Columbus arena needs renovations, says local paper, because all the other kids are getting them

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.

Columbus arena hurt by lack of ticket tax, Hartford arena hurt by presence of one?

Columbus’s Nationwide Arena, the privately built and publicly bailed-out home of the Blue Jackets, is running out of money unless the county rides to the rescue with a citywide tax on sports and entertainment tickets:

The initial proposal outlined in January was for the city to levy a tax of 3 to 8 percent on tickets to arts, cultural, entertainment and professional sporting events within the city limits and for Franklin County to contribute sales-tax revenue.

Together, those sources could generate $15 million to $20 million a year, with $4 million being earmarked for the arena and the rest going to artists and organizations that the arts council supports.

Basically, what’s going on is that the county funded the arena bailout, including future renovations, with a casino tax, and Columbus residents just haven’t been gambling their money away like everyone had hoped. And while initially the county arena authority proposed just a tax on tickets at the arena, that’s expanded to a tax on all tickets anywhere in Columbus, and arts groups and their supporters are understandably miffed about the prospect of having to be taxed in order to fund a competing entertainment option just because the Blue Jackets needed to make more money.

(Ticket taxes, as has been covered here ad infinitum, tend to come out of the pockets of those selling tickets, not buying them, as they’re already charging the maximum that the market will bear; though there’s some argument that a citywide ticket tax would hit ticket buyers a bit harder, since they wouldn’t be able to avoid it by going to see some event other than hockey.)

So we have the specter of Don Brown, executive director of the Franklin County Convention Facilities Authority, saying of a money-losing arena, “To keep that magic happening, we have to keep reinvesting in the arena itself.” Magic!

Plenty of other local governments have funded their sports venues with ticket taxes, of course, among them Hartford, Connecticut — where the public operators of that city’s arena want nothing more than their ticket tax to go away:

The overseers of the XL Center in Hartford say the venue is feeling the sting, in more ways than one, from a 10 percent state admissions tax that kicked in six months ago.

The levy has played a role in the 16,000-seat arena striking out on as many as a dozen events, mainly concerts, that it bid on, according to Michael Freimuth, executive director of the Capital Region Development Authority (CRDA), XL Center’s management overseer…

The problem, Freimuth said, is that the tax curtails a show’s potential profit margin “by such a degree that it results in the building losing actual events and the subsequent revenues.”

Connecticut’s is a statewide tax (though some venues have gotten exemptions, including the Hartford arena at times in the past), so it’s not entirely clear what the arena managers or concert promoters are griping about — it’s not like they can get out of the tax by just going to, say, Bridgeport. Though I suppose griping is how concert promoters get better deals — Freimuth told the Hartford Business Journal that “They say ‘you just took my margin down, split it with me,'” which indeed sounds like something a concert promoter would say.

The lesson here is: You can’t get blood from a stone, or much more money from a concert industry that has other options, especially when you’re a market like Columbus or Hartford that big-name acts can just skip if they aren’t feeling the profits. Though if you’re a concert promoter, you totally can try to get a state to cut your taxes to boost your profits by threatening to blacklist them. And if it seems like letting sports teams and promoters play states off against each other in a bidding war to the bottom is bad public policy, yeah, maybe Congress should have listened to David Minge.

A ticket tax would be the least bad thing about the godawful Blue Jackets arena bailout

Nationwide Arena, the county-owned home of the Columbus Blue Jackets, is still barely bringing in enough money to pay operating costs, something that has been a problem for years now, ever since the city, county, and state teamed up to bail out the team from its money-losing private arena construction deal. Now, the Franklin County Convention Facilities Authority is proposing a solution: adding a ticket surcharge to build up a surplus to pay for any unexpected repair expenses.

There are probably those among you reading this thinking, “Those bastards! First they take a money-losing arena off the hands of a private sports team, now they’re forcing fans to pay for it with higher ticket prices!” It’s a reasonable enough response, but it’s dead wrong — at least the last part is. Allow me to explain why.

So you’re the head of the ticket sales office for a not-overly-popular NHL team. (Or a super-popular one — it doesn’t matter for our purposes here.) Your job is to figure out how much you can charge for tickets that will make your bosses the most money possible. Selling more tickets doesn’t really cost you anything — you may have to hire a few extra concessions workers for the night, but it’s not like you have to manufacture more hockey — so your calculus is just: How far can I raise prices before fans decide to stay home and watch on TV?

Now, let’s add a ticket tax to the mix — say it’s $2. If you were charging $50 previously for a certain tier of seats, that’s because you figured that $51 would drive enough fans away that it would end up costing you money. So do you now add $2 to that $50, and charge $52 a ticket? Only if you’re an idiot — we just said you’re going to bring in less money if you charge more than $50, remember? So the only solution is to keep charging $50, and eat the $2 ticket tax yourself.

It’s a bit counterintuitive, because it doesn’t work that way in other economic realms — add a 1% sales tax, and stores don’t all cut their list prices by 1%. But those are for good that actually cost something to procure — if you sell one less of them, that’s one less that you have to buy from the wholesaler — and besides, if consumers choose not to shop at your store (or restaurant or whatever), they’ll still have to pay the same tax if they do something else that evening. Unless people are so desperate for hockey that they’ll pay any price to see it, you’d be insane to do the same for tickets — and if the fans are that desperate, you should be raising ticket prices already, with or without a tax.

There is much that is terrible about the Blue Jackets arena deal: Taxpayers essentially took responsibility for the arena’s losses for no damn reason after the team had initially built it with private money, and now it’s left for the city and state to squabble over who’ll pick up the check. But whenever you hear “ticket tax,” remember, that’s a good thing for fans and taxpayers alike — because the peculiar economics of sports venues means that it’s really a stealth way of sticking it to the team owners. Say, is there anything in the Blue Jackets’ lease preventing the facilities authority from setting fees at, say, $20 a ticket to get taxpayers some of their money back…?

With casino taxes falling short, Columbus could bail on $44m of Blue Jackets bailout

Back in June, I discussed how Columbus and Franklin County taxpayers are doing on their public bailout of the Columbus Blue Jackets‘ arena, which is not well: Thanks to local casino taxes falling far short of projections, the arena is barely managing to pay its operating costs, meaning there’s no money left over to repay $10 million in debt to the state of Ohio and $44 million to former arena owners Nationwide Realty Investors. It turns out that may be good news for Columbus residents, though, since the terms of the deal are that if the casino money falls short, taxpayers can simply skip out on the debt:

The deal was structured so that casino tax revenue would be used to fund part of the arena management company operations, pay for capital expenses and repay the loans — in that order.

So far, casino taxes are generating only enough revenue to supplement management and operating costs at the arena.

The way the deal is constructed, Nationwide would assume the debt if there is not enough money to cover the arena purchase. The city and the county are not obligated to provide any other sources of revenue from their budgets to make up for the shortfall. That means their own budgets aren’t at risk, and without the prospect of an empty or dilapidated arena neither has an incentive now to reopen the deal.

“As far as I am concerned, Nationwide is carrying bad debt,” said City Auditor Hugh J. Dorrian. “ The contract will not be rewritten.”

This doesn’t make the bailout a good deal, mind you: The city and county are still sending $4 million a year in casino taxes to cover operating costs, plus have an estimated $2 million a year in deferred maintenance expenses that it has to pay off somehow. And defaulting on a $10 million loan from the state would just shift the burden from city taxpayers to state taxpayers in general, which isn’t really a net gain for the Ohio public.

That said, kudos to whoever on the Columbus side of things negotiated this “we’ll owe the private arena developers who we’re bailing out $44 million, unless we don’t have it in which case you’re out of luck, suckers” clause. At least it’s prevented a bad deal from going to worse.

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.