DevelopmentONE OF THESE THINGS IS NOT LIKE THE OTHERS
You’re being sold a lie. The $1 billion community venues project is a bill of goods pushed on an ambivalent public by an ambitious mayor, a cowed city council, a self-interested chamber of commerce, a sanctimonious Orlando Sentinel editorial board and a greedy pyramid-scheme magnate. For more than a year, these powers-that-be have orchestrated a full-throttle propaganda campaign to convince you that building a new arena and a new performing arts center and renovating the Citrus Bowl will turn Orlando into a world-class city.
The projects will boost our economy, we’re told. If we don’t build them, we’ll lose our chance to be a real city, maybe forever. Tourists will pay for almost everything, so don’t worry about the details. As the Orlando Sentinel lectured us April 22, “You can’t get a better deal than free and, except for a handful of downtown Orlando property owners, these state-of-the-art venues will cost local taxpayers nothing.”
Which isn’t true. The city, for instance, doesn’t like to tell you that $328 million of the funding will come from city or Community Redevelopment Agency funds. That’s money that could be spent on things like cops and affordable housing. The city employs fuzzy math to obfuscate how paltry the Orlando Magic’s $50 million contribution to the arena really is, and it downplays the inherent risk associated with mortgaging $160 million based on the assumption that downtown property values will continue skyrocketing, even as the Florida Legislature considers deep cuts to the state’s property taxes.
Mayor Buddy Dyer and company are acting like teenagers with dad’s credit card, giving no thought to the bill coming due. They want it all, and they want it now.
On May 21, the Orlando city council approved the projects. The Orange County Commission will vote on them July 26. Since the county controls the tourist tax, it’s their opinion that counts.
(Procedural point: If all three projects are bundled into one vote, tourist tax law requires a supermajority – five of seven commissioners – to approve them. If they’re separated, the arena will only need four votes, while the other two will still need five to pass. County sources say the former is more likely, at least right now.)
Since this whole plan is in the home stretch, we figured it’s time to lay out our case in plain English. So here goes:
Build the performing arts center; scrap the Citrus Bowl, at least for now; tell Magic owner Rich DeVos to open up his wallet or get lost; and fix the state law that precludes us from spending tourist taxes on the things that really matter.
Remember the last time Orlando hopped in bed with a shady businessman? His name, if you’ve forgotten, was Lou Pearlman. That worked out well.
Rich DeVos is no Pearlman, of course; he’s much richer. His net worth is somewhere in the neighborhood of $3.5 billion, more than 10 times the annual general-fund budget of the entire city. If he wanted to, and were it a wise business investment, he could build the $480 million arena himself. But he wants you to do it. And Orlando officials are employing some fuzzy math to convince you it’s a good deal.
The Magic’s contribution to the arena’s construction is $50 million, but the city and team want you to think it’s a lot higher. So they include $12 million – the present-day value of the $1 million annual rent the Magic will pay for 25 years – and $3 million in interest on the original $50 million to arrive at a more impressive number: $65 million.
But take a look at the proposed arena’s operating budget, and you’ll see the Magic’s $1 million annual rent included there too. In other words, the city is applying the rent money to both the construction costs and the operational budget.
Apparently the old adage of being in two places at once doesn’t apply when you are trying to sell the idea of building an arena for the benefit of a billionaire.
Let’s assume that $12 million can’t be in two places at once, as logic would suggest. If you apply it upfront and subtract it from the operating budget, that leaves the new arena running between $503,000 and $652,000 in the red annually for at least the first five years, according to city records. Guess who gets to make up the shortage? (Hint: not Rich DeVos.)
But the fact is that the Magic aren’t paying the $12 million upfront. Orlando is, from an “internal source of financing,” according to city spokeswoman Heather Allebaugh.
Let’s repeat that point, because it’s important: The city is throwing in $12 million and crediting the Magic to artificially pump up the team’s contribution. It’s nice to have friends in City Hall.
How else have the Magic sweetened the pot? They’ve promised to pay for construction cost overruns and back up $100 million in bonds. Both offers sound generous. Both carry virtually no risk for the Magic. It’s highly unlikely that the tourism tax – the portion of funding the Magic will back up – would default. And since the city gave the Magic control over the arena’s construction, they should be on the hook for any cost overruns in any case. In neither case is the team doing us any favors.
Bottom line: The Magic is offering $50 million to get this thing built. That sounds like real money, but offers from comparable teams in other cities are much more generous.
Both the Spurs and the Pacers – teams the Magic like to compare themselves to – paid a larger percentage of their arenas’ construction costs: 15 percent and 31 percent, respectively. Sixty percent of Indianapolis’ arena was paid for through private funding. San Antonio’s residents got to vote on whether or not to fund that city’s arena, a luxury you’ll not receive.
Other cities have rejected public funding of arenas altogether. Last year, Seattle voters passed a law banning tax dollars from going to sports teams. Sacramento voters rejected building its team an arena with public funds. Orlando officials don’t like to talk about that.
DeVos could easily bring more money to the table; he certainly has in the past, at least for things he really believes in. Between 1990 and 1997, he gave $95 million to mostly right-wing charities that promote his version of Christian values. (Notably absent from the list were groups that helped the poor. “I don’t want to make ’em too comfortable there,” DeVos explained to the Grand Rapids Press.)
In 1994, he made the largest-ever soft-money donation to the Republican Party, $2.5 million. Two years later he bankrolled the GOP national convention with another $1.3 million. It seems to have been money well-spent. In 1997, the Republican Congress sneaked a last-minute provision into the federal budget that granted DeVos’ company, Amway, a $283 million tax break.
Amway itself has long history of questionable dealings. The company was convicted of criminal fraud in Canada and slapped with a $25 million fine in 1983. That same decade Canada fined Amway another $38 million for not paying import taxes. DeVos’ company has been investigated by the Federal Trade Commission as a pyramid scheme. The FTC ruled it to be legal, but ordered Amway to stop inflating its profit potential to potential clients. In 1986, Amway broke that rule and had to pay a $100,000 fine.
It received so much bad press that the company doesn’t even use the name Amway in the United States anymore; now they go by Quixtar. New company, old tricks: In 2004, Dateline NBC reported that Quixtar was telling recruits they could make $250,000 in 18 months while working 10 to 15 hours a week.
Though he’s accrued astonishing wealth, DeVos would like Orlando taxpayers to believe that the Magic are one of his business dealings that just isn’t working out. The team claims to lose $20 million a year. Without a new arena, the argument goes, they can’t afford to stay in Orlando.
Even if the reported loss is true – and there’s no way to verify it because the Magic are privately held – that doesn’t account for the current value of the franchise. DeVos bought the Magic for $85 million in 1991; the team is worth $283 million today, according to Forbes.com. His investment has more than tripled its worth in 16 years. Not too shabby.
DeVos’ investment is rising, even though the team sucks. The team pays its players $79 million a year. The Magic have posted four straight losing seasons. They made the playoffs this year, barely, only to be swept by the Detroit Pistons.
The fact is the Magic want to be here. Central Florida is the 19th largest media market in the country and growing. DeVos should pay to stay; 25 percent of the arena’s cost – $120 million, less than he’ll pay his players in the next two years – would be a good start.
The Citrus Bowl
It’s astounding that renovating the Citrus Bowl is more popular than building a new arena. The arena will feature at least two professional teams – the Magic and the Arena Football League’s Orlando Predators – and an estimated 200 events a year. The football stadium won’t. Even after a $175 million overhaul, the Citrus Bowl will sit like a brick on the city’s west end, annually hosting a handful of football games, soccer games and monster-truck rallies. (The Citrus Bowl hasn’t hosted a major concert since Metallica in 2003.) No college or professional team will call it home. It will never host a Super Bowl. The Citrus Bowl isn’t being renovated to NFL specs, as Florida Citrus Sports director Steve Hogan admitted during an April 26 public forum. That means if an NFL team wanted to relocate here, we’d have to fix it up again.
Yet, according to an April Sentinel poll, 52 percent of Orange County voters think this is a good idea, while just 41 percent say the same of the arena. Perhaps that’s because there’s no billionaire at the other end of this deal, trying to use tax dollars to fatten his bank account. Or maybe it’s because we’re more of a football town than basketball town.
You can sympathize with the Florida Citrus Sports folks. FCS is a nonprofit, and the facility it uses for the two college football bowl games and the Florida Classic – a game between two historically black colleges – is decrepit. It’s 71 years old and showing its age. If the stadium isn’t renovated, FCS could lose its highest-profile event, the annual Jan. 1 Capital One Bowl, as well as any shot at a Bowl Championship Series game or an NCAA conference championship game.
But minus an anchor tenant, spending $175 million public dollars – no anchor tenant means no private money – on this facility doesn’t make sense, at least not right now.
Assume the best-case scenario: The Citrus Bowl keeps its three annual football games, and perhaps adds a pre-season NFL game, an NCAA conference championship and, one day, a BCS game. That’s $175 million for three extra games. Perhaps, once every few decades, the Citrus Bowl could vie to host World Cup games.
In other words, the best-case scenario is a gamble. But even if we get lucky, there’s no sure payoff. The three big games attract about 150,000 people a year combined. That’s much less than 1 percent of the 51 million tourists who visit Orlando each year. And that assumes that everyone who attends those games is, in fact, a tourist, not a local who would spend their money in the area anyway.
In the next seven months there are exactly six scheduled events at the Citrus Bowl: a soccer game in June, another in July, a monster-truck rally in January and the three aforementioned football games. In fact, the Citrus Bowl is so irrelevant to the fabric of Orlando that, during the three years the stadium would undergo renovations, nothing would be scheduled there between Feb. 1 and Oct. 31. That’s nine months of the year the Citrus Bowl will sit dormant. Will anyone even notice?
Ask yourself this question: If renovating the Citrus Bowl weren’t being done under the auspices of a larger redevelopment project, would anyone take it seriously? Could it stand on its own merit?
There will come a day when Orlando warrants a football team. So, as the saying goes, it’s time to go big or go home. Renovate it to NFL standards or not at all.
Of course, the county doesn’t have enough money for that. In fact, no one’s sure exactly how much that would cost. Assistant county administrator Eric Gassman pegs the dollar amount in the hundreds of millions, beyond the $175 million currently planned – assuming the hypothetical NFL franchise didn’t want us to tear the Citrus Bowl down and build a new stadium altogether.
Either way, doing it halfway makes zero sense. This one should be parked until there is an actual reason to do it.
The performing arts center
We were skeptical of the newly christened Dr. P. Phillips Performing Arts Center. The idea of building it downtown has been floated for the better part of a decade. Former Mayor Glenda Hood tried desperately, but failed due to a lack of both support and effective leadership.
We were also taken aback by the preliminary numbers, and the fact that in its early presentations, OPAC Inc. – the nonprofit set up to run the center – had an ethereal, pie-in-the-sky vibe that was not reassuring to anyone worried about the cost-benefit ratio. As we said last year, it was amateur hour.
The center was originally going to cost $376 million, of which OPAC was committed to $50 million. The rest would come from city, state and tourist tax dollars. It was to be a partnership with the University of Central Florida, but they bailed. The city would subsidize up to $4 million a year, the projected deficit in the center’s operational budget. (The Bob Carr Performing Arts Centre breaks even.) OPAC wanted to spend more, per seat, than comparable buildings in Newark, N.J.; West Palm Beach; Houston and Fort Worth, Texas. The sense, back then, was that they wanted a sort of Taj Mahal.
Then there was the question of whether anyone actually wanted a performing arts center. On that, at least, we have an answer. An April Sentinel poll found the arts center is far and away the most popular project of the three, with 66 percent of county residents in favor of it. In May, despite casting the lone vote against the arena and Citrus Bowl, city commissioner Phil Diamond backed the arts center.
We’ve seen the light. Of the three projects, the arts center is the most worthwhile. What changed our minds?
The OPAC people themselves, and the way they’ve rallied the community around a project that has lingered for so long. They’ve already raised almost $70 million – more than initially expected – and will ultimately pitch in $125 million toward the center’s ultimate $408 million cost, which includes $96 million in construction and property acquisition, as well as operations money and pre-opening expenses.
To put that in perspective, this nonprofit will pay double what the very much for- profit Orlando Magic will pay for the construction of their pet project.
OPAC has solicited multimillion-dollar donations from foundations, local businesses and individuals, which more than any poll demonstrates a depth of support. People believe in it. OPAC executive director Kathy Ramsberger has a lot to be proud of.
If you want to talk about the nebulous “quality of life” thing, the performing arts center has the two other projects beat, hands down. It will give the Orlando Philharmonic, Orlando Opera and Orlando Ballet a home base. It will expose kids to the arts, something they get less and less of at FCAT-obsessed schools. Its presence in the heart of downtown would give us a bedrock of culture in an area often devoid of it.
We could, and probably will, skip another performance of Oklahoma, but if the money such events generate allows more daring art to flower, all the better.
Change the law
Don’t let the spinmeisters tell you that tourists are going to pay for everything. They’re not. Half of the venues’ funding, about $526 million of the $1.044 billion total, would come from tourist taxes. The rest won’t. And contrary to what the backers would have you believe, a lot of that money could be put to other uses.
For instance, $160 million will come from the downtown Community Redevelopment Agency, a tax-levying organization set up to improve downtown and Parramore. Is long-blighted Parramore best served by a new arena and improved football stadium? Or could that money be spent fighting crime and building affordable housing?
The city will also kick in $168 million from the sale of the Centroplex land and from its coffers. This money could be spent anywhere else in the city. Cops, roads, parks – even incentives for high-tech businesses with well-paying jobs. Government spending is all about priorities. We’ll leave to you to judge whether this is the best way to spend $328 million.
But there’s still the issue of the tourist tax. Last year, county officials voted to add a sixth cent to the tax – meaning that hotel taxes are now 6 percent of a night’s stay – with income from that extra percent of hotel-tax money to be split between the arena and advertising for the tourism industry. Under state law, the tax can only benefit the tourism industry or build a venue for an existing professional sports team. Over the next 30 years, the arena’s portion of that sixth cent will generate enough money to cover the $270 million bond officials plan to take out.
The other five cents of the tourist tax – at least the part not dedicated to paying off the Orange County Convention Center – will generate a $256 million bond to pay for the Citrus Bowl and performing arts center.
It’s true that this vat of money can’t go toward other causes. But it’s also true that the law that prevents that from happening needs to be changed, as some have noted.
The Central Florida Police Benevolent Association, for one, is pushing a change in state law to allow tourist taxes to be used for cops. Hotel magnate Harris Rosen has publicly endorsed that idea, since the perception of rampant crime scares off some would-be tourists.
Las Vegas lets its hotel taxes go toward roads and schools, the things that people really care about. (Last month, the Sentinel printed a leaked survey conducted by the Orlando Regional Chamber of Commerce. It showed that, out of 16 possible priorities, building these venues ranked dead last.)
The sales job insists that if we build the venues, tourist taxes will benefit the rest of us. Would a first-class transportation system and better schools not benefit us as well? Of course it would. Which is why the tourism tax law needs an overhaul.
If the law ever does change, however, Orlando will have maxed out its tourist-tax credit card already. We may one day soon have access to a new pot of money, but we won’t be able to take advantage of it.