Sunday, May 30, 2010

In friendly interview, Ratner claims team purchase was a "civic venture," dodges question about arena economics

On Friday, May 26, WOR radio host John Gambling, broadcasting live from Coney Island, interviewed by phone Bruce Ratner, Chairman & CEO of Forest City Ratner Companies and part owner of the New Jersey Nets.

Notably, when Ratner was asked if the arena would suck dollars from the rest of the city, he asserted it would be an "an additive to the [local] experience," thus dodging the question.

Ratner sounded kind of subdued, but maybe he's just not used to talking on the radio at 7:10 am. Gambling sounds authoritative--like, um, a radio announcer--but he doesn't know much.

Defining the project

Gambling started off by asking if arena construction had begun.

BR: We've been in construction for about a month and, in two years, we will have a brand new arena.

JG: There's more to this than just an arena.

BR: There's the arena. There's housing, both affordable and market-rate housing. It's an architecturally beautiful project. And of course the arena brings the Nets and circuses and all kinds of concerts and entertainment.

Whether it's architecturally beautiful is an open question, given that the only renderings beyond the arena are "vaportecture." Keep in mind that Ratner famously told Crain's New York Business last November, "Why should people get to see plans? This isn't a public project."

Adding revenues, or changing the subject?

JG: I wonder whether or not it will detract from New York... maybe suck some of the dollars out of New York into Brooklyn. Have you done any speculation along those lines?

Gambling, a notably uninformed (but authoritative-sounding) interviewer, might have pointed to the June 2009 New York Times article "arena glut" article, which suggests that five arenas--and maybe even four--are too many for the region.

The Barclays Center would compete with the main arena in New York City, Madison Square Garden, but it could compete more with the antiquated Nassau Coliseum on Long Island.

BR: No, I think really what it is is additive.., whether it's the rides that you're about to watch or a new arena anything really new like that is just additive to the experience of New York and it's always been that way, Whether it's a new team when the Mets came, some 30-40 years ago, or whether it's the Nets coming.... It's an additive to the experience, particularly for Brooklyn.., Brooklyn has not had a pro sports team for over 50 years, and now we have a professional sports team in our great borough.

Note that Ratner stresses "an additive to the experience," which is undeniable, rather than analyzing the revenue issue.

The substitution effect

Neil deMause, co-author of the book Field of Schemes and author of the Field of Schemes blog, testified 3/29/07 before Congress that there was no additive economic impact of pro sports:
If sports fans spend more money at new stadiums, how is it possible that there is no impact on the local economy? There are several reasons, but two of the most important are substitution and leakage. The substitution effect measures how much spending is simply cannibalized from elsewhere in town, as fans spend their disposable income on stadium hot dogs instead of at the local pizzeria. While it’s hard to measure substitution directly, we fortunately have a perfect experiment: work stoppages from strikes and lockouts. During the 1994 baseball strike, economist John Zipp found “retail trade appeared to be almost completely unaffected by the strike,” while the Canadian Broadcasting Corporation reported “a grand slam” for businesses such as comedy clubs and video rentals while the Blue Jays were on hiatus. The obvious conclusion: Without sports, people spend the same money, just on different things.
I'd add that there might well be an increase in Brooklyn, but not in the region. That's why the city wanted to poach a team from New Jersey and why it's dubious federal policy to subsidize sports facilities with tax-exempt bonds.

And, of course, the New York City Independent Budget Office says the arena would be a money-loser for the city.

Ratner's motivations: team purchase a "civic venture"

JG: How long have you been involved with the Nets?

BR: Almost seven years.

JG: Seven years. Did you get into it because you were a basketball fan, or was this a business venture?

BR: It was more of a civic venture, really. The idea first came to me from our great Borough President, Marty Markowitz, he kept calling me, and everyone knows, Marty doesn't give up, we need a professional team, here... That was really the impetus to it, really, bringing professional sports back to Brooklyn.

Remember, Chuck Ratner, CEO of parent Forest City Enterprises (and Bruce Ratner's cousin), on 9/9/05 told investment analysts: I will confess that it was less than two or three years ago we were sitting around in New York wondering where the next deals were going to come from. We had finished a whole bunch of office and we completed MetroTech and we didn't have the next great site in Brooklyn. That was one of the reasons we got so aggressive and creative, Bruce and his team did in this Atlantic Yards project. We saw that land sitting there for this last 10 years, realizing it would be a great opportunity if somebody could turn it on.

The impact of the Dodgers

JG: Much is always made about the Dodgers leaving and what it meant... But it really did leave a hole, didn't it?

BR: It did. Whether it was the Dodgers or whether it was more the times, I think it was more the times, really after that, Brooklyn had a very difficult time. It had a difficult time economically, a lot of people left Brooklyn. Now of course over the last ten years Brooklyn's come back in a way that brings it back to the old glory that everybody was accustomed to when the Dodgers were here.

What? Old glory? Brooklyn had a completely different economy, and a completely different population. It's changed enormously due to such things as immigration and historic preservation, with numerous neighborhoods being rebuilt in the past decades.

Brooklyn had rebounded from the loss of the Dodgers by the 1960s, according to Michael D'Antonio's 2009 book Forever Blue.

Neighborhood changes

JG: I assume that Marty Markowitz and yourself.. are looking at the Barclays Center sports arena to be sort of the cornerstone, if you will, and expect a lot more in the neighborhood.

BR: I think that's right. Brooklyn is a place that's now growing in so many different ways. And the area where the arena's being built is an area where there were open trainyards... Somebody called it an open scar--the area where the arena is going. In fact, across the street, where we built a shopping center, the Atlantic Terminal shopping center, that piece of land was vacant from 1955 to 1995, 40 years. So, now to bring an arena, the shopping center across the street... now housing, it's a very very important development for Brooklyn.

Ratner has a rather expansive definition of the neighborhood, since he suggests, inaccurately, that the arena would be built exclusively over the railyard, and then moves quickly across broad Atlantic Avenue.

Ratner can't even get the name of his mall right. The Atlantic Center mall opened in the mid-90s, while the Atlantic Terminal mall replaces an aboveground Long Island Rail Road terminal that was demolished in 1988.

Rising tide?

JG: The tide raises all boats, I would think.

BR: It would be the fourth largest city in the country, it doesn't have an arena. Now we have our own arena, our own place to go to. It needs it, it could use it, it's certainly additive. Of course a sports team is particularly special for all of us.

Who's "we"? Ratner and his partners will get the profits.

The Prokhorov deal

JG: How'd you ever get tangled up with Mikhail Prokhorov, who's now your partner?

BR: He's a great partner, as everybody saw last week. I think he surprised some people... It was mentioned to me about two years ago, three years ago now, that he was interested in buying a sports team. A year ago, when we decided we were going to bring in a partner, I decided I'd fly over to Russia and see him. I did that and, in about four hours, we got along so well we shook hands.

Three years ago? That would make it May 2007 at the latest. I hadn't heard that early date before.

Soldiering on

JG: Did you ever get frustrated and say, y'know what, I'm going to pull the plug?

BR: I did get frustrated. I absolutely got frustrated. And there were times when I thought maybe it wouldn't happen. But I never ever honestly thought about pulling the plug, I really didn't. I felt it was important, felt we were doing the right thing. I thought the borough needed it, I thought the city needed it, this kind of development. I never thought about actually quitting... I did get upset a lot of times, and I said, why am I doing this, why am I doing this? But I never really never said to myself, quit, that's a word that was not in my vocabulary.

What Ratner's cousin Chuck said was, "We still need more" subsidy. And they got it.

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