No, Columbus Blue Jackets’ future isn’t actually threatened by county’s arena loan woes, yeesh

Mike Ozanian, aka the guy who’s been overseeing the Forbes sports team valuations since before Forbes was even doing them, took a look at the Columbus Blue Jackets arena loan payments mess yesterday, and declared that the team may be “economically nonviable” in its current home.

On the face of it, this doesn’t make a lot of sense: Franklin County has skipped out on paying off its debt on the Blue Jackets’ arena (which the Blue Jackets initially took on, then decided it’d be way better if somebody else were stuck with paying for) because money from taxes on new casinos is running way below expectations. That doesn’t say anything about whether people in Columbus like hockey, just about how much they like spending their money at casinos — and about how rose-colored the glasses were that Franklin County officials donned before approving this deal.

What Ozanian seems to be getting at, though, isn’t anything about the current arena payments mess, but rather what it will reveal about the Blue Jackets’ shaky underlying finances. Team execs demanded the money in the first place, after all, because they said they couldn’t possibly pay off the arena that they themselves built while also running an NHL franchise in Columbus, and Franklin County agreed to bail them out. Now that the bailout money is on hold, Nationwide (which originally built the arena with the team) will have to wait on its loan payments. The Blue Jackets owners, meanwhile, will be on the hook for arena operations and maintenance, which are … actually just barely being paid off by what casino tax money is coming in, but, you know, if that number drops, then they might have to pay something toward running their own arena!

Certainly, any cost for the Blue Jackets will be a lot, given that Ozanian’s own figures for Forbes show that the team was losing larger and larger sums of money until the arena operating costs were taken off their hands in 2013. On the other hand, the team did make an estimated $4.9 million profit last year under the new deal, and casino revenues would have to drop by an awful lot before the Blue Jackets’ share of operating costs would make a significant dent in that. And anyway, under the bailout deal the Blue Jackets are committed to playing in Columbus through 2039, so it’s not like they could do much even if they were “nonviable.”

So mostly Ozanian’s article comes down to “County’s Threat to Make Blue Jackets Pay Own Arena Costs Reminds Everyone How Broke Team Was Before Public Bailed Them Out.” Poor, sad Blue Jackets. Hey, I know what would cheer them up — a nice fun trip to a local casino! Because that always helps!

Franklin County not making payments on Blue Jackets arena, because turns out there’s no money, oops

Hey, everybody, remember when Franklin County refused to let residents vote on whether to stop payments on the Columbus Blue Jackets‘ arena because if the county voted to pay for things and then didn’t that would make them look terrible? Turns out the county has stopped making payments after all, for a simpler reason — they don’t have any money! It’s irony!

The city-county authority financed the $52 million deal through loans from Nationwide and the State of Ohio in March 2012. To make the payments, the city and county pledged to use a portion of casino tax revenue.

But casino revenue is far below projections. And Franklin County Convention Facilities Authority Executive Director Bill Jennison said no payments have been made to pay off either loan. More than $3 million remains unpaid.

County officials say that if casino taxes don’t start rolling in, they’re not going to fill in with general revenues, but rather will just make bondholders sit and wait for their cash. Wait how long?

[Activist Jonathan] Beard ran his own numbers and expects the city-county authority to be paying on the loan far beyond 2039 based on current casino-tax revenues returns.

“We showed a $1.8 billion deficit at the end of 100 years when we’d still be paying on the [arena]. So it’s this huge albatross,” Beard said.

Yep, that’s a while. I’m guessing at some point somebody is going to suggest selling a few hospitals to save the county’s bond rating in the meantime.

Sporting News went to a Florida Panthers game, and the Miami Marlins’ attendance broke out

The Sporting News has been publishing since 1886, but never let it be said they haven’t learned how to update their headlines to the way the kids today like them:

Oh boy, the Panthers’ arena is empty again (PHOTOS)

And here’s one of the promised PHOTOS:

It got a bit better once the game actually started, but still, it’s never a good thing to have the Sporting News writing: “Part of the reason for all this: the team ended its long-running practice of ‘giving away tickets for free just so the building will have people in it’ for this season.”

Panthers owner Vincent Viola still wants $80 million from Broward County to make it worth his while to keep the team in town — despite a lease that runs through 2028 and the fact that he still makes money on the arena operations despite nobody going to hockey games — but at this point you have to wonder what he’d do with it to get people interested, unless he just stands at the doors handing out twenties to anyone who agrees to watch this strange “hockey” thing.

Markham arena proposal still missing, declared dead

This happened a while back, but I didn’t want to leave you hanging: Remember how Markham’s crazy arena plan was pretty much killed last December, when the city council sent it back to the drawing board for further study? Well, apparently it’s now completely dead, thanks to the developer in charge of it disappearing off the face of the earth:

In the summer, staff confirmed that they were no longer in touch with Graeme Roustan, the arena’s chief promoter, and the project was officially over.

“We never heard from him again,” said Joe Li, who is running for a second term as regional councillor and was one of the first to oppose the financial plan for the arena.

Yeah, that would have gone well if they’d gone ahead with it. Now somebody just tell Howard Bloom that there’s not going to be a place for a second Toronto team to play.

Arizona Coyotes being sold again (of course), could demand more subsidies (of course)

The saga of the Phoenix (now Arizona) Coyotes was one of the longest in recent sports history, and ended in 2013 with the city of Glendale agreeing to pay the team $15 million a year to stay put in town for just five more years. But at least it’s finally over, and now Coyotes fans, such that there are fans, can enjoy the Coyotes season in peace, such that there’s much to enjoywait, what now?

The city of Glendale is not sure what impact — if any — a sale of the majority stake in the Arizona Coyotes will have on a $225 million arena accord reached with hockey team’s owners last summer…

City officials are not sure yet if a change in Coyotes majority ownership would necessitate a new or amended arena subsidy.

Why on earth would Glendale have to kick in more money just because of the checks being made out to a different name? Phoenix Business Journal doesn’t say, but presumably it’s connected to the out clause in the Coyotes’ lease, which allows the team’s owner (whoever it is at the time) to break the lease and move the team in 2018 if they’ve lost more than $50 million over the previous five years.

The Coyotes say they lost $24 million last year, which would certainly put them on the path to lease breakage. But it’s not entirely clear that that entire loss is really loss. As David Shoalts of the Globe and Mail explains it:

The problem for the latest owners is the same as it was for all the previous owners – despite any claims to a successful first year, the Coyotes’ cash flow is not enough to service the franchise’s enormous debt. The team’s hockey-related revenue (HRR) for the 2013-14 season was said to be just $40-million, last among the NHL’s 30 clubs.

Gosbee and LeBlanc borrowed $120-million from Fortress Investment Group and $85-million from the NHL to finance the team and have some working capital left over. While the NHL loan is at favourable terms, one source pegs the interest rate for the Fortress loan at 10 per cent.

The New York Post, which first reported the $24 million loss figure, doesn’t indicate if this counts debt service. But if it does, it’s completely ridiculous: Just because the team’s owners took out a terrible loan (which is soaking up the entire $15 million in subsidies from Glendale to pay off) because they didn’t have enough cash to buy the team shouldn’t count against the franchise’s performance. And it certainly shouldn’t allow the Coyotes owners to cry poverty in order to demand more subsidies. (They would have to repay some of the subsidies to do so, but it’s not really about whether they’d use the out clause, but whether they’d threaten to.)

Anyway, let this be a reminder to city officials everywhere: Don’t sign lease clauses based on team profits and loss, because the teams can cook the books however they want. Maybe someone could just print up some nice plaques with Paul Beeston’s quote on it and send them around to city halls everywhere? The world will appreciate it.

Detroit using adjustable-rate bonds for Red Wings arena because that’s all banks would give them

Here’s some more explanation of the Detroit Red Wings‘ new arena financing plan revealed last week, courtesy of Crain’s Detroit’s Bill Shea. In short: It’s still pretty much the same deal as announced last year, which is that the state and city give Red Wings owner Mike Ilitch about $300 million in cash and land, but it’s cash that the state says it’ll only use for economic development anyway, so why not give it to Ilitch instead of blowing it on something like working streetlights?

The main new twist appears to be that the Downtown Development Authority had to use variable-rate bonds for the project — i.e., bonds where the interest rate can go up later if the prime rate rises — because “under market conditions right now, [fixed-rate bonds were] not available,” an indicator that bond brokers weren’t real excited about this deal, and an explanation of why those interest-rate swaps were necessary as a hedge against interest rates soaring down the road. Though apparently the DDA intends to refinance in a few years once the project is underway and they can maybe get a fixed-rate loan and … man, these people really are taking every page they can find from the real estate bubble financial playbook, aren’t they?

Detroit to use (DUNH dunh dunh!) interest-rate swaps in Red Wings arena deal

The Michigan Strategic Fund approved new terms for the Detroit Red Wings arena bonds this week that involve … frankly, I don’t entirely understand them either, despite an excellent Bill Shea article in Crain’s Detroit Business attempting to explain them. Suffice to say that the Downtown Development Authority will now be able to pay off the bonds more quickly if more tax revenue comes in than expected (instead of having a $15 million a year cap), plus there will be credit-default swaps, which nobody truly understands except that they almost broke the global economy.

[CORRECTION: In fact, they're so confusing that I confused interest-rate swaps, which is what the DDA will be using, with the related but distinct credit-default swaps. Interest rate swaps didn't almost destroy the global economy, just some municipal and state budgets. An interest rate swap is essentially a hedge against interest rates going up, but if interest rates instead go down, you end up paying more than you would have otherwise. With interest rates still at historic lows, that's not too likely, but there's still a decent chance that the DDA ends up spending money on the swaps that will gain it absolutely nothing in return.]

In the grand scheme of things, it probably doesn’t matter much, or at least doesn’t matter as much as the $300 million or so that the arena will be costing the Michigan public. But just in case it blows up spectacularly when the DDA spends all its money collecting Pat Boone albums, don’t say I didn’t warn you.

Florida Panthers reassure fans they’re not moving … yet

From the Florida Panthers veiled threat department:

As we close in on the one-year anniversary of our ownership of the Florida Panthers, we want to reiterate our commitment to Broward County, South Florida and our Panthers fans and business partners. As we said at the press conference when we bought the team, we view ourselves as stewards of the team for the community and our plan is to build an organization that makes South Florida proud and to win the Stanley Cup in South Florida. Despite media speculation to the contrary, we have no plans or intentions to move this franchise…
It is no secret that the Panthers and BB&T Center have lost tremendous amounts of money over the last dozen years. We are working hard to address this situation, which we believe we can do with the support from our loyal fans, our business partners, the business community and our community-at-large.

In other words, “Only you can help us meet our goal of sticking around.” The only thing missing is the offer of a tote bag.

[Also, the Panthers aren't actually losing money. But shh, don't tell anyone, gotta keep those phones ringing!]

Bettman: No, NHL isn’t offering expansion teams, and they’ll cost way more than that anyway

Those unsourced rumors about the NHL being about to expand by four teams for $1.4 billion finally got to the point where commissioner Gary Bettman responded to them on Wednesday, and he did so in classic Bettman fashion, both denying that the league is looking to expand, and saying it would want way, way more money if it does:

On Wednesday, Bettman called the report a “complete fabrication,” and took issue with the franchise fees cited in the story — US$1.4-billion, or $350-million per team.

“The part of the story that I found particularly difficult is: suggesting that we would sell four franchises for $1.4-billion is way too low,” Bettman said. “It undervalues our franchises.”

Of course, Bettman could just be saying that, in an effort to make prospective owners (and cities) think that they not only need to put up enough money to grab an available expansion slot, but enough money to make the league think it’s worth their while to expand in the first place. Or the whole thing could just be a trial balloon — hey, let’s hint that we’ll give out expansion teams for a billion dollars apiece and see if anyone bites. There’s really no way of knowing, since the gambit would look the same from the outside either way.

As for $350 million per expansion franchise being “way too low,” well, maybe. The average NHL team was worth $413 million last year, according to Forbes, a number that’s been steadily rising. That’s heavily skewed by big-market Canadian teams like the Toronto Maple Leafs, though — and aside from Quebec, all the likely NHL expansion targets would be smaller markets and in the U.S.

In short: Hey, if Bettman wants to ask for half a billion dollars for an expansion team, he might as well try it — there are clearly a bunch of billionaires out there who just want a team and don’t care what it costs to buy one. And worst case, you just don’t expand, which means forgoing a bunch of quick cash, but also avoiding any more Arizona Coyotes messes, which isn’t the worst thing in the world. Man, is it a good time to be running a tightly controlled monopolistic sports league, or what?

Vegas would be “disaster” for NHL expansion, Seattle not much better, according to Fivethirtyeight’s numbers

Fivethirtyeight has taken a look at the hard numbers behind the possible NHL expansion targets [or at least as hard as you can get from counting up Google searches for "NHL" — see comments], and pretty much concurs with what I said off the top of my head the other day: Quebec could work, as could Toronto (leaving aside the pesky problem of the Maple Leafs wanting that market all for themselves), but Seattle and especially Vegas would be pretty lousy NHL sites:

Teams in markets with fewer than 300,000 hockey fans, however, have tended to lose money, and that’s where the wisdom of adding franchises in Seattle and (especially) Las Vegas gets iffy. We estimated that Seattle contains about 240,000 NHL fans — fewer than that of Phoenix and Florida’s Tampa Bay, home to two franchises that have struggled to turn a profit for many years. And if Seattle is an enigmatic choice by this metric, Las Vegas would be a disaster. According to our estimates, there are only 91,000 hockey fans in the Vegas media market, which is nearly 40 percent fewer than even Nashville, Tennessee, the least-avid current NHL city, has.

Interestingly, Fivethirtyeight estimates that Kingston and Halifax, and maybe even Moncton, Sherbrooke or Sudbury, could viably support an NHL team better than the U.S. cities under consideration — and better even than five current NHL cities, Phoenix, Columbus, Raleigh-Durham, Miami, and Nashville — thanks to the fact that there are actually people who like to watch hockey in Canada. No doubt there are other factors here at work as well — TV networks, in particular, care as much about overall media market size as whether the market contains any actual hockey fans — but it’s still a worthwhile reminder that just because a city has possible arena plans and some name recognition doesn’t mean it’s necessarily a good place to start up a sports franchise.