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Dispatch -- Arena Deal No Windfall for Public

Home Forums General Columbus Discussion Dispatch — Arena Deal No Windfall for Public

Viewing 7 posts - 61 through 67 (of 67 total)
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  • #543540

    sirlancelot
    Participant

    The impression I have of this situation is this: people voted against funding a city-owned arena. Private business then decided to build an arena and fund a hockey team that would make money. When the venture was no longer profitable, these owners decided to unload it onto the public, i.e. Franklin County. We, the tax payers are stuck with maintaining an arena, which also competes with ANOTHER arena nearby. I’ve been in Columbus since 1988, and this is just the latest example of how government and business operate together-no matter what voters think. I’m glad Nationwide Arena was built and Arena District is a great asset to downtown, but we can’t keep bailing out private companies over risky investments.

    #543541

    pez
    Participant

    NDaEast said:
    City Auditor Hugh Dorrian emailed me the 12/8/11 draft, which he told me is what was enacted. It is on page 9, Section 303 – Nonappropriation of Funds. All that happens is that the lessees have to “peaceably surrender its interests to the CFA.” I have it in a PDF if you want to send me your email address by message.

    Is this the document you were sent? I think its the text after the non-appropriation of funds statement that is important. Regardless, I read it as the CFA owning the arena, Nationwide is the seller and bondholder, the payments from the city and county pass through the CFA to pay down the bonds and state loan. Would not failing to pay hurt the county via the CFA since they are on the hook for bond payments?

    Cities can and do make multi-year leases, but there is a risk that funds won’t be allotted that the lessor must account for. My thought is that this deal was structured in such a way that Nationwide could transfer this risk to the CFA (county) and also take a good size, lump-sum loss on the sale.

    #543542

    CHermann
    Member

    I am late to the discussion, but had a few thoughts. I think it is worth reminding ourselves where we came from and where we are today.

    The most recent sales tax vote for an arena was in 1997 (16 years ago) on an initiative to build an arena and soccer stadium in Downtown on the Penitentiary site. The voters turned down this 0.5 percent, three year sales tax to help fund a proposed $277 million complex. But remember, this is the proposal voters were voting on:

    original 1997 sales tax proposal

    In hindsight, I think the Franklin County voters got it right. If it had been approved, our “arena district” would consist of an arena (not nearly as nice as the one we have), a soccer stadium, and thousands of surface parking spaces surrounding them… Oh and direct highway ramps connecting Nationwide Boulevard straight to SR 315 via where Neil is today. No mixed use. No office. No organizing parks. Minimal walkability. Minimal spinoff. Basically an asphalt, uninhabited desert when games weren’t going on.

    I would say voters got it right under those conditions. And as a result, our corporate citizens and city stepped up and we got this instead…

    Arena District 2011

    For $122 million of public investment, we have an Arena District with over $1 billion and counting of private investment, close to 4,000 daily employees, and over 1,000 residents by the end of the year. It is an impressive, walkable, livable mixed use district that is vibrant year-round. As a result, Nationwide Arena is one of the top-ranked sports experiences in the country; and the arena together with Huntington Ballpark (funded by the county – no popular vote) and Lifestyle Communities Pavilion attract 2.3 million visitors annually. From a public revenue perspective, it contributes property taxes, income taxes, and sales taxes – about $30 million annually per the original post. (Note that a public arena, stadium, and related surface parking – i.e. almost the entire district per the 1997 plan – would have been exempt from property taxes; and with no offices, there would be few workers to pay income taxes.) In addition, the plan as executed created an environment that is attractive to keeping the creative class, young professionals, and businesses not only in downtown, but in Columbus.

    Now with the recent sale, let’s add the $250 million public purchase price to the ledger above. So the accounting would be a $372 million public investment in the Arena District resulting in over $1 billion in private investment plus annual income, property, and sales taxes, plus the urban form of the district itself. Now, while I recognize I am biased, I will still take that deal any day of the week and twice on Sunday.

    So now I ask you to imagine we are back in 1997 and the Penitentiary still stands. Pretend that the casino had been approved earlier, say in 1994, and just opened in 1997. The Arena District as we know it today and all the private investment, development, and tax revenue it represents is being offered to the city and county for $9 million a year for 27.5 years. No tax increase required, just an allocation of a portion of the casino tax revenues. How would you feel about the county and city allocating those funds to achieve what we have today and everything that has resulted from it?

    #543543

    ehill27
    Participant

    pilsner said:
    ehll27, just curious about why you’re a big supporter of the arena bailout. You’re one of the few people around here I’ve admired over the years at CU. Did you live in Columbus back in 1997…

    Oh ouch… I’ve never been so touched and saddened by an Interwebs post about me. Thanks for the kind words, and so sorry to disappoint.

    In a nutshell, I am supportive of using public funds for this purpose. For one, it is common to have public money invested pro sports. For another, I believe there are benefits that are harder to quantify, or cannot be quantified, in Columbus being a “big league city”.

    ~~~

    The long answer…

    Was I here in 1997? Yep, and I know how much different 1997 Columbus is from 2013 Columbus, and the arena district and its NHL tenant is a major contributor to the changes since 1997.

    Do I understand the voting argument? Sure, I can understand how you could make that argument, but I just disagree. In my opinion, a no vote to increase taxes in 1997 for the POTENTIAL to obtain a pro sport is not the same as allocating public funds to help keep an existing NHL team from leaving town WITHOUT increasing taxes in 2012 (15 years later). And it was done by using a portion of NEW money that Central Ohio didn’t expect to have and didn’t even want. To me, it seems to be a win-win. Besides, do we typically vote to fund items that don’t increase our taxes???

    For two centuries, Columbus has struggled to get out from beneath the shadow of our sister cities in the state. The NHL is a key that has helped identify us a big league city to the outside, something that brings attention (free advertising) that we are not getting elsewhere. This in turn help draw people/taxpayers/investors, visitors, conventions to Columbus, who may never have otherwise considered us. The arena does not do that… the NHL does.

    The fact that CBus has little or no chance to draw NBA, MLB or NFL in the foreseeable future (i.e. decades) makes holding on to the NHL that much more important.

    #543544

    NDaEast
    Participant

    ehill27 said:
    In a nutshell, I am supportive of using public funds for this purpose. For one, it is common to have public money invested pro sports. For another, I believe there are benefits that are harder to quantify, or cannot be quantified, in Columbus being a “big league city”…

    I think those comments by both @cherman and @ehill27 are very thoughtful, well-articulated, and present excellent arguments in support of what has transpired. And I think they should have been an integral part of a public discussion about the arena bailout, and I think they should be an integral part of a public discussion about continuing the public financing should the citizens’ initiative make it to the ballot. And after hearing the “pros” and “cons” of a public debate, then I think the people who have voted down entertainment complex funding on five prior occasions, should decide.

    The citizens do typically do have a right to vote on major (and multiyear) capital expenditures, which is why we have voted bond issues (against either revenue or as a general obligation of the city). However, in this case, political leaders back-door’ed what is essentially a capital expenditure disguised as a multi-year lease, though with an annual commitment to making the lease payment — something that would never fly in the private financing markets.

    In this case, the power elites (who apparently made bad business decisions in setting up their privately funded entertainment venture, as sometimes happens — though with the goal of having private profits) held private meetings with public officials for two or three years, and then City Council voted for the bailout allowing 3 public comments totaling 9 minutes in support, and three public comments totaling 9 minutes in opposition. This sham of a process is example number one of the completely unaccountable and undemocratic political system (plutocracy anyone?) that we have allowed to take hold in Columbus.

    How real was the potential loss of the Blue Jackets? — again, we will never know. The letter from the NHL said that the NHL was not considering a relocation of the franchise from Columbus. So was this really more about whether our local owners would remain the Blue Jackets owners, versus having to sell the team to out-of-town owners at a loss? Was this really just crony capitalism — protecting friends’ pockets and prestige — rather than an economic development imperative for the arena district and the city?

    How real were Nationwide’s publicly-cited losses on the arena? — the public will never know, as Council, which approved the deal, either did not have or would not release the arena’s pre-deal financial statements.

    One could only assume that financially-sophisticated Nationwide depreciated the arena so that the paper loss offset taxes on profits and was never actually a cash loss. And without any knowledge (pure speculation here based on a general knowledge of how business is done), it would not surprise me if there was some kind of accelerated depreciation that Nationwide has already claimed, and is now disposing of the building prior to the end of being able to claim that depreciation expense.

    Again, our local private sector businesses took a calculated business risk in entering the world of business of sports and entertainment, no doubt with the good intentions of helping grow Columbus. (I, too, believe pro sports adds a certain “je ne sais quois” to a city.) And (to some degree) as a result of the business community taking that risk, the arena district flourished with over $1 billion in commercial office space and apartments. And an unknown portion of that $1 billion was simply moved from one place in the city to another to no net gain, and another portion of that $1 billion in offices and apartment isn’t affected by the presence or absence of the Blue Jackets in Columbus, and a small number of bars and restaurants would be hurt if the Blue Jackets took their 42 home games (and from the way they ended the season, maybe playoff games next year!) and went away — though according to the NHL the far more likely result of financial failure of the Blue Jackets would have been new ownership that buys a money-losing franchise at a discount.

    So there is a great public debate that could be had, and if it happens, I think it will be exciting and invigorating for our local democracy, and I think the taxpaying public will be well-served by that community dialogue on the reasons for, and priorities of, public spending.

    #543545

    pilsner
    Participant

    NDaEast said:
    I think those comments by both @cherman and @ehill27 are very thoughtful, well-articulated, and present excellent arguments in support of what has transpired. And I think they should have been an integral part of a public discussion about the arena bailout, and I think they should be an integral part of a public discussion about continuing the public financing should the citizens’ initiative make it to the ballot. And after hearing the “pros” and “cons” of a public debate, then I think the people who have voted down entertainment complex funding on five prior occasions, should decide.

    The citizens do typically do have a right to vote on major (and multiyear) capital expenditures, which is why we have voted bond issues (against either revenue or as a general obligation of the city). However, in this case, political leaders back-door’ed what is essentially a capital expenditure disguised as a multi-year lease, though with an annual commitment to making the lease payment — something that would never fly in the private financing markets.

    In this case, the power elites (who apparently made bad business decisions in setting up their privately funded entertainment venture, as sometimes happens — though with the goal of having private profits) held private meetings with public officials for two or three years, and then City Council voted for the bailout allowing 3 public comments totaling 9 minutes in support, and three public comments totaling 9 minutes in opposition. This sham of a process is example number one of the completely unaccountable and undemocratic political system (plutocracy anyone?) that we have allowed to take hold in Columbus.

    How real was the potential loss of the Blue Jackets? — again, we will never know. The letter from the NHL said that the NHL was not considering a relocation of the franchise from Columbus. So was this really more about whether our local owners would remain the Blue Jackets owners, versus having to sell the team to out-of-town owners at a loss? Was this really just crony capitalism — protecting friends’ pockets and prestige — rather than an economic development imperative for the arena district and the city?

    How real were Nationwide’s publicly-cited losses on the arena? — the public will never know, as Council, which approved the deal, either did not have or would not release the arena’s pre-deal financial statements.

    One could only assume that financially-sophisticated Nationwide depreciated the arena so that the paper loss offset taxes on profits and was never actually a cash loss. And without any knowledge (pure speculation here based on a general knowledge of how business is done), it would not surprise me if there was some kind of accelerated depreciation that Nationwide has already claimed, and is now disposing of the building prior to the end of being able to claim that depreciation expense.

    Again, our local private sector businesses took a calculated business risk in entering the world of business of sports and entertainment, no doubt with the good intentions of helping grow Columbus. (I, too, believe pro sports adds a certain “je ne sais quois” to a city.) And (to some degree) as a result of the business community taking that risk, the arena district flourished with over $1 billion in commercial office space and apartments. And an unknown portion of that $1 billion was simply moved from one place in the city to another to no net gain, and another portion of that $1 billion in offices and apartment isn’t affected by the presence or absence of the Blue Jackets in Columbus, and a small number of bars and restaurants would be hurt if the Blue Jackets took their 42 home games (and from the way they ended the season, maybe playoff games next year!) and went away — though according to the NHL the far more likely result of financial failure of the Blue Jackets would have been new ownership that buys a money-losing franchise at a discount.

    So there is a great public debate that could be had, and if it happens, I think it will be exciting and invigorating for our local democracy, and I think the taxpaying public will be well-served by that community dialogue on the reasons for, and priorities of, public spending.

    +1

    #993230

    MRipley
    Participant

    Looks like counting on Casino generated revenue to fund the Nationwide Arena bailout might in fact be a very risky strategy…
    “State budget officials are warning county and school leaders to hedge their bets in spending casino-tax revenue because the money might not be there.”

    But it’s not like commissioners (and most likely other city officials) were warned early on….
    “Suzanne Dulaney, executive director, and John Leutz, senior policy adviser, said they have warned members of the County Commissioners Association for two years that they should not count on casino cash.”

    Already it’s becoming clear that Columbus/Franklin County public officials made an unwise decision when they committed public funds from a known risky source to a major ongoing expense regardless of the known risk…
    “Leutz said many counties are wisely setting aside casino revenue for capital expenditures and not using it for ongoing expenses that it might not cover in the future.”

    http://www.dispatch.com/content/stories/local/2014/03/25/counting-on-casinos-locals-told-its-risky.html

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