Category: Columbus Blue Jackets

When I’m asked what I think is the worst sports subsidy deal in history, and I’m asked that a lot, my go-to response is that every unhappy stadium deal is unhappy in its own way. But when pressed to pick a few for the all-time Hall of Shame, I’ll occasionally find room for the Columbus Blue Jackets arena bailout, if only because it turned a model of private arena financing into a massive public subsidy just because the team owners whined that they weren’t making enough money. And then the city of Columbus agreed to give Nationwide Insurance, which put up the money for the original private arena construction, $62 million in added tax money when it turned out casino tax revenues weren’t going to cover the original deal.

If you see this headed toward “more good money thrown after bad,” you’re way ahead of me. Take it away, Columbus Dispatch:

Okay, so maybe the Dispatch got so excited it couldn’t remember how verbs work. The point is, as the paper discussed in an accompanying story with a more grammatical headline, the 20-year-old arena needs not just a new roof, but “$94.4 million in capital-improvement expenses over the next five years.”

The good news is that arena authority director Don Brown says the general public won’t pay for the upgrade costs, because it has a repair fund already set aside, funded by “casino tax and admissions tax proceeds.” The less good news is that these taxes would otherwise go into the general fund if they weren’t being siphoned off for the arena fund; the even less good news is that thanks to casino and admissions tax shortfalls in recent years, the repair fund currently just has $454,000 left in it, plus a $2.4 million reserve fund, which is a lot less than $94.4 million.

The Dispatch article goes on to say that the Blue Jackets and their partners in operating the arena — Nationwide and Ohio State University — will be on the hook for arena upgrade costs, but also that the team’s lease requires that the building be kept in “first class” condition, which seems likely to be a point of contention in any disputes over where to come up with $90 million. Among the items that the arena authority cited the hockey team as wanting to have improved:

The locker room for Blue Jackets players is “reasonably well-appointed but is not as glamorous as NHL home locker rooms in newer facilities,” and could use a “thorough” upgrade. The player lounge and training areas are well-maintained “but not impressive,” and the players’ family lounge “does not present an NHL-level image.”

Well, we certainly can’t have that! What will the neighbors say?

There’s a lot of confusing language in the arena operating arrangement — the public arena authority is part of the management group, but isn’t responsible for upgrade cash unless OSU backs out — but given that we’ve already seen Columbus bail out the private parties for no good reason other than that they asked for it, it’s hard to rule out anything. The main takeaway here is that the Blue Jackets are publicly seeking $94 million to replace their roof and bling up their locker rooms, which is always a sign that taxpayers should hold onto their wallets.

Once upon a time, the Columbus Blue Jackets‘ Nationwide Arena was a privately funded success story, with locally based insurance company Nationwide helping to underwrite construction costs in exchange for a cut of arena revenues (and their name on the thing). Then came the county bailing out the Blue Jackets owners by taking over ownership of the arena, and a new ticket tax to help pay for arena renovations. And now it’s been revealed that the city and county are working on “restructuring” Nationwide’s $44.2 million loan to funnel new tax money into it:

Nationwide, which built the arena through a limited liability company and loaned the authority $44.2 million to buy it, has never received any payments in return because casino-tax revenue backing the loan never generated what was estimated…

Though Columbus officials had repeatedly stressed that the risk on the loan was solely Nationwide’s should casino-tax revenue come up short, the city has now also contributed to the deal, restructuring tax-increment-financing agreements on Nationwide properties to, in effect, let Nationwide repay itself from its future property taxes…

The memorandum indicates that city TIF funds could generate up to $10.8 million toward repaying the loan.

The city’s contribution would be on top of a one-time, lump-sum payment in December 2029 of $51.5 million from the authority, according to the memorandum. Brown said the authority will make the payment by issuing new bonds backed by casino taxes and hotel revenue from its lease with Hilton Columbus Downtown.

On the one hand, Nationwide was already set to get public money to repay its loan, via those casino tax revenues. On the other, it agreed to take payment from the casino tax funds, and now that those aren’t turning up as expected (apparently Columbus residents just don’t love to gamble like they should, or else are too busy going to Blue Jackets games), this is $62.3 million in new money being allocated to Nationwide. Either way it’s not good news for Columbus residents, and has to be especially galling since the city’s then-auditor said in 2011 that the city’s commitment if the casino revenue fell short was “none.” No word yet on when the city and county will be voting to approve the deal, but one can expect they’ll be getting an earful at that time.

The Columbus city council has revamped its ticket tax proposal, lowering the rate from 7% to 5% on all tickets over $10, and permitting only taxes on events at the Blue Jackets‘ Nationwide Arena to go toward arena renovations, with the rest going to arts organizations.

This is getting pretty close to an arguably fair deal, if the goal is to have entertainment venues pay for their own upgrade costs. As I’ve discussed here before, ticket tax money mostly ends up coming out of the pockets of the people selling the tickets, for the simple reason that venues are already selling tickets for as high as the market will bear; if the Blue Jackets decide that they can get away with charging $50 for a certain seat, they’re not suddenly going to be able to get away with $52.50 just because there’s a new 5% tax surcharge, so they’ll have to lower ticket face values (or at least refrain from raising them) to keep the new total price the same. (It’s a little more complicated than that since all entertainment venues in town will pay the same tax — it’s possible ticket buyers may end up having to pay a bit more on the economic principle of “nyah nyah, suck up higher ticket prices or stay home and watch TV,” while that $10 limit creates a rather large incentive for venues to charge $9.99 for tickets instead of $10.50 — but the basic principle still holds.)

This should help placate opponents who were upset that non-arena tickets were going to be taxed to pay for arena renovations; whether it placates the Blue Jackets owners, who previously came out against the earlier version of the tax, is another story. Though there’s nothing saying the Columbus city council has to come up with a tax that the team owners agree to, and the Blue Jackets’ lease that bailed the team owners out at public expense runs through 2039, so maybe they’ll just have to suck it up and accept a tax that will benefit their own arena, which isn’t actually all that onerous when you put it like that.

One of the trickiest bits for a sports team owner seeking a new or renovated stadium or arena is establishing why they “need” one, especially when the old one isn’t that old at all, and the only problem with it is that the other teams on the block have even newer ones. So when a newspaper — in this case the Columbus Dispatch — sets out to make that argument for you, man, it’s Christmas in June. Let’s follow the bouncing quotes:

“Certainly, every time somebody else builds a new arena or renovates an arena, we look and feel just a little bit older. It’s just the nature of everything,” said Xen Riggs, CEO of Columbus Arena Management.

I would argue that this is not actually the nature of everything. Okay, sure, the circle of life can get you down when you notice that you’re forever aging and other, younger beings are arriving to take your place, but 1) the song is supposed to make you feel better about that, not worse, and 2) how is it that when somebody builds a new arena in, say, California, that makes an arena feel older to Columbus Blue Jackets fans? Do they spend a lot of time traveling to other cities and coming back thinking, Man, our arena doesn’t have Bluetooth-enabled cupholders, that’s the last time I’m ever going to a game? How does the arena experience objectively change just because another, newer building exists somewhere else? Is it a quantum entanglement thing?

Moving on:

Action on the ice or court sometimes is the secondary reason for why people attend events, said Ryan Sickman, director of sports and convention centers for Gensler, the architectural firm behind Quicken Loans Arena’s renovations.

“What an NHL fan in Columbus wants isn’t the same that they expect in D.C. or Las Vegas,” he said. “They’re different people, and their expectations are different. … We need to be designing arenas and venues around that.”

First off, asking a guy whose livelihood depends on people hiring him to renovate arenas what he thinks of renovating arenas might not be the absolute best way to get an objective verdict on whether it’s necessary to spend money on renovating arenas. Secondly, I’m not entirely sure what this statement has to do with an 18-year-old arena being deemed in need of renovations — was it somehow built not Columbus-y enough? Is Gensler designing Quicken Loans Arena’s giant glass wall to meet the particular glass-wall needs of Clevelanders?

Overall, this article is a classic example of media coverage that seems objective on the face of it (“Let’s compare our city’s arena upgrade spending to other cities’!”), while the actual bias resides not in how the reporting is carried out, but in how the question being asked reflects the priorities not of the public the newspaper is supposed to be representing, but rather of the sports team owners who built the arena then demanded that the public bail them out because they were losing money on it. (Or in this case the arena managers running the place — the Blue Jackets owners haven’t been publicly agitating for renovations, but then, with landlords like these, they don’t have to.) Put it all together, and it’s Why don’t we have a glass wall like that arena across the state, you’re embarrassing us in front of our friends, which really isn’t the best way to run public infrastructure policy.

Fortunately, the Dispatch did interview one person — literally only one person in the whole article, but I’ll take what I can get — who doesn’t have a vested interest in more money being spent on ever-newer arenas:

“Every major-league team in the country, either at the arena or stadium level, wants to start replacing their stadium starting at about 20 years, said Victor Matheson, a professor who studies arena deals at the College of the Holy Cross. “Whether they need to replace their stadium or arena at 20 years is a totally different question.”

Victor Matheson is the best.