The People’s Park, or From Felon to Phenom

providence-park

On February 10 2014, Providence Health & Services signed a deal for naming rights to the Portland Timbers’ soccer stadium. Everyone of course wanted to know the cost. However, Timbers COO Mike Golub has said that it is a “collective wish [the costs] remain a private piece of information.” The information has been redacted from documents sent to the city, Timbers owner Peregrine Sports is privately held (more on that later) and Providence does not disclose the arrangement in its financial filings, presumably because the amount the “charitable organization” doles out to special interests is “immaterial”.

We can speculate that the arrangement was probably something in the order of $20m-$40m over 15 years. The previous naming rights deal with Portland General Electric paid out just over $1,010,555 in 2010. This deal was done before the stadium renovation and before the Portland Timbers became a Major League Soccer (MLS) franchise and when average home attendance was just over 10,000. Last year, attendance averaged 21,000+. When you’re talking about double the attendance, a better economy, and an MLS franchise tag, even $3m/yr ($45m total) wouldn’t be crazy. Home Depot pays $7m+ for naming rights in LA where attendance averages just over 23,000.

Still…immaterial, right?

Some Background

But we shouldn’t be too surprised that a publicly-subsidized entity is footing the bill. The owner of the Portland Timbers franchise is Henry Paulson III (aka “Merritt”). Merritt learned the trade at NBA Entertainment and HBO On Demand in the mid-2000s. When he was 33, he purchased both the minor league baseball team Portland Beavers and the Timbers from shady felon Abe Alizedeh. Alizedeh has been in and out of jail and negotiations seem to be never-ending; if convicted of all accounts he would have faced a prison term of 844 years.

alizadeh

Other People’s Money

But that is just a side-note; the point is that the City of Portland probably leapt for joy when Harvard-educated Merritt came calling with financial backing from his father, the then-current Treasury Secretary Hank Paulson. Hank, of course, has a colorful past; the former Goldman Sachs chairman was also the architect of the deal to bail the bank out.

Merritt clearly funded much of the purchase with his dad’s money and funded the stadium renovation with ~$31m of taxpayer-related funds. As he puts it:

MIX: You’ve asked the city to pony up millions in your quest to bring major league soccer to Portland. What do you say to those who call your plans for PGE Park “Taxpayers Field” or ask you to pay for it yourself?
MP: I sleep very easily at night saying, “I’m presenting an opportunity the city may choose to accept and take advantage of, or may choose it doesn’t want to do it.”

In fairness, Merritt had it right and the funding was approved in a 4-1 decision. The lone dissenting voice came from British-born soccer fan Amanda Fritz:

The Spectator Fund would be in better shape if PGE Park sat empty for the next 25 years, than if we go forward with incurring additional debt on a project that can NEVER pay for itself.  Any use of PGE Park that does not involve additional debt would leave the spectator fund in better shape than moving forward with this project.

I honestly hope that MLS soccer succeeds in Portland.  I hope that the day arrives that the revenues generated from PGE Park will pay for the cost of operations and debt service on PGE Park.  In the meantime, I hope that every Timbers fan will hug a Blazer fan for paying for their MLS venue.

Mixed Results

The new stadium does look great…

providence_park-0-0

Though there are issues with the turf

“We continue to have what I believe to be the single-best artificial surface for pro soccer in the United States,” Merritt Paulson, the team owner, said in 2012.

In March 2013, the team’s senior vice president of operations, Ken Puckett, echoed his boss, calling it the “top artificial playing surface for professional soccer in North America.”

But seven months later, after another season of wear and tear, Portland no longer had such bold bragging rights.

An outside firm hired by the Timbers tested the field in October. The company found the turf passed safety tests but failed certain performance standards for how the ball should bounce and roll, compared to a grass field.

Major League Soccer requires that artificial fields pass those tests, said Susan Marschall, a league spokeswoman.

Meanwhile, former Timber Eddie Johnson continues to push a lawsuit against the Timbers for $9.9m and he recently added Providence Health to the suit.

The lawsuit claims that negligence by the Timbers and their doctors caused Johnson, who retired from professional soccer in April 2012 due to concussion symptoms, to suffer permanent brain injury.

Some people would surely like to link the Providence-Peregrine relationship and say that Providence may not have done due diligence in the Johnson case because of the close relationship with the Timbers. Indeed, the most cynical readers may even say that the doctors had an incentive to ignore the symptoms. After all, if your star player is out with a concussion, you’re probably going to get fewer people watching the game and less exposure for Providence Park.

But we don’t want to speculate; we’ll just present the facts.

And the facts are that there is an awful lot of public money in sports. We all know about city and state funds but much less is known about the not-for-profit funds, which avoid paying taxes through 501(c)(3):

No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual.

And not-for-profit is very different than no profit, as the current cash balance of $6 billion+ at Providence attests ($’s in thousands):

Management designated cash and investments, YE 2015
Collective investent funds $788,457
Hedge Funds $604,062
Total investments valued using NAV $1,401,506
Total management-designated cash and investments $5,131,109

And so we gulp and admit that we fund a soccer team with every paycheck. But in those moments when the players take the field and lift the MLS Cup, it all seems worth it. So maybe it’s not all bad – it’s just nice to know.

mls-cup-crew-sc-v-portland-timbers-10

(title image source: EthioSports)

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