A couple of days ago I praised AEG president Tim Leiweke's balls (I feel dirty).
Leiweke, as nicely as possible, had told David Cordish of the influential Power & Light District to mind his damn business. Leiweke's comments were in response to Cordish's criticism of the arena for not landing an NBA or NHL team. I've criticized Leiweke for promising a team and not delivering ... but not for the success of the arena itself (check the Best Of Kansas City 2008).
I also mentioned a blog post by Field of Schemes author Neil deMause, who tracks public money being spent for professional sports franchises. In clarifying the $1.8 million in profits that AEG was kicking back to the city, deMause wrote that the money was "operational profit -- in other
words, it doesn't count the cost of paying for the building it in the
first place."
Understanding the funding for the Sprint Center can be confusing.
For a refresher, I called Shani Tate, communications director for the Sprint Center. She walked me
through the basics: The building cost $276 million. AEG put up $54 million in
cash. The NABC put up $10 million. The
city is financing the rest through taxes on hotel rooms and rental
cars. And the city is taking is taking in more from the hotel/rental car tax than expected.
DeMause guessed the city was paying between $10-$15 million a year in arena bond
payments, adding "there's almost no way it [the city] will actually turn a profit
on building the Sprint Center."
His guess was close.
"We pay an annual debt service projected this year of about $13.8 million," said Troy Schulte, Kansas City's budget
director.
Schulte says the hotel and car rental fees have "exceeded projections
over the last couple years every year." For example, last year the city
projected $8.9 million in arena fees. They actually received $9.3
million.
As far as the $1.8 million operating profit, Schulte says that comes after AEG
takes its 16 percent cut and then the city and AEG split the money going forward.
"As long as that continues to generate activity like it has been, it'll be profitable for AEG to operate," Shculte says.
Schulte knows that it'll be tougher as the building loses its shine and
if the economy doesn't improve. And should AEG finally find an anchor
tenant, that sports franchise would take "a very sizable chunk of the
arena
revenues."
"Obviously an anchor tenant would have an effect as far as pulling down
the available revenues because a lot of those revenues would then go to
an anchor tenant," Schulte says.
Right now, it's more profitable for the Kansas City and AEG to book
concerts. But as the newness wears off, the stability of having 41
guaranteed dates a year will become more and more important.
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One thing people forget is that AEG manages most of the arenas in the country. They can basically tell anyone that if you don't want to play KC, you don't play LA. So losing the newness may not matter.
Once the Sprint Center (inevitably) loses it's newness, AEG and whatever shortsighted mayor will tell the city that the Sprint Center needs hundreds of millions of dollars of renovations. They'll make even more outlandish problems that they can't deliver - maybe a political national convention - and dupe the taxpayers into going even further into debt while ignoring the city's crumbling infrastructure and social plight. The projected image of the city is the only important issue year after year.
But are other cities going to be able to pay for new stadiums given the economy? I'd think they'd be a lot less likely.
I do agree with you jjskck about the newness. The building will become less attractive over time. So that's AEG's game to play. Find and anchor tenant before the building is unattractive. Tick tock.
I agree with jjskck - in another two or three years, the Sprint Center is not going to be the newest game in town - some other arena will. Let's face it - KC was talked about as a destination for NBA/NHL more because of AEG and the fact that we had a new arena then this town actually being able to support the NBA or NHL.
The Penguins were our best chance - they would have come here ready to win immediately, with one of the two biggest stars in the NHL ready to draw people in. But if we ended up with a crappy team or an expansion team, I can't see this town supporting it. Same with the NBA - it'd be a novelty at first, but that would wear off and people would realize how boring NBA basketball is until the playoffs start.
Keep in mind that as the fresh sheen on the Sprint Center fades, so does the likelihood of attracting those 41 guaranteed dates a year.
And even with that, I'm still highly skeptical that a 3rd pro sports franchise can be profitable in KC.
That said, I still have no beef with the arena at all. They financed it with other people's money, more or less, and say what you will about that practice--every freaking city in the US does it. Contrast that with the boondoggle that is P&L, and the Sprint Center is just fine with me.
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