October 04, 2011
Blue Jackets bailout clears Columbus council
The Columbus city council approved the public-private bailout of the Columbus Blue Jackets yesterday, putting that deal one step closer to fruition. The mayor and the county commission still need to sign off on it, but that seems pretty likely, as the plan has widespread support:
"So many neighborhoods are literally dying," Smith said. "To do this right now is morally indefensible. We need to focus on our critical needs — infrastructure and the well-being of our citizens."
Whoops, wrong quote: That's actually Columbus mayoral candidate Earl Smith, who says it's a lousy deal, since Columbus would be giving up casino revenue that could otherwise go to serve other needs, in exchange for uncertain economic benefits. It doesn't look like there'll be much that Smith can do about it even if he takes office in January, though — and in any case, as we've seen, it's all too common for stadium-skeptic mayoral candidates to have changes of heart once they're the ones in the lobbyists' crosshairs.
September 15, 2011
Columbus panel proposes public-private bailout of Blue Jackets
One of the few good models of a privately funded sports facility may be about to get a whole lot less, uh, modely. A government task force put together to resolve the Columbus Blue Jackets' demands to be bailed out of their lease at their 11-year-old, privately built arena has come up with a plan that would go like this:
- Columbus' Convention Facilities Authority, a combined city-county entity, would buy the Nationwide Arena from its private owners, Nationwide Insurance and the Columbus Dispatch, for $42.5 million, and take over management and operations. The city and county would pay off the purchase price with part of its share of revenue from the state's four new casinos, just as the Blue Jackets owner requested last summer.
- The Blue Jackets would stop paying rent, currently running about $9.5 million a year. It would also extend its arena lease through 2039, which doesn't sound like much of a concession when it's a lease where you pay no rent.
- Nationwide would buy a 30% minority share in the Blue Jackets for $52 million, as well as signing a 10-year, $28.5 million naming rights deal to keep its name on the building it would no longer own. That money would go, naturally enough, to the Blue Jackets, even though they 1) didn't build the arena, 2) wouldn't own the arena, and 3) wouldn't even be paying tenants, thanks to that whole free rent thing. Effectively, then, the team would be getting paid $2.85 million a year to play in Columbus.
So what's in this for whom, exactly? Well, the Blue Jackets, who say they're currently losing $12 million a year, would get that $9.5 million a year rent break plus $2.85 million a year in naming-rights money, effectively putting them in the black in one fell swoop. Nationwide would take a bath on its $175 million construction cost, getting only $42.5 million in return, and having to cough up naming-rights money as well. As for city and county taxpayers, they'd be giving up several millions of dollars a year in casino revenues in exchange for an arena whose primary tenant would be paying no rent — so how that works out for them will likely depend on whether it's possible to pay operations costs on an arena off of just Lady Gaga concerts and monster-truck shows.
Or, as Columbus City Auditor Hugh Dorrian put it to Columbus Business First (in the newspaper's words): "The deal will not raise taxes and won't take money away from capital projects and city operations." Oy!
The plan still has to be approved by the Columbus City Council, the Franklin County Commission, and the Franklin County Convention Facilities Authority.
May 09, 2011
Columbus on Blue Jackets bailout: No money, ask again later
If you want a parable explaining how the economy's impact on state finances is affecting stadium and arena campaigns, look no further than Columbus, where two years ago the Blue Jackets' demanded a state bailout of their privately owned arena. And two years later, that demand is still "in a state of pause," according to the lawyer trying to broker a deal.
The Columbus Dispatch continues:
That pause accompanies uncertainty about the state budget and whether tax revenue from a casino could be part of a solution. The casino developer has sued the city and county in a case that could decide how much tax revenue Columbus receives from the project.
The casino plan sounds like a mess right now — there are actually two lawsuits, including one over whether the suburban casino site will get annexed to the city — and the state budget is equally messy. Still, it's worth noting that this is just a "pause," not a rejection, and Columbus Mayor Michael Coleman said all the requisite team-friendly things about how he doesn't want to cause "rippling economic consequences" if the hockey team were to move: "I do not want to lose the Blue Jackets. I don't know much about hockey, but I do know about economic development." (Apparently Coleman doesn't know much about the substitution effect, either.)
The upshot: Local government budget crises are putting stadium and arena plans on hold, but the back burner remains lit. And team owners, even those losing $12 million a year like the Blue Jackets claim to be, can afford to sit and wait in hopes for a nine-digit payday; what else are they going to do, all move to Winnipeg at once?
July 19, 2010
Blue Jackets president: Casino tax would make great bailout cash
Columbus Blue Jackets president Mike Priest announced Friday that the "most viable solution" to his team's demand for a public bailout of its operating losses was to hand over revenues from a proposed tax on new downtown casinos to the team. "It wouldn't require any other money being used," Priest told the Columbus Dispatch. "But it's up to the public sector to decide how it wants to use that money."
That "wouldn't require any other money" is likely directed at Columbus Mayor Michael Coleman, who's said his only condition is that general fund revenues wouldn't be used. A casino tax, though, would otherwise likely go into the general fund, so it amounts to a city expense either way. (This is an excellent example of why subsidies are subsidies regardless of what public revenue source is used for them — once tax money is collected, it all ends up in the same place eventually.) It's also still unclear how much money a casino tax would generate, given that the casinos themselves don't start opening for another two years.
In any case, though, it seems like the tone of the discussion is now on how to bail out the Blue Jackets, not whether to do so — Priest remarked that he's pleased "the momentum has really picked up." And you only need to look one state over at Indianapolis to see what that can lead to.
May 03, 2010
Blue Jackets find $1m a year, still seeking $11m more
In case you've been wondering, the Columbus Blue Jackets are still looking for that lease bailout, but for now they'll have to settle for this: The team and Ohio State University have agreed to merge their booking and operations units for the arena, each saving about $1 million a year in the process.
"This could be an important step, but it represents only about a 10 percent fix to our problem," Blue Jackets president Mike Priest told the Columbus Dispatch. "If we have a $12 million problem and we fix it by $1 million, that's at least a step in the right direction."
Other steps the Blue Jackets owners could be seeking, according to the Dispatch: having the government take over the privately owned Nationwide Arena, and absolve the team of paying rent; having Nationwide, the current arena owner, accept a cut-rate buyout and pay for naming rights; or just Ohio giving the hockey team a bunch of tax money, like they're an auto company or something.
Columbus Mayor Michael Coleman cautioned that none of these ideas were close to becoming reality, saying: "It's not soup yet." You gotta love a mayor who knows his classics.
December 07, 2009
Blue Jackets bailout: What would taxpayers get?
It must be nice to be a sports team owner. If you're a normal person facing bankruptcy, it's not all that likely that the mayor of your town will hire a special consultant just to figure out how to give you enough money to keep you afloat. But if you're the owner of, say, the Columbus Blue Jackets, that's exactly what you get:
John Rosenberger, the former executive director of Capitol South Community Urban Redevelopment Corp., will lead an effort to shore up the finances of the Columbus Blue Jackets by reworking the hockey team's relationship with arena owners, Mayor Michael B. Coleman announced. ...
A report issued last month by the chamber listed about two dozen options -- the most likely involving public money -- to resolve structural problems with the lease that have contributed to the Blue Jackets' estimated losses of $12 million a year.
Leaving aside whether an NHL franchise really falls into the category of "too big to fail," the prospect of a Blue Jackets bailout raises some other familiar concerns. For one thing, is there a risk of moral hazard if sports teams can go into arena projects with unworkable finances, figuring, "Hey, if we're losing money once the place is built, we can always get the government to renegotiate our lease later"?
A bigger question now, though, might be: What, if anything, will Columbus get in exchange for any money it pours into the Blue Jackets' coffers? If the team doesn't have money to spare, the next most likely thing is equity — if the U.S. can become part-owner of AIG and General Motors, there's no reason Columbus can't demand a share of the Blue Jackets in exchange for any bailout money. And unlike the federal government, they already have plenty of experience in such things...
November 05, 2009
More evidence that arena subsidy ideas never die, they just go dormant: Five months after the Columbus Blue Jackets abandoned their plan to have the county to give them millions of dollars in lease concessions, the Columbus Chamber issued a report today warning that the team could move without a massive infusion of cash. And where would that cash come from? The report mentions selling more tickets, but most of the options involve public money:
- Funneling state, city, or county money directly to the team, from alcohol and cigarette taxes, hotel/motel tax, car rental taxes, or a special Arena District tax.
- Have Nationwide, owner of the team's arena, cut their rent and/or give them a larger share of arena revenues.
- If Nationwide isn't amenable to that, have the public buy the arena, and then give the team lease concessions. Either city tax-exempt bonds could be used, or federal Build America Bonds, which were authorized as part of the economic stimulus package.
The report asserts that the Blue Jackets are losing more than $10 million a year, and blames it on the fact that the team has to pay rent and doesn't get a cut of naming rights, seat licenses, or parking. Of course, the team also has never won a playoff game, which can't be helping ticket sales. And it's not like the team's owners didn't know what was in the lease when they signed it in 1997.
What's happening here, says the National Post, is that the NHL's revenue model is imploding, and its teams are looking to the public for a bailout:
OK, add them to the list. We've been saying all along that Phoenix was only the first franchise to implode, and that the structural flaws inherent in the new NHL — salary floor, little national TV money, too many non-traditional markets — could combine with the still-dormant U.S. economy to create a wave of similar failures.
And when you look at the attendance numbers creeping in from across the league, some of them are chilling, and not in hockey-rink-in-the-morning chilling.
Phoenix, of course, is beyond repair — its last two home games have featured reported paid attendance of 6,495 and 5,855. But others are hemorraghing, too. The New York Islanders, waiting forever for an arena, are averaging 11,909. Nashville: 13,398. Tampa Bay: 14,329. Florida: 14,397. Atlanta: 14,893. And remember, these are tickets sold, not patrons in attendance, and in many cases they include any number of cut-rate deals.
The Blue Jackets' last attempt at getting subsidies crashed and burned, but it looks like the team and its backers are trying hard to move the debate in the direction of "It's not whether we give them money, but how." Columbus Mayor Michael Coleman told Business First of Columbus that "we will not use city tax dollars from our general operating fund that are dedicated for basic city services," but that "the public and private sectors should explore options that keep them in Columbus." This is common mayoral code, and means that any special taxes not dedicated to the general operating fund — in other words, like the sin and other taxes proposed by the Columbus Chamber — are very much on the table.
The NHL may or may not be headed for a wave of failures — and it's debatable whether teams losing money when they're lousy should be considered a "failure" — but it's almost certainly heading for a new wave of eyeing taxpayers' wallets.
June 03, 2009
Blue Jackets ditch sin-tax bailout plan
The Columbus Blue Jackets have thrown in the towel on their previously reported plan for a county bailout of their losses by buying their privately owned arena and cutting their rent. The reason, according to Business First of Columbus: Everybody thought it was a terrible idea:
Lobbyists for the beer and tobacco industries had feared the excise tax authorization would be slipped into the budget bill with no public discussion. But the issue became public May 28 when media outlets, including Business First, began reporting on the Blue Jackets' proposal.
Many of the stories have included citizen comments against a county buyout of a privately owned arena during a recession and raising alcohol and tobacco taxes to pay for it.
The team will now go back to the drawing board seeking other ways of stemming their losses, presumably through a bailout that looks less like, you know, a bailout. Business First further adds that Blue Jackets officials "have said the team wants to avoid talking about what will happen if the Blue Jackets can't get a more favorable arena deal, including the threat of the team being sold or moved." Paraleipsis is an owner's best friend...
May 29, 2009
Blue Jackets seek taxpayer lease bailout
The Columbus Blue Jackets' Nationwide Arena has gotten lots of praise as a model of a privately financed sports facility (though the city did kick in for infrastructure costs) — so naturally, nine years after it opened, the Blue Jackets are looking for those subsidies that voters made them do without back then. Team president David Peacock met with state political leaders this week to seek a tax hike on beer, wine, and cigarettes that would, in the words of the Associated Press, "raise an estimated $65 million a year, which would help offset team losses and help the county pay for a bond sale to buy the arena."
How this would work: The arena is currently owned by Nationwide Insurance and the Columbus Dispatch, which paid to build it and, naturally enough, expect the Blue Jackets to pay enough rent to pay off their arena bonds. The Blue Jackets claim they can't do this on the revenues they bring in from arena events — remember what I've said before about sports facilities seldom paying for themselves? — and are hoping the county can use the new taxes to buy the arena and give them a new lease, one that not only cuts their rent, but absolves them from paying $1 million a year to the local school district out of ticket taxes, something that was arranged to compensate for the full property tax exemption the team was given when the arena was built.
In other words, the Blue Jackets want the county to buy the arena because they want a landlord that will bail out their losses by cutting their rent. They could always just ask Nationwide for a lease break, but apparently public officials are a softer touch.