FIeld Level Providence Park.jpg

A rendering of proposed Providence Park stadium expansion from field level.

(Brooklyn Digital Foundry)

The Portland Timbers organization is publicly promoting its proposed stadium expansion as a "win" for Portland, including "millions" a Timbers executive says the city would receive in ticket taxes.

But the Timbers are seeking a deal that would exempt them from paying any taxes for the next 10 years on tickets for the 4,000 seats it hopes to add. And Portland Mayor Ted Wheeler is urging the City Council to approve a resolution Wednesday supporting the tax break, worth at least $200,000 a year.

When the team announced the planned expansion in April, Timbers President of Business Mike Golub told The Oregonian/OregonLive that "the city derives... a ticket tax on every ticket we sell. Adding 4,000 seats will have a material upside in tax remittance that they receive."

Even if the Timbers are successful in getting the council to suspend those taxes for a decade, the deal is still a win for city government anyway, Golub told The Oregonian/OregonLive in an interview Monday. "If the expansion happens, the city is better off financially," he said. "We are putting $50 to $55 million into a city-owned asset. It'd be like going into your home and having us pay for an addition to your house."

Wheeler supports the expansion plans, including the tax break, because the city won't have to pay for it, said mayoral spokesman Michael Cox. "This is a good deal," he said. "Private dollars will go to into a city-owned facility and an "exciting design" for a "beloved Portland organization," he said.

The city owns the stadium, and leases it to the Timbers for a rental payment and a share of ticket sales. The Timbers plan to finance the expansion with private funds, not taxpayer money.

Since their inaugural Major League Soccer season, in 2011, the Timbers have been obligated to pay 7 percent tax on all ticket sales under an operating agreement with the city. The organization has also paid the city an average rent of $950,000 the last seven years.

Susan Hartnett, Portland's spectator facilities and development manager, says if the city agrees to forgo the tax on the added seats, that will increase the loss the city is already expecting from investing in the stadium, going back as far as 2001, when it was home to the Portland Beavers baseball team.

"What we're asking for is, for the first 10 years, not to realize money that they wouldn't have realized anyways," Golub said.

The city will have to bear some increased costs as a result of the expansion. Portland currently pays insurance on the building itself, but not the operations, and also pays for repairs and other capital replacement costs. The Office of Management and Finance did not respond to a records request for these costs in time for publication.

Hartnett estimated that without the stadium expansion, the city will spend $100,000 on insurance next year and more than $125,000 for capital repairs.

"We will see an increase in our costs," Hartnett said. "Obviously, with the expansion, it will go up. As will the repair costs, with more square footage."

Under the operating agreement between the city and the Portland Timbers, the team has paid the city $1.6 million to $2 million a year in rent and ticket taxes.

The deal gets sweeter for The Timbers beginning in 2018. Rent payments end, and Timbers owner Merritt Paulson gets to keep as much as $1.1 million in ticket taxes each year to pay himself back for his initial investment in the stadium. The city will receive a far more limited payment: it will only collect the 7 percent ticket tax if ticket tax collections exceed the amount that Paulson will be guaranteed.

The city contributed $11.9 million to remake the city's former baseball stadium into one fit for soccer in 2011, Hartnett said. Paulson's company, Peregrine Sports, contributed $24.1 million. The city invested another $33 million in the park in 2001, when the park was home to the since-departed minor league baseball team. Former park operator Portland Family and Entertainment also contributed $5.5 million in 2001 to renovate the then baseball park. The 2001 renovation lost the city money, requiring the city to take revenue from Rose Quarter ticket sales and parking fees to "moderate those expenses," Hartnett said.

The city invested so much because the Timbers operation positively impacts the city through job creation and increased economic activity like spending on restaurants, stores and tourism, Hartnett said. Because Oregon does not allow a sales tax, the most direct sports contributions to the city are ticket taxes.

"If we agree to that exemption, that direct and immediate benefit may not be realized, but that ... economic impact will be," Hartnett said.

Golub said investing in the Timbers also brings a psychic and economic benefit.

"This is a win for the fans, a win for the city that they have a private entity (adding) to their venue and that they can earn money they would not realize otherwise over time," Golub said.

The investment will also help Providence Park keep up with Major League Soccer's growing economics, Golub said. The stadium, he said, is now in the low half of the league in terms of its capacity of 21,000.

Without the expansion, the stadium runs the risk of no longer being a viable place to host professional soccer matches, he said.

"We're trying to prevent that," Golub said. "We're trying to ensure the Timbers and Thorns are in Portland for the long term."

Most cities raise taxes in order to pay for sports stadium expansions, Cox said. In March, Las Vegas began collecting an increased room tax to help fund the city's $750 million contribution to fund a new National Football League stadium, the Las Vegas Sun reported.

"This is a good deal that provides public benefit at private cost," Cox said. He said the mayor's office is following the advice of financial experts within the Office of Management and Finance, under which Hartnett manages the Spectator Venues and Visitor Activities fund.

Taxes and fees from Portland Trail Blazers games and related parking ticket sales contribute about 40 percent of the fund's revenue. Revenues from all Rose Quarter events, including concert ticket sales and user fees from Veterans Memorial Coliseum, contribute 75 to 80 percent of the fund's revenue, Hartnett said.

Providence Park, on the other hand, requires more money for debt payments and operations than it brings in.

"There is a large net positive for the Rose Quarter and a large net negative for the Providence Park," Hartnett said. "That makes it very clear we are taking funds from the east side venues and spending them on the west side venue."

Ending the Timbers' license and ticket tax payments as planned will make it more challenging to pay the stadium's debt, which the city has paid using largely revenues from the Rose Quarter, Hartnett said.

"Beginning next year...it gets pretty ugly, pretty fast," Hartnett said.

Hartnett declined to comment on the Timbers' proposed tax exemption on its expansion because the soccer stadium operator and the city are still in negotiations, she said.

Although the City Council will consider a resolution supporting the Timbers' proposal, including a 10-year ticket tax break, a detailed contract laying out terms for the expansion has not yet been drawn. Once negotiations come to a close, the deal will go before the City Council for approval, Cox said.

--Jessica Floum

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