Question for Financial Gurus

[sutomcat]

A question for the financial gurus on the board.

New York State invested $15 million to help build the Carrier Dome in 1979.

Forget about all the soft benefits of having a facility like the Carrier Dome in Syracuse.

Was this a good investment for the state? Did it end up making money by supporting this project?

 

[Millhouse]

A question for the financial gurus on the board.

New York State invested $15 million to help build the Carrier Dome in 1979.

Forget about all the soft benefits of having a facility like the Carrier Dome in Syracuse.

Was this a good investment for the state? Did it end up making money by supporting this project?

who wants to say they think of themselves as a guru? eek

but i'll just add this to make it easier to think about

3% inflation that's about 40 million in todays dollars.

that is ten times smaller than what will come from governments this time around. i don't think it made money for the state but i'm just guessing. if it was expected to be a money maker without soft benefits, someone probably would've put up that 15 million voluntarily.

i saw that jackson state is trying to build a replica of the carrier dome for 200 million. the artist renderings look like you're in the carrier dome, it's pretty funny. costs have gone up way more than inflation, i don't know what to make of it

 

[PartTimeFan]

The dome also created something new for the area so the city could host a wider variety of events. A replacement of the dome would have little of that effect.

 

[IthacaMatt]

A question for the financial gurus on the board.

New York State invested $15 million to help build the Carrier Dome in 1979.

Forget about all the soft benefits of having a facility like the Carrier Dome in Syracuse.

Was this a good investment for the state? Did it end up making money by supporting this project?

Huge sales tax increase from 30,000 attending games instead of 7,000 in Manley. Since 2/3 of local govts operating expenses come from sales tax, I'd say it has been a huge benefit.

 

[Orangello]

Used repeatedly as a site for HS FB playoffs, plus fans traveling to and spending money in CNY has to be good for NYS.

 

[Millhouse]

Huge sales tax increase from 30,000 attending games instead of 7,000 in Manley. Since 2/3 of local govts operating expenses come from sales tax, I'd say it has been a huge benefit.

don't forget substitution

those extra people that got in the dome that couldn't get into manley didn't all of a sudden have more money to spend

people who didn't buy manley tickets might've bought something else

all this stuff just shifts who collects the sales tax. it's the biggest problem with evaluating this stuff. seen vs unseen. some big building with lots of people - easy to see how they're spending money. all those people instead scattering their spending around a thousand different places - much harder to see.

for the dome to be a good investment from a sales tax perspective, it has to make people richer or make them more likely to spend in the same sales tax area vs outside it

 

[dasher]

don't forget substitution

those extra people that got in the dome that couldn't get into manley didn't all of a sudden have more money to spend

people who didn't buy manley tickets might've bought something else

all this stuff just shifts who collects the sales tax. it's the biggest problem with evaluating this stuff. seen vs unseen. some big building with lots of people - easy to see how they're spending money. all those people instead scattering their spending around a thousand different places - much harder to see.

for the dome to be a good investment from a sales tax perspective, it has to make people richer or make them more likely to spend in the same sales tax area vs outside it

Well, you would also have to consider the number of people who came to Syracuse to see a game and what they spend in the city to go with it. When I go to see a game at Syracuse, where I wouldn't consider going back to a game at manley (couldn't get a seat) I stay at a hotel. I eat local. I stop at the bookstore and always buy something. The Dome must have been a winner. Having said that, I don't see where a new dome would add extra $$$.

 

[Millhouse]

Well, you would also have to consider the number of people who came to Syracuse to see a game and what they spend in the city to go with it. When I go to see a game at Syracuse, where I wouldn't consider going back to a game at manley (couldn't get a seat) I stay at a hotel. I eat local. I stop at the bookstore and always buy something. The Dome must have been a winner. Having said that, I don't see where a new dome would add extra $$$.

that's true. i'm one of those people too. does the salt shaker dildo looking hotel collect sales tax on overpriced captain and cokes? if so, i've stimulated the economy in a big way.

but you're right. i don't think it amounts to much because i don't think people travel to home games very much (football attendance)

fwiw, i said "for the dome to be a good investment from a sales tax perspective, it has to make people richer or make them more likely to spend in the same sales tax area vs outside it"

so i kinda covered tourism. maybe the dome means that tourists are more likely to spend in the syr sales tax area vs outside it

 

[Millhouse]

Used repeatedly as a site for HS FB playoffs, plus fans traveling to and spending money in CNY has to be good for NYS.

people traveling to HS FB games would be from NYS. intrastate tourism probably doesn't do much for NYS. and it's not like those HS FB playoffs would cease to exist in the absence of the dome

 

[SUFan44]

who wants to say they think of themselves as a guru? eek

but i'll just add this to make it easier to think about

3% inflation that's about 40 million in todays dollars.

that is ten times smaller than what will come from governments this time around. i don't think it made money for the state but i'm just guessing. if it was expected to be a money maker without soft benefits, someone probably would've put up that 15 million voluntarily.

i saw that jackson state is trying to build a replica of the carrier dome for 200 million. the artist renderings look like you're in the carrier dome, it's pretty funny. costs have gone up way more than inflation, i don't know what to make of it

More like 50 million, but yes - much smaller than would be needed today.

http://www.minneapolisfed.org/index.cfm?

 

[KaiserUEO]

got to be a not a money loser, but a money whatever.

as in whatever they get, theyre happy with, but i doubt its an oh my god #.

think about how many days the Dome sits there and there isnt a sales tax producing event?? football & hoop being more than the lions share of $$$, count for lets say 30 days a year. throw in lax and womens hoop and thats another 30 days. lets say 5 concerts to make the math easy and that means 300 days a year it doesnt make a dime for the state.

put that downtown and now youre getting 5 or 6 nights a week of use. the 3 R's show up: raslin, rodeo and an rv show. concerts, hockey etc.

the school wants its land back, the city, county and state want the events...looks to me like the Dome was just pink-slipped.

 

[Millhouse]

put that downtown and now youre getting 5 or 6 nights a week of use. the 3 R's show up: raslin, rodeo and an rv show. concerts, hockey etc.

the school wants its land back, the city, county and state want the events...looks to me like the Dome was just pink-slipped.

that's quite an assumption

 

[Millhouse]

got to be a not a money loser, but a money whatever.

as in whatever they get, theyre happy with, but i doubt its an oh my god #.

think about how many days the Dome sits there and there isnt a sales tax producing event?? football & hoop being more than the lions share of $$$, count for lets say 30 days a year. throw in lax and womens hoop and thats another 30 days. lets say 5 concerts to make the math easy and that means 300 days a year it doesnt make a dime for the state.

put that downtown and now youre getting 5 or 6 nights a week of use. the 3 R's show up: raslin, rodeo and an rv show. concerts, hockey etc.

the school wants its land back, the city, county and state want the events...looks to me like the Dome was just pink-slipped.

assumptions
500M price tag
10% discount rate
260 nights per year (i think that's crazy but i'll run with it)
30 year life.

that means the dome needs to average $204,000 profit for those 260 nights per year to break even. 53 million profit per year.

at 20% margins, that means someone is paying $1 million dollars to use the dome on average for those 260 nights. That means it would need to be a 265 Million dollar top line business per year.

even if you throw some imaginary magic multiplier in there , those numbers don't work

from the states perspective, the investment of 40 million in the dome at a 10% discount rate over 30 years made sense if they got 4.2 million in benefits per year. cut the utilization in half just ballpark guess, down to 130 nights (again, i think that's high), that means they need 33K in value from every dome event. so many of these dome events are so piddly, even that is a tough argument to make. they're not all basketball games

 

[BlazeOrange]

people traveling to HS FB games would be from NYS. intrastate tourism probably doesn't do much for NYS. and it's not like those HS FB playoffs would cease to exist in the absence of the dome

It also applies to the increase in radius of fans coming to SU games, unless they are coming in from out of state (probably only significant at all during the GMAC years). For the STATE to get a return on its investment you need to figure out things like:
- jobs created in the Dome that didn't exist in Manley - state income tax and theoretical savings on unemployment if you assume some of the workers wouldn't have jobs otherwise
- out of state enrollment - you kind of have to figure out where we'd be athletically without the Dome, maybe by comparing NYS % of rosters before/after and seeing if the increase in profile is also reflected in drawing more out of state students in the general student body. Out of state students don't directly increase income as I don't believe SU has separate rates (except ESF), unless the overall enrollment has increased. All you get for return on investment is money spent by the students families when they are moving in/out each semester or visiting.
- construction income - some of the initial investment would be re-couped right away from income taxes on the construction workers, sales taxes on supplies, etc.
- overall increased profile of the school - like with out of state enrollment, you have to make some assumptions of where we'd be without the Dome. Would hoops be at the same level or would we be in a different peer group? Would we have gotten the ACC invite? Would the BE even have expanded to add football? What about media exposure? And does any of this make more money for the state? I don't see much in terms of businesses associated/aligned with the university anyway like you do surrounding some other colleges.

 

[KaiserUEO]

that's quite an assumption

yep. too big.

3 or 4 is a stretch.

 

[Millhouse]

It also applies to the increase in radius of fans coming to SU games, unless they are coming in from out of state (probably only significant at all during the GMAC years). For the STATE to get a return on its investment you need to figure out things like:
- jobs created in the Dome that didn't exist in Manley - state income tax and theoretical savings on unemployment if you assume some of the workers wouldn't have jobs otherwise
- out of state enrollment - you kind of have to figure out where we'd be athletically without the Dome, maybe by comparing NYS % of rosters before/after and seeing if the increase in profile is also reflected in drawing more out of state students in the general student body. Out of state students don't directly increase income as I don't believe SU has separate rates (except ESF), unless the overall enrollment has increased. All you get for return on investment is money spent by the students families when they are moving in/out each semester or visiting.
- construction income - some of the initial investment would be re-couped right away from income taxes on the construction workers, sales taxes on supplies, etc.
- overall increased profile of the school - like with out of state enrollment, you have to make some assumptions of where we'd be without the Dome. Would hoops be at the same level or would we be in a different peer group? Would we have gotten the ACC invite? Would the BE even have expanded to add football? What about media exposure? And does any of this make more money for the state? I don't see much in terms of businesses associated/aligned with the university anyway like you do surrounding some other colleges.

easy to see the jobs created in the dome. they're up on scaffolds for everyone to see. hard to see the jobs not created by spending that 40 million on something else.

 

[cuseinchina]

Without sports, SU as much as I love it, would be another middling private university in a slowly shrinking depressed area of the country without a real value proposition for undergrads outside of a few very strong majors. Liberal arts colleges can thrive in upstate, but its tougher for a big private university in a cold climate with a bad economy not close enough to leverage NYC. You can look at the Cornell MBA program as a microcosm example of this - they pour money into that program but no one wants to go there because it's not where the jobs are so the rankings stay down and the thing never takes off. The carrier dome was a huge deal in its day and it cemented the brand - sports became a major differentiator for the school and continue to be to this day. It's difficult to overvalue investments that allow your no. 1 employer to do well even if there is no way to calculate a specific ROI.

 

[Millhouse]

Without sports, SU as much as I love it, would be another middling private university in a slowly shrinking depressed area of the country without a real value proposition for undergrads outside of a few very strong majors. Liberal arts colleges can thrive in upstate, but its tougher for a big private university in a cold climate with a bad economy not close enough to leverage NYC. You can look at the Cornell MBA program as a microcosm example of this - they pour money into that program but no one wants to go there because it's not where the jobs are so the rankings stay down and the thing never takes off. The carrier dome was a huge deal in its day and it cemented the brand - sports became a major differentiator for the school and continue to be to this day. It's difficult to overvalue investments that allow your no. 1 employer to do well even if there is no way to calculate a specific ROI.

any thoughts on tomcat's original post?

 

[cuseinchina]

any thoughts on tomcat's original post?

yes I already expressed those thoughts. The carrier dome was clearly a good investment given the intangible benefits that it brought to the University. Intangibles as any accountant will tell you are very difficult to value - but warren buffet finds them to be the most important assets a company can have and one of the key criteria to investment and business success. Given the importance of the university to the economy in central NY, there is no doubt it was a good call by the state to invest on behalf of their citizens.

 

[Millhouse]

yes I already expressed those thoughts. The carrier dome was clearly a good investment given the intangible benefits that it brought to the University. Intangibles as any accountant will tell you are very difficult to value - but warren buffet finds them to be the most important assets a company can have and one of the key criteria to investment and business success. Given the importance of the university to the economy in central NY, there is no doubt it was a good call by the state to invest on behalf of their citizens.

"Forget about all the soft benefits of having a facility like the Carrier Dome in Syracuse."

 

[cuseinchina]

"Forget about all the soft benefits of having a facility like the Carrier Dome in Syracuse."

intangible assets are only soft in the sense that you can't accurately value them until someone buys you out and they are priced in as good will. I don't know how to calculate a replacement value for Syracuse pre and post carrier dome because there is no liquid market in trading large private universities. But I am sure people who have been there through the years, and students who made college decisions before and after the carrier dome could pile on a whole lot of anecdotal evidence.

It's not soft just because it's difficult to quantify - investment in intangibles often makes the difference between success and failure. People without the ability to think abstractly have difficulty with that. Anyone can do time value of money math.

 

[Millhouse]

intangible assets are only soft in the sense that you can't accurately value them until someone buys you out and they are priced in as good will. I don't know how to calculate a replacement value for Syracuse pre and post carrier dome because there is no liquid market in trading large private universities. But I am sure people who have been there through the years, and students who made college decisions before and after the carrier dome could pile on a whole lot of anecdotal evidence.

It's not soft just because it's difficult to quantify - investment in intangibles often makes the difference between success and failure. People without the ability to think abstractly have difficulty with that. Anyone can do time value of money math.

that's all great. If it's so easy, answer tomcat's question

 

[Crusty]

The cost of building the dome in today's dollars is s bit less than $80 million. The state's gift would be about $40+ million. What is the true replacement cost of the dome if it were replicated today - a helluva lot more than 80 million. Due to inflation in post construction years, the state built the dome with cheap money and the nominal revenues were generated during much higher price levels. Because of this alone, there is little question that in nominal dollars the dome has been an enormous financial success.

The problem is that there is no guarantee that we won't have lower inflation or, God forbid, deflation over the course of the life of a new stadium, which would generate an entirely different experience. That said, the Net Present Value of the tax revenues over the next 30 years is probably in the $1 to $1.5 billion range with about a 5% discount rate. (The new Vikings stadium has a projection of $3.5 billion.)

When calculating success or failure for the state there are so many indirect financial benefits that are almost impossible to calculate (much less forecast) that it is an art form rather than a true financial analysis.

Syracuse University is the greatest asset Syracuse has and the sports programs are the largest CNY entertainment by far. These are the crown jewels and it only makes sense to do everything possible to ensure their continued success. As a matter of fact, the city, county and state should be out in front of the curve.

 

[Orangepace]

assumptions
500M price tag
10% discount rate
260 nights per year (i think that's crazy but i'll run with it)
30 year life.

that means the dome needs to average $204,000 profit for those 260 nights per year to break even. 53 million profit per year.

at 20% margins, that means someone is paying $1 million dollars to use the dome on average for those 260 nights. That means it would need to be a 265 Million dollar top line business per year.

even if you throw some imaginary magic multiplier in there , those numbers don't work

from the states perspective, the investment of 40 million in the dome at a 10% discount rate over 30 years made sense if they got 4.2 million in benefits per year. cut the utilization in half just ballpark guess, down to 130 nights (again, i think that's high), that means they need 33K in value from every dome event. so many of these dome events are so piddly, even that is a tough argument to make. they're not all basketball games

Lucas Oil Stadium in Indianapolis has annual revenues of $150 million. This stadium would at best guess generate maybe 60% of those.

That said, you also have to factor in... the Dome is currently an on-campus arena and I don't believe the University has to pay income taxes on the net annual profits. That would change with an off campus facility the University is leasing as opposed to owning.

 

[xc84]

A question for the financial gurus on the board.

New York State invested $15 million to help build the Carrier Dome in 1979.

Forget about all the soft benefits of having a facility like the Carrier Dome in Syracuse.

Was this a good investment for the state? Did it end up making money by supporting this project?

I cannot think of a better investment that the state has made in CNY in my lifetime.