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.

Beckham seeks to hook up with Bucks owner for Miami stadium cash

Now that David Beckham’s proposed Miami MLS team finally has a site where a stadium can fit, sort of, the negotiations have entered a weird phase, with Beckham shopping around for somebody with the cash to actually build the thing. Or lend to him to build the thing. Or give to him to build the thing in exchange for a share of the team, or the stadium revenues, or something. David Beckham seeking rich partner for stadium play, is what I’m saying here.

Back in February, there was a rumor that Beckham was looking to sell a chunk of the team to Qatar Sports Investments, owners of the French soccer giants Paris Saint Germain, but those talks apparently went nowhere. Now, the Miami Herald (citing unnamed “sources familiar with the talks”) says Beckham has approached Wesley Edens, co-owner of the Milwaukee Bucks and co-chair of real estate giant the Fortress Investment Group, about being an “investor” in the stadium project, whatever exactly that means. The easiest way would still be for Beckham to just sell Edens a share of the team, though there are plenty of other options for structuring a deal where Beckham gets cash now to build and Edens gets revenue down the line.

Regardless of how this all works out, the Miami stadium is still looking like it’s mostly going to be a deal indirectly subsidized by MLS — in that the league gave Beckham an 80% off coupon for one expansion franchise as part of his contract to play in the league, and now Beckham needs to do whatever it takes to cash it in. That’s all well and good, if a bit odd, but it’s interesting to see that even with an $80 million head start, Beckham is having to shop around to find investors interested in being a part of his project. Making money by starting sports teams and building stadiums for them with your own money is hard, which is no doubt one reason why so many rich people looking to own sports teams try to skip the “with your own money” part. (The other reason being that skipping the “with your own money” part is always a nice way to make even more money, even if you could turn a profit doing it yourself. Really, there’s no downside to having other people spend money on you, except for having to live with yourself in the morning.)

Utah official apologizes for “rookie mistake” of voting on Jazz subsidy without public debate

Salt Lake City’s $22.7 million tax break for renovations to the Utah Jazz‘s privately owned arena is all over but the shouting, and there’s plenty of that:

  • Deseret News sports columnist Brad Rock writes that “the tradition of coercing cities into building sports arenas at public expense, under threat of relocation, is tried and true,” but then adds that he’s fine with being threatened if the price is right: “If Utah loses the Jazz, for lack of an updated arena, Salt Lake will return to the college town it was when the team arrived.” Not that the Jazz have threatened to leave town, mind you, or that it would make any sense for them to do so when they’d be abandoning an arena they themselves own, or even that this deal does anything to stop them from threatening to leave again later. But, you know, cold Omaha.
  • Salt Lake City Redevelopment Agency chair Lisa Adams says it was a “rookie mistake” to schedule the arena subsidy vote only one day in advance, and that if she had it to do over again she’d give a month of lead time so people could actually discuss the plan first. Not that she’s offering to go back and change her vote now, but, you know, next time.

Once again, $22.7 million isn’t a huge subsidy for the year 2016, but on the other hand Salt Lake got exactly zero in exchange: no added arena revenues, no signed commitment to stay in Utah for a longer term, just 60% of the additional property tax revenues from the increased value of the arena — where if they hadn’t approved the subsidy, they’d be getting 100% of those. If this is the last time the Jazz ask for public money for the next couple of decades, it’s at least a fairly modest sum; if it turns out to be the camel’s nose, that’ll be a different story.

Falcons stadium now to cost $1.6 billion, and it’s not finished yet

Both Atlanta Falcons officials and Atlanta Mayor Kasim Reed have started referring to the team’s new stadium opening in 2017 as a $1.6 billion facility, which probably means it now costs $1.6 billion, though there’s been no official announcement. That’s up from $1.5 billion in April, which is up from $1 billion in late 2013, which was already a pretty crazy amount of money to spend to build a new stadium to replace a 20-something-year-old one next door.

Now, Falcons owner Arthur Blank recently revealed that the amount of public money for the stadium is now “almost $700 million,” up from almost $600 million at last accounting, probably because projections of the hotel-motel tax that will go into the stadium’s “waterfall fund” for future maintenance and operations have risen. Still, that’s a hefty sum for Blank to pay, on top of a hefty sum that Atlanta citizens will be paying (yes, they’re paying it even if comes from a tourist tax, since once the city collected the tax money it’s the city’s to spend however it likes). It seems inconceivable that this will end up paying off for anyone, but apparently this is what Jerry Jones and the taxpayers of Arlington have wrought.

San Diego put down sharp rocks to keep homeless from sleeping near All-Star Game

When San Diego city officials installed jagged rocks under a highway overpass near the Padres‘ Petco Park in April to prevent homeless people from sleeping there, many locals assumed it was an attempt to clear out homeless in advance of July’s MLB All-Star Game. City officials countered that the rocks were there at the request of local residents. The news site Voice of San Diego filed a public-records request to find out the truth, and duh, it was all about the All-Star Game:

Sherman Heights is never mentioned in dozens of emails exchanged between city staffers discussing the rock installation. Rather, the rocks were part of a larger effort to clean up the area prior to the July 12 All-Star Game and improve the flow of traffic to and from Petco Park. Early plans, emails show, called for rocks not only along Imperial Avenue, but also along two blocks of a wall lining Petco Park’s Tailgate Park as well as outside the New Central Library, all in an effort to deter camping and loitering near the ballpark during All-Star Game festivities…

John Casey, the city’s liaison with the Padres until March, took the lead on getting price quotes for the rocks. In multiple emails, he urged city staff to move the project along. “Any breakthroughs?” he wrote in a November email. “The Padres and SDPD are asking me when we can see the curbs painted red as well as the rocks at the underpass and Tailgate Park wall.”

In early January, Casey emailed City Traffic Engineer Linda Marabian and laid out a checklist of remaining work to be done before the All-Star Game.

“Back to the vision of Imperial as a Gateway to East Village,” he wrote. “The wrought iron fence has been installed on the wall at Tailgate Park and works well at discouraging loiterers. Remaining work in anticipation of the All Star game is: Rip Rap rocks under the I-5 overpass at Imperial on both sides of the street. Rip Rap rocks at the base of the Tailgate Park wall from 12th to 14th.”

The VoSD didn’t report on where the homeless went who have been displaced from their camp under the overpass. Wherever it is, one hopes that they appreciate it as one of the ancillary benefits of their city getting to host an All-Star Game.

Flames owners on arena Plan B: Reply hazy, ask again later

Ever since the city of Calgary shot down the Flames owners’ plan to build a $1.2 billion combined arena-stadium complex (after discovering it would actually cost $1.8 billion, and the public would be on the hook for the difference), we’ve been waiting for someone to announce next steps. And it sounds like the next step is … to figure out a next step:

In a letter that season ticket holders received Monday, CEO Ken King said the company “accepted an offer from the City to examine a Plan B.”

The less ambitious Plan B would see an arena and event centre located on the Stampede grounds, a separate field house in the northwest, and some renovation to McMahon Stadium.

How much would such a scaled-back (but still sizable) plan cost? Nobody knows, which is what “examine” means. The Flames owners are supposed to provide a response to the city’s report later this month, but even that doesn’t guarantee that an actual plan or price tag will be in place — it’s a fair assumption that we could be here awhile as the details get worked out, which when hundreds of millions of public dollars are at stake isn’t a bad thing at all.

Hartford Yard Goats stadium’s insurance elapses, rain of toads forecast for Friday

Your morning Hartford Yard Goats schadenfreude:

Hartford’s $63 million minor league ballpark — now standing unfinished just north of downtown — is not being covered by property insurance in the wake of the city’s decision a week ago to terminate a construction contract with its developer, city auditors said Wednesday.

“The bottom line is the city’s investment in that stadium is not insured for property and contents,” said Craig S. Trujillo, the city’s deputy chief auditor. “There is no insurance on that property for perils, like windstorms, like fires.”

In short, the insurance on Dunkin’ Donuts Park ran out once construction was halted, whether this was because the stadium was done (it’s not) or because it’s in a permanent holding pattern (bingo). And nobody bothered to find out about replacement insurance, so if somebody wants to burn down the unfinished stadium, the city would be screwed. Not that anyone would do such a thing, but given how cursed this stadium is, it’s totally what’s going to happen.

NHL seriously putting expansion team in Vegas, sports world just shakes its head sadly

Las Vegas Black Knights? Las Vegas Black Knights:

A person with direct knowledge of the NHL’s decision says the league has settled on Las Vegas as its choice for expansion, provided organizers can come up with a $500 million US fee.

The person spoke Tuesday on condition of anonymity because details have not been released by the league ahead of its Board of Governors meeting on June 22 in Las Vegas. Quebec City was also considered for expansion.

A second person who had been briefed on the decision said Las Vegas was a “done deal” following the recommendation of the NHL’s executive committee.

This has been in the works for a while now, though no one could actually believe that the NHL would go ahead with adding just a single team (resulting in continued unbalanced divisions), and that it would be in Las Vegas, of all places. I mean, nothing against Las Vegas, but it’s a very small city, and anything but a hockey hotbed, and — you know what, let’s let Nate Silver tell it, as he did in April 2015 and reprinted yesterday at Fivethirtyeight:

The city has had several professional sports franchises (albeit none from the four or five largest North American sports leagues), and it hasn’t supported them very well.

Consider that the city’s Triple-A baseball franchise, the Las Vegas 51s of the Pacific Coast League, had the lowest attendance in the PCL last year.

Or that the city’s professional hockey franchise, the Las Vegas Wranglers of the ECHL, disbanded earlier this year after years of middling attendance and an inability to find a suitable home arena.

The Las Vegas Gladiators of the Arena Football League were relocated to Cleveland in 2007 after five seasons of attendance well below AFL averages. Las Vegas has a new AFL team this season, the Las Vegas Outlaws, but their attendance was poor in their first two games…

If the city has some positives, it also has some negatives, like irregular working hours, middling public transit and abundant competition for the entertainment dollar, which may depress sports attendance.

To their credit, the backers of the Las Vegas NHL franchise, after a monthslong campaign, have gotten commitments from about 11,000 would-be season ticket holders. That sounds impressive until you consider that the Winnipeg Jets sold out their entire allotment of 13,000 season tickets in 17 minutes after the Atlanta Thrashers were relocated there in 2011. Hockey’s a bit more popular on the frozen tundra than in the middle of the desert.

Gary Bettman has spent his entire career as NHL commissioner devoted to the idea that he can increase the value of the league by expanding to areas where people traditionally don’t like hockey, and despite all signs that this was a terrible idea, he’s doubling down on it with this move. At least the other 30 NHL owners will get to pocket half a billion dollars in expansion fees, I guess, but running a league as a Ponzi scheme is … actually, a long NHL tradition, so forget I said anything.

Jazz owners get $23m in subsidies, at least left Salt Lake its credit cards and driver’s license

The Salt Lake City Redevelopment Agency unanimously approved $22.7 million in tax-increment financing kickbacks for the Utah Jazz‘s $120 million in arena renovations yesterday, because renovations iz gud:

“The improvements they will be making … will be significant and will really add value to the venue and to the neighborhood,” said RDA Vice Chairman Derek Kitchen, one of six board members who voted for the tax break.

As discussed yesterday, there is really no reason for Salt Lake City to be cutting the Jazz a tax break, given that the team owns its arena and isn’t really a danger to go anywhere (or cancel the renovations) if it didn’t get the money. At the same time, it’s only 40% of future increases in property taxes, from both the arena and the rest of the TIF district, and if property tax receipts don’t rise, the city is off the hook for it, and it’s only $23 million on a $120 million project, and $23 million is practically nothing these days, right?

We’re ultimately down to asking whether throwing a relatively small (but still large in normal human terms) amount of money down a hole for no good reason is something to complain about, or something to be glad isn’t so much worse. And the obvious answer is “yes.”