Bankruptcy and the billionaire
The corporation that owns the Rose Garden arena, home of the Portland Trail Blazers, has filed for bankruptcy. The company, Oregon Arena Corp., is owned, as is the Trail Blazer team, by Microsoft co-founder Paul Allen, the fifth wealthiest individual in the world.
The move is part of a prolonged attempt by Allen to get Oregon Arena out from under its obligations on the mortgage for the building. That loan, a 25-year bond deal, essentially precludes refinancing, which in turn forces the company to pay interest at nearly 9 percent through 2020. According to "the debtor," as the defaulting borrower is known in bankruptcy, the arena has lost money in all but two of the nine years that it has been open.
The bankruptcy prompts interesting questions from a number of different angles. First, Portland and Multnomah County taxpayers are holding their breaths with their eyes shut tight, waiting for another blow to their wallets. So far, everyone at City Hall and the county building says the Chapter 11 case won't matter to the local governments. I'm not so sure I'd agree. For example, you can bet that Oregon Arena will be looking for a reduction in its property tax assessment, and that its compliance under existing contracts with the city for matters like maintaining the Memorial Coliseum (next door) may deteriorate.
Second, the uncertainty surrounding the Rose Garden should caution the city to sit tight on its proposals for the Coliseum. Plans for a gigantic recreation center in a renovated Coliseum ought to go on hold until it's determined just what the future of its upscale neighbor is. Of course, the city has proved its ineptitude in managing projects like this in recent years, and it may plow ahead with something, only to find out that new management at the Rose Garden -- or some other outcome of the bankruptcy -- could render its best-laid plans unworkable.
Next, the Blazers deny that the bankruptcy has anything to do with their increasingly vocal opposition to bringing a Major League Baseball team to Portland. But without question, the arena bankruptcy will negatively affect that effort. This makes two bad Portland stadium deals in a row for the powerful TIAA-CREF pension fund, based in New York. TIAA-CREF invests retirement money for college and university professors throughout the country, including me and probably several hundred others in Oregon. It's also in the middle of the Portland Civic Stadium/PGE Park fiasco with the City of Portland. You can be sure that it won't be back for a third stinko sports deal in Stumptown, and that its troubles here will not go unnoticed by other potential "financing sources" for a baseball stadium.
Major League Baseball is doubtlessly going to hear about it, too. Although Portland baseball backers will seek to reassure the big leagues that Portland can be a two-professional-team city, the Blazers are obviously trying to show them that the fan base may not even be able to cover one.
The Chapter 11 filing is another consequence of the failed management of former Blazer president Bob Whitsitt, who took a sure thing, the Portland NBA franchise, and wasted it through stupidity and arrogance. In the last six months or so, the new team management has blown up the roster in the hopes of winning back fans turned off by the street-thuggishness to which the Blazers have sunk over the past five years. In the new PR campaign, character is supposed to matter.
Character -- as in not repaying your debts? It would be one thing if the arena were owned by a mere mortal whose prime tenant was an unrelated entity. But here the owner is a certified multi-billionaire, and the tenant is his basketball team, whose outrageous salaries and poor personnel choices are to blame for its financial woe. Allen signed the arena bond deal in '95, back when he held absolutely all the cards. Now he's weaseling out of it.
Taking the building into bankruptcy and flipping the bird to the nation's retired college professors are not the actions to take when you're supposedly showing your commitment to character.
Indeed, word coming out of the negotiations with the bondholders has been that they would gladly release Allen from the onerous mortgage rate if only he would personally guarantee the bonds. And if he were sure that his company was going to repay the bonds, one would think he'd have no trouble with the guarantee. But apparently he's specifically refused to sign it. To him, bankruptcy is a better option.
Maybe Allen is getting ready to pull out of basketball. If that is his desire, then all I ask is that he find a halfway responsible buyer, leave the team here, and not let the door hit him in the backside on the way out.
More ominous is the prospect that he's thinking of taking the franchise out of town. That would be a disaster for many area residents who rely on the team for their livelihood. Although it seems unlikely, the new Allen philosophy, "This is a business, and we're tired of subsidizing it," points to that outcome as a distinct possibility. Moves like this bankruptcy put the Blazers in play to a frightening degree.
It's like an old boyfriend calling from his aging BMW at 3 a.m. to say, "Love me or I might kill myself."