Legal Commentary

Continuing to suspend reality on financing the soccer stadium

By Tom Kirkendall

This earlier post addressed the economic absurdity of having financially-strapped Texas Southern University make an investment in the long-proposed Houston Dynamo downtown soccer stadium.

However, why is it that common sense seems to evaporate into thin air whenever either TSU or the soccer stadium is mentioned. Buried in this Chronicle article about TSU's failure to prepare its students adequately to pass state licensing examinations is the following gem of analysis on TSU's proposed investment in the Dynamo stadium:

TSU President John Rudley and athletic director Charles McClelland also gave an early report on negotiations to share a new stadium with the Dynamo, Houston's professional soccer team.

McClelland said the proposed $105 million stadium would seat 21,000. In exchange for a $2.5 million investment, TSU would get a 20-year lease, a locker room, 50 percent of concession sales and 100 percent of the profit on TSU merchandise sold there, he said.

The deal is preliminary, and regents won't vote for a while. The stadium won't be completed until 2010 or 2011, he said.

McClelland, on the job just a few months, said the deal would be a good investment for the university, whose football team plays mostly at the University of Houston's Robertson Stadium, at a cost of $40,000 a game.

The Tigers occasionally rent Reliant Stadium, which costs $115,000 a game, he said.

Investing in a new stadium would be cheaper in the long term, he said.

TSU has a stadium, but it seats only 4,500 — too small for the competitive football program McClelland has promised to build — and lacks the amenities people expect.

Let's see now. In return for pre-paid rent of $2.5 million (which TSU really doesn't have to throw around right now), TSU gets a 20-year lease, gets 50% of concession sales (on only its games or on all events of any type?), a locker room, 100% of TSU merchandise sales and a pink slip at the end of the 20-year lease term. I hope that locker room is really nice.

Meanwhile, without paying a dime up front, TSU can continue to lease Robertson Stadium on the University of Houston campus for about $200,000 per year (5 home games x $40,000) or $4 million over a 20-year term. While playing at Robertson, TSU could invest the $2.5 million that it wouldn't have to pay the Dynamo and easily generate at least another $2.5 million off that investment over the 20-year lease term. At the end of 20 years of playing at Robertson, TSU would have a net surplus of at least $1 million to play with.

So, in view of the foregoing, my question is this: How could any reasonably responsible TSU leader even consider using the scant existing financial resources of that institution to invest in the Dynamo soccer stadium?

Perhaps the answer is revealed in the last paragraph of the Chron article:

Regents cautioned Rudley and McClelland to make sure TSU has good representation in the negotiations. "They're sharks," Javier Loya said of the Dynamo's leadership.

Full post as published by Houston's Clear Thinkers on June 30, 2008 (boomark / email).