Not So Fast
George Maragos, the Nassau County Comptroller, issued his own initial report about the financial viability of the plan and offered several recommendations couched in the disclaimer that “it would be inappropriate for the Comptroller to further speculate as to what the finalized contractual terms will be and synthesize an economic analysis based on these hypotheses.” Although the report is therefore inconclusive, it raises questions about which party will assume the responsibility for cost overruns not contemplated in the construction RFP answers and worries that “the nature of the Islanders’ guarantee as the anchor Tenant is unknown.” The report does, however, indicate that it lacks confidence in the construction figures given by Camoin and the county concluding that based upon comparable arena projects the equivalent cost of constructing a coliseum and minor league ballpark “would be $451 million” and “$28 to $39 million” respectively.
Therefore, Maragos’ office believes the construction costs would, at a minimum, be $479 million. Because the tentative lease agreement only caps Arenaco’s exposure at $25 million above the $400 bond issuance, it is unclear how the additional (albeit theoretical) $54 million exposure would be covered. Alternately, the lease provides that should the overall cost of the area be less than the $350 million allocated toward construction costs, the difference would be held in escrow for future capital projects on the facility. The implication here is that taxpayers could potentially be on the hook for cost overruns [a charge that Wang has publicly denied, stating that he would cover any overruns]; conversely, taxpayers wouldn’t receive the benefit of a refund in a scenario where the coliseum is built for less than the financed amount.
Perhaps the most damning part of the Maragos report where Wang’s camp is concerned is in the historical analysis on attendance and revenue as it relates to the Islanders. It’s important to remember that the county already owns the Coliseum, therefore the public has full access to the financial performance of the facility. In 2004 the county generated $2.1 million in total revenue from the Coliseum compared to $2.4 million in 2010. The only problem here, as the report clearly states, is “that in 2004/05, when no Islanders games were played because of the NHL lockout, the County’s total SMG revenues did not decline significantly.”
“This would seem to indicate that the county is able to book other events in the absence of the Islanders and thereby retain the revenue,” it concludes.
The Islanders counter the marginal impact of Islander fan attendance numbers by repeatedly stating that the lackluster facility is hampering their ability to attract and retain quality hockey talent and that fans are inclined to stay home instead of enduring an evening in a decrepit arena. A new arena, they claim, would attract fans in droves and allow the team to hit their targeted attendance projections.
ABLI’s Ryan couldn’t disagree more: “It’s the product on the ice,” he laughs. “Not the refrigerator that holds them.”
Critics also take issue with the vagueness of the referendum.
“I have never seen something this deceptive and misleading on a referendum,” says Paul Sabatino, who served as general counsel to the Suffolk County Legislature, where he helped draft many referenda. He criticizes the Nassau Coliseum referendum as being illegal under state law because “you can’t have a non-binding, public referendum. You’ve got to say something of substance in the bill.
“When you do it the right way,” Sabatino continues, “the Budget Office doesn’t have to speculate as to what the range of values are…. There wouldn’t be this nebulous ‘I don’t know what it’s going to cost.’ At the end of the day, the voters have no clue what they’re voting on…. And to top it all off, the elected officials are saying that they still reserve the right to vote no on the bonds!”
For contrast, Sabatino cites the recent experiences of Hamilton County, Ohio voters who approved a referendum to publicly finance a new football stadium for the Cincinnati Bengals some 16 years ago (also including a baseball stadium) that had “some degree of precision” in its wording, Sabatino says, but now, as reported July 13 in the Wall Street Journal, Hamilton County is facing millions of dollars in unforeseen debt, forcing drastic layoffs and severe service cutbacks so the county can fulfill its bonding obligations.
“If it can fail there,” says Sabatino, “it’s doomed to guaranteed failure in Nassau where they’re backfilling an improperly worded referendum with press releases.”
For Nassau County Legislature Presiding Officer Peter Schmitt (R-Massapequa), “It’s a relatively simple ‘yes’ or ‘no’ question for the voters, and what they say, as far as I’m concerned, goes.” He likens this referendum to two environmental bond acts county voters approved. “We stood to the side,” Schmitt says, while advocates and opponents of the measures took the issue to the voters. “I view this the same way.”
As for adding $400 million—or more than $800 million with interest over 30 years—to the county’s debt load, now pegged at $4 billion, Steven Antonio, executive director of the Office of Legislative Budget Review (OLBR), says that the $14 million to $19 million his office estimates the county would be getting back from the Coliseum “would mitigate the impact of new borrowing,” and might be sufficient to reassure the bond rating agencies that Nassau could meet its obligations. Back in 2000 Nassau’s rating was rooting around in the junk-bond category.
Democratic Chairman Jacobs tells the Press he’s concerned that the added debt burden could provoke the agencies to raise the county’s cost of borrowing by “half a point,” which he figured could translate to another $20 million to the county’s overall borrowing costs and he likened it to “a hidden tax increase.”
Jacobs takes aim at another Camoin report estimate—that building a new coliseum would create 3,000 new jobs.
“How?” he scoffs. “You’re replacing a 16,000-seat coliseum with a 17,000-seat coliseum, a virtual replica….Are there more hot dog vendors? Are there more ticket takers? Are there going to be more people wiping your seats?…It’s nonsense.”
The promise of more jobs seems to hold the key to the referendum’s fate (not to mention more hockey). Supporters of the measure, such as John Durso, president of the Long Island Federation of Labor AFL-CIO, and Roger Clayman, the federations’ executive director, take Wang and Mangano at their word that there would be some 800 construction jobs alone, and for an industry suffering 30 percent unemployment, that is something.
“We have total confidence that if the borrowing for this Coliseum is approved, there will be union jobs created in construction and there will be jobs created that will help our economy,” says Clayman.
But there are signs that labor is divided about this measure. Indeed, the CSEA (Nassau County Civil Service Employees Association), which recently lost 130 jobs at the hands of County Executive Mangano, is split over it but “they have not come out and spoken against it,” either, which Durso says, “speaks volumes on this.” He called the layoffs “a tragedy,” adding that “if you cut out every single Nassau County employee, you’re not going to balance the books. You have to bring in some revenue.” He concludes the choice is between having “some sort of future at that site” or just “77 acres of cement.”
Doubts about how many jobs the project will produce also weigh on Legis. Robert Troiano (D-Westbury), who is “mixed on the referendum,” even though the Coliseum “sits right in the middle of my district.”
He tells the Press he wishes “there were an opportunity for my constituents to get jobs as part of the construction crew but I don’t think it’s going to go that way,” believing the unions’ seniority rules will be an obstacle to his residents getting hired.
“I think the Coliseum needs to be rebuilt but I don’t like this deal,” continues Troiano. “If Wang is so confident that his projections about revenue will satisfy our debt service obligations, why doesn’t he just guarantee the full amount? And to date they’re refusing to do that.”
Holding an election on the first Monday in August is also curious, charge critics.
“I expect it to be an exceptionally low turnout, and it’s a shame because we could have saved a lot of money and engaged a lot more people if we would have had this on Election Day,” says William Biamonte, Nassau’s Democratic Board of Elections Commissioner. “Even more, the details of the deal would have been ready by then.”
Schmitt says a 10-percent turnout would not be a mandate but “certainly silence implies consent, as they say.”
Not so, says Legis. Wayne Wink (D-Roslyn). “I don’t believe silence implies anything on a Monday in August!”
Until the voters speak, everything is just conjecture but one interesting speculation making the rounds was put into words by Gary Port, the Democratic candidate for Hempstead Town Supervisor, who won’t be supporting the referendum himself because it lacks concrete details. He says no matter how the election turns out, the county executive has an out.
“If Mangano puts it up for a bond, and the bond fails and the Islanders leave, then he can say, ‘Hey, I didn’t lose the Islanders! It was the will of the people.’ And if the bond passes, and everyone is bitching and moaning about how much it costs on their taxes, then he can say, ‘I didn’t do anything! It was the voters who did this!’”