Tuesday, January 30, 2007

Real Salt Lake Leaving Salt Lake Behind?

It's not surprising since things haven't gone well, but there is new speculation on the future of Real Salt Lake (RSL). Despite a ground breaking in August, RSL does not have all it's financing in place for their new stadium / hotel / office complex. You read that correctly, they had a ground breaking to announce they were building something before they new they could actually build it. Normally in those circumstances, you would assume the deal is close to done and just a few minor formalities are needed to complete it. But that wasn't so clear this past summer. Salt Lake County rejected the initial proposal. The financing available, a hotel tax, wouldn't kick in for a few years so the county was facing a few years without payments on their $30m in bonding for the $100 million project. The county balked as too much debt would accumulate during a couple years of non-payments (that is, interest added to principal and then interest added to interest on top of principal). To get an idea what this is like, ask your bank what your mortgage payments would be like had you not made a single payment for the first 3 years. What happens to that $250, 000 mortgage? If you're lucky it jumps to $300k. That's right, the $250k really is $300k+. If you thought the payments on 250 were a pain, good luck with the $300k+ ones. Now imagine what that sort of difference is for $30 million. The problem is that RSL's owner Dave Checketts and Sandy's Mayor Tom Dolan didn't take this into account. Or at best they did and didn't feel that such a jump in debt would matter to the politicians voting on this matter. But those with the vote, including RSL season-ticket holder and Salt Lake County Peter Corroon, didn't feel it was a good deal and rejected it early last summer (note : Salt Lake County has a board headed by a mayor; don't confuse with Salt Lake City and their Mayor Rocky Anderson). What was surprising is that soon after that the city of Sandy and RSL came back with nearly they same deal. The difference was that Sandy was coming up with $15 million to fill the bonding's financing gap. The problem with this plan was, as we can see today, it only addressed one of the many concerns voiced by those voting against the stadium. Leading up to the original proposal, Utah had been changing it's laws in regards to RDA money (similar to TIFFs). There was already a recent history of public debate over how much good comes out of public financing of any sort of project like this. Fresh on the heels of this debate, RSL popped onto the scene and started asking for money. First for infrastructure and land for a$60 million stadium project. Last this project turned into a $110 million hotel, office and stadium project. Did owner-operator Dave Checketts, RSL CEO Dean Howes and others involved not think that such a large jump on the overall price tag not have an affect on public perception? While not a major mistake in itself, moves like this played into the public perception that this project was just another rich businessman looking for public money instead of spending their own. Another move that played into this was RSL's reluctance to show transparency in regards to their finances. Given the public mood over the project and it's initial problems, RSL's leaders should have been searching to proactively address more of the issues at hand rather than just that of the ballooning debt. Stepping forward and publicly volunteering financial information would've helped. After all, when you're asked to do so and complain it raises eyebrows. What does RSL have to hide? But in the end I think the real problem came down to a lack of leadership at Real Salt Lake. Recently new stadiums have been built for baseball teams in DC and Minneapolis despite clear, strong public opposition to these deals. One poll of DC voters found those in opposition of public financing out numbers those in favor by 2 to 1. St. Paul voters twice rejected building the Minnesota Twins a new stadium in referendums. And the current deal that was passed for Hennepin County to finance the lion share of the stadium with a sales tax included a clause that wouldn't allow a voter referendum to held. Not exactly the sort of thing you do if you think most people favor the legislation. Why did they succeed when RSL failed? There aren't any silver bullets in life (sorry, Lone Ranger). Surely one of the major reasons these proposals failed is leadership. When things didn't go well for Checketts and company, the media had reports of Checketts butting heads with the very officials he was trying to persuade to fund the project. After the first proposal failed, Checketts had a public exchange heated words with Corroon and others on the county board. And it happened again recently after the county's debt committee recommended against the revised plan. Not only was RSL's management spending time haggling with those they were asking favors, they were doing so when the public was giving those leaders no reason to help Real Salt Lake. Just look at the recent election, Utah's House Speaker Greg Curtis was re-elected by only 20 votes. Not only did RSL's management fail to win support from leadership, they failed to anticipate how they should go about appeasing the public's fears. While they're never going to win over all of Utah's hearts and minds, they could have learned from the RDA debate leading up to their proposals. Had they done so, they would see that no matter how inaccurate it may be opponents will try to to frame the issue in a way that favors their viewpoint (actually, that's basic politics that again Real Salt Lake's management failed at). To ensure their proposal would pass when the majority of the public opposed it, Checketts should have made sure to have some school officials on his side before going to battle. They should anticipated the "you're taking money from the schools" angle. Another thing they could have done was get their word out to public from day one that they were only looking for money for land and infrastructure and framed it again what the Utah Jazz got for the Delta Center in terms of real dollars. There are other similar things that could have been done to help ease the public's fears. And having done that the politicians may have gone ahead with the plan despite the public opposition. After all, it's worked in other places. Why didn't it work in Utah?

2 comments:

n said...

Here's an interesting alternative that I think has been on the table more than once. If Checketts can let his pride go, he could have a stadium no problem.
http://www.andersondevelopmentonline.com/blog/?p=6

Allen said...

It first came out this summer and Checketts, Howes and co. didn't seem too interested in it. So I wasn't surprised to see RSL turn down this option. I don't think the league would allow for it either. And hopefully it won't be needed.