United States Sports Academy - "America's Sports University"

With new state of the art sporting arenas costing anywhere between $30 million to $300 million to build, huge financial investments must be made. There are many options in financing sport and recreation facilities than involve both public and private arrangements and investments. This paper will address various financial ventures and the benefits and pitfalls of those options.

Funding may be separated into two distinct groups public funding and private funding. Public funding may included but may not be limited to taxes, municipal bonds, certificates of participation and special authority bonds. Public funding may include but may not be limited to, cash donations, contributions, naming rights, concessionaire and or restaurant rights, sponsorships, lease agreements, luxury and preferred seating, parking fees, advertising, and gifts shops revenues. Other ways of financing in order to spread the enormous costs of building a state of the art sporting facility is that projects have been partnered in joint public and private funding. Often, the public funding is in the form of land contributions or luxury taxes and the private contributions are reflected within the facility itself.

Cities, counties and states such as Tampa and Miami Florida, Nashville TN. and Irving TX. have picked up the entire cost for new arenas through public funding. More than half of the construction costs for other facilities in Dallas, Seattle, Atlanta, Raleigh, N.C. and St. Paul, MN. are financed by their local governments.

Public funding in the form of taxes

In the state of Texas, there was a controversy around the arena funding bill called House Bill 92. Passed in 1997, House Bill 92 is a tool that communities can use as possible funding options for the development of new sport facilities by levying taxes and tapping sales tax funds. The bill authorizes cities to tap the sales tax to fund other economic development projects as well (San Antonio Business Journal, 1998). Many have their eyes on the funding source. One of those interested was State Senator Frank Madla, who had a proposal using the House Bill 92 to couple the funding of a new arena, community projects and a campus expansion at the University of Texas, San Antonio. Considering the little support that voters had toward approving a sales tax to fund a new sports arena, a referendum involving a combination of many different projects, might have had more of an appeal. Community leaders reacted to the idea of a bundled project referendum with apprehension. Although, it may have more of a voter support, the plan will limit the amount of money that could be raised for any one project. A half cent sales tax would bring in about $50 million a year and spread out over several projects, it is not a lot of funding. A ½ cent sales tax was also desired solely for the building of a new arena for the San Antonio Spurs, the Livestock Show & Rodeo and ice hockey. Arguments opposed to the use of the ½ cent sales tax came from the Metropolitan Transit in San Antonio. The sales tax that the House Bill 92 refers to is what Texas voters had previously designated as the Mass Transit Authority (MTA) sales tax. The state legislation allowed for the MTA to receive a full cent for operating a public transit system. The Metropolitan Transit decided to collect only a ½ cent with the expectation that the additional ½ cent would be available for future needs. It is that extra ½ cent that was wanted for the development of projects. The MTA claims not only address the transportation needs of the community, it also maintains 550 full time jobs, and provides returns three times its cost in business revenue to the communities it serves. Its argument is that the building of a sports arena only satisfies the private interests of a few people and its supporters (San Antonio Business Journal, 1997). A similar argument echoed in Dallas, where citizens questioned by they should pay higher taxes to benefit the team owners who are two of the wealthiest citizens in Dallas. Even though the teams were contributing $105 million to build the arena, the city was getting no revenue directly from the facility (Dallas Business Journal, 1997). These arguments have lasted for several years and in 1999, the city of San Antonio was exploring other funding options for the new arena. Not only would voters be asked to back 1/8 of a cent a tax revenue, but the San Antonio Spurs and other private donors would be expected to contribute funds. Besides the use of sales taxes, House Bill 92 authorizes the levying of other public taxes such as motor vehicle rental tax, event parking tax, hotel occupancy tax and facility use tax, which allows visiting teams to be charged up to $5,000 per game for the use of the facility. The burden of the taxes levied fall on the visitors rather than the general public. This attracted opposition from trade groups, and convention groups whose members depends on tourism. The thought is that when hotel and car rental taxes are increased, fewer people will consume those services. Those opposed to the idea feel that the city visitors gets poorer by paying for something he or she may not use, a new arena, but the owners and players get richer. The cities of Dallas and Houston have taken advantage of the hotel and car rental taxes. Dallas has a $230 million downtown arena project that is publically and privately financed. The Dallas plan as approved by the City Council ended up as roughly a 50/50 deal between the city and the two teams to use the facility. The city contributed a total of $110 million for the construction of the arena and an additional $15 million in infrastructure improvements and the teams kicked in $105 million for construction costs. In San Antonio, voters did approve $110-147 million to be raised through hotel and car taxes only by slim margins. Of the 125,000 votes casts, the arena referendum passed by just 1,642 votes. (San Antonio Business Journal, 1999).

Often residents are concerned with how much a new arena would cost them. One question also to be considered is how much would it cost not to build at all. In a recent study done by the St. Louis Cardinals, a new stadium would bring a tax revenue to both St. Louis and Missouri, from $14.5 million last year to $23.2 million by 2005. By 2035 the projected revenue is estimated at $77 million (St. Louis Business Journal, 2000). Without a new stadium, the city stands to loose that much. Over the years, the Cardinals by investing millions in stadium upgrades, has already increased tax revenues from$6.3 million in 1995 to $16.4 million in 2000. The proposed ball park, would cost approximately $370 million to build and the city and state would allocate a portion of taxes to fund the costs. Without a new stadium, the team president fears they will not be able to compete with division rivals and fund a higher payroll. The same fate happened to the Minnesota Twins and the city of Minneapolis in 1992. After winning the 1991 World Series, the Twins asked for a new stadium to compete with the Metrodome. They were turned down, the payroll was cut and attendance fell. As a result, the $3.2 million generated in taxes from ticket sales, fell to $500,000 as of last year. The city of St. Louis may face the same situation and needs to weigh their economic opportunities for their city.

At the national Council For Urban Economic Development conference, Rick Horrow, President of Horrow Sports Adventures spoke of the revenues lost by not building needed facilities. He reported, "80%-85% of team revenue that is shared comes mostly from ticket sales and television contracts. The 15%-20% balance comes from skyboxes, parking concessions and club seats.." (Amusement Business, 1997). It is this 15%-20% that is fueling new sports facility development. The average annual revenue income of the NFL is $71 million, and the top five teams average $86 million. Horrow also said, the building of new NFL facilities generally requires cooperation between cities, counties, and states, and that the financial risks and burdens borne by the public sector have been increasingly shifted onto tourists, who pay through hotel and car rental taxes and other mechanisms that minimize the cost to local taxpayers. The latest trend is to package other community needs with facility funding. Many of the new facilities are multipurpose facilities which can offer concerts and other events. Public funding in the form of bonds.

Bonds are a way for a city government to generate money needed for the construction of a new or the renovation of a sports facility or arena. A bond is defined as " an interest bearing certificate issued by a government or corporation promising to pay interest and to repay a sum of money (the principal) at a specified date in the future"(Samuelson and Nordhaus, 1985, Sawyer, 1999). Bonds sold by a government are referred to as municipal bonds. The two most common type of municipal bonds are general obligation bonds and non guaranteed bonds.

Some state governments permit the state to fund construction and other capital expenses by selling general obligation bonds (GO) that are backed by their tax bases. They are considered to be full faith and credit obligation bonds . Both state and local governments usually ask voters to approve proposed GO bond issues, an opportunity not available to voters by federal governments. Most of the time voters approve the issues even though it may increase local debt and taxes. Since 1993, a majority of public referenda (23 of 41 ) have been approved totaling $4.4 billion in public funding. (Amusement Business, 1999). The funding for development may be desirable if the development spurs economic growth.

One example is that of Scottsdale in Arizona who is pursuing to redevelop an old neighborhood. The redevelopment plan called "Los Arcos Redevelopment Project" is being funded with private and public funds. This hefty redevelopment plan can be seen on the Internet page www.newlosarcos.com. The project costs are as follows: arena costs- $175-183 million, land acquisition/parking- $172-182 million, retail development- $90-98 million, construction- $63-72 million, subtotal: $500-590 million, the over 30 year total: $1066-1125 million. The public will pay for a portion in taxes as follows: land acquisition- $120-135 million, public infrastructure (streets, sewer, plazas)- $30-50 million, sub total: $150-185 million, over 30 years- $340-390 million, the total public participation is 30-35% of the total redevelopment plan. The arena itself will be funded by the developer and the Coyotes. The plan is designed to satisfy the redevelopment of the neighborhood by joining the arena with a mall, restaurants, supermarket, retailers, and a movie complex. (Amusement Business, 1999).

In New Jersey, the Governor offered this year the sum of $75 million toward the $325 million needed for the development of a new arena. The arena in Newark is apart of a plan to bring new retail growth to a suffering city. The state plan has two options: stay in East Rutherford and build a new arena at the Meadowlands Sports Complex for $250 million or move the New Jersey Devils and Nets to downtown Newark. Both projects need voter approval. Those who want the arena built in downtown Newark claim that the funds not only build an arena but rebuild a city. The funds will go to improving access arteries, highways, exit ramps and a new parking garage. But the minimal state investment may keep the teams in the Meadowlands since the Governor is not convinced that new downtown sports arenas can spur economic revitalization in the cities. One assemblyman disagrees, Wilfredo Caraballo, D-Essex said that the lawmakers need to seek more state funds for the Newark project, "In the Meadowlands, the land is already publicly owned. In Newark, the land still needs to be purchased. Moreover, the Meadowlands property might be used for more lucrative ventures for the residents of this state. In Newark, the arena investment would be part of an overall, long term strategy to revitalize the state's largest urban center." (The Record, 2000).

Non guaranteed bonds such as special authority bonds, revenue bonds and certificates of participation are other sources of finance that can be used to build, own and operate utilities, airports, transportation systems and public purpose facilities, such as arenas, and have no power to tax. They derive their revenues from user fees and other sources and must finance general and capital expenditures out of these receipts and whatever they are permitted to borrow. When issuers undertake capital projects, they sell long term bonds. One type of bond, called an industrial development bond, can raise up to $10 million. This type of bond known as an industrial revenue bond offer low interest rates and in order to be eligible for the issuance of these bonds, the borrower must show to the government that the deal will create jobs. Generally, for each $50,000 in capital raised by industrial development bonds, there should be one new job. This will qualify the interest income as tax exempt to the buyers of the bonds. The city council must approve all projects using these bonds. (Nation's Business, 1998). Since their securities cannot be backed by expected tax collection, often the issuers pledge the revenues from their operations, giving the name revenue bonds. These are considered a greater risk for the investors than full faith bonds and credit bonds and therefore likely to pay a higher interest. Instead of GO bonds, which are backed by the city's tax receipts, revenue bonds would be sold and backed by specific revenues generated by the new sports facilities. Such revenues may be concessions, ticket sales, and advertising rights. By using revenue bonds rather than GO bonds the city may avoid criticism that may ensue from using funds needed to improve the schools, create affordable housing or other city priorities.

One example of creative financing to lower taxpayer risks is the city of West Sacramento who teamed with two other governments, the county of Yolo and neighboring Sacramento County to sell bonds to build the new baseball stadium, Raley field. The bonds are to be repaid entirely from team and stadium proceeds over the next 30 years, where by then the River Cats will own the stadium outright. The deal is structured so the team could pay off the bonds with an average game attendance of just 3,500, the lowest of any AAA team. At the present time the River Cats are averaging more than 12,000 fans a game. An innovated part of their plan is to have daily deposits put into a lock box account to assure that the bonds are repaid to a Joint Powers Agency. Joint Powers Agencies are common for government entities to band together to pay for law enforcement, fire protection, and insurance but are not common to finance sports facilities (Business First, 2000). If other governments could get together, it is a promising financial package that will not raise taxes to back the bonds and lessen the risk for all involved.

The down side is that revenue bonds may not be as popular with the fans since they are the ones coming up with the extra fees. The city of Boston is considering imposing a surcharge up to $100,000 on luxury box and club seats. They are also considering a personal seat license for all ticket holders. The personal seat license requires season ticket holders to purchase the right to buy certain seats every year.

Revenue bonds which are sold by state and local governments account for about 2/3rds of the $100-200 billion in new state and local government debt. GO's account for about 1/3rd. In the Las Vegas NV. area, Clark County's total bonded indebtedness is $2.9 billion, which is up 18% from last fiscal year. The largest fiscal year percentage increase was posted by the Las Vegas Convention and Visitors Authority, which had $172 million in debt last fiscal year and is $312 million this year. The 82% increase was due primarily to the issuance of bonds for the current conventional hall expansion project. According to Nevada's Taxpayers Association President, Carole Vilardo, "We're still well below our legislatively imposed GO(General Obligation) limit." (Las Vegas Business Press, 2000). Under state law, Clark County GO bond issuance is limited to 10 % of its assessed valuation. Current assessed valuation stands at $34.1 billion while the county's GO bonded indebtedness stands at $1.2 billion or 35% of its limit. Revenue bonds are not considered in the debt cap. Clark County's $1.6 billion in revenue bonds account for more than 54% of all its indebtedness. The total indebtedness for the 5 area cities in the Las Vegas area and special authority entities such as the water district, water authority, and international airport amount to $8.6 billion for FY00-01, up 12.1% from the previous year.(Las Vegas Business Press, 2000).

Because income from state and local GO and revenue bonds is exempt from federal income tax, they have a strong appeal to many taxpayers. Unlike the federal government which has maintained its reputation for prompt payment of debts, state and local governments have periodically, in recent years, defaulted on their bonds or have come close to doing so, making it important to be mindful of the credit quality of the government securities.

Municipal bonds whether GO or revenue, are rated by the rating agencies in a manner similar to their ratings of corporate bonds rating. The most credit worthy corporations are given a AAA rating. The next three grades are AA, A, and Baa. The bottom ratings go to the most speculative or junk bonds, which would be rated as, Ba, B, Caa, Ca, and C (Renberg 1995). The rating can be improved as the company's finances are monitored and upgrades it if the issuer's situation improves. It also may be downgraded if the situation deteriorates. Many of the corporate bonds have maturities of 30 years, which may involve call risk, which is similar to the prepayment risk of mortgage backed securities. An investor should expect to be compensated for the degree of risk that they will accept. Securities with the highest rating, will offer the lowest yields and likewise, the lower ratings will be higher yields. Revenue bonds tend to have lower yields due to their debt is met out of fees and receipts and therefore, may be affected by recessions, a fall in supply and demand by falling out of favor, or being affected by other services such as water, and utilities. (Renberg 1995).

Investment Grades are as follows:

High Grade

AAA: Bonds with this rating are judged to be the best quality. They carry the smallest degree of investment risk.

AA: These are high quality by all standards. They are rated lower because their margins of protection is not as large.

Medium Grade

A: These bonds possess many favorable investment attributes. Even though, factors giving security to principal and interest are considerable, elements may be present that suggest a susceptibility to impairment some time in the future.

Baa: They are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present by certain elements may be lacking or may be characteristically unreliable over any great length of time.
Speculative (junk)

Ba: Their future cannot be considered well assured. Safeguards and protection for security may be very moderate

B: These bonds lack characteristics of the desirable investment. Assurance of interest and principal payments over any long period of time may be small.

Caa: These are of poor standing. They may be in default or elements of danger of the principal or interest.

C: These are the lowest rated class of bonds. They are considered to have extremely poor prospects of attaining any real investment. (Renberg 1995).

General obligation vs. revenue bonds. General obligation bonds are serviced out of appropriations and backed by the credit and tax base of the issuing unit of government. Interest and principal on revenue bonds are paid from the revenues of the facilities that were built with the money received from their sale. Generally the supply of revenue bonds is greater in longer maturities, while the supply of general obligation bonds are greater in intermediate maturity. GO bonds are considered a better credit risk because of the taxing authority behind them.
Many long term municipal bonds timely payments are insured. It is intended to protect the funds against loss in the event of a state or local governments unit's default. The literature of the bond should state whether or not it is insured. Three types of insurance are involved in tax free bond funds. First: New insurance is what state and local governments or their underwriters obtain if the issuers qualify. Higher ratings such as AAA may result from the coverage. Second, secondary market insurance is purchased by investors, to cover bonds as long as they are outstanding. Third, portfolio insurance is bought by funds to cover bonds in a portfolio (Renberg 1995). It is not enough that the bonds that funds buy have ratings that meet their standards, they must have the claims paying ability of the insurance company providing the coverage. Most funds make certain the insurance companies are rated AAA and remain at that standard. Insurance is an extra layer of protection. Bond insurance negates the need for costly letters of credit and grants an instant AAA rating, and interest rates paid to bond investors are lower. Therefore, refinancing at a later date would not be necessary. With most sporting arenas now being built as revenue palaces, underwriters and investors are more open to insuring private sports deals.

Other risks to watch for in long term municipal bonds purchase is bonds being "called" prior to maturity (Barker 2000). Simply, if a long term bond gets called after five years, the purchaser want to make sure that its total yield is similar to that of other 5 year bonds. The longer the term the bond, the more likely it is to lose value before maturity if interest rates rise. On the other hand, lower rates boost a bond's value. Some bond brokers advise against bonds with maturities past five years or so unless they are likely to be called sooner. For example, the average AAA rated five year municipal bond may trade 4.64%, while a 10 year bond may yield just 4.93%. The interest rate risk with the 10 year bond may not be worth the risk (Barker 2000). When purchasing or trading bonds, one usually goes through a bonds broker who will charge a commission for the transaction. An alternative would be to call a firms such as Charles Schwab or Fidelity Investments and they will sell from their inventory of bonds, not as brokers but as principal. They make their money on the bid spread and not commissions. (Barker 2000).

Certificates of participation are a government buying a facility or land and then leasing it out to pay off the facility's expenses. An example is that of the city of Boston. Several plans are being considered for the new Fenway Park in which the city could invest $200 million. The city may issue revenue bonds to buy a proposed site for a new ball park next to the 88 year old Fenway and assist with construction costs. It has not been determined yet as to whether the city will own the new ball park and require the Boston red Sox to pay an annual lease or it the new facility will be jointly owned by the team and the city (The Boston Globe, 2000).

Residents frequently do not support bonds or increases in tax bases. In Columbus Ohio, financing for a new facility is needed. Polled residents said that they do not support a sales tax increase to fund a stadium, the present location of their stadium is fine and if the Clippers did move, they would prefer a new location outside of town (Business First, 2000). In Dallas, residents resisted the tax increase for a new arena to replace the outdated Reunion Center. One resident's opinion was that the only reason to develop a new center was to add luxury suites which doesn't add back to the community but pays for the escalating player salaries (Dallas Business Journal, 1997). Likewise, voters struck down proposed tax increases to help construct a $160 million basketball arena for th4 NBA Rockets in Houston, and a $325 million baseball stadium for MLB's Twins in St. Paul MN. Other sources of revenues for the building of sports facilities are available for team owners to look at such as private funding.

Private funding is a way to finance a new or renovated facility without a tax increase and little risk to taxpayers. New arenas in San Francisco, Denver, Washington D.C., Boston, and in Vancouver, Montreal, and Ottawa in Canada all have been built entirely with private funds. Minimal public funding was used for arena projects such as in Columbus, Portland and Philadelphia.
Private funding through naming rights.

The San Francisco Giants's privately funded ballpark opened this year. The sale of licenses and naming rights was a key source of income for the ballpark. The San Antonio Spurs will sell its naming rights to the Ellerbe Becket venue. Similarly, possible naming rights may contribute to the new Boston stadium which could add up to $50 million toward the financing. The city may plan to allow the Red Sox to retain revenue generated from the sale of naming rights but still be a city owed facility. But Bostonians have an affiliation with the name Fenway Park and fans may be furious with the changing of the name(The Boston Globe,2000). American Airlines paid $2.1 million a year for 20 years for the naming rights of the American Airlines Arena in Miami FL. The Miami Heat who predominately plays at the arena signed up sponsorships with CitiCorp/Citi Group, Lucent Technologies, Carnival Cruises and Florida Power & Light.(South Florida Business Journal, Miami-Dade Edition, 1998). Dallas's Stars, of the NHL will receive revenues from naming rights , concessions, parking and other arena income when their new arena will open. In Seattle the Seahawks will split arena revenues with the city and the owner. Fans may be getting tired of the corporate naming of stadiums. On the web site www.epinion.com. the user can look up stadiums by option of name, sport or city. A brief description and rating of the stadium/arena is available with comments from the fans. One critic wrote, "Personally, I hate corporate names on buildings. Candlestick Park is now 3Com Park, Joe murphy Stadium is called Qualcomm, and Joe Robbie is Pro Players Stadium. What's next? The Preparation H Arena? Kibbles and Bits Stadium? Depends Fieldhouse?" (Craigmoosh, 2000). The comment rings true, but it is the corporate sponsors that pay for the upgrades, player salaries and other costly expenses. It is an amusing and interesting site to browse.

In Denver a state of the art facility, the Pepsi Center, was developed entirely by private funding. The facility which costs $170 million almost didn't get built when one of the original funding partners pulled out of the deal. The one company left would had to pay $2 million a year for 25 years and not even own the asset at the end of the period. The two primary teams who would play at the new center are the Nuggets and the Avalanche who had a prior lease agreement with the city at the McNichols arena. In order to break the leases, the city wanted a commitment from the Nuggets and the Avalanche to stay in Denver for 25 years at the new center. The teams resisted. There was a stall of building for 2 years. Finally a deal was struck with the city. The arena would be deeded to the city of Denver when it opened but leased back to the teams for 25 years to ensure they did not move during the span of the city's agreement. During the 25 years the city will take all sales tax proceeds generated by the arena as compensation for the teams breaking their prior leases. Ascent Entertainment Group Inc. who owned the Colorado Avalanche, agreed to pay the arena's construction costs and an exemption on a 10% city/county seat tax. At the end of the 25 years, the teams will own the arena. The city was happy that no tax money was spent and the received additional sales taxes from the Pepsi Center. Major sponsors contributed their funds in exchange for naming rights, such as Pepsi, who contributed millions. The amphitheater is called Coors Meadow, which provides a direct path to the Coors Tap Room bar inside the arena. Private concession stands who pay leases offer items from all over Colorado's eateries. Other sponsorships include the Denver Post to got the Fanway and upscale restaurant on the club level. The business center is named for US west Inc. who offers the business community benefits from the new Pepsi center because it offers state of the art conference rooms for rent. Another major sponsor Conoco, has a service stations and mini marts next to the arena, and is one of the few stations in the down town area. The deals with the sponsors are termed for 10 to 30 years. Recently, Ascent Entertainment sold the teams and the Pepsi Center for $461 million (Denver Business Journal, 1999).

Not always do naming rights work out so well especially when the facility is sold. In Buffalo, home of the NHL Sabres, there was a contract dispute regarding the name of their arena. The arena which was called Marine Midland after a bank which no longer exists. The parent company HSBC wanted the named changed of the arena. The Sabres dispute was over the fact that their contract with the bank was for the arena to be called Marine Midland, who was to pay $15 million over 20 years for the right. The facility's standpoint is that they spend lot of time and money promoting the name and then they have to change it. The Buffalo Sabres who was in default on their loan with HSBC because of a $15 million loss last year has changed the name of the arena to HSBC arena.

Naming right experts report that during the early entitlement deals, sponsors fail to protect themselves in the event that a merger or buy out forces them to change their name (Business First, Western New York, 1999). In recent entitlement deals, sponsors have provisions in the contracts for a name change during the course of the agreement. In name rights sponsors this occurrence happens mostly with banks due to buy outs. The costs of changing a name may average around $2 million. Corporate sponsorship of naming rights is well established in professional sports such as the Pepsi Center in Colorado and the Continental Arena in New Jersey.

A recent trend in college athletic is naming rights for multipurpose sports facilities. On Ohio State University's campus, the facility the Schottenstein Center and the basketball and hockey arena the Value City Arena are named after the retail store chain and owners. The owners of the retail chain paid $12.5 million for 75 years of advertising. The University of Wisconsin sports facility is named after Kohl's Department Stores. Syracuse University in 1979 was the first sports facility to sell naming rights for $2.75 million for the Carrier Dome. Some companies buy naming rights for name recognition, tax deductions or support of the community. Experts have not agreed as yet if the tax deductible millions spent on naming rights actually pay for themselves (Business First, Columbus 1995).

Asset Backed Securities

Securities for the multi million dollar arenas are being backed not only by naming rights and sponsorship, but from revenues from luxury suite sales and food concessions. The Pepsi Center in Colorado is an example of how asset backed securities were used to build the arena. The borrowed funds are backed by the sale of luxury suites, sponsors, and food concession sales. The original owner of the Pepsi Center and its teams, Ascent Entertainment Group, reported while securing funds, "One benefit was that we received an investment rating...we were able to get an A rating from Fitch, the highest rating for a sports financing."(Treasury & Risk Management, 1999). This led t a 6.94% interest rate, which helped in raising $139.85 million towards the total cost of the arena. D. L. Auxier, the director of securitization services in Ernst & Young, a structured finance group reports some set backs with asset back issues. He fears, "the interest for sports franchises is short lived." (Treasury & Risk Management, 1999). If the securities are backed by luxury suites and a team projects a certain amount of sales, falling short means adjusting the financial picture. In Florida, the Miami Heat's arena's $180 million in private revenue bonds was able to get bond insurance. It was the first time that private bonds issued for a new arena had received an insurers guarantee even though there is a shadow of a doubt of meeting revenues. According to Larry Levitz, of MBIA Insurance Corp., "The Heat's expected revenues could fall 40% but over half of the arena revenues is from contractually obligated income." (South Florida Business Journal, Miami-Dade Edition, 1998) It seems that luxury suites are in demand. The Reunion Arena in Dallas and the Continental Arena in New Jersey are both outdated because they don't offer enough suites. The American Airlines Arena in Miami was able to raise $180 million toward their arena, home of the Miami Heat. The arena has 65 luxury boxes and is able to take in approximately $13 million a year from leases. The arena leased four first of a kind court side luxury boxes for $500,000 each. (South Florida Business Journal, Miami-Dade Edition, 1998). Other luxury boxes have gone for $300,00 at the Staples Center in Los Angeles and at Madison Square Garden in New York City. For the new arena that will house the San Antonio Spurs and the Live Stock Show/Rodeo in will have 50 new luxury suites and 340,00 potential seats that are sold out in advance. The center will receive 100% of parking , concession, ticket and adverting revenues as well. (Amusement Business 1999).

Extra revenues may be offered to a new arena by management companies who want the contract to manage the facility. In 1998, two big management companies were in competition with each other for the management rights over the smaller version of the SuperDome in New Orleans. The Philadelphia based company, Spectator Management Group (SMG), who already has a contract with the SuperDome, offered $5.6 million cash toward the construction of the Baby Dome. Another management company, Houston based Leisure Management Inc. (LMI), offered $6 million for both contracts. The extra cash would allow the building of luxury suites that would be necessary to attract corporate contracts and big league teams. LMI has 10 arena management contracts in the South. Two other companies made offers in the form of cash loans. Globe Facilities Services of Tampa, FL. and a New York based management company, Ogden Entertainment, made cash loan offers. Ogden Entertainment has 34 other arenas that it manages and also had made offers for cash loans. But a offer of cash without interest is certainly more desirable. In order to make an arena management bid, the company must submit information on their assets. Ogden Entertainment reported $3.6 billion, SMG reported their assets totaling $64.7 million, leisure Management International reported $2 million in assets and Globe Facility Services reported $409,000 in assets ( New Orleans city Business, 1998). Those who do not submit the information would not be in the running for consideration. Joint management of both Domes would save millions in equipment and personnel sharing, and in attractive contracts with vendors and sponsors.

Opinion

It amazes me still that millions of dollars are available for those who need to access it. In 1958, the Phoenix Sun Devils Stadium was built for $1 million dollars. Quite a bit of money back then. Today the new Foxboro arena is estimated to cost $325 million when built. My husband and I priced the tickets for the NHL all stars game in Denver, Co. Just the tickets and hotel would costs us, $1,500 each. At some point in time the costs of going to games is going to be more than the average joe can afford. I do not think the economy is equating with what the average annual salary is. Yes, there are the dot com millionaires but not everyone has been so fortunate to have gotten on that boat. It could be that my personal salary never quite made it out of the range it was in the 80's. Nevertheless, I think with the new presidency, there will be economic changes where going to a game will just not be affordable anymore. The new costly arenas will not fill their seats, not be able to pay their bills and sponsors will not be so willing to spend up millions on advertising rights.

Chart for Arenas and Financing

Legend for chart:
A: City A
B: Facility B
C: Opening C
D: Total Cost D
E: Public Share E
F: Comments F

Miami, FL.
National Car Rental Center 1998
$185 million 100%
Panthers home financed by Broward County

Nashville, TN.
Nashville Arena 1998
$144 million 100%
Predators home in the NHL-voters approved a property tax increase

Tampa, FL.
Ice Palace 1996
$153 million 100%
Tourist bonds and ticket charges will repay municipal bonds

Seattle, WA.
Key Arena 1995
$119.5 million 83%
City gutted Seattle Coliseum and rebuilt from the inside

Raleigh, N.C.
Raleigh Sports Arena 1999
$140 million 75%
N.C. State boosters help facility for NHL and NCAA-home of Hurricanes and Wolfpack

Atlanta, GA.
Philips Arena 1999
$284 million 74%
Turner contributes money- home of the NHL Thrashers

St. Paul, MN.
River Centre 2001
$130 million 73%
The city and state split the public bonds

Dallas, TX.
To Be Announced 2000-01
$232 million 54%
all public contributions from city, not county or state, home of the NHL Stars

Buffalo, NY.
HSBC 1996
$122 million 37%
New York State put in $25 million and Erie county put in $20 million-name change 1999

Columbus, OH.
Nationwide Arena 2000
$139 million 14%
voters shot down sales tax raise for arena, home of the NHL Blue Jackets

Portland, OR.
Rose Garden 1995
$307 million 11%
A mulit use complex

Philadelphia, Penn.
CoreStates Center 1995
$213 million 6%
Owner got $13 million in city and state loans- First Union Corp. bank merger acquired CoreStates, kept name

Denver, CO.
Pepsi Center 1999
$160 million 0
City finally approved downtown facility agreement, delays in building for 2 years

Montreal Canada
Molson Centre 1996
$230 million 0
Canadien's home financed by beer giant

Washington D.C.
MCI Center 1997
$200 million 0
Part of a redevelopment plan

Vancouver, Canada
General Motors Palace 1995
$116 million 0
Grizzlies owner built arena and bought franchise

Boston, MA.
Fleet Center 1995
$160 million 0
Celtics and Bruins home owned by Delaware North Cos.

Ottawa, Canada
Corel Center 1996
$145 million 0
Corel paid owner Terrance Investments $25 million for naming rights

Arlington, TX.
The Ballpark in Arlington 1994
$191 million 71%
Arlington voters passed ½ cent sales tax for Rangers

Irving, TX.
Texas Stadium 1971
$35 million 100%
Cowboys pay Irving rent

Fort Worth, TX.
Texas Motor Speedway 1997
$121 million 0
Speedway Motorsports built facility and gave title to Fort Worth

Grand Prairie, TX.
Lone Star Park at G.P. 1997
$96 million 68%
Grand Prairie voters approved a ½ cent sales tax for the Ponies

East Rutherford, New Jersey
Continental Arena 1981(original) new arena to be built
$250 million if stays in East Rutherford
AKA the Meadowlands, Home of the Devils

Scottsdale Arizona.
Los Arcos (to be announced) 2001
$175-183 million 30-35%
New home of the Phoenix Coyotes part of a large redevelopment.

Foxboro, MA.
To Be Announced. 2002
$325 million 0
badly need new home for the New England Patriots will be privately funded

Phoenix AZ.
Sun Devil Stadium 1958
$1 million 100%
used by college and professional teams built on the campus on Arizona State.

San Antonio TX.
To Be Announced 2002
$175 million 70-80%
Taxes will pay off $260 million worth of revenue bonds in about 20 years. The teams will lease the building from Bexar County.

Sources from Dallas Business Journal 1997 and www.epinion.com.

REFERENCES

Arnott, D. (12/19/1997). Arena proposal would rob the poor to pay the rich. Dallas Business Journal, v21, i17, p39.

Barker, R. (11/6/2000). Buying munis, not heartbreak. Business Week, i3706, p218.

Bernstein, A. (8/23/99). Arena name dispute influences future deals. Business First-Western New York, v15, i47, p5.

Bonded indebtedness in county up 12 percent from fy99-00. (7/31/00). Las Vegas Business Press, v17, i30, p14.

Boston mayor leans toward financing plan for proposed new ball park. (5/3/00). The Boston Globe.
Caywood, T. (2/2/98). Scoring the contract. New Orleans City Business, v18, i31, p1-4.

Crawford, D. (11/27/95). Sports marketers debate impact of naming rights. Business First, Columbus, v12, i13, p4.

Crawford, D. (8/11/2000). Calif. model: Low risk funding of ball park. Business First-Columbus, v16, i52, p1-2.

Dwyer III, J. (7/10/2000). The cost of not building a stadium. St. Louis Business Journal, v20, i44, p1-3.

Hovey, J. (July, 1998). Cheap funding through bonds. Nation's Business v86, i7, p50-52.

Kamerick, M. (3/20/98). Senator floats plan to fund AG campus with arena bill. San Antonio Business Journal, v12, i6, p1-2.

Kaplan, D. (5/8/98). Insurers ok private bonds for funding new heat arena. South Florida Business Journal, Miami-Dade Edition, v18, i38,p7a.

Mitchell, E. (9/3/99). How arena became a reality. Denver Business Journal, v51, i2, p17a-19a.

Muret, D. (11/15/99). Two pass, two fail in new venue referendums. Amusement Business, v111, i46, p3-5.

Prior, C. (May/Jun 99). Asset backed arenas. Treasury & Risk Management, v9, i4, p21.

Renberg, W. (1995). All about bond funds. John Wiley & Sons, Inc.

Sawyer, T., Goldfine, B., Hypes, M., LaRue, R., Seidler, T. (1999). Financing Facility Development .Sawyer, T. Facilities planning for physical activity and sport. P43, Iowa.

Stile C. (8/23/00). New Jersey governor approves funding for new basketball, hockey stadium. The Record.

Suggs, W. (10/17/97). Dallas arena deal takes middle road on funding. Dallas Business Journal, v21, i8, p8-10.

Tankerson, R. ( 6/20/97). Don't compromise public transit system. San Antonio Business Journal, v11, i21, p54-56.

Weiss, S. (2/19/99). City staff will draft funding plan for arena. San Antonio Business Journal, v13, i2, p1-2.

Zoltak, J. (3/3/97). NFL economics separate haves and have nots. Amusement Business, v109, i9, p18.

Web sites:
www.newlosarcos.com.
www.epinion.com.