Mo Money, Mo Problems

Justin Azevedo
October 04 2012 11:04AM


This isn't about wealthy people, and it isn't about giving money to rich people to build buildings and do their business.

With all due respect, Mr. King, it is about wealthy people.

It's about rhetoric that's been tried again and again over the course of recent history - justifying public dollars being spent on projects that will fill the pockets of a private enterprise. 

The issue is that we value sports teams too much. The economic impact of a new stadium - let alone the actual team - is minimal at best, and sometimes even a negative. It makes sense to a large degree - there is a temporary job boost while the stadium is being built, but that's the same as every construction project. The vast majority of revenues are kept by the team, which is an isolated group (i.e., with little impact on buying and selling things in the local economy) within a larger organization (the NHL, not the city or economic area) and as such most of those revenues just sit there, not being injected into the public/local economy. The jobs created by the sports team themselves aren't likely to change unless the stadium size increases exponentially, which it won't since the Flames are having a hard enough time as it is to put butts into seats.

If the Flames are highly profitable (which they are, and don't let Forbes' valuations skew your views - I will expand on this in the future), then all they're doing is allowing money to sit there, which helps only the Flames.

The team won't move, for all of the same reasons Edmonton won't: they make too much money. Even if they do, a market like Calgary (million plus population, oil money, vibrancy of the city, hockey loving) won't be without a team for longer than a year.

But to the arena itself: there's two main issues the Flames will run into here that the Katz group didn't have to deal with in Edmonton: the first is that there is a severe lack of space in the downtown core to build another arena. Almost certainly if the Flames wish to pursue an arena downtown, they'll have to buy an existing property, level it, clean it up, and then start building. That, of course, creates a whole mess of issues because it's unlikely you're going to find some company downtown that wants to move.  

The other is that Calgary's downtown is not like Edmonton's downtown. While Katz has been trying to sell his arena as a sort of "revitalization project", the Flames will have to call their arena exactly what it is: a sporting facility.

The reason for this is quite simple: Calgary's downtown is in need of exactly zero revitalization, and anyone who tells you otherwise is flat-out lying.

There are precisely three places that I can think of that would work for a new arena downtown, and trust me when I say that it needs to be downtown. (Why? Calgary's urban sprawl has just made it too difficult to be able to get from one end of the city to another in an efficient manner. Think about it: if you live in Mackenzie Town, do you really want to have to drive or take a bus anywhere north of the Trans-Canada for a game? If you're travelling that far, you're starting to spend almost as much time driving as you are at the game.) The Flames owners also want it to be near a C-Train line, but relying on Calgary Transit to be the primary mode of transportation to and from a game is a nightmare right now, so that's not exactly a good starting point.

The first is the one that is the most obvious: Stampede Park. There's an existing relationship with the Stampede board, Edwards owns a bunch of the surrounding land and it's a location that's familiar. The issue with that plan though is that the Saddledome will have to come down in order to facilitate the extra parking needed, as the amount of land there that's not being used for parking space during games is quite little.

The second possibility is in the East Village near the river, and I think that if the Flames go to council with this they'll get some money for sure. Everyone knows about how much of a sinkhole the EV has turned out to be over the past two decades, but I feel like an arena project on the river could be looked at as a keystone development and get lots of funding as a result. The issue here is that it lacks C-Train stations, unless you want to park your car at the Zoo - but what's 10 million for a new platform, right?

The third possible location I only heard about a week or so ago, and it's currently where GSL Chev City sits. Apparently Edwards owns land on both sides of Bow Trail and into the industrial area near the Pumphouse. It's an expansive piece of land, and right near the new West LRT stops by the old Science Center and the 5th Ave connector. Buying out a dealership of that size and scope wouldn't be easy, but the Flames have more than enough capital to do so. The thing I find interesting about this location, however, is that it's big enough to also have a football facility attached to it - which would work nicely as the University-owned McMahon stadium is really starting to show it's age. The Flames would have a tough(er) time getting money from the council with this land though, as shutting down a business of that scope would have some economic impact.

Regardless of the location, the Flames are going to want money, and they're going to bully the city with the prospect of moving the team. It's going to be like a 6 year old who wants candy.

I believe there is a major difference between here and Edmonton, though: our Mayor isn't one to be pushed around. It's going to be an interesting power struggle, and I look forward to laughing at those who thought the Peace Bridge was a waste of taxpayer money but a new arena won't be. I don't doubt that the city will give some money to the Flames (and expect taxes to increase as a result), but if they're doing that they need a substantial cut of the profits from the new arena to make the ROI worthwhile in both the short (<5 years) and long term.

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Justin is a 22-year-old Flames fan who also happens to be pursuing a double major at the University of Calgary. He has played hockey at high levels, enjoys wearing shorts and tends to drink far too much Grasshopper. Please don't hate him.
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#1 RexLibris
October 04 2012, 11:20AM
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Great article. Some very intriguing points that those of us outside Calgary might not necessarily be aware of.

I was wondering though, you believe that Mandel has been a pushover in the arena negotiations? The same day that Katz went to Seattle and the Katz Group was tweeting about relocation possibilities Mandel told them all to be back in front of council by Oct 17th and that he wasn't even going to recognize their current behaviour with a response.

From where I sit Mandel has been in favour of the arena because it achieves one of his goals, to revitalize the downtown core and encourage interior development over urban sprawl. Those shared goals aside, Mandel has also been quite stubborn, in a beneficial way, in some of his dealings with the Katz group.

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#2 Kent Wilson
October 04 2012, 11:28AM
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It will be interesting to see how the team goes about this. King's initial shot over the bow in the quote above isn't terribly encouraging.

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#3 RossCreekNation
October 04 2012, 11:42AM
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Good stuff Jazzy.

The one thing I'll note about up north here, is that the City WANTS a new facility downtown just as bad as Katz wants it there. I highly doubt the city would pht any $ into a facility downtown, but the city itself champions the idea of the "revitalization" of downtown. And while I don't think Katz should get ALL non-hockey revenues, I do believe the city SHOULD put $ into it. They looked at the possibility of refurbishing Rexall and discovered that it would cost in the neighborhood of $250M (this was also back a couple years), and that cost would be entirely the cities. Obviously, that would be a poor idea, and building a new facility downtown makes much, much more sense. Given the number already there, I think it's fair to suggest the city should cough up the $250M it would cost to refurbish Rx1 & put it toward Rx2.

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#6 RossCreekNation
October 04 2012, 12:14PM
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RossCreekNation wrote:

Good stuff Jazzy.

The one thing I'll note about up north here, is that the City WANTS a new facility downtown just as bad as Katz wants it there. I highly doubt the city would pht any $ into a facility downtown, but the city itself champions the idea of the "revitalization" of downtown. And while I don't think Katz should get ALL non-hockey revenues, I do believe the city SHOULD put $ into it. They looked at the possibility of refurbishing Rexall and discovered that it would cost in the neighborhood of $250M (this was also back a couple years), and that cost would be entirely the cities. Obviously, that would be a poor idea, and building a new facility downtown makes much, much more sense. Given the number already there, I think it's fair to suggest the city should cough up the $250M it would cost to refurbish Rx1 & put it toward Rx2.

*I highly doubt the city would put any $ towards a facility that is NOT downtown*

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#7 beloch
October 04 2012, 12:23PM
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The problem with Katz's latest offer was that the city (and presumably province) were going to provide almost all of the construction funding as well as the operating budget while Katz was going to rake in all of the gross. The city pays, Katz profits.

The only way for city hall to get any revenue back would have been that idiotic "ticket tax". What kind of moron expects people to pay a "ticket tax" to pay for the stadium? In a sane world the cost of the venue should be a part of the ticket price. Katz was clearly trying to screw city hall out of their fair share, since the tax, simply because it was called a tax, would be unpopular and there would be pressure to reduce or drop it even as Katz continues cranking up the ticket prices.

Given how much Katz wants Edmonton and the province to pay for the new arena, there's absolutely no reason to give him control of it or the revenues, let alone pass anti-competitive laws that prevent Rexall from competing with the new arena.

This really is the heart of the matter. If the municipal or provincial government invest in a for-profit venture like a new stadium then they should receive a fair share of the revenues proportionate to their investment. If King or Katz wants more of the profits then they need to pony up more of the capital. That's how the real world works.

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#8 Kent Wilson
October 04 2012, 12:28PM
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@beloch

This really is the heart of the matter. If the municipal or provincial government invest in a for-profit venture like a new stadium then they should receive a fair share of the revenues proportionate to their investment. If King or Katz wants more of the profits then they need to pony up more of the capital. That's how the real world works.

Agreed.

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#9 Domebeers.com
October 04 2012, 02:48PM
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Off the top of my head, I can think of one sports team/arena that is a community asset, and that is the Packers, where the community is in fact the shareholders.

I am not holding my breath in anticipation of some shares in Flames corp, even though it is this supposed community asset.

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#10 mayhemsince1977
October 04 2012, 04:01PM
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If Edwards and co. want to play hardball, then I say we play back. There are probably more people waiting in line to buy into a Canadian based hockey franchise than American cities willing to hand out a new facility.

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#11 Kevin R
October 04 2012, 04:36PM
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Sure a little ill timed in the midst of this greed battle of a 3.3billion hot out of the oven apple pie called Hockey Revenue. Not going to be well accepted by tax payers to eat these kind of costs to make wealthy owners and players state of the art playgrounds either.

Cant imagine a scenario where the City is being threatened of losing the team either. Personally, I could actually see it that if Katz was going to pony up way more $$$ on the condition they give him his Casino liscense, the Province(Alberta Gaming)should do it. Same deal if thats what King wants.

Economies were way better the last time around & the dollar sucked & and Canadian teams like us were desperate for a system(Cap) that provided a semblance of parity in the league. This time around, this is the wrong time for this kind of battle and especially the wrong time to asking Joe public for hundreds of millions of dollars to build a hockey rink. I cant imagine how many Joe public are out of work or reduced incomes from the collateral damage of this lockout & then Katz is demanding this sweetheart deal to boot. No wonder the answer was go get stuffed. Duh!

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#12 Tach
October 04 2012, 04:44PM
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@Domebeers.com

German Bundesliga mandates all teams to have some form of fan ownership/control. I also understand that there are certain teams in the EPL that have some form of fan/community ownership.

The only other North American example I can think of is maybe the EIG before Katz bought the Oilers.

That being said, I don't necessarily think widespread ownership in something necessarily makes it a "community asset". Shares in RBC are widely held, so to speak, I don't think that makes RBC a community asset.

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#13 They're $hittie
October 04 2012, 05:36PM
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a big difference between edmonton rink and calgary rink;

both cities will have somewhere in the high range of 1.5 million people using the rink

calgary will have 1.1 million calgarians paying taxes towards the rink

edmonton will have 800 thousand edmontonians paying taxes to the rink

strathona county, airdrie, st. albert, okotoks, cochrane, spruce grove, leduc, ft sask, stoney plain, will not have municipality taxes going to the rink.

Would be nice if the regions could help out. Wont happen though.

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#14 RexLibris
October 04 2012, 06:11PM
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@Justin Azevedo

That is certainly understandable.

It has been interesting watching Mandel's approach and reactions in each stage of this process. He has at times had harsh words for some of the City Council members who seem to want to delay proceedings if only to exert some semblance of power over a process some may not even completely understand.

At other times he has been perfectly willing to go face to face with the Katz Group over their business negotiation strategies. In this case he clearly has the advantage both by appearing as a defender of the public interest and as an individual with a great deal of political experience.

Mandel is perhaps the one person who has screwed up the least during this process (from the perspective of one who supports the building of an arena) but also potentially has the most to lose if this thing goes sideways. He has bet his political career and legacy as a mayor on this project.

Thanks again for the article on the Calgary process. I look forward to more information as it comes along. Sometimes the details of these things don't translate across media platforms and get lost outside of the local community.

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#15 RexLibris
October 04 2012, 06:12PM
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@They're $hittie

That's why many Edmontonians would argue in favour of a poll tax for bedroom communities to pay for civic infrastructure that services the capital region.

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#16 Glenn
October 04 2012, 07:18PM
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Great article Justin. I do know that the City of Calgary has already told the Flames organization there is NO money towards a new stadium.

However the City is willing to supply the land and it will be downtown. I can assure you that any major sporting arena in any market is destined to failure if it isn't located in or near the downtown core. Hello Phoenix. Your arena is in freakin' Glendale.

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#17 Jai Kiran
October 04 2012, 08:11PM
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Ottawa's arena is way out in suburban Kanata. Just an observation; I mean, downtown is best, no doubt

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#18 suba steve
October 05 2012, 07:37AM
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@They're $hittie

From my Okotoks perspective, I'd like to see more research to justify any of my tax $$ going to a new hockey facility in Calgary. I don't think any Calgary tax $$ went into Seaman's stadium (Okotoks Dawgs baseball), though I could be wrong on that. Not TOTALLY opposed to the idea, but would need to see some compelling justification before I'd say I'm behind the idea. We (like a lot of communities) need to build more ice surfaces in our own town before we put any funds toward feathering the Flame nest.

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#19 Domebeers.com
October 05 2012, 09:34AM
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@Tach

The shares Packers fans have are not like the shares you own in RBC. Whatever they are called, it's essentially a different class of security.

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#20 They're $hittie
October 05 2012, 02:05PM
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@suba steve

do you work in Calgary or Okotoks? What about your spouse?

I live in St. Albert and dont want to pay more taxes either, but it would go along way in helping get the arena deals done.

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