So no sooner did I note that the average U.S. arena only hosts a little over half the 200 events per year that Chris Hansen is projecting for his Seattle arena than PubliCola observes that the city of Seattle is similarly skeptical about Hansen’s numbers:
The City Budget Office estimates that the arena could attract 171 events per year—if, and it’s a big if, Seattle attracts an NHL team in addition to the NBA. Without the NHL, the city estimates the arena would attract about 125 events a year, or 37.5 percent lower than Hansen’s estimate.
And fully 69 of those would be “minor events,” writes the Seattle news site, such as “graduations and high school football games.” (Football? Presumably they meant to say basketball. Unless Seattle high schools have a thriving arena football competition.) The city didn’t project how many of the events would otherwise be held at the existing KeyArena.
By the terms of the proposed Seattle lease, at least, Hansen will pay more rent to the city if those 200 events a year don’t materialize — in fact, you could argue that Seattle taxpayers are better off if fewer events were held, since then they’d receive real cash rent payments from Hansen instead of just kicked-back tax revenue that would be partly cannibalized from existing city funds. Presumably the same wouldn’t be true if a Virginia Beach arena fell short of its 200-event-per-year target, but it’s going to be hard to say until boosters there reveal how they’re actually planning on paying for it.
The Seattle Times is looking for all reasons to oppose the arena. And now I think this arena deal, in spite of Hansen’s promise to pay for over 60% of it, will be mostly paid for by local government.
However, the Times’ is going over-the-top with its opposition to this arena. Take a look at this editorial:
seattletimes.com/html/editorials/2019041548_editportxml.html
I completely disagree with it. There’s a very clear conflict of interest here. And my point is, the Times is reducing its credibility on this issue. There’s a clear conflict-of-interest with Yoshitani. I guess there’s not quite enough smoke pouring out of his gun?
Why do you think “mostly” government, Mike? I’d say “some” is defensible, but can’t see how Seattle would be on the hook for anything close to half.
It’s a matter of how businesses in this country operate — on the margins.
Reduce a company’s revenues by 3/8, and you don’t reduce their profits by 3/8; you completely wipe profits out.
This thing has gone from a possible wash to a probable huge money-loser that Hansen will eventually or quickly ask to have bailed out.
This isn’t really new. It had already been established that the proposed arena needed an NHL team to pencil out, i.e. in this article (although it mentions 180 days as Hansen’s target number to book events for the arena):
http://seattletimes.com/html/localnews/2018719680_arenadeals19m.html
There are some differences in Hansen’s days/revenue projections and the cities (not surprisingly), but ultimately that doesn’t really matter to the city, since Hansen and his group will make up the difference of any shortfall.
Some have taken the fact that Hansen’s deal states that he won’t begin building until one team (rather than two) has been acquired as meaning that he really doesn’t want the NHL. But it’s really more because getting two teams at the same time is pretty unlikely.
And yes, Mike, the Times has been obnoxiously negative about this deal, which is rather odd, since they’ve usually been supportive of stadium and arena funding in the past.
Hansen’s proposal is bad business for the City of Seattle. Anyone, who has researched the Hansen proposal, would tell you that the proposal is plain bad business. It is not suprising that Seattle’s newspaper would editorialize against the bad business of Hansen’s proposal. It is bad business because Seattle would invest, give tax exemption, and Seattle would make no profit.
The original Hansen proposal required both an NHL team, and an NBA team. The Arena Review Panel Principles (the original proposal) required both teams. The Arena Review Panel Report says that for this to have a chance at working would require both teams.
There has been no involvement of the NHL, or an NHL investment group, in Hansen’s proposal.
Hansen removed the NHL requirement from the proposal after the Arena Review Panel. There is no requirement in the current MOU for there ever to be an NHL team.
Notice that Hansen did not remove the NBA team requirement. Notice that Hansen is not partnering with an NHL effort. Levin has connections to the NHL, and says that he has 100 million dollars for an arena (that 100 million dollars would get rid of the “need” for Seattle involvement). Hansen is not partnering with Levin, or anyone else with connection with the NHL.
The NBA has a history in Seattle of monkeywrenching the NHL, in this case the monkeywrench is Hansen’s removal in secret of the NHL requirement from the current MOU. Why not require the NHL team, and remove the requirement for an NBA team?
Hansen has specifically stated that Hansen is not interested in owning an NHL team. Hansen has made no effort to include an NHL team in his proposal. There is no evidence, or indication, that Hansen ever wants an NHL team at the proposed arena.
The Hansen talk of the NHL ended after the Arena Review Panel concluded. Hansen used the NHL requirement of his original proposal to gain support of NHL fans. As soon as Hansen got the support of some NHL fans, Hansen personally, and with no fanfare, removed the NHL requirement from his proposal. Par for the course of the NBA monkewrenching the NHL in Seattle.
The Arena Review Panel Report says both teams are needed. The excuse (and I have never heard Hansen say it) that it would be hard to get both teams, is only an excuse. It’s hard-waah waah waah. Everybody else is doing hard things everyday, nobody is handing everybody else complete Seattle tax exemption and 120 million dollars of public money.
The NHL talk in Seattle was a cynical marketing ploy by Hansen. Carl Hirsch was probably involved with the cynical NHL marketing ploy; but we don’t know, because Hansen has his backroom meetings with the Seattle Mayor,and Hirsch in complete secrecy. Hansen removed the NHL requirement in complete secrecy. There is an NHL connection in Seattle; Levin, with 100 million dollars for an arena, and Hansen just turns his snobby NBA nose up. Hansen has no interest in the NHL. The Hansen NHL talk was dishonest marketing.
I’m not sure that makes sense, jhande. Hansen both gets larger public borrowing if the NHL is present (because the county loans kick in) and has more tax revenues to pay off the bonds with, instead of having to use his own rent money. So it seems to me that he has a huge incentive to try to get an NHL team as well as NBA.
That it’s going to be hard, though, I don’t doubt. There are very few NHL teams looking to move, and they’re going to want sweetheart leases to get them to do so. Hansen isn’t going to be in a position to offer that, not with his arena debts.
While I agree that this arena wouldn’t be a huge boon to Seattle, I still think the bigger worry about the deal isn’t that taxpayers will get soaked, but rather that Hansen has painted himself into a corner that it’s going to be very hard to find enough money to paper over. (Er, to terribly mix a metaphor.)
Perhaps, but given Section 19 of the MOU, Hansen’s Seattle tax exemption, the talk of tax-free bonds, I am starting to think the proposed arena is just a “loss-leader” (arena as loss-leader. Stolen from you. Thank you).
I am thinking Hansen, and Ballmer, would have other companies that they own (or newly create) doing tons of churning tax avoidance business with the proposed arena. Then since the proposed arena is in a development area, there might be government grants, or other subsidy, available.
Hansen has indicated that he wishes to be in complete control of the proposed arena. It could be as simple as Hansen’s ego would not wish to share control with a foundational NHL team. Hansen also wants complete majority control of any NBA team. Hansen wants to be “in charge”.
So, perhaps Hansen mentions the NHL in good faith; but, Hansen has changed his tune too often about his proposal for his words to have any credence.
Finally, the current MOU says the proposed arena must be designed to be useful for an NHL team. The current MOU would leave the business dealings with a prospective NHL team to Hansen. The MOU does not state the amount an NHL team would pay Hansen to use the proposed arena. Were Hansen to not wish there to be an NHL team at the proposed arena, Hansen would be able to make the lease amount higher than what an NHL team would pay.
Given that Seattle passed I-91 with 78% of the vote, I find this entire proposal to be strange. There is not much that could make this proposal stranger. It would not be that strange if Hansen did not want to deal with another powerful ownership group at the proposed arena. Who knows, maybe Hansen has found a way to hedge more profit if the proposed arena does lose money.
I’d imagine Hansen will use the profit sharing provision of the NBA CBA and the ability to deduct arena expenses to full advantage. Hansen would want to massage the books to have an arena that loses/reinvests in itself in order to have a book loss/net even for the CBA.
I asked this in a previous thread: What is the average # of events for arenas with two co-anchors? As far as I know, there are 10 US arenas with 2 or more anchor tenants. Staples being the only one with more than 2 anchors.
The City’s estimates were very conservative when comparing to league averages for ticket prices and attendance figures for the last few years the sonics were in Seattle. They were bottom 5 for ticket prices which is not consistent with the Demo of Seattle but still good conservative number for the city. I understand Neil’s risk metaphor, barely :-) but I can’t imagine things ever looking sustainable if you go conservative all three drivers: ticket prices, attendance and number events.
IAVM didn’t break it down by # of sports tenants for me. I did count the number of 2011 events for TD Garden in Boston (from their website calendar), and came up with 150, but I could be missing some smaller non-ticketed events like graduations and the like. Anyone feel like tackling the other nine NBA/NHL U.S. arenas?
You wait until you see roday’s news about Sacramento. It turns out that the Maloofs funded Think Big. In a clerical error, KJ forgot to disclose “behest” contributions.
He forgot. Yeah, that’s the ticket.
I jusk know the apologists will come out of the woodwork today.
JB, I don’t think the city was all that conservative except that they did calculations based on no playoffs (which, for most teams would average only a couple extra games) and didn’t include any parking tax revenue (because Hansen still hasn’t outlined his plan for parking). Granted, it’s pretty tough to break down because they listed prices, attendance, etc without actually saying how many seats of each type there would be. http://www.seattle.gov/arena/docs/120330-ArenaModelInputs.pdf I’m not sure what to say about the attendance figures used being compared to the last season though. I’d be more interested in how many tickets sold at face value. It seems like the owners love to flood the market with give-away tickets when the season is doing poorly.
I will see if I can pull something together on the events in the other 9 arenas as well as look into my conservative claim (I knew someone would call me on it). At the first city council meeting where they shared the $ forecast, I got the assumptions from Neil (via comments). I was only looking at Avg ticket prices and regular season attendance assumptions (not parking or any other auxiliaries).