FanPost

How to Argue with an Arena Skeptic Part 3 – Wang Is Paying Most (and May Pay All) of the Arena Costs

The number 1 argument of arena skeptics I find online is “Wang should pay for the arena himself.”  Or more accurately “WANG SHOULD PAY FOR THE ARENA HIMSELF!!@!!”

We all know the sorry history here – Wang DID try to fund the arena himself as part of the Lighthouse Project but was stymied by the Town of Hempstead.  And many arena plan supporters cite this to skeptics.  But skeptics probably don’t care about the back story.  We also know that arenas and stadiums rarely get built this days without substantial government help.  But, again, that’s not going to convince a skeptic.

The strongest response is as follows:  Wang is paying for somewhere between 60% and over 100% of arena costs himself under the lease with the county.  Under the lease, Wang is obligated to pay a minimum of $14 million per year for 30 years, or a total of $420 million.  The arena costs will initially be funded with $350 million of the $400 million bond issue.  Total principal and interest on the $350 million is (using the numbers issued by the legislative budget office) $682.5 million.  Thus, assuming Wang only pays the minimum payment under the lease, he will be funding 61.5% of the total cost of the arena ($420 million of $682.5 million).  However, if 11.5% percent of arena revenues exceed $14 million, Wang is obligated to pay that amount instead.  As discussed here, the county's economic expert, Camoin Associates, using fairly reasonable assumptions, estimates that the the 11.5% revenue share provision will kick in, requiring an $18.9 million payment during the first year of aren operation, to increase each year by 3% to reflect inflation.  If these estimates are correct, , Wang’s annual payments will total $770.4 million -- actually exceeding the cost of the arena to the county.  In fact, even the revenue share amount is $17 million in Year 1, the arena will turn out to be fully funded by Wang.  And this doesn’t even take into account Wang’s obligation to fund cost overruns – which would increase Wang’s contribution to the arena cost.

I don’t plan on doing any more of these but if any readers come across arena skeptic arguments that you would like me to address, please let me know in comments. 

 


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