Is Oklahoma City basketball purgatory?

[oneforone]

There is nothing I hate worse then somebody who moves to a new location and just does nothing but complain about it.

I saw this garbage all the time when I was in the military overseas. Life is what you make it, when your in a new place you should venture out and see what the locals do for fun. Enjoy the culture, make new friends, find new things to do to replace the things you miss.

[Larry OKC]

How is leasing the Ford Center a subsidy? If someone lease office space are they being subsidized by the property owner?

Depends on the terms of the lease I guess...our lease with the Thunder could have been a lot worse but it could have been a lot better too. Instead of the $1M profit we made with the Hornets, we are looking at maybe making $150K/year with the Thunder. Our self-described "sophisticated" City leaders that negotiated the deal approached it with a self-described "break even philosophy". We didn't lose anything we were currently getting but we aren't gaining much either. The long term potential costs of the 15 to 30 year lease (based on what it has cost so far and extrapolating the numbers out) suggests a total cost nearing a billion $$$.

[Kerry]

Depends on the terms of the lease I guess...our lease with the Thunder could have been a lot worse but it could have been a lot better too. Instead of the $1M profit we made with the Hornets, we are looking at maybe making $150K/year with the Thunder. Our self-described "sophisticated" City leaders that negotiated the deal approached it with a self-described "break even philosophy". We didn't lose anything we were currently getting but we aren't gaining much either. The long term potential costs of the 15 to 30 year lease (based on what it has cost so far and extrapolating the numbers out) suggests a total cost nearing a billion $$$.

A subsidy is when you take money from one entity that earned it, and give it to another entity that didn't earn it. Unless the Ford Center lease pays money to the Thunder that the Thunder didn't earn (which it doesn't by the way) then there is no subsidy.

Even the tax rebate agreement the Thunder has with the State isn't subsidy. Allowing an entity to keep money that it earned/generated is not a subsidy. All Thunder dollars don't belong to the city/state first, and then the Thunder only gets to have what the city/state is willing to part with. It doesn't work that way in a capitalist economy.

[betts]

It was an unfavorable lease, as much as the arena, that lost Seattle the Sonics. They made money, but they lost their team. Last night on ESPN, Kevin Durant was the player of the day and Russell Westbrook's outstanding dunk was #4 on the top ten list. If you google Oklahoma City, you see articles about the Thunder from all around the country. The article that started this thread, although I consider it only quasi-complimentary, would not have been written but for the Thunder. The city couldn't afford the kind of publicity and air time we get by having an NBA team, so you might have to consider free advertising in that cost consideration. The city wouldn't be making anything without the Thunder, because the Ford Center wouldn't have a tenant, so anything it makes over expenses is a bonus. I pay a $1 seat tax on every Thunder ticket I've bought, which is money the city wouldn't be making as well.

[Larry OKC]

A subsidy is when you take money from one entity that earned it, and give it to another entity that didn't earn it. Unless the Ford Center lease pays money to the Thunder that the Thunder didn't earn (which it doesn't by the way) then there is no subsidy....

Case in point: Naming Rights. The Thunder get to renegotiate the naming rights to the arena (to a building they don't own). They get the money to the naming rights to the Practice Facility (another building they don't own). This is money they didn't earn. The lease is replete with examples of "subsidy". This money rightfully belonged to the City (taxpayers) and the City decided to give it to the Thunder owners (who hadn't earned it).

[Larry OKC]

Spar. Are you sure that we paid for anything associated with the practice facility referenced or are you just making up your facts as you go, again? If memory serves, the owners bought that ice rink, turned it into a practice facility and furnished it. Can you point to any news article to back up your assertion?

The news articles did indeed indicate that the Thunder bought/paid for the temporary practice facility (but there was an ESPN article that said the Thunder paid for the Ford improvements too). Here is the info from the actual lease (available for download from the City's website: City of Oklahoma City | Public Information & Marketing)

ARENA UPGRADES AGREEMENT

3.8.2

If the License Commencement Date occurs prior to Substantial Completion of the Practice Facility as provided herein, the City will provide to the Team, at no expense to the Team, a temporary practice facility in the Oklahoma City area reasonably acceptable to the Team. Such practice facility will conform to applicable NBA Standards for practice facilities and made available at times necessary for Team use from the License Commencement Date until a date 30 days after Substantial Completion of the Practice Facility. The costs of providing such temporary facilities hereunder shall not he included in Project Costs. To the extent necessary, an amendment to this Agreement will be executed identifying any agreed revisions to the Scheduling Deadlines.

Interesting to note that even though the City paid for/owns the temporary practice facility and is paying for/will own the permanent practice facility, there is a provision in the Lease that requires the City to pay the Team $5,000 per day that the permanent facility is not complete:

3.13.2 Practice Facility Project. If the Practice Facility Project does not achieve Substantial Completion on or before the Scheduled Completion Date for the Practice Facility and such delay is not attributable to a Team Change Order(s), then, in addition to other rights of the Team as provided herein, the Authority shall remit to the Team, subject to the limitations set forth herein $5,000 for each day of such delay. The Team shall have reasonable approval rights of any liquidated damages provided for in Construction Contracts and the procedures relating to the collection and payment of the same, which Construction Contracts shall excuse payment of liquidated damages only in the context of delays resulting from Force Majeure. Liquidated Damages hereunder are not Project Costs.

[dcsooner]

The news articles did indeed indicate that the Thunder bought/paid for the temporary practice facility (but there was an ESPN article that said the Thunder paid for the Ford improvements too). Here is the info from the actual lease (available for download from the City's website: City of Oklahoma City | Public Information & Marketing)

ARENA UPGRADES AGREEMENT




Interesting to note that even though the City paid for/owns the temporary practice facility and is paying for/will own the permanent practice facility, there is a provision in the Lease that requires the City to pay the Team $5,000 per day that the permanent facility is not complete:

Larry et al,
There is no question the Team owners received a very generous lease agreement. But, for me the $350M, plus $75M paid by the owners is a huge investment in this City and is worthy of our generosity. The spin off benefit of the Thunder is almost incalculable but I dare say far exceeds anything we could have experienced had the Thunder not arrived. I say, let the owners make money, it only solidifies the long term stability of the franchise which is what I really want.

[Kerry]

Case in point: Naming Rights. The Thunder get to renegotiate the naming rights to the arena (to a building they don't own). They get the money to the naming rights to the Practice Facility (another building they don't own). This is money they didn't earn. The lease is replete with examples of "subsidy". This money rightfully belonged to the City (taxpayers) and the City decided to give it to the Thunder owners (who hadn't earned it).

Larry, you need to read the lease agreement again. The Thunder only get money from naming rights that are above what the city was able to negotiate without the Thunder being there. So anything above the $400,000 the City got from Ford was directly attributed to the Thunder playing there, and thus, that revenue was generated by the Thunder.

The same thing goes for the practice facility. What would be the naming rights value of a facility that didn't have a primary tenant? Close to $0. Put the Thunder in it and now people want to put their name on it.

Now, if the City gave the practice facility or the Ford Center to the Thunder then you would have a point, but the Thunder are only tenants and make payments to the City. Was it a favorable lease? Sure it was but the Thunder are still only keeping what they generate (and they don't even get to keep all of that).

[Larry OKC]

Kerry,

I understand what you are saying but if the Thunder want the rights to a building they need to pay for the building themselves (then they can do whatever they want to with the money). Not all NBA facilities are taxpayer subsidized. Most do have some level of public money but 5 NBA arenas had ZERO public money used. 8 (now 9 with the Ford) are 100% public financed with the balance pretty evenly split at various percentages.

Saying the Thunder earned that money by being a tenant is like saying if Bennet et al started buying the houses surrounding your property and building multi-million $$$ homes (thus increasing your property value as well) and then demanding that any increase in your property value had to be turned over to them. After all, if it wasn't for them your property wouldn't be worth anything more. Would you be as willing to do that?

Why does a tenant deserve any naming rights to a building they don't own? if they are going to get the naming rights to a building they don't own they can pay for the improvements to the same building (reportedly, this was the City's intention, that the eventual tenant would pay for the any improvements).

Concerning the $409,000 the Thunder is so generously allowing the City to keep...we don't get to keep it after all. That money has to be put back into a revolving fund for the Thunder/Ford. Now in theory I don't have a problem with it because that was what the naming rights money was originally intended for (to cover the maintenance and capital improvements needs of not only the Ford but other MAPS projects). The problem with that was the City was severely off in its projections as to what the maintenance (and especially the capital improvement needs) would be. After 5 years it was determined that $100M in capital improvements would be needed to bring the Ford back up to NBA standards. That works out to be $20M/year yet the naming rights only cover $400K of that or 50 times more than what they had thought.

Betts mentioned the $1 seat tax. While it is mentioned in the Lease (that the Thunder is allowing the City to charge it on all Thunder seats with the exception of the NBA mandated $10 ones), I haven't found any place where that $1 charge is earmarked. Hopefully the City is putting it back, because under the lease terms the City is responsible for upgrading the Suites and Loge Seating every 5 years. Now I don't know how much was spent on doing that this time around (again, just 5 years later) but they need to put back at least that same amount again.

Then councilman Cornett had it right when he voted against the naming rights of the Arena. He didn't have anything against Ford, but he thought we should be promoting the City with the name and not a corporation.

Were you aware that the Thunder is only paying the City $12K/game to rent the Ford (after game day expenses are covered)?

Did you know that the Thunder was prepared to pay $200K/year for the practice facility yet our "sophisticated" negotiators managed to get that cut in half?

[cdbthunder]

I agree with Betts, you can't put a $$$ sign on the kind of pub this has brought to OKC.

[Laramie]

When other cities become jealous of you:

This is a great sign that we are a major league city. It has happened to other cities-- Memphis (Grizzlies), Nashville (Titans-Oilers), Raleigh (Hurricanes), Salt Lake City (Jazz), Phoenix (Cardinals)...

When teams relocate to another City the hate-log stays with you for five years...

Welcome to the major leagues!

[hoya]

Larry, I haven't read the lease. I don't intend to read the lease. I just don't care about it that much. You have, that's great. But I think the standard you are using to judge this is a bit off. This wasn't a regular business decision. The city has had a goal over the past several years to get an NBA team here. That was the goal, and every action they've taken has been towards it.

So why isn't this a lease where the city tried to leverage as much as they could for the city? Because we're not a "big league city" yet. We have yet to prove we can support a team long term. We don't know what the Thunder's operating expenses are going to be in 5 years, nor their income. So the city gave them a sweetheart deal.

Remember, Clay Bennett and his group made what many considered to be an unwise business decision. Had they stayed in Seattle, they'd have a larger fan base, a bigger market, a more valuable team, etc. They brought the Thunder here so we'd have an NBA team in Oklahoma City. So the city gave them a sweet deal because they want them in the Ford Center. Was it the best deal possible? Of course not. The team is a status symbol, not a cash cow. And I don't have a problem with that.

It's a quality of life issue, not a pure economics issue. There may be a little bit of good ol' boy-ism going on, but I think that has gone both ways. Bennett and crew didn't have to bring the team here. They did it for good ol' boy reasons. I think expecting them to pay for Ford Center renovations, etc, would be like looking a gift horse in the mouth. It would be blowing our best shot to get a professional team. So overall, I'm happy with the lease arrangement as it is.

[Larry OKC]

How can you say you are happy with the lease arrangement if you haven't even read the lease?

[Larry OKC]

I agree with Betts, you can't put a $$$ sign on the kind of pub this has brought to OKC.

Or the negative $$$ amount and the negative publicity the City received over the relocation. That will fade in time but there are still people ticked that the Dodgers left Brooklyn. LOL

[betts]

There are senior citizens in New York that are still ticked that the Dodgers left Brooklyn. Ask the average man on the street and he won't even know they ever played in New York. The only negative press we're still getting about the relocation is in Seattle and from Bill Simmons. We'll see how much they say about the Sonics at the All Star game, when Kevin plays.

Seriously, google Oklahoma City and go to News. Don't add Thunder to your search. Four out of the ten news stories are about the Thunder, with 879 related stories on the Thunder and 163 on every other Oklahoma City topic. On many days it's 8 out of the ten. Watch Sports Center tonight and every night between now and April and tell me how many nights they talk about the Thunder. Every night we get mentioned is one night nothing would have been said about Oklahoma City two years ago. We've been selected as the game of the week on NBA TV four times this year. Those games include shots of Oklahoma City at every break. Again, that kind of advertising, if we had to pay for it, would cost Oklahoma City more than they could ever hope to make on naming rights.

How much money does the city make from its parks, the Civic Center, the Brick, the Art Museum, the downtown library, the Bricktown Canal? I suspect each one of them costs the city money. The Thunder, in my opinion, are every bit as much as asset to the city as any of the above. A different kind of asset, and one that cannot stand alone, just like all the others. As a whole, however, all of them make this a much better place in which to live.

[hoya]

How can you say you are happy with the lease arrangement if you haven't even read the lease?

Because I'm not looking for the city to make a lot of money on it. Yes, the city probably could have gotten more cash from the deal, but the fact that they didn't doesn't bother me. Remember, the deal they had with the Hornets was risky. If the team didn't make money, the city agreed to pay the team quite a bit. Fortunately, fans showed up in droves and so the city made more than they ever thought they would.

I'm okay with a little bit of payback to Bennett's group for bringing the team here. Understand that the whole team-purchasing thing was a money loser for them. This wasn't a traditional team move. This was done specifically so that OKC could get a team, and so the city was more accommodating than they had to be.

Is the Ford Center a subsidy? I guess you could call it that. However, the decision was made to build it back with the first MAPS program. At that time, the city as a whole decided to subsidize some potential future team. This was the plan, and it was voted on back in 1993. If someone is only now realizing that some private citizen might make money off of it, well, I don't know what to tell you. Do you really expect Clay Bennett and crew to purchase a team, move it to a smaller market (causing a decrease in team value), and then buy the arena as well? I don't.

[Larry OKC]

Because I'm not looking for the city to make a lot of money on it.

But you should, that is part of being "Big League"...the ability to bring in the Big League Bucks

I'm okay with a little bit of payback to Bennett's group for bringing the team here.

A little payback? This "payback" is amounting to $100s of millions (more than it cost to buy the team). What would you consider to be excessive and unacceptable?

Understand that the whole team-purchasing thing was a money loser for them.

Sorry but that just isn't the case. While it is true that they overpaid for the team by about $100M, this was a business investment. No guarantee of course, but most likely they will get every penny of their investment back when they eventually decide to sell the team. Just as EVERY previous Sonics owner had done over it's 40+ year history. Even Schultz with his multi-million $$$ losses, got back those, the initial cost of the team with a few million to spare. Money loser? Hardly. They went from multi-million $$$ losses in Seattle directly to multi-million $$$ profit.

Do you really expect Clay Bennett and crew to purchase a team, move it to a smaller market (causing a decrease in team value), and then buy the arena as well? I don't.

Yep, absolutely! As it is a privately owned, intended for-profit business. Hardly anyone with the NBA thought it was a bad move since the relocation was overwhelmingly approved.

Now don't get me wrong, I don't blame Bennett for trying to get taxpayer $$$ and probably he even thinks he is entitled to it as every NBA franchise he has been connected with (Spurs/Hornets/Sonics) have all had heavy public financing of their arenas.

While most NBA arenas have some level of public financing, according to the NBA database that used to be available over at NewsOK.com, they range from 5 arenas with Zero% public financing to 8 with 100%. They are pretty evenly split with those at 50% and above, and those at 50% and below. If memory serves, every 10% range was included. While it would have been impossible for OKC to be in the 0% group (given the original cost of the building) would much rather been in the roughly 50% group than the 100% club. Unfortunately now the precedent has been set not only for the Thunder but any other pro-sports team that might come here. They are going to expect the same treatment. OKC was in the best possible negotiating position it could be in and we blew it. And we are going to be paying for it for the next 15 to 30 years.

[Larry OKC]

Again, that kind of advertising, if we had to pay for it, would cost Oklahoma City more than they could ever hope to make on naming rights.

But the point is we had and could have kept the naming rights money too (it IS a City owned building).

How much money does the city make from its parks, the Civic Center, the Brick, the Art Museum, the downtown library, the Bricktown Canal? I suspect each one of them costs the city money. The Thunder, in my opinion, are every bit as much as asset to the city as any of the above. A different kind of asset, and one that cannot stand alone, just like all the others. As a whole, however, all of them make this a much better place in which to live.

Why can't the Thunder stand alone? Didn't they make multi-millions in profit last year? Don't lose money on the arena, as every year the Ford has turned an operational profit. Now Bennett is on record as thinking arenas can't be run at a profit so don't blame him for not wanting to own one. But if he doesn't want to own the business and the rightful costs associated with running that business, he shouldn't be in that business.

If memory serves, according to Steve, the Canal has turned a profit for the City every year but one.

I know you like to lump all of this together under the same banner as we have discussed this before. There are certain things government should be paying for and/or subsidizing and some things it shouldn't. This is one reason why the state constitution needs to be followed and MAPS items needed to be listed as separate propositions. One of the things it shouldn't be doing is paying for the private, for-profit pro sports entertainment. Period.

[ljbab728]

[QUOTE=Larry OKC;292217]But the point is we had and could have kept the naming rights money too (it IS a City owned building).



If memory serves, according to Steve, the Canal has turned a profit for the City every year but one.

I think what you mean is that the boats in the canal have turned a profit for the city. The canal has never and probably never will turn a profit.

[Larry OKC]

yes, I meant an operational profit...sorry

[Rover]

Why is it that these threads keep getting hijacked by the same two or three people who are always negative about anything progressive the city or any government does.

There is always a viable public/private partner relationship that can exist to the benefit of both. In business we are always trying to achieve win/win opportunities in deals and those who only see a deal if it is just a win for them seldom are invited to participate in significant deals and rarely do they last.

The NBA in OKC is a highly desirable venture for the city and the public who benefits by the increased profile and continuous exposure the city gets. My job takes me to all parts of the country every week and I can tell you the good visibility of OKC has never been better and the Thunder is a nice big part. OKC is now considered for investments and re-locations and for job opportunities that it wasn't before. The idea that somehow OKC took advantage of the citizens to benefit a few fat cats is just myopic paranoia from people who would be comfortable going back in time 100 years and to keep this city in basic poverty levels. No taxes, no services but no real income and no competitiveness.

OKC is enjoying unprecedented success and it is not accidental. Hats off to leadership - both public and private - who has helped make it possible for the next generations to enjoy opportunities in a vibrant growing city with lots of opportunities.

[rcjunkie]

Why is it that these threads keep getting hijacked by the same two or three people who are always negative about anything progressive the city or any government does.

There is always a viable public/private partner relationship that can exist to the benefit of both. In business we are always trying to achieve win/win opportunities in deals and those who only see a deal if it is just a win for them seldom are invited to participate in significant deals and rarely do they last.

The NBA in OKC is a highly desirable venture for the city and the public who benefits by the increased profile and continuous exposure the city gets. My job takes me to all parts of the country every week and I can tell you the good visibility of OKC has never been better and the Thunder is a nice big part. OKC is now considered for investments and re-locations and for job opportunities that it wasn't before. The idea that somehow OKC took advantage of the citizens to benefit a few fat cats is just myopic paranoia from people who would be comfortable going back in time 100 years and to keep this city in basic poverty levels. No taxes, no services but no real income and no competitiveness.

OKC is enjoying unprecedented success and it is not accidental. Hats off to leadership - both public and private - who has helped make it possible for the next generations to enjoy opportunities in a vibrant growing city with lots of opportunities.

As my 15 year old son would say "that's how they roll", translated means some are so anti-city, anti-government, that nothing would please them. They appear to be so unhappy with their lives, they try to drag everything around down to their unhappy level.

[Larry OKC]

Why is it that these threads keep getting hijacked by the same two or three people who are always negative about anything progressive the city or any government does....

Presume you are referring to me but I have been responding to other peoples posts and sharing info they may have forgotten or not even known about. I didn't start the discussion (it was Spartan when he asked: "We are subsidizing the team, no?") and Popsy replied that he thought the only subsidy the team received was the Practice Facility. Unfortunately that is not the case.

Not anti-government or even anti-taxes as there are some things Government and Taxes should be used for. IMO it is not any city's responsibility to subsidize a broken business model. If a private, intended for-profit business insists they can't make a profit without taxpayer funding from the beginning and require continued taxpayer support the entire time they are there, maybe they should cease to exist. If Cheasepeak or Devon came to the City and said we need you to pay for our sprawling campus or new tower and you have to keep upgrading it every five years or so would you call that being "progressive"? Being pro-business is one thing but this crosses the line.

I am not anti-NBA or anti-sports either. But owners of pro-teams can certainly afford to pay their own way. And if they insist on taxpayer support, the "silent investors" need to get a direct financial windfall as well. you know, an actual ownership stake in the team or at least a profit sharing arrangement like we had with the Hornets? Oh, and didn't we get the same positive press etc when we had that arrangement as now when we don't?
Unfortunately, our self-described "sophisticated" City negotiators failed in that regard. IMO

[dcsooner]

Why is it that these threads keep getting hijacked by the same two or three people who are always negative about anything progressive the city or any government does.

There is always a viable public/private partner relationship that can exist to the benefit of both. In business we are always trying to achieve win/win opportunities in deals and those who only see a deal if it is just a win for them seldom are invited to participate in significant deals and rarely do they last.

The NBA in OKC is a highly desirable venture for the city and the public who benefits by the increased profile and continuous exposure the city gets. My job takes me to all parts of the country every week and I can tell you the good visibility of OKC has never been better and the Thunder is a nice big part. OKC is now considered for investments and re-locations and for job opportunities that it wasn't before. The idea that somehow OKC took advantage of the citizens to benefit a few fat cats is just myopic paranoia from people who would be comfortable going back in time 100 years and to keep this city in basic poverty levels. No taxes, no services but no real income and no competitiveness.

OKC is enjoying unprecedented success and it is not accidental. Hats off to leadership - both public and private - who has helped make it possible for the next generations to enjoy opportunities in a vibrant growing city with lots of opportunities.

Well Said! Completely Agree!! Go Thunder