Tuesday, April 13, 2010

Stadium debt 

Stadium debt, in some cases, hangs around a lot longer than the teams that once played in them. From the Houston Chronicle comes this story that the vacant Astrodome "carries as much as $32 million in debt — nearly as much as the original cost of construction." $32 million may seem like rounding error in an era of $500 million ballparks. Nevertheless, there's a whiff here of the old political trick of shifting benefits towards the present and costs to the future. And not just in Houston:
Olympic Stadium in Montreal was not paid off until two years after the Expos left for Washington, D.C. Three Rivers Stadium in Pittsburgh still was carrying $45 million in debt at the time of its demolition in 2001.

Seattle's Kingdome was razed in 2000, and King County is scheduled to finish paying off its debt in five years.
22 years of payments

Public money will be required to cover Astrodome debt payments for 22 more years, according to county financial projections.
The story goes on to note that the current debt stems from renovations made to address relocation threats made by the Oilers and Astros in the 1980s.
The Astrodome's debt stems from the $60 million cost in the late 1980s of adding 10,000 seats, removing the scoreboard and installing 72 luxury boxes. County commissioners approved the project in an effort to persuade Oilers' owner Bud Adams to keep the team in Houston. The team left town after the 1996 season.

When asked if the expansion looked like a bad investment in retrospect, Precinct 4 Commissioner Jerry Eversole replied, “Hell, yeah!” But Eversole, who was not yet on the Court when the spending was approved, also said it has to be looked at in the context of the times, when two teams were threatening to leave town.

“We couldn't not try to keep the Oilers and we couldn't not try to keep the Astros,” Eversole said.

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Monday, January 11, 2010

No More Super Bowls in Miami? 

A story in today's Boston Herald reports that posted prices for Super Bowl tickets range from $2,000 to $5,000 in the secondary market. Here are some interesting quotes from market participants:
"The corporate orders are way down. Definitely the corporations are under scrutiny because of what’s going on in the world," said Michael Lipman, president and CEO of Miami-based Tickets of America, which sells Super Bowl tickets. "This is a total fan-driven Super Bowl. What teams are in is going to dictate the market and prices."

That doesn’t necessarily mean it will be an easy ticket, though.

"This year because of it being in Miami, it’s extremely popular," said Robert Tuchman, executive vice president of Premier Global Sports, which arranges corporate and group travel to sporting events. "Also, because the economy has bounced back a little bit, there’s more interest than last year in Tampa."

Tuchman’s company, which runs sportstravel.com, has already sold out of packages at the Fontainebleau Hotel in Miami Beach and Epic Hotel in Miami.
Not bad for a recession-wracked economy. As I read the story, I recalled an opinion piece in the Miami Herald last week, which excoriated Commissioner Goodell and the NFL for the following threat:
As Super Bowl XLIV approaches, the National Football League has delivered a not-so-sporting message to hosting South Floridians: Bend over.

NFL Commissioner Roger Goodell warned local officials that this might be the last Super Bowl game held at Dolphin Stadium unless the facility is refurbished at a cost of $250 million, give or take.

Although the league is wallowing in profits, it has no intention of bankrolling the renovations. The Dolphins haven't said how much, if any, the team would contribute.

Most likely, the money would have to come from public funds, possibly hotel bed taxes collected in Miami-Dade, Broward and Palm Beach counties.

It's old-fashioned extortion, but the NFL has no shame. You'd have better luck negotiating with the Gambino family.

Forget the recession. Forget the fact that our boneheaded politicians just committed $490 million to a new baseball park that is doomed to be a budgetary suckhole for decades.

And forget the fact that the football stadium was renovated just a few years ago for $200 million-plus, and that the Dolphins admit they don't need any upgrades for regular-season games.

Mr. Goodell is a fussy fellow. He would like swankier skyboxes and new hi-def lighting, please. He would also like an expanded roof on the stadium to prevent raindrops from dampening the festivities.
Now, it strikes me that the statements of market participants quoted in the Boston Herald ring true: people are willing to pay top dollar for a Super Bowl ticket in February, because it is paired with a trip to Miami Beach, warm weather, and so on. Can stadium amenities really be worth an investment of an additional $250 million, for a single game once every six to ten years, in which the city itself and its natural surroundings, more than anything else, dictate the demand for this particular location?

If this is indeed a standard "relocation" threat being foisted on local taxpayers by the NFL, it does not seem credible to me.

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Tuesday, June 16, 2009

The NFL and Gambling 

In the WSJ here. The article suggests that the NFL's stance in opposition to gambling is hypocritical and motivated by its appetite for public subsidy. John Vrooman of Vanderbilt states that $17b in public subsidy for NFL stadiums has been obtained in the past two decades. Makes sense to me.

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Tuesday, June 02, 2009

Yankees stadium deal a target 

Richard Sandomir reports on a case where a NY Assemblyman has a subpoena to obtain what seems like a gazillion documents from the Yankees, in order to ferret out the facts behind the recent stadium deal. At least the Yankees are making it seem like a gazillion documents, as they claim it would cost the state over $5 million - about a buck a page - to produce them. Heh - are these gold-plated documents, akin to the $2500 seats the Yankees were trying to sell earlier this year?

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Sunday, April 19, 2009

Mixed Use Developments 

The former Richmond Braves have moved into their new place in Gwinnett, Ga. (with a quote by JC Bradbury of The Baseball Economist and Sabernomics).

As Richmond continues to debate its baseball future, Gwinnett County and its residents celebrated the opening of the $64 million stadium that was built in about nine months.

The aggressive schedule contributed to a $19 million cost overrun but was necessary after the Braves announced early last year that 2008 would be the team's 43rd and final season in Richmond. Officials had grown frustrated over a lack of progress on a plan to replace The Diamond on North Boulevard.

"In some regard, it's been a six-year trek that wound up in Gwinnett. It wasn't designed to be that way. It's just the way it worked out," said G-Braves General Manager Bruce Baldwin, who helped pitch the idea of a new stadium in Shockoe Bottom in 2003.

That's left the Richmond politicians trying to figure out plan B.
Richmond Mayor Dwight C. Jones is now considering a different proposal for baseball in Shockoe Bottom. A group of developers led by Highwoods Properties has proposed Shockoe Center, a $318 million mixed-use development that would be anchored by a ballpark near Main Street Station.
These mixed-use developments seem to be the norm now that the cat is out of the bag regarding the economic impact (i.e. job and income creation nature) of subsidizing sports stadium construction. But are these developments catalysts for economic growth or are they little more than attachments to stadiums to get sufficient voter approval*?

The public goods aspect of sports is certainly in play here. To the extent that sports generate public goods, some type of stadium subsidy is warranted. But the non-sports portion of these mixed-use developments is typically used for shops, restaurants, bars, and condos/apartments, stuff that falls squarely under the umbrella of private goods and where subsidies are not warranted. If a private good needs to be subsidized to get produced, it's probably not a good investment.

*
Which came first: the stadium or the attached development - a chicken-or-the-egg problem?

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Wednesday, April 08, 2009

Time to renegotiate? 

Tom Hicks, owner of the Texas Rangers, Dallas Stars, Liverpool FC, and who knows what else, has defaulted on $525 million in debt. He says its no big deal, just a negotiating tactic. This story describes how Hicks built his business and sports empire on massive leverage. Indeed the $525 million was borrowed in late 2006 against the Rangers and Stars franchises, whose value had risen well above their combined $334 million purchase price. Being fully leveraged is not ideal in a market where revenues are expected to decline.

Two aspects of Hicks' "tactical move" seem awry to me. First, if he can't get new lines of credit (would you loan to a king of leverage in this environment?), how willing are his lenders to give him more favorable terms than they did back in 2006? The notion does not make financial sense. Second, from an ethical perspective, Hicks is really stuffing it in the bankers' faces. As a group at least, the banks have taken an enormous hit as their loan portfolios have evaporated. Hicks is essentially saying, "mark my loan down too, and lower my payments or else!" The bluff is that he's willing to hand over the Rangers to his creditors. At least that is what Hicks' stance implies, in which case they won't be doing much future business with him. Alternatively, he really does need the relief, and his leveraged empire might be ready to crumble.

A few miles north in Kansas City, Missouri, the local pols are taking a second look at a $25 million deal with the Chiefs. The Chiefs were given a $25 million tax credit on the premise that they'd move their spring training camp from Wisconsin to a local venue. The pols think it was a ten year deal; the Chiefs are negotiating a five year deal (renewable), with the owners of the site, Missouri Western State University.

Absent an agreement with the public, the Chiefs are surely working on terms that make sense, with incentives for performance on the part of Missouri Western: do it right for the first five years, and we'll continue the relationship. The public subsidy -- and that's what the $25 million tax credit is, a transfer from the treasury to the Chiefs -- presumably requires a longer period than five years to pass the political smell test. The political reality creates a conflict with sensible private contract terms. But even on its allegedly original terms, this looks like a pure handout to me, one that is quite hard to justify. Stadium subsidies are one thing, but $25 million to hold a summer camp lasting all of three weeks (!!) at Missouri Western?

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Thursday, July 03, 2008

Sonics & Seattle settle for $45 - $70 million 

From the Seattle Times:
The city of Seattle will be paid $45 million in exchange for letting the Sonics move to Oklahoma City this year as part of last-minute settlement announced this afternoon.

Sonics owner Clay Bennett may have to pay an additional $30 million in five years if the city is unable to secure another NBA team, under the terms of the settlement announced at simultaneous press conferences in Seattle and Oklahoma City.
The $30 million requires that state legislation be passed next year to finance renovation of KeyArena. Politics can be strange, but the $30 million (present value more like $24 million) from Clay Bennett presumably would tilt the balance in favor of a bill. One downside of this feature of the settlement is that it puts a non-trivial sum of Bennett's money at work to preserve public financing of a basketball arena in Seattle.

I infer from the following that the commish was at work behind the scenes:
Nickels said the settlement preserves the possibility of NBA basketball in Seattle in the future — noting that NBA Commissioner David Stern agreed as part of the deal that a renovated KeyArena could be suitable for basketball.

In a statement, Stern said he was "pleased" with the settlement and said the NBA still regards "Seattle as a first-class NBA city that is capable of serving as home for another NBA team."
Pleased as punch, I'm sure. Seattle fans feel hosed by the process (do read Horsey's fine piece and check out the comments below it). But once they get their jones going for basketball, which won't take long, Seattle will jump to the head of the queue for the next relocation.

The Sonics name and "history of the team" were transferred to the city of Seattle. I'll put the over/under for the NBA's return at four seasons. If there is a team with happy feet, it could be shorter.

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Tuesday, June 17, 2008

Seattle vs. the Sonics 

The lawsuit brought by the city of Seattle against the Sonics began yesterday. The city is seeking to force the Sonics to play at KeyArena through the remaining two years of the contract. The Sonics want to merely pay the required rent, and get out of town to new and better digs. Three main issues in the case are (1) the ability of the city to demand "specific performance" rather than the monetary payment alone; (2) whether through KeyArena the city would provide an economically viable venue during the next two years, as required by the contract; and (3) whether both parties acted in good faith when negotiating over a new Seattle-based home for the Sonics, a negotiation that was ultimately abandoned when the Sonics decided to move to Oklahoma City.

Coverage from the Seattle Times on yesterday's hearing is here, and there is good commentary on the issues at the Sports Law Blog. The weakest part of Seattle's case rests on the economic impact of the Sonics leaving town. I expect our man Humphreys to carry the day on that point. But intangible values loom large, and I give the city a decent shot on points two and three above, as a means of keeping the Sonics around (in a contractual sense, at least) for another two years. What ultimately happens if the city wins the case is anyone's guess. Maybe they'll get a nice pot of money in a settlement and bribe the Kings to come to the Emerald (nee Queen) City ;) There are no angels in The Stadium Game.

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Saturday, April 19, 2008

A New Stadium and a Bargaining Chip for the NFL? 

Edward Roski Jr. has unveiled plans to build a new stadium in the Los Angeles metro area to entice a team to move to the nation's second-largest market.

The proposed 600-acre site, near the southern intersection of the 57 and 60 freeways about 20 miles east of Los Angeles, would be surrounded by a shopping mall, and located on a vacant property which Roski already owns. Roski said around 12 million people live within 25 miles of the site.

“We are aware of it and are monitoring all stadium-related developments in southern California,” NFL spokesman Brian McCarthy said from his New York office.

Roski said the cost would be around $800 million, adding the stadium will be built into a hillside meaning far less steel will be required. And that, he said will result in a cost of about $400 million less than it might be otherwise.

Roski notes that there will be no public money involved in the construction of the stadium. The LA market that has been without a team since 1995, probably in part because it is such a lucrative threat point for teams seeking public funding for new stadiums in their current cities.

So, how does this announcement change the stadium game being played by the Minnesota Vikings, who have been trying for years to replace the Metrodome, and the other three teams mentioned in the article as possible tenants (the Saints, the Jaguars, and the Chargers)?

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