Do states get a return on sports facilities investments?
MONDAY, 16 AUGUST 2010 07:30
http://www.newjerseynewsroom.com/professional/do-states-get-a-return-on-sports-facilities-investments
BY EVAN WEINER
NEWJERSEYNEWSROOM.COM
POLITICS OF SPORTS BUSINESS
A little less than 34 years after the New York Giants played the Dallas Cowboys in the opening game of new stadium off of Exit 16W of the New Jersey Turnpike in the Meadowlands, the Giants and the New York Jets will play the first football game in the new stadium off of Exit 16W of the New Jersey Turnpike in the Meadowlands. The new stadium has hosted concerts and the international kind of football but this place was built for the Giants and Jets.
The new place has a price tag of an estimated $1.6 billion which was to be split between the Giants and Jets ownership. But the state of New Jersey is on the hook for a lot of cash too, an estimated $300 million in infrastructure costs. The new stadium was built in a decaying sports complex. The race track, which was once the crown jewel of the Meadowlands and counted upon to pump money into the complex is dying and the three decades old arena no longer has either a National Basketball Association or a National Hockey League team. The Xanadu project has not been the panacea that Meadowlands backers had hoped.
New Jersey is saddled with the debt of Giants Stadium 34 years after it was opened and months after it was demolished. New Jersey joins places like King County (the Kingdome in Seattle) and Pittsburgh (Three Rivers Stadium) in paying off the debt of a place that no longer exists except on the ledger sheet.
The New Jersey Sports and Exposition Authority could be as much as $830 million in debt. The Meadowlands Racetrack cannot help pay down the debt anymore. It is no longer 1971, a time when horse racing was still popular and a few years before it began a slow decline.
The New Jersey Sports Authority is in charge of the Meadowlands sports complex. The properties include the Xanadu retail and entertainment project, and also oversees the football stadium and the arena. Monmouth Park Racetrack in Oceanport, and Atlantic City Convention Centers is under the authority's aegis.
The Meadowlands has become unwanted and unloved and a money drain except for the area around the new stadium. New Jersey is not only pumping money into the football facility but is also providing all sorts of tax breaks which has not made elected officials in East Rutherford too happy. The municipality is losing much needed revenue from property in the area.
The question that should be asked in this time when all municipalities are struggling with revenues and balancing budgets, is any municipality getting a return on stadium and arena investments?
On Friday, the State Comptroller of New York, Thomas P. DiNapoli said he didn't know whether New York was getting any kind of return on the state's investments in stadium and arena projects in Buffalo, Rochester and especially the Bronx with the Yankees and Queens with the Mets. New York State also has hundreds of millions of dollars slated to go into the Brooklyn arena project construction that when finished will become the home of the Newark-based New Jersey Nets National Basketball Association franchise.
DiNapoli was quick and seemed very honest when saying that he had no idea if his state was getting any kind of benefit from a minor league baseball park in Buffalo or a hockey arena in Buffalo or a minor league stadium in Rochester. New York is a State spending hundreds of millions of dollars for infrastructure in the Bronx and Queens as is New York City for the Yankees and Mets stadiums.
DiNapoli said New York State has never done a survey and figured out if spending what is probably a billion dollars for sports venues in Albany, Binghamton, the Bronx. Buffalo, Elmira, Queens. Staten Island, Syracuse and other locales in the state was worth the effort.
The state money for facilities was started when Governor Mario Cuomo decided to go along with Major League Baseball's Player Development Contract with Minor League Baseball which required Minor League Baseball franchises to play in facilities that had to meet a standard created by Major League Baseball by 1994. Virtually every minor league team needed some form of upgrade or new stadium and that forced a realigment of minor league baseball teams. The New York Penn League Glens Falls (N. Y.) team relocated for a while in Augusta, New Jersey. Cuomo pitched hard for a Major League expansion team, in Buffalo by building a minor league stadium that could have been expanded into a 40,000-seat stadium.
The MLB/MiLB PDC agreement gave birth to independent baseball leagues and teams in New Jersey in the Atlantic and Northeast League-Northern League which is now the CanAm League.
The stadium/arena building in Buffalo has not been an elixir that has brought the Buffalo economy back to the late 1950s boom years when the city was a major port and there were vibrant steel, flour and shipping industries in the city. Rochester is still reeling from the loss of Eastman Kodak; Syracuse has lost Carrier air conditioners. Binghamton has not replaced IBM and clothing industries yet stadiums and arenas were sold as economic engines.
New York is not alone in the assessment. Has New Jersey benefited from building the Meadowlands Racetrack, Giants Stadium, the Meadowlands Arena, the Trenton arena and other sports venues? The latest proposals to fix the Meadowlands problems of a dying race track and an empty arena include selling the properties to private investors or shutting down racing at the track and make the building a glorified racing studio or Off Track Betting parlor with no horse racing.
The Meadowlands as an OTB parlor may not work all that well without slot machines. The Meadowlands is only about 13 miles away from Yonkers Raceway in New York where there a video slot machines and one of these days, there will be video terminals at Aqueduct Raceway in Queens.
Politicians have spent, spent and spent on sports facilities nationally for six decades and there seems to be no end in sight. The 1986 Tax Act did local municipalities any favors when it came to municipal funding of stadiums. The federal tax code limited cities, villages, towns, counties and states to collect just eight percent of the revenues generated in a sports arena or stadium to go to pay down the debt in the venue.
Since 1986, municipalities have been pitted against one another in attempting to get a team, whether it was an expansion franchise or a team looking to relocate for a better locale. The worst deal that was signed was between Louisiana Governor Mike Foster and New Orleans Saints owner Tom Benson. Louisiana gave Benson $186.5 million in checks as a thank you for keeping the team in New Orleans between 2002 and 2010. The city of San Diego was buying unsold San Diego Chargers tickets as part of a lease arrangement in the late 1990s. This summer, the giveaways kept coming despite belt tightening around the country. Jacksonville politicians gave up the city's right to collect 25 percent of the revenue for naming rights of the city owned football stadium to the National Football League's Jaguars or about $4 million over the next five years.
Some of that four million dollars could have been used to pay municipal workers to keep social and needed services going. Instead Jacksonville Jaguars ownership can spend the $800,000 or so annually on players.
The National Hockey League's Columbus Blue Jackets franchise is crying the financial blues so in the middle of July, the team president Mike Priest came up with a "most viable solution" asking the city to turnover over revenues from a proposed tax on new downtown casinos to the team. Columbus is getting a casino soon. A portion of the construction costs of the new Pittsburgh arena was paid by a new casino in the city.
Indianapolis elected officials decided earlier this summer to give Herb Simon, the Pacers owner, $10 million a year for the next three years along with $3.5 million for a new ribbon ad board inside the Indianapolis arena in an attempt to keep Simon happy and his team playing at the arena. Simon's team has been playing at the city's taxpayer-funded arena since 1999, a building that he uses for free as in no rent and the kicker is that Simon keeps all revenues from his team's home games. The Indianapolis Capital Improvement Board which runs the arena and the one-year-old Colts-NFL stadium has to come up with the money. But there is a problem, the board is broke and had to borrow $27 million from Indiana last year to continue operating. Simon's team will play in Indianapolis for at least three more years.
San Diego officials are planning to spend $500,000 (in cash strapped California where state workers may have their salaries reduced to minimum wage if Governor Arnold Schwarzenegger and the state houses cannot get a budget done) to study the viability of a new football stadium for the Spanos family's NFL Chargers. Hamilton County and Cincinnati are having financial problems and don't have money to pay off the debt load on the NFL's Cincinnati Bengals stadium.
So it goes and that is all the news in the past 60 days or so. In Major League Baseball, the Tampa Bay Rays and the Oakland A's continue to look across the bays, Tampa Bay and the San Francisco Bay, for new homes. Rays ownership would like to play in Tampa while A's owner Lewis Wolff is waiting for Godot or Major League Baseball Commissioner Bud Selig or Dionne Warwick or Burt Bacharach or Hal David to ask him "Do You Know the Way to San Jose?" Wolff would pack up the A's in a moving van and drive south on the I-880 in a New York minute to play in San Jose. Of course there is a question of stadium funding in Tampa and San Jose that needs to be answered.
The Giants ownership almost accepted a renovated Giants Stadium in the mid-2000s, while the Jets ownership planned to move to Manhattan's Westside near the Javits Center between 30th and 34th Street surrounded by 11th and 12th Avenues. Both ownership groups watched other municipalities build stadiums or create incentive packages such as the Foster-Benson agreement in New Orleans. New York Assemblyman Sheldon Silver blew up the Manhattan stadium which forced Jets owner Woody Johnson to look elsewhere and eventually Johnson along with the Giants Mara/Tisch families came up with the New Meadowlands Stadium deal which involved land swaps, tax breaks and infrastructure money for a stadium and other retail development.
Back in 1971, New Jersey officials decided to get in the game. What they didn't realize then is that once you start playing, you better bring your money to the table and be prepared to spend, spend and spend. Was it worth it? In New York the state comptroller DiNapoli couldn't answer the question with an affirmative or negative response since he didn't have the data because no one in the state ever decided to give it a close inspection.
The answer is pretty obvious.
It is no.
Stadium and arena building has not been an economic engine (in Baltimore, the baseball stadium came after the Maryland Science Museum, the Harborplace and the National Aquarium opened. the baseball and football stadiums were an add on and not an anchor for the project). Stadiums have not rebuilt city's downtowns in Cleveland or Phoenix. Governor Chris Christie ought to appoint someone to do that survey that no one has done in New York as to whether a state or a city really gets a return on a sports venue investment like the New Meadowlands Stadium.
Of course politicians may not want to really know that answer.
Evan Weiner is an award winning author, radio-TV commentator and a speaker on "The Politics of Sports Business.' He can be reached at evanjweiner@yahoo.com
Showing posts with label Herb Simon. Show all posts
Showing posts with label Herb Simon. Show all posts
Monday, August 16, 2010
Thursday, July 22, 2010
Forget Lebron — bigger NBA stories are on tap for the summer
Forget Lebron — bigger NBA stories are on tap for the summer
By Evan Weiner - TheDC 2:07 AM 07/22/2010
http://dailycaller.com/2010/07/22/forget-lebron-bigger-nba-stories-are-on-tap-for-the-summer/print/
The National Basketball Association’s biggest public splash of the summer is the Miami franchise signings of Lebron James and Chris Bosh and getting Dwayne Wade to stay in South Florida and forming the nucleus of a “super” team.
That story is garnering a lot of attention globally, but underneath Heat owner Ted Arison’s opening the checkbook and getting three stars on his roster, there is a boat load of trouble brewing in NBA Commissioner David Stern’s world. The sale of the Golden State Warriors by Chris Cohan to a group led by Jacob Lacob for a reported $450 million is a silver lining because it means there are still people willing to put up big money for a franchise for Stern, but it is one of the few pieces of good news that the NBA bean counters will get in the next 12 months.
In Stern’s world, two immediate problems have cropped up. And in the somewhat distant future, there is a possibility that the owners will lockout the players on July 1, 2011 in an attempt to rein in salaries as part of a new collective bargaining agreement. Stern’s owners allegedly lost $400 million in their business last year.
In California, Governor Arnold Schwarzenegger has threatened to cut state employees hourly wages to the minimum wage of $7.25 because of California’s extreme budget crisis, and that is not good news for the Sacramento Kings ownership group looking for funding for a new arena in California’s state capital. A good many workers in Sacramento are state employees and might not be able to afford Kings games if they lose money or their jobs. How can the Maloof brothers, the Kings owners, ask for public funds when there is nothing but fiscal bad news coming out of the state house on a daily basis?
Schwarzenegger had a court’s backing to cut the salaries of some 200,000 state workers until a state budget is passed. Schwarzenegger’s leverage in the political process disappeared last Friday. The Sacramento area could have lost as much as $60 million a week in wages if Schwarzenegger went ahead with the plan. But Schwarzenegger’s idea has been blocked by Judge Patrick Marlette of Sacramento County Superior Court for the time being.
On Tuesday, the Sacramento City Council passed a resolution asking Schwarzenegger to reconsider his order as one in five Sacramento workers are state employees.
Schwarzenegger promised that the pay cuts will be rescinded when the state comes up with a budget. None of this can please NBA Commissioner David Stern who stepped into the Sacramento arena battle in December 2006.
On November 7, 2006, Sacramento voters flatly turned down Proposition Q 72-28 and Proposition R 80-20; both measures would have provided funding for a new arena.
Sacramento voters just did not want to fork over anything extra for a sports arena for the Maloofs, but that did not made Sacramento politicians and business leaders any less determined to build a new venue for an NBA team. Nearly four years later, there are still options on the table.
Stern hired John Moag, who helped negotiate the deal which brought Art Modell and his Cleveland Browns to Baltimore. Modell cut the deal with Maryland in the fall of 2005 and moved his NFL team to Baltimore for the 1996 season. Moag has been working at an arena proposal for years but hasn’t delivered one quite yet.
Sacramento politicians were prepared to give the Maloofs something no other California city would agree to in 2006. There was five hundred millions of dollar available for a sports facility. But the Maloof brothers didn’t really like the Sacramento deal as presented. Compared with New York, Los Angeles, and Chicago, Sacramento is a weak TV and corporate market, so the Maloofs needed every penny generated in the arena for their business and wanted no competing businesses near the building. The Maloofs wanted a parking lot, not a rebirth for a depressed economic area, by the rail yards. The parking lot would have been a revenue generator for the Maloofs, the city wanted to build on the parking lot in an effort to create businesses, jobs and a tax base.
The parking lot was a deal breaker as the Maloofs went to the sidelines during the 2006 arena campaign because business development was not good for them.
In Stern’s world — as in that of other big league sports commissioners — every team should be viewed as a three-legged stool. All three legs are needed or the stool falls over. In sports, the three all-important legs are big press and broadcast dollars, corporate support, and government. And if you can separate emotions and apply rationality to this issue, the Stern Theory makes a lot of sense.
Government: Without the support of a local mayor, city council, county officials, state government, governor, and federal government, you can’t operate a franchise. Local and state governments typically raise taxes to build arenas and stadiums or give land away for a sports owner to build on in exchange for payments (in lieu of taxes) and a promise that the arena or stadium will serve as an economic engine that will spark a local economy and create jobs.
There is a lot of local government support in Sacramento to build a new arena, an absolute necessity yet there are questions about where to put the building and how the construction will be funded.
Sports owners and sports leagues need government to give them total control of the revenues a municipally built facility generates, including on-site arena restaurants and stores and — a big revenue source — parking. Owners also need a government that will give them sweetheart leases and create special tax districts within the facility so that if a team owner contributes to the cost of the building, he/she can pocket some of the sales taxes collected and earmarked for government coffers.
Owners also don’t necessarily want to see development (such as restaurants and bars) outside their arena, because those establishments become competition for the dollar. The idea is to keep customers in the building, where they’ll spend on products and franchise-owned enterprises that their owners can cash in on.
For the Maloofs, a parking lot is more valuable than the potential for new businesses to pop up around the arena. It’s that simple: The brothers keep parking lot revenues and don’t have to compete with other businesses that might attract their customers.
Local Broadcasting: Comcast probably overpaid to land the Sacramento Kings cable TV rights so it could in turn launch a profitable San Francisco Bay Area regional sports network. Sports owners make billions from cable television, which Congress deregulated in the 1980s. Because of deregulation, everyone who has basic expanded cable pays for sports channels even if they never watch a regional sports network or tune in to national networks like ESPN and TNT. Hapless cable subscribers may pay anywhere between $7 and $12 a month for sports channels alone, and sports are the most costly part of the monthly cable bill. Congress refuses to address a la carte pricing, which would allow cable subscribers to choose which channels they want, in part because the financial toll could wipe out many cable TV networks and have serious impact on sports finances.
Corporate Support: Part three of the Stern trilogy. Someone has to pay for high-end seating like luxury boxes and club seats, and it’s not the everyday fan. In fact, owners don’t court fans; they want customers who can afford luxury suites and seats surrounding the basketball court or rink side seats at a hockey game. Corporate types buy seats and reap the tax write-off, whether they’ve gone to the games because they’re fans or just looking to be seen.
You can’t really blame the Maloofs for playing hardball in 2006. They were just following Stern’s three-legged sports business philosophy; Sacramento got a lesson in what it means to be a small market in the major leagues.
In Indianapolis, Herb Simon got another city bailout to help the “struggling” Indiana Pacers franchise. These two storylines are far more important to the financial health of the NBA than the Miami singings although the loss of Lebron James in Cleveland will return the northeastern Ohio city back into the NBA doldrums and that could add Cleveland owner Dan Gilbert to the list of financially hawks who might want to shut down the NBA next year when the collective bargaining agreement ends on June 30, 2011.
In a fiscal-conservative state, Indianapolis officials through the city’s Capital Improvement Board and Simon have adjusted a 1999 lease agreement and the city will give Simon $33.5 million over three seasons for expenditures to operate the city’s arena.
There will be a $10 million per year bailout to operate the arena along with $3.5 million for capital improvements between 2010 and 2013. The Capital Improvement Board, which is cash strapped, hopes to use funds from a one percent hike in the Indianapolis hotel tax to pay some of the $33.5 million they have committed.
Indianapolis has spent over a billion dollars on the arena and a new football stadium. Simon’s original lease gave him the ability to control the operations of the building, pay virtually no rent and keep all of the revenues from Pacers games and other events in the building. Despite the one-sided nature of the lease where Simon got virtually all of the revenues and the city got whatever was left, Simon has claimed his losses are staggering.
Simon’s Pacers will continue to play in the building for the next three years which ends Simon’s threat of moving the franchise for the time being. In 2013, Simon can move the team if his annual losses exceed $2 million. Should Simon find a greener pasture (Kansas City, Louisville, and Newark, New Jersey—the New Jersey Nets franchise does relocate to Brooklyn— he would have to give back a portion of the $30 million and pay money for breaking the 1999 lease that he signed with Indianapolis officials. Simon is free to leave without penalty in 2019.
Indianapolis is a small market and cannot compete with major markets on the same economic playing field and has given team owners the wherewithal with taxpayers dollars to be on an even playing field monetarily with New York, Los Angeles, Chicago and together big market cities.
Jim Irsay’s Indianapolis Colts National Football League franchise keeps rights to all football-related revenue in the almost new Indianapolis taxpayers funded stadium, as well as half the annual non- football revenue, up to $3.5 million. Irsay pays no rent to use the facility and has a lease until 2034. Irsay receives all revenues from a stadium name, signs and sponsorships in the stadium. The Capital Improvement Board picks up the tab for stadium maintenance and game-day expenses.
In the United States, local and state governments have been pouring millions of dollars into building sports facilities since Milwaukee funded County Stadium in 1950. Milwaukee pioneered giving away the store philosophy when the city finally got a Major League Baseball team. Lou Perini moved his Boston Braves to Wisconsin and got a gift, a stadium to use 77 times a year in 1953 (and beyond) in exchange for $1,000 in rent. Perini had some guilt about paying $1,000 in rent and keeping all the concession money so he gave Milwaukee $25,000 for rent after nearly 1.9 million people paid to see Braves baseball in Milwaukee in 1953. There is no real reason that municipalities spend billions on sports facilities other than it gives an area a sports identity and a meeting place where people to bond watching a game. But it sure seems rather expensive to prop up the sports business.
Evan Weiner is an author, radio-TV commentator and speaking on “The Politics of Sports Business” and can be reached atevanjweiner@yahoo.com
Read more: http://dailycaller.com/2010/07/22/forget-lebron-bigger-nba-stories-are-on-tap-for-the-summer/print/#ixzz0uPcY5MXt
By Evan Weiner - TheDC 2:07 AM 07/22/2010
http://dailycaller.com/2010/07/22/forget-lebron-bigger-nba-stories-are-on-tap-for-the-summer/print/
The National Basketball Association’s biggest public splash of the summer is the Miami franchise signings of Lebron James and Chris Bosh and getting Dwayne Wade to stay in South Florida and forming the nucleus of a “super” team.
That story is garnering a lot of attention globally, but underneath Heat owner Ted Arison’s opening the checkbook and getting three stars on his roster, there is a boat load of trouble brewing in NBA Commissioner David Stern’s world. The sale of the Golden State Warriors by Chris Cohan to a group led by Jacob Lacob for a reported $450 million is a silver lining because it means there are still people willing to put up big money for a franchise for Stern, but it is one of the few pieces of good news that the NBA bean counters will get in the next 12 months.
In Stern’s world, two immediate problems have cropped up. And in the somewhat distant future, there is a possibility that the owners will lockout the players on July 1, 2011 in an attempt to rein in salaries as part of a new collective bargaining agreement. Stern’s owners allegedly lost $400 million in their business last year.
In California, Governor Arnold Schwarzenegger has threatened to cut state employees hourly wages to the minimum wage of $7.25 because of California’s extreme budget crisis, and that is not good news for the Sacramento Kings ownership group looking for funding for a new arena in California’s state capital. A good many workers in Sacramento are state employees and might not be able to afford Kings games if they lose money or their jobs. How can the Maloof brothers, the Kings owners, ask for public funds when there is nothing but fiscal bad news coming out of the state house on a daily basis?
Schwarzenegger had a court’s backing to cut the salaries of some 200,000 state workers until a state budget is passed. Schwarzenegger’s leverage in the political process disappeared last Friday. The Sacramento area could have lost as much as $60 million a week in wages if Schwarzenegger went ahead with the plan. But Schwarzenegger’s idea has been blocked by Judge Patrick Marlette of Sacramento County Superior Court for the time being.
On Tuesday, the Sacramento City Council passed a resolution asking Schwarzenegger to reconsider his order as one in five Sacramento workers are state employees.
Schwarzenegger promised that the pay cuts will be rescinded when the state comes up with a budget. None of this can please NBA Commissioner David Stern who stepped into the Sacramento arena battle in December 2006.
On November 7, 2006, Sacramento voters flatly turned down Proposition Q 72-28 and Proposition R 80-20; both measures would have provided funding for a new arena.
Sacramento voters just did not want to fork over anything extra for a sports arena for the Maloofs, but that did not made Sacramento politicians and business leaders any less determined to build a new venue for an NBA team. Nearly four years later, there are still options on the table.
Stern hired John Moag, who helped negotiate the deal which brought Art Modell and his Cleveland Browns to Baltimore. Modell cut the deal with Maryland in the fall of 2005 and moved his NFL team to Baltimore for the 1996 season. Moag has been working at an arena proposal for years but hasn’t delivered one quite yet.
Sacramento politicians were prepared to give the Maloofs something no other California city would agree to in 2006. There was five hundred millions of dollar available for a sports facility. But the Maloof brothers didn’t really like the Sacramento deal as presented. Compared with New York, Los Angeles, and Chicago, Sacramento is a weak TV and corporate market, so the Maloofs needed every penny generated in the arena for their business and wanted no competing businesses near the building. The Maloofs wanted a parking lot, not a rebirth for a depressed economic area, by the rail yards. The parking lot would have been a revenue generator for the Maloofs, the city wanted to build on the parking lot in an effort to create businesses, jobs and a tax base.
The parking lot was a deal breaker as the Maloofs went to the sidelines during the 2006 arena campaign because business development was not good for them.
In Stern’s world — as in that of other big league sports commissioners — every team should be viewed as a three-legged stool. All three legs are needed or the stool falls over. In sports, the three all-important legs are big press and broadcast dollars, corporate support, and government. And if you can separate emotions and apply rationality to this issue, the Stern Theory makes a lot of sense.
Government: Without the support of a local mayor, city council, county officials, state government, governor, and federal government, you can’t operate a franchise. Local and state governments typically raise taxes to build arenas and stadiums or give land away for a sports owner to build on in exchange for payments (in lieu of taxes) and a promise that the arena or stadium will serve as an economic engine that will spark a local economy and create jobs.
There is a lot of local government support in Sacramento to build a new arena, an absolute necessity yet there are questions about where to put the building and how the construction will be funded.
Sports owners and sports leagues need government to give them total control of the revenues a municipally built facility generates, including on-site arena restaurants and stores and — a big revenue source — parking. Owners also need a government that will give them sweetheart leases and create special tax districts within the facility so that if a team owner contributes to the cost of the building, he/she can pocket some of the sales taxes collected and earmarked for government coffers.
Owners also don’t necessarily want to see development (such as restaurants and bars) outside their arena, because those establishments become competition for the dollar. The idea is to keep customers in the building, where they’ll spend on products and franchise-owned enterprises that their owners can cash in on.
For the Maloofs, a parking lot is more valuable than the potential for new businesses to pop up around the arena. It’s that simple: The brothers keep parking lot revenues and don’t have to compete with other businesses that might attract their customers.
Local Broadcasting: Comcast probably overpaid to land the Sacramento Kings cable TV rights so it could in turn launch a profitable San Francisco Bay Area regional sports network. Sports owners make billions from cable television, which Congress deregulated in the 1980s. Because of deregulation, everyone who has basic expanded cable pays for sports channels even if they never watch a regional sports network or tune in to national networks like ESPN and TNT. Hapless cable subscribers may pay anywhere between $7 and $12 a month for sports channels alone, and sports are the most costly part of the monthly cable bill. Congress refuses to address a la carte pricing, which would allow cable subscribers to choose which channels they want, in part because the financial toll could wipe out many cable TV networks and have serious impact on sports finances.
Corporate Support: Part three of the Stern trilogy. Someone has to pay for high-end seating like luxury boxes and club seats, and it’s not the everyday fan. In fact, owners don’t court fans; they want customers who can afford luxury suites and seats surrounding the basketball court or rink side seats at a hockey game. Corporate types buy seats and reap the tax write-off, whether they’ve gone to the games because they’re fans or just looking to be seen.
You can’t really blame the Maloofs for playing hardball in 2006. They were just following Stern’s three-legged sports business philosophy; Sacramento got a lesson in what it means to be a small market in the major leagues.
In Indianapolis, Herb Simon got another city bailout to help the “struggling” Indiana Pacers franchise. These two storylines are far more important to the financial health of the NBA than the Miami singings although the loss of Lebron James in Cleveland will return the northeastern Ohio city back into the NBA doldrums and that could add Cleveland owner Dan Gilbert to the list of financially hawks who might want to shut down the NBA next year when the collective bargaining agreement ends on June 30, 2011.
In a fiscal-conservative state, Indianapolis officials through the city’s Capital Improvement Board and Simon have adjusted a 1999 lease agreement and the city will give Simon $33.5 million over three seasons for expenditures to operate the city’s arena.
There will be a $10 million per year bailout to operate the arena along with $3.5 million for capital improvements between 2010 and 2013. The Capital Improvement Board, which is cash strapped, hopes to use funds from a one percent hike in the Indianapolis hotel tax to pay some of the $33.5 million they have committed.
Indianapolis has spent over a billion dollars on the arena and a new football stadium. Simon’s original lease gave him the ability to control the operations of the building, pay virtually no rent and keep all of the revenues from Pacers games and other events in the building. Despite the one-sided nature of the lease where Simon got virtually all of the revenues and the city got whatever was left, Simon has claimed his losses are staggering.
Simon’s Pacers will continue to play in the building for the next three years which ends Simon’s threat of moving the franchise for the time being. In 2013, Simon can move the team if his annual losses exceed $2 million. Should Simon find a greener pasture (Kansas City, Louisville, and Newark, New Jersey—the New Jersey Nets franchise does relocate to Brooklyn— he would have to give back a portion of the $30 million and pay money for breaking the 1999 lease that he signed with Indianapolis officials. Simon is free to leave without penalty in 2019.
Indianapolis is a small market and cannot compete with major markets on the same economic playing field and has given team owners the wherewithal with taxpayers dollars to be on an even playing field monetarily with New York, Los Angeles, Chicago and together big market cities.
Jim Irsay’s Indianapolis Colts National Football League franchise keeps rights to all football-related revenue in the almost new Indianapolis taxpayers funded stadium, as well as half the annual non- football revenue, up to $3.5 million. Irsay pays no rent to use the facility and has a lease until 2034. Irsay receives all revenues from a stadium name, signs and sponsorships in the stadium. The Capital Improvement Board picks up the tab for stadium maintenance and game-day expenses.
In the United States, local and state governments have been pouring millions of dollars into building sports facilities since Milwaukee funded County Stadium in 1950. Milwaukee pioneered giving away the store philosophy when the city finally got a Major League Baseball team. Lou Perini moved his Boston Braves to Wisconsin and got a gift, a stadium to use 77 times a year in 1953 (and beyond) in exchange for $1,000 in rent. Perini had some guilt about paying $1,000 in rent and keeping all the concession money so he gave Milwaukee $25,000 for rent after nearly 1.9 million people paid to see Braves baseball in Milwaukee in 1953. There is no real reason that municipalities spend billions on sports facilities other than it gives an area a sports identity and a meeting place where people to bond watching a game. But it sure seems rather expensive to prop up the sports business.
Evan Weiner is an author, radio-TV commentator and speaking on “The Politics of Sports Business” and can be reached atevanjweiner@yahoo.com
Read more: http://dailycaller.com/2010/07/22/forget-lebron-bigger-nba-stories-are-on-tap-for-the-summer/print/#ixzz0uPcY5MXt
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