In an earlier piece, The Proposed Downtown Albany Soccer Stadium: Potential Risks and Benefits, I considered the financial viability of the proposed facility. Although a hypothetical model showed a likely operational deficit, under more optimistic assumptions, the proposal might be viable.
But the analysis did not account for the reality that the stadium’s capital costs must be paid. Even with a contribution of fifteen to twenty percent of the project cost by the government, debt service would likely be large enough to make the project unsustainable. For example, if the government contributes $15 million and the developer contributes $5 million, $50 million would be financed. Debt service at 6.8% would result in an annual debt service cost of $4.6 million—a large enough amount to wipe out any likely operating margin. Under an optimistic scenario, the stadium could achieve an operating margin of $2.2 million, but debt service results in a $2.4 million loss.
There are ways to achieve a more favorable financial outlook. Increased capital contributions from the project sponsor and government could help, but a more realistic approach would phase the development. An initial stadium project costing $40 to $45 million would substantially increase the proposal’s viability. In this approach, 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.
I will provide more information about this approach in a later post.