New Downtown Arena

[BoulderSooner]

to be clear, no one is talking about Seattle’s response to Bennett. We are referring to Seattle’s response to Shultz’s proposal and he did not plan to move the team…he sold them to someone who would.

Bennett proposed his arena in Renton, not Seattle since they voted in I-91 after Shultz’s Key Arena proposal failed and after he sold the team to Bennett. Though I still do think that the sonics would’ve stayed if they’d agreed to their outrageous proposal…they just weren’t going to and Bennett knew that.

all correct

[BoulderSooner]

From the Oklahoman today; OKC Director of Finance Brent Bryant:



So, $976 million is the minimum sales tax (I showed my calcs earlier that indicated $1.3B is more likely), plus $70 from MAPS 4 and $50 from the owners.

That's a minimum budget of $1.094 billion, not $900 million the City used in the press release. What's an extra $200 million right out of the gate? Although we keep being told that $50 million by the owners is 'significant'.

please show me a larger portion by an ownership group to an arena with OKC's management structure?

[BoulderSooner]

Some back of the napkin math, so that I can wrap my head a bit around the economics at play here:

Per Forbes PBC has Rev of $274M. They'll pay ~$140M to the active roster. So let's say 10% of that gross stays in Oklahoma between taxes and money spent in the local economy. That's $14M/year.

Let's say another $25M is paid to non-player staff/execs and that 65% of that stays in Oklahoma. That's another $16M/year.

If PBC pays $2M in arena rent, and OKC clears $8M in concessions annually, that brings us to $40M.

Let's say 15% of the attending fan base only comes to OKC (metro area) due to the Thunder and they spend on avg $250 in OKC (including ticket). That's $23M gross. $2M in sales tax receipts and let's say another $8M in profit that stays in OKC.

So we're at $50M annual economic positive but over half of that is going to the state not the city (maybe that's where some of this funding should come from, tbh). Really OKC is walking out with $20M/year, some good entertainment and something that certainly helps the city's brand.

So, yeah, it's an economic engine we'd rather keep, BUT it comes with a super hefty price tag. If the Thunder leave in 15 years, the city still ends up substantially in the red on this deal even as the economic impact inflates due to increased league revenue. 15 years at $40M is $600M + PNC's initial $50M investment. So we'd still be out $600M for an amenity we already have. A lot can be done with $600M.

keep in mind that 25-30% of the money being used to build this arena comes from people that don't live in OKC (which is a great deal for OKC)


also you are discounting the PR benefit of the thunder to OKC

[BoulderSooner]

Maybe another way to frame this discussion:

Oklahoma City does not need another arena. Professional Basketball Club LLC needs a new arena.

Now, PBC provides a lot of value to Oklahoma City, and OKC has provided to PBC a relatively reliable fan base and a facility at a very reasonble cost.

PBC now wants OKC to build them a new facility that OKC doesn't need in order to increase PBC's profitability to provide essentially the same product to OKC. OKC should recognize the benefit they will receive from having a nicer facility but also has to reconcile the opportunity costs of spending these resources on something they already have.

.

the 25 year lease guarantees that the teams stays in OKC for about 22 or 23 year of the lease .. min ..


do you think the peake will be a viable arena forever??

meaning surely you believe that at some point OKC will need a new arena

(others can comment ) but one of the huge reasons OKC needs a new arena is the loading dock/set up space is not big enough currently to have back to back events in OKC ..

[BoulderSooner]

I think Golden 1 Center is probably the best comp next to Milwaukee. I can't find a lease summary for their deal, but the team is listed as the operator. They do pay more than the Bucks do in rent, though. Something like $361 million over the life of the lease.

So, it seems like there's been an increase in team ownership in investment of publicly owned arenas, but through the lease, they become the operators of the venue for all events.

yep cities that can't raise the full amount for a new building (politically) pretty much give away their arena to a private business .. and still pay for half (or more) of it ..

berceuse that looks better on the front end optics.

[Teo9969]

keep in mind that 25-30% of the money being used to build this arena comes from people that don't live in OKC (which is a great deal for OKC)


also you are discounting the PR benefit of the thunder to OKC

25% - 30% of the money used to build a big phallus statue planted in the middle of the great lawn would come from non-OKC residents if we voted to build it. That's not a valid argument. OKC is a cool city and that's why we get so many people coming in to spend their dollars with us. We don't only collect that % of outside money 41 nights a year.

I'm not discounting the PR benefit. I'm just struggling to risk $1B on it.

[Teo9969]

the 25 year lease guarantees that the teams stays in OKC for about 22 or 23 year of the lease .. min ..


do you think the peake will be a viable arena forever??

meaning surely you believe that at some point OKC will need a new arena

(others can comment ) but one of the huge reasons OKC needs a new arena is the loading dock/set up space is not big enough currently to have back to back events in OKC ..

I fundamentally disagree that the lease guarantees OKC stays. The only thing that guarantees OKC stays is an ownership group committed to OKC. If PBC sells and the buyers don't have emotional ties to OKC, then I have no reason to believe the Thunder are staying in the long run.

Yeah, there's probably utility outside of the Thunder to getting a new arena in the next 15-20 years, but under no circumstance do we need to spend $1.3B on it. And sure as hell doesn't need to use up the Cox site.

[PokeFromOk]

The way a lot of you are talking, the Thunder are just a greedy organization, clearly trying to fleece the city of every penny they can. Lol

What none of youv are actually talking about is that there is a basketball component to this. Many of these other cities and franchises you are discussing don't spend the money the Thunder have and will continue to do to try to win a championship. They've spent big money on HOF talent, huge free agents, and have developed a lot of young talent without just immediately trading them off for financial value as soon as they could.

As almost the smallest market team, they need a different deal from the city than almost every other city any of you have mentioned since they are also going to spend more to keep this franchise chasing an NBA championship. The fact that none of you that are complaining have even brought that up at all tells me you're only looking at business numbers. This involves much more than that.

The Thunder have never acted as a franchise that just wants to just get their profits from the city and be greedy. And, it's pretty short sided by anyone to assume that suddenly that's who they are going to become. The organization has a very committed approach with their time and resources for charity and community outreach. Far more than just the minimum required by the NBA. Sam Presti has been ridiculously committed to the OKC community and takes every player that joins the team straight to the memorial so they always understand the community and what they're been through. They have a franchise culture that doesn't tolerate any player that might compromise the team or the city with their behavior and decision making. It is extremely rare to see any thunder player in the news embarrassing the city or the franchise, and that's because the team will only sign a certain type of individual. All these things they do come at a premium. And, being such a small market, the revenue isn't the same as larger markets.

This is a partnership and the city thankfully understands that. This organization has always met the city halfway to ensure that they can keep actually chasing a championship and giving this city something to be proud of and in the process hasn't squeezed the city just for profit. It's unfair to suddenly assume they are just throwing in all their chips to screw the city and the citizens. They aren't. Yes, we need to see more details, but they have never given us any reason up to this point to think they are screwing us. They've definitely earned enough trust to have this deal pass and that's a big reason it will.

Great post!

[PokeFromOk]

Of course it isn't binary. Why would it be? Why would this deal be the first in the history of sports to be non-negotiable?

And as you mention, there are at least 3 years to negotiate.

There are plenty of examples of sports deals or deals in general being non-negotiable. Leverage and proper valuation upfront can and will establish a firm line in the sand in certain deals. Negotiating is what I’ve done for a living for over 15 years, so I’ve seen this.

And you acting like this hasn’t already been discussed and negotiated to this point, it has. This isn’t a number that was picked out of a hat. This is the deal, I believe it is binary because Holt who knows and understands the deal better than you or I says it is now binary at this point.

[BoulderSooner]

I fundamentally disagree that the lease guarantees OKC stays. The only thing that guarantees OKC stays is an ownership group committed to OKC. If PBC sells and the buyers don't have emotional ties to OKC, then I have no reason to believe the Thunder are staying in the long run.

Yeah, there's probably utility outside of the Thunder to getting a new arena in the next 15-20 years, but under no circumstance do we need to spend $1.3B on it. And sure as hell doesn't need to use up the Cox site.

again show any example anywhere in pro sports where a team broke a 20+ year lease .. or broke any lease .( with out an agreement with the city)

[Pete]

There are plenty of examples of sports deals or deals in general being non-negotiable. Leverage and proper valuation upfront can and will establish a firm line in the sand in certain deals. Negotiating is what I’ve done for a living for over 15 years, so I’ve seen this.

And you acting like this hasn’t already been discussed and negotiated to this point, it has. This isn’t a number that was picked out of a hat. This is the deal, I believe it is binary because Holt who knows and understands the deal better than you or I says it is now binary at this point.

The data from every other single deal for an NBA arena indicates your assumptions are completely wrong.

[Dob Hooligan]

The NBA hates moving teams. Last time was Seattle 15 years ago. And that was mainly about Seattle having stadium fatigue from building a new baseball stadium, football stadium, and overhaul of Key arena in the previous decade-ish. Plus Howard Schultz decided the Key Arean makeover was inferior after 6 years and decided to bail.

The NBA worked overtime to keep the Kings in Sacramento, the Hornets in Charlotte and the Pelicans in New Orleans. They need teams in different cities. They like, and have been very successful, being the only game in town.

If it was so easy to sell and move a team, then the Thunder ownership would sell today for $4 billion to one of the expansion groups who would then move to the Gold Mine Towns of Seattle or Las Vegas, as Bill Simmons would have you believe.

[BDP]

yep cities that can't raise the full amount for a new building (politically) pretty much give away their arena to a private business .. and still pay for half (or more) of it ..

berceuse that looks better on the front end optics.

What's interesting about the Milwaukee deal as I learned more about it (I think), is that the city does not even technically own the arena or directly participate in the district around it. The state carved out a special "semi-autonomous" district that issues its own bonds and collects its own taxes, with an exemption for the team of sales within the arena. So, there's no real direct revenue for the city. It sounds like any collections within the district stay within the district to pay for the debt incurred to develop it and its portion of arena construction.

It's pretty convoluted, so I may be wrong on some of those points, but I'm just wondering if there would ever be support for, say, carving the cox site out of the city and any sales tax collected within the development on that site stayed within the district and all revenue the arena generated, basketball or otherwise, would stay with the team owners. At least for me, if we get a sense that's what happening here before the vote, I'd probably vote no, unless there is some angle I am missing.

[April in the Plaza]

The NBA hates moving teams. Last time was Seattle 15 years ago. And that was mainly about Seattle having stadium fatigue from building a new baseball stadium, football stadium, and overhaul of Key arena in the previous decade-ish. Plus Howard Schultz decided the Key Arean makeover was inferior after 6 years and decided to bail.

The NBA worked overtime to keep the Kings in Sacramento, the Hornets in Charlotte and the Pelicans in New Orleans. They need teams in different cities. They like, and have been very successful, being the only game in town.

If it was so easy to sell and move a team, then the Thunder ownership would sell today for $4 billion to one of the expansion groups who would then move to the Gold Mine Towns of Seattle or Las Vegas, as Bill Simmons would have you believe.

Not exactly. It doesn’t make a whole lot of sense for the owners to sell a rapidly appreciating asset, particularly with league expansion on the horizon. The ownership group will very likely collect ~$250M or more as its share of expansion fees.

And, I’d presume that ownership shares in sports teams, much like other capital assets, are eligible for a stepped up cost basis. So it would be much more tax efficient for the owners to remain vested.

[BoulderSooner]

The NBA hates moving teams. Last time was Seattle 15 years ago. And that was mainly about Seattle having stadium fatigue from building a new baseball stadium, football stadium, and overhaul of Key arena in the previous decade-ish. Plus Howard Schultz decided the Key Arean makeover was inferior after 6 years and decided to bail.

The NBA worked overtime to keep the Kings in Sacramento, the Hornets in Charlotte and the Pelicans in New Orleans. They need teams in different cities. They like, and have been very successful, being the only game in town.

If it was so easy to sell and move a team, then the Thunder ownership would sell today for $4 billion to one of the expansion groups who would then move to the Gold Mine Towns of Seattle or Las Vegas, as Bill Simmons would have you believe.

the owners don't want the team to move from OKC ..

[BoulderSooner]

The data from every other single deal for an NBA arena indicates your assumptions are completely wrong.

again apples to oranges ... except for memphis and orlando .. that i can find ..


are you for the city of OKC paying for 50% or more of a 100% team (essentially ) owned arena?

[Pete]

again apples to oranges ... except for memphis and orlando .. that i can find ..


are you for the city of OKC paying for 50% or more of a 100% team (essentially ) owned arena?

Nobody can find any deal where the ownership group has only paid 5% (or anywhere near that tiny amount) of the arena cost, regardless of the other details which we still don't know.

If the governor, a senator or any other politician was doing this -- especially behind closed doors -- everyone would be going ballistic. People have been losing their minds over Swadleys and a few million. But now everyone should just pipe down and fork over $1B in public money in a deal that looks way off the charts? That's ridiculous.

[BoulderSooner]

Nobody can find any deal where the ownership group has only paid 5% (or anywhere near that tiny amount) of the arena cost, regardless of the other details which we still don't know.

If the governor, a senator or any other politician was doing this -- especially behind closed doors -- everyone would be going ballistic. People have been losing their minds over Swadleys and a few million. But now everyone should just pipe down and fork over $1B in public money in a deal that looks way off the charts? That's ridiculous.

memphis 0% orlando 10% the leases in the other deals make them completely different and not comparable to the OKC siltation ..

[BoulderSooner]

Nobody can find any deal where the ownership group has only paid 5% (or anywhere near that tiny amount) of the arena cost, regardless of the other details which we still don't know.

If the governor, a senator or any other politician was doing this -- especially behind closed doors -- everyone would be going ballistic. People have been losing their minds over Swadleys and a few million. But now everyone should just pipe down and fork over $1B in public money in a deal that looks way off the charts? That's ridiculous.

OKC is building a facility for them selves ... first and foremost .. they just happen to have anchor tenant lined up that is gifting them 50 mil

[OKC_Chipper]

Nobody can find any deal where the ownership group has only paid 5% (or anywhere near that tiny amount) of the arena cost, regardless of the other details which we still don't know.

If the governor, a senator or any other politician was doing this -- especially behind closed doors -- everyone would be going ballistic. People have been losing their minds over Swadleys and a few million. But now everyone should just pipe down and fork over $1B in public money in a deal that looks way off the charts? That's ridiculous.

So you would vote against it as currently laid out?

[Pete]

memphis 0% orlando 10% the leases in the other deals make them completely different and not comparable to the OKC siltation ..

We don't even know the details of the Thunder lease, if the ownership will have rights to ancillary development, etc.

Memphis is a remodel as was Paycom which was also 100% funded by OKC.

[PokeFromOk]

The data from every other single deal for an NBA arena indicates your assumptions are completely wrong.

What assumptions are you referring to? The $50M pledge from Thunder ownership was accepted by the city through some sort of ongoing discussion, which some like to call a negotiation, that is why the number is what it is. You are ignoring every other piece of data that says each arena deal is unique, just like this one. The facts are that OKC has one professional team, it only occurred due to a special set of circumstances that is likely not be repeat and due to size, location, etc. (i.e. potential revenue) we do not have leverage like most cities. Those are facts, not assumptions. Teams do move for various reasons and we got the Thunder over an arena issue, so we should be able to understand the potential for team relocation due over arena issues/potential revenue better than most.

Also, you are likewise ignoring that the arena will be owned by the city and and all other sources of revenue that comes from it (concerts, etc.) will not be run through The Professional Basketball Club, LLC.

[BoulderSooner]

We don't even know the details of the Thunder lease, if the ownership will have rights to ancillary development, etc.

Memphis is a remodel as was Paycom which was also 100% funded by OKC.

and the memphis arena is getting a 350 mil public paid for renovation (which is possible because it wasn't built as a small sqft bare bones arena in the first place) over 800k sqft instead of under 600k sqft


i think we can say that the city is not turning over 100% control of the arena to the thunder (if this turns out to be incorrect i may have deferent feelings on the project)

[shai2022]

Nobody can find any deal where the ownership group has only paid 5% (or anywhere near that tiny amount) of the arena cost, regardless of the other details which we still don't know.

If the governor, a senator or any other politician was doing this -- especially behind closed doors -- everyone would be going ballistic. People have been losing their minds over Swadleys and a few million. But now everyone should just pipe down and fork over $1B in public money in a deal that looks way off the charts? That's ridiculous.

While this may be true, the risk reward for this not passing is extraordinary.

Do the owners have all the leverage? Absolutely. Is there anything we can do about that? No.

There are no "second chances" at these things. No magical better deal is just going to appear (from okc). Who it will appear from is 10+ other markets that want an NBA team and may already have the necessary arena. Offers to buy the team will flood in just as the league expansion windfall hits. Jumps in team valuations will never be stronger.

So I ask again, is the risk worth the reward? We can be the next major city and continue growing, or another Louisville or Wichita or Columbus.

And if you have an issue with an extension of a 1c penny tax while we are one of the least tax burdened states thats just on you (not you specifically pete, in general). I can guarantee you the public outcry will be far louder once sale rumors hit news cycles and billionaires are lining up with offers. But hey - if you want to stick it to these ultra wealthy individuals then go for it. It will only hurt us more at the end of the day.

[Pete]

^

Not ignoring anything.

Please show me a deal for another NBA arena where a City provided anywhere near in $1 billion in public funding. Nothing is even close.