Category: College basketball

Emanuel to propose $300m DePaul arena/convention center/maybe casino using public money

access_time personNeil deMause

Chicago Mayor Rahm Emanuel may have held firm on not spending public money on Wrigley Field renovations (though giving the Cubs tons of other free public goodies is another story), but that’s apparently not going to stop him from announcing a $300 million, 12,000-seat arena for the private Catholic school DePaul University that could also be used for conventions and maybe a casino and, and…

No details, including of how all this would be paid for, will be available until Emanuel’s official announcement later this week. In the meantime, go look at Wrigley Field made out of Legos, it’ll make you feel better.

Share this post:

Those Deadspin charts on Final Four spending may not mean what you think they mean

access_time personNeil deMause

Deadspin ran a really cool graphic the other day claiming to show how spending in Atlanta was up during the Final Four relative to the previous week. (They later posted an even better-presented comparison, with one of those slidey things.) Sales tax data isn’t available nearly that fast, so instead Deadspin used data from Square, a company that makes credit card readers for cellphones, and which apparently knows how to make cool graphics to get some free publicity.

Deadspin’s conclusion:

Square reports that this is a week-to-week 11 percent increase in total sales, from $1.6 million to $1.8 million. This is more than double the $800,000 in sales that Square reported for their similar Super Bowl map, which makes sense given that that bigger event took place in a much smaller metropolitan area.

An 11% increase in sales sounds at least moderately impressive, and would counter previous reports that cities don’t see any jump in spending from hosting events like the Final Four. There are two problems with the Square numbers, though:

  1. Just because people spent more money using Square devices doesn’t necessarily mean people spent more money overall. Square provides readers to vendors, remember, not consumers, so if they handed out lots of card readers to people operating during Final Four weekend (which you’d think they would, if they’re going to go through the trouble of touting their product based on the resulting numbers), then this just might mean there were a lot of extra Square-enabled folks running around Atlanta last weekend. If people were spending less money at, say, restaurants across town that don’t use Square devices, then that wouldn’t register on the Deadspin maps.
  2. Even if people in Atlanta spent more money during the Final Four, they could have spend less money at other times as a result. Call it the “temporal substitution effect”: If I go splurge on, say, tickets to the All-Star Weekend Futures Game (as I, in fact, have done), that means I spend more money in Queens on a certain weekend in July; but it also means I have less money left in my back account, so I’m less likely to, for example, splurge on those crazily overpriced tickets to see Tom Petty play at the Beacon Theater in May. To see that, we’d need to examine spending over several weeks and months, not just a weekend, and compare to a similar time period in the previous year — which is what the economic studies that found no positive impact from the Final Four have done.

So: Nice maps, but they should be used for amusement purposes only. It’s possible that there is some increase in spending in Final Four cities — people do come from out of town, after all, and don’t drive absolutely everyone else away during that time — but these numbers don’t tell us much about what that might be.

Share this post:

No, the NCAA tournament isn’t an economic boon, next question

access_time personNeil deMause

With the NCAA basketball tournaments about to kick off, it’s only a matter of time before some reporter somewhere calls me to ask whether they’re really a benefit to local economies in the cities that are chosen to host games. So I’m really glad that Travis Waldron of Think Progress has written an item making clear that the answer is: no, no, a thousand times no.

In their analysis of Final Fours from 1970 to 1999, for instance, professors Victor A. Matheson and Robert A. Baade found that the average economic impact of hosting the NCAA Tournament was actually negative…

Matheson and Baade cite various reasons for the inflated economic estimates. For one, cities estimate the money spent by attendees at the events without accounting for money that goes unspent in that area. NCAA Tournament games surely attract fans to certain locations, but they can also prevent local residents from spending money at the same time, as they seek to avoid the crowd. And the estimates rarely account for the cost of putting on the events, so while a city may gross millions in new economic activity, the net gain is much more often closer to zero.

None of this should be new to anyone — even if you missed Matheson and Baade’s paper when it came out back in 2003, we just went through the exact same thing last summer with the Olympics. Not that this will stop reporters from writing stories in upcoming weeks on all that the NCAA means to its host cities, but at least now when they do, we can say “We told you so.”

Share this post:

Louisville arena TIF windfall fails to materialize for third straight year

access_time personNeil deMause

And finally in today’s onslaught of holiday reporting, we have the news item that isn’t really news:

It was supposed to be a reliable way to help cover the cost of a new downtown arena: The building’s events would bring throngs of people downtown who would eat, drink and shop nearby. Their sales taxes would be captured to help pay for the KFC Yum! Center.

But the arena hasn’t added as much to tax revenues as expected during its first three years — producing less than one-third of the amount originally projected.

Yep, the KFC Yum! Center TIF district isn’t generating as much incremental tax revenue as expected — just as was the case 11 months ago, and a year and change before that. At least tax receipts are finally up from before the arena was built, but only slightly: a total of $6.4 million over the past three years, a drop in the bucket compared to the city’s $19 million in annual arena debt payments, let alone the $30 million a year that that will rise to in coming years.

The city is now expected to be asked to bail out the arena district as early as next spring. (The Louisville Courier-Journal also speculates that this could increase the pressure to lure an NBA franchise in order to add arena events, which would be a great idea if NBA franchises actually paid significant rent.) Meanwhile, arena authority financial adviser Alexander Rorke told the Courier-Journal that nobody should be hung up on the fact that the TIF was expected to bring in a ton of money and now needs a bailout: “With the feasibility study — that was all great for that time period for what people knew. But I think it’s important that we just realize that was then.” Yeah, that’s what they all say.

Share this post:

Louisville authority selling assets to fill gaping arena debt

access_time personNeil deMause

Oh god oh god oh god, sometimes the combination of government stupidity and journalistic stupidity is enough to make my head explode. Here’s the headline in yesterday’s Louisville Courier-Journal:

Arena cash may ease crunch: Security sale could bring millions to KFC Yum! Center

And here’s the key section from the accompanying article:

Louisville Arena Authority officials say they are considering selling a package of securities that financial statements show increased in value by $5 million last year.

The authority’s guaranteed investment contracts provide it a fixed rate of return of 4.7 percent a year — more than $740,000. As interest rates on other investments have declined, the arena’s contracts’ underlying value has increased. The securities were worth $22.6 million at the end of last year, up from $17.6 million the year before, according to the arena’s financial statements.

In case you didn’t follow what’s going on here, allow me to explain: The arena authority has found itself with some investments that earn an annual return of 4.7%, which in the Great Recession era is pretty fantastic. So instead of actually collecting that $740,000 a year in interest year after year, it’s going to sell the investments for $22.6 million, pour all that money into the gaping maw of debt that is the KFC Yum! Center, and be left with nothing.

It’s certainly a defensible strategy, given that the authority needs the money now and doesn’t have anyplace else to turn for it. But treating it like a windfall that actually solves any problems is like cheering paying off a stadium by selling a public hospital, or selling off future parking revenues to pay for a new arena, or, for that matter, selling off city services like swimming pools and golf courses to raise quick cash.

In other words, a more honest headline would have read: “Arena authority forced to sell off only worthwhile assets to pay off KFC Yum! Center debt.” I probably should stop expecting honest headlines by now, but I keep hoping that one day…

Share this post:

Louisville arena costs as much to run as it brings in

access_time personNeil deMause

It turns out it’s not just Louisville’s arena tax district that is running short of money; so is the arena itself:

By all accounts, the KFC Yum! Center has been a spectacular success since it opened in fall 2010, meeting every expectation except one — profitability.

The Kentucky State Fair Board, which manages the building for the Louisville Arena Authority, expects net income of about $500,000 from operations in 2011. That’s far less than the $1.2 million budgeted, and a fraction of the $3.7 million forecast when the project was financed in 2008.

The problem, apparently, is that despite a packed event calendar, operating costs are higher than expected — $9.2 million a year instead of $5 million — which has quickly eaten up the revenue from all those Katy Perry concerts.

Still, turning a $500,000 annual profit isn’t so bad, right? Except that that’s just a $500,000 profit on operations — factor in the $19 million a year in debt payments the public took on to build the KFC Yum! Center, and you have a mammoth loss for taxpayers. And with that tax-increment financing district running short of projections as well, the public is looking at a $7.5 million shortfall in paying off the arena bonds this year and next — something the authority is filling by using surplus funds and raiding a maintenance account. They haven’t had to sell any hospitals yet like up the river in Cincinnati, but the century’s still young.

Share this post:

Lexington task force proposes $300m rebuild of Rupp, convention center

access_time personNeil deMause

If you’re wondering what’s been up with the plans to replace the University of Kentucky’s Rupp Arena for these past four years, it’s now transmogrified into a plan to renovate Rupp Arena, plus a bunch of other stuff:

The Arena, Arts and Entertainment District Task Force’s final report envisions a $250 million to $300 million “transformation” of Lexington Center, including Rupp Arena, the Lexington Convention Center, the Civic Center Shoppes and immediate environs…

If financing is found, phased demolition and construction of the civic center and Rupp Arena could start as early as 2014.

“This important project will require a mix of local, state and private funding for construction,” the report said.

The other change since 2007, apparently, is that Lexington is no longer focusing on using a tax increment financing to fund the construction; it can’t help that its neighbor Louisville is having such trouble with its own TIF district. TIFs are still on the table, according to the Lexington Herald-Leader, but along with “naming rights of the arena, premium seating, advertising, sponsorships, concert and event promotions, concessions, stock offerings, state road funds, state tourism tax incentives, tax increment financing and new market tax credits.”

Needless to say, that’s a big mishmosh of arena revenues and public subsidies. Whether this deal makes fiscal sense is going to depend on which items the city and state choose from that menu, assuming they don’t decide the whole thing is too rich for their blood.

Share this post:

Louisville arena TIF fund on verge of needing bailout

access_time personNeil deMause

Hey, remember back in 2010 when it was reported that Louisville’s tax-increment financing district wasn’t actually generating any incremental taxes, and if things didn’t improve the city would need to bail out its stadium fund with general revenues? Well, guess what:

The revenue needed to pay for the 15-month-old arena at Second and Main streets is falling short of expectations, putting the project at risk of failing to cover its debt and having its bonds relegated to “junk” status.

The main culprit is lagging revenue in a special taxing district that forms the foundation of the arena’s financing plan and is supposed to provide the Louisville Arena Authority with more than enough cash to pay its $349 million in bonds.

Arena authority chair Jim Host told the Louisville Courier-Journal that he has no plans to ask the city for money immediately, but did apparently tell city officials that he will ask for as much as an extra $3.3 million a year starting in 2013.

There are already plenty of reasons to be wary of TIFs, among others that much of the “new” tax revenue is actually money that would have been collected somewhere else in your city regardless. But the scariest part for city officials may be their uncertainty — a relatively small shortfall in consumer spending that causes tax proceeds to go down, not up, and in the words of subsidy expert Greg LeRoy, “a liability that was supposed to be taken care of by the TIF is now eating the lunch of the general fund.”

Share this post:

Goldman Sachs touts Louisville arena as part of its plan to eat humanity’s face do good deeds

access_time personNeil deMause

If you read the kind of publications that Goldman Sachs advertises in, you may have noticed some ads from the vampire squid touting its role in helping save Louisville by selling bonds for its new basketball arena. (There’s a Goldman-created video, too.) As the San Francisco Chronicle’s David Sirota picks up the story:

As Goldman’s ad tells it, Louisville’s major problem was its need for a new arena. That’s when the bank swooped in with a “financing strategy” to build the stadium, which then supposedly led to “a vibrant downtown scene, where new businesses are opening (and) existing businesses are expanding.”

The only problem, writes Sirota: “If you do bother to click around the Internet, you’ll inevitably find that the Louisville economic picture is anything but ‘vibrant.’ Today, the city is suffering from an 11 percent unemployment rate and a $22 million budget shortfall.” He also cites the article we mentioned last fall that noted that Louisville’s TIF district wasn’t generating enough tax revenues to pay for the arena construction costs, which would leave the city having to dip into general funds to pay off those Goldman bonds.

And it gets even worse, according to Insider Louisville’s Terry Boyd:

The truth is even weirder: Goldman Sachs fell short of being able to place all the arena bonds.

It was in fact Louisville-based brokerage Hilliard Lyons that saved the day, placing the highest-risk, lowest rated piece of the arena debt.

How do I know? I wrote the story for Business First last year.

Concludes Boyd: “We’ll find out pretty soon if the arena’s revenue will match our collective debt obligation. But one thing is for sure — you can bet Goldman Sachs makes money no matter what happens to tax payers.”

Share this post: