(Pay) Checks and Balances
Is There Intelligent Life on Planet NBA?
Three days into 2008 and I'm ready to award the Wackiest Quotation of the Year Award to Aaron Goodwin, agent for Damon Stoudamire of the Memphis Grizzlies.
As reported in The Commercial Appeal: "For the Grizzlies to demote Damon because of his age and because of the team's record is unacceptable. They're going to have to do right by Damon – move to get him out of there or restructure his contract so he can be bought out."
Stoudamire, 34, has bad knees and was unable to play much at all last season. He is under contract to earn $4.65 million next season when his contract runs out. He has been losing playing time to younger players Kyle Lowry and Mike Conley. The Grizzlies, as of this writing, are just plain losing, 22 times in 32 games.
By NBA standards, Stoudamire's salary is pathetic. His former teammate Eddie Jones, who wasn't nearly as good, made $15.6 million last year.
Such is life on Planet NBA, a lunatic asylum populated by egotistical, overpaid jocks and their agents who have no conception of a parallel planet where the economy tanks and people worry about gas prices, paychecks, and utility bills. And you and I, lucky readers, may soon get a piece of the action in the form of additional taxpayer subsidies for FedExForum, home of Do Right Damon and his mates.
Sports Illustrated has already predicted that the Grizzlies will leave Memphis this year. My colleague and NBA expert Chris Herrington says that's highly unlikely, and that the franchises in Seattle and New Orleans are more likely movers. So I will offer a corollary to SI's prediction: If the Grizzlies don't leave Memphis this year they will leave before 2014, when their lease at FedExForum gives them a chance to buy their way out.
And here's another one. Whether the Grizzlies stay or go, taxpayers will have to bail out the bondholders for FedExForum.
In a legal ruling in 2001, Chancellor Walter Evans gathered all the contracts and leases for the proposed new arena and cut through the mumbo-jumbo. He concluded, "[The lease] puts the city and county in the position as being sureties and/or guarantors on the bond repayment obligation. This is definitely a contingent liability against the credit of the city and county."
The arena financing pitch was based on projections by Public Financial Management and Community Capital that assumed average attendance of 14,900 and an average ticket price of $49, with ticket and concession prices increasing 3 percent a year. If only. Attendance has dropped each year since the Grizzlies moved into FedExForum in 2004, from 16,862, to 15,793, to 14,654 (last in the NBA) to 12,744 this year. Only twice has attendance topped 14,900 this season. With 6,000 empty seats, the Griz have no pricing power. They compete for sports dollars with the University of Memphis Tigers, who have sold out every home game. In short, things are getting worse, not better.
The economic model, as we often say these days, is broken for Planet NBA in Memphis. The team pays no property taxes for 25 years. Only the $1.15 per-seat surcharge is paid to the city and county for debt service. The Grizzlies get all the operating income from arena events, concessions, parking, and naming rights, but they must also absorb any operating losses. The seat surcharge, ticket revenue, concession sales, sales tax revenues, and parking revenue all depend on butts in seats.
The "break-even" attendance in the financial projections is 10,750. Look for attendance to "break" that mark several times as the season wears on, especially if Memphis slides into a recession.
Still, you gotta love the Griz for their candor. In the midst of their losing streak, players were quoted several times saying they need to "play harder" and "be tougher." Granted, it isn't easy to come up with something original when you are interviewed 82 times a season. But you're making $5 million a year and you don't play hard every game? Imagine FedEx telling shareholders and customers, "We only delivered 75 percent of our packages yesterday. I guess we need to play harder." Or McDonald's saying, "We undercooked 400 burgers yesterday and left off the catsup. We need to play harder." Or AutoZone blurting out, "We sold 800 defective parts last week at our Memphis stores. We need to play harder, gang."
Only on Planet NBA. M