Category: Houston Rockets

Friday roundup: Rays stadium demands include federal disaster relief money, $10/year rent while keeping all revenues

access_time personNeil deMause

On top of everything else this week, the Tampa Bay Rays management dropped their draft memorandum of understanding for a Tampa stadium deal, which sheds a little more light on what precisely they’re asking for in terms of public money. I’ve only had a chance to give it a quick read, but so has Noah Pransky of Shadow of the Stadium, so maybe combined we can hit the biggest takeaways:

  • This is just the Rays’ proposed MOU; county officials haven’t reviewed it yet.
  • Rays owner Patrick Zalupski wants it finalized by June 1, so that a stadium can be open by 2029 — probably an impossible timetable, but if it works to create a two-minute warning, sure, why not?
  • The land under the stadium itself, currently owned by the state, will be shifted to the county’s possession — so all of that previously reported between $1.1 billion and $2.5 billion in free land and property tax breaks is still in play.
  • The Rays will lease (or maybe “license”) the stadium for 35 years, for a rent of $10 a year. (No, that’s not a typo: not $10 million, $10.)
  • The stadium itself will cost at least $2.3 billion, with $251 million coming from the city of Tampa (source TBD unless I missed it) and $750 million from Hillsborough County, which will include hotel tax (TDT) money, sales tax surcharge (CIT) money, revenue from an already existing TIF district (Drew Park) around the site, and possibly federal disaster recovery block grant funds. that, notes Pransky, are “generally earmarked to rebuild housing & infrastructure that support low-to-moderate income populations.”
  • Any excess public revenue from all those tax streams will go into a future maintenance fund, so the actual amount of county funding could be much higher, a la the Atlanta Falcons‘ infamous “waterfall fund.”
  • “The Rays Stadium Entity intends to seek additional Public Funding from other available public funding sources,” so the total public subsidy could be even more much higher.
  • The Rays will impose a ticket surcharge, but that money will pay off the team’s portion of costs, not the public’s, so no help there.
  • Likewise, the “Rays Stadium Entity will retain all revenue generated pursuant to the Lease, including but not limited to revenue associated with tickets, parking, suites, signage, advertising, promotional inventory, sponsorships, concessions, merchandise, broadcasting rights, royalties, licensing fees, concession fees and other sources described in the Lease.” So the city and county will get bupkis in stadium revenues to help pay off their share, not even naming rights on a county-owned building.
  • This is all just an MOU for the stadium itself; the surrounding development appears to be waiting for a later date, so no more details on when that would be built, how much it would cost, how much in property tax breaks it would be receiving, or how on earth it could be “100 percent privately financed” but with “tax dollars from the district used to eventually pay off the tab.“

So we’re at a minimum of $2.1 billion in public costs for the entire project, and a maximum of who the hell knows, but numbers like $4 billion or even higher are certainly not out of the realm of possibility. There are certain to be lots of questions from Hillsborough County Commissioners, especially on that CIT sales tax surcharge that voters were promised wouldn’t be used for stadiums (and which residents currently oppose using for a Rays stadium) — in the MOU it’s earmarked for “on-site horizontal infrastructure,” which could mean things like roads and sewers but also building foundations. In fact, County Commissioner Joshua Wostal, who is emerging as one of the louder critics of the deal, has already called attention to a clause saying if the city and county can’t come up with the funds in the MOU, they’ll need to “use best efforts to endeavor to secure alternative financing,” something Wostal said seems to be a “poison pill” intended to “force the commissioners to vote no in what seems to be an intentional killing of the deal.” Or maybe they just hope commissioners will agree to anything, it’s happened before!

More on all that next week, surely. In the meantime, here’s the rest of this week’s news:

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Houston sports venues need almost $3B in upgrades, if you’re not too picky about what “need” means

access_time personNeil deMause

The Harris County Houston Sports Authority’s building committee has estimated how much the Astros and Rockets venues will need in maintenance costs in coming years, and it’s a bundle: $836.5 million over the next 20 years for the Astros, and $635.81 million for the Rockets. The numbers, according to the Houston Business Journal, come from a study by Tennessee-based public facility consultant firm Venue Solutions Group, which previously estimated that the Texans‘ stadium needs $1.4 billion in renovations.

When price tags like these get floated, there are always two questions: 1) Is this for renovations the buildings need or just that the team owners want? and 2) Whose responsibility is it to pay for them? Buildings do need maintenance, but they also become what’s been called “economically obsolete,” which means they could make more money if they were schmancier — the second should reasonably be considered less a problem for the public landlord that owns the buildings and more a problem for the billionaire owners who’d like to be even more billionairey.

Let’s start with the need vs. want question: More than half of both the Astros ($448.27 million) and Rockets ($339.24 million) money is slated for “architectural renovations,” which means things like moving walls and rearranging layouts. It’s not something you do to keep a building from falling down, in other words, so much as to rejigger how you organize your building’s interior. Among other things, Chron.com reports that the Rockets’ “premium and legacy level need an upgrade to be more enticing,” which certainly seems to be edging more into “want” territory than “need.”

As for whose job it is to pay for snazzing up the venues, HBJ has this to say:

The Houston Astros and Houston Rockets are responsible for maintenance costs at their respective facilities.

However, leases for the Astros and Rockets require the sports authority to renovate Daikin Park and Toyota Center to keep them in first-class condition. In particular, the Astros’ 2018 lease extension requires HCHSA to obtain additional funding for renovations by Dec. 31, 2030. If the organization does not do so, the Astros have the option to terminate their lease effective March 31, 2035.

When the Astros moved into their stadium in 2000, they agreed to a 30-year lease, but that was extended to 50 years in 2018, with an additional $2 million a year in rent money to be used for maintenance and capital repairs. But somewhere along the way Harris County agreed to a state-of-the-art clause, meaning the lease binds the county to keep renovating the stadium along the way. That’s the same kind of subsidy-that-keeps-on-subsidizing that Hamilton County in Ohio is trying to get out of regarding the Bengals, so if Astros owner Jim Crane terminated his lease early, he’d arguably be doing Harris County a favor. (The Rockets’ lease already expires in 2034, so it’s not as clear what Harris County would be risking there by not giving their arena a $635 million facelift.)

What would really be nice here is a look at the VSG report itself, but if it exists anywhere online, it’s well-hidden. (VSG hasn’t even added the Houston venues to its online portfolio yet.) Until then, everyone please agree to report that the Astros and Rockets owners want almost $1.5 billion in upgrades, not that that’s what the buildings need — and that while denying it could mean having to renegotiate the team’s leases, it’s not like there are any other sixth-largest media markets in the U.S. out there that they could move to instead.

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Friday roundup: Houston readies stadium upgrade cash, Oakland Coliseum buyers seek new payment plan

access_time personNeil deMause

Thanks for your patience while I’ve been traveling this week (and watching Mets playoff games at 3 am), though honestly it’s been a pretty slow news week as well. Not completely dead, though, so let’s get to the weekly roundup:

  • The Houston city council is refinancing its bonds for the Astros and Texans stadiums and Rockets arena, which will let it spend an additional $150 million on renovations. The Houston Chronicle says the money is expected to be allocated as part of lease negotiations — the Texans’ is up in 2031, the Rockets’ is up in 2033, and the Astros’ not until 2050 — but also that the bond money is expected to “be split between the three venues evenly,” so maybe the city plans to set aside $50 million for each team, then see what it can get in lease extensions for that? The Houston Business Journal also reports that the Astros and Rockets leases require “renovations to maintain the first-class status of the venues” — the Astros can terminate their lease in 2035 if the additional spending isn’t made, though there’s no estimate provided of how much maintaining “first-class status” is expected to cost. Friends don’t let friends sign state-of-the-art clauses, let’s just leave it at that.
  • The city of Oakland has rearranged the payment schedule for the African American Sports and Entertainment Group to supply $105 million for the city’s half of the Oakland Coliseum, and the Oakland police union wants answers, calling the change in timetable “strange and weird.” Apparently the new payment schedule also still needs to be approved by the city council before it’s final, so I’m going to go ahead and say that the whole thing is strange, though “weird” will have to wait until we have further information.
  • Destruction from Hurricane Helene is expected to cut into hotel tax revenues earmarked for paying off the Tampa Bay Rays‘ new $1.3 billion stadium, though it’s too soon to predict by how much. Sports economist Geoffrey Propheter notes that if bond buyers balk at purchasing bonds because the tax revenues don’t seem sufficient, Pinellas County could have to allocate more public money to reassure them and keep interest rates from soaring, this should be fun.
  • If the prospective owners who want to get an expansion franchise in Portland, Oregon are successful, and if they then are able to build a stadium where they want, it could have the side benefit of shoring up the approach ramps to a neighboring bridge so they don’t collapse in an earthquake. Neither the earthquake nor the expansion team appears imminent, but this is still news, apparently, so consider yourself informed.

If there’s anything else up, it can get discussed in the comments, or else wait till Monday when I’m back on a normal schedule. See you then!

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Houston has needed new dams for decades, built stadiums instead

access_time personNeil deMause

I may have noted to The Nation’s Dave Zirin last week that building tons of sports venues and giving the surplus ones to megachurch operators who balked at opening them up to disaster victims was an inefficient way for Houston to get hurricane shelters, but I didn’t suggest that Houston’s flood damage could be directly linked to its stadium spending spree or anything. Washington Post sports columnist Kevin Blackistone, though, has no such qualms:

Two Januarys ago, the City of Houston, after a delay of at least seven years, finally started a critical long-term project. It was patchwork on two dams constructed during the post-World War II era to protect the city from catastrophic flood and deemed by the U.S. Army Corps of Engineers to have fallen into as dangerous state of disrepair as possible. The cost: $72 million in federal funds.

Two decades ago, Houston found itself without a professional football team for the first time in seemingly forever. There was no holdup. There was no skimping.

Okay, so it’s not like Houston had a simple choice between fixing dams and building stadiums, and decided, “Stadiums it is, on the double!” But as Blackistone points out, there’s been no shortage of editorials and the like pointing out that aging dams needed to be shored up — or else “floodwaters could submerge downtown, west and south Houston and the Texas Medical Center,” in the words of one Houston Chronicle editorial last year — but the city’s response has been to wait for federal money to pay for the work. Meanwhile, Houston area taxpayers have spent around $1.4 billion on new buildings for the Astros, Texans, and Rockets in recent years (per the numbers in Judith Grant Long’s book with the really long name). As the kids today say, that’s not a good look.

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Friday roundup: Everybody still has lots of dumb stadium ideas, sun keeps rising in east

access_time personNeil deMause

And aside from the Cleveland Cavaliers arena subsidy returning from the dead, Mrs. Lincoln, here’s how some of the rest of the week in stadium and arena news went:

  • Chicago is looking at closing some streets to accommodate DePaul University’s new city-subsidized basketball arena, because of course they are.
  • The new arena for the Detroit Red Wings and Pistons will have a Kid Rock-themed restaurant, because of course it will.
  • San Diego mayor Kevin Falconer wants to build a professional lacrosse stadium, even though the owners of the city’s newly created lacrosse franchise say they don’t need one, because of course he does.
  • Rhode Island state senate president Dominick Ruggerio says he hopes the state legislature will vote on $38 million in public funding for a new Pawtucket Red Sox stadium in November, despite not believing the team has a viable threat to move to Worcester if it doesn’t get what it wants, because “You know what, we’ll get criticized for anything.” And you know, he’s got a point: No matter what elected officials do, there’s somebody somewhere who won’t like it, so might as well do whatever they want, right?
  • The Las Vegas Raiders’ stadium construction could be delayed because nobody realized until now that they needed Army Corps of Engineers approval to remove a flood culvert. (The Raiders have agreed to pay the $1 million cost, at least.)
  • Dave Zirin at The Nation has examined how Joel Osteen’s dithering over whether to let Hurricane Harvey evacuees into his megachurch has its roots in the Houston subsidy deal that turned the Rockets‘ old arena into the church in the first place, and I put in a cameo to note that while littering the landscape with redundant current and former sports venues is one way to create a lot of hurricane shelters, it’s probably not a very cost-effective one.
  • Wells Fargo released a report that “real stadium construction spending” on new sports facilities has “climbed 80 percent over the past five years” to $10 billion per … something. And are they counting money committed, or actual construction money spent, and does this count both private and public funds? I guess we should cut Wells Fargo some slack, they have a lot on their minds these days.
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As goes AIG, so goes Houston’s sports authority?

access_time personNeil deMause

The disarray of the world financial system continues to hit the stadium world: The latest victim looks to be the Harris County-Houston Sports Authority, which could see huge hikes in its bond payments on Minute Maid Park, Reliant Stadium, and the Toyota Center thanks to the collapse of the esoteric financial instruments known as credit default interest rate swaps. (You may recall CDSs for bringing down a little company called AIG.) Without going into all the technical details — which, frankly, I’m not sure I understand even after reading more about default swaps than is really healthy [UPDATE: Apparently I really didn’t understand, as I mistook credit default swaps, which sunk AIG, for interest rate swaps, which threaten to sink the Sports Authority; everything else I wrote here is still valid, though] — the upshot is that in order to undo the bad financing, the sports authority will have to pay off its stadium debt early, with annual debt service expected to rise from $62.3 million to $83.7 million over the next two years.

That’s troublesome, because the authority only collected $79.3 million total in 2008 — and tax revenues, which depend on things like car rental and hotels that are highly dependent on a booming economy, look to be dropping. “I’m deeply concerned about the financial stability of the sports authority and all its bonded indebtedness,” former authority chair Jack Rains told Bloomberg News (which somehow managed to give Janet Jackson’s “wardrobe malfunction” equal mention in its article). “When you borrow for 30 years, you have to do prudent things, and they didn’t.”

If the shortfall comes true, the sports authority could end up having to go to the county for a bailout. And we know how well that’s worked in the past.

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