"Knowledge will forever govern ignorance

 and a people who mean to be their own governors

 must arm themselves with the power which knowledge gives."

Saturday, January 21, 2006

Deal for Stadium in New Jersey Gives Teams Reason to Cheer

We’ve written on this subject before, but the article in the New York Times - Deal for Stadium in New Jersey Gives Teams Reason to Cheer – reminds us why state run businesses are such a bad idea. And we mean any business – entertainment, real estate, stem cell research, manufacturing – you name it.

One reason – politicians make decisions based upon political considerations and not sound business or financial calculations. The state's deal on the sports stadium and property in the Meadowlands is just one sad example.

In his farewell address last week as governor of New Jersey, Dick Codey highlighted his deal to build a new stadium in the Meadowlands as an accomplishment.

"We watched a new day rise in the Meadowlands with the Giants and the Jets working together to build a new stadium at no cost to the taxpayers," said Mr. Codey, who has described the deal as a win-win for the football teams and for New Jersey residents.

But as any fan knows, some wins are more lopsided than others. The new, 80,000-seat stadium promises to be a gold mine for the teams, and something less than that for the taxpayers.
The Giants and the Jets will make a killing. Here’s what they get:

  • $183.9 million a year from advertising and premium seats

  • $100 million for each team in annual media revenues

  • $55 million in ticket sales for each team

  • $17.5 million a year for the stadium's naming rights

  • $35 million a year from corporate sponsors and advertisers whose logos will adorn the stadium

  • $30.8 million a year for club seats

  • $102.8 million a year for luxury suites

  • Ability to develop the property with 520,000 square feet of restaurants, ports stores, entertainment facilities, health and fitness centers and halls of fame and millions more in profit
New Jersey’s taxpayers on the other hand will take a beating. This is what we get:

  • $100 - $124 million in debt on the old stadium

  • $30 million bill for utilities, sewers and other infrastructure for the new stadium

  • Loss of the revenue, about $19 million, the state currently gets from parking, luxury suites and advertising under the current lease

  • New Jersey must acquire 20 acres in northern New Jersey for a Jets headquarters and training facility

  • The Giants are getting the free use of 20 acres in the Meadowlands for training fields

  • A total of $5 million a year in rent from the Jets and the Giants for the next 25 years

  • In lieu of taxes the teams will pay a combined $1.3 million for the next 15 years

  • Sales tax revenue from tickets, merchandise and concessions and income taxes from the players for the days they are in the state

  • Two New York football teams - they won't even use New Jersey in their names
This is a business deal only a politician could love. The Giants and Jets had nowhere else to go and yet this is the best deal the state could make? The property in the Meadowlands, some of the most valuable in New Jersey, could have been leased or sold for far more than a paltry $6.3 million a year. Not only does the deal cost New Jersey’s taxpayers money, we have lost a valuable asset that could have generated big bucks for the state's treasury.

George Zoffinger, the chief executive of the sports authority, was a vociferous critic of what he described as the one-sided nature of the new deal. But he was overruled by Mr. Codey.
You have to ask yourself why Codey did.

Update: The Star-Ledger - Concerns about whether the state got a fair deal were raised after the teams floated a prospectus among investment bankers earlier this week in an effort to financing for stadium construction.

"It's 183 for the Giants and the Jets to five for the state of New Jersey," said George Zoffinger, executive director of the New Jersey Sports and Exposition Authority.

"Serious questions have to be raised about the financial adviser to the governor in negotiating this deal," Zoffinger said. "Codey would have been better off with Sponge Bob Squarepants as his adviser."
We have been witting for well over a year (see previous posts below) that the various stadium deals reported in the press were bad for New Jersey. Codey wanted a deal come hell or high-water and as we previously pointed out:

During the gubernatorial campaign last fall, Corzine would not say what he thought of the deal: "I have no idea. I haven't seen the numbers."
Now we learn:

Codey said Corzine never expressed concerns over finances when the two spoke during negotiations last fall. His singular worry, Codey said, was that the Jets and Giants were both part of the package, which they are.
The current stadium deal is not final and Governor Jon Corzine can order the Sports Authority and the football team owners back to the negotiating table. He should.

When Corzine was running for Governor he liked to bill himself as “among his party's chief economic and finance experts” and in the later months of the campaign promoted himself as “one of the nation’s foremost experts on the economy and financial markets”.

Let’s see if Corzine proves any better than Sponge Bob Squarepants.

Previous posts:
Kill The Deal With The New York Giants
The Opportunity Cost Of The Giant’s Stadium Deal
Giant Rip Off
We Want Our Bread, Not Circuses
The Fine Print Of The Giants Deal
Giants Stadium Was Always A Bad Deal For Taxpayers
Deal For New Giants Stadium Stalled
Democrat’s Priorities Inconsistent With Rhetoric.
NJ Taxpayers Still Owe $117 Million On Giants.Stadium
NJ Sweetens Stadium Offer To NY Giants
NY Jets - The Other NJ Football Team
Codey Eliminates “Pay To Play” For New York Giants.
NY Giants Seek New $700M Stadium In NJ


At 9:33 AM, Blogger RBM said...

Sports complexes in every state are a boondogle. I read an article once that suggested that sports areans never help a city like they are supposed to. I don't understand why the state doesn't build my company an office building. I guess my business isn't sexy enough.

At 7:25 PM, Blogger James said...

I'm sure that no Jersey politician will ever sit in one of those luxury boxes. [/sarcasm]

Parkway Rest Stop

At 8:34 PM, Blogger WjcW said...

George Zoffinger, from what I've read, did some really great things at the sports and exposition authority. If my memory is correct, I think he turned around the agency from losing 1 million a year to actually turning a profit. It's truly amazing that his advice was ignored on this deal. (what's more frustrating is that Codey refused to wait with NJ's offer until after NY declined to build the Jets a stadium, everyone in the free world knew it would better to stall negotiations until the outcome in Manhattan was settled)

At 10:08 AM, Anonymous Rafe said...

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