Category Archives: Sports – The Business of Sports

Glendale shares details of deal with potential Phoenix Coyotes buyer:

A proposed 20-year agreement with a likely Phoenix Coyotes buyer may cost Glendale more than $45 per resident each year over the life of the deal. The city appears poised to pay a group led by former San Jose Sharks chief executive Greg Jamison nearly $325 million over 20 years to operate and make improvements to the city-owned Jobing.com Arena.

[….]

But such success may not translate into smaller payments for Glendale. A Republic analysis revealed that even if the Coyotes went to the Stanley Cup Finals for the next 20 seasons and the arena booked 30 sold-out concerts each year for the next 20 years, Glendale could still expect to lose about $9 million annually.

Among the many pieces that have been written about the Coyotes, one thing typically missed is that even if the Coyotes leave Glendale for another city, the arena stays, and with the arena, the debt the city took on to build it. That was $180 million of a $220 million price tag (Look at this article for a good overview of the building financing and the assumptions and dreams of the time).

Looking back at the deal through hindsight, it’s clear now that the deal was a combination of bad assumptions and this dogged belief that somehow the deal had to be made. One key assumption that was made (and Glendale and the Coyotes ownership at the team wasn’t alone in this) was that the economy would never stop growing — no air pockets allowed or planned for. Once the economy went into recession and notes’ other businesses faltered as well, all hell broke loose (this is not the first time this has happened in the NHL, either. Peter Pocklington’s ownership of Edmonton ended when his oil businesses faltered, and that was part of his reason he traded Gretzky; the old Atlanta Flames team failed primarily because of the owner’s other businesses faltering as well).

The old Winnipeg Jets moved to Phoenix with everyone seeing the potential, but they needed a new building. Glendale decided they’d build the building, but the ability for everyone involved to find a deal everyone could live with — this was a difficult set of negotiations before everyone had numbers they could sign a deal one. We realize now that deal was a house of cards; everyone just kept rolling the numbers until they “worked”, but at some point, they moved into “unworkable” territory. The first economic windstorm toppled the whole charade. 

In reality, it seems clear now the Glendale building shouldn’t have been built, and the Coyotes, after a stay in Phoenix, should have relocated again. That goes against so many of the built in assumptions of deals like these that it didn’t happen, and now everyone is paying for it, and will continue to. It’s a great case study of how NOT to make these deals happen; at some point, someone needed to pull the plug and say “this can’t work”. but nobody did, not within the City, not within Noyes’ management, not within the league. If there’s a lesson to learn here, it’s that “make a deal at any cost” usually leaves you with a cost you regret. 

But knowing that now doesn’t fix the problem. And nothing will. If the city of Glendale decides to cut the Coyotes loose, that doesn’t make the building go away, and doesn’t remove the debt from their obligation. They could, I suppose, default on the bonds, but that creates other massive problems for them that I can’t see a city wanting to face. 

So the question in Glendale really isn’t about “do we pay to keep the Coyotes or not?”, it’s “Will we lose less money if the Coyotes stay or if they leave?” — will having an NHL team cost more or save more? Either way, the debt on the building exists and has to be paid, and all the wishing you can upgrade parks won’t make those bonds disappear. 

They way an arena makes money is light dates — how many events does it have a year? A decent building might have 150 dates a year, a really busy building over 200, maybe closer to 230. A hockey team fills 40 light dates a year. The big question for Glendale is really whether they’ll net more money with or without the Coyotes. If you replace 40 Coyotes games with 5 monster truck rallies and two weeks of RV flea markets, the answer is going to be a major “no”. 

To make money in an arena, it needs to be managed by a team that knows how to fill those light dates, and more importantly, fill them with higher value, higher-grossing events. That doesn’t happen overnight, and it takes understanding the business of booking events, and having the right connections to bring in the right events. 

Being here in San Jose, I got to watch Greg Jamison and his team make the San Jose Arena work. Over the years, I ran into Jamison at times and we would talk, and I even interviewed him once (there are some interesting comments in there that give some illumination to how he’ll work to improve things in Glendale if he ends up there). 

My belief is that if Greg Jamison thinks he can turn the arena around, they should let him. The core to build that around is a major sports team, so you won’t get someone like Jamison or his management team in there without a sports team. This looks to be a 3-5 year process of adding events, boosting revenue surrounding the team, and stealing higher profile and profit events from the other arena in the city. Oh, sorry. not stealing, convincing them to come to Glendale. 

If you don’t have someone like Jamison running the operation, that’s going to be difficult to impossible. If you don’t have the Coyotes, you won’t have someone like Jamison. If you don’t have Jamison, you’ll still have the bills; will you have a team in place that can get the revenues up to pay for them? 

That’s the big issue here — not whether the Coyotes stay or go, but that there’s a big wad of financial pain in Glendale, and how can the city put things in place to limit that pain and hopefully over time create enough revenue for those bills to get paid. Decisions made ten and more years ago have come home to roost, and the Coyotes are not the answer no matter what they do; but the Coyotes might be part of an answer that brings in a team that can, over time, figure it out. 

And I know from watching Greg Jamison and how he managed the San Jose Arena that if he thinks he can figure out how to fix the Glendale Arena, it’s probably worth a shot to let him try. 

Unsold Premium Seating is Becoming a Structural Problem | The Business of Sports:

Unsold premium seating inventory is a rising problem in the sports industry. It is becoming more and more common to turn on the television for a game, only to see dark suites and swaths of empty club seats in the background. Most teams have approached this issue as a sales problem… making more sales calls, offering more creative discounts, etc. In my opinion however, this is not a sales problem, this is a structural problem. During the sports facility building boom that lasted from the early 1990’s to the mid 2000’s, most professional sports teams drastically ramped up their inventories of luxury suites and club seats. Prior to the building boom, the vast majority of seating revenues for sports teams were generated from general admission tickets, but now seating products focused on corporations and high-income individuals can account for as much as 25% of a franchise’s locally-generated income.

This is an interesting look at a growing problem. it’s hard to tune into a broadcast with some teams without noticing the wide swath of empty seats masquerading as fans — seats that were actually sold to corporations, but which they didn’t bother using. And now, as the economy turns, it looks like those seats are starting to turn into unsold (and expensive) inventory.

Not a surprise to me. I wrote about this back in 2007 after the Wall Street Journal did a piece on it. These kind of structural rejiggerings within stadiums and arenas were happening four years ago. Even then, if you looked, you could tell that some teams were getting increasingly desperate (or greedy) about pushing revenues by pushing high margin (um, luxury or service-enhanced) seating options.

Arena design and sports financing are kind of hobbies for Laurie and myself, going back to the days when Laurie’s masters thesis involved helping the San Jose Giants get their stadium upgrades financed. We visited the Portland Rose Garden shortly after it was built, and found the design and ambience really sad and disappointing (and to be honest, that building has been a disappointment from a revenue standpoint); we did the same the year after Key Arena was rehabilitated for the Sonics, and look how well that worked out — it’s basically an empty building with a lot of unpaid bonds and a team that now lives in another state.

And I can’t say I’m surprised. The redesign up there was — arrogant. It was one of the early buildings to build in a cloistered mezzanine floor for luxury seats, taking secondary seats and hitting them with magic fairy dust to get premier pricing out of them. The Rose Garden does the same thing, and we sat in them one night and ended up sneaking out (easier said than done given all of the locked doors “protecting” us from the common fans) and finding empty seats down on the main level.

There’s been a massive growth in revenue in pro sports over the last 30 years; the change in economics has been stunning. Much of this has been driven by television, but teams have gotten very scientific about understanding demand for seats and have spent a lot of time and energy trying to drive pricing to the maximum possible price, and for a number of years, this has worked.

For all the cries by the fan with “normal” paychecks that tickets have gotten to expensive, the reality is that these tickets were still being sold. If it’s sold, it’s not too expensive (whether you’re canibalizing your future sales is another question; whether you’re allowing future generations access to become fans is a good question — given owners tend to turn teams over to new owners before they have to worry about that, do they care? they should, but do they?). of course, only an idiot would believe this kind of pricing growth would continue indefinitely, and it’s pretty clear, especially with the recession and the economic downturn, that the glory days are done and that revenue is going to at best stagnated.

This is especially true given the massive changes going on in the TV industry; I believe TV revenues have peaked, or are close to it, and it’s unclear that the alternate video distribution methods that are starting to spring up will equal the numbers leagues are getting out of CBS, NBC and ABC; the networks are trying to figure this out (see NBC’s big move into regionals and repackaging of Versus, for instance), but I sure wouldn’t want to build an economic model for a team or league that assumes continued growth. Sorry, athletes who presume 10% raises every year coming out of college.

Buildings that aren’t flexible about reconfiguration are in trouble (I’m looking at you, Portland and Anaheim). Compare that to places like San Jose, where they were smart enough not to overbuild (keeping the building smaller and more intimate — they could have built a 20,000 seater, and didn’t — but more importantly, not overbuilding luxury boxes or building inflexible premium seating. Vancouver’s building is very similar, so if demand drops, they can change their pricing structure without massive pain.

To me, San Jose’s building is a model of how the future looks; in the last few years, they moved by adding the party pavilions; they’re premium seating is not driven by in-arena cloistering but by using a club area where access is manageable; that allows them to grow of shrink the luxury seating areas if they absolutely need to. Beyond that, they never got overly greedy on pricing, and have worked hard at keeping areas in the arena affordable and available day of game so that parents still can take kids to a game without a mortgage. They clearly left some potential revenue on the table — but they also hedged their bets and aren’t as exposed to the economic downturn, and haven’t gutted their future fan base at the expense of maximizing revenue today. That kind of long-term future thinking is unfortunately fairly rare in many areas of pro sports (but NHL hockey seems, because it never got so addicted to the needs of network TV revenues, not as greedy as other sports and more forward thinking).

The next five years are going to be fascinating. Painful for some teams and leagues, but fascinating. Here in the bay area, if you’re a building and finance geek, ti’s an absolute circus — we have the 49ers who absolutely botched the Hunters Point project and now are trying their damnedest to screw up the Santa Clara stadium. You have Al Davis and the city of Oakland. You have Lew Wolff, who was handed a deal in Fremont and botched it, because deep down inside he always wanted the team in San Jose. Oakland has some weird new plan to revitalize the coliseum area and magically turn it into Downtown Disney, but I’m paying no attention to that because it has zero chance of happening. Ditto any time San Francisco pops up to say they’re still in the game for, well, pretty much anything. The Oakland arena refurbish for the Warriors wasn’t as disastrous as the Key arena rehab was for Seattle, but it was far from a success (the only building with that footprint where it seems to have gone okay was Phoenix; all of those cookie cutters just need to be torn down, they do nothing well).

So while the Giants succeeded massively with their park despite everything san francisco could do to screw them up, and San Jose’s Sharks are solid if not printing money, the A’s need a park desperately, the Raiders need a park desperately, the Warriors need — god knows, but what they have hasn’t worked. the Kings up in Sacramento are in a building that’s not even AAA worthy any more, and, oh, who cares? answer: nobody.

So we have four teams in a six team market that have arena/stadium problems. The 49ers will figure out a way to not screw up the Santa Clara deal, but I expect continuing amusement watching them try. I also think that at some point the NFL will broker a deal for that stadium to be shared with the Raiders the way the New York stadium is, because there simply isn’t money available to build two NFL caliber stadiums in this region any more. So that’s two of the teams. (IMHO, the gating item on getting the Raiders do join into the 9er stadium deal is Al Davis. and the 49ers dislike of the idea of dealing with him; if Al Davis weren’t in the way, this would likely be a no-brainer).

The warriors have a relatively new building with a  mediocre redo, but new owners. Hopefully, they’ll help. the old ones never impressed me. By all that’s sane, the Kings should move to Anaheim already, except I think the NBA really wants the Clippers there and are waiting for an owner that’s sane. So I nominate the Kings as the first Las Vegas team, although I’m not sure they can outdraw the Rebels. (more likely, Kansas City).

And the A’s? Rule 1: ignore anything Oakland says, they are incapable of making it happen. Lew Wolff I just can’t figure. Smart real estate guy who had what I thought was a no-brainer project in Fremont and gave up on it way too easily. I still don’t understand why, and I followed it fairly closely. My best guess is deep down inside he always wanted the team in San jose (but wanted the land in Fremont to develop, and needed the Fremont project to get those permits). And the San Jose stuff?

Dear everyone who thinks the A’s are coming to San Jose (especially you, Mr. Purdy): ain’t gonna happen. Not the way this is being done.

The A’s have been waiting for Selig for what, two years now? On this territorial issue, silence speaks volume: a lack of answer is an answer. if Selig had any intention of letting this happen, it would have happened.

And here’s what the unspoken elephant in this sitting room really is: Wolff wants to get territorial rights to San Jose without paying the Giants what the Giants want for it (I’m guessing at least $50 million, probably $80. if I’m the Giants, my asking price is $100m and then we negotiate). The Giants have no intention of giving it up for free. Wolff has played the San Jose folks and public pressure to try to convince Selig to give him the territory for free, or to set a lower price for it.

Seligs silence, I think, is really saying he’ll approve the deal, at a price both teams agree to. If he were to publicly say no, it’d kill any move to San Jose and then he has a REAL issue with the A’s and a lousy stadium and no options. But he won’t cut Wolff a sweetheart deal here. So he sits back and says nothing and waits for Wolff to go to the Giants and bargain. And Wolff doesn’t want to pay market price. And so we sit.

So I declare the san jose deal dead, unless someone has a spare $80 million to give Wolff to pay for the territory he’s unwilling to buy. If I were selig? I’d do exactly what seems to be happening, which is leaving these two teams to work out a market value and not mucking around with the territory rules. I can’t decide if the city of san jose really is naive? or if playing naive is part of the plan. I don’t think it matters, enough time has gone on to realize if it was a plan, it didn’t work. So, sir Wolff, either open the pocket book, or go back and figure out how to unscrew up the fremont deal. Or sell the team and cut your losses — because honestly, I think Wolff was more interested in the real estate than the team from the start, and in this current economic climate, I can’t see that he can make the real estate work any time soon, either.

So my current view of the A’s is “screwed, basically”, and I bet if major league baseball went to Wolff privately and whispered the word “contraction”, he’d sign the paperwork so fast you’d hear the sonic boom. And I don’t think I’d blame him.

Because really, the A’s can’t stay in their current stadium, they can’t fix it up until they get rid of the Raiders (and 99% of oakland city government and most of the populace); there really isn’t a place they can move to, there’s no convenient empty stadium they can threaten to head to to get a deal for a building. The best option might be BC place, and given the CFL schedule, that really sucks, too. So there really isn’t a good solution here.

(actually, my favorite solution was always a stadium out in the pleasanton area, on the bart line, given how strongly the A’s core attendance demographic ties to the BART line. the big weakness of the fremont proposal was that it didn’t deal with that aspect).

Or maybe this will all magically work out. In this economic crisis? I doubt it. But it’s going to be fun to watch, as long as you aren’t financially tied to it. If you are? my sympathies.

Because the only thing I know is true is that the golden days of pro sports are ending, and anyone who expects the next ten years of economics to look like the last 15 is going to be seriously disappointed. (and that’s not a bad thing, in the greater scheme of things…)

As kind of a follow up on the Sonics to San Jose thread….

First, a nice piece summarizing the current state of disorder up in Seattle, courtesy of the Seattle Metroblog. What it doesn’t get into is the economics of the PREVIOUS refurbishment of Key Arena, and how much of that isn’t yet paid off.

(I”m curious, though… there are San Francisco, Seattle, Portland and Vancouver metroblogs, but nothing for San Jose? shame. What, we’re too suburban for you? grin)

Our background in all of this. Laurie and I have been interested in sports business and finance for years; Laurie’s MBA thesis was a financial analysis of San Jose Muni and whether it made sense to upgrade it LAST time the city had to deal with that question (in 1993, back when Hammer was mayor); it helped the Giants convince the city to spend money on the stadium and keep the baby giants in town (and away from Chico). We were season ticket holders with the Baby Giants for years, until 70 summer nights a year became incompatible with the rest of our life (like work; the last season, I was the guy in the box seat with the laptop trying not to get beaned while finishing up reports). We’ve been season ticket holders with the Sharks since day 1, including lots of long, boring drives to the Cow Palace to watch bad hockey because, well, it was better than no hockey.

Later on, we lived the dream for a year, signing up as the web geeks for the San Francisco Spiders of the IHL the year they came, they played, and they went out in a blaze of, well, ennui. But we actually did get to be part of a pro (well, in theory) sports franchise for a bit and see life from the inside, and it was just as strange and funky as we expected — while we got to spend a year driving up to the Cow Palace to watch IHL hockey, but we also got to sit down with the management team and talk the business side of sports as well, especially NBA and arenas, since the president of the Spiders that year came from the Warriors…. (in the meantime, the Cow Palace went from “gee, it’s great we have hockey, no?” to “boy, is this a pit. but it’s OUR pit, dammit!” — can we just tear the poor thing down and put it out of our misery?)

My personal stance on public funding of sports buildings is guaranteed to piss off both sides of the fight: I believe there IS a legitimate purpose to public funding of public buildings, which tends to piss off folks like Andrew Zimbalist who like to create funding models that “prove” that public funding is a bad idea. At the same time, I also believe the public funding should be limited to the same kind of investment they would make in any business enterprise in the city: it has to foot out, and it has to pay itself back, and no, you can’t assign arbitrary values to intrinsics like “civic pride” and “public image”.

For instance, I think that San Francisco absolutely screwed the Giants — and I wish the Giants had walked down to San Jose instead of finding a way to make it work; on the other hand, Pac Bell Park is an absolute gem, but the financial deal stapled to it sucks, especially compared to the $100 million dollar bonds worth of extortion the 49ers pulled out of San Francisco, but fortunately, that deal is dead and those bonds will never happen. I think the deal between San Jose and the Sharks is generally fair to both sides and been beneficial to everyone. it’s a great example of something that works for everyone, but doesn’t make anyone completely happy (which is a feature, IMHO). I’ve talked to Greg Jamison about it a couple of times, and he clearly feels the city ought to be investing some more money into capital improvements in the building, and I’ve talked to people on the city side who think the Sharks (okay, okay, Silicon Valley Sports and Entertainment; the sharks are a separate company, but down that road lies madness) ought to be returning more to the general fund. I think the balance of power here is fairly even, so I like it.

I’ve been watching Lew Wolff handle the A’s situation since he took over the team with great interest. His proposed deal with fremont is a great example of innovative financing that should work for all parties (the only downside: it’s not closely tied to BART, but that can be solved with a bus bridge at reasonable cost). Compare that to the fiasco that is the Raiders, and what Oakland did to the A’s in their lust to bring the Raiders back.

I’ve long in favor of using PSLs for financing, as long as you don’t get greedy and screw them up like the Raiders and Oakland did, because in reality, they’re use taxes on the people most likely to actually use the building; at the same time, these buildings get used for a lot more than just the team’s games, and to that degree, these things are civic resources. Asking the season ticket holders to fund the use of the building by the circus or the monster trucks is just as unfair as asking the city to pay the tab for the season ticket holders…. Where the rational compromise in the middle is, that’s the rub, and these situations have been so politicized that there are rarely any openings for rational compromise any more (another reason to cheer on Wolff in Fremont; he’s finding a way) — and this polarization is directly the result of overly demanding and greedy owners who’ve demanded not fair deals, but patronage deals — and two of the worst of this are the people up in Seattle, and our friends over in Oakland. Although, in reality, the city is as much to blame as Davis is, beacuse they basically opened up the kimono and started throwing goodies at Davis, but someone needed to see how irrational and guaranteed to fail the deal being set up was; nobody did, they’re going to be paying for that for years, or decades. AND lose the A’s as a side effect.

I”m basically that strange geek who, instead of wanting to grow up to be Harmon Killebrew, I grew up wanting to be Buzzie Bavasi. That, of course, never happened (but I did get to meet Bob Bavasi a few times when he was running the Everett Aquasox and we were roadtripping up there in the summers….). I keep hoping that when laurie and I move north in a few years I’ll be able to get a job as an usher for the ‘Sox, just because I think that’d be fun…

something we’ve talked about a lot. Here are some economists who’ve studied it:

http://thesportseconomist.com/archive/2005_02_01__arch_file.htm#110930727705075792

and here’s a summary of what they found:

Our analysis offers historic evidence that suggests the consumers’ threat has not been credible. In general, none of the events we examined had a permanent impact upon attendance in these sports. In fact, in almost all instances attendance immediately rebounded in the year following the labor conflict. This explains why strikes and lockouts are happening with increasing frequency in professional sports. If the levels of attendance in the postconflict era are equivalent to the preconflict time period, only short-run costs are imposed upon the conflict partcipants. Given the millions at stake in each dispute, our analysis would indicate that labor conflicts that disrupt the regular season of these sports are likely to occur again in the future.

The “fan lashback” basically doesn’t exist.

Statistically, fans don’t stay away after a strike, or if they do, it’s for short periods of time. Individually, some obviously do, but statistically, it’s not an impact, any more than I impact Safeway when I move my shopping to a different supermarket.

Which basically means that (as I’ve said over time), all that talk by fans about punishing a sport for strikes and lockouts is, well, talk. Just like fans whining about high prices who still buy the tickets, fans talk about boycotting sports that go out on strike, but statistically, that lasts until 10 minutes after the new labor deal is signed. then it’s back to normal…

(originally posted on 11/26. I’m just catching up with my post-vacation e-mail deluge..)

This is mostly off-topic, but I’m bringing it up because we’ve had
discussions about business issues before, especially things like the Arena
lease and other aspects of the business side of sports, and while this isn’t
hockey-related, I think it brings some hard data into the arguments over the
business of sports, and public funding for buildings and the like.

Over in baseball-land, the fight over contraction continues. The Minnesota
government is currently in the not-fun position of simultaneously having to
argue that:

1) the Twins are a private concern, and therefore, no public funding for any
new stadium.

2) the Twins are a major economic and civic resource, and therefore, the
owner of the Twins (Carl Pohlad) isn’t to be allowed to shut them down.

Doesn’t this sound a bit like talking both sides of the fence? If the Twins
are a private concern, why does the government have the right to tell the
owner he can’t do what he wants? If they’re important to the area, why won’t
the government invest some money into making sure the team is economically
viable? (FWIW, goverments have no trouble investing in other industries,
whether it’s dairy subsidies or tax breaks….)

Jesse Ventura (Da Guv) campaigned on a “no money, no how” platform on the
stadium. He’s now waffling, having moved to a “well, maybe, if it doesn’t
affect the budget” position. If there are user fees or “things that don’t
affect the general fund” that can be taxed, he’s willing to consider it. The
problem: most of those things are already taxed, and those taxes already go
into the general fund. He hasn’t commented on being willing to redirect any
existing taxes….

Evidently someone clued him into the numbers. Here are some:

Payroll taxes on the Twins players paid just under a million dollars into
the general fund.

Payroll taxes on visiting players (who are taxed by most cities on the money
earned while playing in the local city) added another $2.2 million.

Sales tax on concessions was worth $800K, based on an average purchase of $7
per fan.

There is also a sales tax on ticket sales.

This means the Minnesota Twins directly adds $4-5million a season into the
general fund. If the Twins go away, that number goes to zero. And this
doesn’t include a lot of things: lease payments to the stadium, payroll
taxes for non-player staffers, jobs created at the stadium or indirectly,
moneys spent by the twins in the community or by the visiting teams (hotels,
meals, etc), moneys spent by fans in the area, etc, etc, etc.

If you just look at the taxes generated by the twins, it’s about $5 mil a
year. How many companies in Minnesota generate that much directly into the
general fund?

I’m not going to take a hard position on all of this, but I’m curious what
people think.

I think a government has every right to refuse to build a stadium. But I
also think that if they don’t, the owner has every right to go somewhere
that will. Many governments want it both ways: no investment, but wanting to
define how things are done. If you don’t buy into the program, stand on the
sidelines and shut up.

My position has been, and continues to be, that a sports franchise isn’t
“just a private business” — the area and fans have an emotional investment
and commitment in a team (except in Montreal), in a way you don’t with a
dairy farm or a chip-fab facility. But emotional investments don’t pay the
bills. There has to be a financial commitment as well.

Cities that blindly built stadiums and paid the bills to “save the team” are
just as stupid as cities that blindly refuse to get involved at all. I’m not
saying “build it” — I believe that the involved governments should invest
only to the point that it makes economic sense to get involved, and no more.
How much is that $5 mil in tax revenues worth to Minnesota? How much would
it be worth to double that (which wouldn’t be unreasonable in a new stadium
with new revenues, an increased payroll and improved attendance).

One problem, of course, is that both sides of this fight politically come up
with their own definitions of ‘worth’. The anti-stadium people define most
revenues as “not really attached to the team”, while the pro-stadium side
tend to toss in money that is trivially attached (at best). There is rarely
an attempt to come up with a rational economic value to a team, the two
sides are too busy demonizing each other.

That’s why I find the Twins numbers fascinating. You can ignore the
intrinsics: just look at the $4-5 million of general fund money a year, and
ask yourself what it’s worth to save that money.

If the Twins leave, or shut down, that goes to zero. You lose it. If you
shift that money into paying off bonds that partially fund a new stadium, it
STILL goes to zero, but the Twins stay, and you keep getting all of that
indirect revenue, civic pride, etc. Eventually the building is paid off and
that money starts flowing back to the general fund again.

Turn this back to the Sharks a bit: the Sharks probably generate $2mil in
direct taxes on a local or state basis a year, on top of the indirect
economic revenues. If the Sharks went to the city and said “we need $10
million to fund improvements to the arena” with the inevitably implied “or
else”, just how involved should the city get?

The answer, of course, is “it depends”, depending on many features. But
knowing that there are tax revenues that will disappear if you don’t, I
think you have to look and see what makes sense. The problem is how to
de-demonize the argument and make a good deal that’s financially reasonable
to all sides.

If you look back in history, prior to the 1950s, cities didn’t build
stadiums, people did. But teams moved around and folded a lot, too. It was
the move of the Dodgers and Giants that really changed this, convincing
cities that they had to invest in a team to keep it. And that’s led, in most
cases, to decades of relatively stable franchises, where movement has been
rare and folding (thanks mostly to the teat of mamma-TV) pretty much
non-existant. Of course, as cycles go, some cities were stupid and built
financial white-elephants, and those abuses have caused things to start
cycling back.

San Francisco is a rare case, where they ended up with their cake and eating
it too — but we shouldn’t think that’s a reasonable model in most cities,
either. Don’t forget they REALLY WERE the Tampa Bay Giants for a while, and
if not for some serious backroom politics and Peter Magowan, they’d still
be.

The future of all this has to be the partnership model. Minnesota is finding
this out the hard way, and hopefully everyone on both sides (government AND
ownership) will notice. Sports teams DO generate economic benefits to a
city. They also generate ‘non-revenue’ benefits, too (and defining a value
to those is a b-tch, which is more or less how this whole morass got this
bad).

I guess the question I have is this: what do you consider reasonable to
consider as part of that “economic benefit” when it comes to defining the
value of a franchise to an area? And what does that translate to into having
the affected governments invest in guaranteeing those benefits? Does a
governemnt “go into the red” to protect those non-revenue benefits? If so,
how far?

Montreal, I think, did it pretty much the right way — they looked at it,
decided the Expos just weren’t that important, and now they’re moving on
into whatever comes next. Sometimes, it DOESN’T work (anyone else miss the
Vancouver Grizzlies?), or maybe it could work but isn’t worth the fight.

Minnesota tried to have it both ways — no investment, but all the benefits.
They’re now finding out the hard way what that means.

I think the real road, is down the middle somewhere: everyone gets involved,
to the level it makes sense. If you don’t get involved, you don’t get a say.
Seems pretty simple, no? But the fun is in the details. When millions and
millions of dollars are involved, nothing’s simple. (but, I note for the
record that while the city of SF was doing the “not a penny” schitck against
the Giants, millions of dollars of subsidies and building-improvement money
was stuffed into the SF Symphony and Davies Hall; it wasn’t okay to invest
in keeping the Giants, who now draw 3+mil fans a year, but it was okay to
heavily subsidize the symphony. So much for consistency…)

What do you think?