In two earlier posts, I examined the proposed downtown Albany soccer stadium. In the first, I discussed its possible role in Albany’s redevelopment and the likely difficulties it would face in generating operating profits. In the second, I briefly discussed the impact of the stadium’s capital costs on profitability. In this post, I examine possible financing structures for the proposed stadium and their impact on project viability.
The Current Proposal – A $75 million Stadium with Substantial Government Assistance
Details on the stadium proposal have not been released to the public, but a series of press reports indicate it would have 7,500 seats for soccer and up to 12,000 for musical events. The stadium is part of a proposed downtown redevelopment that would include 1,000 housing units and associated commercial structures. The cost of the stadium has been estimated at $70 million, with the total project cost being $500 million or more. In an earlier post, I argued that government assistance of no more than fifteen to twenty percent would be a prudent contribution, given the project’s risk. However, additional support for other elements could be justified.
With government support ranging from $10 million to $15 million, private developers will be responsible for covering between $55 million and $60 million of the total project cost. Part of this amount could be provided through a capital contribution, while the rest would be financed with debt. The spreadsheet below illustrates a likely scenario where the government contributes $10 million and private-sector sponsors provide an additional $10 million in capital. Please note that some assumptions have been updated from my earlier posts to reflect new information.
Important Assumptions:
- A public/Private capital contribution of $20 million – for example, $10 million from the government (15% of the project cost) and $10 million from developers.
- Events: 15 men + 14 women + 14 other = 43 use days
- Average paid attendance:
- Men 2,350 @ $20 | Women 2,058 @ $18
- Reflects league averages and competition from sports venues (Saratoga Race Track and Joe Bruno Stadium) and venues (SPAC, MVP Arena, Proctors and Palace Theaters, etc.)
- Other events (14):8 rental + 6 co-promote
- Rental: 2,500 heads/event; $5/head capture + $12.5k flat rent
- Co-promote: 3,500 heads/event; $25 ticket; 45% concessions on ticket; $2 facility fee
- Sponsorships/naming: $700k (HQ-light market)
- Other rentals (annual): $250k
- Concession rate: 45% of ticket revenue (soccer + co-promote only)
- Facility fee: $2 per paid ticket (soccer + co-promote only)
- Parking share: $0 (no on-site/owned parking)
- Fixed OpEx: $2.2M | Variable: $22k/event | Maintenance: $350k | Marketing: $200k
- CapEx reserve: 1% of $70M ≈ $0.7M
- Debt (for context): 6.75% / 25y → $20M ≈ $1.68M/yr; $25M ≈ $2.10M/yr
This estimate shows an annual operating loss of more than $300,000. With debt-related costs, the stadium could lose more than $5 million annually. Using three different assumptions—the baseline, a conservative estimate with attendance and related factors at 85% of the baseline, and an optimistic projection with attendance and associated inputs at 120% of the baseline —deficits, including debt-related costs, could range from $4.2 million to $6 million.
Although operating income or losses can vary based on factors such as attendance, ticket prices, sponsorship revenue, and income from other events, the facility’s ability to generate an operating profit is by no means assured. With likely debt service, the project isn’t viable.
Possible Phased Development
In my earlier post, I pointed out that a smaller project would be more likely to succeed because of the lower debt load required to cover capital costs. The table below presents a hypothetical income/expense statement reflecting a $42 million stadium. Permanent stadium seating would be reduced to 5,500, with 1,500 seats in temporary bleachers, and amenities would be cut back. A canopy, club/premium seating, expanded kitchens, community rooms, and a larger videoboard would be deferred. In a second phase, the build-out could be completed. That stadium would have smaller losses, but substantial ones — almost $2.5 million annually, including debt service — in this scenario.
It’s important to note that these models are hypothetical. Developers could find various ways to increase revenue. However, the substantial debt burden associated with the project, even in a reduced form, would make achieving positive cash flow unlikely. In an optimistic scenario, the annual deficit, including debt-related expenses, would be about $1.5 million.
Both the original proposal and the smaller $42 million option suggest that the project is unlikely to generate enough revenue to cover its debt service. Given the significant impact of debt service on the project’s potential viability, developers may seek a larger public contribution to help offset these annual costs. However, increasing this contribution would elevate the risk to public funds and could hinder other projects that also require public support. Public decision-makers should carefully consider the substantial risks associated with the stadium project before committing any public funds.