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Thursday, July 9, 2009

New pitch for Paulson: No new stadium, no summer sports at all

The Trib plays right along with the Paulson stadium propaganda this morning. Reporter Jim Redden points out that the "minor" soccer league in which the Portland Timbers currently play may be phasing out its West Coast presence soon, as several of the teams in this region shift over to the "major" (by U.S. standards) league. If Portland doesn't expand the grandstand at PGE Park and make the place soccer-specific to the tune of $40 million plus, then the Timbers can't move up to the "majors." And if they can't move up, then they might be shut down, because their current "minor" league may fold in the near future.

The rest of the article covers ground that's already been well tread: If you remodel the stadium for soccer, the Portland Beavers baseball team will have nowhere to play. And so they might leave town, and even the Portland area, permanently as well.

But the conclusion the article reaches is new: Hurry up and do the soccer deal now, or you may wind up with no team at all. They may both leave.

There are a couple of problems with this last assertion. One problem is logical and the other journalistic. Let's start with the logic first. There are four possible outcomes here:

1. Both teams stay in Portland.

2. The Timbers leave and the Beavers stay.

3. The Beavers leave and the Timbers stay.

4. Both teams leave.

Let's look at these possibilities and see what it would take for each of them to happen.

Outcome 1, both teams stay, could occur only if one of three alternative scenarios plays out: (a) the Timbers remain "minor league" and the "minor league" remains viable; (b) the "major league" soccer owners agree to a shared stadium with baseball, utilizing movable grandstands for soccer games; or (c) the city blows big bucks on two stadiums. We are told that scenario (b) will never happen, because the soccer overlords in New York have spoken on the matter. Today the sales spiel is that variation (a) isn't a safe bet, either, because "minor league" soccer on the West Coast may be ending soon. That leaves option (c) -- the $80 million or greater option, with two stadium projects -- and that's currently on the rocks because without buying up land, which would push the price tag even higher, the city doesn't have a new place to put either team. Thus, it certainly appears that one of the two teams will be closing up shop in town, and if the Beavers leave to make room for the remodel, it's for good because the stadium will be irrevocably made unsuitable for baseball.

But which team should leave? Let's look at Outcome 2 -- the Timbers leave and the Beavers stay. Nobody in City Hall is talking about this outcome, but in this one the city would not be spending tens of millions of new dollars on another stadium remodel or buying temporary seating. It wouldn't be spending anything. Turner Construction wouldn't get its $22 million or more contract, and the Paulson cronies on Wall Street wouldn't get their tens of millions in interest payments on the new bonds. The only drawback from a taxpayer standpoint is that it would make it harder for the city to pay off the existing mortgage on the stadium, without hitting up property taxes even more heavily than it currently does for this purpose, because there would be only one team, not two.

Note that Outcome 2 could be locked in by the city at any time. Just say no the PGE remodel, and we're done. We keep the Beavers, who have an official total attendance of more than 200,000 so far this summer at PGE, and ditch the Timbers, who have drawn fewer than 85,000 over the same timeframe.

On to Outcome 3 -- the Timbers stay, the Beavers move. This is what the City Council is looking at with the ordinances it considers this afternoon. The revenue currently generated by baseball is lost, and the revenue generated by soccer is increased. That pair of effects may be a wash, or it may be a net loss, from where we stand with the two teams occupying the stadium today; it's dubious that it will be a net gain from today's ticket revenues for both teams. But the city takes on around $40 million of new debt to get there (to remodel PGE), and it ends up with only the Timbers' money, not the Beavers'.

And then the final outcome, No. 4: Both teams leave Portland for good. Is this going to happen? Of course not. Here is where the logical fallacy of Redden's article is apparent. For one thing, if the soccer upgrade deal falls through and the "minor" soccer league folds, there will be no need for the Beavers to go anywhere. They can just play where they do now, with no additional out-of-pocket cost to the city's taxpayers, but a loss of the soccer revenue. In other words, Little Lord Paulson and the city will always have the option of Outcome 2. Both teams will not be forced out of town.

Now, of course, Paulson could decide of his own royal accord that he wants to try his luck with both his teams, or his sole surviving team, outside of Portland. The likelihood of that seems extraordinarily slim, and as far as we can tell, the city could not stop him from doing that in the long run anyway, regardless of the stadium situation. But keep this in mind: If Paulson pulled the teams out of town -- not because he had to but because he wanted to -- there would still be a ready-made minor league baseball stadium here, extensively remodeled less than a decade ago, waiting for another owner. And as we've seen over the last couple of decades, somebody or other is always game to try it, at one level of minor league baseball or another, in the Rose City.

Redden spends a lot of time going over the money aspects of the deal, and he notes that the loss of either team would make it harder to pay off the existing debt on the recent remodel of PGE Park, which still has a balance of $26 million outstanding. If you build two stadiums, you get to keep two streams of revenue (Outcome 1, version (c)), but what needs to be emphasized is that at that point the total debt jumps to more than $100 million. If you get rid of the Timbers and keep the Beavers (Outcome 2), you get one income stream and a debt of $26 million. If you get rid of the Beavers and remodel PGE to keep the Timbers (Outcome 3), you get one income stream and debt of more than $65 million. If Outcome 4 ever happened, you'd have no income stream and a debt of $26 million, but as noted earlier, the chances of that occurring seem negligible, and you could probably get another baseball team in there to pay something.

In short, if it comes down to the Timbers leaving or the Beavers leaving, it would be a much, much cheaper scenario if the Timbers left:

Which brings us to the journalistic problem. For this morning's article, Redden appears to have interviewed a total of two people. The first is Fireman Randy, the city commissioner who's been shilling for Paulson and the construction unions on this deal beyond the point at which, if it were most elected officials, they'd be a little embarrassed. The second is Jeremy Wright, whose credentials on the subject are that he's part of the mob of rude soccer fans known as the Timbers Army.

That's it? Where is the other side of the story? Commissioner Fritz, who's expressed grave concern about the financial side of the deal? Worried Beavers fans? Municipal debt analysts? People who have studied costly sports stadium disasters in other cities? Too much work to call them, apparently.

Comments (51)

Hmmmm Option 2 - Keep America's pass time in Portlandia at same debt level and same revenue level versus the loser options. It's too logical for some people I guess.

Gotta admit, Beavers players have a loyalty bond with Portland equal to a bus load of Greyhound passengers. Make it worth their while and some might stay.

But then that is true with the Blazer players, no?

Ok then, how about extending WES to the Volcanoe's stadium in Keizer?

I am probably in the minority, but I just don't care about either team.
I would like the schools to be funded, the streets maintained and bridges fixed, and the city's debt load reduced, not increased.
If these teams are such great money makers then let the team owners and fans finance them.
And that goes for hotels too!

What happens when "Pro Soccer" collapses a year or two after the remodel? You need a fifth quadrant in that square showing $65 million + debt and no income stream. Man, talk about a lapse in logic and journalism. How dare you chastise the Trib for theirs, sheesh!

I am a Timbers fan and I completely agree with Portland Native. As much as I enjoy a night out at PGE park, I would prefer that our current social obligations have been met, (e.g. schools, police, fire, rescue).

How about if both teams stay and Paulson goes?

Maybe we're reaching the "loan" stage here. Can't we have Sam Adams contact Don Garber of MLS and say there's a cash envelope with the receptionist at city hall? In it we leave a million dollars, in case Garber is behind on any bills.
Maybe he'll go for it. Then afterwards - but not connected to the "loan" in any way - Garber could announce that he's now okay with a dual-use PGE Park.

If anyone objects we just trot out our Mafia-fighting tough guy State Attorney General to say the deal looks clean to him.

I would also recommend a few provisions in the deal that won't cost anything now but could help out greatly in the future:

In the event the economy continues to tank, and this really does turn out to be the collapse of the United States as an economic power, Merritt Paulson has to agree to let the citizens of Portland camp out in PGE Park. This goes for a big earthquake as well.

Of course, that's just in case we're not prepared because our civic leaders have spent all their time sucking up to the Paulsons or any of the other Wall Street types who helped bankrupt America.

@Bill M
The envelopes have already been received.
Bloomberg reports that Morgan Stanley is repackaging its toxic assets as AAA securities.
The soccer/baseball scam is just Paulson's version for Portland. Scam and Randy are just too stupid to realize it.

Why does the City's economic development strategy remind me of Shel Silverstein's poem, "Smart" ... ?

My dad gave me one dollar bill
'Cause I'm his smartest son,
And I swapped it for two shiny quarters
'Cause two is more than one!

And then I took the quarters
And traded them to Lou
For three dimes -- I guess he don't know
That three is more than two!

Just then, along came old blind Bates
And just 'cause he can't see
He gave me four nickels for my three dimes,
And four is more than three!

And I took the nickels to Hiram Coombs
Down at the seed-feed store,
And the fool gave me five pennies for them,
And five is more than four!

And then I went and showed my dad,
And he got red in the cheeks
And closed his eyes and shook his head--
Too proud of me to speak!

Thanks, GW.

I forgot how therapeutic a good chuckle could be.

Well maybe Redden proves that corruption is not a City Council "ONLY" thing. There should be enough grease for everyone. Not much money at the Trib, gotta make it when you can. My opinion.

Perhaps Mr. Redden is up for that Transportation Dept. job recently posted for City Hall . .

Minor note: I believe it's Jeremy Wright, not David.

How does minor league baseball territory come into play? If the Beavers relocate within the Portland area doesn't that prohibit another minor league team from relocating to the region and using PGE Park?

The reason the Beavers can't stay in PGE park is because he's betting the public is more willing to build them a new stadium than to build one for the new MLS. If he floated the idea of a special new stadium for his new MLS team, and left the Beavers alone, no one would really attach any urgency to it. By deliberately creating this situation where the Beavers future is jeopordized, he's more certain to get what he wants. Shameful and manipulative. But Scam and Fireboy are happy to do his schilling.

If the Timbers leave the Beavers will not be able to generate enough revenue to continue paying off the renovation, and in any case the stadium as is, is too large for the Beavers to adequately fill.

It's actually a highly likely scenario if a deal isn't reached. If the Timbers don't go MLS, they will fold, because they have no other teams to play west of Denver, and no money to do all that flying. If the Timbers go, they leave the Beavers at PGE, and their time will likely be short after that.

Oh noes! Paulson would take both teams out of Portland? Even though there's no way in hell that another city could afford to host a new team right now, or that no other would touch the sort of insane deals that Paulson is demanding? Say it ain't so!

Minor note: I believe it's Jeremy Wright, not David.

Corrected. Thank you.

You need a fifth quadrant in that square showing $65 million + debt and no income stream. Man, talk about a lapse in logic and journalism.

There could actually be eight boxes. Outcome 1 could have two, one or no income streams; and Outcomes 2 and 3 could have one or no income stream.

Its a very old and well known sales tactic to attach fake urgency to a sale in order to force a decision, and that's exactly what Paulson is doing here.

He may as well be the car dealer saying "I got a guy coming down this afternoon with cash to buy this car, so if you want it, you better act right now!"

If the Timbers leave the Beavers will not be able to generate enough revenue to continue paying off the renovation, and in any case the stadium as is, is too large for the Beavers to adequately fill.

The Beavers and Timbers are not coming anywhere near "paying off the renovation" now. The debt service is $3 million and upkeep by the city is in the neighborhood of $1 million (not to mention the city actually paying part of the peanut vendors' salaries). Paulson pays about $1 million.

And who says anyone needs "to adequately fill" the stadium?

BTW, "LentsOK," that's your last post here until you tell us whether you are or aren't Mark Bunster.

If the Beavers relocate within the Portland area doesn't that prohibit another minor league team from relocating to the region and using PGE Park?

It depends on how you define the "region." Keizer is obviously far enough away that it's compatible with PGE Park.

This is good stuff you've presented here, Jack, & all. In these economic times, to go on with a non-competitive, no-bid contract is enough, by itself, to have Adams, Randy, et al., who "approved" it to be recalled and have the deal pre-empted. In more enlightened times they'd already've have been tarred & feathered and run out on a rail. They've been in chronic breach of their fiduciary duties, and they flaunt it with blatant contempt for the good people, the regular Joes and Janes, of Portland -- and their children and grandchildren....

The same goes for all of those city hall apparatchiks who spinelessly facilitate those scams -- planners, accountants, lawyers, spokespeople, etc.

The potential financing details were presented to City Council this afternoon.

$11.9 Million in Bonds. $11.2 million from the Spectator Facilities Fund.
$8 Million in cash from Paulson.
$11.1 Million in cash from Paulson as pre-paid rent for years 2018-2025.

Total cost $31 Million.

Cost overruns are city's responsibility for first $1 million. Any additional is Paulson's responsibility.

Contracts to be negotiated by Paulson and presented to City of Portland for approval.

Ballpark workers free to organize.

No URD funds at all.

The "pre-paid rent" is a cute ploy. He puts money down now, gets rent-free space later. This is another way of him lending the city money.

So basically, he pays $8 million, the city pays $34 million, all borrowed ($12 + 11 + 11 million).

What a racket!

"$11.2 million from the Spectator Facilities Fund."

Don't forget this was paying the existing $30M remaining from the PFE deal.

"Any additional is Paulson's responsibility"

This whole thing sounds like Randy's "Don't worry, Paulson will pay" refrain. So Paulson is taking on $65M in debt ($31M for PGE and $35M for the franchise) or $2.4M/yr (@ 6% and 30yrs) or $158K/game (@ 15 games/yr) and now we have no way to repay the $30M debt from PFE?

This whole thing is smoke-n-mirrors to get it to pass, it is stinking already. Not bad for a story made of whole cloth. Between Randy, Sam and MP I don't think they'd recognize truth if they stepped in a pile of it.

Jack... That would be $23 million. The $11.1 from the Spectator Facilities Fund is part of the $11.9 million.

Not to belittle your math skills Jack, but if the entire bill is $31 million and Paulson is paying $8 million of that and then loaning the city $11 million. That doesn't equal $34 million from the city. Paulson is fronting $19.1 million on top of the $35 million franchise fee and the City is on the hook for Bonds covered by the Spectator Facility Funds of $11.2 million and $700 thousand in soft money(aka reduction in planning and building code fees)

So Paulson:
$35 million - franchise fee
$8 million - cash
$11.1 million - future rent payments upfront

City :
$11.2 million - Bonds back by Spectator Facility Fund.
$700,000 - Discount on permit fees.

Yes the city will not be getting rent for years 8 through 25 during those years, but according to you the league will have folded by then. If the league is alive and kicking, the city will still be collecting a 7% ticket tax.

Ooops... That should read:

"The $11.2 from the Spectator Facilities Fund is part of the $11.9 million."

My post wasn't clear enough.

$11.9 million is the city's portion. Of the $11.9 million, $11.2 million are Spectator Facilities Fund Bonds. $0.7 million were not identified specifically.

So the $34 million figure is really $23 million. Sorry to mislead.

And a mistake on the pre-paid rent, it's for 2019-2036.

"$0.7 million were not identified specifically."

This is coming from cost savings in reducing the amount of periodic maintenance done on the Coliseum.

I'll have to wait to see the actual deal -- I was responding to the comment -- but the remodel budget numbers I've seen are between $36 million and $41 million. I see Paulson putting up $8 million of his own money. Everything else is city debt of one kind or another. "Total cost $31 million" makes no sense.

I loved the cablecast of the previous meeting in which our brainiac Council grilled the expert witness to verify that there is no possible way to configure PGE Park for both MLS AND other sports. Internationally acclaimed design, engineering and architecture expert Don Mazziotti swore to it on a stack of consulting contracts.

We need to revise the title of our fair city: The People's _Banana_ Republic of Portland.

I'll have to wait to see the actual deal -- I was responding to the comment -- but the remodel budget numbers I've seen are between $36 million and $41 million. I see Paulson putting up $8 million of his own money. Everything else is city debt of one kind or another. "Total cost $31 million" makes no sense.

$11.9 million + $11.1 million + $8 million = $31 million.

"The long-awaited deal scales back the proposed changes to PGE Park from what was previously envisioned by more than $6 million to fit within available funding sources."


For now. We are still in the liars' budget stage.

Even if we are in the "Liar's Budget" phase as you so optimistically call it, the city would only be on the hook for $1 million in cost over runs. That means that if Paulson and his no-bid construction company spend $50 million on renovations. The city will not be on the hook for that extra $18 million and Paulson would have to come up with the extra money.

"the city would only be on the hook for $1 million in cost over runs."

Gee, that sounds as ironclad as the deal Gardiner/Glickman gave Vera with PFE and now look, we are stuck with $30M in debt.

I realize you want this stadium really bad, but its smoke and mirrors:

- $41M to $31M with cost savings (like CoP has ever done that)
- $11M for SFF that was supposed to pay the original $35M from PFE so now that comes out of the general fund
- Paulson's promise to pay every over runn is about as believable as his promise to create 300 living wage jobs.

Are you people that dumb not to see that this deal is being made up on the fly and is total versisfication to get a commit from the weak-minds in CoP? I mean the story changes byt the minute which means they are mking it up as they go.

Dear god, why doesn't Randy be honest and say something to the effect of"

"Hey, we're rolling the dice here with taxpayer money and we really don't know how it is going to be repaid"

1: Any venture that uses public dollars is a bad deal.

2: But this revised deal doesn't use public dollars.

1: This will never pan out financially.

2: Let me show you how it will pan out financially and put the city at virtually no risk.

1: Those numbers don't add up.

2: Yes, they do add up. Here's a detailed explanation.

1: Ah, don't bother me with your fancy "explanations." They're probably just lying.

Ad infintum...

the city would only be on the hook for $1 million in cost over runs

That's the concept that's being sold at the present, but the devil will be in the details. The city will wind up owning the facility, and will therefore be responsible for the safety and comfort of those attending events there. In that posture, it will be unable to insulate itself from all risk of unforeseen expense.

yeah and I'm the tooth fairy, Santa, and the Easter Bunny!
So sorry, I do not get your numbers, nor do I get how the Paulsons and co are going to be held accountable for any coat over runs or repayment of OUR tax money.

@ "...therefore be responsible for the safety and comfort of those attending events there."

Are you insinuating, Jack, that the Timbers attract a crowd that is more likely to cause injuries to other patrons than any other sporting event, or even any other public event? I know you're a big baseball fan -- I've been to dozens of Mets games in my life, and have attended baseball games in 2/3 of all the MLB stadiums in the country, and I have seen more fights and rowdy behavior at baseball games than I have ever seen at Timbers matches (and I have been to just about every home match the past 5 seasons). Honestly, I have probably seen as many fights and safety issues at Blazers games (half-season ticket holder for the past 4 years) as I have as Timbers matches, which is to say - not any. And let's not even talk about NHL or NFl crowds. In other words, safety is an inherent risk at every public event, and I'm sure the ownership and the City will ensure proper precautions are taken to protect visitors and to protect their financial investment in the facility.

sorry, my "not any" should read "not many."

Jack states: "The Beavers and Timbers are not coming anywhere near paying off 'paying off the renovation' now".

Does that mean that Mayor Katz and Sam, her senior adviser, that negotiated the past renovation deal with Portland Family Entertainment with the then Beavers and Timbers knowingly knew that PFE couldn't pay back the city? The same teams and other parties that helped pay the renovation debt then, are the same teams as today.

If the past debt can't be paid off, then why add another $40 Million if only soccer remains or $80 million if two facilities are made-all with the same or similar contributing parties?

Rich, I think you're missing my point. As owner, the city is liable for safety issues and many others. And so if Paulson's hand-picked architect and contractor skimp on fire safety items or disabled access, the city will have to fix the problems. Will the final contracts that Sam-Rand sign off on effectively shift that risk to Paulson? I know, the two of them are such gifted dealmakers, but still, one worries.

And what exactly was the city on the hook for at the beginning of the tram debacle? And what was the final amount the city sunk into the tram? I know these things do happen but far too often and with a high percentage of error in original estimates

I love the spectacle of three people energetically pushing a catastrophe on an unwilling population. Reminds me of the Bush years. Good times, good times.

Jack, permitting and site inspections are covered by the City's own processes. If the City's inspectors fail in doing their due diligence, how is it MP's or Peregrine's issue?

There is nothing different in this case than in any other major building project in the city. The fact that the structure will remain a public facility should mean the City will pay particular attention to its responsibilities to the public.

The devil is in the details. It all depends on what's in the contracts. Is the city capable of making sure that Paulson is truly responsible for all additional capital costs beyond the current blatantly lying $31 million budget? Forgive me, but having watched the city screw this up time and again, for many years, I'm not confident.

ep - who says this is "pushing a catastrophe on an unwilling population?" what makes you think the population is unwilling? over 16K turned up for a soccer match that was only scheduled 2 weeks beforehand -- does that seem "unwilling" to you, in this town, in this economy? I know this blog is filled with a few dozen NIMBYs and others who are against the deal, but what about the City-organized Task Force (unanimously in favor) or the attendance at each and every Commission meeting (9:1 in favor)?

Put it to a vote. Double dare you.

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