Category: Philadelphia 76ers

For months, Philadelphia Mayor Cherelle Parker has been hedging on her position on a new 76ers arena next door to her city’s Chinatown, most recently saying that keeping the team in town was “a priority,” but that “we have a process here in the city of Philadelphia that we are following, and we will allow it to play itself out.” Yesterday, that all changed, as Parker released a weirdly framed video declaring that “an agreement has been reached that will ensure that our Sixers are staying home”:

“I will be transmitting the related legislative package to our city council of Philadelphia for its consideration, where it must be approved. … This is an historic agreement. It is the best financial deal ever entered into by a Philadelphia mayor for a sports arena, and I wholeheartedly believe it is the right deal for the people of Philadelphia.”

Then Parker said she would have “a lot more to say in a forthcoming formal presentation,” and would hold town halls so that “the people have access to the facts.” Then she claimed the arena would create “hundreds of millions of dollars in new tax revenues” and “hundreds and hundreds of jobs,” and wrapped up without including any details of what is in this agreement or showing any of her math. (A previous report by the Sixers’ hired consultants projected $16.2 million a year in tax revenue for the city and school district, and was immediately jumped on by people with actual economics degrees as a load of hooey.)

What prompted Parker’s abrupt transformation into a 76ers arena stan is unclear, but public response was — unsurprisingly in a city where people oppose the plan by a more than 3-to-1 margin — overwhelmingly negative. Debbie Wei of the Save Chinatown Coalition wrote in a statement: “This fight is far from over. We are going to fight this, and we are going to the mat. It’s on.” And the reply thread to Parker’s video on Twitter was just brutal:

She said, “People of Chinatown, I hear you” while she was having secret, closed door meetings without them. — Andrew Lee

The same beer people will buy on Market St, they would have bought at Wells Fargo/Xfinity Live. She just became a multi millionaire with the kickbacks she’ll get from the unions. She’s a termite — Shaun

You’ll never be reelected again. Ruining Chinatown and separating the one of the sports teams all at once. Only doing this to get your pockets lined. Disgusting — Philly Sports Truther

Are you drunk? It would make sense because it would explain why you entered this ridiculous agreement. One term, Parker. — The Centryst

Why does this have the feel of a parody skit on SNL? — Brian Thuer

Actually fuck you for this. — PKSparkxx || #BlackLivesMatter

The last remaining obstacle to the arena going forward, it would appear, is now local councilmember Mark Squilla, who has been similarly wishy-washy to Mayor Parker up until now, saying first that he wouldn’t do anything that the neighborhood opposed but then pivoting to saying he’s “comfortable making that decision” on his own. Following Parker’s video statement, Squilla said only, “It’s up to us to look at that legislation and see if the proper safeguards are put in place, and if not, add those safeguards in place before an introduction can happen,” which translates as “yes, we are the city council, we consider legislation, that’s our job description.”

Next step is to see what new details, if any, Parker reveals in her formal presentation, but the battle lines seem pretty set regardless. It is, most definitely, on.

UPDATE: Wei emails that Parker held an invite-only meeting of selected Chinatown leaders yesterday afternoon, then “WHILE PEOPLE WERE STILL IN THE MEETING her folks posted that ridiculous video.” Classy.

One of the enduring myths of the proposed Philadelphia 76ers arena is that it would require no public money. That’s what team owner Josh Harris keeps saying, certainly — but it carefully overlooks the fact that the proposed arena site comes with a get-out-of-property-taxes-free card, though whether that card is worth $25-90 million or $900 million depends on who you ask.

That’s a debate for a different time, though, because it turns out that Harris does, in fact, want a guarantee of straight-up public funding — under one condition:

The team is requesting that its deal with the city include a provision that could allow the 76ers to receive local taxpayer backing in the future, according to a person with knowledge of the negotiations. The provision would apply only in the event that the city subsidizes a different Philly sports facility after the proposed basketball arena gets approved…

In that event, the 76ers would retroactively receive the same subsidy that the owners of the new facility get, the source said….

“If they commit to no city dollars and another arena gets built, then [the 76ers] would get the same thing” as the second arena’s owners, [councilmember Mark] Squilla said, describing the provision. “If somebody, say, Comcast wants to build a new arena and they say, we need $200 million — if we give them $200 million, then you have to go back and give the 76ers $200 million.”

So, like, any Philly sports facility? Ever? And how would a “subsidy” be defined? I have so many questions, please let this Philadelphia Inquirer article answer at least some of my questions—

In international trade, “most favored nation” status means that a designated country cannot be treated worse than any other nation…

THAT WAS NOT MY QUESTION THANK YOU

This clause has apparently become a sticking point in negotiations between Harris and Mayor Cherell Parker, and maybe helps explain Parker’s weirdly conflicted statement on the arena plan last week.

Not conflicted, meanwhile, are the many Philadelphians (organizers say 3,000-4,000, WHYY-TV says “scores”) who marched in the rain on Saturday to protest the arena plan and its potential impact on Chinatown. “It’s raining, it’s pouring and Squilla is snoring,” they chanted at one point, in reference to the councilmember who represents the proposed arena site and who has been close-lipped on whether he will support it, saying only that once legislation is ready, he’ll give community members 30 days to review it before he introduces it in the council. It’s pretty clear at this point what the community response is likely to be, but Squilla is certainly either looking to hear from constituents or looking to make it appear he is to provide cover for whatever he wants to do anyway, definitely one of those two.

Last night I did a podcast interview where one of the questions was (paraphrasing) “Do you think elected officials are starting to get smarter about not offering huge subsidies to sports team owners?” This morning, we learn that New Jersey provided a partial answer:

New Jersey Gov. Phil Murphy’s administration told the Sixers in a letter Monday that the state could award up to $400 million in tax credits — as well as borrow hundreds of millions of dollars — to support an arena in Camden and a broader “large-scale redevelopment project.”

This is not actually news per se: It was reported back in July that a Philadelphia 76ers arena in Camden would be eligible for up to $400 million in tax credits under the state’s ASPIRE program, which one public policy watchdog had called “another last-minute lame-duck special that will benefit big developers at the expense of everyone else.” But the letter from Murphy is the first official confirmation that New Jersey is willing to offer what it already said it would offer, so there is that.

Meanwhile, what does Murphy’s letter say about that “as well as borrow hundreds of millions of dollars” bit?

Furthermore, we are also prepared to work with the legislature to enable the structuring of up to $500 million of special-purpose bonds supported by fees and surcharges on tickets, concessions and parking (with no impact to New Jersey taxpayers) to support the development of an arena.

“With no impact to New Jersey taxpayers” sounds promising, certainly, but it’s the kind of promise that has been betrayed before. To pay off $500 million in bonds would cost about $30 million a year, which would require more than $30 in ticket, concessions, and parking surcharges per Sixers fan, which is a lot. (Maybe if the arena is super-successful at attracting concerts that could be $10-20 in surcharges per fan, but that’s still a lot.) So there’s at least a possibility that some of the bonds could end up being paid from taxes on tickets, concessions, and parking, which would indeed have an impact on New Jersey taxpayers; more once we see actual bond legislation, I guess.

If you’re now thinking that for Philadelphia or Pennsylvania officials, the most rational response would be, “The Sixers stay in the Philly area and New Jersey taxpayers have to pay for the arena and Chinatown can go on being Chinatown, where do I sign?”, you are decidedly not Pennsylvania Gov. Josh Shapiro:

“I’m confident that the mayor will bring this to a conclusion that works for her, for council, for the city of Philadelphia and that keeps the Sixers here in the city.”

Not sure whether Victor Matheson saw that quote before telling NorthJersey.com that “New Jersey is one of these states that could easily be used as a pawn” to “get into a bidding war,” but if not, good prescience, Victor! And podcast host, if you’re reading this: Nope, not smarter yet, check back in a couple of decades.

We’ve seen the value to team owners of generating interstate bidding wars in Kansas City, now could Philadelphia 76ers Josh Harris be the next to try the gambit? According to ROI-NJ, which is apparently “the brand-new, go-to media company created to inform and connect businesses in New Jersey,” somebody unnamed wants you to think so!

The state of New Jersey is making a serious push to convince the Philadelphia 76ers to move to New Jersey and into a new arena that would be built in Camden, four people familiar with the discussions confirmed to ROI-NJ.

Discussions between top state officials and leaders from Harris Blitzer Sports & Entertainment (which owns the team) have been ongoing for the last two months, the sources said.

So that could be people with the state of New Jersey leaking it, or people with the 76ers. Three guesses which one has more incentive to spread this story, and the first two don’t count.

The 76ers’ current arena plans, you’ll recall, are to get out of being a tenant at the Flyers-owned Wells Fargo Center by building a new arena on top of a failing mall near downtown. Since that site comes with a full property tax exemption, it would be partly subsidized by taxpayers, though with few fiscal details having been revealed, estimates of the city cost have ranged all the way from $25 million to $900 million. The bigger concern expressed locally has been the likely impact on the adjacent Chinatown neighborhood, where community leaders have pointed warningly to the near-complete disappearance of D.C.’s Chinatown after an arena opened there in 1997.

As for Camden, there would reportedly be tax kickbacks on the table there as well:

While HBSE’s owners have indicated a willingness to pay for the entirety of the project, coming to New Jersey would make them eligible for a tax credit of up to $400 million through the state’s Aspire program.

Aspire, it turns out, is a relatively new New Jersey state program that provides up to $350 million in “gap funding” for “transformative projects” that have a private investment of at least $100 million and, for commercial buildings, are at least 100,000 square feet in size. (I can’t find any references to $400 million in tax credits being available per project, but there’s a lot of fine print.) Eligible projects also must be “not economically feasible” without the subsidy (easy enough for an arena developer to claim), be located in a designated “Incentive Area” (all of Camden is included as eligible on the state’s map), and “result in a net positive benefit to the State” (“benefit” is not defined here), among other things. Peter Chen of the New Jersey Policy Perspective think tank last winter called the expanded Aspire program “another last-minute lame-duck special that will benefit big developers at the expense of everyone else.”

Would Harris throw away his shot at a downtown Philadelphia arena subsidized by tax money in favor of a Camden arena subsidized by even more tax money? Who knows! Would he like to pit both states against each other, in hopes of shaking loose public money in one place or another? Undoubtedly! Would either state be better off letting the other win being the Sixers’ home, putting up with traveling across the river to see games in exchange for not having to help pay for an arena? Quite possibly, depending on the size of the tax kickback and how much new tax revenue would actually result from having the arena in their state! Will we see in-depth public discussion of all these costs and benefits, or mostly just panicking about who’s “losing” the Sixers? We can always hope, but you probably know the answer as well as I do.

If you want an example of how to actually use research to fact-check claims by elected officials (and disgraced former ones) about stadium deals instead of parroting their claims, all props to the Philadelphia Inquirer, which ran an excellent analysis this morning of the tax subsidy plan being considered for a new 76ers arena.

The total subsidy amount for the Sixers arena has been really hard to pin down, in part because it’s not a direct cash subsidy but rather a property tax exemption — meaning it would depend on the assessed value of a future arena on the site of a failing mall near Chinatown — and in part because nobody is saying yet if it would be a full exemption or if Sixers owners Josh Harris and David Adelman would be offsetting the cost by providing the city with some payments in lieu of property taxes, or PILOTs.

Adelman told the Inquirer that the financing mechanism, in which he and Harris would hand over ownership of the arena to the city in order to get out of paying property taxes, but then pay a (presumably smaller) PILOT instead, is needed because it’s too hard to properly assess the value of sports venues. But the Inquirer then did something unusual in these journalistic end times: It asked a property tax expert.

That is not true, said Geoffrey Propheter, a professor of public affairs at the University of Colorado-Denver and the author of Major League Sports and the Property Tax. While assessing the value of arenas is complex, it is not impossible, and 13 venues for American professional sports teams are on the tax rolls, he said.

He noted that the newest NBA arena — the Chase Center in San Francisco — was developed without any PILOTs or any other public subsidies, including none of the state and federal programs the 76ers remain open to. The Golden State Warriors own the real estate for the Chase Center, which opened in 2019, and their property tax bill this year is about $19.5 million, he said.

For Propheter, the real motivation for teams to donate their real estate to municipalities is to save money.

Propheter went on to calculate exactly how much money Harris and Adelman would save: between $48.8 million and $181 million over 30 years. (Their total tax savings would actually be about 30% more, but they would get that additional chunk automatically thanks to another tax-break program that kicks back 90% of commercial property taxes for the first ten years.) That would come to between $25 million and $90 million in present value cost for the city — though Propheter notes if the Sixers owners want a more exact tax kickback estimate, they need to release more details of how much they plan to spend on various aspects of the arena, and which bits they would pay PILOTs on.

The Inquirer article doesn’t go into it, but there’s also the question of opportunity costs: How much tax money could Philadelphia be bringing in if it didn’t go through the disruption of tearing down the mall and building a tax-exempt arena? A real estate professor previously estimated this as leaving as much as $900 million on the table, though using some extremely back-of-the-envelope math. It’d be great if the Inquirer or another Philadelphia news outlet could conduct a thorough report on all the possible arena costs to the public — preferably before the city council takes up arena legislation this fall.