Only 12 years ago, Memphis, Tenn., opened a $69 million arena, the Pyramid, that was supposed to satisfy generations of sports fans and invigorate the downtown district.
Developers said it would attract a music hall of fame, a Hard Rock Cafe and a steady supply of visitors who would ride to the top of the arena, 321 feet above the banks of the Mississippi. The building would provide 19,000 seats for basketball and even more for stage shows. City boosters called the Pyramid "the ninth wonder of the world."
Now just about everybody in Memphis calls it obsolete. Only two miles from the Pyramid, a new $250 million arena is under construction. The Pyramid appears doomed.
What's happened in Memphis isn't unusual. America's economy may be sagging, but the building boom for sports arenas continues, most of it funded by taxpayers.
In Memphis, 100 percent of the new arena is being financed by the public. But the new building will be operated by a private enterprise, the Memphis Grizzlies of the National Basketball Association.
The Pyramid is about to become a dinosaur because the NBA said it was not good enough for the Grizzlies, who wanted luxury suites and other premium seating for fans with money to spend.
Because the Pyramid never attracted a music museum or the bars, restaurants or tourists that boosters claimed it would, its future looks dismal. It will lose the Grizzlies as a tenant when the new arena, called FedExForum, opens in fall 2004. The University of Memphis, which has played its basketball games at the Pyramid, also may bolt.
"The new building is going to destroy the Pyramid, which we still owe millions on," said Duncan Ragsdale, a Memphis lawyer who sued unsuccessfully to block public money from being used to finance the new arena.
The management company that runs the Pyramid says taxpayers' debt on the Pyramid is about $30 million. Even so, Memphis and Shelby County politicians said the expense of a new arena was necessary to land the marquee names and international exposure of the NBA.
"They would not have come here had we not agreed to pay for a new building," said Marlin Mosby, a Memphis financial manager who put together the local governments' funding package for the new arena.
The Grizzlies, who moved to Memphis after foundering in Vancouver, will manage and operate FedExForum for all events. But construction expenses were covered by city, county and state taxpayers.
Memphis and Shelby County provided $12 million each for the arena, and the Tennessee state government allocated $20 million more. Another $202 million in revenue bonds were issued by the local governments. The debt on that loan is to be repaid by the 9.5 percent state sales tax on arena merchandise, a ticket surcharge and taxes on rental cars, hotels and motels.
Ragsdale argued in court that it was illegal for governments to incur debt for the gain of a private company. He won the first round, but the Grizzlies prevailed on appeal.
With the arena debate finished, Memphis-area politicians are gambling that the prestige and entertainment value of an NBA team will be worth the cost of a new arena.
Charlotte, N.C., and Glendale, Ariz., were similarly entranced by pro sports teams seeking new arenas.
Charlotte is beginning construction on a $265 million building that will replace the 16-year-old Charlotte Coliseum. The coliseum, once the most visited venue in the NBA, is now rated economically obsolete by the league and most Charlotte politicians.
Glendale, a Phoenix suburb of 230,000 people, will open a $220 million arena in December that will be home to the Phoenix Coyotes of the National Hockey League. The city will pay up to 81 percent of the cost. Glendale's arena is to be the centerpiece of a new commercial development.
In Charlotte, the city's original NBA franchise, the Hornets, led the league in attendance for eight years during the 1990s. But the team owners, George Shinn and Ray Woolridge, said they were losing money in the coliseum. They moved the Hornets to New Orleans last year, after voters in Charlotte rejected a new arena in a referendum.
But the Charlotte City Council revived the arena plan and pushed the project through.
Charlotte since has been awarded an NBA expansion team, called the Bobcats, that will begin play in 2004.
The new Charlotte team owner is billionaire Robert L. Johnson, founder and chief executive officer of Black Entertainment Television, or BET. His financial contribution to the new building is nothing, a fact that rankles many in Charlotte.
"Why," asked Republican City Councilman Don Lochman, an arena opponent, "is it appropriate for Johnson to pay the other 29 NBA owners $300 million to join the league, but to put nothing into the building built for his team? Sports owners do this because governments let them."
Charlotte's downtown arena will be financed by a rental car tax and the sale of three city parcels and buildings, including the coliseum. Assistant City Manager Curt Walton expects the property sales to bring in $50 million, helping to offset the expense of the arena.
Walton said the new building was essential to attract and keep a major-league team. Even though the Charlotte Coliseum was built in 1987, he said it is antiquated by NBA standards. Walton called the coliseum and its 23,000 seats "cavernous" and unworkable for a major-league franchise.
"The coliseum has 12 luxury boxes, but there's nothing luxurious about them," he said.
Lochman said the building will cost taxpayers far more than the city administration wants to admit. He calculates the actual cost, including interest on debt, at $430 million over 24 years.
In that span, he said, the arena will consume all proceeds from the rental car tax, leaving nothing for the arts and a minor-league baseball park, which were supposed to be other beneficiaries of the revenue.
If a plus side exists for Charlotte when it comes to arenas, it's that the coliseum is paid off. It cost $42 million.
An indoor sports arena is a brand-new venture for Glendale, one of the 20 fastest-growing cities in America, but a place that most Americans have never heard of.
The arena is to anchor a 223-acre shopping and entertainment village that will include restaurants, theaters, specialty stores, lofts and perhaps other housing. Steve Ellman, co-owner of the Coyotes, is responsible for the development.
Glendale taxpayers will provide up $180 million to build the arena for Ellman's team. Thirty million dollars of the debt is to be repaid through property taxes, though the city administration says there will be no tax increase. The rest of the bill is to be covered through revenue generated by the project.
Ellman faces a penalty of up to $1 million if the project fails to meet a quota for development within two years.
Glendale administrators said they hope the project will generate a minimum profit of $100 million over the 30-year term of the Coyotes' arena lease.
Numerous other sports stadiums have been touted as the catalyst for widespread neighborhood development. Many failed, including Pittsburgh's old Three Rivers Stadium.
Backers of Three Rivers projected that the stadium would spur construction of office buildings, a restaurant pavilion, a marina, a 300-room hotel, a children's theme park, a summer festival area, parking garages and a mass-transit connection to Downtown Pittsburgh. None of it happened.
Julie Frisone, spokeswoman for Glendale, said the project in her city should work for reasons that have little to do with the arena. A new highway has created development potential across a vast area of Glendale that was farmland just two years ago.
Ellman proposed putting the arena there, and the city saw potential to create a new neighborhood in the process.
The city also extracted another project from Ellman in return for its financing of the arena. He is contractually bound to redevelop a blighted area near downtown Glendale.
"Our goal was not to get into the sports business," Frisone said. "It was to create business opportunities."
So far, a movie theater and a restaurant owned by Wayne Gretzky, managing partner of the Coyotes, have committed to the arena area. The city says Ellman is pursuing some 40 other businesses, including a major hotel.
The Coyotes are fleeing 11-year-old America West Arena in downtown Phoenix, where the primary tenant is the NBA's Suns. The Phoenix arena seats about 16,000 for basketball, but only 12,000 for hockey. The Coyotes said obstructed views in the arena made it impossible for the team to build a devoted fan base.
The new Glendale arena plans to compete against the downtown Phoenix venue for concerts, circuses and other events unrelated to sports.
Milan Simonich can be reached at msimonich@post-gazette.com or 412-263-1956.
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