Anaheim to spend somewhere between $0 and $400m on Ducks arena development

I spend a lot of time on this site savaging other news outlets for lousy reporting on stadium and arena deals, and indeed there’s a lot of coverage that could be improved if editors would even read their own articles before writing the headlines. But some deals are so expertly designed to obscure who the hell is actually paying who for what that I’m willing to extend at least a little sympathy to the poor journalists who have to figure out what to write in the 15 minutes they have before having to put up their next post.

Take, for example, Anaheim’s announced plan, which got preliminary approval from the city council last night, to issue $400 million in public bonds on behalf of OC Vibe (apparently officially spelled “ocV!BE,” but we’re not going to get ridiculous here), a 95-acre development of stuff that Ducks owner Henry Samueli plans to build around the team’s Honda Center. That $400 million, reports Voice of OC, isn’t really public money, because it will be repaid out of the Ducks owners’ arena revenues; or maybe it is really public money, because maybe it won’t be repaid by the Ducks:

[Anaheim spokesperson Mike] Lyster said the revenue from the city-owned Honda Center would go toward bond repayment under a proposed agreement with Anaheim Arena Management, which is headed up by Ducks owner Henry Samueli…

The deal’s got the markings of a government subsidy, if you ask Victor Matheson, a sports economist and professor at the College of the Holy Cross…

Matheson wrote that if Anaheim Arena Management goes bankrupt the city will bear the risk.

Okay, so the question here is less who’s selling the bonds than who will pay them off — if Anaheim can just use its bonding capacity to do Samueli a solid, but Samueli writes all the checks, that’s indeed not much of a subsidy. (Matheson’s point about the Ducks going bankrupt stands, but that’s a pretty unlikely scenario.)

The question then becomes WTF OC Vibe and the city mean by “revenue.” There are a squillion possibilities here: 1) money that Samueli will peel off his profits and send special to pay off the bonds; 2) money that Samueli is sending to Anaheim anyway as lease payments but which will now go in a box marked “4 OC Vibe”; 3) money that is currently being collected at the arena, but by the city, not Samueli; 4) money that may or may not exist, depending on how much revenue Samueli brings in; 5) money that Samueli is paying in taxes, or should be paying in taxes, which is only “private money” if you buy into the Casino Night Fallacy. Those are all very different things, which is why it’s important to be precise about who would be spending what and under what circumstances.

Fortunately, I was able to track down someone who pointed me to the Anaheim city council’s staff report for last night’s meeting; less fortunately, it just says that the bonds will be paid off with “lease payments … payable from revenues generated by the Honda Center and other sources included in the definition of ‘Gross Revenues’ under the Amended and Restated Facility Management Agreement.” Heading over to that document, we find that “gross revenues” is defined as “any and all payments, fees and deposits of every nature received by Manager or Owner” — the former being the Ducks, and the latter the city of Anaheim. So that could be team money, or it could be city money, and there’s no real way to tell from the paperwork alone.

It’s possible more light was shed on this at the Anaheim council hearing, but I didn’t stay up to watch it, and nobody in Orange County has woken up this morning to write about it on the interweb. Which means we’ll have to wait to see what the morning news brings once it’s morning in California — I’ll post updates here as soon as I see or hear anything more.

INITIAL UPDATE: Lyster provided some more info in the comments below, and Voice of OC has more in their just-posted report. The upshot: The city of Anaheim is currently supposed to get half of all arena profits over $6 million a year, though it’s never actually seen any money since the Ducks management has kept net revenues too low for profit-sharing to kick in. Assuming that profits rise eventually, though, then some money that would otherwise go to the city would instead get kicked back to pay for this additional development — though Lyster argues that the city would get more back in taxes than it would lose in profit-sharing, based on, uh, this entirely unfootnoted deck slide.

Needless to say, that makes for unknowns on top of unknowns, making an evaluation of the public costs of this deal like trying to figure out the winners and losers in a trade that entirely consists of conditional draft picks. I’ll see what other numbers I can dig up, though, and will revisit this in a future post — for now, though, “somewhere between $0 and $400 million” is probably the best we can do.