I’m really excited. When you guys see the drawings that reflect the changes and the improvements and the repurposing of certain spaces, you’ll see why I’m excited. It will give us what I think will be a new arena at a very economical price. —Greg Miller
SALT LAKE CITY — When Greg Miller was CEO of the Utah Jazz, he engaged in a similar conversation with then-NBA Commissioner David Stern during occasional phone calls.
“The first words out of his mouth,” Miller recalled with a laugh, “were, ‘Do you have a new building underway yet?’”
Miller would then respond, “We like this building.”
“I like it too,” Stern would tell him.
Though no longer commissioner, Stern, no doubt, will likely be happy to hear about the Jazz’s plans for Vivint Arena. This much is sure: Miller’s love for the sports and entertainment venue his father proudly constructed 25 years ago will increase by the time his family’s team opens the 2017-18 season.
That is when the organization anticipates that the building’s $125 million facelift — a "major renovation," as new Jazz president Steve Starks describes it — will be completed.
“I’m really excited,” said Miller, who remains the team's representative on the NBA's Board of Governors. “When you guys see the drawings that reflect the changes and the improvements and the repurposing of certain spaces, you’ll see why I’m excited. It will give us what I think will be a new arena at a very economical price.”
The Jazz aren't ready to disclose exact details of the project that brings a large smile to the faces of ownership and management — aside from divulging that some technology (e.g. WiFi) and the roof will be improved this offseason.
However, the project's budget has been finalized.
The price tag for the renovation has been set at $125 million, with the vast majority ($102.3 million or 82 percent) being funded by Larry H. Miller Sports & Entertainment.
The remaining $22.7 million (18 percent) will come from public funding if the organization's proposal to Salt Lake City's Redevelopment Agency next Tuesday is approved in that group's monthly meeting.
The Jazz worked with city leaders, including the mayor's office and the Chamber of Commerce, to come up with an economic solution that team officials believe is a win-win for the team and the community.
If given the thumbs-up, the public finding would be delivered via intermittent payments over the course of the next 25 years, perhaps sooner, through the city’s Tax Increment Reimbursement mechanism.
This is an incentive program the RDA implemented to promote redevelopment in specific locations around the downtown area, including the lot that's situated next to Stockton and Malone streets on the west side of the city.
The way this Tax Increment Reimbursement program works is simple.
The Jazz currently pay about $1 million per year in property taxes for the Miller-owned Vivint Arena, which sits on city-owned land. If the value of the building increases — and they anticipate it will by a lot — the city will incrementally reimburse the franchise 40 percent of the tax increase. The other 60 percent of the newly created funds will go to the Salt Lake City School District, the city’s fund, the Salt Lake County general fund, etc.
“It’s performance-based,” Starks explained. “If through renovation it doesn’t create value, then we don’t get the reimbursement. We bear the burden of creating the value there. It doesn’t take away budget that’s going to other places because it would all be incremental. That minimizes the risk to the city.”
This is a different approach than the Jazz took when building what was known as the Delta Center in 1991. At that time, a public bond was approved and taxpayers footed $24 million of the original $90 million in construction costs.
In other words, Larry H. Miller’s organization paid 73 percent of the cost 25 years ago while the public chipped in 27 percent. Both the total amount and the percentage the public will contribute this time around have decreased.
“The principle that the (Miller) family laid out — financially responsible, fair to everybody — we feel like we’ve accomplished that with this approach,” Starks said. “It’s fair. We create the value. We can share in the value that we’re creating through the investment.”
The public bond in the early 1990s resulted in a lofty return on investment over the ensuing 25 years to the Wasatch Front ($2.05 billion), Salt Lake County ($1.99 billion) and Salt Lake City ($720.8 million), according to an economic impact study provided by Christine Richman of GSBS Consulting and peer reviewed by the University of Utah’s Gardner Policy Institute.
That was estimated to be an ROI of 3,004 percent for Salt Lake City.
The new projection — made and reviewed by the same entities — suggests much bigger returns on investment for the Wasatch Front ($4.5 billion), Salt Lake County ($4.46 billion) and Salt Lake City ($3.31 billion) through 2041. Salt Lake City is projected to benefit from an ROI of 14,391 percent.
“We felt it was the responsible way to fund the project,” Miller said. “We’re the stewards. We accept the responsibility, the burden of protecting the asset, and with that comes significant financial responsibility, and we’re going to step up to it.”
In their presentation to the Salt Lake City RDA, the Jazz will also point out that their 82-18 split favorably compares to other arena projects in the NBA.
The league average split is 52 percent private funding and 48 percent public funding, according to a report via Marquette University.
Small markets rely even more on public funding with a 59-41 split. In comparable arenas — buildings in bottom-10 markets that have opened since 2002 — the public provided an average of 86 percent of the funding, according to that same study.
“We’re only taking 40 percent of the incremental. There’s still 60 percent incremental created from this project that will go back in (city coffers). It’s going to benefit across the board,” Jazz chief financial officer John Larson said. “This project will actually help the education of the state of Utah.”
Tuesday's anticipated approval will be the next step in the process, which began years ago when the Jazz began brainstorming about how to get more fans into fourth-level suites and how to maximize the potential of the arena for fan enjoyment and increased revenue.
That exploratory process led to the Jazz hiring arena construction and renovation specialists the ICON Venue Group and SCI Architects to assist with the planning and remodel.
As the Jazz considered their options — all of which included keeping the franchise in Utah but not necessarily at the same site — it was determined that the best choice would be to work with the solid bones of the existing building.
A new building would have been much more costly than the renovation.
“They (consultants) said this arena is so classic in its design and the structure of it on the city block that a renovation will get you all of the things that a new build will get you essentially,” Starks said.
“We feel great about that because if we were to look at building a new arena we’d be looking at numbers that are five times what we’re talking about. That becomes a different conversation about how we’d approach that. We were fortunate to have an arena that was built originally the way it was.”
Added Miller: “It became clear very quickly that the best solution for a number of reasons was to just rejuvenate this building.”
Remaining in downtown Salt Lake City — a spot very near and dear to the hearts of the Miller family — is a huge bonus for the organization.
“This is home to us,” Miller said. “We love it.”
By the time the renovation begins, Vivint Arena will be the oldest building in the NBA that hasn’t undergone a major enhancement. Overall, it’s the seventh-oldest arena in the league.
The update will mostly be on the interior, but Starks said there will be visible changes on the exterior, including to the plaza, which is considered public property.
According to the Jazz’s RDA proposal, other objectives include:
• Returning the arena to a first-class venue for the benefit of all guests (from the front row to the highest seats)
• Upgrade safety and security standards
• Improve environmental and energy efficiency (including the use of solar panels)
• Enhance spectator and performer experience (this will comprise a complete seating overhaul using the deep structure of the bowl and new basketball areas for which general manager Dennis Lindsey and coach Quin Snyder were consulted)
• Modernize technological capabilities and services (arena WiFi included)
• Contribute to revitalization of westside downtown (The Gateway is about to undergo massive changes as well).
Part of the $125 million in renovations includes the $15 million the Jazz spent on their humongous, state-of-the-art video screens, among other changes over the past five years.
Miller said the upcoming arena renovations are comparable with that immense scoreboard upgrade.
“Everything you see will be on par of that,” Miller said. “You look at the JumboTron that we had. It was like a transistor radio compared to what we have now. I think you’ll see the whole facility mirror that same feel once it’s upgraded.”
Once the funding proposal is approved, the Jazz will finalize renovation details, make a public announcement to display the plans, hold a ribbon-cutting ceremony and then begin the two-summer project.
The Jazz have been communicating with voting RDA members, so they don’t anticipate any hitches in the funding-approval phase.
“The support,” Starks said, “has been very positive from everybody that’s been involved with this, which we’re grateful for.”
Perhaps Miller should consider giving his old friend and ex-NBA commissioner a phone call to deliver the news that Stern had hoped to hear for several years.
“When we’re done, we’ll have a facility that we can all be proud of,” Miller said. “I’m excited about that. I’m eager to be a part of it.”