Friday, December 14, 2007

"Doing it for the kids"? Sports biz reporter, after AY announcement, dissects the rhetoric

On 12/12/03, the same day that Forest City Ratner CEO Bruce Ratner appeared on WNYC radio's Brian Lehrer Show, so too did Matthew Futterman, sports business writer for the Star-Ledger of Newark, who made the necessary but obvious point that the developer's rhetoric about "doing this for the kids" or "for the community" shouldn't obscure the basic drive for profits.

Futterman first explained that New Jersey planned to spend $150 million to build a rail link to the Meadowlands--which is finally coming next year-- and hope that would entice New Jersey developer Charles Kushner, and his partner, then-Senator (and now-Governor) Jon Corzine, to buy the team and keep them in-state.

Futterman explained that multi-millionaire Corzine was serving more as a state supporter than a businessman: I'm not sure he's all that happy ...He’s used to making money, not losing it, and sports teams generally lose money.

BL: Well, part of the Brooklyn argument is that New Jersey has not supported the team, even when it’s been the Eastern Conference champions the last two years. They don’t sell out, like the hapless Knicks have through their lean years, in recent times, why is it a good business decision for any team owner to even stay in a situation like that?

MF: Every businessman who buys a sports team thinks that he’s made money elsewhere, thinks he’s going to make money on this… You’re completely right… they haven’t made any money. They’ve certainly been a financial failure, they’ve only won the last couple of years. And there’s any number of reasons why they haven’t done well financially...

Poor location

BL: What do you think the main reasons are, the location of the Meadowlands...?

MF: The location doesn’t help. It’s not that easy to get to. It’s not that fun to go to. There’s not very much going on… but the Nets were a terrible team for a really long time and a terrible way to spend whatever disposable income you had. Now they’re a pretty good team… but even with them being a good team, it’s still incredibly expensive to go see one of these basketball games, if you’re a regular person. With the entertainment options in this market, I just don’t know that it makes a ton of sense for people to spend their money on going to a December basketball game when maybe half the guys on the court actually feel like playing that particular night.

Still, if the team were to play in a transit-accessible arena such as in Newark or Brooklyn, it would be easier to fill seats.

Doing it "for the community"

BL: And what Brooklyn is going through now, in terms of debating the merits of this, Newark has gone through in the last few years.

MF: It was very funny. I mean, I like Bruce Ratner very much personally. He’s a very engaging person, he’s very enthusiastic, and I think he’s sincere, he has his heart in the right place, but it’s amazing how similar he sounds to the people who wanted to build the arena in Newark five years ago, in terms of, y’know, 'we’re doing this for the community, and we’re doing this for the kids, it’s important for them.'

Is it really important that you have a basketball team right there? And, y’know something, people are doing this to make money. He’s going to make a ton of money if he gets the arena and he gets to build this development, he’s going to make so much money that he can afford to pay nearly 300 million dollars for a basketball team that probably won’t make money. He’ll make money on the apartments and and he'll make money on the the office development and if he loses 15 to 20 million dollars a year on the basketball team, which is certainly what the basketball team has been losing in the past couple of years, it’ll be just fine.


Given the lucrative naming rights deal with Barclays Capital and the plethora of luxury suites, Forest City Ratner likely would make good money on the arena.

Profits in the new location?

BL: Why not think, with the central location [in Brooklyn]… he wouldn’t make money on the team, assuming they play well?

MF: Because it’s so expensive to run a basketball team. I mean, right now, the Nets’ payroll is up over 60 million dollars. Look, God bless him if the Nets are champions and they sell out every game. But even the teams that do really well on the court don’t necessarily make money on the court. The real money in sports, as it’s always been, has been in the increased value of the team each year. The game is to lose less money than the value of the team goes up… And then sell it. Meanwhile, you’ve had a nice tax write-off each year, to offset income that you have from your other businesses.

Hmm... does this mean the Nets might be for sale once they move?

BL: Is that the case around the NBA?

MF: That’s the case in sports everywhere… There’s very few teams that actually make money. Look, he may make a lot of money. He’s got a—he could have a great location. It’s going to rely on the Knicks’ formula, which is to have all these big companies that are housed in New York to spend a lot of money on tickets and on luxury boxes. That’s where all the money is, it’s in the corporate seats. Because… you can’t afford to go to basketball game regularly. It’s a 200 dollar night out for me and my wife.

AY sans arena?

BL: So it sounds like… that some people in the community don’t mind some of the other pieces of the development project, although I’m sure many do object to high office towers… but don’t want the Nets. And you’re saying he could make more money if he just built the other stuff without the Nets.

MF: The problem is that the arena is the draw for the office towers, it makes it a good place to be, it makes–the arena makes it happening. That’s what these arenas have become in a lot of cities. Right in the immediate area of the neighborhood, there’s a hotel, there’s an office building, in this case there’s probably not going to be much of a parking lot. There’s this other ancillary development. It doesn’t spread out more than a couple of blocks from the arena. So this idea that an arena’s going to remake a whole city has been proven false at this point. But right in the immediate area… they call them the real estate play--there’s a couple of real estate plays that always do very well.

Well, there would be quite a few parking lots. And the arena would be not just a draw for the "real estate play" but also a lever for government subsidies and the exercise of eminent domain.

Creating jobs and revenue

BL: Do you have an opinion, as a sports business reporter, as to whether stadium and arena developments generally create jobs for the community?

MF: There are certain jobs that get created; there are certain people who have to hand out hot dogs and take tickets…. But I think the larger public policy question is whether that’s really a good idea to allow developers to keep the money that their developments generate in taxes… I’m not sure what the answer to that is… But, y’know, if a sports team owner gets it, then who’s to say that Bear Stearns isn’t going to go up to—I just use Bear Stearns colloquially as any other businessperson... who’s to say they’re not the next people to go to the state and say, 'we want to build this building, but we want to keep all the taxes it generates.' He didn’t mention income taxes. There’s a 66 million-dollar payroll... What’s the city income tax, plus the city income tax on all the visiting basketball players. It starts to be a pretty big number that they get to keep.

Actually, that tax increment financing (TIF) has not been deployed. But the question remains as to why certain businesses get subsidies and others don't.

It's about the Benjamins

BL: Who gets to decide which bidder gets the team?

MF: Ray Chambers and Lewis Katz, who are the principal owners.

BL: Want to make a prediction?

MF: Right now, I’m going to go with the guy who’s put the most money on the table, that’s Bruce Ratner, I mean, it’s an auction.

BL: So they [Chambers and Katz] don’t care about New Jersey?

MF: Probably about as much as Walter O’Malley cared about Brooklyn.

Or, to quote Ratner's interview in the 6/26/05 New York Times Magazine: We were the highest bidder for the team. Like so many things in life, it was just a matter of money.

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