$100 Million for the XL Center? Here’s a better idea.
Updated: Dec 25, 2018
As we grow closer to Gov.-elect Ned Lamont’s inauguration, we have a clearer picture of the hard work that lies ahead to dig this great state out of its fiscal morass. So, with that in mind, I read with interest The Courant’s Dec. 8 story, “Ahead of inauguration, Lamont not committing to XL Center renovation” where Lamont has not yet committed to supporting a $100 million renovation proposal for the XL Center.
I don’t know what he will decide, but I have three words to consider: Public, private, partnership.
Numbers vary, but everyone agrees that the 43-year-old arena needs updating and a new operator. A $250 million renovation plan was supported by the Malloy administration that ultimately went nowhere, and now a slimmed down $100 million rehab plan is being floated. Sure, that’s a smaller amount, but can the state really afford it when facing billions in debt and pension liabilities? The stadium has lost $2 million per year for the last five years, so obviously there must be changes; however, the state cannot afford to give up on the arena, as it would mean giving up on Hartford.
The arena has had issues ever since the Hartford Whalers left in the late ‘90’s. While Hartford is a long way from the return of an NHL franchise, a restored commitment to the facility with private capital would be a huge step forward.
Look no further than Seattle. In the last month, a private developer stepped in to acquire the aging KeyArena at Seattle Center. The NHL has now committed to an expansion franchise in Seattle upon the developer agreeing to fund a complete overhaul of the arena. This is the new normal, and it would take something similar to get a deal done in Hartford.
Over the years, there have been offers to buy the aging venue and spend the money needed to renovate the center to attract franchises and other top-tier events. In fact, the Capital Region Development Authority (CRDA), which operates the facility for the city of Hartford, put out a request for proposals this year and received a qualified offer from a large Chicago-based real estate investor seeking a public-private partnership and a $250 million renovation of the arena to restore it to its former glory.
Public-private partnerships and sale-leasebacks such as the one proposed for the XL Center would have a multitude of benefits for Connecticut residents and taxpayers, including ridding the state of onerous financial obligations for a host of public buildings.
Connecticut is in a financial rut that was years in the making, and the old ways of trying to climb out of it – incurring more debt – won’t work. We need a sensible yet aggressive approach to get Connecticut back on the right track, and Gov.-elect Lamont can start with looking at alternative means to extract value from state- and city-owned properties.
The state owns several million square feet of commercial and specialized use space, and the government does not need to be in the real estate management business. It can sell off these properties and rent them back as a tenant.
Selling properties like the XL Center will position Connecticut for growth by slimming down government operations while increasing revenue.
We should be monetizing these non-income producing properties, such as the XL Center, and putting the money into investments that drive long-term economic benefits. This is not an idea without precedent. Several states, our federal government and numerous corporations have enjoyed the benefits of doing this.
The benefits of leasing real estate far outweigh those of ownership. Even the worst sale-leaseback program is much better than being forced to increase taxes or cut services to maintain an aging real estate and infrastructure portfolio.
Greg Kraut is a managing partner at K Property Group, a commercial real estate company and the Founder Solutionist at The Economic Policy Project. He is a member of the Westport Representative Town Meeting and was a candidate for the 136th State House district.