by Commentary
Published: July 19, 2012
Tags: concerts, construction, Finance, Giants, hockey, jets, Nassau County, Nassau Veterans Memorial Coliseum, NHL, professional sports, sporta arena, sports events, trade shows
There is no doubt in my mind Nassau County desperately needs to build a new Coliseum and convention center to help retain the Islanders and create a viable outlet for residents to see sporting events, concerts and attend trade shows.
The last time this was up for discussion, the public overwhelmingly rejected it, not because it was a bad idea, but because Nassau lacked a responsible, sustainable way to fund the project.
Here, then, are some alternatives to help finance construction, many of which have not yet been discussed.
The average cost and length of a naming rights contract to a stadium in the United States are $2.9 million per year for a term of about 19 years. Naming rights to a convention center should go for about $1 million per year. Assuming that a new coliseum would command a premium because Nassau is more densely populated with a higher average income than just about anywhere else, it is safe to say the combined stadium and convention center naming rights are worth at least $6 million per year. Split this with a developer, and Nassau has a $3 million annuity to pay off any bonds.
The Broadway show, ?The Producers,? was one of the first entertainment vehicles to charge premium pricing on tickets to capture money that was being lost to scalpers. While the Islanders won?t command seat-licensing revenue like the Jets and Giants recently did, I believe there is a market for a yearly surcharge for premium seating. Charging $1,500 per seat for the year for the first right to purchase tickets on 10 percent of the roughly 17,000 seats in a new arena would create an annuity of $2.5 million per year. Outside of hockey season (I wouldn?t offer this for hockey tickets because that should be up to Mr. Wang) there are roughly 100 events a year, and this would equate to a $15 per-event premium for the best tickets that are already going to many ticket agents.
The previous referendum and proposed contract had given Nassau the rights to use the Coliseum for several days. If the county had the rights to 10 days it could sublease them or create its own annual event such as an opening season Big East basketball tournament. The going rental rate for a state-of-the-art facility is about $100,000 per event. This could generate about $1 million per year.
The Democratic Party leader in a recent LIBN article suggested a ticket tax. While nobody likes to pay a tax, I agree a $3 ?fee? could be added to the roughly 1.5 million people (assuming an average of 10,000 people per event) attending the 150 events the new arena would have per year. This would generate about $4.5 million per year.
Finally, I recommend floating $20 million in Tax Increment Financing Bonds. TIF bonds are paid back with income from new real estate taxes generated by a construction project. About $1 million a year in new real estate taxes would need to be generated to finance these bonds to retire them over 30 years. With a new and larger project being built, I don?t think the incremental new tax revenue would be difficult to reach. Such a bond would create a new revenue stream that would not conflict with other government agency budgets.
None of the aforementioned ideas include tax hikes. Instead, they conservatively raise over $10 million in yearly revenue and include $20 million in direct financing. I believe these ideas could be used in conjunction with any development project to make it financially feasible.
The local economy desperately needs this project for financial reasons, and it is equally important for Nassau County?s morale. I hope both sides of the aisle get together soon to do something, so we can finally put a shovel in the ground.
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Source: http://libn.com/2012/07/19/haber-fresh-ideas-for-nassau-coliseum-financing/
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