On Columbus, Pt. 2

5 Aug

Now Give Me Money (That’s What I Want)

There are two other things to keep in mind in all of this discussion about Columbus. The first is that the arena district that Staples writes about, and that the Katz Group frequently uses as a model for an arena district in Edmonton, was paid for through private investment. It was not publicly funded. Through referendums, voters in Columbus repeatedly rejected the use of taxpayer dollars, so the Nationwide Mutual Insurance Company built the district mostly by itself, and Blue Jackets owner John H. McConnell agreed to lease the arena from Nationwide.  The man who was to be a co-owner of the franchise with McConnell, Lamar Hunt, backed out when voters refused to finance an arena using taxpayer dollars.

Secondly, despite voter rejection of major public investment in the district ten years ago, the Blue Jackets are now asking the City of Columbus and Franklin County for a handout. Why? Because they claim to be losing $12 million dollars a year. Nationwide owns the arena and is charging the Blue Jackets rent, keeping some revenues for themselves, and of course the team is perennially bad and has only made the playoffs once in its ten years in the league. They also aren’t making enough money with the concerts they hold at Nationwide, losing $4 million a year in non-hockey related revenue. The Blue Jackets have asked for public money in a variety of forms, including having the city take over the arena and cutting them a deal on rent. The Columbus Chamber has even warned that the Blue Jackets might be forced into relocating their franchise if they can’t get financial help from taxpayers. Sound familiar?

Some might jump all over this news as proof that the Katz Group and the Oilers really do need the city to foot the bill and give them all the revenue from a new downtown arena. But to do that one has to admit two other realties: that things in Columbus aren’t as rosy and ideal as they are made out to be, and that the economics simply don’t work. And that last one, to use a sports metaphor, is the ballgame. The National Hockey League’s current business model is so bad one of its teams can’t even afford to pay the rent (and that isn’t even counting problems in Phoenix, Nashville, Tampa Bay, and Long Island). That team, the Columbus Blue Jackets, are the Columbus Arena District’s major tenant, and they say their hockey business is losing millions of dollars a year. Furthermore, even if they got a free pass on revenues recognized as hockey-related revenues (Nationwide has actually given them a break the last two years), they say they’d still be losing $4 million on the non-hockey revenue side. Yet their owners have expressed no interest in taking financial control of the arena, nor has Nationwide offered to buy the Blue Jackets (they have offered up the arena to the Blue Jackets for the low, low price of $55 million dollars). Two private businesses, then, are refusing to invest any more of their own money into the district, the arena and the hockey team. Why? Because they know the math doesn’t work, and rather than be accountable for the bad business decision they made 10 years ago, they want the taxpayers to bail out the Blue Jackets. But why should government take on the financial risk when two private business are proving that it’s a losing venture? Why should taxpayers be responsible for cleaning up the NHL’s mess? And what kind of precedent does it set for future handouts when government eats the costs for a private business gone bad? Columbus is often identified as the ideal case, the exemplar of arena redevelopment, and yet the real lesson of Columbus, just like everywhere else, is that sports arenas are financial sinkholes. Governments should therefore treat the idea of funding them like they’re being asked to join the Mob. Think really, really hard about it, because once you’re in, you’re never getting out.

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4 Responses to “On Columbus, Pt. 2”

  1. YKOil August 11, 2010 at 12:16 am #

    Great work Andy. Great, great work.

  2. Shane O'Bryan August 10, 2010 at 10:46 am #

    Great series of articles Andy – this is the kind of thoughtful non-biased journalism that people need these days. Here’s hoping your articles and opinions reach the audience they deserve. Good luck.

    • Andy Grabia August 10, 2010 at 12:36 pm #

      Thanks, OB. Appreciate it. Good news is it’s stuff everyone in Calgary will be able to use once the Flames try this song and dance themselves. And that will happen, sooner rather than later.

Trackbacks/Pingbacks

  1. They’re The Same Face « Why Downtown? - October 29, 2010

    […] so frustrating is that I wrote two posts about Columbus in August, and one of those posts dealt quite specifically with the Humphreys’ […]

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