Newark, Newark

23 Aug

“Our city is the complete opposite of Newark, NJ and, as such, there can be no doubt that a downtown arena district in our city will be anything other than an unmitigated success.”

yegarena

Uh, okay.

Since the proprietor of that website won’t allow comments, thereby preventing people from challenging the merits of his arguments, I thought I’d open up a thread and encourage people to leave their comments here. We’ll call it a group post. I’ll even get the ball rolling by pointing out a few things:

1) The Devils haven’t paid rent since 2008, and are now going to court with the city of Newark. So that’s $5.7 million owed to the city by the team the city spent  $358 million to build an arena for.

2) The arena doesn’t pay taxes or water fees. Those taxes and fees might be useful for an impoverished city to have.

3) I don’t know the mathematical system where $15 million in economic activity is a proper offset for the cost of $350 million dollars, but even so, that article was written in April, and probably doesn’t hold up when the city of Newark is now looking at laying off 350 policeman and firefighters, cutting back trash pickup, and closing city pools.

Calling a public expenditure of that amount an “unquestionable success” in light of the stark reality facing Newark is bewildering. Saying “if Newark decides to sell its interest in the downtown arena, it won’t be be [sic] because the project failed to achieve its goal; it’ll be because Newark needs money fast” is…I don’t even know. Crazy piled on crazy? If Newark decides to sell its interest in the Prudential Center, if Newark is able to sell its interest in the Prudential Center, it will only be correcting a mistake it never should have made in the first place. Newark made the very poor decision of investing a very large amount of public money into an arena, and now can neither offer basic public services nor gather taxes as a consequence. It can’t even get its major tenant to pay the rent. Newark isn’t a lesson in economic success. It’s a lesson in irresponsible governance.

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22 Responses to “Newark, Newark”

  1. Andy Grabia August 27, 2010 at 12:11 am #

    The Oilers Hockey Club is a business, just because the owner has a billion dollars doesn’t mean the team can’t go tits up. As I said the NHL has no say in Katz abandoning a failed business venture, no sale required (Phoenix? TB?).

    Wait, are you saying he can just declare bankruptcy one day, walk away, and leave the team without an owner? And are you suggesting that that is what happened in Phoenix and Tampa Bay?

    • lesoteric August 27, 2010 at 8:02 am #

      In May 2009, the owner of the team Jerry Moyes put the team into bankruptcy, the NHL now runs the team (assumed all debts, etc…). TB, similar situation http://thepuckdoctors.com/2010/01/tampa-bay-lightning-broke/

      I don’t know what the franchise agreements allow for, but if I own a business and am losing more money by staying open than I would by liquidating and paying penalty fees, etc…I close the business, if I can’t close it, I stop putting money into it. I’m sure there is a penalty structure, the possibility of litigation, but what can the league do if Katz walks?

      Alternately what if The Edmonton Oilers don’t sign a lease for Rexall/Northlands and the team has nowhere to play in the 2015 season? Will the NHL get involved there? Take over the team? Pay the Rent? Where does that leave the City, the team, Katz, and the NHL?

      If Katz is bluffing it’s a good one.

  2. Chris August 26, 2010 at 9:39 am #

    “Absence of evidence is not evidence of absence”

    I believe the correct answer to this riddle is, “Life is like a box of chocolates.”

    “How is Edmonton is one of the ‘best’ hockey markets, by what metric? (no media money, long travel, poor facilities) ”

    Gosh, I dunno. How about selling out every single game despite being a last-place team? How about being consistently ranked by Forbes as one of the most profitable teams in the league despite being a relatively small media market and having Kevin Lowe spend money like a drunken sailor? How about those metrics?

    • lesoteric August 26, 2010 at 11:44 am #

      I never said move. the NHL doesn’t have to approve anything if an owner (or club) goes bankrupt (be it for real or as a business move). If Katz abandons ship the NHL can’t really do anything. Even so me not being able to identify three markets which might want a hockey team doesn’t mean they aren’t there, or wouldn’t be if the opportunity arose, that’s a straw man if there ever was one.

      As for Edmonton being a great market – I went to a lot of games there between 1992-1996 – let’s just say fans can be fickle. If they can weather the storm now I think a case is stronger for a new arena based on that demand for the team to stay. Civic pride and what-not, but that’s not important here, is it?

      • Chris August 26, 2010 at 6:15 pm #

        I think civic pride is something that would receive a strong boost from a new arena. I definitely don’t want to downplay that as a non-tangible benefit from a new arena. The tangible benefits of a new arena? Well, I think those are significantly more debatable.

        Also, I think it’s important to point out that the camps here are not necessarily “anti-arena” or “pro-arena.” Rather, the two sides here are really arguing more about whether it’s appropriate or even responsible for a city the size of Edmonton to be burdening its taxpayers with something that will take decades to pay for. Especially since this *can* be done with mostly private funding.

      • Andy Grabia August 26, 2010 at 7:17 pm #

        Even so me not being able to identify three markets which might want a hockey team doesn’t mean they aren’t there, or wouldn’t be if the opportunity arose, that’s a straw man if there ever was one.

        No, it’s not. First off, I never misrepresented your view. I asked you to validate it by answering a question, which you couldn’t do. Secondly, outside of the GTA, there isn’t a single feasible market. And one in the GTA isn’t happening any time soon. As James Mirtle, hockey writer for the G&M noted in these comments

        Every other “new” market would have similar issues to the teams relocating barring outstanding performance on the ice and/or a sweetheart deal that bends the resident city over.

        There are not 25 excellent NHL markets in North America that can generate revenues to pay $50-million in salaries. Never were and probably never will be.

        But if you want to make a case for where they could relocate, I’m all ears. In the meantime, I’ll treat the Katz Group’s threat as a bluff. And a bad one at that.

      • Andy Grabia August 26, 2010 at 7:25 pm #

        the NHL doesn’t have to approve anything if an owner (or club) goes bankrupt (be it for real or as a business move).

        Huh? Bankrupt? When is that going to happen? Katz would try and sell the team first. And guess who has a say in that? The NHL. For case studies, see Jim Balsillie.

      • lesoteric August 26, 2010 at 9:00 pm #

        “Huh? Bankrupt? When is that going to happen? Katz would try and sell the team first. And guess who has a say in that? The NHL. For case studies, see Jim Balsillie.”

        The Oilers Hockey Club is a business, just because the owner has a billion dollars doesn’t mean the team can’t go tits up. As I said the NHL has no say in Katz abandoning a failed business venture, no sale required (Phoenix? TB?). If either of those teams was looking to secure an arena deal right now I suspect it might be fairly difficult.

        Katz is willing to play ball, somewhat, right now. Edmonton can play with him or not, but Katz holds all the cards, the team and the money. Will an arena get built without Katz, maybe, without the Oilers, no.

  3. Andy Grabia August 25, 2010 at 1:20 pm #

    Testy, aren’t we?

    Not at all. Just asking for some evidence or proof. Since your answer is “No I can’t, I don’t need to,” I’ll just leave it at that.

    • lesoteric August 25, 2010 at 1:28 pm #

      Absence of evidence is not evidence of absence, plus you ignored my question to you. I’ll leave it at that.

      • Andy Grabia August 25, 2010 at 2:28 pm #

        Absence of evidence is not evidence of absence

        Do I get the One Ring of Sauron if I guess the answer to that riddle?

  4. lesoteric August 25, 2010 at 12:18 pm #

    If a new arena is not built Katz will move the Oilers and Edmonton will no longer have an NHL franchise. Edmonton will not likely get another NHL franchise in the near future.

    Without an anchor tenant Rexall Place will be unsustainable and will close without major cash injections from the city. This will limit the types and scale of events which can be hosted in Edmonton as well.

    Once Rexall is gone there is even less hope of obtaining another NHL franchise or of building a new arena.

    It’s a ‘now or never’ sort of proposition, like it or not. Edmonton can get a portion of the funds from Katz or nothing at all, another ‘now or never’ proposition. That is the reality of it.

    • Andy Grabia August 25, 2010 at 12:46 pm #

      If a new arena is not built Katz will move the Oilers and Edmonton will no longer have an NHL franchise.

      Where is he going to go? Can you name me three cities that the NHL would allow him to move to? And can you explain why the NHL would let him relocate?

      Edmonton will not likely get another NHL franchise in the near future.

      Can you tell me why teams in Phoenix, Atlanta, Nashville, Tampa Bay, Long Island and Florida won’t want to move here? Can you explain why the NHL would leave empty one of its best hockey markets?

      • lesoteric August 25, 2010 at 1:07 pm #

        Testy, aren’t we?

        Where is he going to go? Can you name me three cities that the NHL would allow him to move to? And can you explain why the NHL would let him relocate?

        No I can’t, I don’t need to. Katz stated they won’t play in Rexall. If Katz dumps the team the NHL is left holding the bag (PHX, TB) then what? You can’t force him to bankroll the Oilers, so the NHL runs the franchise in the current facility b/c there is no way Edmonton is building a new arena without an owner if they can’t get on board with a team with one who is offering (even $100M) to help build an arena.

        Can you tell me why teams in Phoenix, Atlanta, Nashville, Tampa Bay, Long Island and Florida won’t want to move here? Can you explain why the NHL would leave empty one of its best hockey markets?

        How is Edmonton is one of the ‘best’ hockey markets, by what metric? (no media money, long travel, poor facilities) Then ask yourself why would the NHL allow any of those teams to move to Edmonton without an owner? Or is there another person willing to spend upwards of $100M on a floundering franchise and move it to the first, second, or third oldest arena in the league, in a city which is not very interested in building a new one?

        • Chad D August 29, 2010 at 8:54 pm #

          no media money: the majority of broadcast money is generated in Canada, and shared league-wide. The Oilers did have PPV, which isn’t exactly a sign of diminished demand.

          long travel: Like Vancouver or LA? This has nothing to do with whether a team can make money.

          poor facilities: The last Rexall renovation was in the late 1990s and was described by ownership as “state of the art.” Meanwhile, there has not been any good reason given as to why a cement hockey-dedicated fixture like Rexall needs to be replaced anytime in the next 30 years or so.

  5. Zeus August 24, 2010 at 10:52 pm #

    “You might not think that $358+ million could have been better invested, but the city of Newark seems to disagree with you, as they are looking to sell the building.”

    To be fair, you can’t really depend on the City of Newark as a model of good investment decisions. They did buy the arena in the first place…

    (But yes, the yegarena arena article is very bizarre)

    • Andy Grabia August 25, 2010 at 12:36 am #

      They did buy the arena in the first place…

      It was led by the previous Mayor Sharpe James, who just got released from prison in April. But yeah. Which leads me to plugging Street Fight, a documentary about James and now-Mayor Cory Booker. Phenomenal movie.

  6. Kent Wilson August 24, 2010 at 10:56 am #

    Alex is right about the economic factors. That is an inexact science that can be construed to say whatever forwards the agenda you wish to forward. Suffice to say, that moving a pro hockey team to your city has got to be a net positive in economic activity. The extent of that activity is uncertain.

    So…the evidence isn’t clear and the issues are complex and ambiguous enough to allow folks to project their own agendas as “fact”…and yet clearly there is a net economic benefit to moving a pro hockey team to your city.

    Priceless.

    • Andy Grabia August 24, 2010 at 1:01 pm #

      There’s also this one:

      Newark is a poor comparator…

      …there are lessons here for Edmonton.

      I can’t speak for Alex, but my guess is he was talking about economic activity numbers supplied by owners, cities, chambers of commerce and economic development organizations, not independent research by academics.

  7. alexabboud August 23, 2010 at 7:08 pm #

    Leaving aside the issue of whether or not a downtown arena in Edmonton is a good thing, that article is abysmal. A few of the other problems with it:

    1. The title of ‘America’s Worst City’ was given to Newark in 1975, 35 years ago! Yet, the author quotes and uses it as if it was a contemporary designation. Yes, Newark has its problems, but quoting material from 1975 is ridiculous.

    Of course, the article he linked to mentions this all the way at the bottom of the first paragraph, so it’s easy to miss.

    2. We should all know better by now than to quote economic activity numbers without second guessing them or demanding more proof.

    3. The Devils relocated from East Rutherford to Newark, so any economic activity they factor into is, in fact, likely new economic activity for Newark. That’s not the case for Edmonton, where the arena would be moving from one part of the city to another.

    4. There’s the whole issue of the opportunity cost of the city’s investment in an arena, and whether or not that could have been better spent, as one Newark councilman says in the NY Times story linked to.

    5. The argument that the arena helped Newark residents is contradicted by the author Brad Tuttle, quoted in the NY Times story who says “The arena’s main success has been bringing outsiders to Newark as opposed to helping Newarkers”.

    6. There were already urban improvement efforts and new projects built in downtown Newark prior to the arena.

    7. The syllogism at the end, and the assumption that if an arena succeeds in a struggling city, it will succeed in a more successful one, isn’t substantiated anywhere, and sounds pretty far-fetched.

    8. In terms of a market, Newark (and the Prudential Centre) is in the middle of the most densely populated corridor in the United States. It’s also roughly 20 minutes by train from Penn Station in Manhatten. Suffice to say, there’s a much bigger population (with better access for the most part) to draw from than a downtown Edmonton arena would have. It’s not a good comparison for Edmonton in any sense.

    • Steven Dollansky August 23, 2010 at 10:53 pm #

      Alright… a few questions/comments on your original post:

      1. One quarter of the cost of building the arena is to be recovered through naming rights from Prudential Financial.

      2. The city did not pay $350 million, they paid $210 million and agreed to forego taxes and water fees, correct?

      3. The city’s deficit is due to the fact that transfers from the Port Authority have dried up and their population has dropped by 40% over the past 30 years though the size of their civil service has not. This has nothing to do with the arena and everything to do with irresponsible governance. If anything the arena is one glimmer of hope in an otherwise dismal future.

      4. Alex is right about the economic factors. That is an inexact science that can be construed to say whatever forwards the agenda you wish to forward. Suffice to say, that moving a pro hockey team to your city has got to be a net positive in economic activity. The extent of that activity is uncertain.

      5. Newark is a poor comparator because it is a city in decline whereas Edmonton is continuing to grow and prosper.

      Newark is certainly not an ideal situation, but it does not warrant being dismissed. In my view, a partnership between the team and the city (preferably one that doesn’t result in litigation) is the best route forward and there are lessons here for Edmonton. Its probably in our best interest to avoid sarcastic insults and be open to assessing both the positives and negatives in each instance.

      • Andy Grabia August 24, 2010 at 1:18 am #

        The city did not pay $350 million, they paid $210 million and agreed to forego taxes and water fees, correct?

        No. Cost overruns and other hidden costs make the price much higher. I was probably low-balling with $358 million.

        If anything the arena is one glimmer of hope in an otherwise dismal future.

        $15 million in economic activity? On that level of investment? You might not think that $358+ million could have been better invested, but the city of Newark seems to disagree with you, as they are looking to sell the building.

        Suffice to say, that moving a pro hockey team to your city has got to be a net positive in economic activity.

        Not really. As explained in this paper, most of the jobs created are temporary or low income. The vast majority of the money goes to the owners and the players, who leak that money by living and spending the money elsewhere. And, as noted a million times before, “increases” in local spending is just a redistribution of money from one form of entertainment to another.

        Newark is a poor comparator because it is a city in decline whereas Edmonton is continuing to grow and prosper.

        Uh, I didn’t make the comparison.

        Its probably in our best interest to avoid sarcastic insults and be open to assessing both the positives and negatives in each instance.

        I’m open to positives, Stephen. I just believe they need to be actual positives, not wishful dreams based on poor evidence. I didn’t come to this position based on a feeling. The evidence took me there. It’s overwhelming, and almost entirely unanimous.

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