Wednesday, March 28, 2012

Is Memphis Major League?

Grizzlies want to do more and get more to keep team in Memphis.

Posted By on Wed, Mar 28, 2012 at 3:12 PM

The Grizzlies have raised their game. Now Memphis fans have to raise their game.

That was the gist of a four-hour meeting Saturday of team owner Michael Heisley, his lawyer, team executives, and Memphis business and community leaders. The meeting was prompted by, among other things, recent reports that Oracle CEO Larry Ellison is interested in buying the team and possibly moving it to California. The newly created advisory board or local board of directors — the title is not yet clear — met in an office at FedExForum.

Kevin Kane, head of the Memphis Convention and Visitors Bureau, is chairman of the board. He said Heisley emphasized that he would like to see the team remain in Memphis indefinitely. But he said he is 75 years old and is going to sell the team eventually. He said the team loses money. His asking price is $350 million.

According to Forbes, the Grizzlies had an operating loss of $24.8 million last year, and the team valuation is $269 million, 29th in the 30-team NBA. The most valuable team ($900 million) is the Los Angeles Lakers, with a TV deal worth $200 million annually.

"There was no threat," Kane said of the meeting. "Everybody knows Memphis is a vulnerable market."

One illustration of the difference between small-market teams and major-market teams is ticket prices. Tickets for individual Grizzlies games for 2012-2013 are priced at $5 to $227. The New York Knicks, one of the NBA haves, sold out their season tickets this year before the games began. The cheapest ticket to a game this season is $10, the most expensive is $1,900.

Given the low per-capita income in Memphis, one of the goals of NBA NOW, the local group that brought the Grizzlies here, was keeping tickets affordable at all levels of the arena.

"The flip side of our relatively low average ticket price is that we probably have the most integrated crowd in the league," Kane said.

The Grizzlies hope to duplicate the success of San Antonio and Oklahoma City as profitable winners and civic icons in cities with a single major-league team. Memphis got a taste of that last year when the Grizzlies lost in the seventh game of the second round of the NBA Playoffs.

"Memphis probably needs the Grizzlies more than the Grizzlies need Memphis," Kane said. "The Grizzlies are a strategic asset for the region, like FedEx, AutoZone, MLGW, or the airport."

The board has three goals: increase season ticket sales by 3,000 next year; advise the Grizzlies as to what local activities they should be more involved with; and be ready to present either a local ownership group or an out-of-town owner who would keep the team in Memphis.

In the financing projections for FedExForum, average attendance was pegged at 14,900. The team drew 16,862 fans per game in 2004-2005, the first year in the new arena, But in 2008 the Grizzlies were 29th in the league in attendance at 12,770. This year, the team is averaging 15,490 in announced attendance, which ranks 21st in the league. Under the new collective bargaining agreement, teams can earn $20 million a year in revenue sharing if they meet certain attendance goals.

Others at the meeting were Stan Meadows, Chris Wallace, and Greg Campbell representing Heisley and the Grizzlies and Memphians Pitt Hyde (a minority owner), Henry Turley, Bryan Jordan, Lawrence Plummer, Billy Orgel, Otis Sanford, Bob Henning, Duncan Williams, and Joe Hall, the head of a public relations firm in Nashville that worked with NBA NOW 11 years ago. Absent were Staley Cates, Willie Gregory, and Beverly Robertson.

"Season ticket sales are going to be dependent on local small- to medium-size companies," Williams said. "Our New York Stock Exchange companies are doing what they need to do."

Duncan Williams Inc., a financial firm, was involved in the underwriting for the FedExForum bonds and has eight season tickets in a club box, at courtside, and on the floor.

Board members asked if the Grizzlies can co-exist and prosper with the Memphis Tigers. Kane paraphrased Heisley as saying that John Calipari helped bring the team here and "you will never hear me say the University of Memphis is taking away from the Grizzlies."

Board members noted that most of the players don't live in Memphis in the offseason. They invoked the name of Shane Battier, the popular player who was not offered a new contract last year. Heisley reportedly said he is a Battier admirer and would gladly have him running one of his companies.

Wednesday, March 21, 2012

State of Denial

Predictions are dicey, but these nine are easy.

Posted By on Wed, Mar 21, 2012 at 1:54 PM

Football games at Liberty Bowl Stadium are not going to draw 55,000 fans unless Tim Tebow discovers some unused college eligibility and shows up in Memphis.

Large numbers of Memphians are not going to trade in their cars for bicycles and ride them to work.

The federal government is not going to give MATA a few hundred million dollars for a light-rail line from downtown to Memphis Not-Very International Airport.

Beale Street Landing will not bring Memphians back to the river or attract as many visitors as the brainy, welcome, and grateful American Contract Bridge convention going on this week at the Memphis Cook Convention Center. Bring THEM back.

A $30 million bicycle and pedestrian path from Main Street Mall over the Harahan Bridge to Broadway in West Memphis is not going to happen anytime soon.

The city of Memphis is not going to get out of a court-ordered $57 million payment to Memphis City Schools.

Memphis taxpayers are not going to avoid a supplemental property tax increase this year.

City of Memphis and Shelby County employees are not going to avoid cuts in their benefits, pensions, and pay.

Suburban communities are not going to join a unified school system rather than create their own municipal school systems.

I'm no prophet, but I'm pretty comfortable with these nine predictions. We are living in a state of denial in Memphis. And, what's more, our politicians and business leaders know it, from mayors Wharton and Luttrell and their division directors to FedEx CEO Fred Smith.

But not a month — sometimes not even a week — goes by that I don't see or hear some person or group state that each of these propositions is viable.

Football promoters and the University of Memphis routinely inflate their attendance numbers. Even with a new coach and Tiger Lane in full flower, it would be remarkable if average actual attendance were to exceed 30,000. There is no more loyal Tiger football fan than Fred Smith, but as he told me recently, there are simply too many entertainment options these days.

Gasoline costs about $3.75 a gallon, but the answer isn't bicycles and bike lanes. It's fuel-efficient cars, moving closer to where you work, eliminating discretionary driving, taking the bus, and car pools.

MATA persists in acting as though a light-rail line, estimated to cost $450 million in local and federal funds, is not as dead as winter. And the Airport Authority thinks its problem is bad media.

The riverfront was gorgeous last Saturday evening and packed with people, even though some call Tom Lee Park the worst riverfront park in America. But self-interested parties insist that massive capital expenses, like the ones that delayed the opening of Mud Island 30 years ago and that have delayed the opening of Beale Street Landing, are miracle cures. BSL's chosen restaurant operator Bud Chittom is a great guy who has made something out of nothing over and over again. But somehow that lesson has been forgotten. Chasing federal dollars for big riverfront deals is a sucker play. Make better use of what we have.

A C Wharton, a lawyer, has said several times that he is uncomfortable defying the court-ordered payment to the schools. But he and the city council have been in denial for three years. As early as this week, however, the council is likely to approve a property tax increase. And later this year it will have to cut public employee benefits. We are, as our city government reminded us a month ago, passengers on the Titanic and there are icebergs ahead.

A delay from 2013 to 2014 has been proposed for the merger of the city and county school systems. Supposedly this would allow for a fuller debate of the issues. But as some of the people proposing such a delay well know, there is no uncertainty at all on the part of suburban communities determined to form municipal school systems. They are ready to act now in preparation for 2013. Nor are private-school parents uncertain about their future school choices. Nor are optional-school parents. Memphis and Shelby County residents have been exposed to the consolidation debate for two full years now. Minds are made up.

Energy and interest don't increase after a story is two years old. They decrease, and apathy takes over. Anyone who has held public office or served on a committee or worked in the news business knows this. Do the plan, and let the chips, the dollars, and the students fall where they may.

Wednesday, March 14, 2012

Butts in Seats

Why actual attendance is crucial in funding facility improvements.

Posted By on Wed, Mar 14, 2012 at 2:25 PM

The University of Memphis opened the 2011 football season at home against Mississippi State before an "announced" crowd of 33,990 and ended the home season against Marshall in front of an announced crowd of 15,101 in 62,000-seat Liberty Bowl Memorial Stadium. The actual numbers, however, were 26,398 for the opener and 3,301 for the Marshall game.

The most recent AutoZone Liberty Bowl drew an announced 57,000 and an actual 31,578. And the 2011 Southern Heritage Classic announced 43,532 while actual attendance was 26,398. (Pure coincidence that this is the same number as the Tiger opener, according to Memphis Division of Parks director Cindy Buchanan and her assistant, who provided and double-checked the numbers at the Flyer's request.)

According to Buchanan, total attendance for the eight games at the stadium last year was 120,300, compared to the sum of the "announced" attendance of 221,002 by the stadium's three tenants.

It is common knowledge that announced attendance, which includes tickets sold and distributed but not necessarily used, is often inflated. It is also common practice among colleges and professional teams and the media outlets that follow them. What is not so clearly known is the gap between reporting and reality. It's a downer, and it does not endear reporters to the people and organizations they must report on.

The gap is especially relevant now in reference to Liberty Bowl Memorial Stadium. Tenants and boosters say the stadium needs an upgrade, and the Memphis City Council and city taxpayers may be asked to shoulder some of the costs, estimated at several million dollars. The tenants have told Councilman Reid Hedgepeth that they will bear at least half of the costs of the upgrades and are aware of the city's financial predicament, but a tenant meeting scheduled for Monday was postponed.

On March 20th, the city council must decide how much public support should be pledged to upgrading the stadium. Hedgepeth said the tenants would provide specific numbers then. Actual attendance should be among them.

Here are the numbers Buchanan provided for each game: AutoZone Liberty Bowl, 31,578; Southern Heritage Classic, 26,398; Mississippi State, 26,398; Austin Peay, 9,198; SMU, 9,208; East Carolina, 7,128; UAB, 7,127; Marshall, 3,301.

It looks like Memphis is going to hold a swap mart of its assets including Liberty Bowl Memorial Stadium, AutoZone Park, and certain public schools. It has been suggested that the University of Memphis take over the stadium and that the city take over AutoZone Park. In that case, it's important to know real attendance numbers to arrive at a fair valuation. In the private sector, no company would take over a competitor without determining its actual sales and expenses as opposed to its projections.

College football games are an important part of the local sports scene and, even at the low number, bring thousands of out-of-towners to Memphis and help put paying customers in hotels and restaurants. But a ticket that is distributed but unused, although it inflates "announced attendance" to the benefit of promoters, does not contribute to the stadium ambience, concession sales, or parking revenue. And the city gets a share of the latter two.

One way to pay for the stadium improvements would be through user fees — a ticket surcharge of, say, $2. In that case, we could be in for an interesting discussion of what exactly constitutes a "user."

Is it the end user — the fan who walks through the stadium turnstile? Or is it the organization or institution that announces the inflated attendance figure? Or the college that buys 10,000 tickets for a bowl game but cannot sell all of them?

A similar question can be asked about the Memphis Redbirds and AutoZone Park, the finest and most expensive stadium in minor-league baseball. With a seating capacity of approximately 14,000, Redbirds tickets are easy to score, and a cheap ticket gives the bearer the freedom to move into seats that would cost four times as much at a big-league game. Pricing power has collapsed since the newness of the ballpark wore off. Whether that's a good deal for the owner or owners is another matter.

Wednesday, March 7, 2012

Fees and Freezes

How governments give and take, and what you can do about it.

Posted By on Wed, Mar 7, 2012 at 12:36 PM

Watch out for F-bombs when the Memphis City Council and Shelby County Commission work out their budgets this year.

Not the kind you're probably thinking. The new F-bombs are fees and fines, and expect to see lots of them instead of those terribly unpopular tax increases.

The big picture was played out on a small scale at the Memphis City Council on Tuesday. First, the Budget Committee revisited last year's confusing 18-cent "one-time" tax assessment for Memphis City Schools. A couple of hours later, the Parks Committee took up the issue of improving Liberty Bowl Stadium and "appropriate funding" including user fees.

Coincidentally, 18 cents, give or take a fraction of a cent, is also the amount of a portion of the city tax rate that already goes to schools. In yet another coincidence, the overall Memphis tax rate is $3.1889. Hence the confusion. The council might or might not send property owners a separate tax bill for the "other" or "special" 18 cents, which would cost the owner of a $100,000 house about $47 and raise roughly $20.5 million.

Fees, fines, and freezes all have an impact on the city and county budgets. The city administration went over this at a retreat two weeks ago, using a graphic of the sinking of the Titanic to illustrate their point that they were serious about running a tight ship. Chief administrative officer George Little said property tax collections declined by 2 percent — the first decline in 50 years. And finance officer Roland McElrath said the budget has a "structural deficit" even if the "other" 18-cent tax is levied.

Some council members aren't so sure about the icebergs-ahead warning given that the city gave out $5 million worth of employee bonuses last December.

"I'd rather the city take the strain than the taxpayers," said Budget Committee chairman Jim Strickland.

Little pointed out that city employees took a 4.6 percent pay cut last year. And Councilman Shea Flinn said the council passed the "extra" 18-cent tax last June (and, he said, got called "sons of bitches" by angry citizens), but then it was not levied.

Whether it will be levied is unknown, but here's a guide to taxes, fines, and fees and what you can do about them.

Fees come in many flavors: bank fees, credit-card fees, phone fees. MLGW bills are full of them. The city is considering increasing existing fees or imposing new ones for car inspections. A $2 surcharge on tickets to football games at Liberty Bowl Stadium would essentially be a user fee to service the debt on improvements to the stadium and field and a new scoreboard and JumboTron.

Fines are fees' ugly sister. If you forget to feed a quarter into a parking meter and get a ticket it will cost you $20, and if you ignore that the fines can really add up to well over $100 plus a court appearance, for which there will be more fees. And if you get a couple of speeding tickets they can easily cost more than that controversial 18-cent property tax increase.

Freezes are often passed out by quasi-city agencies to bring in new businesses or development and keep old businesses. They are contagious. Nonprofits also get special treatment. In all, about 30 percent of Memphis property is exempt from standard property taxes. This option, unfortunately, is not available to homeowners. What they can do, however, is appeal their county assessment. In fact, so many people did this successfully last year that it contributed to the budget deficit, Little said.

One-time fees are pretty much fairy tales. The county wheel tax was pitched several years ago as a one-time fee for roads, but it is still around and can be used for lots of things. A one-time 18-cent levy for Memphis City Schools is slightly more believable due to the pending consolidation of the school systems in 2013 that could do away with the city schools tax and shift the whole burden to the county tax. But counting on or counting out any tax is risky.

The sales tax is the target of the suburbs that want to start their own school systems. The beauty, of course, is that it is paid by outsiders as well as residents. A half-cent increase in the sales tax would bring the total to 9.75 percent, one of the highest in the U.S.

The so-called bed tax on hotels and motels is a hefty 14 percent in most cities but is usually dedicated to the local convention and visitors bureau. A "seat tax" at FedExForum helps pay off the bonds on the arena.

One way or another, we all pay for what we get.

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