Phoenix LXXII: Send in the Clowns
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02-13-2013, 05:14 PM
Avoiding the Cap
Join Date: Dec 2002
Location: Since 2015
On pages 5 and 6 of the TLHocking study it describes Conseco Fieldhouse, home to the Indiana Pacers. The TLHocking study obtained a 2010 major study prepared by Hunden Strategic Partners entitled “Impact of the Indiana Pacers.” It demonstrated that the Pacers were important to the venue and stated that the operating costs with the Pacers averaged $17.4M a year and without the Pacers averaged $21.1M a year. But the more relevant part of the Hunden study created a benchmark cost for running an arena based on the cost per seat. The HSP study was based on NBA facilities but it is also relevant for NHL facilities. The TLHocking study on page 6 quotes from the Hunden survey, “HSP studied a number of large, NBA facilities (or those that are NBA-ready) and observed that revenue and expenses vary but generally follow a line with an average $777 per seat with an average deviation of seven percent, suggesting a reasonable operating expense per seat of $722 to $831 per seat. The estimated expenses at Conseco are $819 per seat, six percent above the average of this sample and within the average range of costs.”
The use of a per seat cost seems to be the most accurate measure of arena operating costs. Based upon the figures used in the HSP study using the seating capacity of Jobing.com publicly listed as 17,799 and an average cost per seat of $777 the cost of operating Jobing.com would be $13,829,823. It then seems reasonable to peg any lease management agreement for Jobing.com arena at $14M annually with some kind of CIP escalator included.
Anyone want to tear that apart? Was Glendale not previously paying for the operating cost of the arena? If so, that would explain why the Coyotes were 15+ million in the hole every year, regardless of what they did.
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