SEA attendance and finances during the pandemic

Summary: The Sports & Exhibition Authority (SEA), a joint authority of the City of Pittsburgh and Allegheny County that owns Heinz Field, PNC Park, PPG Paints Arena and the David L. Lawrence Convention Center, saw attendance and finances significantly affected as a result of the coronavirus pandemic. 

Based on SEA audits and reports, COVID had a significant impact on attendance at the four venues due to games and events being canceled, postponed or having limited attendance due to government restrictions on capacity.

From 2019 to 2020, convention center attendance fell from 576,315 to 215,134 (63 percent), Heinz Field from 863,760 to 24,769 (97 percent), PPG Paints Arena from 1,608,104 to 408,554 (75 percent) and PNC Park from 1,276,950 to 0 (100 percent).  When considered in total, attendance fell from 4.3 million to 0.6 million, a decrease of 3.7 million attendees (85 percent).

Reports note that the number of convention center events, concerts and post-season games fluctuate year-to-year; typically, there are 10 pre- and regular-season Steelers games, six to eight Pitt Panthers games, 81 Pirates games and 43 Penguins pre- and regular-season games. 

As an example of the impact COVID had on scheduling and attendance, the Steelers’ 2020 season at Heinz Field (Aug. 2020 to Jan. 2021) had two pre-season games canceled; fans were permitted at five of the eight regular-season games, two of which were rescheduled to different days; no fans were permitted to attend the lone post-season game.  The game with the highest attendance was in November with 5,909 fans, roughly 10 percent of 2019’s lowest-attended game. There was a decrease in the number of home regular-season games played by the Pirates (81 in 2019 to 32 in 2020) and Penguins (41 in 2018-19 to 35 in 2019-20).  Events at the convention center totaled 198 in 2019 and 56 in 2020.

Through the end of 2021, total attendance rose to nearly 2.5 million, which was a three-fold increase over 2020 but 42 percent lower than 2019.  Another 9,000 people attended events virtually. Attendance at the convention center was lower in 2021 while the other venues improved from the decrease they experienced in 2020. In 2021, the National Football League enacted a 17-game regular-season, giving the Steelers an additional home game.

SEA Venue Attendance, 2019-2021

The SEA’s operating revenues—a mixture of surcharges; parking revenue; fees and event revenue that are generated from games and events—were negatively affected.  Revenues totaled $29.4 million in 2019 and fell to $14.3 million in 2020 ($15.1 million or 51 percent).  The 2021 figure of $15.8 million was slightly above the previous year. 

Specific payments from the sports facilities to the SEA declined from 2019 to 2020.  Total payments were $11.8 million and dropped to $9.5 million ($2.3 million or 19 percent). Heinz Field from $5 million to $3.5 million, PPG Paints Arena declined from $6.1 million to $5.9 million and PNC Park dropped from $0.7 million to $0.1 million.  In 2021, with activity returning, total payments were $10.6 million, or 10 percent below 2019. 

Operating expenses—operations and maintenance, administration and depreciation and amortization—were $65.3 million in 2019 and fell to $59.3 million the year after ($6 million or 9 percent).  Expenses then climbed slightly through 2021 to $60.9 million.  Depreciation and amortization represent the bulk of the SEA’s operating expenses, averaging 79 percent over the three years.

The difference between operating revenues and operating expenses is the operating loss.  This figure rose from $35.9 million to $45 million ($9.1 million or 25 percent) from 2019 to 2020.  The loss in 2021 was essentially identical to 2020’s.   

The SEA’s finances include non-operating revenues that reduce the operating loss.  This money comes from various entities, mostly to pay for the debt service obligations. The Regional Asset District (RAD); Allegheny County; the commonwealth; the federal government and the Rivers Casino are among these.  Total non-operating revenues, on net, after accounting for interest and development expenses, rose from $7.8 million in 2019 to $28.2 million in 2020 ($20.4 million or 261 percent).

Much of this growth was attributed to money received from the state and federal government for the I-579 “cap” project.  Last year, the SEA also received a $10 million grant from the Stadium Authority—the entity that was supposed to dissolve when Three Rivers Stadium was demolished (see Policy Brief Vol. 17, No. 33)—to help with operations.  Allegheny County gave the SEA $1 million from its CARES Act allocation and granted $20 million from its American Rescue Plan allocation. 

The SEA’s net position at the beginning of 2019 was $360.9 million and at the end of 2021 was $301.7 million ($59.2 million less or 16 percent lower).

Before COVID, the SEA sought to secure recurring sources of tax revenue to pay for its responsibilities at the sports facilities under current lease agreements and at the convention center, which it owns and oversees management (see Policy Brief Vol. 18, No. 34).  The SEA received a RAD grant of $800,000 in 2019, 2020 and 2022 and $760,000 in 2021.  Of the $2.3 million spent from 2019 through 2021, $1.8 million (78 percent) has been spent at the convention center and $0.5 million (22 percent) at Heinz Field.

The General Assembly repurposed a $1.7 million annual allocation the SEA was receiving for the convention center’s operating deficit to the creation of the SEA Sports Commission (see Policy Brief Vol. 18, No.16).  This past November when the SEA board set-up its procedures for distributing financial awards, a restricted account to hold 25 percent of the revenue for capital repairs at the four venues was approved. 

If a proposed special assessment on hotel stays becomes law (see Policy Brief Vol. 22, No. 7), there is language in the bill that would set aside an unspecified percentage of revenue to be directed to the SEA for facility maintenance.

Rather than cobbling together more sources of taxpayer dollars, the professional sports teams should be responsible for more expenses related to the structures they benefit greatly from and the promises of the convention center being an economic engine need to be realized. 

In a news article, the chair of the SEA board stated in regards to the Pirates’ and Steelers’ leases that “I think the lease as a whole, you almost have to blow it up and start over again to make it as fair as possible to each [side].” 

That’s something for present and future SEA board appointees, who are appointed by elected officials of the City of Pittsburgh and Allegheny County, to consider as the end date for leases of two of the facilities are less than a decade away.

Steelers to Pay for Stadium Expansion

After threatening the SEA with a law suit in an attempt to force the authority to pay the cost of adding seats to Heinz Field, the Steelers have settled for having the SEA borrow the needed funds to be repaid by the team.  This settlement with the SEA has to be the result of the likelihood of losing in court and the public relations beating the team was suffering on the issue. The Steelers will add a ticket surcharge to cover the bond debt service.

 

As we noted when the lawsuit was first talked about, the Steelers have benefitted enormously from the tax dollars expended to build the stadium.  Given the profitability of Heinz Field and strong demand for tickets it only made sense for the Steelers to incur the cost of building the additional seating.  It was the height of arrogance to ask the taxpayers through the SEA to bear the expense.

 

If the Steelers believed the seats would not pay for themselves in a reasonable time period, then why would it be in the interest of taxpayers to underwrite their cost?  This should have never been an issue. Obviously, the Steelers believe the seats will be a profitable investment. The fact that the Steelers made their demands of the SEA is a reflection of the assumption by the City’s sports teams that they are owed public subsidy, and lots of it. And given the past behavior of politicians who bend to their wishes they are probably justified in that belief.

 

Good for the SEA for holding firm in this case. Perhaps it is a portent of things to come in these matters.

Heinz Field Expansion

Yet another reason taxpayers should have a basic understanding of economics.

The director of planning and development for the Steelers, commenting on the impending trial of the team’s lawsuit against the Sports and Exhibition Authority (SEA) for refusing to pay two thirds of the cost to add 3,000 seats, is quoted as saying "it (the pre-trial hearing) was an important step to make sure the SEA lives up to its obligations." And then he proceeded to add, "The expansion of Heinz Field will allow an opportunity for more Steeler fans to attend games." Not content with that, the speaker went on, "If this matter is not resolved in the near future, another year of increased fan attendance and increased revenue will be lost."

This self-serving commentary notwithstanding, the question the Steelers should answer is this: "Will the new seats and scoreboard pay the full cost of building them with additional ticket sales, seat licenses, concession revenue and other in-stadium and game day parking revenue resulting from the 3,000 additional seats?" If the cost of the project, along with any borrowing costs, can be recouped and perhaps even boost profits through increased revenue generated by the additional seats within ten years, the Steelers ought to build the project and pay for it themselves.

If the project will not generate enough revenue to pay for itself, the Steelers should not build it.

Clearly, they should not be asking taxpayers to subsidize a project that will add to Steeler profits. And they certainly should not be asking for taxpayers to help pay for a project that cannot pay for itself.

Why should taxpayers subsidize another 3,000 fans who want to see Steeler games in person? When is enough, enough? If fan demand for tickets is sufficiently strong to warrant putting in another 3,000 seats, then fan demand is strong enough to raise prices to pay for seat additions. The attitude of entitlement on the part of the team and many of its fans with seats who are happy to get the heavy subsidy they receive is nothing short of deplorable.

Steelers’ Ludicrous Rationale for Heinz Field Subsidy

A clearer example of hubris and sense of entitlement could not be found than the Steelers’ justification for having the public underwrite the cost of expansion and upgrades at Heinz Field.

"This state- of- the- art expansion assures that Heinz Field would remain the first-class facility our fans expect and deserve." Is this what we have come to? Fans deserve to have the public subsidize a stadium that is already a tax exempt structure and is occupied by a team that has been massively enriched by the public’s underwriting most of the cost of construction?

For goodness sake, why should fans expect or deserve a first class facility at the expense of the public? When is enough enough? And how is adding seating capacity creating a first class facility for fans? Will they be really good seats for viewing games? Or will they simply add to Steelers’ revenue?

This is a prime example of what is wrong with today’s culture and perforce our economy. The notion that fans of professional sports teams deserve a "first class" facility in which to watch games and the public should subsidize that facility is simply outrageous. One can only marvel that the world has come to this.

The Steelers’ have been enriched enormously by the taxpayer investment in Heinz Field and the rights they received regarding development on the North Shore. The stadium pays no property tax and the Steelers’ rent payment is de minimus considering the value of the stadium.

Why is there so little gratitude on the part of the Steelers’? Is there no limit to their willingness to keep asking taxpayers for more money? If the Steelers’ want to expand the stadium, let the expansion pay for itself.

Or how about this. The Sports and Exhibition Authority will agree to pay for the expansion if the Steelers’ sign an ironclad agreement to pay sufficient additional rent necessary to cover the borrowing costs needed to build it. What could be more fair? But in the world of Steelerdom fair is apparently what they say it is-no more, no less.

Is a Sweet Steelers Deal About to Become Ridiculously Generous?

With all three Pittsburgh professional sports teams playing in fancy new digs, taxpayers could be forgiven for thinking they are through having to subsidize the teams. But they could be wrong.  There is high probability they will be asked to pony up even more money for Heinz Field as the team eyes adding 3,000 more seats at the southern end of the stadium. 

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Some Hart Comment Surgery Needed

In his attempt to present the "real" facts in response to a Tribune Review commentary regarding North Shore parking, Mark Hart of the Steelers offers up a litany of purported benefits stemming from the efforts of the Pirates, Steelers and Continental Real Estate.

The most salient point is the claim that, "The money this development has returned to the City far exceeds the investment of public dollars that helped to fuel this growth." The development referred to includes two sports venues, a hotel, office buildings, and a concert venue all of which, it is claimed, have created thousands of new jobs. Mr. Hart also states "that through the efforts of many, including limited support from the public, we have taken an area that held only Three Rivers Stadium and a plot of vacant land-and completely transformed it into a destination area".

Limited public support? Total state, local and Federal tax dollars to build new stadiums and reconfigure the street patterns is close $400 million. The return on the $125 million in claimed private development will never come close to paying back the taxpayers. Total real estate taxes will run about $3 million per year assuming the property is valued close to the development costs. The office buildings referred to did not significantly add new jobs; they were predominantly employees who were moved from other parts of the City. New restaurants are not necessarily producing net jobs or income. Much of their business is likely being taken from other restaurants in the City and County.

Moreover, the Hart comment claims the North Shore transformation is producing millions in amusement taxes, parking taxes, real estate taxes and payroll taxes. Sorry. Three Rivers Stadium was also producing amusement taxes and parking taxes. Mr. Hart needs to show how much additional amusement and parking tax can be attributed to the new stadiums over and above what would have been collected if games were still in that facility. Then too, he needs to take into account the fact that several acres of the near North Shore are now taken up with a tax exempt baseball park that was previously occupied by taxable or potentially taxable property.

As is too often the case, Mr. Hart looks only at what can be seen and does not take into account the unseen: Taxable development that could have occurred absent the new ballparks, the removal of taxable property from the tax rolls, and the opportunity cost for taxpayers for the hundreds of millions spent to build non-taxable facilities.

Finally, it should be noted that absent the two new stadiums, the extraordinary wasteful use of $535 million to build the North Shore connector would never have happened-a project that has not a ghost of a chance to repay the taxpayers for their investment.