Arena FAQ
WHY VIRGINIA BEACH?
Why is an arena proposed for Virginia Beach?
Virginia Beach and Hampton Roads are underserved in the sports and entertainment
markets because we lack a venue that can accommodate today’s events. In all of
Virginia, there is no large, modern arena outside of the University of Virginia at
Charlottesville. Norfolk, Hampton and Richmond have three older, smaller arenas:
Norfolk Scope (opened 1971 – capacity 10,200)
Hampton Coliseum (opened 1970 – capacity 12,000)
Richmond Coliseum (opened 1971 – capacity 12,000)
Norfolk also has a newer, smaller arena:
Ted Constant Center at ODU (opened 2002 – capacity 9,200)
None of these venues can support the kind of mega-concerts and large sporting events
and conferences that come to other cities our size. In addition, Hampton Roads is the
largest market in the country without a major professional sports franchise. The most
likely franchise opportunity comes from the NBA or NHL, both arena sports.
What other cities our size have large arenas?
Comparable cities that have large arena without a major arena sports franchise, but
draw major national and regional sports tournaments and championships, include
Kansas City, Omaha and Spokane. Similar size cities with large arenas and majorleague sports franchises include San Jose, Columbus, Memphis, Oklahoma City,
Raleigh, Charlotte, Nashville, and Indianapolis.
What kind of concerts could come to this arena that skip Hampton Roads
because we lack the capacity?
Major acts that draw very large crowds like Lady Gaga, Bruce Springsteen, Jay-Z, U2,
Paul McCartney and the Rolling Stones, among others.
What kind of sports events could come?
National and regional tournaments and championships for college basketball, figure
skating, gymnastics, ice hockey, boxing, wrestling, lacrosse, track and field, martial arts
and swimming (yes, a temporary pool could be installed for special events).
See presentation here.
Would an arena steal events from the Convention Center and the Amphitheater?
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No. The Convention Center will complement the arena. For example, faith-based
groups often draw up to 20,000 attendees. They will use both venues. So will sports
tournaments and championships. The amphitheater attracts different acts and operates
during the spring through early fall. The arena’s peak utilization would be fall through
spring. (See presentation here.) Modern concert tours are designed for either arenas or
amphitheaters, not both, because of the difference in stage designs and production
equipment.
THE ARENA
What would the arena include?
The 18,500-seat arena will include a playing surface, a variety of seating options
(courtside, stadium, loge, suites, etc), concessions, offices and a practice facility for the
team. Design planning is not yet complete. Designs will be made available as soon as
possible.
Where would the arena be built?
On city-owned property across 19th Street from the Convention Center.
Why there?
Interstate access is key. It’s an area where the city often handles big crowds, and it fits
perfectly with the city’s resort master plan. Unlike other sites, this site has the
infrastructure to handle the proposed building and crowds. The site also has convenient
access to the Convention Center, making it easy for large events and meetings to use
both facilities. Also, the resort area has the hotels and restaurants to support events.
How does an arena fit in with the City Council’s long-range vision for Virginia
Beach?
One of the City Council’s goals is to create a first-class year-round resort for residents,
businesses and visitors. The arena will be busiest from October through May, outside
the height of the tourist season. Another goal is to grow the local economy and create a
financially sustainable city that provides excellent services. An arena will help achieve
both goals.
Who would run the arena?
Comcast-Spectacor, one of the biggest entertainment and sports companies in the
nation, will enter into a 25-year agreement to operate the arena for the city. The
company owns the Philadelphia Flyers and the Wells Fargo Center in Philadelphia
(home of the Flyers and 76ers). Comcast-Spectacor is the principal owner of Global
Spectrum, a large national company with more than 100 facilities in the United States
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and Canada. (See: http://comcast-spectacor.com/aboutus.asp) The company will
contribute $35 million to the arena’s construction – more than it has contributed to
construction of any other arena in the country.
Live Nation will book acts for the arena. It is the largest producer and promoter of live
music events in the world, producing more than 20,000 shows a year for more than
2,000 artists. (See: http://www.livenationentertainment.com/about_us/ )
How much did it cost to build arenas in other cities?
Many of arenas in comparable cities – including ones in San Antonio, Oklahoma City,
Nashville and Charlotte – cost more than $300 million (the projected cost of a Virginia
Beach arena) in 2014 dollars. A complete list of arenas and costs is on Page 16 of the
CSL report, along with the percentage of public versus private funding.
Won’t traffic be a problem?
No. An independent study by Kimley-Horn and Associates found that the existing road
infrastructure around the site can still operate at full capacity, even with an additional
6,000 vehicles arriving in late rush-hour. No new interchanges will be needed. Keep in
mind that crowds this size are already handled in this area during events such as the
Rock ‘n’ Roll Half Marathon. (See pages 46-51 of this report.)
Won’t parking be a problem?
No. A new surface lot will be developed on 19th street between the arena and Birdneck
Road to replace any existing parking spaces that may be lost by the arena construction.
And, there are 9,000 parking spots in surface lots and city parking garages at the resort.
Trolleys and shuttle buses could carry arena-goers to and from their cars. (See pages
46-51 of this report.)
Will the arena’s height be an issue?
No. On Nov. 26, 2012, the Federal Aviation Administration approved a building up to
178 feet tall. It will not pose a danger to national security radar or to jets from Naval Air
Station Oceana.
Would the arena need a parking garage?
No, although it’s possible one could be built in the future.
Would it require a new hotel?
No. Professional sports leagues require a 4-star or 5-star hotel in the marketplace, but
not necessarily next to the arena. Virginia Beach has two hotels that qualify.
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How many events would take place at the arena in a typical year?
Based on market research and projections from industry leaders, the expected number
of events by category is as follows:
Family Shows:
33
Non-tenant sporting events:
22
Concerts:
25
Other events (i.e. conferences, meetings, etc.): 42
Major tenant events:
44
Minor/secondary tenant events:
38
TOTAL
204
More information is available here.
What would be the average attendance at most events?
It varies widely. The Arena Operating Pro Forma document prepared by BARMAC
details the type of events we could expect, the number of events per year and total
attendance at these events. Average attendance for a wide variety of shows, sporting
events and concerts is in the appendix. Read it here.
Could the arena become an emergency shelter during hurricanes and
snowstorms, like the Virginia Beach Field House?
Possibly. That’s something the city will have to explore in more detail.
THE COST
Who would pay to build the arena?
The people who use it – through ticket sales, admissions taxes, meals taxes, hotel
taxes and other revenues. No money will come from the city’s General Fund. The real
estate tax on citizens’ homes or businesses WILL NOT pay for the arena.
Bascially, funding will come from the new revenues that are generated because the
arena is built. Any revenue in excess of what is needed to pay the debt service on the
arena will help pay for other services. The arena will generate new money to help
provide better services to residents of Virginia Beach.
Be more specific. Who would pay, and how much?
Under the current proposal, construction costs would be split this way:
City
State
$160.8 million (construction and financing costs)
$150 million
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Comcast
$35 million
---------------------------------TOTAL
$345.8 million
Also, up to $80 million may be required for team relocation costs.
Why does it cost so much to move a team? And who will pay for it?
There are two separate costs for moving a team:
$35 million relocation fee, paid to the governing league (NBA or NHL). This is not
negotiable. It is required by the league.
Up to $45 million to cover the team’s estimated losses while playing in a smaller,
temporary facility as the Virginia Beach arena is being built. This also would help
with actual costs of relocating the company. These costs would be capped and
distributed as a reimbursement to the team. A performance agreement would be
signed that would allow the city to audit costs incurred by the team that are
eligible for reimbursement.
We don’t know yet who will pay for this. That is a subject of negotiation.
$345.8 million is a lot of money to pay all at once. How can we afford it?
It wouldn’t be all at once, and the payments would not come from our property taxes.
That’s the key. The city and state will issue bonds for their portions, and pay a little
each year – like paying off your home mortgage. Revenues from taxes paid by arena
customers will pay each yearly installment, with money left over for the city.
The City Council has made this commitment: Income from the arena must be sufficient
to fund all city debt and increase existing revenues to the city.
From the start, the city has consulted its financial advisers to ensure the project would
not hurt our credit rating or exceed our debt capacity. All financial projections and proformas have been structured to account for other major capital projects, including light
rail, the Dome site, schools and others. By adopting this proactive approach, the city
and its financial advisers feel confident in the proposed financial plan for the arena
project.
Can you be more specific?
Yes. This is where the city will get the money to pay for its bonds each year:
Arena operating net revenue:
$18.5 million
$2 per ticket surcharge:
$1.7 million
Two-thirds of admission taxes from the arena: $5.2 million
1% hotel tax increase
$2.8 million
State sales tax rebate
$0.9 million
TOTAL
$29.1 million
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And how much would the debt payments be?
$19.7 million a year for the City.
So the city would receive $29 million a year in revenues to pay for almost $20
million in debt service?
Exactly.
OK, that’s the city side. What about the state’s $150 million? That’s our tax
money, too.
That is true. An independent study shows the state will get about $11 million a year in
new taxes from the arena. (See complete study here.) That will more than pay for the
state’s debt service.
How can Virginia Beach afford to build an arena and the Dome site and light rail
and Town Center, all at the same time?
They’re separate projects with different funding methods. We’ve discussed the arena.
As for the others:
The Dome site: The entertainment district will be a private investment. The city
would pay for parking garages and streetscapes. The garages probably will be
paid for by parking fees and other project-related financing mechanisms.
Light rail: This is primarily a federal project. In Norfolk, for example, the federal
government paid for 63% of construction. The state paid 20% and the city paid
17%.
Town Center: The city pays mainly for parking garages. Real estate taxes in the
Pembroke district pay for the garage bonds. Special higher real estate taxes in
Town Center pay for maintaining the garages, plaza and entertainment.
How would all this new debt affect the city’s prized AAA bond rating?
It will not. The City Council caps debt at $2,800 per resident. All three bond rating
services say this is sound policy and will not affect our bond rating. Even with an arena,
light rail and Town Center, the city’s per capita debt will hit $2,800 only briefly – in 2019
– and then drop. The city has been working closely with its financial advisers and the
major bond rating services to make sure its ratings will not be hurt by the arena project.
Wouldn’t it be better to spend that $240 million on schools or roads?
We can do both. Obviously money spent on schools and roads maintains Virginia
Beach’s high quality of life. An arena investment provides a financial return – new
revenues that help fund schools and roads. The money that would be spent on an arena
is money that would not exist if the arena were not built.
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What if the arena loses money?
The operator, Comcast-Spectacor, has agreed to cover any operating loss. The city will
not be responsible for it.
How can Virginia Beach build an arena for $300 million when most other recent
arenas cost more? The arena Seattle just approved will cost about $490 million.
What’s different about the Virginia Beach proposal?
Every arena project is different. It depends on the overall design and local market. The
proposed Seattle arena will likely include features that the Virginia Beach arena won’t.
Also, development costs in Seattle are different than costs in Virginia Beach. By
comparison, the Sprint Center in Kansas City is a 19,000-seat arena that opened in
2007 (without a sports team) and cost $276 million. The KFC Yum! Center in Louisville
is a 22,100-seat arena that opened in 2010 and cost $349 million
What if there are cost overruns? Who will pay for that?
The cost estimate includes a contingency for some cost increases. The team would pay
for some parts of the arena dedicated to team operations. The rest is subject to
negotiation.
What if the General Assembly won’t fund the arena?
The project cannot move forward without the state as a partner. We certainly hope the
General Assembly will support this project.
Is there a contingency plan for going to outside funding sources if the state says
no?
No, there is no contingency.
How much money has the City of Virginia Beach spent on this project to date and
what is the projected cost going forward?
The Virginia Beach Development Authority has spent about $1.1 million to date on this
project . The money comes from the Development Authority’s budget, not the city’s
General Operating or Capital Improvement budgets. About $40,000 of city funds were
used to pay for the study completed by CSL at the request of City Council. Projected
costs going forward are to be determined. It depends on approval of a deal structure
with Comcast-Spectacor and the team, as well as receiving state funding for capital
costs.
The city has spent a lot of money on studies. What if no team decides to move
here?
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Regardless of what happens, the studies show there is much benefit to building a large,
modern arena in Hampton Roads, and they show the economic impact of building an
arena here. Whether an arena is built now or in the future, the studies provide valuable
information for citizens and leaders to make informed decisions. The market data
provided by the various studies is already being used by others interested in investing in
Virginia Beach.
THE ECONOMIC IMPACT
What kind of economic development would an arena draw to Virginia Beach?
How did an arena change, say, Oklahoma City?
Having an arena and a major-league team would raise Virginia Beach’s visibility around
the world. No other major-league teams play in Virginia, so the focus of the sports world
would be on Virginia Beach. Other events would increase the city’s profile and
marketability. Leagues often bring their all-star week events to new arenas within five
years of a new team or venue opening.
Oklahoma City reaped huge benefits during the playoffs. The Oklahoma City team
made the NBA Finals this year. During the playoff run, Thunder Alley (the commercial
area next to the arena) attracted 180,000 people over 10 games. Inside the arena for
the two home Finals games, concession stands sold $1,000 of food and beverage per
minute. (Oklahoma City’s metro area is smaller than Hampton Roads – 1.3 million
versus 1.7 million.)
How much money would the arena generate from things like tickets, concessions,
souvenirs, restaurant meals and hotel rooms?
$92 million a year, according to an independent study commissioned by the City
Council. (See complete study here.)
How much new tax money would that generate for Virginia Beach?
$8.9 million a year. (See complete study here.)
How many new jobs would that create?
1,900 new jobs. (See complete study here.)
How many of those jobs would be low-wage jobs? How many would be
management opportunities?
There would be a mix. Numbers are not yet available by job classification. Keep in mind
that an arena would create new opportunities for small businesses to provide support
services.
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What kind of impact would construction have?
It will create about 3,944 jobs statewide (this includes direct and indirect spending) and
about $559 million in total economic impact, according to a separate study
commissioned by the city staff. (See complete study here.)
Can the arena succeed if the sports team is lousy and doesn't draw as many fans
as expected?
Yes. Certainly good teams draw more fans than bad teams. So having a good team
helps. Ask Oklahoma City and Miami. But every NBA team – good or bad – plays only
41 home games a year. Ultimately, the success of an arena depends more on booking
concerts, shows, tournaments and conventions that people want to attend. Ask Kansas
City how their arena is doing without a major-league team. It’s a success. Our partners,
Comcast-Spectacor and Live Nation, have expert capabilities in booking events.
What has been the return on investment for other big city projects, like the Farm
Bureau Live amphitheater, Town Center and the Convention Center?
All three are successful public-private partnerships. Here’s a breakdown of each:
Amphitheater: The Farm Bureau Live Amphitheater opened in 1996. Price
Waterhouse prepared the initial market study in 1993, including a five-year projection.
City staff later compared actual performance against the projections. The amphitheater
did better than expected.
Projections from Price Waterhouse Market Study for First Five
Years of Operation vs. Results for First Five Years of Operation
(1996-2000)
Difference
Averages for first
Projected
Actual
(Actual five years of operation
Projected)
Events Per Year
35.6
35.6
0
Annual Attendance
322,000
332,000
10,000
Total Revenue Generated
for the City*
$666,000
$846,130
$180,130
From 1996 to 2011, the amphitheater has generated more than $18.8 million in
revenues for the city.
Town Center: Virginia Beach Town Center generates much more money every year
than the city spends on debt service. Before Town Center was built, experts predicted it
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would generate $9 million to $13 million in net new revenues (after expenses) for the
city over the first 10 years. In reality, it was double that. Town Center has had a net
fiscal impact of more than $25 million since 2005.
TIF Revenues Generated v. Costs Incurred to Pay Debt Service in
Central Business District South TIF
(Town Center)
Difference
TIF Revenues
Costs Incurred to
(Revenues Generated*
Pay Debt Service
Cost)
FY 05-06
$
4,690,697 $
1,908,024
$ 2,782,673
FY 06-07
$
6,180,090 $
3,136,085
$ 3,044,005
FY 07-08
$
6,908,677 $
3,774,435
$ 3,134,242
FY 08-09
$
9,308,077 $
5,296,568
$ 4,011,509
FY 09-10
$
9,793,318 $
5,256,841
$ 4,536,477
FY 10-11
$
9,299,935 $
5,369,321
$ 3,930,615
FY 11-12
$
9,550,926 $
5,537,171
$ 4,013,755
TOTAL REVENUE GENERATED $25,453,276
*TIF Revenues generated include business license tax, business
property tax, trustees tax and real estate tax.
Convention Center: Estimates for the Convention Center are being compiled by city
staff.
Are there any non-financial benefits to getting an arena and team?
Civic pride – putting Virginia Beach and Hampton Roads on the national map. Ask the
people of Oklahoma City what kind of bump they got from having 1,800 reporters and
media people in town for the NBA playoffs, putting their city on the front pages and
nightly news broadcasts across the country. We also believe it will help the city and the
entire region attract more companies to relocate here.
Also, an arena would make Virginia Beach more competitive at keeping its young talent
from moving away.
If a City Council member doesn’t believe the numbers provided thus far for
revenues, expenses and financial impacts, can he commission a study of his
own?
Of course.
THE TEAM
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Who’s the team?
Comcast-Spectacor is committed to pursuing an NBA basketball team or an NHL
hockey team for the arena. We cannot reveal the team’s name yet. Discussions are at
a critical stage.
When will the city announce the name of the team?
As soon as we’re sure we have a contract. That could be in February or March.
What if Comcast-Spectacor can’t get an NBA or NHL team?
Then the arena won’t be built.
THE MARKET
Is Hampton Roads big enough to support an NBA or NHL team? Isn’t this a small
market?
With a population of 1.7 million, Hampton Roads is bigger than 12 metropolitan areas
with major-league teams:
Nashville
1.6M
Milwaukee
1.5M
Memphis
1.3M
Oklahoma City
1.3M
Calgary
1.3M
Ottawa
1.3M
Edmonton
1.2M
New Orleans
1.2M
Raleigh
1.2M
Salt Lake City
1.2M
Buffalo
1.1M
Green Bay
0.8M
We’re just a little smaller than four other metro areas with major-league teams:
Columbus
1.9M
San Jose
1.8M
Charlotte
1.8M
Indianapolis
1.8M
How else does Hampton Roads compare?
Obviously, some cities are huge. We’re not New York or Los Angeles or Chicago. But
some metro areas have several teams that split the population and corporate support.
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If Hampton Roads had a major-league team, it will be 15th in the nation in population per
team. Here are the five metro areas just above and below us on that list:
Toronto – 5.8M – 3 teams – 1.9M per team
Chicago – 9.5M – 5 teams – 1.9M per team
Columbus – 1.9M – 1 team – 1.9M per team
San Jose – 1.9M – 1 team – 1.9M per team
Hampton Roads – 1.7M – 1 team – 1.7M per team
Dallas – 6.6M – 4 teams – 1.6M per team
Philadelphia – 6M – 4 teams – 1.5M per team
Washington – 5.7M – 4 teams – 1.4M per team
Miami – 5.6M – 4 teams – 1.4M per team
Memphis – 1.3M – 1 team – 1.3M per team
It doesn’t seem like we have enough families with money to support a team.
Actually, 18% of all households in Hampton Roads earn more than $100,000 a year.
Here’s how that compares to some other major-league areas:
Salt Lake City – 20%
Portland – 20%
Phoenix – 19%
Detroit – 18%
Charlotte – 18%
Hampton Roads – 18%
Miami – 18%
Milwaukee – 18%
Indianapolis – 18%
Columbus – 18%
St. Louis – 18%
Nashville – 17%
New Orleans – 16%
Orlando – 16%
Are there enough big businesses here to support a team?
We’re about in middle of the pack. Among all 36 metro areas with NBA or NHL teams,
we’re 17th in big businesses per team. Here are the metro areas just above and just
below us in a list of areas with corporations of at least $5M in sales and at least 25
employees – per team.
Sacramento – 947
Philadelphia – 931
Salt Lake City – 927
Miami – 893
Memphis – 832
Hampton Roads – 825
Atlanta – 812
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Detroit – 797
Oklahoma City – 748
Milwaukee – 746
Minneapolis-St. Paul - 744
I read that the average ticket price for an NBA game in Virginia Beach would be
about $70. Is that high? Can this market afford that?
An independent study by Conventions Sports & Leisure lists the average ticket price for
every NBA arena. (See chart on Page 51 of CSL report here) Of the markets
comparable to Virginia Beach (Orlando, San Antonio, Oklahoma City and Miami), the
average ticket price is $70. The average ticket price in Oklahoma City, the newest
arena in a comparable market, is $73. A variety of ticket prices and packages would be
available.
An independent study by Scarborough (not commissioned by city) found a higher
percentage of the population in Hampton Roads is willing to pay $75 for an NBA ticket
than in Memphis, New Orleans, Salt Lake City, Orlando, Phoenix, Detroit, Denver,
Milwaukee and Charlotte.
How much does the average Hampton Roads resident spend on entertainment?
According to the Conventions Sports & Leisure report, the adjusted median household
effective buying income (disposable income less taxes and adjusted for the cost of
living) in Hampton Roads is $42,002. (See chart on Page 17 of CSL report here.) The
average for NBA markets is $42,997. The average for NHL markets is $44,637. Our
average places us above Oklahoma City, Charlotte, Tampa, Chicago, Sacramento,
Philadelphia, Boston, Buffalo, Miami, Los Angeles, and New York.
Market research shows the average amount spent on luxury goods (automobiles,
hobbies, home values, travel, entertainment, etc.) in Hampton Roads is comparable to
existing NBA and NHL markets.
THE TIMETABLE
When will we see a final deal?
Negotiations are continuing. We may not reach a deal acceptable to all parties. If a deal
cannot be achieved in January, it is unlikely state funding could be approved in this
session of the General Assembly.
When will the City Council make a final decision?
Probably in February or March 2013.
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What’s the rush?
Any NBA or NHL team will need to notify the league of its move by March 2013.
If the arena is approved, when would it be built?
Construction could start next year. It could open in fall 2015.
What would the team do in the meantime?
The team would need to find temporary facilities in the region for the next two seasons.
PUBLIC INPUT
How can I learn more about the arena proposal?
A citizens committee will hold a series of public information and input meetings.
Come and learn more and let us know your thoughts. Opportunities will be
posted on www.VBgov.com/arena.
All materials about the arena are posted to VBgov.com/arena
Contact Us
All Virginia Beach City Council members: [email protected]
Individual City Council members: Visit www.VBgov.com/citycouncil for e-mail
addresses and phone numbers.
For more information, contact Warren Harris, Director of Economic Development,
at [email protected].
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