New York and New Jersey done a favor by not getting 2012 Olympics
Thursday, 29 September 2011 10:40
BY EVAN WEINER
THE BUSINESS AND POLITICS OF SPORTS
It has been more than six years since we last heard from Jay Kriegel and NYC2012, the group that had hoped to bring the 2012 Summer Olympics to the New York City metropolitan area. The New York Olympic dream or at least the Dan Doctoroff, Kreigel and others dream, ended in June 2005 when New York State Assembly Speaker Sheldon Silver voted against building a West Side Olympic/football stadium.
Doctoroff decided New York would be a perfect place to hold the Olympics while watching a Soccer World Cup match in New Jersey at the Meadowlands in 1994.
Sheldon Silverhammer came down on NYC2012 head, Sheldon Silverhammer made sure NYC2012 was dead and in doing so probably did New York and New Jersey taxpayers a major favor. He saved them hundreds of millions of dollars as the International Olympic Committee requires local communities to pay for Olympics cost overruns.
NYC2012 limped into the Olympics selection sweepstakes without a stadium and lost to London. Recently the organizers of the 2012 London Summer Olympics announced that they would no longer provide financial summaries of the Games since it might be a distraction. The general feeling is that Prime Minister Tony Blair’s 2005 genuflecting act before the International Olympic Committee and London’s 2012 budget will be causing some cash flow problems after the Games are done.
So see no evil, say no evil and hear no evil or taking a Sgt. Schultz “I know nothing. Nothing.” stance is probably best. It may also be telling. London could be losing copious amounts of money on the Games even though Prime Minister David Cameron claims the Games will be worth a billion pounds (or $1.5 billion) in economic impact. Some analysts think England is spending 7.2 billion pounds or $11.2 billion on the event.
Those numbers should become available in about a year although no one knows what China spent on the 2008 Games. Budapest considered a 2012 Olympics bid and came in with a $28 billion budget which seemed absurd. Hungary was going to redo the country’s infrastructure to house the Games. The bid never got off the ground.
Kreigel and NYC2012 contended that a 2012 New York Olympics would have cost $3.3 billion and would have been paid for by ticket sales, TV revenues and various IOC funds including merchandising.
The 2004 Athens Summer Olympics didn't cause Greece's financial meltdown but the billions of Euros that need to be paid off by the government for the debt accumulated by hosting the Games.
Sheldon Silver voted against funding the Manhattan west side stadium was not necessarily a vote against the Olympics. Silver was concerned too much money would be funneled into the stadium that would have been built between 34th and 30th Street and 11th and 12th Avenues and that his downtown district would lose out on dollars for local needs.
Is government spending on sports worth it?
For fans the answer is yes even though a lot of middle and lower class fans have been priced out of stadiums by owners who got public money for new stadiums.
The stadium game was pretty simple. Owners knew investing in stadiums was prohibitive and asked for government handouts, if they didn't get the local government to help with financial assistance for a new stadium, another city would give owners just what they wanted on the public dime.
That is what happened in Cincinnati although the owners of the Major League Baseball's Reds never did say they would leave town without a new stadium. The Brown family, the Bengals' owners, did in the mid 1990s when they threatened to move to Baltimore without a new stadium. Cleveland Browns owner Art Modell beat the Brown family to Baltimore. Eventually Cincinnati and Hamilton County worked which included a 0.5 percent sales tax hike which would pay down the stadium debt.
The Browns finally kept virtually all of the revenue generated inside the stadium which is capped at 92 percent by federal law. Eight cents on every dollar generated inside the building could go back to the municipality to pay down the debt thanks to the 1986 federal tax reforms.
The sales tax hike did not produce the revenues needed to pay off the two stadiums debt and that has become a major problem. The Reds and Bengals ownership got sweetheart deals and local taxpayers now face a tax hike or slashed services and municipal employees could lose their jobs because of sports stadiums debt.
Don’t expect the Reds or Bengals ownership to share in the sacrifice. After all a contract is contract and the lease is good for them.
Hamilton County needs $14 million in a hurry to pay off the 2011 stadium bill. The county doesn't have the money for the two stadiums debt load. Hamilton County property owners are now paying more on their tax bill because of the stadium but that is not enough.
The two teams got great deals from Hamilton County—maybe too great. Back in the 1990s, the general feeling was that if you built a stadium, it would be an economic engine. A platform that featured a stadium and potential growth of businesses around the facility. That has never happened although some will argue that downtown Baltimore was revitalized by a baseball stadium but that would be wrong. The Orioles baseball park was the next to last piece of an urban renewal that included a museum and an aquarium along with the building of a retail center.
The football stadium was supposed to have cost $280 million. The official price tag is being disputed with the Bengals owners saying the field cost $350 million while local politicians say it is $454 million. Hamilton County was on the hook for $34 million in debt payoff in 2010. The country pays the day-to-day maintenance of the facility
The Cincinnati Enquirer newspaper did something remarkable last Sunday for a newspaper. The newspaper reported on the financial problems of the two stadiums that were built for Reds baseball and Bengals football and how the stadiums have become a financial drain on the city. The paper's reporter checked out how other cities were handling cost overruns of stadiums and arenas.
The reporter looked at a number of cities. Indianapolis built a new football facility which nearly bankrupted the city's Capital Improvement Board with a $47 million a year shortfall. The Capital Improvement Board fired people and cut other costs while Indiana created a Professional Sports Development Zone near the stadium and there was a tax hike--one percent boost in hotel taxes.
That might not help. More tax hikes could come in 2013.
The stadium game has been a losing proposition for years. Jay Cross, the man who was supposed to deliver to Jets owner Woody Johnson, once said that the only people who benefit from a new stadium or a new arena were owners, players and parking lot attendants.
The Cincinnati saga is being ignored in other cities. Sacramento's city council voted on Tuesday to spend $555,000 to consultants as the first step in building a new arena to house the National Basketball Association's Kings. The city's mayor is Kevin Johnson a former National Basketball Association player. Johnson claims that the $555,000 investment (in a city that has cut municipal jobs and social services and has had a tent city for homeless within Sacramento) is worthwhile because an arena can create thousands of jobs and bring billions of dollars into the region.
Johnson is still reading off of the 1990s pro sports script sounding like Major League Baseball Commissioner Fay Vincent telling Cleveland build a stadium and it will open up enormous business opportunities for you. Cleveland built a baseball park, an arena and a football facility and none of them has done much to revitalize the struggling downtown. The next hope is a casino to turn Cleveland's fortunes around.
Silver did New York and New Jersey taxpayers a favor by killing the New York Olympics dream. Montreal and Quebec residents pay extra taxes for 30 years to pay down the debt of the 1976 Summer Olympics. Do local politicians learn a lesson? No Montreal leaders were thinking of bidding for another summer event. Sydney, Australia interests are paying down the debt on unused facilities as a legacy from the 2000 Summer Olympics. Greece has to pay billions of Euros to pay off the 2004 Games.
Still countries continue bidding for the Olympics; California politicians have bowed to the Anschutz Entertainment Group and are trying to fast track a Los Angeles football stadium despite losing a convention center. Minnesota politicians are trying to figure out how to built a Vikings football stadium, Charles Wang's New York islanders could spark a bidding war for the team between Brooklyn interests, Nassau County interests, possibly Queens interests and Quebec City investors. Of course Quebec as a province is broke but that probably won't stop politicians from funding an arena and out in Edmonton, politicians seem to be a little too slow for the National Hockey League's Oilers owner Daryl Katz's liking on funding a new arena. Katz has told Edmonton elected officials vote on the arena issue by October 31 or else. Whatever the "or else" means. Buffalo, Oakland, San Diego and St. Louis politicians better start firing up the mint if they want to keep their NFL teams around.
The Buffalo Bills record is 3-0 but that's immaterial. The Bills next real important game will take place in 2012 or 2013 when the lease between Erie County and New York State officials ends and the real contest begins---"the Stadium Game."
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition" is available at bickley.com, Barnes and Noble or Amazon Kindle.