Portland soccer deal: Team gets profits, public gets the risk

The Portland Timbers stadium plan took another step forward last week, as the Portland city council voted 4-1 to approve the preliminary finance plan for a $31 million rebuild of PGE Park as a soccer-only facility. (This would force the minor-league Portland Beavers baseball team — also owned by Timbers owner Merritt Paulson, son of Henry — to relocate elsewhere.)

The Oregonian notes, as I alluded to earlier, that much of the $31 million consists of hidden subsidies that could come back to bite Portland in the general fund. For example, the $11.1 million in “prepaid rent,” notes the paper, is actually public money, and expensive money at that:

The prepaid rent, which the city refers to as capitalized rent, is akin to Paulson providing the city with a construction loan.

In exchange for $11.1 million today, Paulson will avoid rent and ticket tax payments totaling at least $38.4 million over 18 years. That translates to some $27 million in interest payments by the city over the life of the loan — the equivalent of paying an interest rate of 8 percent.

And while another $11.2 million would come from future ticket taxes, it’s actually mostly taxes on basketball, not soccer: “The Blazers are effectively locked into their Rose Garden lease until 2025. If they left at that point, the Spectator Fund would become insolvent, unable to repay the final 10 years of soccer debt.” And, of course, even without that dire scenario, it would be $11.2 million that the Spectator Fund wouldn’t be able to use for other public projects.

For further analysis of the Timbers plan, see Bojack‘s report, which calls it “the most preposterous deal you’ve ever seen” and concludes: “Bottom line on the remodel: The Paulsons and their friends get all the upside, and Blazer fans and the taxpayers take a major share of the downside risk, which is substantial.”

Paulson: My stadium is “crap”

Running down your own stadium in the cause of getting a new one has a long, inglorious history, but Portland Beavers and Timbers owner Merritt Paulson still deserves some sort of award for telling Willamette Week that PGE Park is a “crap stadium,” just in time for his team to host the AAA All-Star Game there last night. That’s the All-Star Game, WWeek notes, that Paulson announced he’d landed two years ago with the statement that “we are thrilled at the opportunity to showcase Portland and our wonderful ballpark.” But that’s when he was more interested in selling tickets than stadium financing packages.

Paulson, Portland push new Timbers plan

The $15 million hole in Merritt Paulson’s $31 million soccer stadium plan has been filled, the Portland Timbers owner and city officials announced yesterday. Under the new plan, Paulson would pay $8 million in cash, and prepay $11.1 million in rent and ticket taxes; the city, meanwhile, would kick in $11.2 million in future tax revenue, plus a $700,000 development tax break.

So who would actually end up paying the $31 mil to convert PGE Park to soccer-only? It’s hard to say — if the previous plan was confusing, the new one is if anything more so: The $11.1 million in prepayments by Paulson, in particular, looks more like a loan than a private expense. The key point here, though, seems to be that this plan avoids using urban renewal money, which was a no-go with some city commissioners; since Paulson has already ditched the more-controversial minor-league baseball stadium plan for the time being, he seems to have given himself a leg up on getting the soccer deal done. We’ll know more in two weeks, when the council has to vote on the new financing package.

Paulson: Forget baseball, let’s talk soccer

Those protestors in Lents have to be thinking, “That was easy”: Portland Beavers owner Merritt Paulson withdrew his plan for a minor-league baseball stadium today, saying he wanted to instead focus on finalizing plans for a soccer stadium for his expansion Timbers team. As for the Beavers, he said he’s committed to keeping them “in Portland or the Portland area.”

It may or may not have been intentional, but Paulson has now pulled off a series of switches even slicker than his dad managed last fall. Let’s recap:

  • Two years after buying the Beavers and minor-league Timbers franchises, Paulson wangles an invitation to move up to Major League Soccer in 2011, provided he has a soccer-only stadium.
  • Paulson presents Portland with a no-lose proposition: He’ll build a new stadium for the Beavers, and renovate their current home park to be soccer-only. And all he’ll need is $30 million or so in tax money.
  • Everyone freaks out about where to put the baseball stadium. Paulson freaks out about the freaking out.
  • Mayor Sam Adams says, “We don’t need to worry about baseball to get soccer done.”
  • Paulson: “What is this ‘baseball’ of which you speak?”

While nobody knows what the soccer stadium deal will look like now — it was only presented previously as a package deal — Paulson is potentially sitting pretty, as the city has already identified a whole pile of different public revenue streams, any of which could cover the soccer costs if the baseball stadium is scrapped. Meanwhile, Paulson now gets to play “Who Wants To Build Me a Baseball Stadium?” with the Portland suburbs — both Hillsboro and Vancouver, Washington have been mentioned as possibilities — and at worst, he’s traded in two minor-league teams for one big-league one and a AAA baseball franchise that he can move or sell or whatever, which is a good swap however you want to count it. “Hey, how about you build me a new soccer stadium and make my baseball team a free agent?” isn’t a deal he likely could have gotten if he’d proposed it back in March, but what’s important is how you get there, or something.

Portland: We’ll do MLS stadium with or without baseball

Hours before more than 100 people rallied in protest of a Portland Beavers minor-league baseball stadium in their neighborhood of Lents, Mayor Sam Adams and city commissioner Randy Leonard threw the project under the bus, declaring that they’ll back converting PGE Park for soccer for the expansion Timbers regardless of whether the Beavers get a new home. This likely means the Timbers deal will get done — commissioner Dan Saltzman, the swing vote on the city council, has opposed the soccer stadium because of concerns about the baseball plans — but also could mean the Beavers would have to move if the Lents stadium plan falls through: “I don’t see another option,” said Mayor Adams.

Of course, there’s always the much-discussed option of having the Timbers and Beavers share digs at PGE, saving millions of dollars on building duplicate facilities. MLS Commissioner Don Garber has said he doesn’t want to do that, but he’s going to say that, obviously — he has no incentive to shack up with a baseball team if he doesn’t want to. The only way to test whether he’d actually rescind the Timbers franchise rather than share space is to make the demand and see what happens. Not that Mayor Adams is likely to do that, but you don’t get if you don’t ask…

Portland study: New ballpark site blows

Another city-backed study of the proposed Portland Beavers minor-league baseball stadium is out, and it looks just as promising as the last one: A stadium in Lents Park, according to consultants HVS International, would have lower attendance and revenue and provide less visitor spending in the immediate neighborhood than the previously considered downtown site, thanks to being way out in the boonies and surrounded by a residential neighborhood. City Commissioner Dan Saltzman, who has opposed the downtown site and holds the swing vote on approving the baseball stadium — which is being sought by Beavers owner Merritt Paulson so their current stadium can be converted for his expansion Timbers soccer franchise — told The Oregonian that he planned to make the report “my weekend reading.”

Portland study: Stadium would destroy jobs

Another day, another economic consulting report making glowing claims about the jobs created by new stadiums … er, what’s that you say, Portland Mercury?

Mayor [Sam] Adams’ office asked consulting firm ECONorthwest on Monday, May 11, to figure out the number of jobs the Beavers stadium construction would create in Portland. The mayor gave ECONorthwest only one working day to turn around the study, but its results were not good news for the mayor’s office or the stadium plan: While the ballpark construction would create 453 jobs during construction, the $49 million total investment would actually create a net loss of 182 jobs citywide.

“If those individuals who put their money into baseball via taxes are allowed to put that money into the private market, that same amount of money would actually yield more jobs,” explains ECONorthwest number-cruncher Abe Farkas. The study also showed that 67 percent of the construction jobs would go to people who do not live in the City of Portland.

You will not be surprised to learn that this report never saw the light of day — the Mercury only finally obtained it from the city yesterday. For their part, Mayor Adams’ office charged their consultants with making “seriously faulty underlying assumptions,” including that residents would get to keep their urban-renewal tax dollars if they didn’t go to the stadium. While this is a fair criticism, it’s worth noting that urban renewal money would presumably be spent elsewhere if not on a stadium, an opportunity cost that the ECONorthwest study (downloadable here) doesn’t attempt to quantify; and if other taxes ultimately have to be raised to support whatever other project doesn’t get the stadium money, then the study’s numbers pan out. (For his part, Farkas said he made reasonable assumptions, given the one-day turnaround required.)

While one city commissioner called for a new report, the mayor’s office nixed that idea, saying it would take up to a month and cause them to miss Major League Soccer’s deadline for a Timbers stadium, which is coming up in … September. But still, it’s got to be better to act first, and ask questions later, right?

Paulson: All bets are off if stadium site is changed

The Portland Timbers deal keeps moving backwards: The latest came on Friday, when team owner Merritt Paulson declared that if the city moves the associated minor-league baseball stadium for his Beavers franchise to Lents Park as is being considered, then the whole deal would need to be renegotiated from scratch:

“The only way Lents is on the table as an official option is if we can reach a financial deal with the city first,” Paulson said. “And it’s going to be a very different financial deal than we have at Memorial Coliseum. We’re starting from scratch.” … “I can’t see doing anything like that anywhere else other than the coliseum site. That’s such an unusually good site that we really extended ourselves in terms of personal protections.”

That’s not quite “Rose Quarter or the highway,” but it certainly looks like Paulson is trying to dissuade city officials from seriously considering Lents. If so, the fate of the deal could all depend on what city commissioner Dan Saltzman considers due diligence in finding alternatives to knocking down Memorial Coliseum to make way for a baseball stadium: If he’s just trying to cover his butt to please preservationists, he can now use Paulson’s statement to say there are no alternatives; if he’s really out to avoid demolition, though, Paulson could be painting himself into a corner.

And, let’s not forget, there’s still the matter of the missing $15 million, which has mostly dropped from discussion during the siting debate. There’s a lot to be resolved between now and Paulson’s September deadline.

Timbers stadium gets vote delay, September deadline

Those concerns over saving Memorial Coliseum have led to another delay in the Portland Timbers stadium vote: Portland mayor Sam Adams and team owner Merritt Paulson agreed yesterday to indefinitely delay the city council vote until a site has been worked out for a new minor-league baseball stadium that won’t require razing the coliseum. The city tried to see if it could squeeze in a stadium just north of the coliseum (“It won’t fit,” said the mayor); it’s now revisiting the idea of building it in Lents Park in residential Southeast Portland, something that was floated earlier and rejected in favor of a downtown location.

The delay is apparently an attempt to placate city commissioner Dan Saltzman — if you’re wondering why members of the Portland city council are called “commissioners,” yeah, me too — who is the swing vote required to approve the $88.8 million deal. Unlike some other swing votes, though, Saltzman isn’t asking for cash, and isn’t even dead opposed to knocking down the coliseum if it comes to that: “If I’m going to make a decision to demolish the coliseum, I’d like to do that knowing there’s been some process to look at the options,” he told The Oregonian.

Meanwhile, Paulson levied the most direct threat yet if the stadium deal doesn’t get done, saying, “If we come to September and we don’t have a deal in place, then we’re not going to have Major League Soccer in Portland.” We’ll see if he’s any more serious about that than some other sports team owners.

Timbers deal features fuzzy finances, dubious demolition

The Portland Timbers soccer stadium mess is turning into, well, a bigger mess, with questions about both the financing plan and the site for the new minor-league baseball stadium that would be built as part of the deal.

Starting with the financing: The Oregonian yesterday ran a wordy analysis of the economics of the twin-stadium deal, noting that while Timbers owner Merritt Paulson has promised to guarantee $31 million in rent payments and ticket taxes that are supposed to help fund the $88.8 million project even if the team (or MLS) doesn’t last another 30 years, much of those will go to pay existing debt on renovation of the team’s current stadium. That means, writes the paper, that “the city will have to rely on revenue from Portland Trail Blazers ticket taxes and parking proceeds — or, if those fail, the general fund — to cover about $20 million in baseball and soccer bonds.”

It’s of particular concern, say reporters Helen Jung and Ted Sickinger, because the city’s economic impact study of projected tax revenues from the project is “peppered with basic math errors” and “assumptions that change from page to page,” though they didn’t supply details. (Consultant Brian Harris explained — I swear, you cannot make this stuff up &mdash that this was because he was keyboarding figures into a spreadsheet during an airplane flight, and while he was sick.) Paulson’s projections — which the economic impact study was supposed to verify — include a 50% jump in attendance for his minor-league Portland Beavers franchise in their new home, as well as the Timbers clearing an operating profit in their first year, “despite the fact that 10 out of 13 Major League Soccer teams recorded operating losses in 2007,” notes The Oregonian.

On the city’s end, meanwhile, that suddenly unguaranteed stadium borrowing turns out not to be your garden-variety municipal bonds:

For a majority of the new borrowings, the city plans to issue the municipal equivalent of a subprime interest-only loan. For years, it would make no payments on the debt while interest accumulates at an estimated 9 percent. Then it would retire the loan with a series of increasing balloon payments in later years through 2035.

The structure is so unusual that the city’s debt manager isn’t sure anyone would be willing to buy the bonds. That’s where the Paulsons have stepped in again.

Paulson and his father, Henry Paulson, a former investment banking chieftain and U.S. treasury secretary, have pledged to help find a buyer.

With all this going on, the Portland city council has delayed by a week a vote originally scheduled for tomorrow to finalize Paulson’s development agreement — but not because of concerns about the financing. Rather, the council wants to consider concerns of preservationists who want to save the Memorial Coliseum. The Coliseum, former home of the Trail Blazers, is currently home to the minor-league hockey Portland Winter Hawks and lacrosse Portland LumberJax, who may have trouble booking dates at the Blazers’ new Rose Garden — and who have lease clauses guaranteeing them a year’s notice before they’re evicted, clauses that the city may have to buy out if it intends to demolish the 49-year-old arena.

And meanwhile, the $15 million funding hole remains. See why I’m always warning that stadium deals are never over until they’re over?