Columbus Dispatch editorial: Never mind, Blue Jackets arena is a money pit

I called out the Columbus Dispatch last week for a misleading headline implying that the publicly owned Blue Jackets‘ arena was turning a small profit, so credit where credit is due for a Dispatch editorial today pointing out exactly how and why that was oh so wrong:

Nationwide Arena reports it will end its fiscal-year budget on June 30 with a profit of $316,000. That’s a paper profit, courtesy of a public bailout and the kind of creative accounting that would land an ordinary property owner in foreclosure…

Most people would see their financial situations vastly improved if they, too, could dispense with property taxes and mortgage payments.

The editorial also notes that Columbus residents voted five times against using public money for a sports arena between 1978 and 1997, only to have the Blue Jackets pursue a privately funded arena in 2000 — and then demand a public bailout eleven years later because they claimed they were losing money. Fighting against sports subsidies is really hard when teams owners only have to bat .167 to get everything that they asked for.

Columbus arena projects $47,000 profit by ignoring $14m in annual unpaid costs

Writing about stadium and arena economics in a way that’s easily digestible by a general-interest newspaper audience is hard — and doubly hard on newspaper deadlines. I get that. But the result is way too often stories that are only likely to confuse readers, and leave them with a false impression about how sports finance works and what’s important for economic success, and — you know, let me just skip to the Columbus Dispatch story itself:

Nationwide Arena reports small profit

That’s a great headline: Simple, direct, easy to understand. There’s some question about why the Dispatch replaced its more downbeat headline on an earlier version of the story (“Nationwide Arena to end fiscal year barely in black, with tax bill, debt looming”), but it’s two different ways of saying the same thing, really.

Except that neither way of saying it is really accurate, or at least doesn’t paint a full picture of what’s going on with the Columbus Blue Jackets arena following their $60 million(ish) public bailout in 2011. Here’s how the arena “turns a profit”:

  • The city and county send the Franklin County Convention Facilities Authority, which took over the arena in 2011, about $4 million a year in casino taxes.
  • The state provides the arena with a $4 million a year property tax exemption, though that expires this year.
  • The state, which is owed $10 million on an arena loan, and former arena owners Nationwide Realty Investors, who are owed $44 million on their own loan, have never received any payments on these debts, though the casino taxes were supposed to cover loan payments.
  • The county is deferring about $2 million a year in maintenance costs, which will have to be paid somehow eventually, but there’s no money for it now.
  • After receiving all these breaks — figure about $14 million a year total in various tax subsidies and unpaid obligations — the arena is projected to end the year with about a $47,000 surplus in its bank account. Profit!

Much like the Sprint Center in Kansas City, in other words, Nationwide Arena is a financial success on its books, but only because its books are propped up by massive subsidies from other people (mostly taxpayers, but by Nationwide as well via that unpaid loan). So the entire premise of the news story is dumb — whether the arena is “profitable” is entirely about how much cash the state, county, and city has decided to send it this year, not about whether the arena can actually bring in more revenue from operations than it spends on expenses, which is the usual definition of “profit.”

This is especially important because the next battle is likely going to be over that $4 million a year property tax break, which is already being framed as a way to keep the arena from losing money, though really it’s just about who’ll be $4 million a year in the red, the arena or the Columbus school district. Economic literacy in journalism matters, not just for being technically factually accurate, but because big policy decisions end up being based on how the public perceives the issues — and even if it’s too late to undo the costly public bailout of the arena, there are still plenty of future mistakes that can be avoided by actually understanding how money works.

Columbus arena still losing money for county, which now must find $2m a year for added repair work

Hey, how are things going for Nationwide Arena, home of the Columbus Blue Jackets, since Franklin County bailed out its private builders almost five years ago? Let’s see:

A modest uptick in casino-tax revenue will allow Nationwide Arena to go forward with one major maintenance project — replacing part of the heating and cooling system — but officials continue to search for ways to fund a goal of $2 million in updates and repairs each year…

The arena, which was taken over by the facilities authority in 2012, made a net operating profit of just under $250,000 in the first half of its fiscal year, from July through December; event revenue was $10.8 million.

Beyond an annual $2.1 contribution from the facilities authority, virtually all of the arena’s revenue comes from rental income.

So, same as last time we checked in: The arena is turning a small operating profit, but only because the county is shoveling tax dollars at it every year. So while it’s good news that casino taxes have rebounded from their dip a couple of years ago that left the county in danger of defaulting on its bonds, all this means is that the county hasn’t yet run out of money to shovel, at least not until something else at the arena breaks and needs repairs.

This is a reminder of two things: One, most new arenas don’t bring in enough money to come close to paying off their construction debt, if the reports out of Kansas City hadn’t already convinced you of this. And two, it’s a really bad idea to take over responsibility to repairing an arena that your local sports team built, while letting the sports team keep all the revenues that are needed to make the actual repairs.

In fact, if you’re a local elected official reading this, maybe you should print out that last paragraph and glue it to your computer monitor. It won’t guarantee you of being saved from Columbus’s fate, but it’ll at least give you a better shot.

Columbus figures out who’ll be stuck with tax tab from Blue Jackets bailout (hint: not the Blue Jackets)

If you’ve been waiting eagerly to hear whether the Franklin County Convention Facilities Authority or the Columbus school system will be on the hook when the Blue Jackets arena’s property-tax exemption expires in 2017, the winner is: both! Or the loser is both. Both the county and the school system will soon have less money, is the point:

The public owner of Nationwide Arena has offered to pay Columbus City Schools $586,000 a year, instead of almost $3 million that it would owe the district if the payment were based on the $143 million value that the Franklin County auditor puts on the structure.

If you’re going to say, “Hey, at least $586,000 a year is better than no property taxes at all!” keep in mind that the Blue Jackets owners have been paying $1 million a year in lieu of property taxes until now. So under the new deal the schools will get less money, and the county will have to cover that $586,000 annual tab. Everybody loses! Except the Blue Jackets owners, of course, who really managed to pull off quite the heist when they negotiated their arena bailout deal.

Blue Jackets bailout leaves Columbus schools, state arena board squabbling over tax money

The Columbus Blue Jackets arena saga is one of the weirder ones, with the team building an arena mostly with private money, then complaining it was losing money and getting the county to bail them out by taking the arena off their hands, then a local group trying to force the county to let residents vote on whether to default on the arena bonds (and failing). Now there’s a new twist: As part of the bailout deal, the Blue Jackets owners agreed to make an annual $1 million a year payment to the Columbus school system in lieu of property taxes. Starting in 2017, that deal expires — meaning the arena will be looking at a $4 million tax bill, and the Franklin County Convention Facilities Authority will have to pay it itself.

This sounds bad, and it sort of is if you’re the arena authority, which is why the people who run that body is asking the state legislature to extend the tax exemption. But when you think about it, this is just a squabble between two public agencies over who’ll pay whom: Either the arena board gets more money to run its building, or the school system gets more money to run its schools. Or, you know, the state could just throw some more money everybody’s way and everyone could go home happy, except the recipients of whichever services got cut to make sure that the arena and the Columbus schools were both made whole.

The main lesson here, really, is this one:

“I don’t know what they knew or didn’t know” about the looming tax bill, said Don Brown, the facilities authority’s executive director since February and previously Franklin County’s administrator. “I’m not aware that there was a public discussion.”

That? Don’t do that. If you’re going to bail out your local hockey team, at least have a public discussion about what all the costs are going to be, including those a few years out. That is all.

Columbus arena sparks opening of convenience store, bringing Twizzlers to struggling local economy

And now, here is an actual newspaper article from Columbus boasting about how the city’s new hockey arena prompted the opening of a 1300-square-foot convenience store:

“That’s the ideal tenant for that space,” said retail analyst Chris Boring, principal at Boulevard Strategies. “They’re not just filling space.”

With so many visitors, office workers and residents within a block or two of Nationwide Arena and the nearby Greater Columbus Convention Center, “it’s a no-brainer,” Boring said. “There are all kinds of places to eat and drink in the Arena District, but what if you just want a candy bar or a bottle of water? There’s really no place right now for that.”

In related news, the Chicago suburb of Bridgeview just sold another $16 million worth of bonds to help pay off its money-losing Chicago Fire MLS stadium, but this year a new gas station opened nearby.

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.

Columbus Blue Jackets arena still a money pit for taxpayers

This time last year, the Columbus Blue Jackets‘ Nationwide Arena was reported to be turning a $500,000-a-year profit since its takeover by Franklin County in a much-maligned bailout plan — a profit that disappears once you take into account that the county is subsidizing arena operations with $4 million a year in subsidies. And how are things going now?

The arena spent most of its second year under public ownership operating at a deficit.

A recent rally, thanks to special events that included Bruce Springsteen, Cher and Demi Lovato, has nudged the arena $426,000 into the black, according to the latest revenue report.

Again, that’s “in the black” if you don’t count the annual county subsidies to the arena, meaning the building is actually losing more than $3 million a year, but Franklin County taxpayers are making up the difference.

And why is this, tell us, Columbus Dispatch?

Put simply, the contracts allow everyone else to make money from the arena except taxpayers.

The Blue Jackets take all concession and parking revenue for all hockey-related events. Performers, such as Springsteen, demand a certain percentage of all ticket sales (usually 85 percent or more) before agreeing to come to Columbus.

The public also pays for improvements inside the arena, such as the nets on the hockey goals. More than $900,000 in public money was spent in the past year to replace and repair seats.

That’s right: Columbus area taxpayers are paying for hockey nets for a team that keeps 100% of the revenues from hockey games. Also, cue the jokes about why they need to replace seats when they’ve barely been used in the first place.

Columbus sports fans celebrate bailed-out hockey team’s success with citywide apathy

It’s the two-and-a-halfth year anniversary, more or less, of the bailout plan for the Columbus Blue Jackets that has left county taxpayers covering annual losses on the team’s arena, enabling the team to stop losing money. And that’s apparently enough of an excuse for the Columbus Dispatch to check out how excited hockey fans are at having a money-making franchise to root for, and one that is finally poised to actually make the playoffs to boot:

The Blue Jackets are in fourth place in the eight-team Metropolitan Division, but they are 29th in a 30-team league in attendance, drawing 14,347 per game to Nationwide Arena, which has been filled to its 18,144-seat capacity only four times in 36 games this season.

Okay, not so hot. But things are at least improving slowly on the attendance front, right?

Although the Blue Jackets have seen a 23 percent bump in season-ticket sales over the past year — from fewer than 7,000 season-ticket equivalents early last season to 8,600 as of this week — attendance actually has dipped from last season’s 14,564 average.

Hmm. Maybe fans are starting slowly, getting their feet wet by watching more on TV?

Further, according to a recent report in Sports Business Journal, the Blue Jackets rank 29th in the NHL in TV viewership. According to sources, the Jackets attract an average of 6,000 households per broadcast on Fox Sports Ohio, down from 9,000 last season.

Okay, but once the team capitalizes on its newfound flushness and offers cheaper tickets, things will improve, right?

The Blue Jackets don’t appear overly concerned, either. Early this season, there were some thin crowds: eight games with fewer than 12,000 fans, including two with fewer than 10,000. Still, they’re raising season-ticket prices in almost every section of the building for next season.

Sigh.

The only silver lining is that sports attendance usually lags behind on-field (or on-ice) success by a year, since fans only wake up and decide to start buying tickets after they’ve seen a successful playoff run. Still, if the main thing Columbus bought with its bailout money is civic pride in its hockey team, residents aren’t exactly busting out with it.

But, hey, sunk costs and all, and at least local taxpayers can sit back and rest assured that they won’t have to spend anything more on the Blue Jackets from here on

The practical impact of low gambling and the resulting state tax revenue shortfall to Columbus and Franklin County residents is that a quarter of the $10.3 million received by Columbus that is dedicated to the arena lease is just $2.6 million — not enough money to cover the $3.3 million required to cover the bond payment schedule for 2013… According to [Columbus Coalition for Responsive Government] projections, if the current 23% shortfall happens in every year of the lease, the total added costs will be $97 million and a bond payment schedule that extends an additional 7 years – to 2046. The only thing that can prevent such a shortfall: we need more gamblers willing to belly up to the poker table and bet their retirement on a three-of-a-kind.

Yep, this is working out just great. Happy baseball season, everybody!