Torpy at Large: Is a Hawks arena in College Park nothing but net loss?

Jan 31, 2018

In late 2016, College Park officials announced a deal to bring the Atlanta Hawks’ minor league basketball team to an arena they planned to build near the airport.

The 3,500-seat facility, which would be part of the Georgia International Convention Center, would cost somewhere between $10 million and $40 million, a city official ventured. That was a pretty wide range, even as guesstimates go.

Well, guess how much it will cost? Nowhere near the low estimate, that’s for sure. In fact, it’s even more than the high guess. About $42 million before you toss in the bond issuance costs, attorneys’ fees and postage. After that you’re approaching $45 million. Add interest payments for the bonds and you’re at $57 million. Or even $60 million.

That’s a lot of dough to watch some NBA wannabees bounce a basketball around an arena 25 to 30 times a year, I mused.

But I was corrected. It’s a “multipurpose arena,” College Park City Manager Terrence Moore told me. There will be concerts, comedy shows and other events to fill out the other 335 nights each year.

The Baby Hawks are merely an anchor tenant. The D-League team will give the place a splash of pizzazz — just a splash, mind you — and offer the city an assured (albeit modest) revenue stream. Like $5,000 a night, which is just the “base fee,” Moore explained. How high will that nightly fee go? He did not know. There will be surcharges and fees and concessions adding to the arena’s take.

In 2016, College Park shared some figures showing the Hawks playing 36 nights and paying $10,000 a pop. But that rental fee has dropped and demonstrates how professional sports teams do so well: They get subsidized by taxpayers.

The Hawks, of course, are owned by a billionaire, Tony Ressler. But he has better things to do with his cash than pay full freight. He and his deal-making minions pulled off a public financing trifecta. The Hawks got taxpayers to help fund facilities in Brookhaven, Atlanta and College Park.

In 2016, Atlanta agreed to pay $142.5 million (the Hawks will pay $50 million) to retrofit Philips Arena, which is an ancient 18 years old. Earlier that year, the city of Brookhaven gave the Hawks a $6.5 million tax abatement to build a $36 million practice facility.

And then there’s College Park.

The arena was to have had a groundbreaking this week, but it was postponed after local resident/spoilsport John Duke filed a motion to stop the issuance of the bonds on a procedural technicality. The court agreed and ordered the city’s development board to hold a special meeting this week to solve that issue.

John Duke, a College Park resident for 19 years, thinks money getting spent to build a new arena to house the Atlanta Hawks’ D-League would be better spent on other causes. Photo by Bill Torpy Photo: BILL TORPY / AJC

Duke, who paid $1,500 of his own money to rent a lawyer for the hearing, said he wanted to slow down the juggernaut to get the City Council to reconsider. One of the deal’s proponents got defeated in an election in November, and now two of the five council members oppose the project. Duke hopes a third no-vote on the council will emerge, although that possibility seems as remote as the 15-35 Hawks making the playoffs this year.

Duke called the arena a case of “keeping up with the Joneses.” Just about every county in metro Atlanta — and tons of cities — either have arenas or performance halls or want one.

He likened the situation to someone trying to dig out of a hole by shoveling faster. The arena bond note will cost College Park $2.7 million a year for 17 years. (For a down payment, the city is also kicking in $9 million it has lying around.) The Baby Hawks wouldn’t even commit to the life of the note, just promising to stay for 10 years starting in the fall of 2019.

“Here we are in a middle-class city just trying to get by,” Duke said. “We can’t afford it. It’s a disgrace. It’s gross.”

November 10, 2016, ATLANTA — Atlanta Hawks coach Mike Budenholzer stands beside renderings of a 3,500-seat arena that would host Atlanta’s new NBA Development League team beginning in 2019. (AP Photo/Paul Newberry) Photo: PAUL NEWBERRY / AP

Moore, the city manager, said the “multipurpose arena is an extension of the GICC (Georgia International Convention Center). It’s to remain competitive as a convention center.”

As they say in bidness, if you ain’t growing, you’re dying.

The 400,000-square-foot GICC is touted as the state’s second-largest convention center. The GICC, Moore said, creates jobs and tax revenue and buoys other businesses that support the facility.

A 2016 audit shows the GICC brought in $9 million in revenue that fiscal year but had $14.2 million in expenses, meaning the nearly $5.2 million deficit is bridged by hotel taxes.

City officials say the convention center fills hotel beds, which bring in more taxes, which then fill the financing hole. It’s like the Circle of Life, drawn up by actuaries.

A rendering of a proposed arena in College Park that would expand the Georgia International Convention Center and make space for a new Atlanta Hawks Development League team. (Source: City of College Park and the Atlanta Hawks) Photo: COLLEGE PARK / ATLANTA HAWKS

“Convention centers lose money, that’s what they do,” said Heywood Sanders, a professor of public administration at the University of Texas at San Antonio. “They call them loss leaders.”

“Loss leader” is a retail term for a product sold at a loss to attract customers, like $1.99 12-packs of Coke.

Whether the Baby Hawks will act as cheap soda is yet to be seen.

Professor Sanders wrote the book “Convention Center Follies,” which has a photo of Atlanta on its cover. He said the dearth of performance centers/arenas on metro Atlanta’s south side “reflects a market reality” that they have not yet been successful. Perhaps some public money might change that. Or not.

College Park, population 16,000, has more than a third of its residents existing under the poverty line. That’s one reason city leaders want to roll the dice on a new arena.

“These things come on with great hope but not a lot of realism,” Sanders said.

It’ll take a few years to see how real it is. In the mean time, the Hawks might even field a winning team.

But it’s a good bet that with their cozy deals across metro Atlanta, the Hawks will make tons of money while the fans wait.