Show the work.
Test the downside.
A useful model makes assumptions visible and identifies who carries the risk.
The short version. Model outputs depend on scope, demand, costs, credit and timing. Assumptions cannot manufacture evidence of profit or of an acceptable public subsidy.
The test that matters for the budget
- 01Start with receiptsShow the actual payer, source and timing.
- 02Subtract prior claimsOperating costs, offsets, restrictions and reserves.
- 03Compare with obligationsDebt service and continuing public commitments.
The stress tests
| Scenario | Question the model must answer |
|---|---|
| Cost +25% | Who supplies committed completion funds? |
| Receipts −20% | Which public payments continue, and who pays debt service? |
| State tranche delayed | Can a funded phase finish safely, and who bridges the gap? |
| Higher rates | What reprices and who can decline financial close? |
| Operator default | Which entity pays and what does continued operation cost? |
| Major earthquake | Who restores, where do teams play, and what debt survives? |
| End-of-term deterioration | What reserves and security fund the correction? |
Corrections to the earlier estimates
We retire the combined $1.1–1.2 billion “market-standard return” floor, the $2.5 billion arena-value headline and the claim that security is free to a compliant owner. Comparables show feasible mechanisms; they do not prove every favorable provision can be combined at the same price. PFM includes fully publicly funded renovations and notes limits to what its capital comparisons capture.
An assumed yield on construction cost does not establish demand, new revenue or profit. Gross receipts are not net income. Franchise appreciation may capitalize earnings already counted. Avoided repairs, future maintenance, guarantees, principal and debt service can overlap. A tax deduction’s value depends on the actual taxpayer and timing; a generic cents-on-the-dollar claim is inadequate.
Relocation has obstacles and requires NBA action, but its probability is not established as zero. Expansion exploration is not a completed award of two markets. Conversely, neither a forced franchise sale nor a tenant-controlled option is an alternative the City can simply elect. Price the actual choices, including delay and tenant disruption.
Sources: State PFM comparables review · NBA expansion announcement · Exclusive Site Agreement approval exhibit