Estimated at $327 million before the inevitable cost overruns.
Wolstein Group intends to put up $15 million of it’s own funds, and raise another $157 million from other investors. The state is going to be asked to shell out $14 million up front, and then allow Summit County to impose a $0.30 per pack tax on cigarettes to raise another $180 million. Those numbers from the Beacon add up to $366 million, but Wolstein’s promised $8 million to Nordonia to get out of paying property taxes, and the cigarette tax estimate is probably soft as well.
(As usual, the cigarette tax includes splitting the booty with various “arts” groups to buy some additional political support)
To help pay off the bonds, a $2.00 per ticket surcharge is imposed, which is supposed to raise $2.2 million annually. That translates into 1.1 million in paid attendance at various events. That’s an extremely suspect number. , MLS teams (assuming that one actually materializes in 2009) play a 32 game schedule, so there are only 16 home dates. Assuming that the 20,000 seats, plus 3,000 standing room and 2,000 suites are sold out for every game, that’s only 400,000 tickets.
Obviously, any promos, freebies, etc. would drastically reduce that number. The average MLS attendance per game in 2005 had a an aveage attendance of 15, 502 and a median attendance of 14,175 (HT: Ken Thomasch). Assuming that we take the average, and then give ourselves credit for being rabid soccer fans who turn out in droves, (nobody wants to be average, right?) the new team might average 20,000 per contest. That’s 320,000 maximum likely paid attendance. This kind ticket sale would probably place the expansion team in the top 3-5 teams in average attendance.
Which leaves a best case scenario of 780,000 seats to be sold by other events. In a market that has Gund Arena, the CSU Convocation Center, and probably several other smaller competing venues. I don’t see women’s soccer or lacrosse selling 780,000 seats.
So, the revenue projections for the stadium portion of the project are already looking shaky.
My original post on the stadium proposal is here. The only major difference is – surprise – the expected costs have increased. As noted in that post, the typical stadium project simply does not deliver the benefits promised:
“There is little research on the economic impact of minor league teams and their playing venues. Queried via e-mail, Rosentraub said, ‘Given the relatively small to nonexistent benefits from team sports at the higher levels, one should not expect anything or very, very little from minor league activities.’”
After all, if this was such a great deal, why would the private investors want to share the benefits with the government? Why would they need public financing?
Update: A fresh story in the Beacon notes that the cost of the stadium portion of the development is only $170 million out of the total $327 million project cost. Presumably, we’re only going to used taxpayer backed funding for the stadium part, not the shops, offices, etc.
Also noted is the enthusiasm for the legislature for spending our money on shiny new stuff. Thank goodness it’s only at the expense of the smokers. Well, at least that’s what they are saying now. I suspect that if the revenue projections from the cigarette tax don’t materialize, the rest of us will be on the hook for the balance. I know that I certainly feel better.
There’s probably fodder for an interesting study on cigarette arbitrage (smuggling), depression of sales in the local county, etc., especially for people who live close to the county border. Given $0.30 per pack, that’s $3.00 per carton, assuming a pack a day habit, probably 2.5 cartons per month, or $7.00. Perhaps not enough to rearrange your life, depending on the marginal amount of trouble to get to a low tax jurisdiction.
If nothing else, this only furthers the state’s inherent conflict of interest between promoting health by reducing smoking, and dependence on tobacco taxes for significant portions of revenue. Essentially, the State of Ohio is something of a silent partner of Big Tobacco.
If approved, this will definitely impact the University of Akron’s shot at building a new football stadium, which will depend on taxpayer funding to a larger degree than this soccer project. Two factors at work: 1) the state is really only going to pour so much money into stadium construction in Summit County; 2) these will be two competing venues, with similar profiles.
And just how far do we want to go down the road building our economy on bread and circuses?