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Arena Deal Falls Short Of Solving Blue Jackets’ Financial Woes
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The Blue Jackets are off to a terrible start. Last night’s win over the Red Wings was the team’s first. The losing comes as the City of Columbus and Franklin County are preparing to buy Nationwide Arena in an effort to save the team. WOSU looks at whether the deal will actually solve the Jackets’ financial problems.
City and county officials say a $42.5 million dollar purchase of Nationwide Arena is essential to keep the Blue Jackets in Columbus AND to preserve the tax revenue generated from the Arena District. If the Jackets leave, officials say the district will suffer. Columbus Mayor Michael Coleman once compared the circumstances to the failed downtown mall.
“Remember City Center? It’s like saying remember the Alamo,” Coleman said.
Under the agreement, which continues to move closer to completion, the team will not owe Nationwide rent and it will not be responsible for running the facility. The deal’s creators say this will help the financially struggling franchise.
But the team already has enjoyed a similar benefit. In an email to WOSU, Nationwide president Brian Ellis said the Blue Jackets have not paid rent in four years – totaling $12 million. Plus, Ohio State University has been managing the arena for the team, saving them an additional $1 million.
And remember, the Blue Jackets receive some money from NHL revenue sharing.
“But even with their money coming in and even with the new deal this is not going to be a profitable venture unless something dramatic happens on the ice,” Stephen Buser, a retired OSU finance professor said.
Buser was charged with finding options to retain the Blue Jackets.
“I mean people have informed me another part of the problem is that attendance isn’t what it should be, and if they were winning the championship and getting into the play-offs on a regular basis the money thing could turn around. And that might be,” he said.
Media reports indicate the Blue Jackets do not expect to receive a full revenue sharing payment because last year’s attendance did not meet NHL requirements. The Blue Jackets would not comment.
Last season, the Jackets averaged 13,658 per game, the 4th worst in the NHL. This year the Jackets are averaging 11,394 a game. That means there are a lot of empty blue seats in 18,500-seat arena.
The reason is simple. The Blue Jackets have not won. They’ve only been to the playoffs once, and this year is the team’s worst start in franchise history.
Poor attendance means poor revenue. Documents obtained by WOSU show the Blue Jackets lost $12 million in 2006, $10 million in 2007 and $16 million dollars 2008. While no other records were available, the team continues to post similar losses.
OSU’s Stephen Buser said he thinks the Blue Jackets will continue to lose money under the proposed deal, only the losses will be bearable.
“I also think that the present owners, partially, the McConnell family, for instance, will be much more comfortable saying we’re willing to lose significant millions per year, but not the obscene amount of money we had been losing,” Buser said.
Columbus City Council president Andrew Ginther reiterated an arena purchase has very little to do with hockey and more to do with economics. But Ginther said the proposed deal will help the Blue Jackets finances by putting them on what he calls a level playing field with similar franchises.
“They’ve enjoyed, in essence, four years of not paying rent, and they will have that situation moving forward,” Ginther said.
Yet to vote on the arena purchase are Franklin County Commissioners. And Commission president Marilyn Brown said the proposed deal should help the team to improve on the ice.
“What that allows for is the team to focus on the team and not be concerned about those other areas that they’ve needed to be concerned about those other areas that they’ve needed to be concerned about that they couldn’t do for the last several years,” Brown said.
If the team continues to lose money and the McConnell family sells it, the new owner would have to pay a $36 million penalty to move it under the proposed agreement. But is that much of a penalty for at team that has lost at least $60 million over the past five years?
Stephen Buser thinks the proposed deal will keep the threat of an offer at bay.
“They’ve dramatically raised the stakes. So if you are another city, and you’re thinking ‘Gee, I’d love to have the hockey team.’ I think before if I were looking at the numbers I would say ooh that’s a pretty easy deal. Maybe you can low-ball and still even get them because they’re in such bad shape. So I think the required bid is now much, much higher,” Buser said.
It remains to be seen if taking the arena off the hands of the team will effectively turn things around for the Blue Jackets’ finances. The deal still has to go through one more vote. Buser admits the deal is no panacea.
“I think it’s an amazing step toward a solution. Will it work? I’m cautiously optimistic,” he said.