Each Phantoms' Ticket Sold Will Cost Taxpayers $20-40

Let's crunch a few numbers, shall we?

State Senator Pat Browne, author of the NIZ legislation, has told local municipal officials that the steady state arena debt service will be about $10.5 million. I assume these are revenue bonds with a sinking fund feature so that the money has been sequestered to retire the principal at maturity in 30 years. That works out to a debt service of approximately $11.2 million (7%)  per year, assuming that the total arena cost is $160 million.

If the EIT collected is about $550,000 a year, that will cover about $8 million of the debt service. Total. Over the course of 30 years.

But what about cost overruns?

My guess is the EIT will be used for the first $8 million of the inevitable cost overruns of the project. To be fair, that $160 million is a "soft" figure. You really don't know the real cost until it's finished. A recent Morning Call news account about soaring hockey arena costs, is very disconcerting. Before construction has even started, we may have spent as much as $45 million. Obviously, King Edwin would rather not ask his own taxpayers to make up the difference. He'll grab the EIT.

Won't the lease to the Phantoms pay for the $10.5 million in annual debt service? Nope. Not even close. That lease is only $500,000 a year, with a corresponding $500K a year for "capital improvements." Rent on the arena is $10 million less per year than the annual debt service. It doesn't even cover 5% of the debt service!. And the $500K a year in capital improvements sounds great, but is only one-third of one percent of the development cost.

Let's (generously) assume the land is valued at $10 million and the improvements to the land at $150 million. That means, for that $500K a year to actually cover "stuff that wears out," the average building component would have to have a useful economic life of 300 years! Even at $5 million a year, that's a 30-year average life.

Do you know of an HVAC system that lasts 30 years, much less 300 years? How about those seats in the arena? The playing surface? The roof? The interior fit (including dressing rooms, office space and so forth)? The "pig-in-the-poke" here, for me, is the enormous subsidies given directly to the tenant of the arena in a desperate attempt to get a minor league hockey franchise to locate in Center City.

The taxpayers will be on the hook for a lot more than $10.5 million a year - closer to $20 million by my estimates - for just the arena. 

If the arena attracts 500,000 attendees a year, taxpayers will be subsidizing the ticket price for each and every one of those attendees to the tune of $40 per ticket! Even at 1 million attendees a year (that, folks is four events a week - every week - averaging 5,000 attendees per event), that's a subsidy of $20 per ticket. Imagine how much cheaper the Phantoms' owners will be able to lease those "luxury boxes" to King Edwin's wealthy political contributors (and still make a tidy profit) with such a massive subsidy from "the little people." And, they'll get to "write off" even that heavily-subsidized cost as a business expense.

Once again, this is government pork built in a simple way: figure out what your wealthy contributors are willing to "pay-to-play," then have "the little people" make up the difference.

It ain't complicated!