MN gov proposes diverting cigarette and sales taxes for Vikings stadium

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Heads up, everybody, Minnesota Gov. Mark Dayton has a new plan to pay for a Vikings stadium, and it doesn’t involve gambling of any kind at all. Well, not the fun kind of gambling where you can win cash prizes, anyway, but just gambling with your health: The state would take the first year’s $24.5 million windfall from a new cigarette tax and pour it into the stadium fund. And if gambling revenues continued to fall short, the state could tap $20 million a year from a new provision to get Minnesota-based corporations to pay their full taxes on in-state sales.

All of which is well and good, except that both of these taxes were already in the state budget plan, and expected to put money into Minnesota’s general fund. Dayton is only proposing to use them for the Vikings stadium — instead of the far simpler method of just appropriating money straight from the general fund — because he promised that no general fund money would go to the stadium, and since these are new taxes that haven’t hit the general fund yet … well, let’s let Minnesota Revenue Commissioner Myron Frans explain it:

“These are new revenues coming in to the state for the first time. And the same thing is true of the new electronic gaming situations for gambling, that was a new revenue source and it all goes into the general fund. It’s just that the Legislature designates some of those funds to be used for certain purposes.”

Yes, right, money is fungible, so it doesn’t really matter which pocket you take it from, we get that. None of this changes the fact that the gambling plans were put into place specifically to fund the stadium, while the cigarette and sales-tax provisions would be there to fund schools and such if the state doesn’t give the proceeds to the Vikings.

Though really, maybe the best way to look at this is that Frans has a point: All tax revenues could go to the general fund if you wanted them to, so no matter how you raise the money, a stadium subsidy is a public cost. In fact, the same thing goes for those e-pulltabs and e-bingo and all the other e-things that Minnesota is trying to use for stadium funding: The state could be using those revenues for other services if it wanted, too, so it’s not really found money, either. So really the way to look at this is that no matter how they end up paying for it — gambling, smoking, bake sales — Minnesota taxpayers are out $1.1 billion on the Vikings deal, and it doesn’t really matter how they pay for it, one way or another they’ll pay. Um, that was your point, right, Myron?

Edmonton arena funding could be even shorter of 100% than we thought

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University of Alberta sports economist Brad Humphreys has chimed in (at The Sports Economist, natch) with his analysis of the Edmonton Oilers arena deal, and if anything, he’s even more pessimistic than I was yesterday. Among Humphreys’ concerns:

  • The current construction cost estimate for the arena (not counting land and roads and bridges and other needed infrastructure) is $480 million, up from a $450 million estimate in March 2008. But given the actual inflation rates since then for steel, concrete, and labor costs, the actual cost in 2013 dollars is more likely to be $517.5 million.
  • In her new book with the really long title, Harvard planning professor Judith Grant Long estimates that the average sports facility deal comes in at about 25% above the stated cost estimate. That would make the expected Edmonton arena cost $562.5 million.
  • Filling in the gap by increasing the projections of revenue from the Community Revitalization Levy — future increased property tax revenues from the project, aka a TIF — is awfully dodgy, since “if they could have raised an additional $15 million from the CRL when it was proposed as part of the financing package years ago, why wasn’t the CRL contribution higher back then?”

In other words, the funding gap may still be pretty large — though it could be the kind of gap that doesn’t show up until you’ve already agreed to build the project and suddenly realize that there isn’t enough money to pay for it. Man, this really is the week for that, isn’t it?

 

 

 

Kings sale to Ranadive finalized, now they just need … what was it … oh right, arena funding

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That didn’t take long: Chief Sacramento whale Vivek Ranadive announced last night that he’s reached an agreement to buy the Sacramento Kings from the Maloof brothers, just two days after the NBA rejected the Maloofs’ sale to Chris Hansen’s Seattle group. Ranadive agreed to kick in an extra $6.5 million, bringing his payment to $347 million (actually $200 million in cash to the Maloofs, with the rest in debts to the NBA and city of Sacramento that he’s assuming), for a total franchise valuation of $535 million — $10 million more than his group had previously offered, and $90 million less than Hansen’s proposed team price.

So for all those who were asking whether there’s anything the NBA could do to force the Maloof brothers to sell, the answer is either 1) no, but they can twist their arms pretty hard by telling them this is the best offer they’re going to get, 2) no, but the Maloofs were only saying they wouldn’t sell to Ranadive because they were hoping to convince the NBA to approve the Hansen sale, or 3) no, but once Hansen was off the table, the Maloofs felt they had to settle for whatever they could get.

Either way, the question of who will own the Kings has apparently come to a conclusion, leaving us to return to the question of when and how Sacramento will finalize the deal to give the Kings $334 million in subsidies toward a new arena. There are still several loose ends to be tied up, plus there’s the little matter of the Sacramento council actually voting on a financing plan, as opposed to the rough description of a financing plan that they approved in March. (Not that there’s any chance of the council voting it down after winning the Kings back, but they still need to write it down on paper, which will require resolving some of the handwavy math involved.) And there’s still one group threatening a referendum, plus another filing a lawsuit against the deal for understating the level of subsidies.

Individually, none of these are likely to derail the deal; taken together … probably still none of them are likely to derail it, but there are enough different ways this could go sour that it adds up to a significant possibility. And there’s also still a very real chance that the plan is approved, but then the parking revenues that would be used for arena funding fall short, leaving the city to cobble together money from hotel taxes and possibly the general fund. Sacramento officials may have won the Kings back, but they still need to figure out how to pay for them.

Edmonton declares Oilers arena deal “100%” done, still not actually 100% done

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The NBA owners’ vote to reject the relocation of the Sacramento Kings wasn’t the only big arena-related decision yesterday: The Edmonton city council also voted to approve a new funding plan for the long-in-the-works Oilers arena. The council voted 10-3 to commit a series of different public funding sources to a now-$604-million arena, with Mayor Stephen Mandel declaring triumphantly, “This is actually 100 per cent.”

Of course, Mandel has said that before, but this time he apparently means it. So, how did the city finally fill that pesky $100 million arena funding hole? Let’s refresh ourselves on where the arena plan stood back in January:

That’s $676 million, but the old arena cost estimate was $601 million, not counting the $75 million in land costs, so it all adds up. Except for the part where $114 million was unaccounted for.

And the new plan:

  • $279 million from the CRL, parking fees, and the like.
  • $125 million from the ticket surcharge.
  • $184.4 million from Katz, including an extra $15 million that the owner agreed to kick in yesterday.
  • $25 million from the provincial Regional Collaboration Program.
  • $7 million from the province of Alberta.
  • $7 million from the federal government.

That adds up to … $627.4 million. So it’s actually still $50 million short of where things were in January. Maybe the city is no longer counting its land costs as part of the deal? It’s hard to tell from the documents released by the city, and press coverage that includes offenses to math like “$23.69 million in third party funding ($25 million from the provincial Regional Collaboration Program, and $7 million each from the province and the federal government)” isn’t likely to help much either.

Basically what appears to have happened yesterday: Katz agreed to kick in some extra cash; the city gave up on raiding its Municipality Sustainability Initiative fund and is instead just assuming the CRL will raise more money; and the remaining gaps were filled in by flat-out assuming the cash will come from the provincial and federal governments.

That’s a whole lot of assumptions, and pretty much still amounts to “we’ll borrow the money and figure out how to pay for it later” — in particular, just flat-out upping the projected revenues from the CRL increases the odds that new revenues will fall short, and end up eating the lunch of the general fund, as Greg LeRoy of Good Jobs First memorably put it. Plus the RCP money still isn’t approved, and lord knows where those $7 million contributions from the province and feds are supposed to come from.

Still, Mandel and the council say it’s a done deal, so it looks pretty likely that this is a done deal, and any shortfalls will be worked out later. (Because that always works out.) Which means that Edmonton taxpayers are now going to be on the hook for more than half of the cost of a new arena for the 7th-most-profitable team in the NHL, owned by Canada’s 11th richest man. It’s still not the worst arena deal in history, but that doesn’t make it a good one.

NBA votes 22-8 to keep Kings in Sacramento, will figure out who owns them later

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David Stern is talking right now about the NBA’s decision on the fate of the Sacramento Kings, which you could be watching here right now if the stream hadn’t just crashed. Instead, let’s let Chris Daniels of KING-TV take it away:

So it sounds like: The NBA rejected the move, as has been long expected, and is effectively rejecting (for now, anyway) the sale of the team, too. And because the Maloofs don’t want to sell to the Sacramento buyers, it means nobody’s buying the team for the moment.

Basically, then, the “everybody is unhappy” scenario from this post. There will be much, much more once the Stern press conference is over, I’m sure — and then probably much, much more tomorrow, and then even more next week and the week after that and OH GOD I’M NEVER GOING TO BE ABLE TO STOP WRITING ABOUT THE SACRAMENTO KINGS EVER EVER AM I?

[UPDATE: The press conference is now streaming properly at KIRO-TV's site.]

Your last-minute Kings-to-Seattle NBA vote rumors

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Okay, here we go: Today is the day that the NBA owners are set to meet and vote (unless they decide to put it off again) on whether to approve the Sacramento Kings‘ relocation to Seattle, and on whether to approve the sale of the Kings to Seattle-area owners Chris Hansen and Steve Ballmer. The last 24 hours has seen a flurry of unnamed-source-based reporting on what’s likely to happen today:

  • Aaron Bruski of NBCSports.com wrote a long article on how Microsoft CEO Ballmer is alienating NBA owners with his “scorched earth policy,” and needs to back off or risk being shut out of not only the Kings talks but any possible future expansion plans.
  • Tim Montemayor of San Francisco radio station KGO says that it’s not Ballmer that’s the problem, but rather his and Hansen’s alliance with the Maloof brothers who currently own the Kings — or as Montemayor called them, “that family” — that’s jeopardizing their bid, because the NBA so hates the Maloofs. But Montemayor says that starting this week, Hansen and Ballmer have begun to heed that warning, and could instead accept the offer of an expansion franchise starting play in 2014-15 if they back off of trying to buy the Kings.

This is all rumors at this point, mind you, but it does point to a potential face-saving solution for all involved: Sacramento gets to keep the Kings, Hansen and Ballmer get their shot at a Seattle team sooner than later, and the NBA gets both of its new arenas. Okay, not all involved: The Maloofs would still be out $65 million. But it’s pretty apparent that nobody is in the Maloofs’ corner on this one, and their chances of winning a lawsuit against the NBA would be pretty slim.

There would still be two potential major holdups: First off, the Sacramento arena deal is getting shakier by the minute, with one group announcing yesterday that they’d launch a petition campaign for a referendum to kill the city’s arena funding, and another suing the city on the grounds that it illegally undervalued the public cost of the project when it presented the plan. If either of these measures succeed in tripping up the project — or if the city finance plan just falls apart before the Sacramento council can approve it, which still seems very possible — then the whole NBA plan to keep the team in Sacramento likely goes with it, though I suppose there would be plenty of time to turn around and tell Hansen and Ballmer, “Screw an expansion franchise, you can have the Kings after all for 2014.”

Problem #2, meanwhile, is the Maloofs, who don’t actually have to sell the team at all if they don’t wanna. So we could conceivably come out of today with the NBA having ratified the status quo: The Maloofs still in charge of the Kings, Sacramento still proposing a shaky arena plan and some new owners who the Maloofs don’t want to sell to, and Hansen and Ballmer waiting impatiently on the outside looking in. That rock-paper-scissors option is looking better and better…

Edmonton council could vote today on Oilers arena, still no word on how they’ll pay for it

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Today could be the final vote to determine the fate of … ha ha, you thought I was going to say the Sacramento Kings, didn’t you? (Because you, um, don’t read headlines. Yeah, that’s it.) No, I’m talking about the Edmonton Oilers arena project, where the Edmonton city council has called a special meeting for 1:30 pm today to discuss the $480 million project and how to fill a persistent funding gap that’s either $30 million or maybe $44 million or maybe a lot more than that, but who can be bothered with trifling details like “numbers” when there’s an arena to be built?

Coun. Bryan Anderson confirmed the meeting will deal with the arena, which still needs $30 million out of the required $480 million in construction funding.

“It sure as hell wouldn’t have come forward this quickly if there wasn’t a solution on the remaining money,” Anderson said.

Anderson, who knows the details but wouldn’t discuss them, said he has talked to several of his colleagues and thinks the proposal will be approved.

Meanwhile, an Edmonton resident plunked down $5,000 of her own money to poll her neighbors on whether they think the arena deal is a good one, and got a resounding “no”: In a poll of 300 randomly selected city households, with a 5.6% margin of error, 61% say no taxpayer money should be used on a new Oilers arena, 83% oppose the city taking on half a billion dollars in arena debts (some of which would be repaid by Oilers owner Daryl Katz, but by no means all of it), and 71% think the city should go back and renegotiate a better deal.

And also meanwhile, Edmonton apparently did get neighboring communities to agree to kick in $25 million in government-capacity-building money toward the arena last Friday, though apparently only by not actually recording the votes for and against the proposal:

Board CEO Doug Lagore said he recorded the vote as 17-7, which just meets the threshold to pass under the board’s regulations.

However, Lagore said St. Albert Mayor Nolan Crouse “didn’t complete the roll properly. I don’t know what he did.”

An Edmonton Journal audio recording of the proceedings suggests one vote cast against the arena was missed and accidentally counted in support. If eight of the 24 members vote against a motion, it fails.

Man, today’s council meeting is going to be just awesome.

Emanuel’s proposed DePaul arena would use $125m in city money, sap schools budget

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Remember how I said yesterday that we’d have to wait till later this week for financial details of Chicago Mayor Rahm Emanuel’s plan to build a $300 million arena for DePaul University? Well, turns out we only had to wait a few hours, thanks to whichever City Hall sources leaked them to the Chicago Sun-Times:

Mayor Rahm Emanuel’s plan to build a 12,000-seat basketball arena near McCormick Place that would double as a home for mid-sized shows would be built with $125 million in public funds — $55 million in tax-increment financing and $70 million in hotel taxes, sources said Tuesday.

That’s a pretty big chunk of change for what amounts to a minor-league-sized arena that would be mostly used by a private Catholic university along with, maybe, some conventions or something? And TIF money, as has been covered extensively in the past, has in Chicago in particular ended up raiding property-tax revenues that would otherwise be used for school funding — something that WLS radio reporter Bill Cameron tried to ask Emanuel about yesterday, but “he fled to his SUV and left.”

The Sun-Times article also makes it look like there’s some significant neighborhood opposition to the arena plan, with South Loop neighborhood group leader Tina Feldstein declaring, “We’re not afraid of tall buildings. We’re not asking for this to be quiet with no activity. But, we want to see it become a destination [year-round] — not a few times a year. An arena with 12,000 seats is a massive wall that’s essentially going to just deaden the neighborhood.” Mayors usually get what they want in these projects, especially Chicago mayors, but in terms of public perception, Emanuel is already digging himself a pretty big hole to start.

Dolphins probably would have lost stadium referendum anyway

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Miami Dolphins owner Stephen Ross might not want to point too many fingers at Florida House Speaker Will Weatherford for killing his stadium renovation subsidy referendum, now that it looks like the referendum was likely to go down to massive defeat anyway:

A majority of Miami-Dade voters who cast ballots in the special stadium election before it was called off opposed the $350 million makeover, according to a count the elections department released late Tuesday.

The tabulation showed that among the 60,678 voters who voted by mail or at early-voting sites, 34,780 — about 57 percent — opposed the Dolphins’ proposal, compared to 25,898 — or 43 percent — who favored it.

Early voting doesn’t always match up precisely with later voting, and Ross still would have had a week and change to gear up a major ad campaign to press for “yes” votes. But it’s another sign that this spring’s whole campaign was a tremendously uphill battle, and way more likely to be the opening salvo in a years-long stadium war than something that anyone, Ross included, seriously thought would succeed on the first try. Remember, the thing about stadium campaigns is that team owners can lose as many times as necessary, so long as they eventually win once.

Louisville arena to turn a profit, thanks to more city money

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Finally some good news about Louisville’s KFC Yum! Center, the college basketball arena that has been hemorrhaging money since TIF revenues started falling massively short three years ago: The chair of the Louisville Arena Authority now says that under a new operations manager, the arena should “show a pretty amazing operating profit this year” and may soon be able to move its bonds out of junk status.

That’s indeed great news, since it means that the beleaguered arena won’t be needing any more annual subsidies from the city to remain afloat, right?

After having to unexpectedly increase the city’s contribution to debt service in this fiscal year, Mayor Greg Fischer’s 2013-14 budget includes a $9.8 million contribution as TIF revenues are again expected to not meet original projections.

Oh. Well, never mind, then. But at least it’s nice that the arena can turn a profit when the city gives it $10 million to subsidize its operations, or something? Hey, I’m trying not to be negative here! Somebody help me out!