Friday, October 19, 2012

UNO Arena Proposal Goes to Regents Next Week

UNO is asking the NU Board of Regents on Friday, October 26, 2012, to approve a "Letter of Intent" for a $76.3 million project to build an arena just south of Ak-Sar-Ben.  This is the first step towards finalizing any sort of plan; it isn't the final plan.

According to the agenda, the project can be summarized as such:
This agenda item would approve the President entering into a letter of intent with the Developers. The letter of intent would signal the University’s intention to enter into a ground lease, facility lease, and other agreements once the sources of funding and developer financing are identified and the terms are acceptable to both parties. Negotiated ground and facility leases and related University financing documents, if any, will require formal approval by the full Board of Regents.
Of the $76.3 million, $35 million will be donated, $31.3 will be financed by the developer, and $10 million will come from the city of Omaha...presumably for street and utility work.

Who is the developer?  It doesn't say.  Who is donating the money?  It doesn't say.  But what we can say is the $31.3 will ultimately be paid by UNO over the period of time the Mavs are renting the facility from the owner.  Let's assume it's a 25 year arrangement at 4.5% interest:  Borrowing $31.3 million would mean a monthly payment of $173,980, or an annual payment of $2,087,760.

Where does UNO get that money?  Those are the key details that will tell us whether this is a good deal or not...and that information isn't available. UNO won't have to pay rent anymore to MECA for hockey.  UNO will receive all advertising revenue as well as concession revenue.  UNO may receive money for the naming rights for the building, but that may be part of the donated part of the deal. And, of course, UNO will have to take care of all of the maintenance and administration of the new building.

So can you really make an informed decision about this project at this point?  Not so much based on the information we currently have...other than it's a 7,500 seat building for a program that averages 8,000 fans each game.  And that's the rub in my opinion.  Last season, UNO's crowds after Christmas would have far exceed the capacity of this building.  Some point that some people got in for free for those games.  That's probably true...but it's far more likely that the paid attendance most of those games still wouldn't fit into this new arena.

Will this make more sense financially for UNO?  Many fans agree, but then observe that ticket prices are sure to go up moving forward to pay for this. Many have no issue with that, and that almost certainly will depress demand so that a 7500 seat arena might be more than enough for UNO hockey.

But when Dean Blais and Trev Alberts hint to Tom Shatel of the World-Herald that they expect to net around $3 million a year with this new arena, you realize that UNO is looking to gross something more than $5 million a year in revenue.  That means an average of $666 a seat in revenue, folks.

And that's my biggest concern.  UNO hockey tickets already seem to be priced high compared to other local sporting events.  UNO tickets currently start at just over $10 a game.  Lancer tickets in the new Ralston arena cost over $13 a game, but kids pay $10.  Creighton basketball starts at $11 a game.  UNO basketball starts at around $6 a game; Husker basketball starts at around $5 a game.

If UNO ticket prices go up, which nobody seems to dismiss, it doesn't take long to see UNO hockey as the most expensive ticket in the area short of Husker football.  Already, lower bowl season tickets cost more than Nebraska football tickets on a season-long basis.  (Granted, UNO hockey is 20-23 games versus 7 Husker home games.)

So is this arrangement too expensive for UNO?  Maybe it is...or isn't for the school.

It might be for the fans of UNO hockey.  Hockey's popularity was always based on drawing fans from a blue-collar background.  The expectations for revenue coming out of Sapp Fieldhouse are anything but blue collar.

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