Jun 29 Get the Facts
Over the course of the last week, the question has been raised as to why public financing is needed for the Arena project. As discussed below, we believe there are three key reasons:
- It improves the economics of the project to an acceptable level
- It reduces the upfront equity commitment required
- It is fair given the public benefits the Arena will provide
Public support improves the economics of the project: The first reason why a public contribution is necessary to the Arena project is that it meaningfully improves the economics of the project. In our proposal, we have not asked the City or County for any existing funds or tax revenue streams. Rather, we have simply asked the City and County to reinvest the direct tax revenues that the Arena generates into the project.
As almost everyone is surely aware, building and operating a sports Arena is not and has never been a high return-on-investment endeavor. This is the reason most modern arenas have had some level of municipal/public investment.
While we are confident that we can consistently operate the NBA franchise together with the Arena at a sufficient level of profitability to protect the public investment in the project (and have created numerous safeguards in the MOU to insulate the public’s exposure to risk), the City and County Councils must appreciate that there is a significant difference between operating profitably and earning an adequate return on our investment. While we will again state that investment returns are not the primary motivation of our group, we do believe it is fair to ask that the project meet a minimum return threshold...