Friday, November 10, 2006

Welcome to the sports industries version of The Twilight Zone

There is a fifth dimension, beyond that which is known to most professional sports owners. It is a dimension as vast as space and as timeless as infinity (where corporate welfare for sports owners doesn’t exist). It is the middle ground between light and shadow, where common sense in dealing with the Billionaire Boys Club actually exists, welcome to the State of California where there is little if any pubic financing available for the Maloof’s, the York’s, Alex Spano’s, Lewis Woolf and those prepared to own a sports team in --- The California Zone.

Ever since state California Proposition 13 passed in 1978, changing how taxpayer money is spent, California cities have regularly rejected attempts to extract public funds for new stadiums.

In the last 48 hours Sacramento taxpayers overwhelming rejected a ballot measure that would have provided the funding for a new arena for the Sacramento Kings. In San Francisco, 49’ers president John York announced the franchise was abandoning their plans to build a new stadium in San Francisco in favor of one 40 miles to the south in Santa Clara. In San Diego, in less than seven weeks the Chargers without a taxpayer funded stadium will be free to negotiate a stadium deal, along with the ability to move their team. And in Los Angeles, the National Football League is nowhere with their plans to put a franchise back in America’s second biggest market, a frustrating ten-year experience with the same message -- Proposition 13 is alive and well in California.

Last year amid much fanfare the 49’ers announced they would build their own state-of-the art facility, costing more than $800 million. The team may have hoped San Francisco taxpayers would fund the needed infrastructure costs associated with the proposed stadium. Essentially the 49’ers wanted a deal similar to the arrangement San Francisco Giants owner Peter Magown had when he built Pac Bell Park six years ago. The Giants paid for the entire $357 million associated with the ballpark, and the City of San Francisco redeveloped the cities waterfront. The challenge 49’ers owner John York faced, while he may have been looking for public support, he had none.

“We hired the best experts and advisors in the business and worked tirelessly with the City and Lennar to move forward with this project at Candlestick Point,” said team owner John York. “I want to commend Mayor Newsom and his staff and Lennar for their support and determination over the past year in this enormous undertaking. This decision is not a reflection of their efforts, but rather the geographic challenges of this site.”

At the end of the day, after a year-long study, the 49’ers realized it would cost between $600 and $800 million in infrastructure costs associated with the proposed stadium. Even if taxpayers where prepared to offer limited support when the costs of the stadium and the infrastructure costs where added up the total would easily top a billion dollars.

In San Francisco reaction for the most part was muted. The biggest impact could be on San Francisco’s 2016 Olympic bid. San Francisco, Los Angeles and Chicago are the three American cities vying for the right to be the American bidder (and the likely favorite) to host the 2016 Games. A new 49’ers stadium in San Francisco not one 40 miles to the south was considered a key centerpiece in San Francisco’s Olympic bid.

Are the 49’ers moving to Santa Clara? Don’t kid yourself there isn’t a plan in place to build a stadium in Santa Clara, with public or private money. How did Santa Clara end up on the 49’ers wish list as the teams’ “Plan B”? Since 1987 Santa Clara has been home to the 49’ers administrative headquarters and practice facility.

``The 49ers have said we were Plan B. I guess this is logical, if this is true, that we would become Plan A,'' Santa Clara City Councilman Kevin Moore said. ``The 49ers have been part of the Santa Clara family for 20 years. We would welcome the opportunity to have the 49ers play their home games in Santa Clara.''

Said Santa Clara Mayor Patricia Mahan: ``For Santa Clara this is great news. This is huge for our region. We will be taking seriously anything they bring to the table.''

Take this to the bank – unless and until John York has a stadium agreement he believes he can make money with the 49’ers won’t be moving anywhere. The challenge York and the 49’ers face, Monster Park (the stadium formerly known as Candlestick Park) was built in 1960 at a cost of $15 million. The financial valuation of the average NFL franchise may exceed $850 million, however according to Forbes Magazine subjective but respected financial valuation the 49’ers have a value of $734 million, 29th on the list of 32 NFL teams, and according to Forbes most the 49’ers revenue generation issues can be directly linked to their stadium.

Despite playing the country's sixth biggest TV market, the 49ers have some of the lowest revenues in the league thanks to an antiquated stadium that features no club seating, and an onerous lease that forces the team to share concession, luxury-suite, naming-rights and signage revenue with the city.

The San Diego Chargers play in a facility not quite as old as the 49’ers stadium, and just as terrible in terms of generating key revenue streams from the stadium amenities modern NFL stadium offer. Qualcomm Stadium was built in 1967 at a cost of $27 million. Forbes placed the value of the Chargers at $731 million, 30th on the Forbes list. Again Forbes assessment is largely based on the antiquated stadium the Chargers are playing in.

The team has raised ticket prices more than 30 percent over the past two years to boost revenues. The team's latest revenue generating ploy is increased parking prices for 2006 with prime tailgating spots going for $75. The long held belief has the Chargers moving to Los Angeles.

The Chargers will be in a position to negotiate a move to any City after January 1, 2007 if they don’t have an agreement to build a new stadium in San Diego County by that date. The team can move after the 2008 season by paying off the city's $60 million debt from the 1997 expansion of Qualcomm Stadium. For the Chargers it’s a classic Catch 22. For all the ‘talk’ about moving and heading to Los Angeles the Chargers are offering nothing more than an empty threat. Los Angeles taxpayers haven’t supported a publicly funded sports facility since Proposition 13 was passed in 1978. The $330 million Staples Center, built in downtown Los Angeles was built at a cost of $330 million in 1999, with taxpayers contributing $58.5 million. A new state-of-the art NFL stadium built in Los Angeles will cost more than $1 billion.

Would Orange County, 40 miles from Los Angeles build a stadium for an NFL team? The city of Anaheim covered most of the $118 million in renovations at Angels Stadium (done between 1997 and 1999). The City of Anaheim also built the Honda Center (the home of the NHL Ducks) in 1993 at a cost of $123 million. So yes there has been public (taxpayer) support in Orange County to build sports facilities, but nowhere near the billion dollars Chargers owner Alex Spanos needs to build a new stadium. Bottom line, the Chargers can huff, puff and threaten to move, but if they want a new stadium in San Diego or Los Angeles, Proposition 13 remains an impossible hill to climb.

Tuesday night voters in Sacramento overwhelmingly rejected two key ballot measures rejecting what would have been the worst arena proposal any municipality had considered in decades. The NBA has a future in Sacramento, and indeed there may indeed be a partially funded taxpayer built arena, but not as long as Joe and Gavin Maloof own that NBA franchise. However, the Kings arena saga took another interesting twist Thursday after The Sacramento Bee published a report suggesting the NBA had no interest in supporting the measure that would have provided most the needed funding for the Kings proposed $540 million arena.

80 percent of the voters rejected the plan, not only dooming the proposal, but creating serious image issues for the foreseeable future for the Maloof’s in Sacramento. The Bee raised a serious question Thursday, did the actions of Joe and Gavin Maloof reflect their volatility and lack of political savvy, or whether they systematically sabotaged the campaign because they prefer that a new arena be built next to Arco in North Natomas or want to move the team to another city.

Veteran political consultant David Townsend told The Sacramento Bee he believes the sabotage was deliberate.

"I know a professional campaign when I see it, and this is a professional campaign," Townsend said. "This is not all by happenstance. ... This was an orchestrated, well-thought-out campaign to tube Q&R."

Robert Waste, professor of public policy at California State University, believed one of the key mistakes the Maloof’s made was in their appearance in a Carl’s Jr. commercial eating burgers while drinking a $6,000 bottle of wine.

"If they were trying to sabotage (the arena plan) from Day One, I don't think they'd have done anything differently," Waste said.

Townsend for his part made it clear to The Sacramento Bee; the Maloof’s have burned too many bridges to have any real future in Sacramento. "It's my opinion that as long as the Maloofs are in the mix, it will never happen," he said.

In the 2004 negotiations with North Natomas landowners, Townsend told the Bee, the Maloofs' (in yet another failed Sacramento arena bid) "demands reached absurd levels, so the property owners basically said we're not going to pay for all that stuff -- plasma screen TVs everywhere, blah, blah, blah."

The Sacramento Bee also pointed some fingers directly at David Stern and the NBA suggesting the league was very much a part of the failed effort, and according to Bee columnist Marcos Bretón, “NBA not only didn't help, it then piled on.”

Regardless of the role the NBA may or may not have played the Maloof’s are done in Sacramento. President Bush has a higher approval rating then does Joe and Gavin Maloof, and the last few days have been ‘challenging’ for the President’s popularity.

The National Football League continues to act like the Big Bad Wolf when it comes to their hopes to place a franchise in Los Angeles. The NFL will be able to generate a billion dollars in expansion fees for “a” franchise when they choose to expand again. NFL awarded an expansion franchise to Al Lerner in September 1998. Lerner paid $540 million, but Ohio taxpayers also did built what they refused to do for Art Modell, build a state-of-the art stadium.

A year later the NFL awarded their 32nd franchise to Bob McNair for a then record expansion fee of $700 million the following week at meetings in Atlanta.

Similar to the rationale Modell used to move the Browns to Baltimore where they where renamed the Ravens, Houston Oilers owner Bud Adams who founded the Oilers in 1960 (Modell purchased the Browns for $4 million in 1961), Adams announced Adams announced that the Oilers would be moving to Nashville for the 1998 season. Nashville officials promised to contribute $144 million toward a new stadium, as well as $70 million in ticket sales. The renamed Tennessee Titans moved into LP Field in 1999. The stadium cost $290 million, again built with taxpayer dollars.

History again repeated itself in Houston. Bud Adams couldn’t taxpayer support to build a new stadium, the NFL left and returned with a new owner and a taxpayer built facility. The variable in each case was the owner. In both Cleveland and Houston the NFL left only to return with a new owner having found a solution as to why the original owner had left the market. The same held true for the NBA in Charlotte, George Shinn couldn’t find any taxpayer support to build a new arena for his Hornets. He moved the team to New Orleans; the NBA immediately announced the league would expand back to the Charlotte market. Robert Johnson paid $300 in expansion fees, and Charlotte taxpayers built a new downtown arena.

Three different cities, three different teams, six different owners, all with the same end result. However, the one constant in California and the variable that doesn’t exist in Maryland, Tennessee, Louisiana, North Carolina, Texas and Ohio is Proposition 13 and California politics. Other American States and communities may have a different set of priorities when it comes to building sports facilities, but when it comes to teams looking for corporate welfare in California – thanks but no thanks, you’re in the California Zone.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The Sacramento Bee and the San Diego Union Tribune

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