May 20, 2009
May 20, 2009
By Oregon Tax News,
At a time when ticket sales and attendance at sporting venues across the country seem to be plunging, the city of Portland is relying on its own counter projections of increased attendance and ticket sales in order to finance its new baseball stadium. As you may recall, the Portland City Council recently voted 3-2 to endorse a loosely defined agreement that facilitated the acquisition of a Major League Soccer franchise for the city while also providing a better home for the Portland Beavers Triple-A baseball team.
Merritt Paulson, owner of the Portland Beavers and Portland Timbers, announced that his family would buy a Major League Soccer franchise, throw in $12.5 million for construction costs and pay for any cost overruns, and would also guarantee bonds issued for the deal.
According to The Oregonian, the debt the city will take on includes $31 million in bonds through the Spectator Facilities Fund, which collects ticket taxes and parking revenue from events in the Rose Quarter and PGE Park; $18.5 million in bonds to be repaid by property taxes from the Oregon Convention Center urban renewal district; and $15 million in bonds to be paid from an undetermined city-backed source.
Paulson’s guarantee includes rent from the two stadiums and the projected revenue from a 7 percent ticket tax on all events at the stadiums. The value of those payments is about $31 million, which explains Paulson’s claim that he’s guaranteeing the city bonds, at least the Spectator Fund portion.
But the Spectator Fund also is responsible for making debt payments on earlier projects, including the Rose Quarter parking garages and the 2001 renovation of PGE Park. The city still needs Timbers and Beavers revenue to cover those payments of the existing debt in addition to the new debt.
When the rest of the city bond debt is added in, Paulson’s guarantees and parking revenue would cover only a sixth of the $64.5 million in new debt that the city plans to take on to fund the deal, according to city projections.
Paulson’s revenue projections seem to be overly optimistic. According to The Oregonian, Paulson envisions baseball annual attendance growing by 50 percent in a new minor league ballpark. According to his projections, revenue from general admissions and club seats would expand by 95 percent over 2008 levels in the first year the stadium opens.
Paulson also expects to generate strong operating profits in his first year as a Major League Soccer owner and clear a profit including his team acquisition costs by 2016. That despite the fact that 10 out of 13 Major League Soccer teams recorded operating losses in 2007, according to an analysis of the MLS by Forbes Magazine. Eight of those teams have operated for more than a decade.
And if other new stadiums across the country are any indication of ticket sale reality taking hold after the initial honeymoon phase, Paulson’s projections may prove to be unrealistic.
For example, the new $1.5 billion Yankee stadium opened to great expectation and fanfare earlier this year. According to PlanNYC, total costs for the stadium were 40% higher than originally projected. The ballpark was designed before the U.S. economic collapse when New York’s business community was still willing to spend a premium for sports entertainment.
Acknowledging their initial ticket prices were too costly, the team recently announced a plan to fill thousands of empty higher-priced seats by reducing prices and giving away unsold tickets. According to the Wall Street Journal, the team cut season ticket prices on some of their premium seats by as much as 50% and will provide complimentary tickets to season ticket holders.
Yankees Managing General Partner Hal Steinbrenner said the team revised its pricing strategy in light of current economic conditions and that the changes were for the 2009 season only.
In addition, even with announced sell-out crowds at Yankee Stadium, to the casual observer there appears to be many empty seats in the stadium.
According to FanSnap.com, an online search engine which has access to inventory for tickets from multiple sources and aggregates them to determine each team’s total available ticket inventory, there are an average of 16,900 tickets per game available on the secondary market for each of the Yankees’ remaining games. In other words, 35% of the per-game inventory sold by the Yankees is now back on the market, thus possibly explaining the unfilled seats.
Further south, the Florida Marlins have long been derided for the poor attendance that has beset their time at Dolphin Stadium. The team is hoping to reap the benefits of a new stadium agreement that was recently announced. The team sold 15,000 individual game tickets on the first Tuesday after the announcement, which is about five times a normal day. Thus, the honeymoon has apparently begun for the Marlins.
However, according to NBC Miami, the bottom-line projection is for the team to sell roughly the same amount of season tickets as it did last year, around 5,000. And coupled with a poor economy and exorbitant parking costs, the Marlins aren’t likely to realize a permanent ticket sale increase until they have a few more winning seasons under their belt.
On the other end of the spectrum, the Anaheim Angels, with the best record in baseball last year, offer the third-cheapest ballpark visit as a result of some shrewd and savvy pricing moves by owner Arturo Moreno.
According to Forbes Magazine, Moreno has cut ticket and food prices at Angel Stadium and dropped the price of draft beer from $8.50 down to $6.50. The team charges just $7 for a souvenir cap, compared to $20 or more by most other teams.
In his first spring training in Tempe, Arizona, Moreno was baffled when he noticed that a section of great seats between third base and left field always remained empty while numerous people crowded into the section farther out in left field. When Moreno found out the outer section tickets were $6, as opposed to $12 for the empty seats, he lowered the price to $6 for those seats as well.
“Now they’re the first to go,” states Moreno. “Should it have been $8? Maybe. But now their butts are in there. They’ll go buy a beer or a dog. We got them in the stadium.”
Attendance at Angel Stadium in Anaheim was 2.3 million in 2002, the year the Angels won the World Series with a victory over the San Francisco Giants. The stadium has cleared 3 million a season ever since. Last year’s 3.4 million put them second only to the Yankees.
Ironically, by charging fans less, Moreno makes more. According to Forbes Magazine, revenue has gone from $127 million to $212 million. The team now has an enterprise value of $509 million, almost three times what Moreno paid for it. In addition sponsorship revenue has doubled to $26 million and a $500 million, ten-year deal with Fox Sports Network was orchestrated by Moreno.
However, the success realized by the Angels seems to be the exception rather than the rule.
Portland City Counsel should examine the overly optimistic attendance and ticket sales projections of other sports venues versus actual attendance and ticket sales and proceed with caution with its own hopeful projections.