Category Archives: NBA

“Private” Virginia Beach arena could cost public $185m

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The Virginia Beach city council found out last night how much a new “privately funded” arena would cost the public, and the answer is: a lot.

On Tuesday, City Council learned that it could cost $52.6 million to $78.8 million to pay for the utilities, road improvements, and traffic patterns in the area.

Add in $7 million a year in tax kickbacks that the developer would be demanding, and that’s a total public cost (in present value) of between $160 million and $185 million. For an arena that will cost $200 million to build.

City councilmembers, naturally, were taken aback by the high price tag:

Council members seemed thrilled with the idea and thought it was time to move forward.

Sigh.

Virginia Beach to get more details on “private” arena plan that isn’t

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The city of Virginia Beach could release information today on how much infrastructure costs would be for a proposed $200 million arena, according to an article in today’s Virginian-Pilot. More on that tomorrow, then; in the meantime, here’s how the Virginian-Pilot again completely screwed up its reporting on Virginia Beach’s two arena proposals:

The council voted in May to begin negotiating with USM instead of rival development group W.M. Jordan, which included politically influential developer Bruce Thompson. Those negotiations are continuing, and the city won’t release cost estimates.

The Virginian-Pilot obtained both proposals in February and reported that each arena would cost about $200 million. The key difference is that W.M. Jordan wanted taxpayers to pick up nearly all of the costs, while USM said it would obtain private financing.

Oy gevalt. No, no, that’s not the key difference at all. As was discussed back in May, the W.M. Jordan plan would have provided $10.5 million a year in public money to pay off arena bonds, whereas the USM plan is set to provide $7 million a year in tax kickbacks so that the developer can pay off arena bonds. Which is indeed better — 7 is less than 10.5, last I checked — but is not at all the difference between “taxpayers picking up nearly all of the costs” and “private financing.”

Anyway, the Virginia Beach city council is set to receive a consultant’s report today on infrastructure costs, so we should learn more about the city’s total outlay then. Though if USM is smart, it will offer to pay for the infrastructure costs now, and have the city repay them later, since apparently no one in the local media is clever enough to see through such advanced accounting tricks.

Gretzky denies interest in owning nonexistent Seattle NHL franchise in nonexistent Seattle NHL arena

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This is from the New York Post and so probably pretty unreliable, but everyone else is writing about it so I suppose I might as well too: Wayne Gretzky is reportedly—wait, what’s that?

Wayne Gretzky’s agent is denying a report that the Great One is trying to bring an NHL team to Seattle…

Darren Blake, Gretzky’s agent, told The Canadian Press in an email that the 53-year-old Hall of Famer isn’t involved in any bid.

“As you can imagine prospective team owners from various franchises call frequently to gauge his interest in coming on board. Seattle is no different,” said Blake.

Oh, good, we can ignore this after all. And not just because what any prospective Seattle NHL team needs isn’t an owner, but somebody willing to build an NHL arena. How’s Gretzky with a trowel?

Kings say new arena will be bigger, smaller, more expensive, not more expensive

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According to the Sacramento Bee, the new $477 million Kings arena, being built with about $226 million in public subsidies after years of bitter fighting, is needed to replace the “outmoded and inadequate” Sleep Train Arena that had among the fewest seats in the NBA, even though the new arena will also have among the fewest seats in the NBA, but that won’t matter because it will have more luxury suites, but only 34 instead of 30 because NBA teams have learned it’s not good to have too many luxury suites especially in a city like Sacramento with no major corporations, but there will be more high-priced seats anyway but there won’t be a “massive” price increase but listen it will make more money it just will that’s the whole point don’t ask questions okay?

Anyway, Kings President Chris Granger promises that the lower seating bowl at the new arena will hold 10,000 fans instead of 7,800 at the old one, which will bring fans closer to the action because being at the back of a larger lower bowl is somehow better than being at the front of a closer upper bowl? It must be some kind of non-Euclidian geometry thing. I hear modern architects are doing great things with toroidal space.

Latest Bucks idea: Fund arena by redirecting income and sales tax — wait, isn’t this where we came in?

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Clearly the Milwaukee Bucks arena campaign, facing both popular and legislative opposition, has hit the throwing-stuff-at-the-wall-to-see-what-sticks phase. Today’s projectile of choice: the “jock tax”!

[Wisconsin Gov. Scott] Walker, in a Friday interview with the Business Journal, said his staff is studying the possibility of tapping income taxes from NBA players and other tax revenue directly generated by Milwaukee Bucks games to possibly pay for a new arena. The income tax already is paid by Bucks players for games in Milwaukee and visiting team players.

The Milwaukee Business Journal’s Rich Kirchen — yes, that Rich Kirchen — goes on to report that state income taxes on NBA players in Milwaukee currently raises between $8 and 10 million per year. The average NBA team spends about $70 million on player payroll, and the top Wisconsin tax rate is 7.65%, so that … makes no sense, actually? The state can tax visiting teams as well, but then Bucks players can also deduct other states’ jock taxes from their Wisconsin tax bill, so this seems a bit optimistic to me.

And regardless, this is revenue that Wisconsin is currently collecting, so it’s hardly free money. (Yes, it’s money that the state won’t collect if the Bucks move elsewhere, but then sports fans would just spend their entertainment dollars on something else, and employees of that something else would make more money and pay more income taxes, and so on, and so on.) So it’s really just a way of totaling up all the money that the state could credit to the Bucks, then rebating them by writing them a check equal to that amount. Except the players would still be paying the taxes, while the team owners would be getting the check. Nice work if you can get it.

And this would only be enough to raise perhaps $100 million, and the Bucks arena is still $250 million shy of the funding needed to build it. So the rest would be filled in, perhaps, by sales taxes paid at the arena — and suddenly we’re back to the “super TIF” proposed by Sheehy back in April, but which Kirchen is apparently pouring into new bottles and hoping no one notices.

Which brings us to this, at the very end of the article:

The advantage of earmarking for debt payments NBA-player income tax and sales tax from Bucks home games is that the proceeds likely will increase in future years, [Milwaukee chamber of commerce president Tim] Sheehy said. NBA salaries continue to increase and, assuming the Bucks on-court record and attendance improve, sales tax on merchandise, concessions and ticket sales also should increase, he said.

Or, looked at another way, the amount of future revenues that the state would be handing over to the Bucks owners would go on rising inexorably year after year. Damn, sorry about that — I must have missed my shipment of Milwaukee Business Journal rose-colored reading glasses.

If you want to sell a sports subsidy plan, state it in terms of cups of coffee

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There was yet another Milwaukee Journal-Sentinel column arguing for public funding for a Bucks arena on Friday, and I wouldn’t even take notice, but columnist James E. Causey brought back the dreaded coffee analogy:

The annual cost to regional taxpayers for Miller Park is about $10, or the cost of two venti Caramel Macchiatos at the local Starbucks.

Even if the figure was $25 a year, it still would be a bargain.

Pricing stadium costs in cups of coffee has a long tradition, most notably back in 2005 when it was the Minnesota Twins seeking public subsidies, and the Minneapolis Star Tribune’s Jim Souhan wrote approvingly, “Twins owner Carl Pohlad will pay $125 million. You’ll pay less than you leave in the tip jar at Dunn Bros.” (That’s a coffee place, FYI.) The problem — other than that the annual cost of Miller Park is repeated over 30 years, so really every man, woman, and child in the Milwaukee area (Causey divides by total population, not just adult taxpayers) is out $300 — is that you can do this trick with just about any public expense you can think of and make it sound reasonable:

Anyway, the point isn’t that big expenditures spread over enough people average out to a small amount — though no doubt writers like Causey are counting on readers’ innumeracy to obscure that realization. (He also buries deep in his article the news that a Bucks arena would cost more like $25 per person per year, or five Macchiatos.) The point should be what else could you be doing with that money. For the estimated $250 million cost of a new arena, Milwaukee could open another 19 libraries, or provide financial aid to an additional 18,000 college students, or, if you prefer, cut the average Milwaukee homeowner’s property taxes by $284 a year.

Not that any of these are necessarily the best uses of $250 million. But you’re talking about how to spend public money, you need to be comparing apples to apples, not to Macchiatos.

Bucks owners to Milwaukee: Fund arena or big bad NBA will take your team away

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With economists savaging their plan to seek $200-300 million in public dollars for a new basketball arena, and voters not much happier with it, Milwaukee Bucks owners Marc Lasry and Wes Edens had to do something to jumpstart their plans. So, speaking to reporters and Rotary Club members yesterday (yeah, I don’t get it either, just go with it), they pulled out the big guns:

“The problem we have is in our agreement with the NBA if an arena is not built, the NBA has the right to take the team back,” Lasry said. “I think we’ve got three or four years to do that. So we’re under huge pressure to do it.

“Wes has said it and I’ve said it: There are no other alternatives,” Lasry said.

So, really, if Milwaukee doesn’t come up with money for a new arena, the league is going to take the Bucks from Lasry and Edens and … do what with it, exactly? Sell it to owners who’ll move it? Hang onto it and see if the league can be any more successful at shaking down local politicians for arena money? Come on, Rich “Culture of Caution” Kirchen, we want to know the answers to the big questions!

I asked Lasry later Monday morning whether the NBA required the “buy back” clause in the Bucks transaction and he said “yes.”

“It was what the NBA wanted,” Lasry told me.

Sigh. I guess “Is Bad Cop making you threaten us with this?” is technically a question, but it’s not the one I would have led with, you know?

Anyway, none of this is really new — the buyback clause has been public knowledge since April — but it’s now more clear than ever that “Don’t make Adam Silver mad, who knows what he’ll do?” is going to be Lasry and Edens’ main negotiating tactic. I’d still like to see a Wisconsin journalist try to investigate whether Lasry and Edens (and former Bucks owner Herb Kohl) conspired with the NBA to insert this buyback clause, but so long as Wisconsin journalists think that “investigation” means asking the team owners “Are you co-conspirators?” we’re probably not going to get much of an answer.

Wisconsin voters on Bucks arena: We will not fund it on a boat, we will not fund it with a goat

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We already knew that Milwaukee area residents were overwhelmingly opposed to a sales tax hike to help fund a new Milwaukee Bucks arena. Now it turns out they’re overwhelmingly opposed to giving the Bucks owners any public money of any kind:

Sixty-three percent of those surveyed in the five-county region said they were opposed to spending state funds for such a purpose. A total of 34% were in support of spending state money for a new Bucks arena.

Statewide, an even larger percentage, 73%, were against spending state money on a new arena, while 24% were in support…

Asked if they supported spending state money on development of infrastructure associated with a new arena, 53% of those surveyed within the five-county area said they were opposed, while 45% were in support.

Statewide, 60% were opposed, compared with 37% who were in support.

Not that this is likely to stop talks about public funding for a new Bucks arena, since elected officials (and certainly sports team owners) tend to see massive public opposition as a hurdle to clear, not a mandate to be followed. Though it may get a few local politicians worrying what the consequences will be if they throw themselves behind another unpopular sports facility funding plan.

New Jersey’s 76ers practice facility deal to cost $252,000 per part-time job

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The watchdog group New Jersey Policy Perspective has issued its analysis of that state’s plan to reimburse the Philadelphia 76ers for the entire cost of a practice facility in Camden, N.J., and as you might expect, the numbers are pretty dismal:

  • The state would cough up $82 million over 10 years in “tax credits,” which in this case appears to be less actual kickbacks of actual taxes than just “the public cuts you a bunch of $8.2 million checks.” That’s a present value of about $63 million.
  • In exchange the state would gain 250 jobs that would shift across the river from Philadelphia, though no doubt many if not all would be part-time, given that basketball teams don’t practice 365 days a year. That’s a cost-per-job ratio of $252,000, which even in the world of corporate relocation subsidies is exceptionally craptacular.
  • Even the state’s own economic projections say that the economic impact is incredibly low: $76.6 million over 35 years, for a present value of just $36 million. Adds NJPP: “That is, if the team even stays that long, since they will only be required to stay for 15 before they can seek tax breaks elsewhere.”

And it’s even worse than that, because with those part-time jobs just shifting across the Delaware River, it’s inevitable that the vast majority of workers will continue to be the same people who the 76ers employ now, living in the same states they do presently. So New Jersey would get a small bump in income tax receipts pro-rated to the handful of days per year they were in Camden, and sales taxes from anyone going out to buy lunch, and … that’s about it.

On the bright side, it’s not like the Sixers’ billionaire owner Josh Harris is getting singled out for this lavish treatment: New Jersey has already doled out $4 billion in corporate subsidies since Chris Christie became governor in 2010. Wait, that’s not a bright side. Unless you’re one of the 252 business owners who’s divvied up that swag, in which case these are very bright times indeed.

New book “The Brooklyn Wars” to rake muck of Nets arena deal

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I know I already ask my readers here to become Supporters of this site (which reminds me, I need to set my next members-only chat date soon), but I do want to alert you to another project I’ve just launched that may be of interest: “The Brooklyn Wars,” a book drawing on my decade-plus of reporting on the massive changes that my home borough has undergone.

I’ve launched a Kickstarter site where you can preorder the book and win fabulous rewards. (One FoS reader has already availed himself of the “Go to a Nets game with Neil and have him complain about the terrible sightlines the whole time” level.) And yes, there will be sports subsidy content: One of the four main sections will focus on the machinations behind the construction of the Brooklyn Nets arena and what it’s meant for its Prospect Heights neighborhood and Brooklyn as a whole since.

Please check it out if you’re interested — and given the way nearly every city seems to have its own burgeoning mini-Brooklyn, or at least is trying to create one by force of will, it’s a story that should have relevance far beyond the confines of one borough. Besides which, everybody is fascinated by Brooklyn, right?