Sprint Center financing explained ...

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A couple of days ago I praised AEG president Tim Leiweke's balls (I feel dirty).

Leiweke, as nicely as possible, had told David Cordish of the influential Power & Light District to mind his damn business. Leiweke's comments were in response to Cordish's criticism of the arena for not landing an NBA or NHL team. I've criticized Leiweke for promising a team and not delivering ... but not for the success of the arena itself (check the Best Of Kansas City 2008).

I also mentioned a blog post by Field of Schemes author Neil deMause, who tracks public money being spent for professional sports franchises. In clarifying the $1.8 million in profits that AEG was kicking back to the city, deMause wrote that the money was "operational profit -- in other

words, it doesn't count the cost of paying for the building it in the

first place."

Understanding the funding for the Sprint Center can be confusing.

For a refresher, I called Shani Tate, communications director for the Sprint Center. She walked me

through the basics: The building cost $276 million. AEG put up $54 million in

cash. The NABC put up $10 million. The

city is financing the rest through taxes on hotel rooms and rental

cars. And the city is taking is taking in more from the hotel/rental car tax than expected.

DeMause guessed the city was paying between $10-$15 million a year in arena bond

payments, adding "there's almost no way it [the city] will actually turn a profit

on building the Sprint Center."

His guess was close.

"We pay an annual debt service projected this year of about $13.8 million," said Troy Schulte, Kansas City's budget

director.

Schulte says the hotel and car rental fees have "exceeded projections

over the last couple years every year." For example, last year the city

projected $8.9 million in arena fees. They actually received $9.3

million.

As far as the $1.8 million operating profit, Schulte says that comes after AEG

takes its 16 percent cut and then the city and AEG split the money going forward.

"As long as that continues to generate activity like it has been, it'll be profitable for AEG to operate," Shculte says.

Schulte knows that it'll be tougher as the building loses its shine and

if the economy doesn't improve. And should AEG finally find an anchor

tenant, that sports franchise would take "a very sizable chunk of the

arena

revenues."

"Obviously an anchor tenant would have an effect as far as pulling down

the available revenues because a lot of those revenues would then go to

an anchor tenant," Schulte says. 


Right now, it's more profitable for the Kansas City and AEG to book

concerts. But as the newness wears off, the stability of having 41

guaranteed dates a year will become more and more important.

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