Superbrief mode today:
- Expanding light-rail service to the Golden State Warriors‘ new arena is now expected to cost at least $62 million, which is a lot for Muni Metro, though not for some other transit systems. The Warriors owners are kicking in $19 million, but the rest will be funded by tax money from the arena district, which may or may not be enough to cover the entire nut. Tim Redmond saw this coming.
- F.C. Cincinnati owners are officially pivoting back to the West End stadium site that it had declared dead last month after not getting offered enough property-tax breaks on the land. How come? Team CEO Jeff Berding said of the other two options, Oakley is “not as close to the urban core as desired,” and the team couldn’t secure land in Newport, Kentucky. Sounds like the West End has the club over somewhat of a barrel, which it should be able to use to ensure the team pays full property taxes, at least, though some residents may be more concerned about keeping out a stadium entirely over fears it will further gentrify their neighborhood.
- The mayor of Montreal is meeting today with an ownership group that wants to bring a new Expos MLB team back to town. “We don’t need a cent from the city of Montreal, but we need a little help,” prospective co-owner Stephen Bronfman said earlier this week; your guess is as good as mine what that actually means.
- Minnesota taxpayers have spent $1.4 billion on new or renovated sports venues over the past 20 years, if anyone is counting.
- The Pawtucket Red Sox‘ stadium demands continue to be stalled, if anyone is keeping track.
- “A deputy in one of Russia’s 2018 FIFA World Cup host cities has claimed that a latest inspection by the world’s footballing body has neglected a missing column at a newly built stadium.” You’ve just got to read the whole Moscow Times article now, don’t you?
Neil, regarding what “little help” Bronfman may need, here are some clues:
– The overall baseball project in Montreal wii require ~$1.5B from private investors and probably the immigrants-investors program to fund the stadium.
– The REM project (electric train) that is approved and will represent a $6.2B investment and Peel Basin station will be close to the Peel Basin land where the stadium is likely to be built. The station is no longer underground (too complex and costly) so the new location along the railway next to the Peel Basin land is yet to be determined.
– These massive investments in Goose Village next to Griffintown will be the extension of downtown Montreal and more investments will be required for parks, road, condos and commercial buildings, development of a new neighbourhood.
– What the investors are looking for is help from the city of Montreal to make sure the overall strategy for Goose Village enable those investments and the city plans (and investments planned) that were announced in the past 2 years would not be changed.
Like the AT&T Park in San Francisco (in SoMa), all stakeholders must have a shared vision in order to make it happen. Otherwise, it won’t work and MLB will not approve an expansion team or a relocation.
A detailed plan as been defined for the overall area and the investors want to make sure that the new mayor Plante does not change everything upside down and jeopardize the project.
Ultimately, once mayor office will have all the details, they would probably want to adjust some things but it should it should not drastically change. Mayor Plante can’t afford taking the risk to loose such investments in Goose Village.
If it’s going to require $1.5 billion from private investors, it’s a fair bet to say this isn’t happening. A Montreal franchise itself isn’t going to be worth $1.5 billion, and don’t forget someone will need to pay to acquire a team as well (either existing or more likely expansion).
AT&T Park cost less than $300 million to build, and had deep-pocketed Bay Area fans (and a phone company willing to spend big on naming rights in the deep-pocketed Bay Area market) to help pay it off.
Final pricing will all depend if it’s a new franchise or a relocation with minority partnership from local investors.
Bronfman and Garber were bold many times on that, money is not an issue for both scenarios and the future stadium will be a Jarry Park 2.0, nothing big and out of proportion.
If you are skeptical on the capacity of Bronfman and al. to fund such project, then, I have to tell you that you you need to do your homework.
Manfred can’t talk about Montreal every year without if he don’t have the proof that the investors are serious and the capacity to fund such project on the short term as welll as the long term.
Stay Tuned!
“If you are skeptical on the capacity of Bronfman and al. to fund such project, …”
Capacity is one thing, whether it makes financial sense – even in the world of franchise-buying billionaires – is another.
The Bronfmans have a lot of money because they know when to spend it and when to get out, like they did in ’89.
Formula E may have been the best thing ever to happen to Montreal, it woke them up to the turkey that Coderre was about to sign off on.
“We need information, like whether a team is coming and whether they have support from Major League Baseball,” [Robert Beaudry, the executive committee member responsible for economic and commercial development] said.
. . . . . .
This is the part that made me do a spit take. I’m like, “Uhm. It is not.”
“And it does not.”
I believe expansion is likely coming ( moving to an even 32 teams is sonething that BOTH owners and players in MLB want. Why? Expansion dollars for owners and more jobs for players). MLB has said the key to expanding to two more teams is getting the situations in Oakland and Tampa Bay straightened out. As far as Montreal is concerned, if the Bronfman family is involved, the Expos are coming back as one of the two franchises. Why? The Bronfman’s have the economic and political clout to get the job done, and are not wasting their time being involved, if they do not.
Then they should frickin’ make the stadiums themselves, MLB and players, if they want it so bad.
I would love to be wrong, I really would. Expos 2.0 would immediately become my favorite NL team, but I rather doubt that the honchos at MLB are dying to return to Montreal, when other proven sports markets like Charlotte, Indianapolis, Nashville, San Antonio, Portland, Las Vegas etc. don’t have teams. And as shown below by another poster, the economics of starting fresh with a new stadium (not at taxpayer expense) doesn’t really work out either . . . and they really can’t play at Stade Olympique. It’s far too old, outdated, and etc. The place has not held up particularly well, aesthetically.
I have to wonder if in fact government subsidies aren’t the ONLY way to make building a new stadium economically viable. If that’s what the Bronfmans have in mind, I hope Montreal tells them to take their team and shove it.
What John McHale Jr. told Jeremy Filosa (98.5FM) in August 2017 is that there is a MLB international strategy to produce/sell digital content (TV, radio, news) for Central/South America (spanish) and for french audiences in Europe/Africa over the next decade.
Montreal is viewed as THE bridge to produce french content for MLB for those countries and helping generating more revenues. So strategically, Montreal is way ahead in front of tons of other cities/market in the US and outside the US.
That’s why any scenarios with a city that can’t generate more revenues for the other teams and the league is a topic that Manfred won’t even discuss.
0.75% of market share of the french countries in Europe/Africa with a large portion of the market in Quebec/Maritimes is way greater in $$$ than 75% or 100% of market share and $$$ of Portland, Charlotte or Las Vegas.
Stay Tuned!
Sure. Okay. Francophiles in Europe and Africa are clamoring for more baseball coverage? It’s a crazy world out there. I suppose it’s possible that in some way this is true, and there might be some money in it, but I don’t know, seems like a long shot.
I watch a fair amount of baseball in Europe. Those who play it love it as much as anywhere else but it is more akin to a hobby.
Not really sure why a fan in Africa would be naturally drawn to the Expos just because of language—that doesn’t seem to be the case for soccer…if you’ve watched recent World Cup coverage you can get quality commentary in nearly any language without spending money on putting people in the stadium.
“I have to wonder if in fact government subsidies aren’t the ONLY way to make building a new stadium economically viable.”
No. They’re just the only way to make building an unnecessarily expensive new stadium economically viable.
There’s no question that the Bronfman family has the money to make this happen (probably many times over). And I would personally love to see the Expos return.
However, the reason the Expos left goes back to the previous actions of the Bronfman family (Charles) who decided in the mid 80s that MLB was not sustainable in Montreal and gave an ownership share to one of his loyal (and undercapitalised) assistants, Claude Brochu. The Bronfmans were rich then, they are rich now. The economics of baseball have improved for “avg” markets since the 1980s, certainly, but the basic costs to compete have also risen greatly.
The question that no-one has answered is: if it costs them U$1.5Bn (which is C$1.9Bn these days) for the expansion fee/purchase and stadium together with the ancillary revenue generating development that they plan to own, why would they do it?
Servicing that debt (and yes, even if they use their own money they will still want an ROI equivalent to the carrying costs of bank loans… how do you think these guys became rich in the first place?) will cost around $125m annually. Could that all be earned from the ancillary development and leave the stadium and expansion fee with no carrying costs? Doubtful.
If the team will play in “Jarry park 2.0” (I doubt the people who say that with pride ever visited Jarry 1.0 in the early 1970s), then they will be hamstrung on game day revenues (limited suites and other revenue producing amenities) and will effectively be a triple A team in a triple A park.
Finally, a competitive MLB payroll (which will be a must to attract fans… the Expos only drew as high as 28k on avg when they were challenging for NL East titles in the late 70s/early 80s) is now $120-140m USD. That is C$165m (and still some way short of what the Blue Jays spend annually).
Add in normal operating costs for a business this size ($40-60m) and you are easily into C$350m necessary to break even on operations (team’s share of debt service, payroll, operations & misc). Remember, everyone gets paid in USD. The majority of your revenues are earned in C$.
And how do Expos 2.0 earn this? (approximate numbers C$)
Ticket revenue (25k x avg $35)….= $70-75m
Concessions and merch………… = $20-35m
Regional TV/radio……………………= $25-30m
Stadium advertising/NR/…………. = $10-15m
MLB distributed revenue…………..= $ 35m (U$ 25-30m)
Those are the base numbers a prospective owner might be able to count on (I wouldn’t bet on 25k showing up every night, however). And at best they total C$180m – barely enough to cover payroll. Go ahead, double the concession/merch revenues… or pop in a windfall of an extra $15m from shared revenues (which all other teams also have to spend, hence the rising player payroll costs) it still doesn’t make up the difference.
Even if you eliminate all stadium costs (either because the owners are “great guys” and eat this themselves or because the taxpayers get stuck with it), the team still needs to generate C$230-250m annually to float a $130m USD payroll (and that is probably being conservative on revenue required too) and pay it’s own operating costs.
Add to that the fact that Canadian teams don’t get to depreciate AND expense player salaries (as US based teams do), and the math gets much worse.
Maybe TSN/RDS are willing to lose $60m a year to be associated with/part owner of a team… but parent Bell media won’t be willing to tolerate three times that.
I’d love to see it. I just don’t see that math working – even for a Bronfman.
“Add to that the fact that Canadian teams don’t get to depreciate AND expense player salaries (as US based teams do), and the math gets much worse.”
I was not aware of this! (That Canadian teams can’t double-dip, I mean. I know about the Bill Veeck loophole in the U.S.) Man, no wonder it sucked to be the Expos.
Expos attendance history 1969-2004
www.baseball-almanac.com/teams/montattn.shtml
For the ones interested, here is the video of the press conference of Mayor Plante, Bronfman and Garber after their meeting few minutes ago.
https://twitter.com/JeremyFilosa/status/982322359737638912
The Green Bay model to fund part of the stadium is an option that could be on the table. Many other scenarios are on the table.
Stay Tuned!
Sure, there are many ways to skin the cat. If Bronfman can find 8-10,000 well heeled fans willing to put down $10-20k each for PSLs (and to be part of a founders club/get their names on the wall), he has half his stadium paid for already.
If Bell Media is involved (and for obvious reasons most expect it will be), he might have a 5-10 year front loaded tv rights deal in place before a shovel is put in the ground.
None of that changes the underlying math, however.
Neil: Question…. we know that the MLB distributed revenue (which increased by $25m/team in one year just a couple of years ago) is dropping due to the changes with MLBAM. Would you give us a brief overview of how you think this change will affect teams income?
Sure, some annual revenue will be lost due to the change/sale/whatever, but distributed revenue is not going to disappear completely.
Its simple. Expansion is weak. Move the Rays to Montreal. Move the Athletics to Vegas or Portland.
Having the Montreal Expos in the AL East would create a strong rivalry between the Blue Jays and Expos.
AL East:
New York
Boston
Toronto
Montreal
Baltimore
AL West:
Houston
Los Angeles
Texas
Seattle
Portland/Vegas
No harm no foul.
So Sternberg is going to build his own stadium in Montreal instead of getting a free (or mostly free) one in Tampa?
Not likely.
Is he going to sell the team?
Also not likely.
“Making a great rival” for the Jays also means having the Yankees, Red Sox and Orioles play twice as many games in Canada as they now do.
“Every action”, as Newton said….
Tampa Bay has a massive TV rights deal. They’re not going anywhere.
Most egregious of all: I was an Expos fan. They belong in the NL East.
I live in Portland and MLB will not happen here. Public money (both direct spending and TIF) for a stadium is an absolute non starter and, as we learned when then-PGE park was converted to a soccer specific stadium, finding and getting consensus on an appropriate site for a stadium would likely be impossible. Full disclosure, I would be one of the citizens screaming bloody murder over any potential financing.
MLB has been pretty good about getting teams into the biggest markets — there aren’t any obvious omissions. Montreal is arguably the best, but not so amazing that a stadium is likely to pay off anytime soon unless you got a break on the expansion fee/sale price, and why would MLB do that?
I’m weird in that I just want to see the old Expos logo back in active duty. Not just one, but TWO phalluses.
As you should be.
On Montreal – Even if they aren’t asking for money anytime you are building something of this magnitude you want to make sure the city is ok with your idea. Its no different then putting up a mall or office building. That being said I am skeptical they will ask for $0
On Minnesota – $1.4 billion over 20 years isn’t a huge deal when you consider 1) Minnesota’s state budget is almost $40 billion last year alone. So in overall state spending $1.4 billion over 20 years isn’t a lot and 2) the 4 major league teams have a combined payroll over approximately $461 million for 2018. Minnesota’s personal income tax rate is 9.85% so that generates $45 million in income taxes just on player salaries. Now one can say the sales taxes generated by the teams would otherwise be generated in other entertainment options, the player income taxes wouldn’t be. If people went out to dinner and movies more often because the Twins weren’t around the impact I doubt there would be enough waiters and ticket takers hired to generate $130 million in payroll
Are you counting the visiting team’s state income tax as part of Minnesota’s team tax? The “home” teams would only pay income tax on the half of their games they play in state, of course. Not sure if Minnesota imposes the “visiting” team income tax rules that some other states do.
Minnesota does have a jock tax https://www.forbes.com/sites/kellyphillipserb/2018/02/03/thanks-to-taxes-minnesota-could-be-the-real-winner-of-super-bowl-lii/#4a53f8216c72
But your analysis assumes all those teams would leave without receiving that $1.7B, otherwise that tax money still rolls in.
The Timberwolves and Wild wouldn’t have come without their arenas being built. The Twins had toyed with leaving (almost went to Charlotte) so they probably would be gone if they didn’t get Target Field same with the Vikings.
The Twins did not almost go to Charlotte. They threatened to go to Greensboro, but got their stadium demands there rejected in a referendum, then waited another ten years before finally getting the MN state legislature to approve Target Field. If they hadn’t gotten that money, they would certainly still be at the Metrodome.
The Vikings made a last-second idle threat to move to L.A., but Zygi Wilf had no interest in a Kroenke-style privately funded stadium development, so they’d still be in MN, too.
The Timberwolves built their own arena; they were later bailed out of their losses by Minneapolis, but they never viably threatened to leave in order to get that subsidy.
The Wild expansion franchise was approved in 1997, a full year before the Xcel Center funding was approved.
Other than that, you’re dead on.
I got Charlotte and Greensboro mixed up. I haven’t been to NC since driving through in 2001 so they all blend together. Its still a stretch to say they would still be at the Metrodome since they were on 1-2 year leases after the contraction debacle got blocked. They reached a deal with the county in 2005, if that hadn’t come through they could have gone to one of the cities that had made offers for the Expos a year earlier. Portland would have fit alignment wise.
The T-wolves only stayed after they got a bailed out, the owners were talking to other cities and had an offer from New Orleans. Glen Taylor wouldn’t have bought them without a bailout.
The Wild franchise announcement was contingent on a new arena https://books.google.ca/books?id=K-OuDxhiXkoC&pg=PA241&lpg=PA241&dq=minnesota+nhl+franchise+contingent+arena&source=bl&ots=ZcsAH1lkd7&sig=koO6cPH9tVNKrPFPMXlobuQAH6o&hl=en&sa=X&ved=0ahUKEwjvkbe1lazaAhVI2oMKHf4CCwoQ6AEIfDAH#v=onepage&q=minnesota%20nhl%20franchise%20contingent%20arena&f=false
As far as the Vikings go with the 3 teams having announced moves in the past 2 years its a stretch to say the league would have stopped them from leaving if they couldn’t get a deal done in Minnesota.
List of cities that actually made offers to the Expos: Washington, D.C.
Ratio of TV households in Minneapolis-St. Paul vs those in New Orleans: 2.7:1.
Sure, the NHL could have pulled the Wild franchise if St. Paul hadn’t built a new arena, but St. Paul also could have called their bluff and said, “We’ll give you a little money, but if you really want a team here, pay for most of the arena costs yourself.”
Nobody said the NFL would have stopped the Vikings from moving. What would have stopped them from moving would have been the desire not to lose billions of dollars. If Zygi Wilf wanted a stadium so badly to be willing to pay for it himself, he would have done it in MN instead of waiting years for the state to do it for him.
Charlotte also has more than twice the population New Orleans has but that didn’t stop the original Hornets from relocating there. Sure St Paul could have played a game of chicken with the NHL but not building an arena is what cost them the North Stars so there is no reason to believe they would have gotten the Wild without funding an arena. As far as the Vikings go, they put up $551 million of the stadium costs. They weren’t going to stay in the Metrodome forever so while they wouldn’t have been able to make a deal with LA without spending more than that, San Antonio or St Louis would have been more than happy to build them a stadium if the Vikings would have brought that to the table
If you look at the list a lot of the cost falls from the NFL stadium–which means its share of the current $40bn budget is probably a lot higher than it was a decade ago.
It is a somewhat strange (but not unique) approach to governance to say–let’s spend $50 million to get $10-15 million in taxes and say the city is breaking even, not counting the life cycle costs of the current stadium or the likely need for a new one in 20 years.
Minneapolis ranks very highly in quality of life and has been the birthplace of some great companies since long before pro sports arrived, so the need for this math problem doesn’t strike me as very apparent.
That’s not what I am saying at all. Its more like lets spend X we’ll get Y back in tangible taxes that wouldn’t be here otherwise Z in money from tourists who come into town for games/other events that wouldn’t be here otherwise.
Y and Z may not add up to X but its not such a large gap that its a tremendous cash flow loss in the context of the government budget and it is an amenity that people enjoy and contributes to the quality of life in the area. I’ve only been to Minnesota a couple of times so I can’t say if its a great or awful place to live, but the locals I interacted with seem to love having their teams around. If we sat down and went through 20 years of Minnesota state budgets I think we could find $1,4 billion spent in ways that were more wasteful then the net costs of the sports venues.
I think we can all agree that the economic benefits are overly exaggerated by proponents but I think the economic costs are also exaggerated.
I’m actually quite OK with the idea of just being up front with it and saying “it’s going to cost us $70 million a year, forever, to have four mediocre pro sports teams along with our mediocre University of Minnesota teams.” Skip the economic development nonsense and just call it what it is, a luxury.
Of course, your model doesn’t account for where the taxes actually fall (city governments that pay for public safety services often have less room in the budget than larger states), or the opportunity cost of giving away valuable downtown land (which always was going to have “nothing happening” despite a nationwide move towards urban cores). Nor does it analyze “how” things are paid for–frontloaded or backloaded debt (it is unclear from the initial article if 1.4 billion equates to the amount actually paid with interest or the initial price, making a real comparison problematic).
It isn’t really the amount (hopefully most governments took advantage of recently very low interest rates), it is the fact that local governments will pay for these things forever whether they are needed or not–which would suggest that a more barebones stadium as seen in Europe would be a more effective use of public money than paying for flat screen TVs in every restroom and all the other absurd bells/whistles of modern stadium construction.
I am honestly fine with bare-bones stadiums especially for football. All I need is a comfortable seat and a good sight-line. For basketball, hockey, and baseball I would want some nice dining options because for the most part I am going to those events during the week after work so I am more likely to want food then at a football game.
You’re right my analysis is a bit simplistic because all I had was “$1.4 billion over 20 years”. We didn’t have a year-by-year break down of the debt payments, all the taxes on salaries of team personnel (which aren’t a substitution effect like sales taxes on tickets are), and all the taxes generated by tourists who come into town for the games (which realistically we can’t track). So to do a proper analysis we would need all that and to be really fair we would need a break down of spending for all amenities/luxuries in the state budget included parks, the arts, snowmobile trails, museums etc. And lastly we would want the overall state/local government spending so we can demonstrate that if you didn’t spend a dollar on sports venues it really wouldn’t help anything because its really a rounding error and not the hill to die on that some folks have made it out to be.
When I was in Cleveland we had a 4.5 cent per pack tax on cigarettes for the stadiums and there were community activists who screamed bloody murder that this was unfair and cigarette taxes are regressive and target people who can’t even afford to go to games blah blah blah. A year later literally the same people (not only people I knew personally but people writing op-eds) campaigned for a 30 cent per pack tax to support art. So that was ok because why? It was just people who thought their hobby was superior to everyone elses.
“the taxes on salaries of team personnel (which aren’t a substitution effect like sales taxes on tickets are)”
They absolutely are. If people go out to eat more instead of going to sporting events, that puts more money into the pockets of people who work in restaurants, and they pay more in income tax. It may take 100 waiters to equal one shortstop, but then, you need a lot more waiters to feed 50,000 people than shortstops to entertain them.
There is a benefit from league money (TV contracts, etc.) that flows through your city’s team, boosting salaries in a way that restaurant spending wouldn’t. But even if team employee income isn’t 100% substituted, it isn’t 0% either.
Taxes on restaurant tips wouldn’t equate to the taxes on an a shortstop making $10 million a year. Especially if tips are in cash, because those are often not taxed at all. The restaurant jobs, similar to jobs at movie theaters, and other forms of entertainment, are more along the lines of the stadium staff (ushers, security, food vendors, etc) the taxes on those jobs you can say are substituted not the ones on the guys on the field