Paulson stadiums deal defies simple math
Fireman Randy "Pele" Leonard and Mayor Creepy continue to load dry ice into the smoke machine in front of the plan to spend upwards of $85 million of public funds on new stadiums for minor league baseball and "major league" (by U.S. standards) soccer in Portland. Media coverage of the proposal has been long on the concept but characteristically short on dollar figures. Today let's play amateur bean-counter and throw out some numbers to see how the plan "pencils" out, or doesn't.
Bear with me on this. It's not that complicated.
The private owner of the teams in question, Henry M. Paulson III, wants the city to put up the $85 million, and given the dire straits the city finds itself in, the money would all have to be borrowed. Recently, the city's long-term urban renewal bonds have borne interest rates of more than 6% a year. To borrow $85 million over 30 years at just 6%, you'd need to come up with $6,175,157 a year, for 30 years, to retire the debt. Assuming that the new soccer team would play 15 home games a year, that would come to $411,677 a game. The average ticket price in that soccer league is something like $22. And so even if the new team drew 18,713 paying fans to every game -- which is quite a bit above the league's average announced attendance, and even more above its real ticket sales -- every single penny the fans paid for their tickets would have to go to pay off the bonds.
Is that realistic?
Definitely not. For one thing, the "major" soccer league itself takes a big cut of ticket revenue right off the top -- one-third on most tickets, apparently -- and so even the rosiest of projections shows net ticket revenue of only $4.4 million a year. With debt service of nearly $6.2 million, it's clear that ticket sales wouldn't pay off the bonds for the stadium construction. It's not even close.
Now, sure, there would be some other money sloshing around -- a ticket tax, profits on concessions, shirt sponsorships, possible television deals, rents from some other events at the stadium, etc. But would those other sources of money be enough to make up the rest of the annual payments on the bonds, plus pay all the payroll, benefits, travel, promotion, and other expenses of the team, plus return a profit to Paulson and his big daddy on the $40 million they would burn for the soccer franchise? It is extraordinarily unlikely.
But wait, you say. Isn't the state talking about throwing in the income tax on players' salaries toward bond repayment? Yes, but that ain't much dough. "Major league" soccer teams operate under a salary cap of $2 million a year. At 9%, the Oregon income tax would raise a mere $180,000 a year, or $12,000 a game. That won't make much of a dent in the $411,677 per game needed to pay off the bonds. (Not to mention that the taxes the state currently collects on the incomes of the players on the current Portland Timbers soccer team would dry up, because the Timbers as we know them would no longer exist.)
What about the Beavers -- the minor league baseball team that would play in one of the new stadiums? I wouldn't count them in these equations at all, because don't forget, the city still owes $27.2 million on the previous stadium renovation conducted for the Beavers' benefit, which is bearing interest at well over 6%. Those bonds are being paid off, slowly but surely, by rents on the stadium, a hotel tax, and a rental car tax. There are still 14 more years of payments due on those bonds, with big balloon payments due in 12 and 14 years. Suffice it to say that anything the Beavers can afford to pay the city is already spoken for. Only the new team's revenue will be around to pay for the new bonds.
Unless you are a rabid soccer fan or work at the big local construction company that has no doubt already been unofficially identified as the contractor, there's nothing here but future tax liabilities for you and your kids. As with the prior PGE Park deal, the financial side of this is doomed to failure.
There's talk of soccer tourism, but where are these tourists all supposed to come from? There are already "major league" soccer teams in Seattle and San Jose, and so don't expect fútbol fans to come flocking in from those quarters. Maybe Emilie Boyles will organize a bus ride from Glendive, Montana.
It's time to kill this deal, but of course, that would make too much sense for the city commissioners. And so, like the Convention Center hotel, this one will hang around in hopes that at some point, the public will be sufficiently distracted to let the Usual Suspects sneak it through. Let's hope not.