Hornets won't take state funds in '09
NEW ORLEANS -- The New Orleans Hornets' ticket sales have been strong enough to eliminate the need for financial inducements from the State of Louisiana this year.
Those inducements could have run as high as $6.8 million if the Hornets had consistently played to crowds below 80 percent of capacity at the New Orleans arena.
Instead, the arena has been nearly 99 percent full in terms of tickets sold and complimentary tickets used, Hornets president Hugh Weber said Thursday.
In what Weber referred to as a partnership with the state, the team agreed early last year to open its financial books to state government if the state would pledge to pay subsidies when ticket revenues failed to meet certain benchmarks. This year, the Hornets needed to surpass the $38.7 million mark to spare taxpayers from having to chip in to help the team's bottom line.
"The partnership was designed so we could get the fans engaged and if they did not, we would have a fallback with the state," Weber said. "The good news is that we're not going to be put in that position this year. So it speaks to the fans, but also it speaks to the partnership and how it was thought through."
While the NBA has taken out a line of credit to help struggling teams' cash flow, with 12 teams electing to borrow a combined $200 million, Weber said the Hornets have not sought any such help yet.
"I think we're running counter to many of the stories that are happening in professional sports right now," Weber said.
The Hornets' season-ticket base is just short of 11,000, a new franchise high since moving to New Orleans from Charlotte in 2002. The club has sold out 14 games, one more than all of the previous regular season. The team still has nine home games remaining and is on track to make the playoffs for a second-straight season.
During last season, the Hornets negotiated changes to their arena lease with the state to include the potential for new "performance-based" subsidies, which ended up costing the state about $6.5 million last year. The amended lease also included an escape clause allowing the Hornets to leave New Orleans if average attendance fell below 14,735 during a two-season period. That benchmark will be easily eclipsed, Weber said.
The Hornets' average attendance this season has been 16,853.
"This is exactly what the agreement was designed to do," said Louisiana Gov. Bobby Jindal's spokesman, Kyle Plotkin. "This is great news for the Hornets organization and the New Orleans community because it shows the excitement that the team has created for fans."
A new two-year period for measuring attendance will now run through February of the 2010-11 season, Weber said.
He said that despite tough economic times around the country, the pace of season-ticket renewals for the Hornets give him the impression that attendance will be about as strong next season as it has been lately.
If that ends up being the case, it could mean millions more in savings to the state in the next fiscal year, when the Louisiana Stadium and Exposition District is forecasting a budget deficit of $23 million, in large part because of projected subsidies for the Hornets and the NFL's New Orleans Saints.
Under the Saints' current lease of the Louisiana Superdome -- which like the neighboring New Orleans Arena is state-owned -- the football team would receive about $23.5 million in direct cash payments from the state for each of the next three seasons, regardless of the club's success at the ticket office. However, the state and the Saints are trying to work out a lease extension that could potentially change that formula, which was agreed upon in 2001 and was based on overly optimistic local hotel and motel tax revenue projections.
The result has been that the state, for years, has had to dip into general revenues to make up shortfalls in subsidies owed to the Saints. The recurring problem has drawn widespread criticism of the lease from state lawmakers, especially recently as so many state institutions have been asked to trim their budgets.
Complicating matters, New Orleans-area hotel tax revenues are running about $1 million behind this time last year and could end up as much as $2 million behind by the time the state's fiscal year ends in June, said Doug Thornton, regional vice president of SMG, the company that manages the arena and Superdome for the state.
That could offset some of the savings gained by not having to pay the Hornets this year.
"Less people traveling could have negative implications for our budget," Thornton said.
Next year, the maximum subsidy the state could owe the Hornets rises to $7.1 million, but based on the club's recent success, Thornton had estimated a payment closer to $4 million when he appeared before a state legislative committee last month. On Thursday, however, Thornton noted that "if next year goes as like this year, we won't have to pay anything."
"This shows the agreement put in place works for both parties," Thornton said. "What it really means is the fans of New Orleans supported the team and it's really a testament to the management of the organization that the team is doing such a great job this year. ... They've worked very hard to achieve this goal."
The Hornets struggled with attendance in their first three seasons in New Orleans, finishing near the bottom of the league in that category twice. After Hurricane Katrina struck on Aug. 29, 2005, the Hornets were displaced to Oklahoma City, where they spent two seasons before returning to New Orleans full-time in the summer of 2007.
With Chris Paul and David West emerging as All-Stars, the Hornets became surprise playoff contenders last season, galvanizing a fan base that also seemed thankful for the team's role in supporting the city's recovery.
Copyright 2009 by The Associated Press
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