Friday, March 15, 2013

Questions Still Exist on UNO Arena Proposal

Nebraska's Board of Regents approved UNO's financing plan for a $75 million arena south of Ak-Sar-Ben, seeming to make the plan an almost complete certainty.  Which is a shame because the numbers reported in today's Omaha World-Herald do not make sense.

The World-Herald reports that UNO anticipates that revenues will increase by $4.7 million a year, mostly from hockey.  That would more than cover the bonds that will pay for the arena ($2.1 million) and the operating costs of the building ($2.3 million).

$4.4 million is less than $4.7 million, right?  So what's the problem?

I'm not sure where that $4.7 million is going to come from in "increased hockey revenues".  The $2.1 million in bonds makes sense; amortize $35 million over 25 years at 3.25% interest, and you get about $2.1 million a year.  So that number seems to gel.  Operating costs of the arena are a clear unknown to me, but let's accept that number for now.

Where does the $4.7 million in increased revenue come from?  With ownership of their arena, UNO can count on all of the profits from concessions, including beer.  All of the advertising revenue, including naming rights, one would expect.  (Unless those were already promised in the $35 million being donated for the project.)  Parking revenue as well.

But $4.7 million equates to about $225,000 in ADDITIONAL revenue per hockey game, based on a 21 game season.  In a 7500 seat arena with students (who should continue to receive free tickets), that equates to an extra $30 per fan in attendance for every hockey game.

That's an awful lot of beer and hot dogs.  Heck, at $30 a ticket, that would make UNO hockey the most expensive season ticket around - even pricier than Nebraska football.  (Even if it's 20+ games versus seven or eight games a season.)

So it's not going to all come from ticket holders.  But it's not going to come from beer sales either.  And that's where the questions come in.  $4.7 a year in additional revenue is a big number, and one that really needs to be explained.  Yes, they can sell suites (some of which probably will go to the donors).  Yes, they can sell premium club seating.  But beer and hot dogs aren't going to make that up.

Now, moving to the new arena will eliminate UNO's costs of renting the CenturyLink Center.  That improves the bottom line, but then they have to take over all of the maintenance.  I wonder if the $2.3 million is instead the additional cost of arena operations over what UNO is paying to rent the CenturyLink Center for hockey games.  But since I've never operated an arena, I have no idea how much it costs to run.

I do believe the $4.7 million in additional revenue is overly optimistic, unless the plan is to charge UNO fans significantly more in the future.

And if that's really how this arena is going to be funded, then this plan was a major mistake for the future of UNO athletics.  Since I know there are many smart people overlooking this plan, I doubt that this is the case.  But I'm still curious because the numbers, at face value from what we know, don't make sense.

2 comments:

Greg said...

The arena will be used for more than just hockey. They have Men's and Women's basketball games too and volleyball. Many other events to make more money on.

Husker Mike said...

Bill Conley, UNO's Vice Chancellor for business affairs, says that the new revenues will come mostly from hockey.