Warriors break ground on privately funded SF arena, only travesty is the entertainment

The Golden State Warriors held their long, long-awaited groundbreaking on their new San Francisco arena this week, which presumably means they’re actually going to build this thing. The event was not without its awkward weirdness, though:

Oooookay. That’s got to be the worst of it, though, right?

Man.

Anyway, the Warriors arena is still being built with $1 billion in private funding, because ownership decided it could make more money by having an arena closer to its wealthier fan base (and to give San Francisco its first arena for hosting concerts and such), which while slightly icky if you consider the whole “San Francisco is for richies while less-richies have to go live in the East Bay” thing is at least the way that matters should work in a world without public subsidies to chase after. And at least East Bay residents can still get to games easily enough — which is good, because it meant at least the Warriors avoided the embarrassment of having a fan from their former city interrupt their welcome-to-their-new-city event, like some other relocating California teams I could name.

Seattle calls for applicants to redo Key Arena with no public cash, may actually get bites

This may go absolutely nowhere in the end, but the city of Seattle is certainly giving it the old college to see if it’s feasible to renovate Key Arena instead of building a whole new one, issuing a request for proposals for private developers to do so with no public money:

Under terms of the 25-page document, the city would maintain ownership of KeyArena, and any developer with an accepted proposal would pay a rental fee and assume all costs for maintenance and arena operations. The developer could sell naming rights for the upgraded venue as well as sponsorships and gain additional revenues via ticket sales and other routes.

“The assumption is that the city would be leasing the facility to the entity that would invest in it,’’ said Ben Noble, city budget director.

This sounds like exactly the sort of deal that private developers would turn up their noses at — you want us to put how much of our own money into renovating an existing arena and pay a rental fee and operating costs on top, what? — and yet two entertainment companies, AEG and Oak View Group (run by former AEG honcho Tim Leiweke), have said they’d be interested in bidding. So, if you’re the Seattle city council, why the hell not?

At worst, this will give the city more leverage to demand concessions from would-be arena developer Chris Hansen, which has already worked once. At best, just maybe they get AEG and Oak View into a bidding war for the rights to operate an arena in Seattle, which while not lucrative on the surface may matter a whole lot in the ongoing battle for arena management market share. Either way, it’s exploring your options rather than bidding against yourself, so preliminary kudos to the Seattle council for doing the right thing on that front.

Agency that okayed Red Wings arena deal is run by a bunch of tax cheats, this all makes sense now

Now here’s a newspaper lede you don’t see every day:

The Downtown Development Authority board spending $250 million in taxes on Little Caesars Arena is dominated by tax delinquents with financial problems and in some cases criminal records, according to public records.

The DDA, you’ll recall, is the local quasi-public development corporation that spearheaded the push to spend $300 million in public money on a new Red Wings arena, plus another $34.5 million to move the Pistons in with them. It’s long been considered about as in the pocket of the local business establishment as you can get — its longtime director took a job with the Red Wings as soon as he’d left office — and now, according to the Detroit News, its board is a clown car full of clowns:

Seven of the 12 appointed DDA members have a history of financial issues, including more than $500,000 in state and federal tax debt, according to public records. Several blamed the problems on the Great Recession, an ordeal they say made them better public stewards and taught them how to avoid making new financial mistakes.

Yes, you read that right: The tax delinquents on Detroit’s development authority board say that this makes them uniquely qualified to plan the city’s economic future. And the city council president agrees with them:

Council President Pro Tem George Cushingberry Jr. said he doesn’t see the past financial troubles of some board members as an issue.

“It doesn’t mean that they aren’t capable of doing a good job,” said Cushingberry, who filed for bankruptcy in 2011 and lost a home to foreclosure. “In fact, we probably need a few people that have some tax issues so they can anticipate the possibilities.”

Not that making bad financial decisions should necessarily rule anyone out from public service, but maybe it might be a consideration for a job that requires making financial decisions for the city? What next, hiring a guy to run an agency that he not only wants to eliminate, but he can’t even remember the name of? Wait, what?

No, the Cavs didn’t get their $70m glass-wall subsidy approved, headline writers are idiots

Media literacy quiz time! Back in April, Cleveland Cavaliers owner Dan Gilbert declared that he wanted $70 million in public money to help him pay for a $140 million renovation of his arena, mostly to build a giant glass wall. Yesterday, Cleveland.com ran this headline:

Quicken Loans Arena, home of LeBron and the Cavs, to get $140 million makeover

Does this mean:

  • A) The money was approved
  • B) The money passed an important hurdle, but more approvals are still necessary
  • C) Gilbert agreed to pay for the renovations himself
  • D) Nothing happened at all beyond the Cavs putting out a press release

Yep, that’d be D:

The Cleveland Cavaliers today announced a striking $140 million upgrade to the Q Arena that dramatically alters the facility’s appearance and, the team says, would make the 22-year-old arena competitive by creating more space for dining, bars and public gathering…

Cleveland City Council will hold public hearings and vote on the proposed use of the city’s admission tax to pay back part of the loans.

The rest of the article is mostly just a rehash of Cavs talking points (“without any increase in taxes”! “an up-to-date arena for sports, concerts and other entertainment”! “the proposal looks pretty good compared to other small or medium-sized sports markets”!), plus a bunch of new renderings helpfully labeled “The Q TRANSFORMATION.” Somebody in the Cavs ministry of propaganda deserves a raise today.

Cleveland to Browns, Cavs, Indians: Everybody gets $57m in tax money, now play nice

And it’s official: The Cleveland Browns, Indians, and Cavaliers will get equal cuts of the “sin tax” extension voters approved back in 2014:

Each team will get $4.6 million per year for the next 20 years. The money can be used to upgrade the stadiums and arena where they play.

Via the magic of net present value calculators (even those that don’t know how to spell “principal”), we can determine that this revenue stream will be worth about $57 million in today’s dollars to each team. It shouldn’t be hard for each of them to find ways to spend that down — especially with the Cavs already asking for another $70 million to pay for a new super-spendy glass exterior wall — but if all else fails maybe they can just buy some IBM “Internet of things” gewgaws and call it “infrastructure.”

Atlanta mayoral candidates debate Hawks arena deal that they won’t get to decide anyway

Atlanta Mayor Kasim Reed is term-limited out of office after next year, which means the city is gearing up for the election of a new mayor in 2017. And, as befits a city that just spent almost $700 million on a Falcons stadium and saw the Braves leave for the suburbs in exchange for $355 million in stadium subsidies and is facing a demand for $142.5 million in arena renovations for the Hawks, sports subsidies are becoming an issue in the campaign:

Candidates Cathy Woolard and Vincent Fort have come out swinging against the proposal, calling it a giveaway to a billionaire. Councilwoman Keisha Lance Bottoms, a key negotiator in the deal, is a hearty backer, while competitors including Atlanta City Council President Ceasar Mitchell, Councilwoman Mary Norwood and businessman Peter Aman, have been more sanguine…

Bottoms, who threw her hat in the ring to run for mayor just days before news of the Hawks deal broke, is also head of the Atlanta-Fulton Recreational Authority that owns Philips and will recuse herself from voting. But she said the project would be a boon to Atlanta’s hospitality community.

“It’s not just about sports,” she said. “It’s an arena that has a lot going on. It’s about being a good steward of a city-owned asset.”

By contrast, Fort said recently, “This is another instance where billionaires are making out like nobody’s business and the citizens of the city are getting very little in return.”

Yep, those would be the two stock arguments. Not that any of the candidates — except Bottoms, Mitchell, and Norwood, since they’re on the city council — will actually have any say in this matter, since the council is expected to vote on it way before the mayoral election, but the public debate could help influence how that vote goes. Especially with candidates saying stuff like this:

Woolard said there was little risk of losing the Hawks after Cobb County Commission Chairman Tim Lee was ousted by voters following his deal with the Atlanta Braves.

“I’ll call that bet,” she said. “I’m not sure the NBA would let Atlanta not have a pro team. And what other jurisdiction in metro Atlanta is going to do this deal after Tim Lee lost [re-election] after the Braves deal?”

That’s a good point! Also not likely to carry much weight, especially when we just saw the Texas Rangers get $500 million in subsidies for a new stadium to replace their 22-year-old one in part by dropping hints that they’d move from Arlington to Dallas even though Dallas hadn’t made any moves to offer them a stadium. But it’s nice to see mayoral candidates using logic as an argument, just for a change of pace.

Pistons, Red Wings still not telling anyone how they plan to split their arena boodle

You know what I could really use this morning? A good article to read. Here’s a good article, from Sunday by Bill Shea of Crain’s Detroit. What makes it good: It’s that rare article about an important lack of information, which nonetheless informs readers about what the issues are, and why it’s important to know what certain parties are refusing to divulge:

The long-speculated on deal to relocate the Detroit Pistons from Oakland County to the Red Wings’ new downtown arena that will open in September was formally announced Nov. 22. What hasn’t been disclosed are any details about the upcoming financial relationship between the clubs.

Neither team is willing to discuss terms of the deal — which apparently still is being finalized — and a spokesman for Detroit’s Downtown Development Authority that owns the new arena said the Pistons-Red Wings contract has not yet been shared with the city. Terms of the deal between the teams do not have to be provided to the city or DDA.

There are plenty of ways to structure the deal, reports Shea, including Red Wings owner Mike Ilitch paying the Pistons to play in his arena but then keeping basketball club seat and suite revenue in exchange (as the Boston Bruins do with the Celtics). And what form it takes could have as much with trying to play revenue-sharing arbitrage with the NBA and NHL rules as with plain old sports bookkeeping.

And if you’re wondering why you should care how the Pistons and Red Wings owners divvy up their private revenue — the $334.5 million in public cash in the deal will remain the same regardless — this is not only likely to help determine the future fate of the Pistons’ old arena in Auburn Hills and how the two teams approach monopoly control of a region’s arena market, but should tell us a lot about what teams can get out of new arenas and why they want them. Other than the $334.5 million, obviously — it’s pretty clear why they want that.

County official proposes diverting one-third of tourist dollars to build Cavs a glass wall

It’s been almost eight months since the Cleveland Cavaliers asked for a $140 million expansion of their arena to add more public space and give it a glass exterior wall, and Cuyahoga County Executive Armond Budish said, “Let me get half of that for you.” Now, Budish thinks he may have found some of the money, asking the local tourism agency to use hotel tax money to pay for the Cavs’ renovations.

Destination Cleveland collects about $15 million a year in hotel taxes, and paying off $70 million in Cavs expenses would cost about $4-5 million a year, so this would clearly be a hefty chunk of change, unless Budish has other revenue sources in mind as well. The Cavs are already getting a cut of the alcohol-and-cigarette-tax extension that county voters approved back in 2014 — Budish recently proposed splitting the proceeds evenly among the Cavs, Indians, and Browns, as nobody bothered to work that out beforehand — and since that amounts to about $170 million in total present value, Cavs owner Dan Gilbert is effectively asking for $70 million on top of the $60 million he just got two years ago for renovations. But really, who can put a price on the enjoyment that local sports fans get from a glass wall?

Stadiums now just big-ass billboards and public subsidy generating machines, face it

Today in sports teams sell ad rights for lots and lots of money:

The [Atlanta] Falcons organization has sold corporate sponsorships at Mercedes-Benz Stadium totaling more than $900 million in contractually obligated long-term revenue, SportsBusiness Journal reports in this week’s edition.

That’s $900 million over several decades, so not really worth $900 million toward today’s construction costs. Still, it should go a long way toward helping pay off the Falcons$1.6 billion stadium, especially when the team is already getting tax money worth nearly $700 million.

Also today in sports teams sell ad rights for lots and lots of money:

The Minnesota Timberwolves and Lynx named five new “founding partners” on Monday who will help pay for the $130 million renovation of Target Center now underway…

In exchange for its sponsorship, each founding partner will receive a customized package with the two teams. Each package will offer a yet-to-be disclosed “physical presence” inside the arena, plus outdoor and indoor digital signage and category exclusivity.

That Minneapolis Star Tribune article doesn’t mention it, but the Target Center renovation also got $48 million in public funds.

These are only two data points, obviously, but they do help explain why team owners are so eager to build new facilities despite tons of evidence that they don’t bring in all that much more money in actual arena revenues. New sports venues aren’t just new sports venues — they’re also new billboards, and corporations are more willing to throw money at slapping their names on a fresh canvas than on one that’s been written on already a bunch of times, even if it’s dubious whether there’s any real business value.

Plus, of course, it’s way easier to ask for public money for new (or renovated) buildings than it is to just ask for straight taxpayer handouts because you want to boost your profits. When future alien anthropologists try to puzzle out why we spent so much of our time building and then tearing down places to watch mass sporting spectacles, it’ll be fun to see how many tries it takes before they arrive at “it was the best way to separate people from their wallets.”

Yep, Pistons owner is getting even more public money to move team to downtown Detroit

And we have the terms under which the Detroit Pistons will move from their 28-year-old arena in Auburn Hills to a zero-year-old arena in their namesake city, courtesy of MLive. With no further ado:

The Pistons will play all home games at the 20,000-seat Little Ceasars Arena starting with the 2017-18 season.

Right, we figured.

The team and Palace Sports & Entertainment will move its business operations, corporate headquarters, team practice and training facilities into a new practice facility, to be built north of the arena at a cost between $32 and $55 million.

That’s pricey. Who’s going to pay for that?

Detroit’s DDA has agreed to contribute $34.5 million in additional bond proceeds through refinancing to be used for redesign and construction to modify Little Caesars Arena from a hockey facility to jointly house an NHL and NBA team.

Apparently Steve Neavling was right to be suspicious when Detroit’s Downtown Development Authority scheduled a meeting for a half-hour before the Pistons announcement and wouldn’t tell anybody what it was. But is this real Detroit city money, or passthrough money that’s really coming out of state education funds, like most of the rest of the arena costs? Reply cloudy, ask again later.

No city of Detroit general fund dollars will be spent on the arena project, and any additional costs or cost overruns will be paid entirely by the Pistons, the Red Wings and associated companies.

Teams pay overruns, all the public money comes out of special segregated funds, not the precious “general fund,” blah blah. It’s still city (or state) dollars that could be used for something else otherwise.

The Pistons are responsible for all costs relating to the development, construction, operation and maintenance of the practice facility.

That’s good!

The location of the team’s practice facility may be owned by the DDA, subjection to a concession agreement with the Pistons.

That’s possibly bad, since it means the practice facility wouldn’t pay any property taxes! Unless the concession agreement involved making payments in lieu of taxes. Reply cloudy, etc.

The Pistons have agreed to a 10-point community benefits plan, including investing $2.5 million over six years for the construction, renovation and refurbishment of more than 60 basketball courts in Detroit, the employment of at least 51 percent of Detroit residents on the construction of the practice facility and provide 20,000 free tickets a year to Detroit youth and area residents.

Better than nothing, but for what the DDA is putting into this, they could have built 1,000 basketball courts.

So, wait, who’s paying for that practice arena again?

Wait, what?

Okay, phew. You know, this “rough draft of history” stuff was a lot easier before Twitter got people publishing their actual rough drafts.

Anyway, total public subsidies for the arena are now at $334.5 million at minimum, and possibly even higher than that. You can argue that it’s worth it to Detroit to throw this money at the arena in order to lure the Pistons across the border from Auburn Hills — the tax impact may not be as huge as team owners like to pretend, but it doesn’t have to be to repay just $34.5 million — or you could argue that the Red Wings are eliminating a competitor (the Palace at Auburn Hills will almost certainly be razed now) and the Pistons are getting a newer home, and they’re both owned by billionaires who clearly want to do this deal regardless, so why the hell can’t they pay for adding a basketball court instead of Detroit be giving up scarce tax revenue?

More news tomorrow morning, if the magic eight ball clears up.