Friday roundup: Saints’ $300m subsidy moves ahead, St. Louis MLS announcement on tap, Richmond council votes no on democracy

Sometimes I feel lucky to cover a topic with so many constant absurdities, and then this happens, and I realize that constant absurdities are just the new normal. Anyway, I did get to edit this this week, which is an excellent look at how this week’s absurdity is having potentially catastrophic impacts on people’s lives, so go read it!

But not before you read these:

  • The Louisiana State Bond Commission has approved selling $450 million worth of state bonds to fund renovations to the Superdome, in exchange for the New Orleans Saints signing a 15-year lease extension. As covered back in May, Saints owner Gayle Benson would cover one-third of the bond cost, leaving Louisiana to pay off $300 million, bringing the Saints’ five-decide subsidy total to a cool $1.442 billion. In exchange, the Saints will sign a 15-year lease extension — with another 15-year option, but there’s no way they’re going to extend their lease again without more subsidies the way this gravy train is rolling — which comes to state taxpayers ponying up $20 million a year for the presence of an NFL team, which is a hell of a lot of money, though not as much as Indiana pays the Pacers, because Indiana.
  • The St. Louis Post-Dispatch reported this week that St. Louis will be announced next Tuesday as the next MLS expansion city, bringing the number of teams in the league to a cool 154. (I think it’s actually 28, but honestly the number changes so fast it’s hard to keep track.) Deadspin read the announcement that there would be no public subsidies for the as-yet-unnamed team’s stadium and excitedly reported that the deal “might not completely fleece the city”; sadly, it will actually involve about $60 million in public subsidies, but since about half of that is coming from the state, not the city, that Deadspin headline is still technically correct, right?
  • The Richmond city council has voted 5-3 against allowing a referendum on the city’s proposed new $350 million city-subsidized arena on the November ballot, because voting is for elected officials, not regular folks. Though regular folks do still get to vote on electing elected officials, something that referendum sponsor Reva Trammell clearly had in mind when she said following the no-voting vote: “I hope the citizens hold their feet to the fire. Every damn one of them that voted against it.”
  • Two-plus years after the arrival of the Hartford Yard Goats in exchange for $63 million in public stadium cash — plus a couple million dollars every year in operating losses — the Hartford Courant has noticed that stadium jobs are usually part-time and poorly paid. Not included in the article: any analysis of how many full-time jobs could have been created by spending $63 million on just about anything else.
  • New Arizona Coyotes owner Alex Meruelo said he intends to keep the NHL team in Arizona, but that keeping it in Glendale is a “difficult situation,” at which point a Glendale spokesperson said that city officials would meet with Meruelo “to see how we can help him achieve his goals of success.” Which is all fine and due diligence and all, but given that helping Meruelo “achieve his goals” is likely to mean paying him money to play in Glendale like the city used to do, it’s not exactly promising; if nothing else, Glendale officials would do well to remember that Meruelo currently has exactly zero better arena options elsewhere in the state, so he’s not exactly negotiating from a position of strength.
  • Joe Tsai, who was already set to buy the Brooklyn Nets from Mikhail Prokhorov, has officially exercised his option to purchase the team, plus the Barclays Center arena to boot, for a reported $3.5 billion. Given that the arena is currently losing about $21 million a year, this seems like an awful lot of money even if the team does employ whatever’s left of Kevin Durant. Since Tsai already owns the New York Liberty, though, maybe it at least means that WNBA franchise will finally return to the city from its exile in the suburbs.

New York state okays Islanders arena lease, still won’t say how much subsidies are worth

The New York Islanders arena plan received its final(ish) signoff yesterday, from the obscure state Franchise Oversight Board, which approved the team’s lease with the state. It also revealed how much the project will be paying in payments in lieu of taxes (PILOTs) as part of its tax break deal with the state:

It also includes a payment in lieu of taxes agreement under which New York Arena Partners would pay $40 million to various municipalities. The PILOT would last throughout ESD’s lease for the arena, and for 20 years for a proposed hotel and 15 years for retail stores at the arena. An estimated $154 million would go to the Elmont and Sewanhaka school districts over almost 50 years, and the state would make at least $1 million per year from rent payments based on attendance.

That is a lot of numbers that don’t actually make sense together, so let’s explain them one at a time:

  • That $40 million PILOT payment appears not to be a PILOT payment at all, but rather the team’s lease payment for the state land it would be using, which we’ve covered previously. (And is also now supposedly up to $50 million.)
  • The actual PILOT payment from the arena will be that “at least $1 million per year” figure, which is certainly way below what an arena would normally pay in property taxes, though no one has revealed how much of a tax break it is.
  • Likewise, the PILOTs for the hotel and stores are actually tax breaks, not special payments to the state, since if the state insisted on the developers buying the land instead of leasing it, it would be subject to normal property taxes.

The upshot, then, is that the state is still giving the Islanders and their developer partners a sweet land deal, plus cash toward a new commuter rail station, plus tax breaks. There are so many moving parts to the financing plan, and so little transparency, that it’s pretty much impossible to put a number on the total public cost, but it’s certainly close to $100 million, and could be much higher.

As far as the approval process goes, I believe the state comptroller still needs to sign off on the deal, but that’s usually a formality. Then will come the inevitable lawsuits; whether the Islanders can meet their aggressive goal of breaking ground in September and opening the place in fall of 2021 will likely depend on whether opponents are able to get court injunctions, or if everyone will be left to calculate the public cost after the horse has escaped.

Friday roundup: Titans want Miami-style renovation to 20-year-old stadium, Orlando throwing more cash at World Cup hopes, and urban myths about small stadiums

I’m back from vacation, and thanks for sticking with my slightly unpredictable posting schedule for the last couple of weeks. (As opposed to my usual slightly unpredictable posting schedule.) It was an eye-opening trip to, among other places, a city that built a stadium with public money and now suffers from a legendarily bad public transit system, though it just might be unfair to blame the one on the other.

Anyway, stadium news kept coming at us fast this week, so let’s get to it:

NY state spokesperson on last-minute Isles land appraisal: Ha ha, we had it for months but you didn’t ask right, joke’s on you

So this escalated quickly: Yesterday, I noted that Jack Sterne, the Empire State Development spokesperson assigned to the New York Islanders arena project, had told me that an assessment of the value of New York state land being leased to the developers for $50 million would be forthcoming before the ESD board’s vote — and indeed it was, a whole three and a half hours before. And the released documents only included the executive summaries of the assessments, which contained no details of how the land values had been arrived at, making it impossible to determine why their conclusions ($35.9 million to $41 million) were so much lower than those arrived at by looking at comparable nearby land values ($114 million to $340 million).

I immediately emailed Sterne to ask if he could provide more details. He wrote back:

Hey Neil — yes I believe the summaries are in the board materials.

If you’re looking for additional docs you are always welcome to FOIL — https://esd.ny.gov/freedom-information-law-foil

A FOIL — Freedom of Information Law request, in New York state terms — typically takes at least a couple of months to get a response to, and some state agencies have been known to drag it out for a year or more. So this wasn’t entirely helpful with a vote just two hours and change away at this point, and I noted that here in a comment. (Then the board unanimously voted to approve the plan, though the arena still has a couple more hoops to jump through before it’s finalized.)

Norman Oder, who’s been covering the Belmont arena shenanigans at Gotham Gazette, then picked my comment up in a tweet:

Jack Sterne then responded on his personal Twitter account:

And:

Sterne almost has a point: Oder, or I, or anyone else, could have filed a FOIL request months ago to get the full appraisals. (According to the dates on the executive summaries, they were submitted to ESD on December 3, 2018 and July 3, 2019.) If, that is, we had known they existed. But when I had asked Sterne previously for the documents, I got answers that in retrospect seem designed to throw researchers off the trail.

On July 8, I asked Sterne via email: “When I spoke to one of your predecessors early last year, they said that ESD would conduct an appraisal of the arena project land before the final presentation to the ESD board. Is that still happening before the final vote at the end of the month?”

Sterne answered several of my other questions in a subsequent email, but ignored this one. On July 22, I tried again: “Is ESD still conducting an appraisal of the value of state land being leased for the project, and if so is there a target date for releasing that appraisal?”

Sterne’s response:

The appraisals will be completed by the time the General Project Plan is approved by the ESD Board.

Now, this isn’t technically lying: The appraisals had already been completed, in one case for months, meaning they would indeed be completed by the time of the ESD board’s approval vote! It is at best, however, deceptive, since an honest answer would have been “No, we’re not still conducting an appraisal, we already have two in hand!”

It’s also pretty exceptional behavior from a press flack, whose job is usually to try to spin or stonewall reporters or sometimes call them up and yell at them when they don’t like what was written. (Sterne has done that, too, but I’m used to that.) All this, combined with the abbreviated last-minute release of the appraisal documents, is certainly enough to fuel suspicions that there’s something in those full appraisals that ESD — or Gov. Andrew Cuomo, who controls ESD — really doesn’t want anyone to see until all the t’s are crossed in the deal. We’ll find out once they process my FOIL request, I guess — hopefully before the new arena opens for its first game.

 

 

NY state board to give final signoff to Islanders arena plan today, still has no idea how much state’s land is worth (UPDATED)

New York’s state-run Empire State Development corporation board is holding its final approval vote on an Islanders arena development plan at Belmont Park today at 3 pm, which reminds me of something:

An ESD spokesperson contacted the Voice after publication to say that in according with its guidelines and state law, the agency will conduct an appraisal of the Islanders arena project land before the project is presented to the ESD board of directors following the conclusion of the environmental review in 2019.

An ESD spokesperson confirmed to me two weeks ago that the appraisal “will be completed by the time the General Project Plan is approved by the ESD Board.” So, they have four hours left — hope the ESD board members can read complicated land value assessments really fast!

The appraisal is important because the Islanders owners are only paying $50 million for 43 acres of state land for the project, a figure that could be as much as a $300 million discount on the land’s actual value. Or it could not! Land appraisals are hard, which is why it’s important to hire trained professionals to conduct them, well before you have to decide on whether a sale of public land is a fair deal or a complete giveaway!

(It’s maybe worth noting that the state most recently has been saying that the $50 million is really the developers’ private contribution toward a new train station for the project, which would make the actual land sale price be $0. If “actual” has any meaning here anymore.)

I emailed my ESD contact again this morning to ask to see the appraisal, but haven’t heard back. It’s altogether possible the report will appear just in time for the hearing — but that certainly won’t give any time for anyone on the board to read the report before voting, let alone members of the public.

If so, it would be only the latest in a long line of, shall we say, not enthusiastically democratic steps taken by the state in its rush to approve the Islanders plan after a year and a half of mostly behind-closed-doors talks: The initial ESD board meeting last month was held on a Monday afternoon after public notice only went out late Friday; and the Public Authorities Control Board, which is supposed to vet actions by public authorities like ESD, went ahead and gave its approval to the plan last week, despite all the final details not being in yet. Whether the final Islanders deal turns out to be a massive public money pit or not too bad, it looks like we won’t know for sure until after the deal has been decided — the phrase “no way to run a railroad” comes to mind.

UPDATE: The ESD board meeting materials have been posted, and they include two separate appraisals — one dated December 3, 2018, the other July 3, 2019 — that estimate the public land value at between $35.9 million and $41 million. The first provides no information about its methodology at all; the second says it bases its figure on the future income that the site could produce, but says nothing about how it calculated that projected income. Lots of questions here, obviously, which will almost certainly take more than (checks clock) three hours and 10 minutes to answer.

Friday roundup: Developer dreams, MLB expansion dreams, and stadiums that only exist on your TV

Still traveling, so super-brief Friday roundup this week:

Calgary just bought itself a new Flames hockey arena, but at what cost?

Welp, that went about as expected: The Calgary city council voted 11-4 yesterday to build a new Flames arena, just eight days after most of them learned about the plan and following just a few hours of debate. The estimate construction price tag is $550 million, with the city and team owners splitting the costs, and the team getting the vast majority of the revenues.

Among the highlights from yesterday’s council meeting:

  • Several councillors asked for a delay until September so that they could fully vet the arena plan — as one remarked, he’s spent more time researching buying a car than he got to on this deal — but the Flames owners said no. And since the deal itself contained a poison pill where it would self-destruct if not approved by yesterday, the council had no choice but to vote it up or down, with no opportunity even to suggest changes.
  • Many of those voting yes cited a figure, provided by the city’s CFO, that the net present value cost of the deal to the city would be just $47 million, thanks to ticket tax money from the arena and incremental property taxes from the surrounding development that would help defray costs over 35 years. This puzzled me at first because the lowest figure I could come up with was $138.9 million, but it turns out the CFO used the city’s projected bond interest rate of 2.5% as the discount rate for calculating the future value of money, which makes taxes that won’t be collected until the 2050s somewhat less worthless. This is not necessarily the best way of choosing a discount rate, and there are other questions about whether all those revenues should really be counted as defraying the public’s cost (see below), but at least the math checks out a bit better. (I still get at least $60 million for the net present value cost, even using the 2.5% discount rate.)
  • There was some concern expressed about the Flames owners’ exclusive option to buy two parcels of city land valued at an estimated $100 million, but it didn’t get much debate in the limited time available.
  • Calgary Mayor Naheed Nenshi said the deal is better than most other North American sports venue deals — a pretty low bar, as regular readers of this site will already know — adding: “It was important [that] we have a great financial deal and I think we did, but it was also important for us to think about the intangibles that we are investing in. I wanted to make sure we had a great balance of social and financial return, and I think we’ve accomplished that here.”

Okay, so it’s impossible to put a value on “intangibles” like ensuring that the Flames stick around for 35 years without move threats (not that the team owners were threatening to leave, except when they were). But what about that financial return?

The biggest problem is counting future property taxes on the surrounding development as paying back the city’s costs. This would only be new development, yes, but there’s no way to guarantee that it would be new development that wouldn’t happen without the arena, at least somewhere in the city. (Studies of whether new arenas spur increased economic growth come down decidedly on the side of “What, are you high?”) Plus, as discussed here previously, property taxes on new development aren’t a windfall, because they’re already needed to pay the costs of all the city services new development requires — police and fire protection, schools for any children living in new housing, etc. — so counting them as available to pay off an arena is double-dipping. If we throw out the property tax revenues, even using the city’s lowball 2.5% discount rate, suddenly the city’s present-value costs balloon to $165 million. (And probably much more than that, since the ticket-tax money would be significantly back-loaded thanks to ticket prices rising over time, but the city hasn’t provided a breakdown of how those revenues would change over time.)

Then there’s the fact that the Flames would get the land for free — as a swap for the site of the Saddledome — and would pay no property taxes on the arena itself, which is typical for U.S. city-owned arena deals but much less so in Canada. These should both be considered subsidies to the team, but there’s no way to put a dollar value on them without more number-crunching, which there wasn’t time for in the past eight days.

So we’re looking at a city net cost of probably somewhere close to $200 million, at minimum. Meanwhile, the Flames owners would put up the same $275 million up front as the city, but would get way, way more in return: All the revenues from selling tickets (except for that 2% ticket tax carveout) and concessions and ad signage and most of the naming-rights money, and so on. A recently revealed study from 2016-17 by University of Michigan sports economist Mark Rosentraub estimated that the Flames could see increased revenues of $48.7 million per year — even if that’s before deducting their debt payments for the new arena, it would leave Murray Edwards and his fellow owners clearing about $30 million a year in new profits, while the city is losing millions of dollars a year on its share.

And that’s the most damning perspective on this deal: Not that it will bankrupt the city of Calgary (it won’t) or that it’s significantly worse than other awful arena deals out there (it’s not), but that the city council has entered into a partnership with a private sports team where they split the costs roughly down the middle, but the private team owners collect virtually all of the resulting revenues. That is a huge gift to the rich dudes who own the local hockey team, and saying well, at least the city won’t take too much of a bath on its part, if you squint at the numbers right is pretty cold comfort.

None of which matters much now, as the deal is done, with Calgary taking its place alongside Minneapolis and Miami and a whole bunch of other cities that were the poster children for holding the line on sports subsidies, until suddenly they weren’t. Can we please stop pretending that the stadium subsidy racket is drying up now? It may require jumping through a few more hoops these days, but owning a pro sports team remains one of the best ways, short of becoming a defense contractor, to make money off of the public till.

Calgary city council is really going to approve $275m in Flames arena funding with no debate

The vote on putting $275 million (and maybe more — see below) in city money into a new Calgary Flames arena doesn’t take place until tomorrow, but it’s already becoming clear which way the council is going to go:

The majority of council members have indicated support for the deal, including Mayor Naheed Nenshi, who last week said the arena would create public benefit through “intangibles.”

“It’s about bringing community together. It’s about uniting people,” Nenshi said. “This deal makes sense on its own merits.”

Also, councillor Jyoti Gondek said a new arena was needed so that people could watch e-sports like League of Legends and Fortnite. With a straight face, presumably, though the Calgary Sun doesn’t say.

Meanwhile, a bunch of economists have noted the same thing I did here, which is that projecting $400 million in new city revenue over 35 years is not the same as $400 million today, which means the city will almost certainly be taking a loss on the deal — and that’s if taxes on new spending don’t simply cannibalize taxes on old spending, which will almost certainly be the case given that this is just a matter of moving an arena a few blocks away. Also, it’s not counting any cost overruns, an agreement on which “still needs to be worked out,” according to the Toronto Star, but the “expectation” is the city would be on the hook for 50% of them.

If that’s all somewhat confusing and seems to call for a more in-depth examination of the numbers, well, tough, because the council is voting tomorrow. This is kind of an amazing ending to a years-long arena debate where the city seemed set on holding firm against any significant public subsidies, but also kind of not amazing, because that’s how these deals tend to happen: not for a long, long while, then all at once.

Friday roundup: Lotsa new vaportecture renderings, lotsa new crazy expensive bridges

I’m traveling this week and next, so there will likely be some weird scheduling changes for posts, such as this Friday roundup appearing close to noon Eastern time. (I think. I’m not entirely sure what time it is here or anywhere, just that it’s hot, which doesn’t narrow it down much because it’s hot everywhere.) The news watch never stops, though, so here’s a somewhat abridged week of highlights:

  • New Los Angeles Clippers arena renderings! This vaportecture is honestly all starting to look more or less alike to me, though what appears to be a transparent roof on an arena is novel — the article refers to “indoor/outdoor ‘sky gardens,'” though, so maybe this is those, whatever those are. (Gardens open to the sky? Wouldn’t that be … “gardens”?) Anyway, constantly releasing renderings is a great way to show people that you absolutely are going to be able to build an arena, despite any lawsuits trying to block it, because everyone knows cartoons always come true.
  • And on the other side of the pond, Everton has released its own stadium renderings, with more lens flare and balloons and promises that 1.4 million more people will visit Liverpool just by Everton moving into a new stadium. (The balloons are probably the least fanciful of these predictions.)
  • Norman Oder has a long analysis of the New York Islanders Belmont Park arena plan laying out all the remaining questions about the project, from the value of land and tax breaks to how exactly the state expects a Belmont arena to host sports and concerts without cannibalizing shows from the nearby Nassau Coliseum. (Not that it should matter to the state if the Coliseum loses business, but if shows are just relocated, they’re not new economic activity. For that matter, if Long Islanders just go to more shows and fewer restaurants, say, that’s also not new economic activity. So very many questions.)
  • Dodger Stadium is getting a $100 million facelift this offseason, including a new centerfield plaza, new elevators and bridges for fan circulation, and a statue of Sandy Koufax. A hundred million dollars seems like a lot for that, but it’s Magic Johnson‘s stadium and his money, so whatever floats his boat.
  • And finally, the cost of the Atlanta Falcons‘ pedestrian bridge has now surpassed $33 million. up $6 million from the last accounting. On second thought, maybe $100 million for some bridges and a statue isn’t that crazy at all.

Exactly how bad is the new Calgary Flames arena deal?

With all of four days of public comment period (expiring today at noon) allowed before the Calgary city council votes next week on its Flames arena plan, the local media have been commenting like crazy on how it’s either terrific or godawful. Among the takes:

  • Toronto Star columnist says it’s “a pleasant surprise that somebody had actually decided to do something in this gloomy town,” and that despite the fact that the city will get little in the way of ticket taxes and naming-rights money, and Flames owner Murray Edwards could get a huge gift in the form of development rights to public land, it’s a good “compromise” because Calgary “badly needed a win on something, anything, after the debacle that was the bid for the 2026 Winter Olympics.” (Ed. note: The “debacle” was that the Olympics bid didn’t happen because Calgary voters didn’t like it.)
  • Edmonton Journal columnist David Staples says the new deal “appears to be far more favourable to the Flames owners than the arena proposal that broke down in 2017 and also more favourable than the deal Oilers owner Daryl Katz got in Edmonton”: He says Edmonton paid 47% of the Oilers’ arena cost, Calgary would pay 50% of the Flames’, up from 33% in the proposal from two years ago. But he admits that the “details are murky,” and ends up noting that even pro-arena Edmonton officials say it ended up being good to have a lengthy public debate on that city’s plan, though of course their side still won in the end, so they would say that.
  • Calgary Herald columnist Don Braid says that the new arena is good because Taylor Swift and Paul McCartney will be more likely to play there.
  • Macleans writer Jason Markusoff writes that the Flames owners “sweetened the pot” by agreeing to pay a ticket tax, but mostly city officials wanted something they could “claim victory” on: “Nenshi and the council want to remember what victory tastes like and get the public excited about something, even at the risk of getting the public furious anew. After Monday’s presentation, Nenshi gathered King and other principal players in the talks for a handshake photo op, until an aide rushed over and reminded the mayor of the optics of shaking hands on a deal that was just opened to public feedback. Oopsie.
  • Small business owners are mostly mad because the local economy sucks and they’d rather see their own business taxes reduced.
  • Global News contributed a not-very-helpful listicle of costs of recent NHL arenas that didn’t include any details of how much the public paid for each, because that shit is too complicated for a listicle, man, do you know how many posts we have to write today?

So who’s right? As covered here on Tuesday, even with the ticket tax and naming-rights money, the city looks like it would take a rather large loss on its arena spending, while the Flames owners would rake in all the profits (presumably, anyway: the city’s report doesn’t include anything on the team’s side of the finances). That’s true even if you count property taxes on the development around the arena as a net plus — without getting too much into “present value” terminology, suffice to say that so much of the city’s take would be pushed out so many years into the future that it wouldn’t be nearly enough to pay off the debt the city would have to take on right now for arena construction costs. I get a net loss to the city of at least $139 million, counting all the new property taxes as a positive, but not counting costs like land and tax breaks that aren’t specified in any of the documents released so far.

All these known unknowns are why some elected officials — and, presumably, Calgary citizens, though it’s hard to tell since they’ve barely had time to speak up since Monday’s arena announcement, and nobody gives them newspaper columns — have been complaining that four days of public input and then just three more days (two of them on the weekend) to process those comments is less a spirited public debate than a fig leaf over a done deal. City councillor Evan Woolley, whose proposal to push back a council vote to September was rejected by a 9-4 vote, remarked, “I have asked numerous times what the rush is, why one week, and I have not been given a clear answer.”

Pro-arena councillor Jeff Davison, who warned his fellow councillors before the vote on Woolley’s measure that any delay would mean “this deal is done tonight and you will forever be known as the council that likely lost the Calgary Flames” — the deal included a clause that it would be null and void if not approved within a week, presumably exactly so that Davison could pull this two-minute-warning maneuver — claimed that the plan all along was to have only one week of discussion, which his fellow councillors immediately said he was wrong about. But they still voted, 9 out of 13 of them at least, to limit any public debate to less than four days.

And limiting public debate, it appears, is what a majority of the Calgary council did agree on, in part because it’s hard to claim a nine-figure arena subsidy for a sports billionaire as a “victory” if the public gets to disagree with you about that. Back to Cunningham:

Public engagement is great and all that, but sometimes decisions are necessary, even if they cost money and piss some people off.

And the deal will go through, imperfect as it may be. At the end of the day, that’s probably what should happen. After all, some things are more important than politics, fiscal rectitude, or citizen consultation.

Hockey, for example. Not to mention civic pride.

I, for one, eagerly await Gary Bettman’s 2019-20 NHL marketing campaign: Hockey. It’s better than democracy.