OKC NBA Subsidy

[cannon_fodder]

The subsidies have already begun and the team isn't even here yet. It looks like the NBA team will cost OKC tax payers at least $2,000,000 a year and as much as $6,000,000 a year (depending on if you count improvements and not counting lost revenue).

First, the "upgrades" to the Ford Center. what shows, conventions, or other things have they missed out on without the upgrades?  Seems the center has done very well as is.  The "upgrade" is really "NBA attracting" and little more.  It will have a new entrance and some needed maintenance, but the $90,000,000.00 addition is a lot of gravy to wow the NBA (more than it cost to build).

The Sonics will pay $1.4mil a year to use the facility (it will also pay $400K to resell naming rights when the time comes).  That $1.4mil books about 100 days of arena usage - so they will lose at least 27% of convention and other revenue for that time.  So lets run some math:

Assumptions:
- $90mil construction cost (lower estimate)
- 6% bond rate
- 30 year capital bond
- 20% loss in other revenue (on 27% loss of use)

1) The naming rights currently bring in $505,405 (page 348 OKC budget), right away they give away at least $50,000 a year to the NBA to sell those rights.

2) On the note, they will pay $6.5 million a year (as well as still paying on the under lying note), the NBA is paying $1.4 million.  A loss on the NBA attracting improvements of $4.1 million.  A loss of $2 million even if you pretend half the upgrades were "needed."

3) Lost revenue:  presumably the Ford Center will lose revenue upon losing 27% of it's available dates.  I can't calculate this opportunity cost because the budget is rolled up somehow that I can not tell the revenue/expenditure total for the Ford Center (MAPS budget seems to be all together.  I see the revenue from the naming rights and the scoreboard (500K each), I see maps sales tax revenue, but not revenue from operations nor expenditures other than MAPS debt maintenance).

I know subsidy is reduced by $2.5mil this year (page 230) but nothing more on the operation of the Ford Center.

So they lose some revenue to gain the $1.4, meaning the $1.4 is not a gain of $1.4mil. I fear the BOk center will be equally non transparent. I'll trust Bates to keep them on the straight and narrow (or at least try!).  Tulsa's budget is MUCH more clear.


So... ignoring the loss of revenue that is more than a $4 million dollar a year subsidy to the NBA on the arena improvements alone.  

Now...they are spending $24,000,000 on a practice facility (so what, $28mil when it's actually built?).   The practice facility will be leased at $100,000 "annual lease" by the NBA franchise and is built exclusively for use by the NBA.  No "but we needed it" argument here and they are clearly NOT making the money back on the arena lease.

- $24mil cost
- 30 year note at 6%
- 100K annual revenue

$1,726,705.00 annual maintenance on the note plus 20% maintenance and repair budget for a total cost of $2,158,381.39.  Annual revenue:  $100,000.

Subsidy to the NBA for practice facility:  $2,000,000.00

Expansion Plans:
http://www.usatoday.com/sports/basketball/nba/sonics/2008-03-18-oklahoma-city_N.htm
OKC Budget (8megs)
http://www.okc.gov/budget/FY07_08/FY%2007-08%20Final%20Budget%20Book.pdf
- - -

If someone has better information or reads the budget different, please let me know.  I'm not claiming to be a definitive source, just passing along what I found over the weekend.  I also did not quantify the added tax generation, development, or "name recognition" from the NBA coming to OKC (the merits of which are highly speculative and topics of debate).  

For comparison, we spend 2 Mil a year on the Gilcrease, 2 mil a year on the PAC, and 400K a year for River Parks.
http://www.cityoftulsa.org/OurCity/Budget/documents/Sec02-ExecutiveSummary.pdf

I'd love to be a pro-sports city, but I'm very curious if it make cents for the city.  I could see it making money, or sucking a "small market" dry.  Starting off with these demands and a history of demands in Seattle, I'm leery.  The subsidy ends up being about $12.50 per person per year, which isn't really that much...  but at the same time if you aren't an NBA fan is it worth it?

Just ran through that and figured I may as well share.

[edit]changed title[/edit]