Areener Math: Wild A** Speculation While We Wait for the Numbers


While we wait for the financial details of the arrangements between the Islanders and Nassau County with respect to the new arena, I thought I would set the stage by highlighting the some of the numbers that will be central to the analysis of whether the deal makes sense for the county.  These numbers are either estimates I developed or based on the Lighthouse Project reports and are therefore inexact (and perhaps slightly slanted by the LHP's proponents), but for those of us can’t wait for actual facts I figure why not make up some on our own.  Feel free to comment, question, correct or criticize in comments.

1.         How much will it $400 million cost the county on an annual basis?

This is perhaps the most important and easy to answer question.  Most important, because this represents how much in taxes and revenue sharing will have to be generated to make this deal tax neutral to County residents (or, in a worst case scenario, how much the county will have to pay annually), and easy to answer because its simply a matter of amortizing $400 million based on a given interest rate.

So, assuming a 4% interest rate (the interest rate for Nassau County bonds issued a few years ago), the County will have to pay approximately $20 million annually in interest and principal over a 30 year period to pay back the bond.  I’m no expert in public finance, but based on municipal bond documents I’ve seen, they often have repayment schedules that are not "flat," so this number may vary from year to year (and given Wang’s propensity for back-loaded player contracts, who knows how that will translate here).

2. How much revenue will a new Coliseum generate?

This question here is simple - how much cash will be brought in by a new Coliseum, without accounting for expenses, "secondary spending" (i.e. increased business for the restaurant across the street) or the overall economic impact of the Islanders and a new Coliseum. The reason why this number is important is because this is the pot of money that any revenue sharing arrangement will be based on. With this number one guess get a rough idea of what percentage would need to be paid to the county so that the bond is paid fully at no cost to taxpayers.

Coliseum under the LHP Plan:  $218 million annually (February 2006 County Executive/HRA Report)

Minor League Stadium:  $10 million annually (June 2006 Legislature Report)

These estimates show that there will be approximately $228 million in revenues annually, suggesting that a 10% sharing arrangement may be sufficient to repay the bond.  However, these numbers should be taken with many, many grains of salt: 

  • These numbers are estimates.  I haven’t seen any data providing the basis for these estimates.  They also relate to the arena and stadium proposed as part of the Lighthouse Project, although I don’t see why the arena/stadium proposed as part of the new plan would generate different estimates.
  • These estimates do not include revenue generated by any surrounding development, although it is unclear whether surrounding development will be subject to the revenue sharing arrangements.
  •  It would be useful to know the revenues generated by the existing Coliseum, which should provide a "floor" for revenues as I cant imagine that a new arena would produce revenue less than the existing Coliseum.  However, I was unable to find such numbers. 


3. How much in tax revenues will a new arena generate for the County?  How much will be lost if the team leaves leaving the existing Coliseum vacant?


This question is important for a couple of reasons.  First, Mangano has said that any tax revenue generated by the project will be devoted to repaying the bond.  Second, tax revenues that the County might lose if the Islanders leave and the Coliseum remains vacant is important to any analysis of the new arena proposal.  But this is where it gets a bit complicated:  if the tax revenue streams for the new arena will go to repay the bond, isn’t the deal a wash from a tax perspective?  Either way, the tax revenues will no longer make its way to the County treasury.  Of course, the hope is that the taxes generated by a new arena – combined with the revenue sharing – will exceed the $20 million in debt payments, resulting in an net increase in revenue for the County  (a result suggested by the tax revenues estimates for LHP).  Also, the hope is that a new arena will result in other economic activity which will in turn generate its own tax revenue.  Anyway, here are the numbers I was able to find.  Unfortunately, I was unable to find projected tax revenues for a standalone arena and stadium:


Existing Coliseum:  $2 million annually (HRA Report)

Lighthouse Project (including non-Coliseum development):  $18.2 million annually (HRA Report)


4.         What is the economic impact of the Islanders and the Coliseum on Nassau County?


In other words, how much of Nassau County’s output of goods and services are attributable– directly or indirectly – to the Islanders and the Coliseum?  While this number may not translate easily to the economic analysis of the proposal, it is an important number nonetheless.  Economic output is the engine that creates jobs a sustainable tax base.  The answer is pretty impressive – approximately $194 million annually.  Note that this number relates to the current Coliseum and does not include non-Islander events like concerts and ice shows.  A the impact of a new Coliseum along with new surrounding development is likely to be significantly more. 

Bottom line:  It's clear that a very convincing case can be made based on existing data that the proposed arena deal is a winner for Nassau County.  Although $20 million per year is hefty sum, given that the alternative means a certain loss of a $200 million per year economic engine and forgoing the opportunity of a redeveloped Hub that can very likely generate more than that, the case for a "Yes" vote is very strong.

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