Mark Cuban, Olympics, Corp. America

Discussion in 'Current Events' started by wkmac, Apr 23, 2012.

  1. wkmac

    wkmac Well-Known Member

    Dallas Mavericks Mark Cuban on the Olympics

    Cuban points out the truth, a fact many in Corp. America won't be happy with but the otherside of this is Romney who is paraded for his Olympic efforts when in fact he was nothing more than a community organizer to extract more welfare to the benefit of the special interests he represented. Cuban should be applauded for his honesty not that he and his own team don't freeload when the opportunity arises!
     
  2. pickup

    pickup Well-Known Member

    About that freeload link, wkmac, it looks like that Ross Perot was the owner of the team when that deal for the new arena was cut. I would think that Ross Perot was the freeloader in this deal as the money value of the sale of the team from Perot to Cuban would presumably have been higher than it would it would have been without the new arena deal in place.

    In other words Perot profited from that arena deal, Cuban didn't.
     
  3. wkmac

    wkmac Well-Known Member

    So Cuban built his own arena and the Mavericks are playing there now?
     
  4. pickup

    pickup Well-Known Member


    How to answer this? I clicked on your link and saw the wikipedia entry for the arena that the mavericks play in. Then I looked up Mark Cuban and saw that at the very least , he bought the Mavericks from Ross Perot after the deal for the arena was done. By hook or crook , Perot got that deal done by financing it through hotel and rental car taxes(taxes on others, I guess it was palatable to the populace as it seemingly mostly affected people visiting the area). By virtue of this, the value of the franchise increased, and Cuban payed for that increase.

    Perot was the freeloader here. Mark Cuban , not really.

    Let's look at this way, let's say that a bank gets a bailout that causes the stock to go up in value. A day after the bailout, I come into the market and buy shares of this bank, I didn't really benefit from that bailout. Those who did were those who were already holding the shares when the deal happened.

    That's the way I look at it. What say you?
     
  5. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    I would say any major city that has a professional sports team will reap the benefit of a new facility over time, whether directly or indirectly.
     
  6. pickup

    pickup Well-Known Member

    I remember seeing some studies on this and the ones I remember(that weren't sponsored by teams begging for new sports arenas at tax payer expense) stated that this may not be the case. The main conclusion of these studies was that people have budgets and that the money expended on going to sporting events means basically less money for movie tickets or dining out. So it is a zero sum game for sales taxes. But with the stadiums comes the additional burdens on the taxpayers.

    I do understand that some stadiums have revitalized downtown areas of some cities but I can think of many instances where new stadiums did diddley squat for the area. One that comes to mind is the stadium for the Baltimore Ravens.
     
  7. pickup

    pickup Well-Known Member

    Allright, sorry about the long cut and paste, but this info did not have a url to click


    Is the New Cowboy Stadium a ‘Winner’s Curse’ on the
    City of Arlington?byTom Kelly, DirectorBaylor Center for Business and Economic Research

    The decision to subsidize a sports team is driven by competition among more than one city for a limited number of sports franchises. The problem with this type of competitive bidding is that the imbalance between supply and demand may result in a city over paying for a sports stadium and wasting taxpayers’ money. Ironically, sports franchise owners face the same situation when they bid for “free agent” players.


    Sports stadiums may be subsidized through the use of federal tax-exempt bonds to finance construction, local tax abatement, infrastructure investment, land acquisition, and other means to increase operating income and to lower debt costs to franchise owners. The resulting cost to taxpayers is generally justified by the projected increase in local income, employment, and tax revenue generated by the stadium and peripheral investment surrounding the stadium site. Intangible benefits of the stadium location are also cited as a means of strengthening the city’s image while increasing local consumer variety that attracts higher income “knowledge-based” workers who create and attract new businesses that foster economic development.


    The Winner’s Curse
    Ironically, the winner in the bid for a sports stadium may end up paying for a facility that may be justified for the entire region but not for the particular jurisdiction. The primary reasons why the host community might fail to receive adequate benefits from taxpayer’s investment are as follows. First, users of the facility might not be from outside of the area but, rather, are merely shifting spending from one form of entertainment to another. This problem is less for a smaller jurisdiction, but the city must have enough revenue potential to support a significant investment. Second, even if spending occurs at the stadium, most of the income generated by the subsidized stadium goes to owners and players who may not spend much in the immediate area. The high leakage rate of income that originates from foreign spending reduces the so-called “multiplier” effect of secondary spending in the area. Third, the spillover benefits of investment are received by neighboring cities in the region that do not pay the full cost of these benefits. Fourth, the stadium investment does not consider the true cost of the taxpayer investment which is the next highest-valued alternative use of taxpayers’ money, such as spending on local school teachers, a community college, parks and roads, better police protection, or fire fighters.


    The initial ‘litmus test’ of the viability of taxpayers’ subsidies to attract a new stadium should be based on the same criteria as any type of investment. Is the present value of net income received by taxpayers from the new stadium or from peripheral investment generated by the stadium sufficient to cover the cost of the subsidy? If not, then the presence of intangible benefits would be needed to justify the subsidy. A more general analysis would also compare the rates of return to taxpayers from the new stadium versus other alternative investments that could benefit taxpayers in the community.


    Case Study: The Dallas Cowboy Multipurpose Stadium
    All four major league sports—Major League Baseball, the National Basketball Association (NBA), the National Hockey League (NHL), and the National Football League (NFL)—play the stadium subsidies game. The ability to attract all four of these franchises is largely governed by area population. Dallas-Fort Worth, with a population of over 5.2 million is among the least populated areas to attract all four franchises. Smaller cities with fewer major sports franchises frequently have difficulty competing in their particular league with larger areas that possess more financial resources needed to ‘buy a team’ in the free agent market or to support an extensive farm system necessary to grow talent.



    The Dallas Cowboys have been marketed as America’s Team with media coverage and a public image that reaches well beyond the geographic region predicted by its immediate population density. When Jerry Jones, the Cowboy’s owner, desires a new stadium to further extend the success of the team, people (voters) listen. The difficulty arises from the fragmentation of political jurisdiction within the area. The City of Dallas, Arlington, Irving (the current location), and Grapevine are four jurisdictions that were mentioned as competitors for the new Cowboy stadium. Mr. Jones smartly approached the City of Dallas first since it is the largest jurisdiction and bears the Dallas Cowboy name that would continue regardless of the location. After Dallas rejected a $425 million dollar subsidy the City of Arlington taxpayers approved an up to $325 million subsidy to pay for up to one-half of the cost of land acquisition, construction, and infrastructure required for the new Cowboy stadium. The location of the stadium will be adjacent to the Ballpark in Arlington that is home of the Texas Rangers baseball team.


    Terms of the City of Arlington - Cowboy Stadium Agreement
    The cost of an air conditioned stadium with a retractable roof and permanent seating capacity of 75,000 is approximately $650 million. The City of Arlington would own the stadium, but the Cowboys would pay maintenance and operating costs and lease it for an annual rent of $2 million beginning in 2009 through 2038. At the end of the leasing period the Cowboys would have the option to buy the stadium for its depreciated value or continue to lease for $1 million per year over two 10-year lease-extension periods. The city would also receive five percent of the value of naming rights, up to $0.5 million per year. The city is promised 10 percent of “Pro Shop” profits, or about $2.5 million per year. A one time payment of $16.5 million would be received from to the Cowboys to the city to fund youth sports, recreation, and education programs. In addition to revenue received from the Cowboys the City of Arlington would raise revenue from a two percent increase in the hotel room tax, a five percent increase in the tax on rental cars, and a one-half percent increase in the sales tax. Revenue received from the Cowboys and additional local taxes would be used to retire thirty year bonds issued by the City of Arlington to finance their share of the capital cost up to $325 million.


    The Cowboys would benefit from an additional 15,000 seats with ticket prices currently averaging over $60 per game and nearly 400 luxury suites that rent for at least $100,000 each per season. Ticket prices will increase by $15 per ticket and will add a 10 percent tax on every ticket. Nearly 20,000 parking slots will average about $36.50 per car plus a $3 tax. Ticket and parking taxes will help retire the tax exempt low interest bonds floated by the city for the Cowboys portion of the debt. The Cowboy is projected to attract the Super Bowl soon after its opening. Other attractions with over 300,000 ticket holders will add to Cowboy income. The incremental increase in stadium profits could easily retire the Cowboys’ share of the stadium costs even without a NFL low interest rate loan of up to $100 million to help pay for the stadium. The bottom line is that the Cowboy’s annual net income could increase from about $50 million to about $100 million in 2010.


    Financial Analysis of the City of Arlington’s Investment
    The construction impact of the new stadium on Arlington would amount to $71.8 million, generating about $1.8 million in local tax revenue during the construction period. The present value of ongoing operations equal to $5 million in direct receipts from the Cowboys from rent, naming rights, and pro shop profits over the 30-year term of the lease beginning in 2009 amounts to $76.9 million based on a tax exempt cost of borrowing of 4 percent. Adding the one-time $16.5 million payment for youth sports, the present value of future Cowboy direct payments amounts to $93.4 million. The present value of revenue from taxes on visitors, residents, and new peripheral investors would need to total at least $229.8 million to justify the city’s investment based on tangible benefits.


    The tax revenue derived from visitors depends on attendance and visitor spending. An estimated 700,000 persons will attend Cowboy games. Other attractions with the retractable dome will add 300,000 more ticket holders. The amount of direct visitor income generated by the new stadium depends upon how many of the 1 million attendees are from outside the area. In 2000 Arlington’s population of 332,969 persons amounted to 6.45 percent of Dallas- Fort Worth-Arlington Metro Area population. If we assume that all but 6.45 percent of attendees at the stadium are visitors to Arlington, then the stadium would generate new spending by 935,500 persons each year in the City of Arlington. According to the Texas Travel Research Model for the City of Arlington each dollar of direct spending by outside visitors generated 2.5 cents in local taxes. New taxes on hotels, car rentals, and general sales would increase this rate to about 0.3 percent. Estimates of visitors spending from survey information reported by the Texas Travel Research Division amount to $110 per person day for each visitor to the Fort Worth-Arlington Metro Area. Each $110 spent by 935,500 additional visitors to Cowboy stadium would generate about $3.1 in local tax revenue each year. While it is difficult to determine the multiplier effect of this direct spending, it is expected to be no more than 2 because of a relatively high “leakage rate” of direct income in the form of spending that is diverted to other parts of the Dallas- Fort Worth-Arlington Metro Area. Hence, each $110 spent by stadium visitors is projected to add no more than $6.2 million annually to local tax revenue over the period of the stadium lease. The present value of $6.2 million per year beginning in 2009 through 2038 based on a discount rate of 4 percent amounts to $95.3 million.


    Based on favorable assumptions the impact of visitor spending on Arlington tax revenue and direct payments received from the Cowboys over the thirty years beginning in 2009 has a present value of $188.7 million, or about $136.3 million below the amount necessary to cover the City of Arlington bond payments. The remainder of the funds would need to come from taxes on additional peripheral investment or from Arlington taxpayer’s pockets. The annual debt cost to city taxpayers that is not covered by Cowboy payments or visitor generated taxes is $8.9 million in today’s dollars. By 2008 Arlington is projected to have a population of about 358,000 persons. The cost per taxpayer in 2008 would amount to $25 each year in today’s dollars.


    The presence of the Cowboy stadium may encourage additional investment in hotels, restaurants, and entertainment facilities in the city that could add to the property tax base and lower the city’s income leakage rate. Arlington hotels presently experience a significant seasonal downturn in the winter months as Six Flags and the Texas Rangers close their operations. Average occupancy rates in the second and third quarters last year were over 58 percent, but they fell to about 45 percent during the first and fourth quarters. The Dallas Cowboys will add to hotel occupancy rates in the winter months, but hotel capacity presently is adequate to cover projected room nights. It is difficult to estimate the amount of nearby investment that might occur because of the presence of the large parking lot “moat” around the stadium that isolates prospective visitors from nearby commercial establishments.


    The presence of peripheral investment may increase the city’s property tax base, but it is already accounted for in projected local tax revenue generated by a relatively constant increase in visitors each year to the city. Property taxes are already projected to rise with population growth, so the real question is whether or not the Cowboy stadium will add to the growth rate. Recent projection of the growth in urban centers focuses more on consumer agglomeration forces measured by variety of goods and services. Corporate stadium luxury suites are specifically designed to meet the needs of firms who actively compete for relatively scarce innovative workers. While the presence of these workers adds to growth in the region, the impact on Arlington will be on whether or not it adds to the presence of new business ventures in the city.


    Conclusion
    The projected impact of the new Cowboy stadium on Arlington is subject to several critical assumptions concerning its ability to attract new income into the area and to maintain the circular flow of that income within the city limits. Based on favorable assumptions concerning taxes from visitor spending and direct receipts from the Cowboys, additional revenue from local taxpayers will be needed to cover the bond issue. The amount of this revenue amounting to about $25 per person in today’s dollars will be relatively easy to achieve from the city’s sales tax on current residents. Indeed, like the Ballpark in Arlington the city could elect to pay off the bond issue earlier than scheduled and save on interest expenses.



    It should be noted that the City of Arlington achieved a relatively favorable “deal” with the Cowboys when compared with many other cities’ negotiation with major sports franchises. The New England Patriots in 2002, for example, built a $490 million stadium that was entirely financed by taxpayers. A 50 percent taxpayer contribution on fixed costs without any obligation toward operating costs is relatively good. However, other jurisdictions that pay a higher percentage are generally in regions with less fragmented tax jurisdictions with a larger population base.




















     
  8. wkmac

    wkmac Well-Known Member

    At some level I understand your point and from a certain POV it may hold true. I also saw in the wiki link that it was under Perot that the building of the arena took place and from that perspective your point is well made. But let's take your bank bailout example and consider it from another angle and then see where we are.

    Mac's bank get's a bailout from taxpayer dollars and then a week later Pickup Banking buys out Mac's bank. I can't foresee a circumstance where Pickup Company is not aware of public dollars being injected into the business so I'm going on full disclosure here. Let's consider several questions to see just how far a clean hand's doctrine would extend.

    1) Without the bailout, would Mac's bank have been a viable entity to purchase in the first place?

    2) Without the bailout or injection of capital, would the profits even have been there to make this investment worthwhile?

    3) How did the fact that Mac's bank used eminent domain to acquire land at below market places transfer to Pickup's bottomline upon purchase?
    (I bring that up because eminent domain was used to acquire the land for American Airlines Arena rather than using open market transactions of negotiated purchase or force sale verses voluntary.)

    4) Had Mac's bank not used the public to pass down various cost risks, would Pickup Company have enjoyed not only it's future profits or it's ability to become a national leader but would the sale price have been far, far higher and therefore not a good purchase to begin with?

    Cuban did not initiate the hand going into the public kitty but you can't tell me he's not aware of the action nor in the future do I believe at this point that given the chance he'd not do the same thing. Sadly this is what sports franchises do these days. I use to own stock in Speedway Motorsports Corp. which owned such racetracks as Bristol, Charlotte and Atlanta among others. At some point I learned that SMS was using eminent domain to acquire additional lands around some tracks, in this case it was Bristol and after a few letters between myself and SMS to which I was unsatisfied, I sold my holdings in SMS and no, it had no effect on the stock price. My point is, like so many other companies and industry, sports owners like Mark Cuban on the one hand will complain when he's expected to kick a buck back in to the members only club but he never lifted a finger to extract himself in the firstplace from it.

    Cuban on the one hand is correct but then he never took it the whole distance either. He does get credit also in calling out the Olympic Committee for not putting the money back into the public hands as you'll see in my original post in reading the last sentence in the quote box. The other problem with using the public tax dollar as the bank of last or sometimes first resort is that you have gov't picking and choosing winners and losers and then to protect their investments, central planning and regulations to assure success for the invested entity further clouds the marketplace and the chance of misallocation of resources grows possible to hyper levels and when the bubble pops it can have horrible consequences for the economy at large. Sound familiar?
    :wink2:
     
  9. moreluck

    moreluck golden ticket member

    Gee, all this talk about Mark Cuban & SPORTS........and I've seen him and know him from Khloe & Lamar !

    When worlds collide ??
     
  10. pickup

    pickup Well-Known Member

    No I see what you are saying. But let's take this to an extreme and figure out where the land(under the bank) came from in the first place. Assuming Mac's bank is in the U.S. it was probably on some land that was originally swiped from an Indian tribe. Does my buying the bank from you after 2 or 3 centuries after this land grab make me an active participant in the land grab? After I pay you market value for the bank and land, should I give the land back to the original tribe and pay them a rental fee?
     
  11. wkmac

    wkmac Well-Known Member


    You could bring into the discussion the situation with native americans and the land actions of the last 500 years but how does that do anything for the discussion of taking public funds for private benefit in 2012'? How does that answer having a cost benefit of shifting cost risks onto the public thus boosting net profits over time?

    It may seem I'm picking on Mark Cuban and in this case it would seem so but Cuban is by far not the only offender and in his defense he may not be the worse. But he said something in the original quote that IMO personifies an attitude that permeates American culture (business and individual) as it pertains to availing one's self to the public kitty.

    Cuban said:
    In the private arena (no pun) I got no problem with what Cuban said but in the business of sports entertainment in which owners often hold guns to local govt's to get overbuilt sports complexes constructed, I find Cuban's words not only telling but on the money.

    To the broader point of my posts, at this link if you scroll down, you'll find a number of other links relating to articles and studies of public monies being used for sports ventures and their economic worth. I'll leave it at that.