Professional Stadiums, Taxpayers Buy’em, Governments give them away?

After a two week hiatus, most faithful readers of this blog were wondering where I was. I heard several reports from the Blog Father.  Was I in rehab? Did I rejoin the CRA?  Was I the one who spied on Donald Trump?  Was I arrested for my shenanigans at a local Mexican restaurant a few months ago?  No on all accounts.

During my absence, X was forwarded an email that almost made him burst into rage!

Dateline: San Diego.

It has come to my attention that since the San Diego Chargers have re-located to Los Angeles, the city had nothing to do with it’s largely taxpayer financed stadium.  So it got a great idea, sell it for $10K, to a soccer team that may or may not ever come.  Kinda sound like a situation in Elk Grove?  Qualcomm Stadium—to be honest was very dated and located in the middle of a canyon—not a desirable place to play or commute too.  However if the answer is selling an 80 acre stadium and land for just $10K, I don’t think I want to know the question!  Yep, they sold 80 acres including the former NFL stadium for less than you’ll pay for a used Toyota.

It gets better. The group of investors “I love that term, give me something for literally pennies on the dollar” want to build 4,200 houses and over 1 million square feet of commercial development; think strip malls, malls, and office buildings.  While details were not released, very likely the deal would exclude the “investors” there’s that term again, from property taxes.  You are probably asking, which far left communist is leader of the republic of San Diego?  That would be CRA endorsed liberal Republican Kevin Faulconer.  Yup, the stadium initially built with taxpayer money, is now being given away for pennies on the dollar, since—well I guess—no professional team is a tenant now!

San Diego suffered from a cardinal sin; never give in to a billionaire owner and the temptation of a sports team to “rejuvenate” downtown.  However, maybe in the long run San Diego may not be that bad off, check out these other two cities facing crazy stadium repercussions over the next few years!

Let’s examine Sacramento and Oakland, the former keeping its basketball team and pulling out all the stops, the latter losing its NFL team.

Let’s start with Oakland. This city pulled out all the stops to get the Oakland Raiders to move back to Oakland from Los Angeles back in 1995.  Keep in mind; the Raiders have had a very nomadic nature during their years in the NFL shuffling from Oakland, to Los Angeles, back to Oakland, now on to Las Vegas in 2020.  What Al and Mark Davis did to the City of Oakland is criminal.  Upon moving back to the Coliseum in 1995, major renovations were required to add luxury boxes, etc. Again the city and in this case the county of Alameda gave in to a billionaire, as they bore almost all the costs.  They both fell for Davis’ push for a personal seat license, this so called “fan tax” on season ticket holders would pay back the loan on the stadium improvements pronto.  The City and County took out 200 million in bonds for stadium improvements, backed by Personal Seat Licenses (PSL’s).  These licenses were to help pay down the bond debt quicker, because if you bought a PSL you got the first right of refusal to buy tickets for any event that took place in the coliseum, sitting in the seat which you would “own.”  This was a well-conceived idea but far ahead of its time, as seat licenses are very popular now.  What the city and county didn’t count on was a number of people not buying the seat license, but buying tickets on the day of a game or through scalpers and thus avoiding the fee the PSL would levy on them.  The PSL’s were scrapped two years later. By the way, the team is leaving and the debt owed on the renovations won’t be paid off for another eight years at the earliest!  Also at a cost of roughly $350 million, almost double the initial bond amount.

Now the economics of the City of Oakland will be examined.  Oakland Mayor Libby Schaaf reports that the city will have an eight figure deficit this year, mostly due to debt service on the coliseum. This doesn’t take in to consideration the improvements made to Oracle Arena, home of the soon to be San Francisco Warriors basketball team, totaling roughly 68 million.  Further, the least team standing of the trifecta, the Oakland Athletics Baseball Club, is moving to a new venue that was 100% privately financed by their owner….wow what a concept!

The city of Oakland is now left with two decaying buildings and their accompanying notes not yet paid for dreams gone bye; sounds like California accounting at its finest.  Remember the argument about how stadiums revitalize the area around them?  Have you been to the coliseum lately?  Yeah, don’t go unless you absolutely must, it’s still a drug filled cesspool.  The second argument about job creation, well if you consider part-time seasonal employees part of a hiring boom, I guess check off that box as an accomplishment as most front office jobs are filled by former players and lifelong employees.

Now let’s talk about income from the stadium itself, the items sold in the stadium such as concessions and memorabilia go 100% to the owner less any sales tax is owed to the municipality.  Parking revenue generally all goes to the owner as well.  The teams usually pay “rent” to the city for the use of the stadiums and in the case of the Raiders, they paid roughly $938k last year, a number that will rise to 3.5 million this season.  A large sum until you realize most corporations pay more in rent/property tax a year than the Raiders would have over the course of several years!  Not such a great deal at all now is it?

Rest easy Las Vegas Raiders fans, the team will be paying 1 whole dollar in rent a year in Vegas, because apparently if they pay more it could jeopardize the tax status of the bonds Las Vegas is issuing to buy the stadium.  Lastly a new revelation has come out regarding how much money the city and county was spending on maintenance of the stadium, they are actually losing 1 million on the Raiders annually due to the fact the baseball and football seasons overlap and heavy maintenance is needed to change the field over from baseball to football.  Sounds like a deal I wish I could get in on, but trust me Oakland you are much better off, pay off the debt and get some additional police on the streets, clean your city up and watch property values continue to skyrocket!

Looking at Sacramento, this process is still playing out as the city council, mayor and ownership groups have “passed the stadium bill to know what’s in it.”  We did get a very nice shiny arena in the middle of downtown, and hosted a few top tier concerts, and the NCAA March Madness games, so I guess there is that.  Yes there have been some new bars/restaurants going in downtown, however when people say the area has turned around, remember the area used to be a run-down mall sold for pennies on the dollar to the ownership group.  The fact that the team is lousy and just traded their star player does not bother me even one iota.  Neither does the fact the two local CRA units actually endorsed the idea of the arena without even bothering to ask questions or taking a principled “no” stance.  What bothers me is Sacramento caved and agreed to a deal brokered by former Mayor and NBA athlete Kevin Johnson and former State Senate President and current Mayor Darrell Steinberg.  The problem…no one really knows what is in this complicated deal; it was drawn up as a land swap, but no one really knows what land was involved.

Further additional details keep coming out that are flat out astonishing!  Sacramento State University—the flagship school in the Sacramento area and a fixture to locals—just found out they can no longer have their graduation ceremonies at the old Sleep Train Arena (former home of the Kings) and must have it at state-of-the-art Golden 1 Arena.  What is the problem X? Well the problem is rent at Sleep Train was $50K to have the event there, now the taxpayers are on the hook for $150K.

My overall point of this long blog is that these stadium deals generally include quite a big payoff up front for the owners and very little benefit for the taxpayers that get stuck with the tab for years to come.  Owners are always angling for the next big pay-off and in this case I believe the residents of San Diego and Oakland are the winners in the long run with the residents of Sacramento due quite a few more surprises along the way.  We already know that the new Kings Arena is financed over a period of 35 years and no one—including Kevin Johnson and Darrell Steinberg—is claiming that the arena will last that long. It will need to be replaced within 20 years.

I will leave you with a few quotes from the current Oakland city council president Larry Reid, the former chief of staff to Oakland Mayor Elihu Harris in the 1990’s who worked on the agreement to pay for stadium renovations; “It was a bad deal.”  Congrats President Reid for your wonderful revisionist thought.  Here is a more damning quote from Reid “The projections were off, but everyone was caught up in the emotion of having the Raiders return.”  Yup, be careful, very careful to what you agree to.

Til next time,


Author: Mr. X

The man with no name.