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February 3, 2005

Stadium fix

Back to the main business of this blog, as Cheesehead Craig likes to call it, my "Don Quixote-ish" battle for a new stadium in Minnesota. You gotta have faith. You just gotta have faith. David wrote an interesting comment yesterday concerning teams that have bankrolled their own stadiums and how valuable those teams have become. Citing a King Kaufman (of Salon.com) article David writes:

"Forbes values the Patriots at $861 million, the Eagles at $833 million, fourth and fifth highest in the league ... The Patriots paid for $350 million Gillette Stadium, with the state of Massachusetts kicking in about $72 million for infrastructure. The Eagles got a bigger gift from the taxpayers. The team contributed about $355 million of the roughly $512 million -- sources differ on the exact amounts -- needed to complete Lincoln Financial Field, with the remainder coming from the coffers of Philadelphia and Pennsylvania."

David goes on to say:
Don't think that Reggie Fowler hasn't read Forbes and realizes that the easiest way to skyrocket the market value of the franchise would be to bankroll his own ballpark. Not to mention that the idea of ending the annual 'march of the poor millionaire/billionaire' to the state capitol looking for a stadium handout makes him a very popular suitor for the club, at least among fans. At last - something to root for rather than against on the stadium issue. Who'da thunk it?

Yes indeed. It has been reported numerous times that Reggie Fowler would try to privately finance most, if not all, of a new Vikings stadium. That would definitely be a breath of fresh air. However, we still have some people that think this is a pie in the sky dream. I was watching the "Sports Show" on WB23 last Sunday and Sid Hartman was adamant that the NFL didn't want anything to do with Reggie Fowler and his Roger Headrick-type group of owners. Dark Star, who I usually can't stand, was equally as adamant that a deal between Reggie and Red was already done and that the NFL is desperate for a minority owner. He also said that the NFL is right now working on dotting all the i's and crossing all the t's. Once again, who knows who is right? Like I've said before, I'll take Fowler or Taylor at this point. Just as long as it isn't Red.

That isn't the main point of this post though. The main point is I think we are beginning to see a trend of owners financing at least half of the costs of their new stadiums. The Eagles and the Patriots did it this way, the Redskins and the Lions, too. Also, and we've all heard this probably a million times now, the St. Louis Cardinals are paying over 75% of their new stadium. The argument is always, why can't the Twins? What is stopping the Twins from doing the same thing? Well, we've got one answer at least.

In a recent "Internet only" letter in the Star Tribune Rich Pogin of Twinsville fame writes about just that argument. Pogin contends that a similar financing deal would not work in Minnesota:

From 1997-2003 the Cardinals averaged 3,056,000 fans per year. Their average ticket price (excluding luxury seats) was $23.76. The Twins averaged 1,486,000 fans over the same period. Their average ticket price in 2003 was $13 per ticket. The simple math on this is that the Cardinals have, at a minimum, about $16 million per year of revenue in ticket sales alone. This makes it relatively easy to monetize their additional contribution to their ballpark.

This, of course, is in addition to the beefy radio and TV contracts the Cardinals get to broadcast their games to the vast "Cardinal Nation" which I think everyone will agree is a great deal larger than "Twins Territory." I think it is safe to say that the Cardinals are bringing in a whole lot more money. So, point taken. It is easier for them to bankroll their own stadium. Pogin goes on to write:
In addition, since we are in Minnesota, things always cost more and take longer. Because Minnesota has environmental impact statement requirements (EIS), it will take approximately 1 years (maybe longer) to get approvals to build a ballpark. It took the Cardinals six weeks to get their approvals. Time is money and delays add significantly to the costs.

This is good to know. So, the Cardinals are also saving some money due to Missouri's weaker environmental laws. Honestly, I can't say if this is a very good thing, or a very bad thing. But time is money. Pogin goes on:
While it is expensive to keep a Major League Baseball team in Minnesota, there are economic benefits. The governor's office estimates the incremental increase from a new ballpark in income tax and sales tax revenue to the state at approximately $7,500,000 per year. This is in addition to the loss of income tax revenue if the team leaves. It is most likely that the tax revenue generated by the team (tax on players' salaries, sales taxes, etc.) would be adequate to amortize the cost of the state's contribution.

Now we are getting to some meat. According to Pogin a new Twins ballpark's TIF value is $7.5 million. I had always heard that this number was closer to $10 million, but I'll trust Pogin on this one. So, if Pawlenty's TIF plan saw the light of day in this year's legislature and by some miracle actually passed, the Twins would be looking at at least $7.5 million of, as David likes to call it, free money. Pogin also argues that this would most likely be offset by the tax revenue generated by the team in general.

Here is what I'm thinking. We all know that Pawlenty is determined to expand gambling in Minnesota, for better or worse. I don't like it, and you probably don't either. About the only thing I like about his plan is his "Community Assets Account" which he says could help fund stadium construction in Minnesota. One thing I haven't heard is how much of the estimated $200 million per year he expects to receive from gambling proceeds would he put into the account. For the sake of argument, though, let's say that he puts in $5.5 million per year for a new Twins stadium. And let's also say that Pawlenty's TIF financing scheme is coupled with this money. All total then the Twins would have $13 million per year of "free money."

This is about half of what they would need to pay off the yearly loan fees for a new stadium. Take a stadium that costs $500 million, subtract Pohald's upfront $120 million donation, and you've got to come up with $25 million a year for 30 years to pay off the rest of the debt. With $13 million coming from the state, the Twins would only have to come up with $12-$13 million of their own and it would be a done deal. Of course, they would try to get this extra money from the host community and I would pray that either Minneapolis or St. Paul would approve that referendum, but I sure wouldn't hold my breath.

The question is, if a referendum failed, would the Twins just let that "free money" sit there? Or would they take the $13 million dollars and call it a done deal? As you can probably tell, I'm just dreaming here, but given the current trends of owners either paying for all or at least half of their own stadiums, I am of the opinion that the Twins would take the money and start digging. Does anyone else have any opinions? Am I completely off my rocker? Are my numbers correct? Could it be this simple?

Pogin ends his thought provoking letter:

The bigger question is: Does the "quality of life issue" justify the subsidy needed to keep professional sports in Minnesota? With respect to the Twins, to date the state has answered that question "no." The next question is: After the Twins are gone, will the state try to get another team (which will require a new ballpark) and, if so, will it cost substantially more to get a team/new ballpark? The answer of course is yes. We did it with the Lakers/Timberwolves and with the North Stars/Wild, we will do it again with the Twins/whoever. That is apparently how we do things in Minnesota.

I couldn't agree more. If we lost the Twins at some point Minnesota would try to get another team and it will cost a whole lot more. It is time to find a deal. It is time to put this behind us.

Posted by snackeru at February 3, 2005 9:07 AM | Stadiums

Comments

Great analysis. A good balance of points on each side of the issue, which makes this better than over half of the stuff on cable and broadcast news. ;)

One comment, though, with respect to this point:

"If we lost the Twins at some point Minnesota would try to get another team and it will cost a whole lot more."

The Lakers/Wolves comparison is really a strawman here, since it's pretty clear that a team from the 1950's is going to 'cost' a lot less than one in the '90s, just using inflation and media attention as reasons.

The North Stars/Wild comparison, though, makes a bit more sense, and there I'd also like to point out that, yes, it cost us more to bring in the newer team, but we also got a *better* team - better ownership, better community involvement. I remember reading something from the North Stars days about how NS ownership didn't really like pee-wee hockey, because they thought it kept fans out of the arena and watching their kids games. Wild ownership is involved in local hockey, realizing (correctly, IMO) that hockey kids and their parents are not just a great target market, but the most likely to become evangelical fans and bring others into the arena as well, buy merchandise, boost the value of the local broadcast contract, and all the rest. They *want* hockey to succeed on all levels, because the more people think about hockey, the more they think about the Wild. (The degree to which the lock-out is ruining this process is another argument altogether, and not one I'll get into right now.)

I think that consideration should be part of the calculus, too - that if you get rid of an ownership group that acts as though all they want to do is exploit the local market economically, the next group that comes in realizes that to succeed, they're going to have to do more. You'd pay more for someone to work on your house who does good work and treats you well as opposed to someone who does just enough to get by and thinks of you as a wallet with legs, right? Why think of your sports team any differently?

Posted by: David Wintheiser at February 3, 2005 11:32 AM

New ownership doesn't necessarily mean good ownership. I wouldn't give that variable too much weight.

Posted by: Stick and Ball Guy at February 3, 2005 4:28 PM

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