Virginia Beach arena builder wants to use $240m in unrated bonds, council replies “mmmph”

So after the Virginia Beach city council held its closed session about the city’s $200 million arena subsidy plans yesterday, the members of the council emerged into the light to hold an “informal” session that the public could attend. (Virginia Beach has some deeply, deeply weird ideas about democracy.) And it turns out that some news was revealed, namely that the developer hoping to build the project now wants to cut its cash investment and take on more debt via unrated bonds:

United States Management is interested in taking on as much as $240 million in debt to make sure the company can cover its construction loans, City Manager Dave Hansen said. The developer also reduced its equity contribution from $40 million to $20 million…

In July, the council set a number of requirements, and one of them included obtaining an investment grade bond from a rating agency. That rating hasn’t arrived yet, and United States Management President Andrea Kilmer said she can’t wait any longer if they want to break ground by the end of the year. The new proposal would require the arena to open by the end of 2019, but United States Management has a goal of 2018.

Hansen has said a positive bond rating is essential because it will determine the interest rates on the debt that the city will be reimbursing. The council had a difficult discussion during Tuesday’s closed session about proceeding with unrated bonds, he said.

So do the members of the council intend to still vote for the deal, regardless of its dependence on unrated bonds? No clue: Barbara Henley, who voted against the original deal last year, says she plans to vote against this one, too, but other councilmembers declined to comment publicly, and we can’t even glean anything from what they said in their official meeting, because that’s secret. Hopefully they’ll at least reveal the results of the vote, but at this point I wouldn’t rule anything out.

Virginia Beach arena report redacts actual numbers, council to vote in secret, democracy cries

Something appears to be wrong with Virginia Beach’s arena financing plans — I mean, something aside from all the hidden public costs it will come with. The Virginian-Pilot has a very odd report out today that — you know, let’s just dig in and try to figure it out as we go along:

A new report says the city should move full steam ahead with building a sports and entertainment arena near the Oceanfront.

But the public won’t get a detailed explanation for how Johnson Consulting arrived at that conclusion because many of the financial predictions upon which it’s based have been redacted from the report.

Wait, redacted? Redacting financial predictions from a financial prediction report would seem to be very odd behavior, even in the rarefied world of economic impact consulting, where facts that don’t conform to the desired result must be disposed of. Tell us more, Virginian-Pilot!

“The Hampton Roads region has been starved for a venue of this size and quality for quite some time,” the report said.

“Virginia Beach does extremely well as a tourism destination, but adding an arena to the existing tourism infrastructure could allow for even greater economic benefits for the City.”

Okay, right, report is happy about the prospects of a new arena! But just reprinting its conclusions without noting its methodology — which you already said is murky — isn’t getting us anywhere. What else you got?

United States Management has outlined its finances and projected sales numbers to the city, but has said that an exemption in the Virginia Freedom of Information Act allows it to keep proprietary information confidential.

“Proprietary information”? What would that be? Also, since when do economic impact statements need to be acquired by filing a Freedom of Information Act request — if the city council is discussing it, isn’t it public record by definition?

The City Council will meet in closed session tonight to discuss the project’s finances.

Oh. Well, then.

After meeting in secret, the council is expected to vote on October 4 on whether to throw about $200 million in subsidies — $76.5 million in land and infrastructure spending, plus another $8.5 million a year in tax kickbacks — at an arena that will only cost $200 million to build. The council approved this once last year already, but since then the financing details changed slightly (who’s lending the money, not who’s paying it off), so they have to vote again. Not where anyone can see them, though. That would be gauche.

Wizards’ $50m practice arena renderings are scenes from a post-apocalpytic nightmare

New renderings for the Washington Wizards practice facility (and Mystics home arena) to be built with at least $50 million in city money were released yesterday, and, I’m sorry, what?

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The new arena will apparently be surrounded by a massive frozen pond, or maybe a thin coating of a liquid polymer. Fortunately, no one will be around to try to walk on it, since that could get ugly.

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Is that a WNBA player? If so, why is she wearing so much makeup? What’s suspending the banner (?) in midair like that? And why on earth is there a film reel countdown projected (?) on a brick wall? What is it counting down to? Will there be any concession stands, or will the whole place just feel like an empty hotel lobby?

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The most important part of any new development: lens flare.

new-dcpract-5Put it all together and you have … dear lord. At least the rest of human civilization appears to have been destroyed in whatever cataclysm turned the very ground into a shiny flat surface, so no one will be around to see this. When the aliens land, though, they’re going to be disappointed that there’s nowhere to buy any curly fries.

“Brooklyn Wars” excerpt: How the Nets arena changed Brooklyn

Hey, everybody, my new book The Brooklyn Wars is out today! (Yes, I know I said tomorrow, but I figured I’d give you all a chance to order it before tonight’s presidential debate numbs your mental capacities beyond the ability to read.) It’s a look at the ongoing transformation of Brooklyn, something that is not only inseparable from many of the issues we discuss here — public subsidies, skewed economic and political power, dunderheaded elected officials — but that involves two specific sports venue projects: There’s a long chapter on the Brooklyn Nets arena that spawned a boroughwide debate about development and eminent domain; and in the Coney Island chapter, the Brooklyn Cyclones stadium turns out to have been surprisingly (to me as well) pivotal to the reinvention of that famed beachfront neighborhood.

You’ll be seeing book excerpts popping up this week on a couple of major news websites, but I’ve saved a good bit just for Field of Schemes readers: a section on the aftermath of the construction of the Nets’ Barclays Center and the surrounding Atlantic Yards/Pacific Park development, and what it did for — and to — the existing neighborhood. Enjoy, and if you’d like to read more, please buy the book!


On September 28, 2012, the Barclays Center arena opened its doors for the first time, for a concert by co-owner Jay-Z. Outside, concertgoers mingled with a few dozen protestors and various onlookers, including a Columbia University class on urban design. Inside, ticket buyers ogled the black-and-grey color scheme and three layers of luxury suites — two forming a vertical wall between the lower and upper decks, the other ensconced at floor level and dubbed “the Vault,” with a half-million-a-year price tag — while high-definition video boards flashed a pre-show message of gratitude: “Thank You Bruce Ratner.”

The building itself by then looked nothing like architect Frank Gehry’s original designs. The odd angles were gone, replaced by a perforated rust-colored steel façade designed by fill-in architects SHoP. (To prevent the rust from dripping on passersby on rainy days, the steel was “pre-weathered” in Indiana before installation; it ended up staining the sidewalks below with orange splotches regardless.) Its size had been trimmed as well, as part of a “value engineering” to cut costs during Ratner’s bond crisis, leading to a shape that fit fine for basketball, but not hockey, a condition that would lead to many obstructed views when Islanders owner Charles Wang chose to move his team in from Long Island anyway in 2015. A promised jogging path and public ice skating rink on its roof, floated as public benefits of the project, had faded away as well, replaced by a plain roof with the logo of naming-rights sponsor Barclays Bank on it, the better to be viewed from airplanes on the approach into La Guardia.

On event nights, the blocks around the arena were utterly transformed, as the surrounding streets swelled with traffic and the subways disgorged thousands of arriving fans wearing Nets shirts, Islanders jerseys, or rainbow-colored Barnum & Bailey circus hats, then reabsorbed them three hours later. (The arena developers had purposely built little parking to discourage car use; as Forest City Ratner senior vice president Jane Marshall explained at one community meeting during the planning process, “There’s a healthy fear that’s already there in potential attendees, and we’d like to encourage that.”)

For a sports arena, though, that’s a minority of the time. In its initial year, the Barclays Center was open for business about 200 nights, which is at the high end for most arenas. The other 165 days a year, plus most mornings and afternoons, it sat like a great beached robot whale at the intersection of Atlantic and Flatbush. An oblong video board tucked beneath its “oculus” — a kind of metal awning with a large hole in the middle, which was just as useful for protecting waiting fans from weather as it sounds — flashed promotions for upcoming events and for various building sponsors: the Daily News App, GEICO, Starbucks, Calvin Klein, Zappos, Bud Light. (Giant animated beer bottles hovering over Flatbush Avenue would normally require special city permission, but the state’s control of the site meant it could trump city billboard laws.)

The surrounding blocks, meanwhile, were an odd mix of the brand new and the remarkably unchanged. Across Flatbush from the new arena, a row of small shops had been converted into outlets of the Shake Shack upscale fast-food chain and the True Religion boutique clothing chain; other storefronts remained vacant, awaiting more revitalized uses. Across Pacific Street to the north, a PC Richard electronics store — itself put in place in the 1990s after a controversial deal to partially relocate a community garden that had been planted there during the previous decade, when the site was an underused parking lot — was fighting the state’s attempts to displace it via eminent domain for an office tower of unknown height. To the south, the former Triangle sporting goods store — named for the shape of its building, isolated on a tiny block bounded by Flatbush, 5th Avenue, and Dean Street — had been sold after ninety-six years in business for $4.1 million to a pair of real estate investors, but remained empty three years later, a wraparound cellphone ad covering its vacant windows.

South again across Dean, the owners of a Patsy’s pizzeria — a newly opened branch of the original East Harlem fixture that claims to be the first pizza place in the city to sell single slices — explained that the arena had been a great boon to their business, but they’d come to grab a slice of the greater Park Slope market as well. “Building a restaurant anywhere, if you have a quality product, you could be a back alley and people will come to you,” said Joe Juliano. “But it could take two-three years — and I don’t have two-three years to pay rent. So over here we have a captive audience across the street, and three nights a week we have the games. That really helps while you’re trying to pay the bills.” Not that capturing an arena audience that only arrives in three-hour bursts is easy, he explained: “You have 100 seats, they all want to be fed in one hour. Our pizza only takes a minute and a half to cook — that helps.” His partner, the Bensonhurst-born Anton Reja, put down his cigar to chime in: “Between this one, the corner, what’s happening over there, you got six thousand families coming into the neighborhood. But this is not working for everybody. People who are coming to see the game but going to eat, they don’t want to go four blocks away. They want to go fast.”

In fact, said Reja, while the arena was a nice bonus, his bottom line was reliant less on spillover from the arena than from the growing aura of Brooklyn as a whole. “I get a lot of locals, and then I get a lot of people who come in from Long Island, and from lots of different countries,” he said. “One night, in my restaurant, I had five tables, five different countries: New Zealand, Australia, France, Mexico. It was unbelievable. They came because of Patsy’s, maybe go to the games. And they’re just coming to see Brooklyn. Just coming to see Brooklyn!”

One block to the east, on a once-residential block of Dean Street now dominated by a police station, a fire station, and the arena’s hulking backside, the owners of Dubai Mini-Mart were finding themselves to be somewhat less of a destination. “The stadium went up, families moved out,” said Abdul Ibrahim, one of a group of cousins who opened the small grocery store in around 2005. Ibrahim, who grew up in part with his mother in Cleveland, in part with his father in East New York, said his family chose the site after the city renovated a small park nearby, building baseball and soccer fields that drew families to the block.

His main clientele, he related, still came from these families, plus police and firefighters at stations on the block, as well as workers at the arena and those erecting the pair of apartment towers that were being squeezed in on two of the arena’s sides. But even they couldn’t provide the same customer base as the now-vanished full-time residents. “Now groceries stand on the shelf. People just buy drinks sometimes,” said Ibrahim. “It’s not like when the neighborhood was a neighborhood.”

Smack up against the arena’s southern side, a bright-red 32-story tower was close to being finished, after years in the works; it had been held up when the contractors chosen to run Ratner’s new “modular” construction plant quit in a huff, saying there was no way to operate it without losing money hand over fist. (The modular technique, in which components of the building would be assembled off-site and then stacked like Legos, raised concerns about whether the project’s promised 17,000 construction jobs would ever materialize.) A couple of blocks to the east, a pair of housing towers — rebranded “Pacific Park, Brooklyn’s newest neighborhood” to avoid the taint of the Atlantic Yards name — were playing rapid catch-up, having broken ground with the aid of Chinese investors, attracted in part after Ratner sought financing via the federal government’s “EB-5” program, which doles out a fast track to green cards for foreign investors who provide low-interest loans to American development projects.

Once those buildings opened, Ibrahim would no doubt see an influx of new customers, but his landlord had warned him not to expect to be around to see much of it. “He told us he’s not going to renew our lease,” said Ibrahim. “We got to do the next four years, and then he’s going to push us out.”

Around the corner, the Slope Food Market had already shut down, shuttering after seventeen years on the spot. Its owner, who gave his name only as Khalid, had packed up and started over with a small luncheonette in the Department of Motor Vehicles building in Coney Island. “I took the store for three years, and the rent started going up high — five hundred dollars escalation every year,” he said there, while ringing up customers. An employee accidentally sold cigarettes to a minor, causing him to lose his Lotto and cigarette licenses for six months; after more losses and more rent increases, he chose to shut down. As for the arena, he said, its impact was almost unnoticeable: “Barclays Center, I tell you the truth, it has an advantage and a disadvantage. It improved the area, and made it look high-class. But as far as business impact, I would say it did not really make a big difference, because the only people we used to get from the Barclays Center were the employees coming into the deli to buy hot sandwiches.” The expansion of the Atlantic Avenue train station to bring more people to the arena, meanwhile, had meant fewer riders disembarking at the next stop, Bergen Street, which happened to be in front of his store. “We lost all the people coming into it. We didn’t see any people coming from the train.”

Two blocks away, the easternmost outpost of Pacific Park, a seventeen-story condo tower sheathed in grey fake brick, was going up on a double-sized superblock at the corner of Vanderbilt and Atlantic Avenues. Vanderbilt, long the main shopping drag of Prospect Heights, was now jammed tightly with new stores and restaurants, including Ample Hills, a homemade ice cream parlor that had soon expanded throughout the borough, and Empire Mayonnaise, an artisanal mayonnaise store that attracted media attention for its $8 jars of white truffle mayonnaise, though it had few visible walk-in clients. After Saturday Night Live lampooned them in a sketch about gentrifying Brooklyn, co-owner Elizabeth Valleau told Good magazine: “We got a whole bunch of new customers because of that skit, so we’re very happy about it.”

Valleau, who said the opening of the arena “had little to no effect on our business” — the location, she explained, had been selected mostly because it was near to her and her business partner’s homes — was somewhat less happy about being painted as a harbinger of neighborhood doom. “People are trying to politicize us, but ultimately we’re just a couple folks from the neighborhood who have a condiment business and we’re making it in the neighborhood instead of in a big warehouse out in New Jersey,” she told Good. Gentrification, she continued, had changed in Brooklyn in recent years, from being “more about new families and small businesses that actually cared about growing a future with the neighborhoods they moved into. [But now] we have these machine-style corporations eating up real estate and literally pushing people out of their homes and businesses the second a new community garden or cupcake shop appears.” Some change was inevitable, she indicated, but the city could be doing more to mitigate the impact. “What it is, is depressing.”

In a subsequent email interview, Valleau reiterated that her store should be seen as “a part of the community that could be pushed out by further gentrification, as opposed to a driver of it” — even at $8 a jar, apparently, mayonnaise sales could only pay so much in rents. (In fact, the storefront eventually closed in summer 2016, though its owners planned to relocate their wholesale mayonnaise business elsewhere.) “I understand how our business could seem frivolous from the outside, but that’s only if the viewer doesn’t realize that we manufacture every jar that we sell worldwide in a 300-square-foot space. There is nothing fancy happening here whatsoever.”

It was the typical New Brooklyn quandary: The minute you arrived in a new neighborhood, it was time to start looking over your shoulder for who was coming after you. Back at the mini-mart, Ibrahim noted that the process had taken a toll on his upstairs neighbors as well: In the past decade, his building’s landlord had already raised apartment rents from $900 a month to $3500 a month. “I’m not mad at him, because development is always good,” he insisted. “But I just feel bad because of the families that we lose. The people that live in the neighborhood, kids, that’s what I’m used to growing up. Not all these big skyrises that could have stayed in the city. But I guess you can never stop change.”

His business partner Ahmed Khtri was more cynical. “To run a business and establish a business, have it in a poor neighborhood,” he advised. “More secure, reliable people. You have it in a rich neighborhood, it comes out greed, and people who love money more than humanity.”

“If they want people to move out of the city, they should make a place for them,” said Ibrahim. “New New York, for the middle class and the broke.”

Print and electronic copies of The Brooklyn Wars (Second System Press, 2016) are available for purchase from brooklynwars.com.

Utah Jazz spending $23m in tax breaks on really big sign reading “PIZZA,” apparently

The owners of the Utah Jazz, as you may recall, are launching a $125 million renovation of their privately owned arena with the help of $23 million in tax kickback subsidies that were approved with no public debate and for no damn reason (Salt Lake City got exactly nothing in exchange for its money), and now they’re releasing their first renderings of what they’ll be spending their cash on, and for some reason the first image is this: screen-shot-2016-09-22-at-7-36-05-amThat’s a whole lotta pizza concession stand! And it tells you that it’s selling pizza! And it’s sorta shaped like a pizza? And the guys making the pizza are definitely wearing chef’s hats, because you can’t put a price on that.

There are other photos in the Deseret News’ slideshow, and you know, the pizza one might actually be the most impressive. Jazz owner Gail Miller may be good at getting public subsidies in exchange for nothing, but she has some work to do on coming up with shiny vaportecture renderings to make taxpayers think they’re getting something for their money.

Sacramento paper says Kings arena won’t cost much in taxes, ignores tens of millions in taxes

Want to read a long, involved article about sports arena finance that tries to clarify things but is only likely to make readers much, much more confused? Dale Kasler and Tony Bizjak of the Sacramento Bee have you covered:

Welcome to Golden 1 Center. That’ll be $18.3 million, please.

That’s how much the city of Sacramento will pay each year to help fund the Kings’ new $556 million downtown arena, set to open Oct. 4.

So far, so good. The original projection was $21.9 million a year, but the city got a 5.67% interest rate instead of an even more extortionate 6.7%, so phew.

The Kings will pay an estimated two-thirds of the debt service through lease payments and property taxes generated by the new arena.

Errrr? The Kings’ lease payments start at $6.5 million a year, and do eventually escalate to $16.7 million by by the end of the lease. but while that may average almost two-thirds of the costs (57%, according to the Bee), it’s heavily skewed toward the distant future, and as anyone who’s taken out a loan (or, you know, handled money) should know, cash flow is way more valuable now than it is 30 years from now. (If you disagree, please lend me $10,000, and I will repay 100% of your costs with a $10,000 check in the year 2046.) So in present value terms, which is how one should be calculating this, it’s a whole lot less than two-thirds.

As for “property taxes” paying for the bonds, I have no idea where that’s coming from. Here’s the actual bond payment schedule, from the city council’s official plan:

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I guess if you count the increased property taxes coming from the arena as a team “contribution,” then maybe that offsets some more of this. (The Bee counts them at $25 million, but doesn’t indicate if that’s present value or what.) But getting to use your property tax money to fund your construction costs is a rather special subsidy not available to normal humans, so shouldn’t be counted as something that is somehow reimbursing taxpayers for their costs.

Increased parking revenue only has to support about 10 percent of the debt, according to the city’s latest cash flow projections. About twice as much money will come from dollars that will get freed up when existing debt on city parking garages comes off the books several years from now.

What? Taking parking-garage debt payment money that otherwise would have returned to the general fund when the garages were paid off and instead funneling it to pay for the arena isn’t free money — it’s, well, money that otherwise would have been returned to the general fund. It’s good that it won’t have to come from parking meter fees, sure, but it’s still the public paying for it.

What this all adds up to is less “this won’t cost the public much” and more “don’t worry, the amount of public money we projected to pay off the arena will be enough to cover the bills.” Which, to be fair, is what Kasler and Bizjak say in the article, if you read carefully enough. (“City officials say Sacramento can handle the debt with room to spare, and without dipping into its general fund.”) Unfortunately, whoever wrote the Bee’s headline did not read carefully enough, and came up with this:

New Sacramento arena relies on city parking fees – plus lots of cash from Kings

And that, kiddies, is how journalism becomes spin.

Here’s the Hornets’ new scoreboards, also my Brooklyn book is out in two weeks

Want to see $24 million worth of scoreboards (okay, all that money didn’t go to scoreboards, but some of it did) that the Charlotte Hornets built with public money? Here you go!

hornets-scoreboard-mk009750xx5642-3174-0-294And there’s a whole slideshow full of more of them here, though most of them aren’t very interesting.

In almost but quite entirely unrelated news, today my publisher Second System Press and I announced that my book The Brooklyn Wars will be available for purchase starting Tuesday, September 27. This is somewhat related because one-quarter of The Brooklyn Wars is dedicated to a recounting of the planning, construction, and aftermath of the Brooklyn Nets’ Barclays Center and its surrounding Atlantic Yards development project — any Field of Schemes readers who are members of the press and would like an electronic review copy right now, drop me an email and we’ll talk. Kickstarter funders, meanwhile, should check their email inboxes for immediate download codes. For everyone else, cool your jets for another 15 days.

Sacramento prepares to pay for new Kings arena with deluge of downtown parking fees

The new Sacramento Kings arena is set to open next month, at a cost of $556.6 million, $255 million of which will come from city coffers. And that also means the extension of parking-meter hours on downtown streets from 6 pm to 10 pm to raise money to pay for the public’s share. The Sacramento Bee has a good long article on how everyone is preparing for this (confusion, mostly), but I’d like to call out just one sentence of it:

Restaurant workers who now park on the street likely will have to adapt.

There are other considerations here for possible negative fallout — like, will some people start steering clear of downtown restaurants once they realize they have to pay for parking — and the city is offering discounted parking in downtown garages for some workers. Still, if you want one epitaph for the publicly funded sports venue era, you could do worse than “workers will have to adapt.”

Three sports venues get new corporate names that you’re going to forget immediately

Lots of old sports venues getting new names this week!

The price tags on the Buffalo deal was $40 million for seven years; no money changed hands in Charlotte, obviously, while the Dolphins declined to say how much they got for 18 years of their stadium name. I’m guessing not much, since nobody is going to remember this corporate name any better than the last five or six, but maybe since they just did a renovation, people will think of it as a new building with a new name?

Anyway, the fact that naming rights are worth more for a brand-new, nameless venue continues to be an incentive for teams to demand them. It’s probably not the best thing from an environmental sustainability standpoint that teams and cities are building stadiums partly just to act as giant billboards, but I can’t complain too much so long as it does allow them to fob off some costs on another sucker.

Ballmer to seek new L.A. site for Clippers in 2024, maybe

Been taking some time away from this site to work on other projects, but hey, it’s summer, right? Nothing new ever happens now, certainly not anyone dropping news of an entirely new arena plan out of nowhere—

Clippers owner Steve Ballmer has begun to explore potential sites for a new Clippers arena, multiple NBA sources said.

What the whaaaa? The Clippers have long had one of the most stable arena deals in sports, playing in the 17-year-old-but-none-dare-call-it-anything-but-state-of-the-art Staples Center alongside the Lakers and Kings. According to the ESPN report, Ballmer is sick of playing third fiddle to the other two teams, and wants to explore whether he can do better by going it alone:

A new facility owned and operated by the team would afford the Clippers greater power to maximize earning opportunities, from sponsorship to licensing fees. As the owner of Staples Center, AEG retains control over naming rights, the business operations of running the facility for events and other substantial revenue streams like concessions.

Well, yes. You know what else a new facility owned and operated by the team would come with? Around a billion dollars in construction debt, that’s what. And while L.A. is conceivably one of the few places where you could make a good chunk of that back on naming rights and maybe seat license sales — i.e., the Rams playbook — that’s quite a hefty nut to pay off before you start enjoying all your maximized earning opportunities. Plus, L.A. is already bursting at the seams with existing arenas, so it’s not like Ballmer would have an easy time filling dates at top dollar on non-basketball nights.

(I’m not even going to get into the possibility of Ballmer asking for public money to help out, because it’s L.A. — or possibly Inglewood — and he’d have to hold a public referendum, but we probably shouldn’t rule it out entirely, because America.)

Of course, it’s also possible something else is going on here. The Clippers’ lease doesn’t expire until 2024, so whatever Ballmer is up to, it has a long lead time. So this could be a matter of exploring his options, or leaning on the Staples Center to give him a revised lease (or lease extension) so that he doesn’t explore his options, or doing whichever he decides is most lucrative once he gets there — i.e., the Islanders playbook. Only one thing’s for sure: He’s not going to Seattle.

“The Clippers are not going anywhere, ever,” Ballmer said. “I will die owning the L.A. Clippers in Los Angeles.”

Or maybe that just means that Ballmer has an incurable disease and less than eight years to live. Parsing owner statements is endless fun!