This Is The Best Deal We Could Get?

For the better part of a year, Mayor David Holt has been saying we need to buy the Oklahoma City Thunder a new arena. To those of us that follow city politics, this has come as a bit of a shock.

We passed arena improvements in a previous MAPS tax as well as MAPS 4. Our arena is not even 25 years old and sized, by seating, to place it in the middle of the pack for NBA arenas. The Thunder have been publicly silent on the matter, leaving Holt and allies in the Chamber to spend their political capital to get a deal done. Despite talking about it for almost a year now, this week was the first time real numbers were revealed and it is unbelievably slanted.

The proposal revealed Tuesday by David Holt is for taxpayers to foot at least $850 million of a minimum $900 million arena. This will require tying up 1% of our sales tax for six years in an extension of MAPS. The owners are committing barely 5% of the total cost despite being worth many billions of dollars. This proposal is scheduled to be voted by the City Council onto the ballot on Sept. 26 and go to a vote of the people on Dec. 12.

To be clear, this is a tax on every retail purchase, restaurant, grocery, clothing item, etc. made in OKC proper. The average OKC resident [including children] will pay more than $1,200 in taxes over that time. A family of four will pay nearly $5,000. This is a tax on the many, to benefit the few.

The economics of this are not as complicated as they seem. The Thunder owners are winning in every conceivable way it is possible to win in this deal. The owners have seen their valuation soar from $350 million to $1.9 billion since they bought the team in 2006. Lucrative TV contracts are about to get renegotiated and increase substantially adding to their value and revenue. The team is well-run and well managed and has generated an operating profit in most of its years in existence.

On the arena side, they currently have an extremely generous license agreement whereby they get all of the advertising revenue, naming rights revenue and a share of the tickets and concessions. Much of this even on non-game events. The City of OKC is also on the hook to cover losses the operator faces each year, about $5M annually. While the team does have to commit to the lease and there are some penalties for leaving, it is doubtful they exceed the massive costs already covered by taxpayers or anywhere near the team’s huge valuation growth potential and profits.

All this to say, a 95% to 5% public to private split is absurd. The owners of the Thunder are obscenely wealthy. This very valuable and appreciating asset makes up a small share of their total net worth. It is ridiculous to believe that the best deal we can get for OKC is a 95/5 split on an arena whereby they keep most of the revenue and benefit. It is not free for us to use after all.

There is also the serious matter of opportunity costs. The Thunder owners can build their own arena and stay; this is always an option and it is still wildly profitable for them. For the OKC taxpayer, this is a massive commitment that leaves many other needs unmet. With near crises in housing affordability, mental health services, food insecurity, lack of sidewalks or adequate public transit, we will be committing to further delaying improvements on these fronts. 

The City of OKC knows the costs to build enough affordable housing, expand our sidewalk system, create a better public transit network or provide desperately needed social services – $850 million would go a long way to fixing many problems. This proposal will route all of that for the better part of a decade into a new arena to benefit the wealthy.

We need a better deal. The owners of the Thunder are fabulously wealthy with deep and abiding roots in Oklahoma. The team is a rapidly appreciating asset that is super fun to own. It is a terrible time to sell and very not cool to hold their state’s largest city hostage [i.e., suggesting they’ll leave] if we don’t pay $850 million for their direct benefit. I am skeptical they would do this.

The owners can better support their state by agreeing to a far fairer deal. Even if they paid 100% of the construction costs, the city would likely have to help with land or other infrastructure improvements that could cost tens of millions of dollars. It is a way better deal to use existing city assets to grease the development wheel than our cash tax dollars for six years to directly build an arena, while we have other priorities.

I implore the citizens of OKC to look critically at this proposal, understand that we have other options and vote NO on Dec. 12.