Category Archives: NBA

After 13 years, Miami finally collects $250,000 from its profit-sharing deal with the Heat

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If you’ve read my and Joanna Cagan’s book Field of Schemes — and if you haven’t, what’s wrong with you, there’s a great big link to it over there on the left, you can get an e-book version even! — you may remember the story of the Miami Heat arena campaign, which featured then-coach Pat Riley appearing in ads carrying a basketball and talking about how what the city of Miami really needed was a new arena to replace the one that had just opened eight years earlier. The final victory at the polls was achieved after a last-minute switcheroo in the funding scheme, where instead of the public being asked to cover a chunk of arena construction costs, the Heat would pay for the new building and taxpayers would pay the team to pay for it. Clever, no?

The result, as Deadspin sums it up:

The Heat paid the full construction costs of the $213-million building, which is owned Miami-Dade County. That’s good! In exchange, Miami-Dade gave them the $38-million plot of land, and promised $6.5 million in annual subsidies. That’s bad. The county, never great with arena math, also negotiated a share of the profits. This year, for the first time ever, there were enough profits for the Heat to cut a check.

How much of a check? Well, the arena’s concessions, suites, and club seats (the revenue streams that the city is supposed to get a cut of) turned a profit of $30 million this year. The Heat pocketed $14 million to pay off their share of construction costs — because the $6.5 million in cash they’re getting from Miami isn’t enough — plus $1.3 million to pay for “facility upgrades,” plus the next $14 million because they get to do that per their lease, plus 60% of whatever is left over. The city’s net from the arena’s most profitable year ever: $257,134.12.

Heat owner Mickey Arison, meanwhile, thinks that this deal is completely unfair — to him, and so he’s demanding more taxpayer money to help him upgrade his 13-year-old arena, by increasing the $6.5 million annual subsidy to $17 million starting in 2029, when the Heat’s lease is currently set to expire. (Arison would sign a ten-year lease extension in exchange for the added cash.) Plus he’d still get the first $29 million and change from those shared revenue streams. Of course, he’d be in a 39-year-old arena (horrors!) by the time the extended lease was up, but if the city of Miami keeps dumping money on his head, he can probably learn to live with it.

Cleveland to give Browns $22m for renovations just because

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The city of Cleveland and the Browns owners have reached an agreement on how the $120 million worth of stadium renovations announced last week will be paid for, and it’s not as awful as it could have been: The city would kick in $22 million, paid off $2 million at a time over the next 15 years (part of that would go toward interest), and the team would cover the rest.

That’s getting off relatively cheap compared to some stadium reno deals, but then, the city is getting nothing back for its money: The Browns aren’t even agreeing to extend their lease at their 17-year-old stadium. Plus, the city already pays into a “capital improvement fund” under the team’s lease, but these more extensive renovations — which include a new scoreboard and new seating and concourses — would come on top of that.

The Cleveland city council is set to hold a hearing on the plan next Monday, and some councilmembers are already getting all gripey:

“I’ve got residents calling me, saying, ‘Please don’t support the stadium,’” said Councilman Kevin Conwell. “That stadium is modern enough right now, in my opinion. They’ve got to break out budgets to show me that putting up that money toward improvements won’t affect city services.”

Right now the $2 million a year is set to come out of the general fund, but if this proposal goes through, it’s almost certain to heat up talk of extending the cigarette and alcohol taxes that paid for the stadium in the first place, and splitting the proceeds among subsidies for upgrades for the Browns, Cavaliers, and Indians, the last of whom have been talking about getting city funding for major renovations for a couple of years now, though clearly they’re waiting for the Browns to go first. Following on the Atlanta Braves‘ new stadium plans and the Carolina Panthers‘ successful renovation subsidy campaign, what Cleveland does is going to do a lot to set the tone of how cities with pre-millennial stadiums handle team demands for upgrades, so this is worth watching closely.

No, Hansen’s Seattle arena wouldn’t really cost Seattle $731m

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Cleveland Stockmeyer, one of the Seattle attorneys who unsuccessfully sued the city to block Chris Hansen’s proposed arena deal, is back with a report on what he says Seattle’s losses would be from the project. And it’s a whopping big number:

In the newly-released report, a group called Sonics Without Subsidies claims Seattle is giving away more than $731 million in subsidies for Hansen to build his SoDo arena — and they’re asking city leaders to change the deal.

$731 million is, needless to say, unexpectedly high for a project that will only cost $490 million to build total, that will only involve $200 million in public spending, and that after tax revenues and rent payments are shuffled back in forth, I’ve estimated previously would leave taxpayers with at worst a $21 million loss. So where does Stockmeyer’s hired economist come up with $731 million?

The answer, it appears, is it depends on what you mean by “loss.” Seattle’s Initiative 91, passed back in 2006 by city voters, requires that the city turn a 2.7% annual profit on any investment it makes in a pro sports facility. Under Hansen’s deal, the city would take out $200 million in bonds, which would be repaid entirely by Hansen, so there would be no cost to the city. But — here’s the catch — if you count the $200 million as a city expense, then city is getting stiffed its 2.7% annual return on investment. If you do the same math for the missing annual return on tax credits and property tax breaks Hansen would be receiving, then subtract the $92 million in land value that the city would be getting back in the deal (Hansen would buy the arena land and give it to the city), voila! $731 million!

In other words, notwithstanding the scary headlines, the “gross shortfall” that Stockmeyer’s report refers to isn’t actually money that Seattle would be giving the Hansen; it’s money that Hansen would have to give Seattle in order for the city to turn the kind of profit that I-91 required, if you count bond sales that the city doesn’t have to pay off as an “investment.”

None of this should be news to the Seattle media, since it’s exactly what Stockmeyer in his lawsuit earlier this year, though he didn’t put a dollar figure on it then. And the shoddiness of I-91′s “return on investment” formula has been established for even longer; as I wrote in July of 2012, when it was Hansen who was using bizarro math to claim that the city would rake in a ton of money from the deal:

The problem here is that I-91 was crappily written, assuming that the city would put up cash up front, and not considering that it might have to borrow money and then pay back both itself and bondholders. As a result, you have Hansen arguing that a deal in which every penny of taxes and rent payments supplied by the arena — even by his own numbers — would get poured into paying off annual bond payments is a net positive return for the city.

That was a dumb argument, and Hansen himself later backed away from it. Stockmeyer, though, seems to be deliberately confusing people about what his economic study means. To repeat: Hansen would be paying off Seattle’s bonds, and (mostly) repaying his tax breaks, but he wouldn’t pay it back and then give Seattle extra money to turn a profit on the deal as well. Whether you think this is a good deal is open to interpretation — Stockmeyer clearly doesn’t think so, two city councilmembers voted against it, and I’m on the record as being pretty meh about it, though “meh” is still better than most arena deals from where I sit. But it’s not a $731 million “subsidy” or “tax break,” no way, no how.

Warriors tweak proposed arena design again, make no one happy

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With San Francisco waterfront activists threatening a public ballot measure on their proposed $1 billion arena project, the Golden State Warriors owners have trimmed their design a bit to assuage some concerns that it would be a great hulking eyesore that would take up precious public space on the bay. Design 3.0 (their name, not mine) would include a slightly smaller roof, a slightly smaller seating capacity, more public green space, and “a gently sloping shop-lined path with a switchback,” because who doesn’t like switchbacks?

Depending on your perspective, this is either an indication that public opposition to the project is forcing the Warriors to work toward a compromise, or, what’s that you say, former mayor Art Agnos?

“It just sounds like window dressing,” Agnos said of the design changes. “The bottom line is this is a mega real estate project.”

Yeah, this sucker is still headed for a public vote. The only question is whether the San Francisco public’s legendary disdain for large construction projects can be overcome by the universal human love for switchbacks.

Virginia Beach revives arena plans, money to come from [SPOILERS OMITTED]

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Sorry for two days of nothing but Atlanta Braves news, but it kind of took over my brain, along with that of the rest of the sports media. (Here’s my latest for Sports on Earth on the whole mess; more on that a bit later.) But surely something else less crazy must be going on in the sports stadium and arena world, right?

Richmond, Virginia mayor plans ballpark on site of slave cemetery

No, no, I said less crazy. Come on, anybody?

The concept of building an 18,000-seat arena at the Oceanfront [in Virginia Beach] that fell apart earlier this year is back with a new player.

Okay, that’ll have to do. Virginia Beach, you’ll recall, last year proposed building a $426 million arena with $391 million in public money, possibly to lure the Sacramento Kings, before the whole thing fell apart when it turned out the state of Virginia wasn’t eager to give them $150 million to help pay for the thing. Then last month there was talk of mysterious Chinese investors, and yesterday the Virginia Beach city council actually voted on, um, something?

W.M. Jordan Co., one of the region’s biggest construction firms, has submitted to the city a proposal with partners to build an arena next to the city’s convention center…

“In talking with various folks, we felt an arena would work without a franchise,” said John Lawson, president and CEO of W.M. Jordan.

He said an existing arena might help attract a team to Virginia Beach, and the building would be constructed so it could be modified to accommodate a team. He said it could open at the end of 2016.

Okay, that’s nice and all that a construction company wants to construct something, but who’s going to pay for this exactly?

Lawson declined to provide financing details about the proposed public-private partnership that would be used to build it. He said that information will come out later. He did say in an email it would be “substantially” cheaper.

“I’m very confident when the financial details are made public that the public will easily understand the financial arrangement and be supportive,” Lawson said.

Oh, one of those proposals. This really is the week for that sort of thing, isn’t it?

If there’s anything to the “substantially cheaper” thing, it sounds like W.M. Jordan may be looking at something along the lines of Oklahoma City’s arena, which was first built for a bargain-basement $89 million without luxury suites or other facilities for a big-league sports team, then later got a $112 million upgrade when the Thunder came to town. It’s not a terrible idea for a small market, though given the economics of concerts vs. sports, Virginia Beach might be better off just skipping the team and booking as much music as it can. Not that that’s still likely to pay off an arena’s construction costs, but at least Katy Perry pays rent.

Not to leave any stones unturned, the Virginia Beach council gave anyone else who feels like building an arena 60 days to submit their own proposals. Because you never know when some more mystery Chinese investors might be lurking out there, just waiting to build an arena for the nation’s 44th largest TV market.

Anti-condo organizers threaten ballot measure on Warriors arena plans

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In addition to the stadium-related ballot items up for vote on Election Day, San Francisco voters cast ballots on a waterfront condo plan, defeating it handily. Which you should care about why? Because this why, that’s why:

Opponents, led by former Mayor Art Agnos, on Wednesday used their election day momentum to call on Mayor Ed Lee to relocate the Warriors arena to Candlestick Point or the Caltrain Station at Fourth and Townsend streets.

The waterfront should be preserved for affordable housing for teachers, artists and others, Agnos said, and if Lee won’t budge from what he calls his “legacy project,” the same group that defeated the 8 Washington condos will sponsor a ballot measure to defeat the Warriors arena, too, he said.

It’s not entirely clear that a victory over a waterfront condo tower is going to translate into a victory over a waterfront arena — say what you will about the modern sports industry, the general public does actually get some use out of a place to see basketball games and concerts, which can’t be said for rich people’s apartments. But it does look increasingly likely that the Warriors plan is going to end up going before voters, so expect this to turn even more into a public war of words between the team and Mayor Ed Lee on one side, and Agnos and his allies on the other. In fact, look, it’s already started:

“Art Agnos just won a game of pingpong, and now he thinks he’s a Wimbledon champion,” said Nathan Ballard, spokesman for the Warriors project.

Because ping pong is a wimpy sport, get it? Because it uses tiny balls. And that’s just the kind of thing sports people say.

Brooklyn arena developer sues NYC to get lower tax bill on its parking lots

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Forest City Ratner, the developer of the Brooklyn Nets arena and the as-yet-mostly-unbuilt surrounding Atlantic Yards housing tower project, is suing the city for lower property tax payments on one of its parking lots. Because that’s just what developers do:

The Finance Department put the block’s market value at $11.2 million for its current fiscal year, which began July 1. But FCR says in a lawsuit filed in Brooklyn Supreme Court that it’s only worth about $1.6 million…

“As you can imagine, real estate and development companies like Forest City have a fiduciary responsibility to review and question assessments in a timely manner,” FCR spokesman Joe DePlasco told DNAinfo New York.

“This is a standard operating procedure for these types of companies.”

FCR, you may recall, last year sued the city over its Barclays Center tax bill, then later said it was a mistake, after realizing that Barclays Center doesn’t pay taxes. Nor does the parking lot block, technically, but it does pay PILOTs (payments in lieu of taxes), which, unlike the PILOTs for the actual arena site, the city gets to keep, rather than kicking them back to pay off Ratner’s arena costs.

Under the deal to build on the Atlantic Yards, FCR leases the block for a nominal fee from the state’s Empire State Development Corporation.

Since the state owns the Atlantic Yards, the land is exempt from property taxes. However, FCR must make payments in lieu of taxes, or PILOTs, to the city to develop the block.

The PILOT amount for the block is the equivalent of what FCR would pay the city in property taxes, according to the ESDC. The Finance Department determined that for this fiscal year the property tax for the block would be nearly $700,000, according to city records.

If the court agrees to lower the city’s appraisal, FCR would in turn pay a smaller PILOT amount, according to the ESDC.

This is apparently the kind of lawsuit that land owners file all the time, so no hard feelings or anything between FCR and the city. Unlike the lawsuit by employees of Ludwig’s Drug Store charging racist treatment when they attended games in the store’s luxury suite, which looks to have hard feelings aplenty — understandable when you’ve been charged $1,000 for a pizza.

MSG unveils $1B in new renovations, but will they soon face the wrecking ball?

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I’m pleased to announce that today I make my debut writing about sports economics for Sports on Earth, the spiffy newish website that is a joint project of USA Today and MLB Advanced Media. (I’m trying not to think about whether this means that Bud Selig will be signing my checks. Or touching them, even.) And while my portfolio will range a lot wider than just stadiums and arenas, today’s item is right in the wheelhouse of this site: a look at Madison Square Garden’s new $1 billion renovation, why the Garden’s owners were willing to throw this much money at a 45-year-old building, and the looming threat that the city could evict the Knicks and Rangers in another ten years.

Here’s a highlight:

The permit may expire in 2023, but there’s nothing magic about that number; as we’ve seen in numerous other manufactured crises around stadium deadlines, leases are made to be extended. The city could technically order the Knicks and Rangers to vacate the premises after 10 years, says Independent Budget Office chief of staff Doug Turetsky — “theoretically, they could ask them to tear it down” — but far more likely is that the city will use this as leverage to get the Garden’s owners to start thinking about moving elsewhere whenever the shine wears off the new scoreboards.

Go read the rest! Poppa needs a new set of hit counts! Also, you might learn yourself something.

The latest Sacramento Kings arena plans, presented entirely in attempts at spin

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Sacramento Kings officials presented arena “concepts” to the city council yesterday, including a bunch of renderings that, the Sacramento Bee stresses, “are not arena renderings.” Presumably this means “they’re just a bunch of random sketches that the Kings threw together so that we could put up a slideshow, because man, do slideshows bring in the hit counts — hey, have you looked yet at our slideshow of not-arena-renderings?”

So if the drawings aren’t meant to look like what the arena actually will, we’re left with what Kings officials said at the presentation. Which was apparently such a tsunami of p.r. verbiage that it’s best just to present it with no context or attribution or anything, just as pure unadulterated spin:

“We want to figure out how to knit the street grid back together. We can’t do that literally – (the arena) is bigger than any city block – but you can create the possibility of moving through the site.”

“We want people to walk there at 2 o’clock on a Thursday afternoon and enjoy being there.”

“We want to blur the lines of whether you’re sitting inside the arena or you’re outside.”

“It doesn’t make sense for us to build a big, giant building. When we go to the (NBA) Finals, and we will get to the Finals, we know we can address (the need for more seating) to pump up the crowd.”

What this seems to add up to, reading between the lines, is: “We don’t want to spend a lot of money building a building that we can’t sell out on a nightly basis, so instead we’re going to put some folding chairs outside and let people peek in through a window. Also, we know that arenas create giant obstructions to the streetscape, but this one will be different because, um, architecture!”

Which is a nice goal, but it’s far easier said than done. Kings officials are getting really good at the saying part, though.

Timberwolves agree to extend lease seven years in exchange for $48m in arena renovation subsidies

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Last year’s announced plan to renovate the Minnesota Timberwolves‘ Target Center, which was already renovated once in 2004, has finally been finalized (the city council will vote on it two weeks from today), and it actually doesn’t look quite as bad as it did originally: The total cost is now down to $97 million (from an initial $150 million estimate), the team and city will roughly split the costs, and the T-Wolves have agreed to extend their lease from 2025 to 2032 as part of the deal. So on the bright side, you can say the city is spending about $7 million for each year of new lease, which is, um, better than it could be?

On the less bright side, the Timberwolves owners managed to extract this deal despite having more than a decade to run on their existing lease, simply by tagging along on the Vikings stadium deal and saying, “Hey, what about us?” So this doesn’t actually guarantee that Minneapolis won’t be asked to put in more money to the Target Center before 2032 — or, heck, to build a whole new arena. It’ll be more than 40 years old by then, after all, and arenas are required to be sent to the carousel after 30.