Abbotsford Heat Dipping Into Public Coffers

Kent Wilson
March 18 2010 10:45AM

Outside of trades for doddering Oiler defensemen and fourth round draft picks, it seems the Flames orginzation is annoying people outside the realm of hockey decisions as well.

In this Province article, Kent Spence relates a cozy little deal the Heat have with the city of Abbotsford, as well as the local residents resistance to the arrangement:

 Council approved a deal with the Heat on Monday that will guarantee the team its $5.7-million annual expenses, regardless of fan support, which is 34-per-cent below expectations.

The subsidies absolve the team from paying its $200,000 annual rent at the Abbotsford Entertainment and Sports Centre unless a profit is made.

...

Vince Dimanno, president of the Abbotsford Ratepayers Association, said the subsidy amounts to a $57-million "liability" over the 10-year length of the deal.

"It's debt. Abbotsford has assumed all the risks. The owners risk nothing. There is no business plan to turn this money-loser around," he said.

The article also notes that the city is having trouble finding budgetary resources to pay for police, road repair and a local community pool. City manager Frank Pizzuto's lukwarm response was "a thriving community needs a little bit of everything. Council made a tough decision [on the contract], but I think time will prove it was a good one."

The decision to invest public funds into professional sports is hardly original or unique to Abbotsford. North American sports teams of every stripe and color have been dipping into the public trough for decades, usually in the form of subsidies to build and/or maintain arenas and the like. The Edmonton Oilers have been revving up their own propaganistic campaign recently to convince tax payers up North to okay the creation of a fresh new Rexall place for their billionaire owner.

There are several economic and non-economic arguments often made in these cirucmstances. The latter usually consists of pandering to civic pride by implying that a sports team or facility will somehow make the city bigger/better/more interesting, be it in the eyes if the locals or people in general. This argument has been frequently proferred in the recent Oiler debates, with the need to re-make Edmonton into a "world class city"*: a claim that is somewhat echoed by Pizzuto's claims above about the needs of a "thriving community".

*(I would suggest that the new facility would have to be house navel battles and gladitatorial wars between slaves, lions and Christians in order for it to accomplish that feat. But I digress.) 

The economic arguments usually consist of theorized future benefits such as an increase in concert/events, improved development in and around the arena as well as the creation of new jobs associated with the team. Unforuntately, most economic studies done on the subject have found that the benefits of public investment into pro sports teams/arenas to be, at best, limited (and, at worst, major liabilities). As Roger Noll and Andrew Zimbalist argue in this article:

Unfortunately, these arguments contain bad economic reasoning that leads to overstatement of the benefits of stadiums. Economic growth takes place when a community's resources - people, capital investments, and natural resources like land - become more productive. Increased productivity can arise in two ways: from economically beneficial specialization by the community for the purpose of trading with other regions or from local value added that is higher than other uses of local workers, land, and investments. Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers.

Stadiums and teams are of value insomuch as they create value in the community. And if that were the case, one could obviously argue that no public money would be required, because private dollars tend to flow in the direction of value creation (meaning: good investments). On top of all that, the current deal is a terrible one for the city of Abbotsford because it's a bad bet; the city assumes all of the future risk while the team accrues a huge chunk of the benefits. If the Heat fail to attract fans and garner revenues, the city (meaning, the tax payers of Abbotsford, both hockey fans and non-hockey fans alike) are stuck with the bill. If they're successful, both parties "win" although even then there's no way to know if the city could have used it's resources in a more efficient or perhaps more civically responsbile manner. Either way, the Flames organization can't lose here. For Abbotsford, however, there is a huge potential downside.

The risk isn't a trivial one either. AHL hockey is a tough sell, as evidenced by the fact that the Flames have had to move their minor league team no less than three times in the last five years in the vain search for a viable market. There's mutiple reasons AHL hockey is a lackluster business opportunity - it's "not quite" proferssional hockey, the lack of bonafide stars, the fluidity of rosters etc. In 2007-08, the average attendance per game across the league was just 5,115. Keep that figure in mind when consider the fact that the 7,000 seat Abbotsford Entertainment and Sports Center cost the BC tax payers $82 million to construct...on top of which the city is now guaranteeing the Heat their yearly expenses.

I'm a fan of the Flames hockey team and, in general, I like the Flames organization. The Franchise has always struck me as a strong community leader and corporate citizen here in town. But this scheme is pure pork barrel politics. It's exploitative and should be roundly denounced as such, even by those of us beyond the city's borders.

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Former Nations Overlord. Current FN contributor and curmudgeon For questions, complaints, criticisms, etc contact Kent @ kent.wilson@gmail. Follow him on Twitter here.
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#1 walkinvisible
March 18 2010, 11:07AM
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back in october, i wondered where the heck the crowd was in abby. i also joked that the team was going broke because their website looked like s***.... i guess those comments aren't so funny now....

ps: the html above better work cause it's a lot of effort, and one of my biggest beefs with FN. my other biggest beef is that i can't even write "H-E-double hockey stick"...

pps: the site won't accept my links in html form. now i will see if they will be accepted in ugly form:

http://hitthepost.blogspot.com/2009/09/heat-going-broke.html

http://hitthepost.blogspot.com/2009/10/monday-randoms-cleaning-off-desktop.html

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#2 walkinvisible
March 18 2010, 11:09AM
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there you go. i can't stand the flamesnation comments page. just sayin'.

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#4 Boondock
March 18 2010, 11:35AM
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The City of Abbotsford's big mistake wasn't making this deal with the Heat, it was building a $100M arena with no tenant in place. They're now locked into a horrible deal with the Heat, but it's better than the alternative of their shiny new building sitting empty.

If I paid property taxes in that town I would be ten different kinds of pissed off, but I'm not, so I will continue to mock my friends and relatives who are.

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#5 Justin
March 18 2010, 11:37AM
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@walkinvisible

Upgrade! Upgrade!

Great article Kent. It is all too often a sports team promises jobs, entertainment, and communitty growth, and then fails to deliver. The worst part of it is that, like in Abby, those who initally support the plan (taxpayers) are shafted into having to shoulder the load.

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#7 Domebeers.com
March 18 2010, 12:07PM
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In general, a couple of things. I am interested in finance and that stuff, so one little asterix to the 'most studies show that they (stadiums) don't produce ecomomic benefit' are paid for by people who would rather the public funds go to their agenda. Ask the casino and bar owners, the taxi car drivers and restaurants in this city if a Flame win doesnt equal a big night.

I mean, what do you think is a better way to spend public funds, a stadium or a bus terminal? I know which one produces jobs and value.

Now, as to this situation, obviously the Flames got a sweatheart deal. That is on the voters of Abbortsford if you ask me. If they didnt want this bondoogle, they shouldnt let the idiots who are running that city stay in power, or get into power. Would Abbortsford have been better off spending 82 million dollars on an airport nobody would use? On infrastructure they don't need? On city union workers?

I don't know how decisions are made in that city, but I am assuming that the voters gave it the ok. If they are pissed off about it now, who is that on? I don't blame the Flames for taking advantage of the situation. It means they have good ownership.

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#8 Justin
March 18 2010, 12:30PM
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@ Domebeers

That's the problem with representitve democracy, though. You put someone in power, and you may not agree with all of their decisions-but you can't do anything about because you have to wait for an election. Then again, council meetings are generally open to the public, so if the taxpayers didn't want the arena, then they should have made an argument against it.

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#9 jess
March 18 2010, 12:31PM
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I go to several heat games, including the last moose game there, and I'll be heading to the next one, and whatever other games are included in my quarter season package. That stadium is LUCKY to have MAYBE 2000 people there. The locals seem to not care, and most are Canuck fans due to close proximity to Vancouver.

This deal is horrific for the local people though, unless they start attending every game. It can't be hard to get 7000 people in there, outside of a serious lack of parking. Tickets are sooooooo dirt cheap and the hockey is pretty fun - I saw Jaffray score a hat trick last weekend! My biggest problem with the heat, is they traded Riley Armstrong, my favourite Heat player. His name on his Jersey was R. Armstrong, which when read quickly enough looks like "RAMSTRONG", thus his nickname. :(

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#11 Boondock
March 18 2010, 02:06PM
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Kent Wilson wrote:

I think it's only potentially better. If the Heat are a net drain on the city every year, then they're left paying for the Arena AND the Heat's expenses (rather than just the arena alone).

Yeah, you're right, I should have worded my post differently. The point I was trying to make was that with or without the Heat, the people of Abbotsford are getting screwed in this deal on a massive scale.

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#12 Domebeers.com
March 18 2010, 08:43PM
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Domebeers, you got a take?

Let's see, taking an academic study at face value in the face of the entire history of academic fraud is at best very naive. Was the paper peer reviewed, or something?

Also a local economic benefit as justification to build stadiums is not baseless, its entirely relevant. These things are amortized over at least 30 years, and the money is spent in the first couple of years. Where is it spent? Do martians build it? I bet they spend that money on martians and not the local work force. Obviously benefits apply to all stadiums, which means all one had to do was to extrapolate the benefits derived in Calgary to the benefits received in Abbotsford after a Heat win, on a smaller scale. But you knew that and were just going for an easy line, I know, because I do that.

As to whether or not people get the governments they deserve? It's very easy to look up how the people voted on the measure: 54.8% majority to build the stadium. Simple research Kent. The people voted for it. Your problem is with democracy, not with me for pointing it out. That number wasn't hard to find. It is almost like you didn't even look.

Hey, I have an idea. Let's look up Mr. Noll and Mr. Zimbalists resumes, shall we?

They are very easy to find:

Noll http://economics.stanford.edu/files/Noll_cv.pdf Zimbalist http://sophia.smith.edu/~azimbali/biography1.html

These guys have never held a job outside of academia ever, and they are going to tell me what creates and doesn't create value? Obviously, they are suspect people to use as your champions. Honestly, Kent, for a guy who likes his advance stats and research, the fact that you didn't do a background check on this is a little surprising.

If you have an agenda against this kind of public policy, then say so. Kent, I will be honest with you. I very much appreciate the support you have given Domebeers. You put me on your blogroll at fivehole, and you probably added 20 daily readers to my site by doing that. I haven't cracked 100 daily yet, so that number is noticeable. But this isn't your best work, in my opinion, and it doesn't look good on you.

This is also posted as a response to the original comment on flamesnation.ca.

Furthermore, I think Peter Loubardias should be fired.

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#13 rubbertrout
March 18 2010, 10:04PM
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I like soup.

*honestly my head hurts now. I didn't think I'd be reading about "pork bellies"

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#14 RossCreekNation
March 19 2010, 02:28PM
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So how is this the Flames' problem/fault? Should this not be on the city of Abbotsford? I recall Ken King saying last summer before the deal was official, that the Flames would not be spending a dime... that the owners in Abbotsford had a model that did not require the Flames to spend $0.01. Am I wrong? Its not as though they're "pulling a fast one". They knew the deal ahead of time, and now they pay the consequences.

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#15 RossCreekNation
March 19 2010, 03:01PM
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Perhaps Abbotsford would have more success if the Flames & Canucks swapped Abbotsford for Manitoba. Just sayin'...

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#16 rod blogojevich
March 20 2010, 11:29AM
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Gotta agree with domebeers. No way in hell do I ever take some Economics PhD seriously. After you spend more than 4 years at university and pursue a Masters or PhD in the Arts, you immediately become a communist. If these PhDs in Econ are so smart, they'd be out in the real world making money, not writing articles.

Also, the Huffington picture is brutal. Keep that b*tch away from anything that has to do with my Flames

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