13 June 2009

Oakland City Council proposes 10% ticket surcharge

Desperate to get out of an $80+ million budget hole, Oakland's City Council is proposing several cost-cutting and revenue-generating proposals which will certainly affect different parts of the populace. This includes eliminating discretionary accounts for the Mayor and City Council, getting contract concessions from OFD, and one major item affecting sports fans: a 10% ticket surcharge on all tickets at the Oakland-Alameda County Coliseum and Oracle Arena.
The surcharge would have to be approved by the Oakland-Alameda County Coliseum Authority, with revenues being split between Alameda County and Oakland, officials said. The city's take would be $9 million a year, according to council members' estimates, though some say that is a sunny projection given that a number of tickets for events taking place in the next year have already been sold.
Debt service on the Coliseum alone is $22 million a year, split between the City and County. While the tax wouldn't cover all of the debt service, it would take a big chunk out of it. Unfortunately, that "sunny projection" matter comes into play. Season tickets and a number of packages have already been sold, so a retroactive tax couldn't be enacted on those purchases. New packages after whatever the enactment date is could be taxed, and gameday tickets would be hit as well. Let's throw this into a quick model:
  • Tax is effective halfway through the season (Game 42), leaving 41 games to get the surcharge
  • According to TMR's Fan Cost Index, the average ticket price is $24.31
  • If there's a 10% surcharge, the resulting average surcharge would be $2.40
  • With the A's averaging 17,000+ per game, put aside 10,000 seats as presold seats, with 7,000 remaining as new or gameday purchases
  • 41 games x 7,000 seats x $2.40 = $688,800 in potential revenue.
  • Next year, assuming attendance patterns hold, $1.67 million for 41 games could be raised (41 games x 17,000 seats x $2.40)
$3 million is what an equitable share would be for the A's considering they are one of three teams at the complex. The combined figures fall over $3.6 million short of projections (assuming the total take is $18 million for both City and County, split among the three teams equally). If the surcharge is going to hurt one team more than the others, it's the Warriors. Their season just ended and they've only started to get season ticket renewals. The Raiders have had the better part of six months to sell its packages. With all three teams struggling between the lines, it's difficult to see any of them being terribly excited about a tax that could further hamper sales efforts.

Now for the painful part. How would a 10% ticket tax affect ticket prices? (Note: two prices are shown, first for regular prices and second for premium games)
  • MVP: $48/$55 becomes $52.80/57.50
  • Field Infield: $35/$40 becomes $38.50/44
  • Lower Box: $30/$35 becomes $33/$38.50
  • Field Level: $26 becomes $28.60
  • Plaza Club: $40/$45 becomes $44/$49.50
  • Plaza Infield: $30/$35 becomes $33/$38.50
  • Plaza Level: $24 becomes $26.40
  • Plaza Outfield: $18 becomes $19.80
  • Bleachers: $13 becomes $14.30
  • Plaza Reserved: $9 becomes $9.90
The City's obviously in a really tough spot fiscally. They don't want to consider such measures since they will no doubt alienate the teams currently playing in Oakland. Honestly, I don't blame them. The Coliseum debt service matter has never been properly addressed by City and County, and for them to properly address it so that it minimizes impact on residents, something needed to be done. The irony is that in enacting a ticket surcharge, they may push away one or more of the three teams that call Oakland home, right as new stadium proposals are being considered.


gojohn10 said...

When I saw the headline I was hoping the city was working towards a solution to the stadium funding issue. Instead the tax is to help close the city's budget shortfall. Unbelievable! I give up, bring on San Jose.

Anonymous said...

I hope MLB's blue ribbon commission hears about this.

Andy Symbolist said...

Is it possible to determine how much Oaktown is currently subsidizing its three teams, or is that info buried in impenetrable layers of legalistic murk?

FC said...

As an A's and Warriors STH, this absolutely sucks. This may help solve their problem in the near term, but you can bet they will have a real problem when the A's, Raiders and maybe even the W's leave town.

Way to go Oakland. Nothing like kicking your "hometown" teams when they're down.

BTW, Warriors renewals are already in full swing. I was at Oracle this morning to see about upgrading our seats. Though there were more seats available this year as compared to past years, it certainly seems as though a lot of STH decided to renew.

Pork chops and applesauce said...

The irony is fans are complaining about potential ticket taxes for the A's but regardless of where they build a new stadium, a ticket tax will probably be levied to help pay for it.

Anonymous said...

"regardless of where they build a new stadium, a ticket tax will probably be levied to help pay for it"

You say this based on what exactly? Taxes are normally levied to cover public costs. The A's have stated they will pay the full cost of building a new yard, meaning there should be no public costs which would justify a tax.

In any event, Oakland is talking about levying a giant tax on the A's to cover PAST costs, not building a new ballpark. (And the costs they are trying to recoup are for the Raider renovation, which actually damaged the A's business).

Under your theory, should the A's expect the ticket surcharge to go up to 20% if they were to actually build a yard in Oakland? That should pretty well guarantee it never happens. (Actually, the 10% tax is probably enough to do it).

Jeffrey said...

Hey Porkchops,

I am all for paying a ticket tax if it is to fund infrastructure or a portion of a new stadium's construction costs.

I am not all for paying that tax and another tax to cover budget shortfalls.

I believe this might happen, meaning a tax now for budget shortfalls. If it does, I think it renders the probability of a future tax for a new stadium less likely and the project at Howard Terminal (whatever that phantom project actually is) even less likely because of the huge cost associated and no "ticket tax" to help pay for it.

Dan said...

Oakland is just making it easier and easier for the A's and Raiders to justify leaving town.

Jeepers said...

Hard to blame them. They get such a pittance in lease revenues from the A's that the money has to come from somewhere. It would have been a lot better PR if they'd negotiated a higher rate on the lease in the first place, though. Nobody would have cared.

Jeepers said...

A PSL is equivalent to a ticket tax. They're both surcharges levied to the end user. The only difference is who gets the money.

There is no doubt public resource will be spent on a new A's stadium, whether it's zoning favors, infrastructure improvements, TIF, or a sales tax on tickets. Some of them just sound nicer than others.

Jeffrey said...

Jeepers, there is a difference between a PSL, a rezoning and a ticket tax.

The difference is in who is taking the risks associated with the expense. From our perspective as fans, maybe a ticket tax and a PSL hit us in a similar fashion... but the risks associated to the tax paying citizens are managed differently. These make each significantly different than one another, it is not just simple semantics.

Jonclaude4baseball said...

Doesn't a ticket tax require a 2/3rd's vote of the people?

Brian said...

/\ /\ /\

You're kidding, right?

Anonymous said...

the problem is if we just missed by a hair last California legislative session getting sales tax expanded to tickets, ie 9.75% in Alameda for a ticket to an A's game. I would have to imagine the STATE is going to go right back at this with the latest Armageddon (didnt know Armageddon's could happen quarterly, though there was only one!). So take that on top of the 10% that I would assume will go through here (who on those boards if going to oppose it?) and boom, 20% increase in A's ticket prices right there, which is a big hit for next years season tickets. I don't think a team that can't draw anyway can take that kind of hit