Some of the folks down at City Hall read this article that I tweeted on August 16 and read that the group trying to bring the last MLS expansion team to Sacramento had withdrawn from the competition, increasing the chances that Las Vegas might get the league’s nod. That’s now how I read it, so I went back and read it again this morning.
The article quotes Sacramento’s mayor as saying no public money will go into a new soccer stadium to house any new team.
The Las Vegas promoters, on the other hand, have asked Las Vegas taxpayers (not Clark County, Henderson or North Las Vegas taxpayers) to fund about 70% of a downtown soccer-specific stadium. It would be available for other things besides soccer, but it would be built to MLS standards, specifically for soccer.
But the rest of the article claims the Sacramento soccer stadium can be built with private dollars.
Here’s the full quote from Sac’s mayor:
“I do not have an appetite to provide tax dollars to build a soccer stadium,” the mayor said. “Can it be built without it? It’s possible. Other cities have privately financed soccer stadiums.”
More importantly, the story notes that Republic FC, the leading contender in Sac hasn’t been asking for any public money. Republic FC, which already runs a successful, smaller-league soccer team, proposed a sales tax increase earlier this year, but withdrew the plan after it proved unpopular. So the group has been making its plans using private capital instead.
Sacramento’s mayor notes that California already has two MLS stadiums with no public dollars: one in San Jose, under construction, and The StubHub Center in Carson, which hosts two MLS teams.
Republic FC is still very much in the hunt for the last franchise, it seems.
Members of the Las Vegas City Council have been offered a taxpayer-paid trip to Portland, OR to visit a MLS game there, and learn how Portland has benefited from its city-owned stadium. I thought it might be cheaper to research the topic online.
The MLS team in Portland plays at Providence Stadium, which was built in 1926 with private funds. The city of Portland bought it in 1966 for $2-million – about $15-million in today’s inflation-adjusted dollars. It was the home of the Portland Beavers, Oregon’s Triple-A minor league baseball team, for longer than the Stars/51s have been at Cashman Field. In 2010, after talking about finding the Beavers a new facility and converting the stadium to a soccer facility, the Portland City Council ditched the “find the Beavers a new home” part and converted the stadium, evicting the Beavers. The cast-off Beavers today have morphed into a minor league team in Texas called the El Paso Chihuahuas. Portland now has a single-A team called the HIllsboro Hops.
The conversion of the facility to soccer cost $36-million dollars, with a complicated financing scheme that seems to put most of the burden on Portland taxpayers, if you read enough about it. Inside talk at Las Vegas City Hall suggest round numbers for the proposed Cordish deal are quite a bit larger – $300-million with half paid for by Las Vegas taxpayers.
It will be interesting to see if any of the council members who make the trip come back thinking how comparatively inexpensive it would be to convert Cashman Field into a soccer stadium.
I will be voting against extending this contract, but I’d like to put some of my reasons on the record.
I want to lay my personal philosophy on the table: government should never muscle taxpayers into starting businesses to compete with taxpayers. Not because I want to protect the private sector, but because government is the least efficient way of getting things done. That’s why our three current private sector arenas compete so successfully with our two current public sector arenas. Government business enterprises fail to successfully compete with taxpayers, costing taxpayers even more. Don’t get me wrong: there’s plenty of stuff for government to do, stuff in which there is no profit to be made. Our city is all about this activity, ranging from creating parks to repairing roads to clearing sewers to funding Metro. We build and fund government to provide those functions: law enforcement, common defense, the protection of individual liberty. Competing head-to-head with Mandalay Bay, the Orleans, MGM is not appropriate.
Setting aside that personal philosophy of mine, I hope to address the council from a purely financial analysis perspective.
First, we are not contemplating changing some long-planned masterminded facility. That masterminded plan had the stadium where Zappos is now. We paid Cordish two and half million dollars and this EDA, years ago, to give up its original stadium location and settle for this one. It was important, at the time, for the City to build this new City Hall, which was contingent on selling the old one to Zappos, which was contingent on moving Cordish’s arena to a new location. That two and a half million bucks is why I am comfortable that Cordish will not suffer if we turn down the extension today. You got the best of us. Thanks, civic partner.
Second, you may be tempted to say that there’s no harm in extending Cordish’s contract. That’s not true. Here we are at the end of their contract, where we hoped they’d have performed years ago, already. In fact, City taxpayers are coughing up about a half million dollars a month in interest on the debt for Symphony Park.
You see, the City borrowed a hundred million dollars to spend prettying the old railroad acreage up, planning to quickly sell all the lots to developers, pay back the debt and ride happily into the sunset having enhanced the Las Vegas city revenue stream so we can fund recreation programs in our neighborhoods, and feed the homeless. Instead, hardly any lots were sold, no debt was paid back, and City taxpayers hold the bag. Lloyds called these bonds last year, apparently due to our non-performance, and we were forced to hurriedly refinance at higher rates.
Today, Las Vegas taxpayers are still paying about a half million extra dollars per month, just in interest payments to the folks we borrowed this latest money from. The government properties (like the Smith Center) don’t pay property taxes, and the private property owners have had their property taxes abated until my children have grandchildren. No revenue, and lots of costs, in addition to the debt service.
This offer before us today is deficient in several ways:
1. The revenue projection is wildly unrealistic (see Downtown Joe). It suggests that we’ll take all of Thomas and Mack’s business away, a preposterous premise. Thus, this project is likely to fail, leaving taxpayers holding the bag.
2. Without pre-selling a bunch of expensive corporate luxury boxes, Cordish is not likely to be able to borrow the money to finance its portion. It has not yet produced a single such luxury box contract. Four months is not enough time to put together and execute an adequate sales campaign to satisfy the requirements of Cordish’s lenders. A stadium proposed for the same area of town in 1999 failed in large part because it could not sell luxury boxes.
3. If Cordish already has this cash on hand and unencumbered, we’d already be watching our new Pro Hockey team in our new arena. They don’t.
4. Yesterday’s decision to eliminate the SID from the sources of funding leaves an eight-digit hole in an already spectral financing plan. Most recently, the remaining source of taxpayer funds appears to have been invalidated (see Ben Spillman).
5. Cordish will tell you that the NBA or NHL really want to come here, but need an “independent” arena. Actually, these leagues don’t care about “independent” – they want a “public-sector” arena because governments are such poor business people, and the teams are able to keep a much higher percentage of the money. That usually means taxpayers come out of pocket even more.
In conclusion, City taxpayers are shelling out a half million a month on interest for our Symphony Park borrowings. Chasing this patchwork dream, built in a different economy, by a different City Council, does our taxpayers a severe disservice. Adding four months delay will cost $2-million bucks – half of what we need to get City Workers back up to 40 hours a week.
I believe the current Cordish proposal – last second, with a way-wobbly revenue forecast, two-thirds paid for by taxpayers – is the wrong way. The right way is to move forward recognizing the new economic environment in which we find ourselves. For heaven’s sake – for taxpayer’s sake – let’s at least start listening to some new ideas in this new era.
For all the drama imputed by the headline writer over there at the RJ, I didn’t receive very many phone calls or emails from people.
One year’s interest on our Symphony Park debt is just about the same amount of money required annually to get the City’s 38-hour-a-week employees back to 40-hours a week, and its been true since they were cut back to save money. I still think we need to figure out how to get out from under that cash payment faster rather than slower.
I have long experience with City redevelopment dreams. In 1993, I moved my fledgling first company, Wilson, Beers & Company, to the Las Vegas Technology Park, an exciting new city redevelopment project. We were first generation PC network and accounting software wizards for medium and small businesses.
Today, the Las Vegas Technology Park still has vacant parcels, twenty years later, while all around it, the private sector sections are completely developed. The City’s master plan has yet to be realized. Today, most of the businesses there are not tech.
Today, Symphony Park sits mostly vacant, about half government tenants who pay no taxes and the other half enjoying near-complete property tax rebates. So the City sees dwindling revenue and plenty of expenses.
Much has changed – the economy continued to decline rather than immediately rebound… and the composition of the City Council has almost completely changed.
Thus, I believe we should end our existing agreement sooner rather than later. We need fresh ideas for this land now. Because time is money. This extension costs the developer nothing, but it will cost City taxpayers about two million dollars in extra interest payments on the money we borrowed to equip all those vacant Symphony Park lots with sewer, power, streets and water. We were going to pay the bonds back from land sale proceeds. Last year, Lloyds recalled those
bonds, and we were forced to hurriedly refinance at a higher interest rate. So time is money.
Every month we extend this EDA will cost us about a half million dollars in interest payments.