ORLANDO-Orlando Magic executives are meeting this week with city, county and tourist industry officials in a new attempt to draft a financing plan for the retrofitting and expansion of the 12-year-old, 375,000-sf, 17,200-seat TD Waterhouse Centre.
Magic officials say the clock for the 2003 season is already ticking and they need to know over the next four months how their estimated $75-million renovation plan will be funded. They will agree to keep the team in Orlando for 10 more years if they can get a better lease deal from the city.
“In order to accomplish that goal, capital funds (by the city, county and state) must be made available prior to Dec. 31, 2001 for renovation to commence in 2002.” So wrote Bob Vander Weide, son-in-law of Magic owner Richard DeVos and president/CEO of RDV Sports Inc., the team’s corporate owner, in an Aug. 24 letter to Orange County chairman Richard Crotty, Orlando Mayor Glenda Hood and six city commissioners.
Magic officials were previously rebuffed in an attempt to have public funds pay for a new $250-million basketball arena. Public sentiment, the city and the county rejected the proposal outright because funds are not available for such a venture.
Vander Weide puts the estimated renovation cost between $70 million and $75 million.
That’s the precise figure Orlando hotelier Harris Rosen cited in an exclusive article published by GlobeSt.com June 4. Rosen and his associates at the Central Florida Hotel and Lodging Association now sense even the $75 million number may be inflated.
“We will be going over that number with the Magic people, line by line,” Rosen tells GlobeSt.com. “And we will be making our disclosures and observations public.”
Magic officials have been criticized over the past eight months for not being more forthright with the public in explaining their need for a new arena that would stem alleged average annual losses of $10 million over the last four seasons.
Hospitality industry sources tell GlobeSt.com the Magic drafted five separate retrofit plans recently.
“None made any business sense,” a hotelier and association member tells GlobeSt.com on condition of anonymity. “The first one came in at $182 million and then was paired down to $100 million after we found $82 million of garbage and crap in it.”
Now a team of structural engineers working with the city, county and hoteliers sense the most realistic construction estimate for the renovation could come in at $50 million to $60 million.
“That’s a good possibility,” Rosen tells GlobeSt.com, “but we’ll know better after we go over their numbers once again.”
In his Aug. 24 funding outline, the Magic’s Vander Weide says “RDV Sports has concluded that there is a strategy using no new taxes and no local taxpayer dollars for capital improvements” on the renovation.
But Rosen, president of Orlando-based Rosen Hotels Inc., tells GlobeSt.com there is enough money on the table right now to do a $60 million renovation job.
For example, he says the state already has allotted $30 million for arena renovations “and that fund is growing by about $2 million a year.”
Another $20 million could come from the Magic reducing its ticket prices by $3 instead of insisting on a surcharge that would bring in $40 million of new revenue.
And still another $15 million could be generated over 15 years by selling the arena’s naming rights to a corporate sponsor. That would total $65 million.
“They wouldn’t have to ask the city, county or state for any money” under this scenario, Rosen tells GlobeSt.com.
He says Atlanta gets $10 million a year for arena naming rights. “We should at least be able to get $1 million or 1 ½ million,” Rosen feels.
However, the Magic see the funding wheel spinning in another direction. The team calculates the renovation could be financed with $28.5 million of tax rebates and another $35 million coming from the county’s annual $110 million tourist tax kitty.
That would generate $63.5 million. Hoteliers prefer the five cents-per-dollar tax revenue be spent on hospitality industry items, not privately owned sports franchises.
The Aug. 24 letter and outline omit spelling out what the Magic’s specific dollar contribution will be until after it negotiates a new 10-year lease with the city. The old 10-year lease expires after the 2004 season. The Magic pays the city $7,500 per-game rent or $300,000 on a 40 home-game schedule, according to previously published accounts.
“That’s what bothers a lot of people about this whole proposal on both the new arena and renovated arena,” a hotelier not directly involved in the financing discussions tells GlobeSt.com on condition of anonymity.
“They seem to want to put in the least amount they can get away with, and I don’t blame them for that, but they’ve got to remember, as well, that they are not championship timber that can demand certain concessions any time they need them.”
In the deflated $250-million arena proposal, the Magic would have put in about $11 million cash. In its latest proposal, team officials say they will pay for all cost overruns on the renovation.
Previously published accounts cite Magic annual losses of $2.2 million in 1996-97; $6.4 million in 1997-98; $13.98 million in 1998-99; and $15.13 million in 1999-2000. The team hasn’t disclosed its balance sheet for the 2000-2001 season.