November 06, 2009
When the headline is "Saving the Jackets" in the Columbus Dispatch, panic sets in for Columbus Blue Jackets fans. When the team president tells that newspaper that "time is of the essence" and that "the current ownership group is not in a position to continue to deal with the arena's structural (financial) problem," there's a natural inclination to place the Jackets on the same rack as the Phoenix Coyotes as endangered franchises.
This isn't meant to downplay the importance of these times for the franchise, but when the dire predictions are coming from an owner with an unfriendly arena lease and the president of the Columbus Chamber, the region's economic growth and development organization that supports the arena, they carry the whiff of hyperbole for the sake of public pressure.
Rather than predict apocalypse, what the Chamber's report did was evaluate the Blue Jackets' economic viability, and that of the arena district, via a study by Ohio State University Fisher College of Business Professor Stephen A. Buser. From the Chamber:
The report offers nearly 20 options in three categories: continuation of the existing ownership structure; implementation of public-private partnerships; and alternative private ownership structures. "I've looked at NHL franchises across the nation, and it is clear that there are forms of public-private partnerships that have been successfully employed in other cities might be equally beneficial if employed in the case of the Columbus Blue Jackets and the operations of Nationwide Arena," said Buser.
The report also details the economic growth that has occurred since the Columbus Blue Jackets came to Columbus and the Arena District was developed. According to the report the Arena has spurred economic growth in and around the district and more than $630 million had been invested in district as of 2006. At least 170 businesses employed more than 5,500 workers with annual wages of more than $350 million. Over a 10-year-period (1998 to 2008), property values increased by 267 percent.
So yeah, there are some very good reasons for local businesses and politicians to keep the Blue Jackets in Columbus. But how can the city keep them, and keep them viable?
For that answer, we turn to Columbus lawyer Jeff Little on The Hockey Writers, who penned what is by far the most interesting and insightful review of this Blue Jackets dilemma we've read. First, on the report:
Being a small-market town, and having competition from the nearby Schottenstein Center at Ohio State, operations for non-hockey events lose approximately $4 - $5 million per year, and a similar amount is paid for utilization of the arena. Add in another $2 million per year that would otherwise be coming in for naming rights, and the Blue Jackets are at a $12 million annual disadvantage over other teams. Buser observes that hockey operations themselves are approximately break-even, when NHL revenue sharing is considered.
Here's Little on the future:
It seems likely that the ultimate solution will involve a combination of approaches. Buser noted the success of Nashville's model, where the government owns the Arena, and the Predators retain some of the key revenue items. And something similar could be orchestrated here. Combined with an increase in hotel taxes and a potential "special district" designation, there are a number of vehicles available to the participants. As intended, the Buser Report lays out those options in admirable detail. Whatever solution is chosen, it can be reasonably anticipated that every effort will be made to avoid a public tax impact requiring voter approval. The grumpy Columbus constituency reacts poorly to funding requests, even for schools, and to count on an exception here could be risky. Ironically, just this week Ohio voters approved the construction of casinos in Cleveland, Cincinnati, Toledo and Columbus. Notwithstanding the fact that the tax revenue derived could be a boon to local government, Columbus was the only one of the four targeted communities where a majority voted against the initiative. The casinos will be built, but the message should be noted.
Reactionary responses notwithstanding, today' report does not represent a setback, nor is it the culmination of an effort. Instead, as intended, it forms the foundation for the serious building of a consensus solution that will make sense for all concerned.
It's important to remember this is part of a much longer process whose politics are getting amplified during hockey season. Please recall back in May when the team backed a controversial "sin tax" to help facilitate the sale of the building, one that failed to garner local support. This study was born out of that effort.
Again, this isn't to diminish the severity of the issues. The Blue Jackets are losing money and asking for economic assistance in an economy whose national unemployment rate just crossed the 10-percent threshold today. States are hurting, counties are hurting, businesses are hurting and fans are hurting. Current revenue streams from taxes are, right now, off the table. The road to solving these issues is much clearer than, say, in Phoenix, it's not a slam dunk.
One major, major difference between the two situations: Columbus is a franchise that's in its second year of upswing and serious playoff contention.
Mirtle took some time away from his bang-up work on the Leafs beat for the Globe & Mail (congrats privately and now publicly on that, sir) to return to the "shaky U.S. franchise" beat on From The Rink, painting with the usual broad brush. We never said winning solves everything for a struggling franchise; we've consistently said that it's impossible to diagnose the strength or weakness of a particular market when the team in that market hasn't enjoyed any playoff success. (James is fond of graphs; here's a representation of the number of playoff games the Blue Jackets competed in from inception to 2008.)
Winning in the playoffs is not a cure-all, but it's still the most effective way to get fans and more importantly businesses to buy your product. The more successful the Jackets are, the more fans frequent the arena district -- and the harder local businesses will fight to "save the Jackets."