  • Increased in-stadium sales taxes are generated by actual stadium business, so this is a plus. It’s not as big a plus as stadium proponents would like you to believe, though, as some of that money would have been spent in D.C. anyway — so if Nats fans are spending more on hot dogs, that generates more sales taxes at the stadium, but less sales taxes wherever they would be eating if they weren’t at the game.
  • The new ticket tax surcharge is completely new, so more money there actually is coming from the team, yay! That’s also by far the smallest share of the money, though, less than 10%, so less yay.

In short, this is all good enough news, but doesn’t say squat about whether the stadium has been a fiscal success for D.C. — we have no idea whether tax revenue is up as a result of the stadium, just that tax revenue is up, period, so with more money sloshing around, there’s more to hand over to the Nationals more quickly. An equally accurate headline would have been “D.C. spending more money on Nationals Park debt each year than anticipated,” but that would have sounded like more of a downer.

I don’t entirely blame Loverro: It’s clear that this story was entirely prompted by D.C. councilmember Jack Evans (he’s the only person quoted in it, and the only source for the tax revenue figures), who never met a stadium deal he didn’t like, so would presumably be putting a positive spin on the Nats deal even if it had to be funded by selling public monuments. (“Who really visits the Jefferson Memorial anyway, amirite?”) It’s still a grossly misleading article, though, plus a single-source story where the source has a vested interest in making the project look good to make himself look good, so, yeah. Bad columnist, no donut.

Rays still have no idea where they want to build stadium, how to pay for it

Tampa Bay Rays execs met with Hillsborough County and city of Tampa officials yesterday to discuss possible stadium sites, and boy, did they discuss a lot of them:

They spent nearly two hours going over nine sites both inside and outside the Tampa city limits — seven presented by the Hillsborough group, two more by the Rays…

Afterward, the Rays would not discuss any of the sites. Elected officials confirmed only a partial list: the Tampa Park Apartments site near downtown, the Jefferson High School site in West Shore, docks near Ybor City now used by International Ship Repair, the Florida State Fairgrounds east of the city and the Heights property just north of Interstate 275.

Not all these sites are necessarily available — the developer of the Heights site, for example, told the Tampa Bay Times, “we’re excited about [our] project; it doesn’t include a baseball stadium” — but they’re throwing them all into the hopper regardless. Rays president Brian Auld said the team will sit down with Pinellas County officials at a later date to identify possible sites on the other side of the bay.

All this is fine enough due diligence, and a necessary first step if the Rays want to determine where a stadium could go, and more important, how much it might cost. Buried way, way down at the bottom of the TB Times piece is this snippet on funding of any new stadium, wherever it might end up:

Based on where a stadium was built, officials have said there could be up to 10 different sources of funding. Along with money from the team, those could include property taxes earmarked for community redevelopment in areas like downtown Tampa, rental car surcharges, some hotel bed taxes, money authorized by the Legislature, ticket user fees and foreign investment available through the federal government’s EB-5 visa program.

In other words, “We don’t know yet where a stadium might go, or how to pay for it.” For all the kerfuffle over St. Petersburg not letting the Rays out of their lease until recently, these are still the main issues keeping the team from building a new stadium, and they’re not going to resolved easily or, it looks like, soon. Stay tuned.

Cobb County Commission chair could be ousted over Braves stadium subsidies

So far the list of politicians booted out of office for throwing money at stadium subsidies has been a relatively short one, consisting of Wisconsin state senator George Petak, who was recalled by voters in 1996 for casting the deciding vote for public money for a new Milwaukee Brewers stadium, plus arguably Miami-Dade County Mayor Carlos Alvarez, who was recalled by voters in 2011 after he fought for public money for a new Miami Marlins stadium, though he was recalled for other reasons as well. (The list of mayors booted for not throwing money at stadiums is even shorter, namely zero.) They may need to make room soon, however, for Cobb County Commission chair Tim Lee, who is now facing a July runoff against an opponent who has been using Lee’s support of public funding for a new Atlanta Braves stadium as a key campaign push:

Chairman Tim Lee barely made it into a runoff against Mike Boyce, a retired Marine colonel who outpolled Lee by clobbering the county’s stadium deal with the Atlanta Braves…

“I simply asked the question: If I can vote on a $40 million park bond, why can’t I vote on a $350 million stadium bond?” said Boyce in an interview Tuesday night as the runoff scenario was emerging.

Lee, you will remember, didn’t only approve $355 million or more in county spending on that Braves stadium without a public vote, he also got brought up on ethics charges for hiring a lawyer for the project with county money without even telling his fellow commissioners about it. (He got out of that one by saying he was sorry and would never do it again. No, really.) So if anyone deserves to have his political future be a referendum on stadium subsidies, it’s Lee. Vote early and vote often, Cobb County!

Jeffrey Loria sues own fans, because it was only space remaining on his supervillain bingo card

You know, it’s tough to be an internationally known supervillain. Take Miami Marlins owner Jeffrey Loria: He’s already gotten the city of Miami to give him around $800 million because he said he needed it to build a better team and stop holding fire sales of all his best players, immediately thereafter held a fire sale of most of his best players, and let his team’s minuscule number of fans experience the world’s first rain delay at a stadium with a roof. What, oh what can he do for an encore? How about, oh, I don’t know, suing one of your most dedicated fans for declining to renew his season tickets?

During numerous sales pitches, [Mickey] Axelband says, the Marlins promised first-floor parking in the stadium garage and a private entrance. There would also be a lounge with pre- and postgame buffets so season ticket­holders could arrive early or hang out late. Axelband happily paid $24,000 for the two-seat package (that’s $148 per seat for each game) — nearly double the $13,000 he’d ponied up for the final year at Dolphin Stadium. He agreed to a two-year deal. Although only the private lounge was actually written into the contract, Axelband says he had no reason to believe the team wouldn’t follow through.

But Marlins Park wasn’t the success the team had hoped for. By midseason, crowds had dwindled to near Dolphin Stadium levels, and the team began slashing expenses. Those nearby parking spaces? Gone. The private entrance? Closed to save money on the extra usher manning the door. The buffet was stocked with the same bland panini for every game. Soon the team shut it down in the sixth inning.

These all might seem like small details, but “that’s exactly what we paid all the extra money for,” he says. Worst of all, Axelband says when he wrote the team to complain, the Fish weren’t sympathetic. “I didn’t want my money back or anything, but I said, ‘Please give me back the stuff you promised.’ The answer I got back was basically, ‘Yeah, we know we took it all away, but tough shit.’ “

Axelband responded by telling the Marlins he wanted to cancel his season tickets, at which point Loria’s minions responded in the one way guaranteed to maintain their villainous reputation: They sued him, along with eight other season ticket and suite-holders, for breach of contract. The Marlins owners are also suing two concessionaires who bailed out of deals to be vendors at the stadium, one of whom filed for bankruptcy after he says stadium sales were less than half what team representatives had promised.

As Fort Lauderdale sports law attorney Darren Heitner told the Miami New Times, which uncovered the story, “I’m not sure the Marlins thought this through. If you’re contemplating getting season tickets, now you’re worried you won’t get everything you bargained for and you even might end up in litigation.” That might be true in normal logic, but supervillains operate by spreading fear: Jeffrey Loria isn’t about selling tickets by making Marlins fans think they’ll get something for their money. He’s about selling tickets by building a death ray.