Portland okays spending $120m on Blazers arena renovation if Dundon agrees to pay rent and PILOTs

After months of public debate, the Portland city council voted 8-4 yesterday to approve spending $120 million toward renovations to the Trail Blazers arena, plus $275 million for upgrades over the next 20 years. But the term sheet it approved included several major new conditions — most prominently, that the team start paying rent, starting at $3.1 million a year and rising by up to 3% a year, as well as payments in lieu of property taxes on the tax-exempt land around the arena, starting at $3 million a year and rising by 5% a year. The team must also agree to cover any cost overruns.

None of those provisions in the final term sheet were in the original one, and they could end up being pretty significant. With the rent and PILOT payments set to increase over time, they should be worth about $110 million in present value to the city, roughly $50 million from the rent and $60 million from the PILOTs because of the different escalation percentages. And while it’s hard to exactly credit these as a windfall for city taxpayers — paying rent on the building you’re a tenant in and property taxes on the land you’re using are usually just what’s expected of everybody — they are additions to the term sheet that would mostly cover the city’s debt payments on its $120 million in arena construction costs. And as for the $275 million in upgrades, that would mostly be covered by ticket taxes, which as we’ve explained here previously largely end up coming out of team owners’ pockets because microeconomics.

This doesn’t make the Blazers plan a good deal for Portland, but it would make it a far better deal. Councilor Angelita Morillo, one of the four no votes, called the revised plan “still the worst deal in the country,” which is almost certainly wrong given some other recent examples, and added “the public is getting fleeced,” which is absolutely correct, especially given that state and county taxpayers would still be on the hook for another $480 million. And it could still get worse in upcoming talks with the team: Yes vote Steve Novick said yesterday, “I’ve already signaled that I’d be willing to accept something that’s arguably less,” which is really not the way you want to start off negotiations.

Still, the Portland council did something all too rare: Presented with a plan that would have poured tax money into the local sports billionaire’s pockets under threat of the team leaving town, they decided to use their leverage as the team’s best option to play in to demand that the billionaire cough up at least some money toward the project, no matter how much he said he wasn’t gonna. And Blazers execs didn’t immediately shoot it down, with team president of business operations Dewayne Hankins issuing a fairly conciliatory (for him) statement that said, in part, “We look forward to continuing to work with the City’s negotiating team in good faith, addressing the issues that remain and finding a resolution that allows all of us to move forward together.” That’s not an acceptance of the city’s rent and PILOT demands, but it’s not “Tom Dundon’s way or the highway” either. One thumb up to the council for at least trying to get something significant for taxpayers, rather than just rearranging deck chairs — how much they stick to their guns from here will determine if they can earn the other thumb.