Thursday, May 19, 2011

Look At The Full Picture

The Lighthouse Project is dead, gone, and not coming back (unfortunately for all of us).  As I've said before, I'm disappointed the situation has come to this, with a public referendum for a bond issue toward a new arena (or "areener," for those of you who speak Lawn Guyland).  However, just like with anything else, we owe it to consider all facts and options before making an informed decision.

Some people are reflexively opposing the new "areener" plan because they see it as a misplaced priority.  I can't say I blame them on the surface, because Nassau County is not in the best shape.  County workers are being laid off, Long Island Bus service is being cut, and despite all that Nassau County is still projecting a $52.7 million year-end deficit due to revenue shortfalls north of $120 million.

On the surface, the areener seems like a complete loser and non-starter, especially given all these factors.

Think again.

Nassau Coliseum and the New York Islanders cannot be looked at in isolation or as purely a luxury good.  Their presence is an economic driver for the region through many different factors, including:
  • Tax Revenue (Includes sales tax, entertainment tax, etc)
  • Indirect Spending (hotels, transportation, and meals for visiting teams and acts coming into Nassau Coliseum)
  • Other economic multiplier effects (salaries of players and employees, some of which is pumped back into the economy through direct spending)
I've been poring through the 2006 study commissioned by Nassau County during the Coliseum site RFP process, and the do-nothing option projected that Nassau Coliseum and the Islanders generate over $60 million in tax revenue for the county per year.  When you factor in indirect spending and other multiplier effects, I suspect the Islanders have an over $100 million effect on the local economy, and trust me, I will continue to dig to get a solid number on this.

What's more, those suggesting that Nassau County save workers' jobs and improve Long Island Bus are not considering the same money.  I wish we could keep the same levels of service, and I fervently hope something can be done to save those county workers' jobs.  It also makes me angry that the Lighthouse Project could have been generating millions in tax revenue for the county (more on this later), but the Town of Hempstead's intransigence has made this impossible.  However, that's not reality, and we are not talking about the same money.  No investor in his/her right mind will purchase bonds floated simply to pay off county expenses.  Bondholders will only purchase when there is a reasonable expectation of making the money back, and a revenue-sharing agreement with Nassau County, the Islanders, and Nassau Coliseum can, if the numbers are right, provide more hope for recouping those dollars.

Again, I don't want the county to cut what it's been cutting, but we're not talking about the same money between that and the referendum.

Bottom Line

I need to dig in order to get the most solid numbers possible on this, but the referendum should not be reflexively rejected because it's seen as more bad debt.  Those who would want to defeat the referendum need to see the full picture of what the Islanders and Nassau Coliseum, which will almost certainly languish and become vacant if nothing is done, mean to the local economy.

Let's not shoot our noses off because there is a small pimple.

(Blogger's Note: Stay tuned as we dig more deeply into the economic multiplier effect and try to figure out how the revenue-sharing agreement with Nassau County could work.  Lots to cover here)



  1. Thanks, great post. This is critical information for helping county residents figure out the choice they'll be facing. A question and a comment:

    1. Any indication from the LHP docs as to what the revenue streams from a new arena might look like? What sort of revenue does the current building generate? What revenue was projected for the new LH coliseum (sans the planned surrounding development)? It would be nice to have a rough "back of the envelope" sense of whether a revenue sharing model is realistic.

    2. The lost tax revenue is definitely one part of the story but obviously not sufficient -- the county is in essence proposing to pay 400M to preserve a 67-100M/yr (and probably more) tax revenue stream plus additional revenue from a sharing agreement. Without sufficient revenue sharing, the lost tax revenue will not be recouped if we have to pay 400M to get it.

    So the basic framework for the analysis that will be necessary will have to go something like this:

    Baseline scenario (no new coliseum, Islanders likely leave the county, possible alternate development years down the road):


    Tax revenues generated by a replacement use (which likely won't be realized for years).

    New coliseum scenario:

    400M plus debt service

    Additional tax revenue above current 67-100M/yr given improved facility, baseball stadium, other possible development Revenues from revenue sharing deal.

    The lost tax revenue point is very helpful to the MangWang's case because it gives them some flexibility in their projections. Even if the revenue from the sharing doesn't hit targets, the county still may be better off given the almost certain losses that will be realized if nothing is done.

  2. Nick,


    Point 1 I was also somewhat disappointed that this has come down to a publicly funded building with a significant 'debt service' when they had a privately funded project that was destroyed by a (let's be honest now) minor politician!

    Point 2 This has to pass, as you have said in the blog and I have said to people, if the Islanders leave the economic ramifications on Long Island and in particular Nassau County would be tremendous.

    As I may have mentioned earlier. I was very interested in the LHP because it would provide a new home for the Isles, but when I looked further into it, I found that it was quite necessary for the good of Long Island. Now we are down to this. Unfortuantely I am in Suffolk and have no say, but I do hope this things passes for all of Long Islanders' sakes.


  3. Mssrs. Wang and Mangano say the cost will be covered by ‘to-come’ revenue generated by the venues themselves over a period of time. Makes sense to me. Of course, I’m just an Islander fan, with pretty much zero aptitude for economics or managing anything financial. I can barely manage my mailbox in the vestibule of my building in Brooklyn. I can see how the chance of the projected revenue stream not panning out would be a concern to the already overburdened residents. I’d also concede that rare is the project like this one that doesn’t end up costing more than forecasted by those pushing for it. That brings us to the ages old sports adage - ON PAPER - the plan SHOULD work. But again just like in sports, there are no guarantees. What’s left then, is - will the value and benefit of the project and all it entails outweigh the POSSIBLE risk of SOME cost to the public that MAY arise IF the plan doesn’t evolve entirely as intended?

    If I had a vote, which again I don’t, I would see this issue in the context of what kind of future I want for the community in which I was born and grew up (which I did). There’s no avoiding that Nassau County/Long Island are in the midst of decline. Serious decline. The economic viability and quality-of-life potential that made Long Island a special place, teeming with forward looking vision and optimism, are bleeding away on a daily basis. It started a couple or few decades ago, right when my generation was being handed the baton by our parents to keep intact the niche that they had literally carved from scratch. It was their piece of the ‘American Dream,‘ and they built it on a foundation of a productive and vibrant life-style, during a time when it was fine to be ‘middle-class’ and when ‘suburbia’ wasn’t another word for decay. There really was a richness to growing up in those surroundings. And the Islanders and Nassau Coliseum were a huge part of that richness for so many of us.

    Given the decrepit state of the arena now, it’s difficult to convey to those not old enough to know themselves, how exciting it was to watch that building go up, and how much a part of the landscape the team immediately became. During the team’s dynastic run I was living in Texas, where I bragged to any sports fan that would listen how cool it was that the best team in sports belonged not to New York City or Chicago or any other big city, but to our suburban community on Long Island. In the Islander locker room after they won their first cup, Billy Smith told reporters with the same audacious edge that personified his play - “The Stanley Cup is not in New York, it’s on Long Island.“ Therein lies what is special about the bond between this team and its home. There are those who diminish the importance of the team, because after all, “it‘s only a game” or “it’s just sports.” I believe these are people that would allow the Louvre to disappear from Paris because keeping it open might require some spending. They would let San Francisco’s cable cars stop rolling because the dough wasn’t rolling in from their continued operation. Some things are just worth keeping because they’re a vital component of the identity and fabric of a place and it’s people. They are part of what makes them special.

    The Coliseum and where it sits have become a metaphor for the sagging state of life in a large portion of Long Island. I hope the decision to be made on August 1st will not only be about taking on a financial obligation that may or may not arise. Rather, I hope it is about saving what is left of the promise that moved a tide of trailblazing residents to forge a thriving and dynamic community, and moving it forward for their sons and daughters, for the children of those sons and daughters, and so on.

  4. Hey not sure if you got my email about this, but these numbers are way, way off. The 2/2006 HRA report projected $27M tax revenues over a 16 year period (2009-2025) in a do-nothing scenario (i.e., existing coliseum) -- less than $2M/year. Further indication of how unrealistic these numbers are -- according to a report done by NYC regarding the Yankees and Mets (, total annual city taxes generated by the two teams combined was only around $12M.

  5. DZ - inelegant wording, I think I was looking at the piece where it was SPENDING in the economy and said TAXES. Either way, the point stands that we should look at the full impact the team has on the economy.

    Will post an update at some point today.

  6. What worries me as I look through the comments on Newsday (ugh, Newsday) articles is the misinformation that people spew as if they are researched facts. For example, they say that the Isles dont generate revenue- which we all know is patently ridiculous. And they say that this proposal will destroy the Hempstead Plains- also ridiculous. Even the LH Project was not going to harm the Hempstead Plains. I think we need to develop some kind of FAQ with legit, referenced responses.

  7. Has any one seen or know the whereabouts or one Nick Giglia in reason days ? A reward of 5 Tacos is at stake !! We need you Nick for insights on latest developments and enjoy your thoughts on this new arena plans !!