Nine months after saying he wanted to offer up to $150 million to the owners of the Atlanta Hawks for arena renovations to get them to sign a lease extension, Atlanta Mayor Kasim Reed has offered $142.5 million to the owners of the Atlanta Hawks for arena renovations:
The city will put $142.5 million into the renovation, with the Hawks contributing $50 million.
About $110 million will come from extension of car-rental tax and the city will contribute $12.5 million from the sale of Turner Field, which is expected to close by year end. The remaining $20 million from the city will come from a series of expected future land sales, Reed said…
Hawks officials have previously said they are looking to, among a number of upgrades, replace the bank of suites that dominate one side of the arena, install a variety of different-size suites, improve the connectivity so fans can navigate around the arena on one level and create better floor seating by changing the layout which originally had oval ends to accommodate hockey.
So how bad would this deal — which still requires approval by the Atlanta city council and the Atlanta-Fulton County Recreation Authority — be for city residents? Let’s come at it from a variety of different angles:
- Having the public put up 74% of the renovation costs for a privately run sports facility sounds pretty bad, unless the Hawks are agreeing to share more arena revenues with the city in exchange. The deal is just being described as a “lease extension,” though, so presumably they’re not.
- On the bright side, $142.5 milllion is a lot less than the almost $700 million in public funds that the Falcons are getting for their new stadium. On the less bright side, they’re getting a whole new stadium out of the deal, whereas this is just rejiggering the suites and concourses.
- Philips Arena only cost $213.5 million to build in the first place, so this is almost paying for its construction cost all over again.
- The Hawks’ lease already runs through 2028; this would extend it through 2046. That makes this a public tithe of a little less than $8 million per each added year, which is cheaper than the $14.6 million per year that Charlotte is paying the Carolina Panthers for their lease extension, so, um, good negotiating?
- Now Hawks fans don’t have to worry about the team moving out of town in 2029! Which will be a real worry following the economic upheaval in the first year of the Farkas Administration.
In short, then, the owners of the Hawks complained that their 17-year-old arena was designed wrong and needed a $200 million upgrade 12 years before their lease was to run out, and the mayor of Atlanta said, “Sure, we’ll pay for three-quarters of that, if you extend your lease some.” It’s not the worst deal in the world — it’s not even the worst deal that Reed himself has brokered — but it’s not an especially good one either, especially if anyone in Atlanta was hoping to use that future tax money for something that would benefit more than one group of local rich guys. Atlanta city council, ball’s in your court.
The arena needs a renovation and the threat of re-location is real. That said, the friggin’ opt-out is only $200 million! Even Milwaukee was able to get a higher opt-out from the Bucks. C’mon, Atlanta.
1) Please define what “needs a renovation” here? I’ve never been to Philips, and I’m genuinely curious. With most of the arenas that have become “obsolete” quickly (Reunion, Miami Arena, etc.) there were clear items that were lacking, i.e. club seating/suites/whatever. What about Philips needs to be fixed and now?
2) Why on earth would there be a real relocation threat for the Hawks? Even aside from the lease going through 2029 (I don’t know what the current buyout is, maybe you do) I see absolutely no way the NBA would allow that to happen. And bluffing aside, I see no better situation for Tony Ressler than staying put with what was already a great lease in a good NBA city, other than I guess staying in the same city and getting $142 million in free money from the government.
“need” and “real” obviously have different definitions in certain universes.
Why wouldn’t the NBA let it happen?
It’s a strong market and the league would take a hit for abandoning it, particularly with a 17 year old arena that still has 13 years left on its lease. Those hits might be worth taking if you have big public money coming from somewhere else, but otherwise, something they avoid. The main relocation option that’s out there is Seattle, and the Kings deal proved nobody in the league is exactly rushing to get them a team to put in a privately funded arena. Other than that (which would require selling the team) where’s Ressler even going to threaten to go? Kansas City? Louisville?
The last time the NBA threw up their hands and allowed a franchise to leave was Seattle, where you had a 40 year old arena and politicians standing firm that they weren’t giving a dime to replace it. The league refused to leave New Orleans and Stern made a point about staying in Sacramento come hell or high water (it’s fair to point out that he had a live one on the other end of the line that basically gave them a blank check for an arena; I’m not saying this was altruistic on anyone’s part.) If Atlanta ever became a serious enough issue, they’d have done what they did in Milwaukee where the NBA office took a much more hands-on role in shaking people down with threats and artificial deadlines. Atlanta basically pre-empted years worth of haggling the price down (if you even think it’s rational to spend the money in the first place) and just gave them money right off the bat.
Key Arena was completely renovated in 1994 making it only 14 years old at the time the Sonics moved. It was only 11 years old when they began asking for a new arena.
The Heat got a new arena in less than a decade after their old one opened. Magic started asking for a new one 12 years in, IIRC, took a few years to get it.
Relocation threats are not threats, they are promises rarely kept. If only we could unload a few of our local moochers on somebody else… but like the celebrities who promise to move to Canada if so-and-so is elected, the teams also disappoint when it’s time to pull the trigger.
William wrote:
“Key Arena was completely renovated in 1994 making it only 14 years old at the time the Sonics moved. It was only 11 years old when they began asking for a new arena.”
Absolutely, but the drumbeat the league and Howard Schultz and then Clay Bennett used over and over as they tried to argue for public money out of Seattle was the overall age of the building. I’m not saying that was an honest representation of the condition of the arena following the 90s renovation, just that they were committed to driving it into the ground to try to justify a new arena with public money.
Philips needs renovating just as much as the Georgia Dome needs tearing down and the Ted needs vacated.
The bank of suites is still a great idea as it means the cheap seats are generally closer to the floor, which is probably one of the reasons it is not liked by the new ownership.
The concourses always seemed plenty wide to me, and yes, I did go when it was full(one of 2 thrashers playoff home games and Radiohead). I also enjoyed the way they tied Philips into the CNN Center.
I have been trying to find the terms of the extended lease but to no avail. I’m sure this is incredibly naive of me to ask but is there any chance that the Hawks are paying the city enough for the lease that it makes sense for the city to pay for most of the renovations up front?
Unlikely. And in any event, unless the lease terms are being changed, it’s money that the city would be getting in either case, so the $142.5m is still just a gift.
I agree that I’d love to see the lease terms as well, though.