Valuation of Sport Talent

Slides by

Moon Song

The value of Sport Talent• General salaries Trend :

– Distribution of salaries is skewed toward superstars (Average >> Medium)

– Salaries have increased dramatically over time

End of MLB NHL NFL NBA

1960 120,000 93,000 90,000

1970 275,000 227,000 380,000

1980 725,000 290,000 420,000 990,000

1990 1.3M 1.4M 1.0M 2.8M

2004 2.6M 1.8M 1.2M 3.8M

Q : How can athletes be worth this much?Q : Why are players of different sports paid less

than others?

Endorsements :

George Foreman $137.5M/5yrs

Tiger Woods 2000 $100M/10yrs

Michelle Wie 2005 $10M

On average, endorsement earnings double the income of male superstars.

The Marginal Revenue Product (MRP)MRP : input’s contribution to the revenue earned by the team owner

1. Sports Talent is just an input to the sports production process.

2. Payment to inputs are determined by inputs’ MRP

3. The product of sports talent is winning (%).

• W : the level of team winning %

• MP(w) : marginal product

( = play’s contribution to winning%)

• MR(w) : marginal revenue generated by the player’s contribution to winning

)()()( wMRwMPwMRP

<EX> Scully study in the Business of

Major League Baseball, 1989

Based on statistical results ;

1) One-point increase in winning percent raises about $46,276 revenue

2) a win = 6.2 winning % points

3) a win worth $286,912

If a solid slugger add 63 points (11 wins) MRP is $3.2M

If a strong pitcher add 20 net wins

MRP is $5.7M

Q : Why do NBA players make more than NFL player?

A1 : NBA player play more game than NFL players.

A2 : NBA player has either higher marginal product than NFL player.

or NBA fans are willing to pay more for added winning (demand by NBA fan is greater) or both

Real-World MRP Insight

A. Payroll imbalance across teamsYankee’s payroll is 5.3 time larger than Twins

and 2.5 times the average. Top payroll teams are successful team from large revenue market

B. Bust and Bargain• Players are paid their expected MRP• Busts and Bargains offset each other

overtime, especially across an entire league

C. The relationship between Ticket Price and Salaries

• Players can only earn more if – They become more productive ( MP(w) ↑)– Fans increase their willingness to pay for the

game (MR(w) ↑)

• Given MP(w) constant, MR(w) ↑ lead to increase in MRP, salary.

• The reason players made more : some demand parameter has increased fan’s willingness to pay.

• Salary vs. Ticket Price– Salaries move sometimes opposite,

sometimes same direction as ticket prices

Salaries do not drive ticket price up.

– If ticket prices do not rise, where is the increase in fan’s willingness to pay that explain the increase in salaries?

TV broadcast right fee increases in

MR(w) portion of players’ MRP

Social values : Ballplayers vs. Teachers

MRP : decreasing with w

Demand function

SW

$

TW

0TSSS Service

DTeacher

price

STeacher

SStar

DStar

Empirical Study (Scully)“Pay and Performance in MLB”

• If labor market in MLB more perfectly competitive, player salaries would be equal to MRP

• The “reserve clause” restricts player bargaining to one owner

Two factors1. Effect of player performance on team

winning : production function2. The effect of team winning on team

revenue : Revenue function

Production function Output (winning) = f (inputs) inputs : performances

Revenue function market Revenue = f (winning, market characteristics)

Performance• Hitter : the slugging average (SA)

• Pitcher : strike out to – walk ratio (SW)

• Quality of managerial and on the field decision making

• CONT = 1 if team is within five games of

the top squad in their respective

division

• OUT = 1 if a team is twenty or more

games out of first place

tPCTWIN ** 9.092.024.37 tt TSW TSA ** 64.7578.4357.38 tt

* OUT ONTC LN

3888.02 DF R

Revenue = Home attention x Average ticket price

+ Revenue from broadcasting rights

SMSA : population size of standard Metropolitan

statistical area

MARGA : Intensity of fan interest

Percent win vs. attendance

NL dummy

STD = 1 if stadium was built in 1970 or later

REVENUE = -1,735,890

** 585,494330,10 SMSA PCTWIN ** 913,580512 NL MARGA

*248,762 STD3675.02 DF R

• One point PCTWIN increase revenue by $10,330

• One point in TSA or TSW increase PCTWIN by 0.92 and 0.90, respectively.

MRP hitter = 0.92 x $10,330

= $9,504 per point TSA

MRP pitcher = 0.90 x $10,330

= $9,297 per 1/100 point

TSW

Omitted factor inputs :

• Managerial quality

• Player drafting and trading abilities

• Stadium investment

• Quality of minor league

Individual player MRP• Assumption : individual performance

carrier with it no externalies

Team performance is simply the linear combination of individual performance

(EX) regular 10 pitcher, 15 non-pitcher

8 starter & relief, 12 regular non-pitcher– Average pitcher with SW of 2

0.125 * 2 = 0.25 points– Average hitter with SA of 340

0.083333 * 340 = 28.3 points

• Average Marginal Revenue Product– Average pitcher 0.25 * 100 * 9,297 = $232,425– Average hitter 28.3 * 9,504 = $268,963

• Need to adjust Gross MRP by deducting– Team costs : non-player salaries – Game costs : transportation, equipment,

stadium rental– General administration costs – Sales costs

Net MRP

More Recent Study (2002)

PCTWIN *48166.108375.0 TSA ** 098331.00574.0 OUT CONT

*021845.0 NL 25%84.852 DF R

REVENUE PCTWIN 641,229596,68

STAD POP 907000068.0 26%2.862 DF R

(EX) Miguel Tejada• Number of at bats in 2002 ; 662

• Total number of team at bat (OAK) ; 5,558

• Percentage of total ; 662/5558 = 0.11911

• Total slugging average ; 0.508

• % of total ; 0.508 * 0.11911 = 0.0605

His contribution to PCTWIN ;

1.48166 * 0.0605 = 0.089661

• Total game during regular season

(2002) : 162

162 x 0.089661 = 14.5

(Tejada’s play was valued 14.5 wins to the A’s in 2002)

229,641 x 0.089661 x 1000

= $20,592,107

(actual salary : $3,625 mil)

Model’s weeknees ; • Defensive contribution

• MVP

• Leadership

• at-bats vs. plate appearance

Bonds MRP (403 at bats) = $19,935K

Bonds MRP (601 plate-appearance)

= $29,730K

<198 walks>

Valuation of Sport Franchise

Slides by

Moon Song

Valuation of Sports FranchiseI. Forbes Estimates Jan.2005 NFL Value V/R

Washington Red Skins $1.1bil. 4.49

Dallas Cowboy $923mil. 4.50

Huston Texas $905mil. 4.50

New England Patrots $861mil. 4.51

Philadelphia Eagles $833mil. 4.21

San Diego Chargers $622mil. 4.20

Revenue(2003)

MLB Value V/R

New York Yankees $730mil. 2.77

New York Mets $482mil. 2.77

LA Dodgers $435mil. 2.62

Boston Red Sox $426mil. 2.12

Atlanta Braves $424mil. 2.62

San Diego Padres $207mil 1.38

Revenue(2004)

1. Revenue

• Components :– Gate receipts– Local & National broadcasting rights– Licensing income– Other stadium-related revenue

luxury boxer, concessions stadium naming rights

* Revenue Sharing

NFL : 60:40

MLB : 80:20 (AL) or 90:10 (NL)

NBA/NHL : hometeam keeps all of the gate receipt

• National broadcast revenues shared evenly among teams (NFL / MLB / NBA / NHL)

2. Franchises typically demand a 30~70% premium to the figure devised by Forbes. Why?

• Role of Intangible assets is important in sport franchise value

Player contracts, TV rights, stadium lease, advertising agreements, concession agreements, luxing suit agreements, season ticket contracts, draft rights, & good will• Ego premium

(EX) In 1998, Dodgers sold for $311mil, $80 mil more than Forbes’ estimated market value of $236 mil.

Other relevant factors that escape Forbes’ analysis?

• A Sport Franchise should technically be worth the present value of its expected future cash flow.

• Sale Price = f ( revenue, attendance, team performance, debt/value, etc)

(Problem) Most sports franchises are privately

held. No obligation to report historical data or any present economic status.

1999 – 2003

Sport Football Basketball Baseball Hockey

Average Forbes value

$354 $175 $241 $132

Average Transaction

Price$633 $241 $268 $131

Average Premium 79% 38% 11% -1%

(Case )ⅠIn 2003, Boston Celtics sold for $360M.Forbes : 2002 value ≈ $275M (31% premium) Standard NBA multiple : 2.5 ~ 3 Celtics care 3.8 timesWhat other factors?

– Play off – Stadium revenues– Favorable debt agreement– Ego factor

(Case Ⅱ)

In 2004, New Jersey Nets sold for $300M

Forbes : 2003 value $217M

What other factors?

Move from Continental Arena to a new state of art complex at the center of a 2.5 billion office, residential & shopping complex.

increase revenue due to easier access

(Case Ⅲ)Washington Redskins : sold at $800M in 1999.1997 : FW $200M (grow at 32% / year)1999 : FW $350M (estimated)

Why factors drive transaction price up?– Auction– 2 year old stadium (80,116)– Any other intangible reason?– Cash flow of team : $55mil / year before tax

and debt– Daniel Snyder’s Dream?

<Empirical Results >ⅠForbes value = f (debt/Revenue, TRPS, Gate

Receipts, Payroll)

TRPS : team relative productivity score

*=Significant at 5% level Football Basketball Baseball Hockey

Intercept 346.1121* 173.6968* -67.9440 39.5076

Debt/Revenue 21.5139 -15.8540 -6.4470 4.3752

TRPS -0.4443 -0.2559 -0.0231 -0.2813

Gate Receipt 7.0152* 5.3568* 2.6838* 3.5111*

Payroll -0.7089 0.8737 -3.2059 -0.6985

R Square 0.5737 0.7161 0.8507 0.7828

Value vs. Revenue

Value = f (Revenue)

League Intercept Multiple R2

NFL -101.555 4.574 0.800

NBA 1.090 2.686 0.928

MLB -193.426 4.008 0.910

NFL -22.956 2.703 0.871

<Empirical Results Ⅱ>

Revenue = f (win, age, attendance, TVs,

stadium, ticket price, payroll,

another team)

NFL NBA MLB NHL

Intercept 1.005 -4.797 -2.009 -7.481

Win 0.046* 0.005 0.006 0.009

Age -0.034 0.017 0.003 -0.025

Attend 0.280* 0.439* 0.298* 0.632*

TVs 0.036 0.142* 0.096 0.112

Stadium -0.002* -0.001 -0.002 -0.004

Ticket price 0.003 0.011* 0.017* 0.009*

Payroll -0.066 0.211* 0.177* 0.375*

Other team -0.147 0.022 -0.175

Intangible Assets

Assets that derive their value from the rights

and privileges granted to their owner, long-

term in nature, and lack physical substance

• Purchased Intangibles; cost of purchase

• Internally-created Intangibles;

Legal Fees, Registration Fees

A. Marketing-related;

Trademarks, Trade Names, & Internet Domain Names

B. Customer-related;

Customer Lists and Relationship

C. Artistic-related;

Copyright etc.

D. Contact-related;

Franchise and Licensing Agreement, Construction Permit, Broadcast Rights, and Service or Supply Contracts.

E. Technology-related;

Patent

F. Goodwill– Purchased ; the excess of purchase price

over fair market value of identifiable net asset

– Internally created; 0

Amortization of Intangible AssetsAllocation of the cost of intangible asset in a

systematic way over periods expected to

Benefit from the use of the intangible assets

A. Limited-life Intangibles– Methods

• Units of Activity Method

• Straight Line Method

– Legal Life• Copyrights ; 70 years beyond the death of the

creator• Patent ; 20 years• Trademark ; indefinite number of renewal for a

periods of 10 years each and is considered to have an indefinite life

B. Indefinite-Life Intangibles– Goodwill, Trademarks not to be amortized

Common types of professional sports team intangible assets1. Play contracts2. Local cable TV, broadcast TV, and broadcast radio

contracts3. Stadium lease4. Advertising and/or sponsorship agreements5. Concession agreements6. Luxury suite agreements7. Season ticket-holder relationship8. Coach management employment contract9. Draft rights10. National franchise agreement11. Goodwill and going-concern value

Sport Franchise Intangible Asset Valuation Procedures

1. Cost Approach Methods

2. Sales Comparison Approach

3. Income Approach Methods

1. Cost Approach Method

• Substitution and utility

• Replacement cost and reproduction cost

• Cost should be adjusted for obsolescence to get value

– Physical ; player contract– Functional ; – technological

2. Sales Comparison Approach

• Efficient market and rational behavior

• When sufficient transaction data exist, it method may be used to value stadium lease, concession agreements, and so on

3. Income Approach

• Anticipation and rational expectation

• Present value of a future economic income stream

• Accounting income vs. economic income

Valuation for Sports Franchise Intangible Assets

1. Player Contract– Amortized over the remaning useful lives of

individual player contracts– Cost approach

• Replacement cost

2. Franchise Agreement– Broadcast revenue sharing– Advertising income sharing– Income Aproach

3. Stadium Lease– Estimated present value of future rent savings– Income approach

4. Season Ticket holder Subscription– Income approach– Current/future ticket price– Cost of servicing the season ticket holder fan

5. Acquired Goodwill

• Portion of the franchise purchase price that cannot be associated with any of the identified tangible or intangible asset

• Residual analysis Good will = total price

- Transferred NWC

- Transferred tangible asset

- Transferred intangible asset

Intangible asset Valuation Methodology

Player Contracts Cost Approach

Franchise Agreements Income Approach

Stadium LeaseMarket based /

Income Approach

Work force Cost Approach

Contracts Income Approach

Sean-Ticket holder subscription

Income Approach

Acquired GoodwillResidual Analysis of Price Allocation

$ million

Total Purchase Price Paid 200.0

New working capital 10.0

Tangible personal property 20.0

Discrete intangible assets required:

Metropolitan Stadium lease 7.2

Camp Real Men lease 2.9

<CASE>

Real Men Roundball Franchise Purchase Price Allocation as of June 30, 2002

$ million

Concession contracts 16.8

Broadcast revenue agreements 20.8

Skybox subleases 12.8

Season ticket holder relationships 19.2

Trained and assembled workforce 4.2

Player contracts 56.5

NRL franchise agreement 24.8

Goodwill 4.7

Total Net Assets Acquired 200.0

Franchise ValuationQuestion 1 : What are the drivers of the financial valuation of sport club?

Question 2 : How should sporting clubs be valued?

Question 3 : What issues arise in disputes over sporting club profitability measurement?

Question 1 :

What are the drivers of the financial

valuation of sport club?A. League Strength and viability

– Media rating– Fan avidity– Revenue sharing– Cost certainty ( Salary cap, etc)– Playoff Revenue

B. Current Club Strength– Current attendance / Season ticket holder

support– Existing sponsorship portfolio– Current on-field success– Quality of playing / coaching squad– Quality of scouting personnel

C. Club Brand / Heritage Strength– On-field success tradition– Fan loyalty tradition– Sponsor attractiveness tradition

D. Club Stadium / Arena Strength– Stadium / arena strength– Revenue generating capacity– Ownership vs. tenant– Attractiveness of contract (sharing)

E. City Strength– Market size / demographics– Affinity to sports– Local economy health

F. Owner Attributes– Trophy status desire– Finance capacity– Taxation consideration

G. Goldman Sachs– Strategic position– Economics– Comparable Entity Valuations– Ownership issues– Trophy status

Question 2 :

How should sporting clubs be valued?

– Public Equity Market

– Acquisition Market

– Financial statement Information

“Shareholder Funds”

Noisy indicator

– Discounted Cash Flow (DCF)

Question 3 :

What issues arise in disputes over

sporting club profitability

measurement?

League vs. Player association

Club vs. Player (agent)

Teams vs. Cities

Dispute : “underestimate profitability”

– Revenue inappropriately excluded– Revenue included, but inappropriately under

attributed to sport club.– Revenue inappropriately back-ended to

subsequent year– Costs inappropriately included– Costs inappropriately front-ended from

subsequent years

Stadium Financing

Slides by

Moon Song

Stadium Financing• In 1990, average MLB ballpark was

around 34 years old. Only 2 of 26 teams played in ballpark that were less than 10 years old.

• By 2004, the average park was only 20 years old and 15 of 30 teams played in stadiums that were 10 or fewer years of age

• Most of cases, source of financing public funds

Stadiums Built before 1990

TeamYear

OpenedPublic Finance

Proportion

Boston Red Sox 1912 0.0%

Chicago Cubs 1914 0.0%

New York Yankees 1923 0.0%

L.A. Dodgers 1962 17.0%

New York Mets 1964 100.0%

Anaheim Angels 1966 96.0%

St. Louis Cardinals 1966 80.0%

Stadiums Built before 1990 cont.

TeamYear

OpenedPublic Finance

Proportion

Oakland Athletics 1966 100.0%

San Diego Padres 1967 100.0%

Cincinnati Reds 1970 100.0%

Philadelphia Phillies 1971 100.0%

Kansas City Royals 1973 100.0%

Minnesota Twins 1982 97.3%

Stadiums Opened 1990-2004

TeamYear

OpenedPublic Finance

Proportion

Chicago White Sox 1991 100.0%

Baltimore Orioles 1992 100.0%

Cleveland Indians 1994 48.0%

Texas Rangers 1994 71.0%

Atlanta Braves 1997 100.0%

Seattle Mariners 1999 66.0%

Houston Astros 2000 68.0%

Stadiums Opened 1990-2004 cont.

TeamYear

OpenedPublic Finance

Proportion

San Francisco Giants 2000 0.0%

Detroit Tigers 2000 45.0%

Pittsburgh Pirates 2001 85.0%

Milwaukee Brewers 2001 71.0%

Cincinnati Reds 2003 90.0%

Philadelphia Phillies

San Diego Padres

2004

2004

50.0%

79.0%

• Why do cities finance?

(The benefits of a franchise)– Sports franchises are public goods and that they

have positive externalities for the community

• City’s Revenue– Rental payments made by team– City’s share of revenue

Parking

Concessions

Luxury boxes

• City’s Cost Operating the facility, salaries, utility, depreciation

(Ex) : A city spends $100 mil. On a facility that becomes worthless in 30 years and faces a real interest of 3.5%. If there is no inflation what is an annual payment a year by city?

Nrr

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11100$

MX 4.5$

• Opportunity Cost

The city could earn $10M a year from alternative and earn $5M in operating income from investment in sport facility economic loss of $5M

Total loss = $5M + $5.4M

= $10.4M

a subsidy to the franchise

Stadium as a Multiple-Revenue - Generating Asset (Reliant Stadium case)

A. Capacity Decision

B. Personal Seat Licenses

C. Naming Rights

D. Suites

E. Season Ticket-Holders

Stadium / Arena Ownership, Operator, and

number of Anchor Tenant Relationship

Owner : club

Operator : club

Owner : Thirty party

Operator : club

Owner : Thirty party

Operator : Thirty party

Single Anchor Tenant

A B C

Multiple Anchor Tenant

D E F

A : FedEx Field : Washington Red Skins

SBC Park : San Francisco Giants

Old Traford : Manchester United

C : Louisiana Super Dome : New Orleans Saints

Owner : State of Louisiana

Operator : SMG Facility Management

D : Pepsi Center Owner : Stan Kroenke Operator : Stan Kroenke Owner : Colorado Avalanche (NHL) Denver Nuggets (NBA)F : Staple Center Owner : Phil Anschutz, Edward Roski Jr. Operator : AEG Tenants : LA Lakers, Clippers (NBA) LA Kings (NHL) LA Sharks (WNBA) LA Invadors (AFL)

Stadium Rents :

• Highly favorable lease agreement– NFL : Baltimore Ravens : no rent– MLB : Chicago White Sox : $1/year– NBA : San Antonio Spurs : $5,000/game

less than 1% of all revenues– NHL : San Jose Sharks : flat($500,000/year)

and 20% of all luxury suite. City also receive a portion of naming right revenue about 5% of revenue

Stadium Rents :• Linkage the rent to attendance guarantee

– MLB

Cleveland Indians : Sliding Scale

1.85M att if

2.5M att if ticket

2.5M att if ticket

0$

/00.1$

/25.1$

– NFL

San Diego Chargers : Chargers keep 90% of ticket revenue, City reimburses 100% of ticket not sold

(Ex) Ticket : $50

Chargers stand to gain ($27) while they gain $50 unsold ticket

Q : Does the lease give the Chargers an incentive to lose football games, while drives away fans and thereby increase revenue?

Why Government Subsidize Sports Franchise?• Profit maximization?• More complex set of costs and benefits

– Cost • Congestion• Pollution• Public safety• Direct financial costs

– Revenues : • Direct revenue• Spillover effects : direct impacts on local

community• Indirect (ripple) effects• Common sense of identity

Direct Benefits

APC (Average Propensity to consume)

Net exports increases?

Indirect Costs and Benefits these costs and benefits are external to the

profit maximization decision• Positive externalities

Benefits to the city which the team is not rewarded

• Negative externalities

Congestion, Pollution, and Crime etc.

sP

P

pP

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D

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pS

: Negative externality cause franchise

to schedule too many games

: Negative externality cause franchise

to charge their fans too little

sp QQ

sp PP

• Play less than optimal ( )

• Need to provide incentives to play game more

• These incentives often take the form of public funding of sport facilities

ps QQ

Positive externality

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Empirical Results

• Baseball and football franchises had no statistically significant impact on personal income and economic growth

• Positive effect on local economy such as amusement and recreation

• Tax revenue increases?

ticket, concession parking : sales tax

payroll : wage tax

• Opportunity Cost

Financing Facilities

• State and local government can justify subsidizing franchise if the city or state benefits from public good aspect of the franchise or from the positive externalities it conveys upon city

• Source of subsidy– Taxes– debt

An economic View of Taxes

• Internalize the externality by forcing the producer to pay

• Subsidizing the producer solves only part of market failure (positive ex)

• Where the government will get the money for the subsidy?

Imposing taxes or fees based on benefit each person receives from positive externality?

General principles for determining who should pay how much for a sports franchise

Ramsey Rule “Sales taxes should be levied in inverse

proportion to the price elasticity of demand”

Efficient in the sense that minimizing deadweight loss

1P

0P

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Efficiency vs. Fairness (equity)• Equity

– Horizontal : fairness at a given level– Vertical : ability to pay tax

• Government levies taxes in proportion to the benefits received from the expenditure Horizontal Equity

• User fees vs. Public taxation? Taxes that fall on residents of the city

that houses the team allow suburban to free ride...

Sales Tax• Sales tax often place a burden on groups received

no benefits

violating horizontal equity

(EX 1)

Florida Marlins : $300M stadium

$4 per day sales tax on Cruises

(EX 2)

Cleveland : 15-year sin tax

Sales tax on tobacco and alcohol

Addictive : inelastic

Violation of both vertical & horizontal equity

Lottery or an Alternative Revenue Source

• Baltimore Orioles’ Camden Yards Funds from a state lottery “voluntary purchase”

– Only a third of the revenue go to state inefficient– Violate both vertical and horizontal equity

Two Superior Funding Examples

1. Milwaukee Brewers’ Miller Park

– They instituted a sales tax on Milwaukee and the surrounding five-county region

– Reduce inequities (Horizontal) but still same vertical inequity Broad Brush Based on one’s purchases of goods or

services not on one’s benefits from having the Brewers in town

Two Superior Funding Examples

2. Seattle Mariner’s Safeco field

– Target the funding directly at beneficiaries of the public expenditure

• Special sales tax of 0.5% on restaurant, bars, and taverns in King county

• A tax up to 5% on admissions to Safeco Field• 2% tax on rental cars

– Violate both horizontal and vertical equities

Taxes or Debt?1. In theory, “Equivalence Theorem”2. Institutional factors leading state and

local governments to prefer debt funding to taxation

Tax laws allow bondholders to deduct the interest paid to them by state and local bonds from their federal taxes

3. The lower tax revenues mean that tax payers elsewhere will have to pay higher taxes:

4. Debt financing allows a city to impose some of the burden of all new facility on future generations

r P D

Major League BaseballFinancing Trends

Public vs. Private Ballpark Funding Contributions

0

100

200

300

400

500

600Private

Public

Average Public Investment : $209.0 million

Percentage of Public Funding

100%

90%90%83%82%79%78%76%75%73%70%

59%57%

44%

23%

5%

0%

20%

40%

60%

80%

100%

120%

Average :68%

Public Funding Sources (Specific Revenues)City/County Sales Tax• Amereiquest Field• Bank One Ballpark• Coors Field• Great American

Ballpark• Miller Park• PNC Park• Safeco Field

Car Rental Tax• Comerica Park• Minute Maid Park• Safeco Field

Lottery Funds/Gaming• Oriole Park• Safeco Field

Ticket Tax• Ameriquest Field• New DC Ballpark• Safeco Field

Sale of Tax Credits• New Brush Stadium

Lodging Tax• Comerica Park• Miller Park• Minute Maid Park• New Brush

Stadium• Tropicana Field• US Cellular Field

Other Taxes• Jacobs Field (Excise)• Safeco Field (F&B)• New DC Ballpark(Business, Concessions,Merchandise, Parking)

Land Contribution• PNC Park• Safeco Field

Public Funding Sources (Contributions)

State Contributions

• Citizens Bank Park

(Grant)

• Comerica Park (Grant)

• Great American Ballpark (Grant)

• Jacobs Field (Grant)

• Miller Park (Grant)

• New Brush Stadium

(DOT Infrastructure Grant)

• PNC Park (Grant)

• Safeco Field (Tax Rebate)

• Tropicana Field (Tax Rebate)

County Contributions• Jacobs Field (Cash)• Miller Park (Cash)

City Contributions• Ameriquest Field

(Cash)• Jacobs Field (Grant)• Miller Park (Cash)• Petco Park

(Operating Subsidy)

Private Funding SourcesTeam Contributions• Bank One Ballpark• Comerica Park• Coors Field• Great American

Ballpark• Minute Maid Park• PNC Park• Safeco Field• SBC Park• Tropicana Field• Turner Field

Seat Licenses• Ameriquest Field• Brush Stadium• Safeco Field• SBC Park

Naming Rights• Bank One Ballpark

• Coors Field

• Great American Ballpark

• Miller Park

• SBC ParkPremium Seating• Ameriquest Field

• Bank One Ballpark

• Coors Field

• Jacobs Field• Oriole Park

Investment Income• Ameriquest Field• Jacobs Field

Corporate Contributions• Jacobs Field• Miller Park• Minute Maid Park

Concessionaire Rights• Ameriquest Field

• Coors Field

• Miller Park• Oriole Park

Land Contribution• PNC Park• Safeco Field

Ancillary Development

• Development rights may be sold to a private developer or retained by the tenant team, who finances its funding contribution through future revenue from the development.

• Public may justify contribution based on estimated future tax revenue generated by development.

• Developments often include restaurants, bars, retail establishments, residential developments and office space.

• Examples:

– St. Louis Ballpark Village

– Nationwide Arena

– American Airlines Center/Victory Development

– Glendale Arena/Westgate City Center Project

– Proposed San Diego Chargers Stadium

Proposed DC BallPark (2008)

Location : Washington DC Total Cost : $534.8 million

Public Funding :

• 10% ticket tax

• 10% in-stadium concessions tax

• 10% in-stadium merchandise tax

• 12% parking tax

Private Funding :

• Team rent ($3.5 million in Year 1, inflating thereafter)

• Ballpark Fee on all DC businesses with revenue of at least $5.0 million per year.

• Private contributions, as generated

Quasi-Private Funding

• Utilities tax (Phone, natural gas, heating oil, electric)

New Brush Stadium (2006)

Public Funding - $87.5 million (23%)

• County Loan - $45.0 million

• State Tax Credits - $30.0 million

• Dept. of Transportation – $12.5 million

Private Funding - $300.5 million (23%)

• Team Bond Placement - $200.5 million

• Team Equity - $50.0 million

• PSL Sales - $40.0 million

• Interest Earnings - $10.0 million

New Busch Stadium Funding

County Loan

Interest Earnings

PSL Sales

Team EquityTeam Bond

Missouri DOTState Tax

Location : St. Louis, MO Total Cost : $388.0 million

Petco Park (2004)

Public Funding - $363.1 million (79%)

• City Hotel./Motel Taxes - $206.0 million

• City Operating Subside - $59.3 million

• Centre City Dev. Corp – $74.0 million

• San Diego PDF Fund – $21.0 million

Private Funding - $93.7 million (21%)

• Team contribution - $93.7 million

Location : San Diego, CA Total Cost : $456.8 million

Petco Park Funding

SD Port District Funds

Certre City Dev. Corp. Funds

City Operating Subsidy

City Hotel/Motel Taxes

Padres Contribution

Citizens Bank Park (2004)

Public Funding - $261.5 million (57%)

• City Bonds Issued by Philadelphia Authority for Industrial Development (PAID) and Philadelphia Indeustrial Development Corp. (PIDC) – $176.5 million

• State Contribution - $85.0 million

Private Funding - $200.5 million (43%)

• Team contribution - $200.5 million

Location : Philadelphia, PA Total Cost : $462.0 million

Citizens Bank Park Funding

Commonwealth of Pennsylvania

City PAID/PIDC Bonds

Team Contribution

SBC Park (2000)

Public Funding - $15 million (5%)

• SF Redevelopment Agency TIF - $15.0 million

Private Funding - $275.0 million (95%)

• Private loan - $160.0 million

• Charter Seat Licenses - $55.0 million

• Sponsorship Rights - $60.0 million

Location : San Francisco, CA Total Cost : $290.0 million

SBC Park Funding

Bank-Financed Private Funding

Charter Seat Licenses

Sponsorship Rights

TIF Funds

America Airlines Center (2001)

Public Funding - $115.0 million (27%)

• City Hotel/Motel and Rental Car Taxes - $15.0 million

• City TIF - $23.0 million

• City G.O. Bonds – $12.0 million

Private Funding - $307.0 million (73%)

• Center Operating Company Private Placement - $197.0 million

• Owner Equity - $65.0 million

• COC rent payments - $45.0 million

Location : Dallas, TX Total Cost : $422.0 million

American Airlines Center Funding

Hotel/Motel & Rental Car

Taxes

COC Private Placement

Owner Equity

COC Rent

City G.O. Bonds

Glendale Arena (2003)

Public Funding - $180.0 million (87%)

• City Municipal Property Corporation Bonds - $150.0 million

• City G.O. Bonds – $30.0 million

Private Funding - $27.0 million (13%)

• Team Ownership Investment - $27.0 million

Location : Glendale, AZ Total Cost : $207.0 million

Glendale Arena Funding

City GO Bonds

City MPC Bonds

Private Contribution

Sprint Center

Public Funding - $143.0 million (57%)

• Hotel and Rental Car Taxes - $123.0 million

• Tax credit – $20.0 million

Private Funding - $107.0 million (43%)

• User Fees/Contract Revenue - $47.0 million

• AEG Contribution - $50.0 million

• National Association of Basketball Coaches Contribution - $10.0 million

Location : Kansan City, MO Total Cost : $250.0 million

Sprint Center Funding

NABCAEG

User Fees/Contract

RevenueTax Credits

Hotel/Auto Rental Taxes