New Downtown Arena

[onthestrip]

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.

But thats exactly what happens. If people didnt spend money on going to Thunder games, they would spend it on other entertainment and going out. Its not as if people would just stash all their thunder money away under their bed and never spend it, or only spend it outside of OKC. Im a thunder season ticket holder, and if they werent here I would simply spend that money elsewhere.

[Zuplar]

I'm glad someone is asking the questions. I mean I want to vote yes because I want to keep the Thunder. But at the same time these types of decisions have generational impact and just because I want to watch the Thunder in my city, doesn't mean that future generations will feel the same way. I think that's the give and take with living in a society.

[Pete]

It would be a huge loss, but not as big as OKC losing the Thunder, on a pro rata basis, IMO. OKC has embraced the Thunder and they are very much engrained in the city. If they left, a lot of civic pride goes, as well, IMO.

If Milwaukee were to lose the Bucks, it would be felt just as much.

The Bucks have been there far longer than the Thunder in OKC and Milwaukee is seen as a shrinking Rust Belt city. Losing a long-held NBA franchise would be devastating and would contribute strongly to the outside perception it is a dying community, which would also impact how the city is regarded by local citizens.


It's easy to say the Thunder somehow means more to OKC when you don't live in Milwaukee. There are people there who have been die-hard Buck fans for over sixty years. Also, the winters in Wisconsin are brutal and the Bucks provide much-needed vitality and a reason to go downtown.

[Pete]

These are the operating costs (loss) regarding Paycom Center and the City of OKC. These were forwarded to City Council by Craig Freeman, the City Manager. The document and footnotes were compiled by the City's Finance Department.

The reason you haven't seen this before is that the numbers are buried in various categories in the City's annual budget. I was told it took repeated requests before this analysis was performed and shared.

What this shows is that the net loss to the City is over $7.5 million for fiscal year ending June 2023. They list sales tax revenue of $2.2 million per year but that would accrue to the City regardless of who owns the arena. Also, that $7.5 million reflects a big bonus from ASM, far higher than budgeted, which implies the City did not get that amount in previous years which would push annual cost to the City close to $10 million.

The reason you don't see Thunder lease numbers is because that is paid to ASM, which operates the arena. The Thunder pays ASM about $40,000 per home game. The Thunder gets all ticket revenue from their games and then about 40% of concessions; ASM gets the remainder. The Thunder only gets about 10% for clubs and restaurants; 15% from bars.

The City pays for all capital improvements and maintenance.

As for the naming rights, the Thunder have the right to negotiate that. The amount paid by Paycom was never made public but previously Chesapeake was paying $3 million per year.

You can see below, the City is only receiving $508,396 per year for the naming rights. We know the NBA takes 50% for revenue sharing, but there is no way Paycom is only paying $1 million per year, which would be 1/3rd what Chesapeake had been paying in earlier years. I suspect ASM gets a chunk of that as well, which is why the City's share is so low.

So, taking the $7.5 million loss per year, that adds up to $113 million over the original 15-year lease with the Thunder. The Thunder have the right to exercise five options of 3-years each. We are currently in one of those option periods.


As far as I know, this net loss to the City to operate Paycom has never been mentioned in public. Holt has stated the agreement for the new arena would closely resemble the current deal. So, it's fair to say the City will continue to take a loss, and since it is currently $7.5 million a year and the term is to be 25 years, that's a ton of money; especially when we are being told $50 million from the owners is 'significant'.

[PoliSciGuy]

These are the operating costs (loss) regarding Paycom Center and the City of OKC. These were forwarded to City Council by Craig Freeman, the City Manager. The document and footnotes were compiled by the City's Finance Department.

The reason you haven't seen this before is that the numbers are buried in various categories in the City's annual budget. I was told it took repeated requests before this analysis was performed and shared.

What this shows is that the net loss to the City is over $7.5 million for fiscal year ending June 2023. They list sales tax revenue of $2.2 million per year but that would accrue to the City regardless of who owns the arena. Also, that $7.5 million reflects a big bonus from ASM, far higher than budgeted, which implies the City did not get that amount in previous years which would push annual cost to the City close to $10 million.

The reason you don't see Thunder lease numbers is because that is paid to ASM, which operates the arena. The Thunder pays ASM about $40,000 per home game. The Thunder gets all ticket revenue from their games and then about 40% of concessions; ASM gets the remainder. The Thunder only gets about 10% for clubs and restaurants; 15% from bars.

The City pays for all capital improvements and maintenance.

As for the naming rights, the Thunder have the right to negotiate that. The amount paid by Paycom was never made public but previously Chesapeake was paying $3 million per year.

You can see below, the City is only receiving $508,396 per year for the naming rights. We know the NBA takes 50% for revenue sharing, but there is no way Paycom is only paying $1 million per year, which would be 1/3rd what Chesapeake had been paying in earlier years. I suspect ASM gets a chunk of that as well, which is why the City's share is so low.

So, taking the $7.5 million loss per year, that adds up to $113 million over the original 15-year lease with the Thunder. The Thunder have the right to exercise five options of 3-years each. We are currently in one of those option periods.


As far as I know, this net loss to the City to operate Paycom has never been mentioned in public. Holt has stated the agreement for the new arena would closely resemble the current deal. So, it's fair to say the City will continue to take a loss, and since it is currently $7.5 million a year and the term is to be 25 years, that's a ton of money; especially when we are being told $50 million from the owners is 'significant'.

Holy smokes, thank you Pete for tracking that data down! That is exactly the data I've been asking for for the last couple of weeks and, wow, that is quite the loss. And last year was apparently a good year given that "largest surplus ever." Even if the new arena brings in bigger acts, it's unlikely to make that up, and that's not even counting increasing interest costs for a more expensive arena. Turns out that owning the arena isn't quite the windfall or source of revenue some thought it was. This makes the deal even worse, something I didn't think was possible.

edit: \/\/\/\/ given that last year produced the highest surplus in arena history, it's unlikely that those years would show a profit

[Anonymous.]

Can we see the same accounting data from 2010-2020? I feel like that is a better indicator considering the team is about to be competitive again for the next decade.

[Pete]

^

A bigger arena would bring in bigger acts but the operator (assuming ASM) would get the lion's share of that.

Also, a bigger arena means a lot more in terms of utilities and maintenance.


To make things very simple, the City loses millions every year from operating Paycom and it's safe to assume the same will hold true for a new arena.

Any argument that the $1+ billion in public money for the new arena will somehow be offset by the deal with the Thunder or the arena operator is completely unfounded, as it seems obvious the opposite would be true.

Thefore, any attempt to say the details of our deal make it incomparable to Milwaukee or the others seems to be incorrect.

[Pete]

Can we see the same accounting data from 2010-2020? I feel like that is a better indicator considering the team is about to be competitive again for the next decade.

What I posted was only shared with Council after repeated requests.

It's not an analysis the City shares on an annual basis.


The bottom line is the City loses money on Paycom and almost certainly will do the same for any future arena. The only issue is: will the number be around $10 million per year or a lot more?

[chssooner]

Well again, FAFO. There won't be any revised votes put out there. If the city votes no, the team will likely be sold in 2024 and moved at the quickest pace the league allows. Then we are stuck with an outdated arena we will have less events for, and not have any lease revenue for it (didn't see that accounted for in that report) so the losses will be even higher, as there will be 41 or so dates a year less of sales tax.

[Pete]

Some more interesting research:

$274 million is the annual revenue of the Thunder per several sites.

$150 million is their payroll.

$2 million is about what they pay in annual rent to ASM for Paycom.


$122 million is the annual revenue less those expenses. I'm sure there is much more in terms of expenses (such as travel, staff and promotion), but still, you have to think the Thunder are pulling in big profits every year.


Value of the team is estimated at $1.875 billion. The old Super Sonics were bought for $350 million in 2006.

[Pete]

edit: \/\/\/\/ given that last year produced the highest surplus in arena history, it's unlikely that those years would show a profit

You can see the City budgeted to cover $10.8 million in losses from Paycom for the last fiscal year.

The new arena will have a lease term of 25 years, which means if the budget stays the same, there would be an additional $270 million cost to the City.

There will also be a very significant interest expense because this project will have to be paid for well in advance of collecting the actual sales tax. This will not be a small number... As way of comparison, we had to provide the Omni all their incentives upfront and it added $26 million in loan costs (at historically low rates) on only $85 million owed to the Omni. I would think interest costs on a new arena would be over $100 million and maybe well above that.

[jdross1982]

Some more interesting research:

$274 million is the annual revenue of the Thunder per several sites.

$150 million is their payroll.

$2 million is about what they pay in annual rent to ASM for Paycom.


$122 million is the annual revenue less those expenses. I'm sure there is much more in terms of expenses (such as travel and promotion), but still, you have to think the Thunder are pulling in big profits every year.


Value of the team is estimated at $1.875 billion. The old Super Sonics were bought for $350 million in 2006.

The problem I have with simply putting this out and is disingenuous to think the expenses related are small. Of the 122 mil, I would imagine there are costs of over 1 mil per away game (more than 40 per year) plus significant expenses for home games. Then you add staff, other admin costs and that 122 mil starts to get ate up real quick.

End of the day, yes it is a business and yes they make a profit.

[gopokes88]

It's going to pass and it will pass easily.

The team isn't selling anytime soon.

The ownership group and thunder org are famously tight lipped about everything.

[chssooner]

And if they lose the Thunder, what will the loss be? It's 41 more days a year the arena will be empty. Concerts aren't beating OKC's doors down to come to the Paycom. They won't replace those dates, aside from maybe 10. And still have to pay ASM.

Sure, getting the owners to pay is nice. But it won't happen, and the effects will be bad for OKC if we lose the Thunder. Think public perception will be positive if we let the team stroll on back to Seattle or Louisville?

I guess intangible things don't matter here. �� the city's reputation it has gained in the last 15 years will be gone, and we will be stuck in mud with an outdated arena with no main tenant.

[BoulderSooner]

^

A bigger arena would bring in bigger acts but the operator (assuming ASM) would get the lion's share of that.

Also, a bigger arena means a lot more in terms of utilities and maintenance.


To make things very simple, the City loses millions every year from operating Paycom and it's safe to assume the same will hold true for a new arena.

Any argument that the $1+ billion in public money for the new arena will somehow be offset by the deal with the Thunder or the arena operator is completely unfounded, as it seems obvious the opposite would be true.

Thefore, any attempt to say the details of our deal make it incomparable to Milwaukee or the others seems to be incorrect.

disregard

[Pete]

The problem I have with simply putting this out and is disingenuous to think the expenses related are small. Of the 122 mil, I would imagine there are costs of over 1 mil per away game (more than 40 per year) plus significant expenses for home games. Then you add staff, other admin costs and that 122 mil starts to get ate up real quick.

End of the day, yes it is a business and yes they make a profit.

Just providing the hard numbers that are available.

Would be happy if someone could add data on their expenses/profits.


This is part of the larger discussion because the current ownership group is offering to contribute way, way less for a new arena than any other NBA franchise. So, their profits matter.

[Pete]

I deleted a bunch of political posts.

If you insist on interjecting "progressives" and "conservatives" and "libertarians" you are going to get banned.


We are attempting to have a discussion here, and politics need to be left out.

[Anonymous.]

What I posted was only shared with Council after repeated requests.

It's not an analysis the City shares on an annual basis.


The bottom line is the City loses money on Paycom and almost certainly will do the same for any future arena. The only issue is: will the number be around $10 million per year or a lot more?

A snapshot of Arena sales tax data for 2023 [a top 3 worst attended season in OKC history] is a bad sample to judge this deal by. That asterisk at the top of the Notes section is all that needs to be paid attention to. Those figures mean nothing when you consider the tax impacts of housing and hosting high salary NBA players and staff each season. The city and state comes way out ahead, I promise you that.

[BoulderSooner]

Just providing the hard numbers that are available.

Would be happy if someone could add data on their expenses/profits.


This is part of the larger discussion because the current ownership group is offering to contribute way, way less for a new arena than any other NBA franchise. So, their profits matter.

not Way way less then orlando or memphis

[PoliSciGuy]

A snapshot of Arena sales tax data for 2023 [a top 3 worst attended season in OKC history] is a bad sample to judge this deal by. That asterisk at the top of the Notes section is all that needs to be paid attention to. Those figures mean nothing when you consider the tax impacts of housing and hosting high salary NBA players and staff each season. The city and state comes way out ahead, I promise you that.

Again, this is the largest surplus the arena has generated. There is nothing to indicate that earlier years were better.

As for the city and state coming out way ahead, can you cite the data you're basing that promise on? It'd be a good codicil to Pete's data.

[Pete]

not Way way less then orlando or memphis

Orlando: $50 million of $380 million 13.2%. The Thunder owners are going to end up paying less than 4%.

Memphis did upgrades to an existing arena, much like we have done with Paycom where the Thunder ownership contributed nothing.

[soonerj2015]

I would be curious to know what the operating expenses are for the BOK in Tulsa

[Pete]

I would be curious to know what the operating expenses are for the BOK in Tulsa

According to Wikipedia, SMG pays the operating costs for BOK:

https://en.wikipedia.org/wiki/BOK_Center

[Anonymous.]

Again, this is the largest surplus the arena has generated. There is nothing to indicate that earlier years were better.

As for the city and state coming out way ahead, can you cite the data you're basing that promise on? It'd be a good codicil to Pete's data.

Yes, attendance data. The Thunder had the worst attendance in the league in 2023. It says right there $2.2MM estimate for sales on merch, food, and bevs. You don't think attendance and poor team performance affect those numbers? Just wait in 3 years, the Paycom will be selling out of seats and jerseys again because the team is about to be in KD/Russ Era of sales generation.

As for the rest of my points on tax generation. Take into account an entire NBA team and staff living and working in the state. Plus we receive all income taxes from visiting players and staff. In the next decades there will likely be several players making $1MM per game. Those visiting salaries for 41 games per season + any playoffs is massive.

This thread is a classic Freakonomics 101. The hidden side of everything. No one here is talking about the loss of millions in income tax from these huge salaries that are only going up.

[Pete]

^

Just FYI, pro athletes in the U.S. have to pay income tax in every state they play in.