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Thursday, February 26, 2009

A question for Little Lord Paulson

In connection with the forthcoming burning of $100 million in public funds for new minor league sports facilities in Portland, a thoughtful reader writes:

The other day, I was thinking that you might want to ask [Merritt] Paulson [private owner of the teams] how many season ticket buyers he has already signed up. Strikes me that any prospective owner of a new sports team should be out there bragging about how many season ticket holders he's already got -- plus, of course, the big bucks skybox guys. Because as we all know, no sports operations these days pencil out without the skybox subscriptions.
Indeed. How many rabid fans and local businesses have signed up for spendy tickets to watch the Beavers and the "major league" soccer team, game after game? Shouldn't the proponents of the stadiums deal be out there beating the bushes for such folks before asking the taxpayers to make them two fancy new nests?

Comments (31)

I'd also be interested to know who gets the revenue from the naming rights to the new stadium, assuming he's able to sell them in this climate.

I guess WaMu Park is out of the question... Ditto for CountryWide Stadium.

Goldman Flats?

Hell, I'd love to see the Timbers books just to see if he nkows how to run a franchise.

To sell skyboxes, you need local large corporations to sell them to. Portland has: Nike, Adidas USA, Intel, and not much else (maybe throw in Columbia Sportswear).

They shouldn't be asking the taxpayers for a thing.

This is private enterprise. If it truly pencils out, no public assistance should be necessary. If it needs public assistance, it should not proceed.

Any newer, larger, spiffier stadium is naught but a tool for civic extortion ten years (or less) down the line.

Also, isn't the professional soccer season in the summer? Isn't that when most Oregonians are out enjoying the blessings of our natural environment? Locals are very fickle about sports entertainment; if it sucks and losing is the usual, locals will head for the hills, the beach, or Seattle for other 'sports entertainment'.

Well, for one thing, the soccer fans are already buying season tickets for this year.

For another, it's pretty easy to sign a pledge saying you're going to do something two years from now. But if it means THAT much to you, we'll get Bill Sizemore on it right away.

And if you're going to trash this, let's try to do better than "Nobody will go in the summertime." I guess that's kind of like how nobody goes to see the Red Sox, since everyone's down at Hyannisport and the Cape ...

Roger - You're not in Kansas (or Boston or wherever) anymore. This is Stumptown. We keep trying to educate you about the local culture, but you don't seem to get it. You must lead a very insular life here.

Hey, I'd go see the Red Sox if they played in Portland. But sadly not this year's Mariners.
And not soccer of any kind.

If Paulson is so convinced that this venture will be a success both for he and city, how about we reverse roles? The city buys and owns the team, Paulson buys and owns the stadium. Presto! Soccer comes to Portland and he can make a ton of money renting the facility to the city. Portland can then sell the team after 5 or 10 years and make a bundle. Oh wait, that's what Paulson is planning to do!

Tsk, tsk. You guys didn't ask the right question. The Oregonian did. As was reported in Tuesday's paper:

"The way we are structuring this, we will be totally insulating the taxpayer," Paulson said. "No matter how the teams are doing, I'm personally guaranteeing that our family is on the hook for those payments."

Enjoy your crow.

That's the same guy who said, "The debt on the Civic Stadium remodel is almost paid off already." Which was a flat-out lie.

If the guy is willing to put his own credit on the line, then there is no reason for the city to issue any bonds. The city can lease him Civic Stadium, and the land in Lents Park. He can finance and build the stadiums himself.

But he won't. Because he wants the taxpayers' credit on the line.

I know what we ate on the last stadium deal that the genius of Sam Adams brought us. Crow would be nice in comparison.

Public risk..private aggrandisement..same as Steinbrunner (jr and Sr) is doing in NY, the other guy is doing in NY and Jerry Jones is doing in Dallas.

As soon as one these rip off artists PROMISE JOBS the local hillbillys roll over and die.

Just go west young man and see the same thing at Bandon Dunes.

Why leave Precision Castparts off a list of Portland's great businesses? Those folks might take a box or two, for a sport other than major league sockminton.

I would start just by asking the current Timbers audience if they'll be willing to pay more than twice as much for regular tickets. Cuz they will. (Where will the Timbers go anyway, if there's a new "major league" team? Would they play in the same place?)

Anywho, I'd love to know more about what Paulson's "guarantee" means. Is he actually saying that he's going to pay off the public bonds, and the public won't pay any of it? Or is he saying that in the highly unlikely event that the city defaults, he is on the hook to make the payments?

Jack, can you help? Anyone else understand what the guarantee is?

Uh, Roger, a personal guarantee may be worth less than the paper it's written on if the Paulsons are keeping their gazillions in the Cayman Islands.

Goldman Sachs has 15 subsidiaries there.

"Following Bailout Money to Tax Havens"



Jack, can you help? Anyone else understand what the guarantee is?

Until Paulson shows details, no one will know. But if he's willing to take the ultimate downside risk on the construction, there are many, many ways it could be structured without city bonds.

I was intrigued by the "300 permanent jobs" in Merritt Paulson's letter to the editor in the Oregonian a couple of days ago.

If a team has 15 home games, as the Chicago Fire do (http://web.mlsnet.com/schedule/scoreboard/season.jsp?team=t100), then that's 15 games * 15,000 fans (his "conservative projection") = 225,000 seats.

OK. What's the average ticket price? Let's say $25.

That gives us $5.625 million if every ticket is sold for every game.

Now, assuming that there's no rent and the players are free, that figures out to $18,750 per "permanent job". Figuring 50% for taxes and overhead, that's about $12,000. Divide by 12 months a year and you get $1000/month. Divided by 160 hours/month, that's around $6/hour.

Except that Oregon minimum wage is $8.40/hour as of 1/1/09.

In other words: bulls**t.

I can accept that Dads like me might take our kids to a soccer game. But I don't believe that anybody is going to pay for pay-per-view or the Timber channel or whatever so they can watch MLS soccer.

The Oregonian did a piece on Paulson's testimony on HB 2531 at the legislature on Tuesday.


"what Paulson's "guarantee" means"

That he'll jerk around Randy Leonard and the rest of the geniuses in govt around with empty promises and stick the taxpayers ultimately with any losses.

"To sell skyboxes, you need local large corporations to sell them to. Portland has: Nike, Adidas USA, Intel, and not much else (maybe throw in Columbia Sportswear)."

For what it's worth, Fred Meyer maintains a box in both the Rose Garden and PGE Park, and the tickets are given out to employees at the main office.

Don't forget that while Fred Meyer is a division of the Kroger Company, they maintain quite a bit of autonomy as they add a good $9B to Kroger's bottom line.

Fred Meyer Stadium, perhaps?

Bankerman asks a good question. The City and the Advisory Committee should ask the same question of why the the City and Paulson's roles can't be reversed. Let Portland buy the teams for $43M, and have Paulson build/improve the two stadiums since he has offered to guarantee the two stadiums.

1. The city already owns all the land being considered for these projects. If the stadium got sold for $40 million to a private entity, you'd all be screaming about the selling a valuable piece of property like that for pennies on the dollar.

2. Pro sports leagues have policies against public ownership of teams. This could reflect the owners' sincere wish to see municipal energies channeled in appropriately civic directions. Or it could mean they don't want their books and budgets open to public scrutiny. I'll let you decide.

One exception: The Green Bay Packers, publicly owned since the days of Bronco Nagurski, have been grandfathered in. Which is why they're still in Green Bay.

Too bad, though. I for one would love to sit in on City Council hearings revolving around trades and firing coaches.

The city already owns all the land being considered for these projects. If the stadium got sold for $40 million to a private entity, you'd all be screaming about the selling a valuable piece of property like that for pennies on the dollar.

The city could lease it to him for the useful life of the new facilities, at a healthy rent. He could own the improvements. There's a model for this. It's called the Rose Garden.

Jacks right, the city could lease. Roger, who says that value of PGE Park and Lents, or elsewhere is only $40 M?

The improvements at PGE Park alone are worth more than $40M, not including the land. Lents, its is worth a fortune since its in an urban renewal district-it's a ticket for all kinds of taxpayer dollars for the developers increasing the value just on the land. Same goes for PGE, when UR added to the mix. They are gold mines.

lw -- I use the $40M as that is the estimated cost of PGE Park renovation. My point was/is that if you sell those parcels on the open market, they bring in way more than the costs of renovating/building stadiums.

In the cost-neutral version of the hypothetical discussed above -- city buys team, Paulson buys land and builds stadiums -- this leads to bloggers griping about sweetheart deals for stadium owners, and griping about selling off park space.

In a logical offshoot of that scenario -- city sells the land -- both of them fetch prices that probably preclude seasonal recreational activity.

So we're kind of on the same page here.


As soon as Shortstop LLC (and or the Paulson Family) issue an $85 million letter of credit payable in full upon default (as defined by the City's outside legal counsel), I will personally sign up for season tickets for both teams.

At a minimum, default would include any action intended to move either team, any form of bankruptcy reorganization (at either the leagues or Shortstop LLC), or reduction in the number of league games played during the season.

And Paulson's quote fails to define what "those payments" include. Portland needs more than bond insurance (payment of interest and principle in accordance with bond maturities), we need payment in full at time of default.


Green Bay is not "publicly" owned. It is owned by private citizen shareholders. The municipality does not own the team. Just like the Boston Celtics are a publicly traded corporation. I cannot think of a single sports franchise in the world that is owned by a public (read: government) entity. I imagine if Green Bay were owned by a government entity the whole world would know the internal finances of the NFL, which we of course do not.

@Jim D:

You leave out sponsorship money and TV deal money. MLS has broadcast deals with ESPN and FSC, I believe, plus they sell an MLSDirectKick (or something like that) package on cable. Additionally, there would be more games than just the season games, such as the Lamar Hunt Cup competition, exhibition matches, and if we're lucky CONCACAF Champions League matches.

Now, this still doesn't mean it all pencils out for Paulson including the permanent jobs quotes. However, I doubt many expansion clubs in any sport are profitable at the get go, just like most businesses.

I also suspect 300 permanent jobs doesn't necessarily mean 300 permanent full time jobs. Most likely this is pure rhetoric and those jobs are the part time stadium vendor type jobs.


I, like most of the commenters here, am concerned with Portland getting stuck with this debt, but I would love to see an MLS club in Portland. I would be at the front of the line for season tickets. I would hope that the City could negotiate an additional $20M commitment from Paulson for the construction costs (which, by the way, would be the only way to make this a true public-private partnership), and some form of guarantee on the bonds and a strong lease. But, that's just me.

"How many rabid fans and local businesses have signed up for spendy tickets to watch the Beavers and the "major league" soccer team, game after game?"

Judging by the crowd yelling and waving MLS placards this afternoon in Waterfront Park near the "McCall's Restaurant" building, about 75 rabid fans. None of the drivers honked their horns when they drove past, at least when I was driving by. Pretty pathetic rally.

@jyah13 Yes, I did leave out sponsorship money. But I also left out player salaries - presumably "major leaguers" are getting more than $1400/month - and a ton of expenses that must go along with running a franchise.

I agree with you that being a part time stadium vendor might be considered a "permanent job" but it's ridiculous to think that somebody can support themselves, let alone a family, on that.

But that's what they're selling with "300 permanent jobs" is this economy.

Jim D: You would be surprised at how little some of these MLS players make. Take a look at the MLS Salary information. Some players have a salary of only $12,900, although I believe those are practice squad guys or some sort of lower level status. I think the league minimum is $33,000. Check out LA Galaxy salaries. Take out Donovan and Beckham and the top salary is still under 200K. MLS has a $2M salary cap with exceptions for "designated players."


As for the living wage salary issue, I don't know, but no stadium job is really going to provide a living wage. those are all part-time minimum wage jobs.

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