As everyone is Isles Country now knows, the County and the team agreed to a lease providing for a new Coliseum and revenue sharing. For those whose reading skills have not yet developed past third grade level, there are these "fact sheets", which suggests that the plan provides for hot pretzels for everyone in the county in accordance with a "Historic Contract Agreement" (did Borat write the copy for these sheets?) printed on a faux-parchment scroll. For everyone else, there is this comprehensive economic report and the lease agreement. While the lease agreement is somewhat difficult to follow, I found the economic report to be easy to read and fairly transparent as to its assumptions.
Q: What is the deal?
A: The County agrees to lease the Coliseum and surrounding property to the team for a 30 year term. Funding of construction of a new Coliseum would come from $350M of proceeds from a $400M bond issue. Once construction is complete, The team agrees to an annual lease payment of $14 million or 11.5% in Coliseum revenues, whichever is higher. Effectiveness of the lease is subject to passage of the variety of approvals, including passage of the referendum, and NIFA and legislative approvals.
Q: What if the project costs more than $350 million?
A: Under the lease, the team is responsible for costs in excess of $350 million. However, there is an overall limit of $375 million on the project cost.
Q: What happens if the approvals (NIFA, legislature, referendum, etc.) don’t go through?
A: Under the lease, Wang can back out of the deal if the approvals aren’t in place by the end of 2011.
Q: Will the new Coliseum bring in enough money to offset the borrowing?
A: According to Mangano, yes. Mangano says that the new Coliseum will bring in $1.2 billion over the 30 year term. The cost of the Coliseum and debt service totals approximately $783 million, yielding a profit to the county of approximately $403 million.
Q: Out of what orifice were these numbers pulled?
A: The numbers are based on a report prepared Camoin Associates, a firm retained by the County. In short, Camoin calculated two kinds of benefits to the County: (1) the 11.5% revenue share due under the lease, and (2) County tax revenues (e.g., sales, entertainment and other taxes) that result from the direct spending (such as Coliseum ticket sales) and indirect spending (e.g., money a Coliseum visitor may spend at a restaurant).
Camoin concluded that the 11.5% revenue share would equal $18.9 million in the first year of operation of the Coliseum, 11.5% of projected Coliseum revenues of $164.5 million. This number assumed:
- Average Islanders attendance of 14,550
- No playoff games
- $60 average price for non-premium Islander tickets, $130 for "club seats" and luxury suites
- 82 other events at the Coliseum
All projected spending at the Coliseum (e.g., tickets, food, souvenirs, parking) were added together to yield $164.5 million annually.
The fuzzier number is the tax revenue number. There are two reasons for this: (1) While it's simple enough to calculate the amount of tax the county would collect on the $164.5 million, the analysis accounted for the fact that some of that money would be spent in the County without the Coliseum because there are other places in the County that can host at least some Coliseum events. (2) Assessing the "indirect" spending resulting from the Coliseum is obviously tricky business. The report uses modeling to assess estimate these numbers (otherwise known as "guesswork"). Anyway, the report concludes that the County would receive approximately $9.2 million in tax revenue from direct and indirect spending relating to the Coliseum. Together with the $18.9 lease payment, the County would receive a total of $28.2 million, $2.2 million more than annual debt service of $26 million in the first year of Coliseum operations.
Q: Democratic County Legislator Kevan Abraham, as well as others, called the projections are "lofty." What say you?
A: I can’t pass on the economic modeling, but the Islander related assumptions seem fairly reasonable, if a bit optimistic. 14.5 K in average attendance and $60 average price for a non-premium ticket would place the Islanders in middle of the pack of NHL teams. Also, during the LHP days, Democrats were touting way rosier numbers – the HRA report commissioned by Tom Suozzi estimated $213 million in Coliseum spending vs. $164.5 million in the Camoin report.
Q: Will my taxes go up?
A: The Legislative Budget Review Office estimates that the $400 million in borrowing will cause the average tax bill to increase approximately $58 annually. However, Mangano says, citing the Camoin report, that once the Coliseum is in operation, revenues will exceed debt service so that no tax increase will result. And even if Camoin’s estimates are wrong, Wang is obligated to pay a minimum of $14 million a year, offsetting at least some of the increase. Opponents’ response is that there is currently no legal requirement that Coliseum-related revenues be dedicated to offsetting the tax increase. In the absence of such a requirement, the revenues will go to the County general treasury and be spent on comic books and records. I’m not quite sure what to make of this argument. Mangano has said the revenues would offset taxes. Why wouldn’t he be able to sponsor legislation requiring it?
Q: What about development in addition to the Coliseum?
A: Not quite sure about this one. The lease gives Wang control over a 77 acre parcel, so no one else can develop any portion of that property without a sublease from Wang. Presumably, Wang himself can develop non-Coliseum portions of the property assuming he gets appropriate approvals. The lease requires Wang to cooperate with the County with respect to development outside of the 77 acre parcel, but I don’t if there are portions of the Hub outside of the77 acre parcel that can be developed.
Any other questions?