BOK Center v. Sprint Center

[pfox]

That excuse won't fly, Conan. The location of the arena and the fact that it would be built was set in stone in September 2003, long before the big collapse. One of the arena's biggest pushers during the "Dialog Visioning" process was already in control of a ton of land on the main approach to the arena. He and other developers had plenty of time to start development during relatively prosperous times if they had really believed it would pay off. We were already coming out of the post-9/11/telecom-bubble recession in summer 2003.

And, no, the arena is not making a profit by business standards. It may be covering its operating expenses, but is well short of repaying the cost of construction or depreciation.

The Blue Dome District was already thriving long before the arena was completed. Its success owes more to a concentration of dining and entertainment in a small area, plus events like the Blue Dome Arts Festival and Tulsa Tough that bring people directly to the area, not a mile away.

In theory, this is true Michael.  I will say, however, that there may have been other factors that discouraged that development around the arena.  I would argue that had the Arena been placed somewhere less convenient to the current convention center, but farther away from some of the social service and other public facilities, that planning such ancillary development might have appeared less risky to investors.  Developers are a risk averse bunch anyway...and I think you are right when you say that there was question about what kind of success the arena would have, so I don't think it is unusual that there was no pure market driven development planned prior to its completion, based on some of the more nuanced reasons given above.  The Power and Light District and the Louisville Live! districts were backed by bonds put forth to voters, so that kind of guarantee is what made those developments happen.  Tulsa, thankfully, didn't do that around the Arena. I think you would agree with that, no?

So, this gets back to good planning and the concept of organic growth.  While it might be easy to criticize the lack of immediate adjacent development around the arena, it is clearly responsible (in part, not solely) for other investments that have been made in Downtown.  I'd argue that those who redeveloped the Mayo Hotel, invested in the Blue Dome, and much of the other smaller business development, factored in the BOK Center as a pro on their pro and con lists prior to making the decision to move forward with those investments, if for no other reason than it means that there might be people in downtown between the hours of 5 pm to 12 pm...  And, thusly, the Arena has had a positive effect on how people view the direction downtown is moving.

I haven't seen the P&L sheet for the Arena, but what is being reported certainly indicates that the Arena is doing better business than expected; and nowhere did I ever see a proforma that showed the Arena would lose money (naturally0.  Is that not true?  If not, I am interested in seeing that data.

[Conan71]

That excuse won't fly, Conan. The location of the arena and the fact that it would be built was set in stone in September 2003, long before the big collapse. One of the arena's biggest pushers during the "Dialog Visioning" process was already in control of a ton of land on the main approach to the arena. He and other developers had plenty of time to start development during relatively prosperous times if they had really believed it would pay off. We were already coming out of the post-9/11/telecom-bubble recession in summer 2003.

And, no, the arena is not making a profit by business standards. It may be covering its operating expenses, but is well short of repaying the cost of construction or depreciation.

The Blue Dome District was already thriving long before the arena was completed. Its success owes more to a concentration of dining and entertainment in a small area, plus events like the Blue Dome Arts Festival and Tulsa Tough that bring people directly to the area, not a mile away.

So what would proprietors of businesses immediately adjacent to the construction area do for a couple of years while their business was blocked by arena construction?  Granted, Blue Dome and Brady were developing at their own rate and had become sustainable districts before the arena was completed.  I'm simply noting that I've seen increased customer traffic in those areas plus SoBo on major show nights downtown.  Reinvestment in an urban area by the city helps inspire confidence in private developers.  As I mentioned in my OP, development around the arena will be incremental and I think the arena has helped provide a good catalyst for that.

I'm not aware of any arenas being devised as major profit centers for metropolitan areas.  I believe the idea is to bring new sales tax dollars into the city via event and convention business and improve the overall liveability of the city.  If the building operation is revenue-neutral, I believe that's considered somewhat of a success these days as many cities operate them at a loss.  It's obvious the arena has not been the bust that many predicted, including myself.  Now that it's done, I'm rather glad it's been built.  It's put Tulsa on the entertainment map for better concerts and events on a scale no one would have imagined (Sir Paul, etc. anyone?) and it's improved the overall downtown cityscape along with the renovation of the Convention Center.

It's kind of hard to complain about all that. 

[Patrick]

And, no, the arena is not making a profit by business standards. It may be covering its operating expenses, but is well short of repaying the cost of construction or depreciation.

I read the City's CAFR every year - as I am sure you do - and understand government fund accounting.  Yes, the BOK Center covers its operating expenses - revenue it receives in various forms is greater than the expense it takes to operate the center (utilities, staff, etc).  The arena by itself does not generate enough revenue to cover other capital expenses, such as interest expense and the debt associated with the facility i.e. the 'mortgage'.  The BOK Center is not specifically responsible for generating the income to pay these obligations - sales tax collections are.

And a quick retort to your depreciation and amortization comment.  These are non-cash expenses required under GAAP - who cares if the arena doesn't cover them?  That is why people look at EBITDA when evaluating businesses - it provides a better proxy of actual, free cash flow.

Remember that, although referred to in the City's financial statements as a "business-type activity," the BOK Center (and Convention Center as they are reported together) is not a typical for-profit business.  Did the City get into the arena and convention center business because they are huge money-makers?  Certainly not - they are capital intensive endeavors.  They do, however, attract tourists and spur development - both of which have occurred and are still occurring even in the worst economic downturn since the great depression.

So while the BOK Center doesn't specifically pay for itself, you forget to mention the other piece of the puzzle such as incremental tax receipts from tourism, dining out, parking, jobs created, and other new development downtown.

It is convenient to look at the BOK Center in isolation to make your point, but you are speaking half-truths and doing a disservice to the City by spreading half-baked 'talking points.'

[pfox]

Thank you Patrick.

That was educational.

[YoungTulsan]

The arena is a loss leader.  When you don't want someone shopping at your competitor, you subsidize the price of something flashy to get them to come to your store.

[Hoss]

The arena is a loss leader.  When you don't want someone shopping at your competitor, you subsidize the price of something flashy to get them to come to your store.

Wow, that's just wrong on so many levels.

Nothing in town can compete, capacity-wise or other.

When most large acts require venues to hold a certain amount of seats, no flashiness in the world can bring a Paul McCartney to an arena which may be brand new, but only hold 8000 people.  That's essentially where we were at.

Now, if you're talking about other cities with venues the same size (Little Rock, OKC) then that does hold some credence.  But that's marketing.  And so far, it's worked.  To the tune of operating in the black for two straight years.  Which I thought wouldn't be feasible (and I voted for it).

[Conan71]

Hoss, I voted against it.  I've since become a convert to V-2025 and come to appreciate how much better the city and county look with the various projects it helped finance.  Most all the predictions by the anti-tax at any cost crowd have proven false.  It's unfortunate some people still can't see the improvements as being a good thing. 

Post-modern Beirut simply wasn't a good look on Tulsa.

Now, I want to know what is going on with our carpet-bombed streets and that package we approved.

[swake]

Hoss, I voted against it.  I've since become a convert to V-2025 and come to appreciate how much better the city and county look with the various projects it helped financed.  Most all the predictions by the anti-tax at any cost crowd have proven false.  It's unfortunate some people still can't see the improvements as being a good thing. 

Post-modern Beirut simply wasn't a good look on Tulsa.

Now, I want to know what is going on with our carpet-bombed streets and that package we approved.

There was a story Monday by KOTV about the big city roads package, it's just about to kick in. I can't find the online version, but if I recall there are 120 road projects that are going to happen over the next three years, almost all are rehab projects. Starts this month I think.

[sgrizzle]

Yes, they said that the amount of road construction is about to increase 4 or 5 fold starting this month.

[YoungTulsan]

Wish I held stock in the company that makes orange barrels.

[Townsend]

Yes, they said that the amount of road construction is about to increase 4 or 5 fold starting this month.

I can take SW Blvd, I44 or the IDL to go to work and back...all are being worked on.  I'm one of the people who's ok with it though.

[MichaelBates]

Remember that, although referred to in the City's financial statements as a "business-type activity," the BOK Center (and Convention Center as they are reported together) is not a typical for-profit business.  Did the City get into the arena and convention center business because they are huge money-makers?  Certainly not - they are capital intensive endeavors.  They do, however, attract tourists and spur development - both of which have occurred and are still occurring even in the worst economic downturn since the great depression.

Then people should stop claiming that the BOK Center is making a profit, unless it really is making a profit according to the standard definition of the term.

So while the BOK Center doesn't specifically pay for itself, you forget to mention the other piece of the puzzle such as incremental tax receipts from tourism, dining out, parking, jobs created, and other new development downtown.

Sales tax and hotel/motel tax receipts have been declining since around the time the BOK Center opened. You've got the burden of proof if you want to claim that receipts aren't as far down as they might be had there been no BOK Center. You'd have to be able to show that the arena allowed Tulsa to capture sales taxes that would otherwise have gone outside Tulsa.

[Conan71]

Then people should stop claiming that the BOK Center is making a profit, unless it really is making a profit according to the standard definition of the term.

Sales tax and hotel/motel tax receipts have been declining since around the time the BOK Center opened. You've got the burden of proof if you want to claim that receipts aren't as far down as they might be had there been no BOK Center. You'd have to be able to show that the arena allowed Tulsa to capture sales taxes that would otherwise have gone outside Tulsa.

Kind of hard to make a correlation either way with the huge economic debacle, though one can certainly point to the fact that we've had 18,000+ seat shows sell out which was physically impossible at the old CC.  That capacity, plus the success in selling the capacity brought in acts who would otherwise have passed on Tulsa.  I'd be willing to bet that sales tax and visitor tax collections in the CBD have risen in that time.  There's been more businesses opening and more hotel rooms brought into inventory and more yet to come.

I'm sure it's had somewhat of a cannibalistic effect by simply shifting sales tax collection points from other parts of the city, but who can argue with the level of entertainment it's brought to town and who can honestly believe that all event-goers live within the city limits?

It's helped re-vitalize the downtown area which is something Tulsans have wanted all along, but they don't seem to be willing to admit there's got to be public investment to get the private dollars down there.  The major concert business had all but died out in Tulsa because our biggest venue was, what, 8000 seats in concert configuration?  It costs far too much to book major acts like DMB, Paul McCartney, Metalica, Elton John/Billy Joel, Clapton, etc. without a large arena.  Those shows certainly got people in from the burbs and further.

[sgrizzle]

Then people should stop claiming that the BOK Center is making a profit, unless it really is making a profit according to the standard definition of the term.

Profit - n - the monetary surplus left to a producer or employer after deducting wages, rent, cost of raw materials, etc.

Income - Operating Expenses = Profit (or loss)

The costs associated with building the BOK Center is encumbered by the county and not by the BOK Center itself. Two separate legal entities.

So.. by definition... it is making a profit.

[Hoss]

Profit - n - the monetary surplus left to a producer or employer after deducting wages, rent, cost of raw materials, etc.

Income - Operating Expenses = Profit (or loss)

The costs associated with building the BOK Center is encumbered by the county and not by the BOK Center itself. Two separate legal entities.

So.. by definition... it is making a profit.

Oh, but puleeze...let's not muddle the arena-bashing with facts!  Why do you hate Tulsa?