San Jose could be about to approve $100m+ in lease breaks for Sharks in exchange for diddly-squat

The San Jose city council is set to vote tomorrow on a lease extension for the Sharks on their current arena while talking about whether to build a new one. You can read the proposal here; it’s a bit convoluted and I haven’t made sense of it all yet, but Marc Morris of Better Sense San Jose has sent along his analysis, which is this:

1.       The Sharks get immediate relief from previously obligated rent payments (total reduction is $7.25M = $2M for the Arena and $5.25M for the Ice Center, where the Sharks and their new AHL farm team practice).
2.       Starting in 2018, the Sharks stop paying any rent at all (that’s $0 per year) for the city owned Arena, down from roughly $5M per year.
3.       The City in the short term kicks in $6M and then, starting in 2018,  pays $2.6M for ‘capital and modernization needs’ for the Arena. That of course will be financed by the $0 a year rent.
4.       The Sharks get to spend a lot of this ‘capital’ money for revenue enhancing improvements; for its efforts, the City gets precisely none of the enhanced revenue.
5.       Just to rub it in, the agreement also explicitly prohibits the City from getting any new revenue from its own Arena, like maybe adding a ticket tax.
6.       It appears that the City will take on the interest rate risk for the bonds on the Ice Center, making the current ultra-low rates the new baseline for the rent calculation. After all, there’s little to no probability that rates will go up in the next 10 to 20 years.
7.       And, although this never gets mentioned, the City will continue to pay over $10M a year in interest on the bonds that paid for construction of the Arena in the first place. In the best case, the net loss to the City from the Arena is over $8M a year.

Like I said, I haven’t done the math on this myself, but if Morris is correct, that could easily be more than $100 million in concessions that the city would be providing to the Sharks — all for a team that doesn’t have an immediate alternative option to play in, and which isn’t even agreeing to a long-term lease deal in exchange. (They’d have to stay put through 2025, but it’s unlikely they could get a new arena built much before then anyway.) That’s the kind of thing you might think you’d want to have a hearing on, or even a financial study, before voting on whether to approve it, but that’s apparently not the way the San Jose city council rolls.

Edmonton fills lingering Oilers arena funding gap, city cost now tops $300m

When last we checked in on the Edmonton Oilers‘ $676 million arena plan a little over a year ago, owner Daryl Katz was about to break ground, despite a lingering $50 million funding gap thanks to putting a line item in the budget marked “put a bunch of money from province here.” Arena construction is now well underway — lookit! — and a source has been found for the money that Alberta will still not be providing. Care to guess who? Everyone guessing “Daryl Katz” can put your hands down:

The city is preparing to pay an additional $32 million toward the downtown arena because money expected from the province hasn’t materialized.

Okay then! For those scoring at home, I think that’s now $311 million that the city of Edmonton has agreed to kick in for the arena project, which is a whole mess of loonies.

The good news, such as it is, is that the TIF district (CRL district in Canadian) created by the city to kick back taxes for use on the project is bringing in revenue faster than expected, meaning the city’s “just assume lots of revenue and hope it comes in” plan might actually work out. Of course, that’s revenue that now can’t be used on providing services for all the new development in the CRL district, or anything else the city might have wanted to use it on in the absence of an arena, but at least they won’t have to sell any hospitals.

Sharks, San Jose have opened talks on replacing 22-year-old arena, because that’s just ancient

I don’t remember exactly when I last suggested that the San Jose Sharks might soon circle back around and ask for another new arena, prompting complaints from Sharks fans that their current 22-year-old home is just fine, but apparently those talks have already begun:

“We have been talking to the Sharks about how we make arrangements for the construction of another facility here in San Jose,” [San Jose Mayor Sam] Liccardo said. “At some point we know, within our lifetimes, this arena will outlive its useful life. We know we have one of the oldest arenas already in the NHL. Hard to believe that’s true, but it is. So whether it’s a significant upgrade to this arena–it’s got to be more than a facelift, obviously–or the construction of a new one, we need to start having conversations about those sites.”

Liccardo is currently working on a lease extension with the Sharks owners on their existing arena, so anything new isn’t likely to get built for another few years, at least. Still, it’s amazing how quickly everyone has come to accept that a 22-year-old building must be nearing the end of its “useful life.” We may not have quite reached Rod Fort’s singularity where team owners can demand a new building every year, but we’re sure headed in that direction.

Detroit council gives up and lets Red Wings owner have his arena rezoning without job commitments

Detroit Red Wings owner Mike Ilitch finally got his rezoning approval from the Detroit city council last night, and it didn’t require a community benefits agreement for local hiring or promising to save two historic buildings or any of that. Instead all that will be worked out later, without the council holding its best leverage, because surely that’s a good plan.

Ilitch celebrated the ruling by tearing down a popular sports bar that stands in the way of his planned arena. (No, not with his bare hands, but if it’s more fun to picture it that way, go for it.)

Glendale proposes $46m garage for Coyotes, Cardinals, because they already got them everything else

Believe it or not, the Arizona Coyotes have found yet another way to get more subsidies out of Glendale: The city council will vote in June on whether to approve a $46 million parking garage to serve the Coyotes, the Arizona Cardinals, and the local mall. The garage bonds would be paid off by Glendale’s 235,000 residents, which on the face of it is only $20 $200 [EDIT: sorry, early-morning math] apiece (plus interest), but coming on top of a $220 million arena and $275 million in operating subsidies for the NHL team, it’s adding insult to injury, if nothing else.

To be precise, the parking garage would actually still be part of the original terrible deals with the Cardinals and Coyotes, which requires the city to provide 6,000 parking spaces for the football stadium and 5,500 for the hockey arena. (The new parking deck would hold 4,000.) And it would save the city a few hundred thousand dollars a year that it’s been spending on renting spaces to meet that obligation.

Still, it’s another expense that hasn’t previously been accounted for in the subsidy totals, so update your scorecards appropriately. And shake your head sadly for the poor citizens of Glendale, who are paying a record price for the presence of a hockey team that hardly any of them are actually interested in going to watch.

Flames CEO reportedly seeking arena plus CFL stadium, plus amateur fieldhouse to throw public a bone

Calgary Flames CEO Ken King has been promising to come out with a new arena plan for months now, and this week … he still didn’t actually come out with anything concrete, but the Calgary Herald leaked a bunch of news that it claims it has “learned” about the project, apparently from the ether, because it didn’t cite a source, not even “according to a source.” According to the Herald, King wants to:

  • Build a Flames hockey arena, a CFL stadium for the Stampeders (which King also owns), and an amateur sports fieldhouse for track meets, indoor soccer, and stuff like that.
  • Pay for the more than half-billion-dollar cost by, okay, they didn’t explain that part. But King told a radio show last month that “we’re not going to sneak in here and steal money from the city,” and he wouldn’t lie on the radio, would he?

There are a couple of clues here to how King could end up asking for subsidies while claiming he’s not asking for subsidied: The amateur fieldhouse could count as a “public benefit” of the project and thus something worthy of city dollars, the city could be asked to kick in free land, and in general big complicated projects are way easier to hide money in than small simple ones. The big question now is how Mayor Naheed Nenshi, who has previously told King in no uncertain words that he’s not going to hand over money for nothing, and the city council respond once King actually releases his plan. He says “in a couple of weeks,” but he said much the same thing in November, so maybe somebody should ask him which couple of weeks.

Flames owner readies arena demands, Calgary mayor readies “No, weren’t you listening the first time?”

Calgary Flames CEO Ken King is getting ready to present the city with his plans for a new arena, and Mayor Naheed Nenshi still doesn’t want to hear about it if it involves public subsidies:

“It can’t be public dollars to subsidize private benefit. As much as we’d love to have Madonna here, I don’t think that you could convince most people that it’s a good use of public money to subsidize Madonna.”

In case you needed reminding, Naheed Nenshi is a total stadium subsidy badass.

Coyotes have seriously found yet another way to ask for subsidies from Glendale

So the city of Glendale already built the Arizona Coyotes a new arena at public cost, then charged them low rent to play in it, then gave them $50 million to keep playing there, then agreed to pay the team $15 million a year more for another 15 years to keep playing there longer, then allowed the team to opt out of its lease if it wants to anyway regardless of all this. After all that, there is no possible way that Glendale can even find any more ways of subsidizing the hockey team, right? Right?

The Arizona Coyotes are talking to the city of Glendale about reducing, changing or getting rid of ticket and parking fees on concerts and special events at Gila River Arena…

The changes would amend a $225 million arena deal forged in 2013 between Glendale and the hockey team’s owners and could reduce direct revenue going to the city under that deal.

Arrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrgh!

The basic idea behind the Coyotes’ plan is that with tons of concert venues in the Phoenix area and fewer and fewer arena-scale touring acts, the only way that the Glendale arena can compete is to lower its prices. And heaven forfend, the Coyotes can’t be expected to lower their ticket prices, because that might cut into profits — so instead, Glendale should forgo its cut of whatever slim concert takings there are in order to make the enterprise more “competitive.”

To his credit, Glendale Mayor Jerry Weiers, who already hated on the last Coyotes subsidy (as well as hosting the Super Bowl), wasn’t thrilled about this latest proposal either, saying, “They want the city to waive the surcharge, but they’re not willing to do anything for Glendale in return.” Weiers has been overruled by the city council before, though, so we’ll just have to see what happens this time. Give the Coyotes owners credit, though: They’re certainly creative in finding new ways to try to milk blood from a stone.

No, community benefits agreements aren’t the solution to stadium subsidies

Here’s British journalist Ian Betteridge explaining his eponymous law of headlines:

Any headline which ends in a question mark can be answered by the word “no.” The reason why journalists use that style of headline is that they know the story is probably bullshit, and don’t actually have the sources and facts to back it up, but still want to run it.

So when Deadspin runs an article asking, “Has Detroit Found An Answer To The Publicly Financed Stadium Scam?” you should probably approach it with a grain of salt. But for the record, allow me to answer Deadspin’s question:

No.

What the Detroit city council is considering is a law to require community benefits agreements for all development projects. CBAs, as they’re known, are agreements that developers negotiate with local residents, community groups, and other stakeholders committing to jobs and other local benefits as part of a project; as state assemblyperson Rashida Tlaib told Deadspin, “We are allowing these large corporations—companies that could build a hockey arena without our money—to get in the corporate welfare line and take resources away from us. In exchange for what?”

In theory, CBAs sound great: If developers want public money, they have to give the public something in return! In practice, they’re more problematic. While everyone loves to point to the CBA for development around the Staples Center in L.A., which got parks and job training for local residents impacted by the new construction, there are far more CBAs that haven’t worked out as well: The one the New York Yankees set up, for example, which arranged for a “charity” that handed out benefits to several groups that barely existed, and which didn’t bother to keep track of how many Bronx residents were hired at the new stadium. There’s also the problem of how the “community” is defined: then-New Jersey Nets owner Bruce Ratner famously paid to set up community groups that he could then negotiate a CBA with, over the objections of much of the rest of the community.

And even when CBAs are legit, more or less, there’s still the problem that they’re less a referendum on whether pumping public money into a development project is good for a city as a whole, and more a way for community members to demand a cut of the boodle. Which isn’t necessarily a bad thing — as Tlaib implies, at least if you’re shelling out all that money, you might as well demand something in return — but it can end up being just an easily applied fig leaf for developers, and an incentive for community groups to trade their support for what amounts to a cash payoff, rather than keeping the broader public interest in mind.

So, points to Deadspin for covering this, but more points off for a misleading clickbaity headline. Developers may hate the mandatory-CBA plan — developers hate mandatory-anything plans — but that doesn’t necessarily make it a good thing.

Markham still won’t release full economic impact studies on now-dead NHL arena project

Plans for an NHL arena in the Toronto suburb of Markham are long since dead, but the battle over them goes on: In the latest, the former head of the Markham Village Ratepayers Association, who in 2012 filed a freedom of information request for the economic impact studies conducted by the city for the arena, and who since then has been elected to the Markham city council, is trying to pass a bill to get the full reports released. But it’s not going that well:

She thought she had enough support to get the motion passed, [Karen] Rea says in an interview, but now isn’t sure. The city solicitor has warned councillors that releasing the reports could break confidentiality agreements.

This is the same thing that Markham officials claimed back in 2013, and apparently there hasn’t yet been a ruling on it. The especially weird bit is that not only has Markham already released parts of the reports that it felt bolstered its case for the arena, but the author of one of the reports said city officials “cherry-picked” his findings to make them look more positive. And yet the city lawyer still says the reports can’t be released, thanks to confidentiality agreements with the developer who the city hasn’t heard from in more than a year. Somebody just leak the damn things to Deadspin already, would you?