VA Beach arena gets new bank, news outlets forget to note public still paying off the loans

I wasn’t going to post anything about the latest Virginia Beach arena news, which involves the developers taking out their construction loan from a U.S. bank instead of a Chinese bank, but then I saw this headline:

VA Beach Arena to be funded by U.S. bank

Yeah, just no. The arena isn’t going to be funded by the bank; it’s going to be financed by the bank. The actual funds going to pay off the arena loans will come from a mega-TIF tax kickback of all property taxes, business license taxes, admissions taxes, arena meals taxes, construction sales taxes, the city’s share of arena sales taxes, and the top 1% off of the city’s 8% hotel tax, which will leave city taxpayers providing about $206 million toward an arena that will only cost $200 million to build. Sorry to be pedantic about the word choice, but it’s kind of a big omission when your headline gets entirely wrong who’s paying for your city’s new arena, you know?

Could Hansen seek a Seattle NHL team now that Vegas has one? Sure, but don’t hold your breath

Speaking of getting an NHL team by waving a $500 million check around, our old friend Geoff Baker of the Seattle Times suggests that Chris Hansen might want to do just that if he ever wants to get a Seattle arena built:

For now, with the NBA not expanding and the NHL needing another Western team to balance conferences, it might be worth giving that “NHL first” option another look.

Las Vegas built its arena with private funds, resulting in limited political delays. Of course, an all-private venture for a $500 million arena in Sodo would be tougher without public-bond money.

Yeah, it sure would be tougher: The finances of an NBA arena in Seattle looked difficult enough under Hansen’s original plan, and it would only be tougher with a hockey team (which is projected to bring in less money) plus paying off $200 million that was supposed to be covered by city bonds — though about half those bonds were going to be paid off by Hansen’s rent payments anyway, so presumably he could just replace those with plain old bank loans. Yes, an NHL franchise would probably be cheaper than an NBA one at this point, but you’d also end up with a less valuable asset for your money, so really the concern here is whether Hansen could turn an operating profit on an NHL arena after paying off construction costs — I’m guessing no, but if he wants to give it a shot, more power to him.

Of course, that’s the other thing: Hansen, like Fannee Doolee, loves basketball but doesn’t think much of hockey, so he might not be willing to risk his money just to become an NHL owner. Baker’s theory is that at least it’ll let him build an arena, maybe, so that down the road he can get an NBA team, maybe, which … sure, maybe. I don’t really expect to see Hansen jumping at this option, but stranger things have happened.

Utah official apologizes for “rookie mistake” of voting on Jazz subsidy without public debate

Salt Lake City’s $22.7 million tax break for renovations to the Utah Jazz‘s privately owned arena is all over but the shouting, and there’s plenty of that:

  • Deseret News sports columnist Brad Rock writes that “the tradition of coercing cities into building sports arenas at public expense, under threat of relocation, is tried and true,” but then adds that he’s fine with being threatened if the price is right: “If Utah loses the Jazz, for lack of an updated arena, Salt Lake will return to the college town it was when the team arrived.” Not that the Jazz have threatened to leave town, mind you, or that it would make any sense for them to do so when they’d be abandoning an arena they themselves own, or even that this deal does anything to stop them from threatening to leave again later. But, you know, cold Omaha.
  • Salt Lake City Redevelopment Agency chair Lisa Adams says it was a “rookie mistake” to schedule the arena subsidy vote only one day in advance, and that if she had it to do over again she’d give a month of lead time so people could actually discuss the plan first. Not that she’s offering to go back and change her vote now, but, you know, next time.

Once again, $22.7 million isn’t a huge subsidy for the year 2016, but on the other hand Salt Lake got exactly zero in exchange: no added arena revenues, no signed commitment to stay in Utah for a longer term, just 60% of the additional property tax revenues from the increased value of the arena — where if they hadn’t approved the subsidy, they’d be getting 100% of those. If this is the last time the Jazz ask for public money for the next couple of decades, it’s at least a fairly modest sum; if it turns out to be the camel’s nose, that’ll be a different story.

Jazz owners get $23m in subsidies, at least left Salt Lake its credit cards and driver’s license

The Salt Lake City Redevelopment Agency unanimously approved $22.7 million in tax-increment financing kickbacks for the Utah Jazz‘s $120 million in arena renovations yesterday, because renovations iz gud:

“The improvements they will be making … will be significant and will really add value to the venue and to the neighborhood,” said RDA Vice Chairman Derek Kitchen, one of six board members who voted for the tax break.

As discussed yesterday, there is really no reason for Salt Lake City to be cutting the Jazz a tax break, given that the team owns its arena and isn’t really a danger to go anywhere (or cancel the renovations) if it didn’t get the money. At the same time, it’s only 40% of future increases in property taxes, from both the arena and the rest of the TIF district, and if property tax receipts don’t rise, the city is off the hook for it, and it’s only $23 million on a $120 million project, and $23 million is practically nothing these days, right?

We’re ultimately down to asking whether throwing a relatively small (but still large in normal human terms) amount of money down a hole for no good reason is something to complain about, or something to be glad isn’t so much worse. And the obvious answer is “yes.”

Report: Economists, team owners disagree on whether stadium subsidies are a good thing

Hey, it’s another “longform” article mulling over stadium subsidies! This time it’s in the Atlantic, headlined, “Is There a Better Way to Build a Stadium?” An excellent question, albeit one that raises suspicions of Betteridge’s Law being at work here, but let’s see what author Alana Semuels has to say:

It has become widely accepted that publicly-financed sports stadiums are a bad deal for cities.

Well, yeah. The only example given here is the St. Louis Rams deal, which was indeed bad but is by no means definitive, but subsidies are long and online attention spans are short, so let’s move on to the nut graf:

What’s different in the case of Milwaukee? Either a whole lot, or nothing, depending on who you ask.

Oh, lord, this isn’t going to be a he-said-she-said “there are opinions on both sides” article, is it?

Next up is a quote from Wisconsin Gov. Scott Walker on the Bucks deal (“we think this is a good, solid move as a good steward of the taxpayers’ money here in Wisconsin”), then a counter from economist Victor Matheson (“There is a fairly big deal of hypocrisy going on particularly in Milwaukee Bucks case”), plus a cite of studies showing bad returns on public spending on stadiums and arenas. Then a confusing discussion of tax-exempt bonds (“Public financing for stadiums came about as Congress tried to limit deals that allowed private entities to profit from tax-exempt bonds,” wait, what?), then “it’s possible that the Bucks, and other teams, have learned something from the public antipathy towards public financing of arenas.” Learned how?

The team isn’t just using public funds to build an arena for itself; it is also pledging to build a seven-story parking structure alongside the arena with mixed-use retail on the ground floor and an apartment complex on the eastern side. It has hired a design team for a block of entertainment, retail, and commercial spaces, and hopes to begin building that area next year, according to spokesman Jake Suski. The team is also the master developer for the entire 27-acre development, which may someday include bars, restaurants, a public plaza, and eventually office space, multifamily housing, and a hotel.

Yeah, that’s not new at all — team owners have been building ancillary development next to sports venues for so long that I’ve already come up with and abandoned a nickname for them. (“Kitchen-sink plans,” because they throw in everything but — you can see why I abandoned it.) Then there’s lots of back and forth about whether this can work out well (conclusion: maybe), and finally a Milwaukee law professor saying, “I remain a skeptic.” And FIN.

This isn’t even an example of Betteridge’s Law so much as an example of an article that sets out to answer a question, then throws up its hands halfway through, because hell, people disagree on the answer. Admittedly, one side is the people who stand to reap a fortune in subsidies — more than $500 million, a figure that is not even hinted at in the Atlantic article, which apparently either doesn’t consider tax breaks to be subsidies or just takes Walker’s word on how much the subsidies are worth — and the other is just about every economist and independent investigator on earth, but hey, who are we as journalists to say who’s right? One thing’s for certain: No one knows.

Jazz propose $125m arena renovation, get blasted by Koch group over $23m in tax breaks

Utah Jazz owners the Larry H. Miller Group are planning a $125 million “major renovation” of their arena, and they’re actually going to pay for it with their own money! Except the part that won’t be paid for with their own money:

The price tag for the renovation has been set at $125 million, with the vast majority ($102.3 million or 82 percent) being funded by Larry H. Miller Sports & Entertainment.

The remaining $22.7 million (18 percent) will come from public funding if the organization’s proposal to Salt Lake City’s Redevelopment Agency next Tuesday is approved in that group’s monthly meeting…

If given the thumbs-up, the public finding would be delivered via intermittent payments over the course of the next 25 years, perhaps sooner, through the city’s Tax Increment Reimbursement mechanism.

Yep, that’s a TIF, or at least a variant on one, since only 40% of the added tax revenue (some of which would come from property taxes on properties other than the arena) would get kicked back to the team. It’s not a huge subsidy, to be honest — though it would be nice to know if the city still has to pay the $22.7 million if property tax receipts do not, in fact, go up — but the Koch Brothers–funded Americans for Prosperity is still opposing it, asking, “Why are we giving multi-billion dollar corporations tax dollars to build or renovate arenas?” (The Kochs themselves have only gotten multi-hundred-million-dollar tax breaks.)

Holding the line on any tax breaks isn’t a terrible idea, especially since there’s no indication that the Jazz would skip out on the renovations or move or set off a thermonuclear device or anything if they were denied the TIF funding. The Salt Lake City Redevelopment Agency is set to hold a hearing on the proposal at 1 pm today; at least take solace in the fact that unless there are other hidden subsidies here we don’t know about — always possible! — at worst the Miller family is going to be paying for 80% of a fairly cheap renovation, which as these things go isn’t too bad at all.

Bucks arena bonds get slightly lower interest rate than expected, business journalist rejoices

Anatomy of a misleading sports finance article, the headline:

Bond sale for Milwaukee Bucks arena deemed a success

Ooookay. A success for whom? A success because the bonds were successfully sold? That’s a pretty low bar, no?

The lede:

With the Milwaukee Bucks poised to start construction on their new arena, the largest chunk of public funding for the project came through Wednesday and Thursday via the sale of bonds totaling $162 million at interest rates that experts said are a good deal for Wisconsin taxpayers.

A good deal for Wisconsin taxpayers, really? Tell me more.

The interest rate on a series of bonds for $108 million and secured by the state of Wisconsin had an overall interest rate of just 2.7 percent… “We’re pleased with the strong market response to this sale, resulting in a significantly lower than expected interest rate,” said Wisconsin Center District board chairman Scott Neitzel, who is secretary of the state Department of Administration.

Okay, so Wisconsin got a low interest rate on the bonds. That’s indeed good for taxpayers, since it means lower payments over time to pay off the $108 million. Wisconsin residents will still be on the hook for the $108 million in principal, though.

No new taxes are being implemented to pay the interest on the bonds.

Now this is just straight-up misdirection. No new taxes are being levied because all the money is coming out of general fund revenue: half from the state, half from the county after the state cut its funding for county programs to cover the rest of the bonds.

Another major selling point for investors was the fact that individual Wisconsin investors who bought the bonds enjoyed a tax exemption on both federal and state income tax, Bryden and others said.

“The tax advantage has appeal,” he said. “You don’t get those frequently.”

Another way of saying this is that the bonds are a very bad deal for federal taxpayers, who miss out on taxes on the income that bond buyers are sheltering from federal tax, and who don’t even get the benefit (?) of going to a new Milwaukee Bucks arena unless they live near Milwaukee.

All in all, the story here is “Bond payments for Milwaukee Bucks arena to cost maybe 2% less than expected.” That’s good news, but on a very different scale than the Milwaukee Business Journal is telling it. It’s almost like the only people author Rich Kirchen talked to were bond managers and the state officials selling the bonds — hey, wait a minute…

Inside of new Bucks arena looks more and more like a dystopian sci-fi movie

It’s a bit of a slow news day, so thank goodness the Milwaukee Bucks have come through with some new interior arena renderings for us to peruse while we wait for the last dregs of the week to run out:

pano3pano1v2I don’t know exactly what’s going on with that creepy dark club with the glowy rings on the ceiling — supposedly it gives fans views of both the court and the city, though given that in real life there would be more than ten people in it at any one time, more likely it will mostly provide a view of those TV screens as you crane your neck to see the score while waiting on line for overpriced food. The “corner sponsor tower” next to it, meanwhile, is even more mysterious — presumably it should have a big sponsor logo on it, but instead it’s just three levels of blank void with more of those geometric patterns on the ceilings. The interior of the levels doesn’t appear to be raked at all, so only the people at the front railing (there is a railing, right?) will be able to see the game, from a great distance, while everyone behind them will be … dancing? Enjoying presentations from the corporate sponsor of their choosing? What the heck does any of this have to do with basketball, exactly?

NYU study: Relocating MSG would cost $5B, give it a rest already

Certain sectors of the New York City policy world (the Municipal Art Society, the New York Times editorial board) have been calling for a while for the relocation of Madison Square Garden, so that a new, grand Penn Station could be built in its place. (The old, grand Penn Station was demolished in the 1960s to make way for the current Madison Square Garden, the fourth building to bear that name.) NYU’s Rudin Center for Transportation Policy and Management released a study last week of how much it would cost to do this, and came up with … do I hear $5 billion?

Screen Shot 2016-05-06 at 8.23.17 AMThis isn’t really all that surprising: A billion and a half for a new MSG sounds about right given that just renovating the old one cost a billion, and acquiring new land could easily cost half that in this market. (The Rudin report looks at the price of buying up the annex to the Farley post office building across the street Morgan post office annex a couple of blocks to the southwest, but other sites would be priced similarly, if you could even find any.) And almost $3 billion for building a new Penn Station is already the price tag established by Gov. Andrew Cuomo for his plans (which would leave MSG intact but build lots of new stuff under it).

It’s also important to consider the political context, with Cuomo’s plan to expand Penn Station with MSG in place (to be paid for by some as-yet-unidentified private developer — applications were due two weeks ago, but if any have been revealed it’s news to me) going up against the MAS and Regional Plan Association’s insistence that MSG really needs to be kicked out. Given that Rudin director Mitchell Moss has already endorsed Cuomo’s plan, and his report’s conclusion is “It’s time to move on,” it’s easy to see some political gamesmanship going on here.

Still, this whole mess is a reminder that as easy as it is to envision redesigning your city to undo past mistakes (tearing down one of the greatest public spaces ever, building a kind-of-ugly sports arena in its place), there’s something to be said for actually existing architecture, both in that it’s already paid for, and in that the city has grown up around it to accommodate it. Not to say that nothing should ever get built or torn down, but it’s important to look at the true costs of doing so, and whether the money could be better spent mitigating the effects of your last mistakes.

Seattle councilmember says despite vote against arena, she still likes shiny things

One of the Seattle councilmembers who voted to block Chris Hansen’s SoDo arena plans on Monday attempted to explain her vote to KING 5’s Chris Daniels yesterday:

“I had to balance fact and fiction,” [Debora Juarez] told KING 5. “The fiction is a third arena and no NBA team, and a living breathing port with people and jobs and traffic, and that’s what concerned me the most.”…

“I really, really want a basketball team in this town,” Juarez said.

“I went to Sonics games. I want a shiny new arena in this town, I just don’t believe it belongs in SoDo.”…

However, the North Seattle district representative says she’s not about to push for a Key Arena remodel.  Juarez, who chairs the Council committee overseeing Seattle Center, says it has issues too.

“The zoning would have to change dramatically in that neighborhood, and I cannot see those neighbors saying wider streets, more upzoning, more parking, more congestion,” said Juarez about Seattle Center. “It’s reached a point in its life where it’s become a public space, a public park, a cultural icon, and that’s why I would like to see a brand new shiny arena somewhere else”.

So: Juarez likes basketball, and likes shiny things, but didn’t like this shiny thing, because it might not have basketball and also JOBS! And TRAFFIC! That’s clear as … something not very shiny.

Proponents of the arena responded in appropriately measured tones:

There’s still a chance that this eventually leads to everyone taking a step back and figuring out what makes the most sense for Seattle, outside the emotional debates about bringing back the Sonics. But for the moment, the future looks not very shiny at all.