Paycom Center (formerly Chesapeake Arena)

**Larry OKC** · 02-22-2011, 02:47 AM

Originally Posted by BoulderSooner

i base it on conversations that is have had with people that would know .. and some of the owners wanted the team here if it could be a sustainable nba team and it couldn't have been without the arena inprovements...

Who are these people? Would think the Mayor and Commissioner Stern would be "in the know"

Were the improvements an NBA requirement? Depends on who you believe...

Oklahoma City Council calls for elections on NBA team preparations (Journal Record, 12/21/07)

However, the decision to ask for a citywide vote on the arena wasn’t supported by a survey: “That’s my opinion. That’s all it is,” [Mayor Cornett] said. Nor has he been told by NBA officials that an arena upgrade is definitely necessary, Cornett said. “They have not said that to me. I’ve suggested that to them, and they have not disagreed. But they have not said that to me”

OKC-based Ford Center upgrade: The ball is in the voters' court (Journal Record, 1/3/08)

Oklahoma City hosted the NBA's Hornets team for two seasons after Hurricane Katrina wrecked much of New Orleans. The Ford Center at the time was sufficient for the team's short-term needs, Cornett said. However, establishing a permanent home for a team requires more changes to the arena to meet the NBA's standards, he said.

But this is in direct contrast from the Mayor & NBA's Stern a couple of weeks earlier:
OKC mayor calls on public support for $100M spending proposal (ESPN/AP, 12/20/07).

Cornett said he had spoken with the NBA and had preliminary discussions about a lease with the SuperSonics but the decision to seek public funding for the upgrades was not forced upon him. NBA commissioner David Stern said during an April visit that the Ford Center, which cost only $89 million to build, did not necessarily need upgrades to host an NBA team permanently.

Again, the idea that the NBA required these improvements wasn't supported by statements by the NBA, just Cornett's unsubstantiated belief.

**Larry OKC** · 02-22-2011, 03:14 AM

Originally Posted by BDP

Actually, just by being the major tenant, they contribute A LOT towards the arena. Every bit of additional value added in potential naming rights is directly related to the team and the NBA's brand. Without the thunder, the naming rights of the arena probably weren't even worth what the Ford dealership paid for it. It's reach was limited mainly to the region and has little tangential exposure potential.

That's fine as far as it goes, BUT ONLY IF the City retained the Naming Rights money can you claim the Team/NBA has contributed anything to the Arena. They are keeping the money, contributing NOTHING to the construction or improvements that were done to "maximize Team revenues" (notice the lease makes no mention of maximizing or increasing the revenue for the City).

Originally Posted by BDP

Also, the arena operations gain significant economies of scale by having a major tenant that opens its doors 40+ times a year. This makes it a much better deal for the city's agreement with the management company. Again, all because of the NBA.

Also you have thousands of more people coming into the city dozens of times a year because of 1 thing: the NBA. There is no way that the arena itself could have done that without the NBA. This is like having an additional 40 concerts a year averaging over 18,000 tickets sold in downtown Oklahoma City. There aren't even that many concerts on tour at any given time that average those kind of sales, let alone the fraction of those that would come to Oklahoma in a given year.

It was those very concerts that allowed the Ford to be run at an operational profit. It was those concerts that put the Ford at the top of the charts in concert ticket sales etc. It is the elimination of 41 dates a year from the calendar (and the addition of Tulsa's BOK Arena) that have shifted some of those concert dollars away from the City (and the associated spending, the restaurant money etc is now being spent in Tulsa).

Take into account that the City was getting the concession money etc, now it has to split those monies with the Team.

Originally Posted by BDP

To have built the arena to be a standalone profit center for the city would have been a stupid exercise in futility that would have had to buck just about every previous public facility model in existence in order to succeed. The reality is that it was built as a way to draw hundreds of thousands of people to the city to help feed its tourism, hospitality, and service industries along with all the tax benefits that come with doing so. As such, having the NBA as a its major tenant is paramount to its success in this area. With the NBA as a tenant, even if the city sees not one dollar in increased revenue from the arena itself, the actual economic benefit of the arena to the city has increased exponentially. This is even before the intangibles effect of the city's reputation, exposure, and livability are factored in. While it may seem like a sweetheart deal on the surface, it is really no different than what most major tenants get in any real estate deals.

Except that is exactly what happened (see above). What concerts, events, conventions have booked here because the NBA is here? Again, there are 41 dates a year where they CAN'T book here because of the NBA.

Economic Impact?
Both sides of this debate were going on during the Seattle litigation. When Bennett was trying to get a new arena built, the Sonic's had tremedous economic impact. When they were trying to get out of the lease, Bennett claimed the Sonic's had a near zero economic impact. To be fair, Seattle also argued both sides of the issue. But even Betts admitted in another forum way back then:

As we discussed ad nauseum when our vote was occuring, virtually every respected sports economist says there is little economic benefit to professional sports teams.

**Larry OKC** · 02-22-2011, 03:39 AM

Originally Posted by betts

In cities like New York, Chicago, Atlanta there are incredible numbers of Fortune 500 companies and others who provide significant sponsorship money to a team. Teams located in large cities are able to negotiate huge television contracts based on their market rankings. We are the 45th largest market. We will never have a television contract that approaches what a professional team in a market like New York can generate. We can't charge ticket prices like they can either. It's far more complicated than selling out an arena and having enthusiastic fans. If we hadn't improved our arena and negotiated a favorable contract for the owners, the team would be in Kansas City or San Jose.....maybe still in Seattle. We have to be honest about what we are......a small market lucky to have a team. Or rather, savvy enough to do what it took to make an incredibly smart PR and quality of life move. Clay Bennett took a huge risk and I'm grateful.

Except, after the Thunder raised the ticket prices, articles said the premium seats were priced along the lines of places like L.A. etc. And after the price increase (well over Seattle and Hornet prices) to just under the league average. It is the very fact that we sold out seats and had enthusiastic fans while the Hornets were here that was used as proof by many (including you, if not mistaken) that we could support a team. Small market or no small market. Can't help seeing SNL's Stuart Smalley and his affirmations. "...because I'm good enough, I'm smart enough, and, doggonit, people like me"

Where do you get the idea the team would be in KC? According to various published articles, Bennett used KC and Vegas as negotiating tools with Seattle (he said they don't even know where Oklahoma City is), TV & Corporate sponsorship was a concern because they have other Pro franchises where the money pie would be divided up and the NBA may not be on the heavily receiving end there. Here, with no other pro team in the State, they don't have to be concerned about that. Even Stern has indicated that the NBA's small market success stories are cities that are single-pro sports (like OKC).

Don't let sales slip because Bennett does have those "out clauses" (baseline set 2 years after the renovations are complete).

Originally Posted by betts

Most NBA teams make very little money or operate in the red.

Even if that is true (according to a just released Forbes info, 18 out of 30 or 60% turn a profit). Don't know what percentage of "small market" teams, or more appropriately small-market single-pro sport states turn a profit, but at this point, it is irrelevant, as we are talking about the Thunder in particular.

Although Team Co-owner Aubrey McClendon stated in the Journal Record (8/13/07) that the ownership group would be happy to just break even in OKC:

"We know it's a little more difficult financially here in Oklahoma City, but we think it's great for the community and if we could break even we'd be thrilled..."

The Teams financial consultant (introduced as evidence in the Seattle litigation) estimated that they could make a "conservative" $9.4M/year (based on a lowball 14,569). Actual tickets sold exceeded that by about 4,000/game. So, they should be doing much better than the $9.4M/year. Along with the much higher ticket sales (and ancillary spending), they got an additional $100K/year from what the City was getting with the existing naming rights. They got $100K/year reduction in the Practice Facility rent. They got another $100K/year reduction in Arena rent. Not to mention the $60M in rebates from the State ($4M for 15 years).

When the Hornets were here (with similar sell-outs/attendance as the Thunder), they made $40.21M (Hornets profit fight heats up 6/1/2006). Reportedly, even with the lowest ticket prices in the league (according to Forbes.com, the average ticket price for the Hornets when they were here was $29). The Thunder raised that to just below league average ($47.51). They recently announced a slight bump in ticket prices. They lowered the salaries of personnel, citing Oklahoma's lower cost of living, so made more money there too.

Sonics would be profitable here, Bennett testifies (6/7/2008)

Seattle SuperSonics owners told the NBA they expect to lose $60.9 million to $64.9 million during the next two years if forced to stay in Seattle, but believe they can turn an $18.8 million profit if allowed to relocate to Oklahoma City. Sonics Chairman Clay Bennett confirmed the projections in a sworn deposition....

The Sonics/Thunder have had a roughly $40M+/year turn around (going from a $30.45M to $32.45/year LOSS to a $9.4M/year SURPLUS). Multiply the turn around by the 3 years they have been here and the owners could have paid for the improvements themselves. That's just using the conservative projection numbers and we know that they have done much better than the projections.

**bombermwc** · 02-22-2011, 06:23 AM

Originally Posted by ljbab728

So with that logic there is no reason to promote any new businesses in OKC. We're going to spend our money anyway so nothing new will ever be needed to benefit the city.
It's not just a flat dollar and cents consideration about new taxes brought in. It's a quality of life issue that can attract new residents and businesses to our area and help persuade those that are already here to stay. And you can't dispute that will affect our tax base.

No, apparently you aren't paying attention here. The arguement about people in town is trivial to this. My point was the totally 100% new dollars from visitors. That's all new money that wouldn't have been in OKC had the Thunder not been here. Players, Fans, Reporters, etc. the list goes on. All of these people use hotels and eat every meal out while they are here. THAT's the point of my discussion....that people forget how much of an impact those people have. Several hundred different people come to town every time there is a game...more than just the 20 or so players.

And obvioulsy we want new business. The logic isn't flawed, you just aren't paying attention to the point, you're reading into it.

**Rover** · 02-22-2011, 06:56 AM

For people who don't understand anything but tangible financial accounting I guess the arena issue is controversial. For anyone who also understands the intangible effects of having the team they get why every citizen in this city is benefited by the NBA being here.

**BDP** · 02-22-2011, 10:12 AM

That's fine as far as it goes, BUT ONLY IF the City retained the Naming Rights money can you claim the Team/NBA has contributed anything to the Arena. They are keeping the money, contributing NOTHING to the construction or improvements that were done to "maximize Team revenues" (notice the lease makes no mention of maximizing or increasing the revenue for the City).

I don't think you understand. Any increase in naming rights revenue is directly caused by the NBA's presence. So any additional money earned on it can be attributed to them and so it's not a factor of lost money to the city. The city would not have gotten that additional money on its own.

It was those very concerts that allowed the Ford to be run at an operational profit. It was those concerts that put the Ford at the top of the charts in concert ticket sales etc. It is the elimination of 41 dates a year from the calendar (and the addition of Tulsa's BOK Arena) that have shifted some of those concert dollars away from the City (and the associated spending, the restaurant money etc is now being spent in Tulsa).

Take into account that the City was getting the concession money etc, now it has to split those monies with the Team.

Those concerts still come here and the arena NEVER needed 41 nights a year for concerts. About 90% of the acts that have played BOK center have played Oklahoma City. The main reason they are going to Tulsa now is because they haven't EVER played there before. New markets are key to tours in this crappy concert industry.
The Oklahoma City Arena has simply added 41 guaranteed booked nights a year, in addition to all of the events it was getting before. The BOK center is not taking any events from OKC because of the team. If the BOK center is pulling away from the Ford Center, then we need new management, one that competes with the BOK Center (they are the same company now), because there are probably a dozen arenas around the country that are host to MULTIPLE major league sports tenants and, yet, still every major arena tour gets booked. There is no operational downside to have a major permanent tenant in your arena.

Take into account that the City was getting the concession money etc, now it has to split those monies with the Team.

Would you rather have all the revenue from 10 major events a year or split the revenue from 50+ major events a year?

Except that is exactly what happened (see above). What concerts, events, conventions have booked here because the NBA is here? Again, there are 41 dates a year where they CAN'T book here because of the NBA.

Again, if there are any events that haven't come here since the NBA came here, its a result of poor management. There are no logistical barriers to have a basketball game one night and a concert the next. So, if you can guarantee the tripling of events in your venue and still have 324 available nights a year, you do it, plain and simple. Any scheduling conflicts that would arise from 10% of your scheduling inventory being GUARANTEED is worth it. Hell, the Staples center hosts FOUR major league sports teams and manages to host dozens of major concerts and other events a year in addition the the games.

Basically, is it some sort of windfall for the city where we can lower our taxes and live off arena revenue? Of course not. It was never meant to be. In the end, the real point of the whole venture is to improve the city's competitive position in the region in terms of profile and marketability. Time and time again we lost companies for one reason: QUALITY OF LIFE. Not cost of business, not work force, not available space... quality of life . It is a very important assest to any community and the arena and the team have improved that aspect of Oklahoma City, as well as help bring increased attention to the other livability assets that were already here.

We also live in a city where development trends are based on disposable tactics. That is, we tend to build new infrastructure instead of maintaining what we have. The long term result is a city that becomes irrelevant to itself. The surrounding communities benefit and the city rots. Strengthening the city's core through the investment in major events and attractions is what keeps the city's revenue from declining more and more. The voters of Oklahoma City recognized this and have voted on improving the city and, specifically, the arena multiple times and results are clearly beginning to show.

In the end, the immediate benefits of having an NBA team as a permanent tenant as opposed to the arena being dark on those 41 nights should be clear. Less clear, but just as important, are the benefits from improved stature, visibility, and profile the city has gained from the short time it has had the NBA. There certainly are diminishing returns for each additional team any market has, but Oklahoma City was probably in one of the best positions in the country to benefit from gaining such a tenant, mainly because it still has so much room to improve. The effect in even, say, a Kansas City would not be a great as it has been here.

**ljbab728** · 02-22-2011, 11:40 PM

Originally Posted by bombermwc

No, apparently you aren't paying attention here. The arguement about people in town is trivial to this. My point was the totally 100% new dollars from visitors. That's all new money that wouldn't have been in OKC had the Thunder not been here. Players, Fans, Reporters, etc. the list goes on. All of these people use hotels and eat every meal out while they are here. THAT's the point of my discussion....that people forget how much of an impact those people have. Several hundred different people come to town every time there is a game...more than just the 20 or so players.

And obvioulsy we want new business. The logic isn't flawed, you just aren't paying attention to the point, you're reading into it.

Evidently I did misunderstand your point and we may be in agreement then.

**betts** · 03-06-2011, 03:14 PM

It looks as if they are beginning work on the new entrance. Windows are out and boarded up on the southwest side of the arena, the area is fenced off and there is some dirt work beginning.

**dcsooner** · 03-06-2011, 04:36 PM

FULLY AGREE!!! bombermwc

**megax11** · 03-07-2011, 09:51 AM

Originally Posted by betts

It looks as if they are beginning work on the new entrance. Windows are out and boarded up on the southwest side of the arena, the area is fenced off and there is some dirt work beginning.

Awesome! I want this stadium to stand out amongst the NBA officials as a very classy stadium, that hopefully lasts for a while, so that when the time comes for more renovations, we can vote on that too and keep the team here, like Seattle couldn't.

**Larry OKC** · 03-08-2011, 12:50 AM

megax11: Unlike Seattle (this was brought up by the judge in the Seattle trial), we are REQUIRED by the lease to keep making upgrades to the Arena to meet whatever the changing NBA standards are. If a new tax is the chosen method of paying for it, a vote will be required by state law. If the vote fails, then the City is still obligated to pay for the improvements and will have to come up with an alternative way that doesn't require a vote (general fund or some other existing undedicated revenue source).

**megax11** · 03-17-2011, 06:31 PM

Originally Posted by Larry OKC

megax11: Unlike Seattle (this was brought up by the judge in the Seattle trial), we are REQUIRED by the lease to keep making upgrades to the Arena to meet whatever the changing NBA standards are. If a new tax is the chosen method of paying for it, a vote will be required by state law. If the vote fails, then the City is still obligated to pay for the improvements and will have to come up with an alternative way that doesn't require a vote (general fund or some other existing undedicated revenue source).

That, to me, sounds like a good thing.

I don't doubt the team will be here forever, as those who own the team, are gas and oil tycoons, and they never run out of money.

To those thinking BOK takes all of the events away from the OKC Arena, they need to think a bit.

First off, Tulsa has their own WNBA team, so how many games is that a year? Then doesn't the Tulsa 66ers play at the BOK? If so, how many games a year is that?

Before the Thunder arrived, I remember Ford Center only getting a few worthwhile concerts a year, if that.

I would much rather have big name teams coming in, spending their money at our malls (people have spotted Kobe eating at Waffle House and Shaq shopping at Quail Springs Mall), rather than some small band or solo artist coming in. The more people the merrier, which means more money for this city.

I mean we now have the tallest building in OK for a reason. Dolla-dolla bills y'all.

**Larry OKC** · 03-17-2011, 08:54 PM