New Downtown Arena

[PoliSciGuy]

deadspin lol .. but what he could have said is " a new arena means you get to keep your team"


the new okc arena will provide tons and tons of new things for 300 level seat holders ..

Like what? Or is this another example of trying to speak authoritatively without actually knowing the details?

[chssooner]

Like what? Or is this another example of trying to speak authoritatively without actually knowing the details?

I mean, modern arena, more retail and concession space (has been mentioned numerous times by Mayor Holt). Without knowing the true detail and specs of the arena, these are 2 things that will likely benefit everyone, not just the wealthy.

[BoulderSooner]

Like what? Or is this another example of trying to speak authoritatively without actually knowing the details?

just like the renovation of the peake would have done .. full bar area or 2 will be in the 300 level ... with better food options ..

[April in the Plaza]

just like the renovation of the peake would have done .. full bar area or 2 will be in the 300 level ... with better food options ..

Wow, this is a pretty interesting concession.

[Teo9969]

Your value analysis is more like a home owner, not a business owner. If you are selling a hotel, for instance, the value isn’t replacement costs, but rather the revenue earning history and capability. Increased income potential adds value in multiples. Increasing value by the two years of interest cost doesn’t equal two years of revenue increase, but multiples of that. Getting started raising revenues accelerates the earning arc and the value calculations.

Right - so owners who want to sell want this quicker. From the city's perspective this should be viewed from a "home-owner" lens because we're not engaging in a major business activity (yes I understand we receive a kick back from business generated revenue), but rather own a piece of real estate that we're leasing out. A lot of the success of MAPs comes from how sound it is from a fiscal perspective. We're not wasting hundreds of millions in financing costs we have no real way to recover except to further raise taxes.

[PoliSciGuy]

just like the renovation of the peake would have done .. full bar area or 2 will be in the 300 level ... with better food options ..

So "tons and tons of new things" is...a bar and some better food, which could've easily been added to the existing stadium? Great sales pitch.

[chssooner]

So "tons and tons of new things" is...a bar and some better food, which could've easily been added to the existing stadium? Great sales pitch.

The things that CAN'T be added to the current arena will also benefit citizens, and not just the wealthy. Better docks and ability to get in and out for those semi-trucks will lead to better shows for everyone.

And also, no, those other options can't really be added to the current arena. There is only so much more room to add to. And this would be it, and only adds a couple years to the life of the arena.

Again, there are hundreds of reasons to build a new arena. If you want to nitpick all of them, then that is your prerogative. But being biased doesn't help further discussions.

[Laramie]

Confident OKC will not repeat the mistakes made with the Downtown arena (Square footage/bare bones interior/exterior). The new arena will have more square footage b/c this is one of several major issues for building a new arena.

Although we all want to see some renderings, you're not going please everyone.

Yes, it going to cost--10x ($900M) what we budgeted for the DT arena ($89 million) in 1993. Confident it will be among the best in the NBA. The $120 million ($70 million Maps 4/$50 million ownership group. That's more than enough for Architectual designs and drawings.

You know regardless of what's designed, there's always going to be critics and those who will never be satisfied. INVEST IN OKC'S FUTURE.

[BDP]

... We're not wasting hundreds of millions in financing costs we have no real way to recover except to further raise taxes.

The other way to recover the financing costs is to move up the timeline for generating revenue. If the revenue stream is enough to cover financing costs, then new taxes would presumably not be needed. If the revenue stream is more than the financing costs, then you'd be delaying the ROI by using the cash method and would effectively be losing money while waiting to raise the cash before starting construction.

Of course, the potential returns can only be estimated, and it seems that exactly how much the current arena generates and how much of that the city actually gets is a bit of a blind spot. IMO, this is one reason knowing lease terms might clear some of it up. Because if financing is involved, then we'd want to make sure that the city is getting at least as much participation in arena operations as would service the debt. I imagine that's why we see a bigger chunk of arena revenue going to ownership groups who contribute in the hundreds of millions for construction of a venue, because they have to have revenue to service that debt.

Of course, all of this is obviously a gray area without knowing the details of how any of it is structured, but, in theory, debt could be serviced by operational revenue instead of taxes.

[April in the Plaza]

https://www.koco.com/article/oklahom...-fair/45433449

I wonder why the ownership group refused to sit down with KOCO. That's really weird.

[PoliSciGuy]

https://www.koco.com/article/oklahom...-fair/45433449

I wonder why the ownership group refused to sit down with KOCO. That's really weird.

That is a really sad attempt by Holt to try to cover for the Thunder. "Well, Detroit has 4 million people" isn't really a defense at all. And the Thunder not speaking at all speaks volumes about what they think of the voting populous.

[chssooner]

https://www.koco.com/article/oklahom...-fair/45433449

I wonder why the ownership group refused to sit down with KOCO. That's really weird.

The article you shared never said they refused to sit down with KOCO? Not sure where you are inferring that from.

[chssooner]

That is a really sad attempt by Holt to try to cover for the Thunder. "Well, Detroit has 4 million people" isn't really a defense at all. And the Thunder not speaking at all speaks volumes about what they think of the voting populous.

It didn't seem like they asked the Thunder to talk. Nowhere does that article say they refused to talk.

And yes, it is a defense. Detroit has every pro sport in the Big 4. OKC has 1. And will never get another if they lose the Thunder.

It is disingenuous of you to bash the Thunder when I don't see anywhere in that article they refused to cooperate.

And it also isn't fair, in that the private wealthy don't keep the revenues, aside from related to the item they own (The Thunder). If N*sync plays the new arena, the owners get nothing. If the owners sell the team to an ownership group intending to move, the owners get nothing for having this nice new arena. If another group buys the Thunder, they won't be staying here, especially after their lease is up. So no buyer will pay a premium for an arena they have no control over. I truly wish people on here got that. Why pay extra for an asset you won't own or have control of? Imagine if the Thunder owned it, then sold, and the arena went to a group out of, say, Seattle or Louisville or something. Then I could see your pissing and moaning that the wealthy would benefit. But as it will stand, if the Thunder sold, the arena would stay under OKC control, and the Thunder owners could try to include its lease as an asset to a potential buyer, but no group will accept that. It adds no value to them.

[April in the Plaza]

The article you shared never said they refused to sit down with KOCO? Not sure where you are inferring that from.

You gotta watch the video, Sport. @4:15

It’s just a bit surprising that a group of native sons would refuse to speak with local media.

Are they embarrassed that they only offered $50M?

[BDP]

"The public's going to pay for it, but the private part will keep all the money. That's not a partnership. That's exploitation," Bradbury said.

That's where this analyst's bias is showing. He doesn't know that anymore than any one else does, unless he's been in the room with the brokers of this deal.

What he doesn't mention is that, in the recent examples where the private part pays around half of construction the public part gets next to nothing. So, which is really a better deal?

I know he'd say "it all sucks". I just think he could probably make that argument without making stuff up. If you're starting from the position of these deals are always bad regardless of how they're structured or who gets what, then just say that and move on without misrepresenting what you actually know.

[PoliSciGuy]

That's where this analyst's bias is showing. He doesn't know that anymore than any one else does, unless he's been in the room with the brokers of this deal.

What he doesn't mention is that, in the recent examples where the private part pays around half of construction the public part gets next to nothing. So, which is really a better deal?

I know he'd say "it all sucks". I just think he could probably make that argument without making stuff up. If you're starting from the position of these deals are always bad regardless of how they're structured or who gets what, then just say that and move on without misrepresenting what you actually know.

No, his studies show that these agreements don't pay off, even those in which the public retains ownership in the stadium. It's quite the claim to say someone doesn't have any knowledge just because you don't like their conclusions. If you read his work, it shows precisely what he states - the private companies get inflated valuations and heavily subsidized arenas at almost no cost. We are socializing the costs while privatizing the gains. It's not "bias" to go where the data is leading you. If you have a problem with his conclusions, then outline where he went wrong with his method rather than just hand-waiving him away based on nothing.

[chssooner]

No, his studies show that these agreements don't pay off, even those in which the public retains ownership in the stadium. It's quite the claim to say someone doesn't have any knowledge just because you don't like their conclusions. If you read his work, it shows precisely what he states - the private companies get inflated valuations and heavily subsidized arenas at almost no cost. We are socializing the costs while privatizing the gains. It's not "bias" to go where the data is leading you. If you have a problem with his conclusions, then outline where he went wrong with his method rather than just hand-waiving him away based on nothing.

How are gains privatized? Seems like a bold claim, without actually knowing that the arena won't travel in the sale. Why would a group from Louisville give a rat's behind about an arena in OKC? There is no way to bind the team here, truly (money will always out, at a certain point). So an arena the team doesn't own doesn't privatize gains. The gains are more revenue for Thunder games, due to improved concessions, retail stores, etc within the arena. But they only benefit on Thunder items purchased and concessions on Game days.

Again, any other single event in that arena, the Thunder don't make a dime. And if they sold (which is when you realize any gains) the arena won't be figured in.

I truly want to know where these gains coming from an arena they don't own will come from.

[PoliSciGuy]

How are gains privatized? Seems like a bold claim, without actually knowing that the arena won't travel in the sale. Why would a group from Louisville give a rat's behind about an arena in OKC? There is no way to bind the team here, truly (money will always out, at a certain point). So an arena the team doesn't own doesn't privatize gains. The gains are more revenue for Thunder games, due to improved concessions, retail stores, etc within the arena. But they only benefit on Thunder items purchased and concessions on Game days.

Again, any other single event in that arena, the Thunder don't make a dime. And if they sold (which is when you realize any gains) the arena won't be figured in.

I truly want to know where these gains coming from an arena they don't own will come from.

Because these arenas don't make back the money invested in them. This arena won't net $1b over 25 years, even with the revenue from concerts and non-Thunder events. Meanwhile, all the proceeds the Thunder make goes to their bottom line - they're not responsible for maintenance or other overhead for the venue. However, the venue will significantly increase their franchise value, allowing them to borrow against it and use that to make more money. In other words, the public will foot the bill for this while the only body making a profit from this will be the private franchise. That's what I mean by socializing the costs, and privatizing the gains. If you can show me that this arena will net $1b over 25 years, then I'll happily admit that I'm wrong in characterizing it in this way.

[BDP]

No, his studies show that these agreements don't pay off, even those in which the public retains ownership in the stadium. It's quite the claim to say someone doesn't have any knowledge just because you don't like their conclusions. If you read his work, it shows precisely what he states - the private companies get inflated valuations and heavily subsidized arenas at almost no cost. We are socializing the costs while privatizing the gains. It's not "bias" to go where the data is leading you. If you have a problem with his conclusions, then outline where he went wrong with his method rather than just hand-waiving him away based on nothing.

He stated that about THIS deal. He doesn't know that and doesn't care to know. If someone is so invested in their position that they are uninterested in even learning the facts of this deal before making aconclusion, then that simply is being biased,.

He took is a step further by making stuff up by saying "the private part will keep ALL the money". He doesn't know that.

Look, he could be some sort of mystical economic soothsayer and end up being right, but stating that as some sort of fact is discrediting, imo.

Now, if he's talking about the Milwaukee deal, fine, because pretty much the private part will be keeping ALL the money in that situation, both from arena operations and the district around it. But nothing at this point indicates that's what's happening here.

[chssooner]

Because these arenas don't make back the money invested in them. This arena won't net $1b over 25 years, even with the revenue from concerts and non-Thunder events. Meanwhile, all the proceeds the Thunder make goes to their bottom line - they're not responsible for maintenance or other overhead for the venue. However, the venue will significantly increase their franchise value, allowing them to borrow against it and use that to make more money. In other words, the public will foot the bill for this while the only body making a profit from this will be the private franchise. That's what I mean by socializing the costs, and privatizing the gains. If you can show me that this arena will net $1b over 25 years, then I'll happily admit that I'm wrong in characterizing it in this way.

I mean, do most publicly-owned assets actually make money? Will Scissortail Park net its cost back? And the arena can and will continue to be used after that 25 years.

You can't treat government like a business. Sure, you are very much likely correct that the arena will lose money. But if it leads to people coming downtown and eating at restaurants, staying in hotels (stuff people do a lot going to shows in Tulsa that skip OKC for a plethora of reasons), then that indirectly helps the city. Some people might never come downtown, except for Thunder games. I know tons of people who make date nights out of the games, or date weekends (from out of town). So for the city, I can see it benefitting them far beyond $1 billion, over time, when you factor in other things like that. People normally aren't choosing between going to a game or going to Chicken n Pickle, it is more between a game or a night in. So they wouldn't automatically just spend that money elsewhere.

Is it perfect, no. But again, I don't think the gains, once sold, will be as great as people think. Because if this arena is factored in, any buyer will immediately reject buying something based off a lease, not owning the asset (I can't sell a leased car, can I?). So I want to see how said public asset benefits private owners valuations.

Yes, their income statement will look better, you are correct. I will agree with you there. But no one buys a franchise based off the income statement. As a CPA, it is the least important financial statement. Cash flows matter. And the Thunder owners don't get to factor in concert revenue in their valuation of selling price.

So maybe short-term, they get a gain, as their cash flow looks great. But when they truly go to sell, then buyers will scrutinize the heck out of their future cash flows, as they won't own the arena (since I doubt any group is buying them to keep them in OKC).

Maybe I just look at it differently than you do, as I am an accountant, so I see things through that lens.

[BoulderSooner]

What he doesn't mention is that, in the recent examples where the private part pays around half of construction the public part gets next to nothing. So, which is really a better deal?

I know he'd say "it all sucks". I just think he could probably make that argument without making stuff up. If you're starting from the position of these deals are always bad regardless of how they're structured or who gets what, then just say that and move on without misrepresenting what you actually know.

this is correct ...

[PoliSciGuy]

I mean, do most publicly-owned assets actually make money? Will Scissortail Park net its cost back?

You can't treat government like a business. Sure, you are very much likely correct that the arena will lose money. But if it leads to people coming downtown and eating at restaurants, staying in hotels (stuff people do a lot going to shows in Tulsa that skip OKC for a plethora of reasons), then that indirectly helps the city. Some people might never come downtown, except for Thunder games. I know tons of people who make date nights out of the games, or date weekends (from out of town).

Is it perfect, no. But again, I don't think the gains, once sold, will be as great as people think. Because if this arena is factored in, any buyer will immediately reject buying something based off a lease, not owning the asset (I can't sell a leased car, can I?). So I want to see how said public asset benefits private owners valuations.

Yes, their income statement will look better, you are correct. I will agree with you there. But no one buys a franchise based off the income statement. As a CPA, it is the least important financial statement. Cash flows matter. And the Thunder owners don't get to factor in concert revenue in their valuation of selling price.

So maybe short-term, they get a gain, as their cash flow looks great. But when they truly go to sell, then buyers will scrutinize the heck out of their future cash flows, as they won't own the arena (since I doubt any group is buying them to keep them in OKC).

What differentiates this from, say, Scissortail Park, is that there's no analogous billion dollar private organization that gets to rent out the park 40 nights a year for free and then pocket everything those events generate, or whose value increases because of the construction of the park. And scale matters here as well. I would be very, very leery of dropping $1b on a downtown park (or really any individual civic project)

[Laramie]

[BDP]

Because these arenas don't make back the money invested in them. This arena won't net $1b over 25 years, even with the revenue from concerts and non-Thunder events. Meanwhile, all the proceeds the Thunder make goes to their bottom line - they're not responsible for maintenance or other overhead for the venue. However, the venue will significantly increase their franchise value, allowing them to borrow against it and use that to make more money. In other words, the public will foot the bill for this while the only body making a profit from this will be the private franchise. That's what I mean by socializing the costs, and privatizing the gains. If you can show me that this arena will net $1b over 25 years, then I'll happily admit that I'm wrong in characterizing it in this way.

Do all civics projects have to make a direct net operating profit?

and/or

Should all civics projects be structured so that no private entities profit directly nor realize an indirect asset valuation gain as a result?

You'll find a lot public projects where private entities contribute zero, yet realize gains from it. Unfortunately, you'll also find public projects that injure private entities. You can always argue from pure ideological position that adheres to a chosen economic -ism, but that doesn't exist in the real world, so you got to evaluate these things on their individual merit and not just copy and paste stuff.

[chssooner]

What differentiates this from, say, Scissortail Park, is that there's no analogous billion dollar private organization that gets to rent out the park 40 nights a year for free and then pocket everything those events generate, or whose value increases because of the construction of the park. And scale matters here as well. I would be very, very leery of dropping $1b on a downtown park (or really any individual civic project)

For free? Man, you ALMOST had me. And any sales tax at those events goes to the city.

Sure, the lease is a good one for the Thunder. But having a major arena without an anchor tenant is a bad, bad look. But the lease they have and will have will help a ton in keeping them here. Any team in any city can leave, at any time, if they have the money.

Is there risk? Yes. But having the Thunder committed to this, and keeping them happy, lowers that risk significantly.