By Jeff Balke
By Aaron Reiss
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"What do we pay?" asks the stilted, reading-from-a-script female voice.
"Us? Nothing," coos a second voice. "No new sales or property taxes. Just some minor taxes on tourists and arena tickets. That's it."
"So we get a brand new arena downtown, and everything that comes with it, and it doesn't cost us anything? Sounds like a walk in the park."
Sounds more like a bald-faced lie, which is what that radio ad for Les Alexander's new playpen boils down to. Nor do the TV spots promising thousands of jobs and millions of dollars in revenues pass the reality test. But that isn't stopping the million-dollar campaign for the arena bond referendum from ladling on the syrup. The question remains whether the voters will lap it up or gag on it.
Reaction from the media (except for the Houston Chronicle's editorial pages) has not helped sway the voting public to punch the Yes hole. Various broadcast outlets have been airing attacks on the ads' grand assertions. They've noted, for example, that the jobs and revenues touted in the ads will mostly be shifted from Greenway Plaza to downtown, and that Alexander has plenty of revenue -- courtesy of the city -- to offset his contribution to the project (60 percent of the total cost, the ads state).
The notion that the arena won't cost a dime has brought the most heat from a skeptical public. The precise cost of the new arena to the taxpayers can't yet be determined, but a few basic figures make a joke of the free-gift claim.
The radio and TV ads dismiss some of the revenue that will pay for the city's $80 million share of the building as a "tourist tax." That tax is applied to rental cars and hotel rooms and is helping pay for the baseball and football stadia. Rental car agencies have calculated that Houstonians constitute about 50 percent of local rental car customers; one area auto dealer has stopped giving its customers free loaners because of the tax. County Tax Assessor-Collector Paul Bettencourt, who has gone public with his distaste for the arena deal, says about 30 percent of the tax collected in 1998 came from area residents.
The cost of the arena to the city isn't limited to the price tag on the building, however. Houston will have to buy the land on which the arena will be built. Add to that such basic infrastructure expenses as asphalt, utilities and traffic control, and the city's cost escalates well beyond its share of the building itself. In response to a request, the mayor's office failed to provide any figure for the land and incidentals (though surely the city staff has run the numbers). But Craig Varoga, whose PR firm is managing the vote-yes campaign, says $20 million is a "worst-case scenario."
Bettencourt disputes that figure. He guesstimates between $25 million and $40 million, depending on the willingness of the landowners to come to terms and on other intangibles. A consultant who has worked arena deals around the country says $30 million is typical for the total package.
Mayor Lee Brown will try to secure a tax break for Alexander on the private parking garage he'll build next to the arena to gouge the customers who currently pay nothing for parking at the Compaq Center. The $45 million structure would normally yield almost $3 million in tax revenue for the city and county over a ten-year period. Varoga calls that money a "phantom cost," since the parking facility doesn't exist now and won't be built without the arena. Bettencourt believes the money should accrue to city and county coffers as intended, and that a tax abatement should be considered a real cost. "It's a direct subsidy of real property tax dollars," he says. "If somebody built that parking garage anywhere else in Houston, they would pay it."
But that money is small potatoes compared to the millions Alexander might reap from the tax on arena tickets and parking that was negotiated by the Sports Authority to ensure enough revenue to pay the debt service. The tax, which the referendum authorizes at up to 10 percent of the ticket price, will be rebated to Alexander for Rockets and Comets games, as well as those for the ThunderBears indoor football team. Bettencourt says that could net him up to $120 million over the 30-year span of the agreement he signed with the city. It would cover most of his costs, making the arena a freebie for him, if not for the citizens. "That money is a direct offset," he says.
Jordy Tollett, president and CEO of the Houston Convention and Visitors Bureau, says there's no guarantee the tax will ever be imposed. If it is, Tollett says, the tax will likely be capped at a buck or two, just as it will be on rodeo and football tickets to help pay for the new football stadium. But Bettencourt argues that if that's the case, the cap should be written into the law, as it is on the parking tax ($3 max). "The ballot language is specific to 10 percent," he says. "There is no cap."
Tollett also suggests that Alexander might not even pocket the money. "He could turn around and give it right back [to the fans]," he says.
Arena supporters point out that the tax is actually a user fee, which they insist means the average taxpayer won't ante up a dime for the arena. The prospect of arena-goers shouldering the majority of the facility's costs may indeed be more palatable to voters than charging everyone for a building that many will never use. But the Rockets are already priced out of many people's budgets: Add a parking fee (all of which goes to Alexander, except for the tax) and a ticket tax, and others will drop out of the pool as well. Nor will the prospect of paying Alexander to park at a circus or concert event (free at the Compaq Center), plus pay ticket taxes, sit well with the average consumer.
Those tangible costs, however they're labeled, may not be the only ones that result from the arena deal as written. In particular, the ability of the city to attract a National Hockey League team, at least one owned by anybody but Alexander, will be shot. This effectively squeezes out Houston Aeros owner Chuck Watson, who has tried to bring in an NHL franchise for several years. Now Watson is funding a campaign against the new arena. "It makes it economically unfeasible to bring in a franchise under those terms and conditions," says John Blaisdell, president and CEO of the firm that manages the Watson family's private investments.
The deal lets an NHL operator collect game-day revenues and allows the city to offer free rent to the team, but the key items that make running a major-league franchise viable are controlled exclusively by Alexander. He gets the arena naming rights. He gets the big sponsors and advertisers. He gets most of the cash from the luxury suites. "They've given him all the money," Blaisdell says.
The Aeros organization laid out the facts to city officials, but to no avail. "It didn't really matter what we had to say," Blaisdell laments. "They had already made up their minds what they were going to do."
Just why Mayor Brown decided to shut Watson out of the negotiations remains a mystery -- the mayor's office had not offered an explanation by press time. But Alexander has made no secret of his refusal to share a new palace with Watson or anyone else [see "Greed Head," by Bob Burtman, February 13, 1997]. Blaisdell says that with Alexander there was no room for compromise. "[He] had to have everything, or there was no deal."
Alexander's generous contributions to Brown's election campaigns may also have swayed the mayor. But for the city to knuckle to Alexander and spurn Watson, an aboveboard owner who has maintained a reputation for honesty and integrity while providing a winning product on the ice, makes no sense. "The farther we get into this, the worse this deal looks," says Bettencourt. "This is poor public policy. We can do better than this."
E-mail Bob Burtman at firstname.lastname@example.org.