The sixth season of Thunder basketball season is upon us, but it’s actually the first full season the team will be playing in a fully renovated Chesapeake Energy Arena. That seems a little hard to believe, but it’s true. The renovations took place in several stages, and the deep playoff runs that OKC made ahead of schedule meant that construction crews had narrower windows of offseason opportunity to work with.
But that doesn’t mean that public investment in the Thunder is over for the people of Oklahoma City. Far from it. The only question to be answered is when. There will come a day when the Thunder, metaphorical hat in metaphorical hand, come to local voters asking for money to re-renovate the Peake or money for an entirely new arena. And judging by recent history, and the lamentable timing that led the Peake to be designed barely before the truly modern standards for revenue-generating arena plans came to full fruition (most visibly, for example, a second deck of suites along the sidelines), that day might be coming sooner than people think.
Any public vote for money for an arena is far from a guarantee, and what happens between now and that vote will have a huge effect on the outcome of the vote. How Clay Bennett, Sam Presti and the rest of the Thunder front office approach keeping the team together (or not) and continuing on a path of long-term contention will undoubtedly play a major role in how willing Oklahoma City voters will be to hand over more money when the time comes.
OKC already winning on arena economics
For now, let’s set aside the argument on whether or not it’s a good thing at all for public money to be invested in stadiums used by professional sports franchises. The current reality is that almost every team in the country, in every major league, plays in a building financed in full or in part by public money.
So the good news for Oklahoma City is that the city invested its money into Chesapeake Energy Arena in the most prudent way possible. It paid cash.
The original MAPS vote in the 1990s provided the funding for what eventually became the Ford Center, now renamed. But the method of the funding — a penny sales tax collected before construction started — meant that the price tag of about $90 million is the actual price tag. Most arenas are paid for with borrowed money of one kind of another. So just like a family buying a $200,000 house on a 30-year mortgage, by the time the mortgage is paid off, the price tag really isn’t $200,000, but a half-million dollars or more thanks to interest payments on the loan.
For a modern example of how this changes the price tag for a sports facility, look to Miami. Marlins Park, the new baseball stadium, supposedly carries a $600 million price tag, and $500 million is on the taxpayers’ tab. But it was financed by bonds, like many public projects and many public stadiums. So at the end of the day, what will the stadium really cost when you include interest payments on the bonds? About $2.4 billion. Two-point-four billion dollars. Wow, what a deal!
But even the renovations to the Peake were paid for in cash. Voters approved another pay-as-you-go penny sales tax for the renovations as part of a deal to bring the Thunder to Oklahoma City from Seattle. Ultimately, the tax funded about $104 million in improvements to the arena. So at the end of the day, voters got a more-than-solid arena for less than $200 million, a relative bargain when compared to arenas like the $420 million American Airlines Center in Dallas, which also was built with debt-financing on the part of the city (but to a much less damaging degree than in Miami). And the price tag for the Peake is the price tag — no interest payments necessary. Plus, the city fully owns the arena. No sharing with the team or anyone else.
The end result is that, when compared to other deals around the country, Oklahoma City voters not only did rather well for themselves, but a strong precedent has been set for future improvements and future arenas. People are not going to be quite as hostile as they otherwise might be when considering future financing, because they’ll know that they made a wise funding decision from the very start and can trust that the method worked.
But that’s not the only part of the equation for voters to consider the next time they’re deciding on whether to subsidize a professional sports team.
Show you the money? Show ME the money, Clay!
Thunder fans, and Oklahoma City residents at large, can have few realistic complaints about how the team has performed so far, and the return on investment the team has provided. The true economic benefit to having a sports team in town is hard to define, and most attempts to do so fail — at best, they’re incomplete, and at worst they’re numbers that are misrepresented or correctly represented but shown out-of-context. Yes, people spend money at Thunder games, in and near the arena, on many things, and the city gets to keep the sales tax revenue. And yes, a lot of those people come from suburbs and other places outside of Oklahoma City. But at least some of those dollars, coming from a person’s or a family’s entertainment budget, would have been spent elsewhere in the local economy. The Thunder’s presence certainly provides some marketing and advertising for the city, but the amount is hard to calculate.
Still, the Thunder were competitive in the NBA after only half of the inaugural season, and legitimate title contenders in only the third season in OKC. That remains the case, and will remain the case as long as Kevin Durant and Russell Westbrook are on the team. From a fan’s perspective, there’s hardly any more than you can ask for. And from a voter’s perspective, with some imported tax dollars undoubtedly rolling in and Oklahoma City’s increased national and international profile, it’s hard to argue that there’s at least some true and tangible benefit for having the team in town.
But for the good feelings to continue, the team almost certainly has to continue contending, or have a sound and well-articulated plan to contend whenever the current core of the team (read: Durant and Westbrook) leave Oklahoma City, whether it’s at the end of their careers after a jersey retirement ceremony that will leave it quite dusty in the arena, or their departure through free agency or a trade.
The first seeds of doubt that Bennett might not truly meet those expectations were planted in the James Harden trade, whether the trade eventually works out for the Thunder or not (which is still an open question, not a resounding “no,” no matter what anyone in the national media says — I see you, Steven Adams and Jeremy Lamb). It’s still at least possible that basketball reasons — just being able to build a full, competitive roster within the constraints of the modern CBA — were at least as big of a factor in the mind of Sam Presti during contract negotiations as money issues. But it sure at least smells like money issues.
Whether those seeds grow into something remains to be seen. And to be sure, some of it is beyond the control of Presti or Bennett. It’s possible that the team will put every possible penny on the table in contract negotiations with Durant and Westbrook, and have a viable contending roster in place, and KD or Russ could still bolt for Houston or whatever. You know, pull a LeBron or something. Or there could be injuries or something else that just happens, and a solid rebuilding plan doesn’t work out because the Thunder get unlucky in the draft.
Ultimately, though, for voters to feel justified to fork over more money someday, they’re going to have to feel like Bennett is putting his best foot forward. He’s going to have to prove that he’s willing to keep doing what it takes to make the Thunder a team that the community can be proud of.
So far, so good. But as the team inches closer to the day KD and Russ and Serge Ibaka enter free agency (and they WILL enter free agency, even if they truly want to stay, because the best players have no incentive to sign extensions thanks to the new CBA — ask Chris Paul and Carmelo Anthony), the city inches closer to the day when it comes time for Bennett to show that he’ll spend what it takes.
We all know he’ll make money whether he spends or not. NBA franchises are appreciating in value at a record pace. Bennett could sell the team today at a massive profit, and that’s not something that’s likely to change over the coming years. Whatever he might lose in luxury tax payments, he’ll get back someday when he or his heirs sell the team.
The vote will come
It’s a fact that the team will someday ask for more money from the city, and that will almost surely have to be approved by a vote. It’s just the way it works. Teams eventually decide they need to make more money from the arena, and until there’s a seismic shift in the economic landscape, there’s always a city that’s willing to pay for it. Most of the time, it’s the city where the team currently resides. Sometimes, it’s another city.
And just because Chesapeake Energy Arena practically still has that new car smell, especially considering the just-completed renovations, there’s no guarantee that the request for more cash will be decades away. There’s no guarantee that it will even be one decade before Bennett asks for more.
There are plenty of examples that illustrate this. One prominent and recent example involves the NFL’s Carolina Panthers. The Panthers’ stadium wasn’t even old enough to buy itself a pack of smokes before the team asked for, and received, more public money. Under the possible threat of losing the team, Charlotte’s city council agreed to pay nearly $88 million to upgrade the stadium. An example much closer to home is the just-announced plans by the University of Oklahoma to launch a study for improvements to the football stadium. That’s a slightly different case, because OU hasn’t put a single public dollar into the stadium since it was first built 90 years ago, but the school nonetheless is only in its 11th season since opening a glittering new upper deck on the stadium’s east side that includes plenty of lucrative luxury boxes and other high-end amenities. Stadiums don’t have the same shelf-life they used to.
The threat of another city being willing to put up the public dollars that a team craves will always be there. Lest we forget, that’s exactly how the Thunder came to Oklahoma City to begin with. Sonics ownership — dating to the pre-Bennett days, by the way — wanted a new or vastly renovated stadium in order to remain in Seattle. Seattle, weary from having paid for new baseball and football stadiums, declined, as did the state government. When Oklahoma City voters stepped in, the Sonics stepped out. You’ve probably heard about that by now.
There will surely be a similar situation whenever the time comes for Bennett to ask for more money from Oklahoma City. Indeed, he would be well-advised from a negotiating standpoint to wait to ask until there’s a real threat for another city to take the Thunder away so he can have maximum leverage. And let there be no doubt that sports leagues are willing to abandon any city without a suitable, taxpayer-financed arena. Otherwise Los Angeles woudn’t be on the verge of entering a third decade without an NFL team. Along the same lines, some city will be hungry to attract the Thunder with tax dollars if Oklahoma City is not willing to. Some city will produce a deep-pocketed owner and the promise of a beautiful new arena if there’s a chance that the Thunder will come to town.
You know, some city like Seattle. Just ask Sacramento.
Between now and then, Thunder fans in and near Oklahoma City can only hope that Bennett proves to them that he deserves their money. As of now, he does. But we’ll all be watching to see if that stays the same.