5 Things: Don’t give in

1) You want how much?

So CalgaryNEXT (or whatever they’re going to end up calling it) was unveiled yesterday with a handy pie chart of the costs and how the tab would be picked up.

In the end, the Flames seem to commit $200 million to the project, which conveniently includes a new rink and stadium for their various sports properties, out of a total $890 million cost. That’s less than 22.5 percent of the bill, and it’s a bilious initial proposal. A lot of transparent talk immediately followed from media cronies — Calgary’s answer to David Staples and his laughable 18-month campaign to get the city of Edmonton to pass the cost of Darryl Katz’s new rink onto the taxpayers — who said things like “this is about More Than Just The Flames” and “what is the city of Calgary without an NHL team?” 

(The latter included a revolting “You wouldn’t rob a little boy with cancer of the team he loves, WOULD YOU?” plea. On Day 1 of what is likely to be a long ordeal. That’s overplaying your hand as much as it is cloying and morally reprehensible.)

The immediate reaction outside the pages of the local papers, though, was thankfully one of incredulity and anger. How could a team ask for $690 million from a city with an economy based on a commodity that, well, isn’t doing so hot these days, with the Canadian dollar at its weakest point in years? These are reasonable questions to ask, and to its credit the mayor’s office seemed more than happy to be among those asking them.

2) A convenient omission

This is especially concerning, though, because the initial CalgaryNEXT — so named because, you see, this is the future of the city!!!! — presentation those numbers are only the cost of putting up the requisite buildings in the proposed area. Not of cleaning up the creosote contamination or altering and/or building more infrastructure to get more people to the new arena district. Those costs could add another 50 percent or so to the total bill, if my understanding is correct. 

Who’s putting their credit card down with that check? It’s obviously not clear, but given the initial ask from the franchise, it’s a good guess that the party holding the bag there will have a name that rhymes with “waxlayers.” It seems to me that $500 million or more is a lot of money to leave out of an estimate, but if this is the dressed-up, palatable version of the first offer on the table, then holy hell this could end up being bad for the city.

3) Here’s a good rule of thumb

Now, it’s important to note here that not all of that cost is going to come from taxpayers by and large. What I mean by that is a pretty big chunk is going to come in the form of a tax tacked onto the price of every ticket at the new rink. As “ways to pay for stadiums in this day and age” go, that is, I think, the least objectionable way to do things.

That’s because you’re only being taxed for using the facilities as much as you actually do so. And usually, the additional cost is pretty low; most I’ve seen are in the neighborhood of $2. So even if you’re a season ticket holder for the Flames, Stampeders, and Hitmen, you’re only paying $172 per year on top of the already-considerable cost of your investment. Assuming $50 for a Flames game, $30 for the Stamps, and $20 for the Hitmen ($3,040 not counting playoffs, preseason, etc.) that ticket tax would add about 5.7 percent to the total. If you can spend that much on tickets, the extra $172 isn’t going to make or break your decision. This is also true of people spending $50 per game; the $2 increase ain’t a big deal.

But again, this all assumes that there isn’t something gross about the average person paying for something that makes billionaires money. Murray Edwards, apart from being a key driver behind two NHL lockouts in the last decade, is worth billions of dollars, and if this was such a great investment, why aren’t he and his business partners digging between the couch cushions to scrape together the $1.something billion this proposed project (MORE THAN A BILLION DOLLARS!) themselves so they don’t have to cut the City of Calgary in on any of the revenues?

Oh yeah, it’s because most of these types of deals don’t cut their cities in on them, so why should Calgary be any different? Right right right. If you hear the details of the Edmonton arena deal — they don’t even get revenues from things like naming rights, non-hockey events, etc. — it seems like there’s shockingly little return on investment for the city. Which doesn’t (and to some extent shouldn’t) be of any concern at all to the billionaire plutocrats behind these schemes.

4) You’re not going to die

The reason cities are so anxious to bend over backwards to give money they don’t have to pro sports franchise owners — as with recently bankrupt Detroit giving hundreds of millions to billionaire Red Wings owner Mike Ilitch — is that, as the Sun’s goons were so quick to remind Calgarians this week, cities have a lot of civic pride wrapped up in their sports teams. And that’s their prerogative, of course. It only makes sense that they would. But owners know this, and aim to exploit it by any means necessary to save as much money as possible on building these sometimes-billion-dollar monuments to excess.

They will threaten to move teams, for instance, saying, “Hey look what happened with Atlanta and Winnipeg,” as though that’s any sort of reasonable comparison. Katz showing up in Seattle like, “Oh, hmm what’s going on down here?” was a ploy so transparent as to be non-existent; there was never any threat of the Oilers going anywhere. But if it milked $25 million more out of Edmonton’s city council, then the cost of the plane ticket and hotel room was very worth it. Likewise, in the coming months I would urge Flames fans to keep in mind that there is no market more attractive to Flames ownership than Calgary. Seattle isn’t going to build your team an arena, and neither is any other boogeyman relocation city. Kansas City? Portland? Yeah right.

And another thing owners often do, as we saw in Edmonton, is try to tie these arena demands into “revitalization projects” that ostensibly benefit the whole entire city and the economy does great wow aren’t you so lucky we came up with this idea?!?!?! That’s because, despite numerous independent studies that show the positive economic impact of “stadium districts” are negligible or non-existent, people continue to buy team-funded lies on the subject. Okay, a bunch of new restaurants and bars within walking distance of the rink? Great, but what about the ones near the old one? Again, if it’s such a great idea, why wouldn’t the Flames’ parent company invest in all this itself?

The lesson here, and one that must be repeated over and over and over until the speaker’s throat is hoarse and the listener’s ears are bleeding, is a simple one: “Don’t give billionaires money.”

5) Reasonable models

I should say here that I don’t have a dog in this fight. I live in Boston, on the opposite side of the continent and in a whole different country. But the thing about Massachusetts is that it does indeed offer a few decent models for how you can build stadiums without breaking the goddamn bank for them.

Massachusetts is, of course, famously ultra-liberal and pretty good at telling corporations to go stick it. Residents of Boston, for instance, recently bullied a hard-charging mayor’s office into dropping the Olympic bid for the 2024 games because, hey, the U.S. Olympic Committee wanted taxpayers to pick up the tab on a bunch of stuff. This is, of course, the Olympic business model, and that also extends to North American pro sports franchises, because it works.

Anyway, because of that whole moral objection to taxpayers paying for billionaires’ business centers, the state of Massachusetts and various cities around the state have occasionally run into upset sports owners multiple times in the last two decades.

It wasn’t so long ago that Red Sox owners wanted to build a new park somewhere in the city, and the city of Boston wouldn’t Play Ball (haha that’s a good one). No help on getting land, no help on stadium costs. So they privately paid for a bunch of improvements to the existing Fenway — which opened the day the Titanic sank! — and while the park still has its problems, it’s not a bad place to watch a ballgame. (One phase of the Red Sox ownership group’s plan involved building a “Sports Megaplex” that would have also housed the New England Patriots, and seems awful similar to CalgaryNEXT.) Until the Sox started to really suck the last few years, the park was sold out every night, and the team has made money hand over fist despite the restraints of an ancient facility.

Speaking of the Pats, owner Robert Kraft was likewise looking for a new stadium in the late ’90s and early 2000s, and at one point even threatened to move the team to Hartford, Connecticut, where he hoped to get a city-funded stadium built. Everyone balked, and Kraft ended up paying for Gillette Stadium privately, then eventually building a little shopping district of his own on adjacent land he already owned. It has worked out pretty damn well for Kraft.

And in the mid-90s, the old Boston Garden was in sorry shape. Here too, Jeremy Jacobs — the NHL’s Charles Montgomery Burns to Murray Edwards’ Aristotle Amadopolis — ran into plenty of municipal and state government-related problems, until Delaware North (Jacobs’ company) was able to secure loans to pay for the building himself. Jacobs is likewise doing just fine with how everything went.

Another example: I am from a city called Lowell, Massachusetts, where a municipal renaissance occurred in the mid-1990s that included the construction of two municipally funded sports venues: Tsongas Center, nee-Arena, a 6,500-seat hockey venue that housed an AHL franchise and the local college hockey team (UMass Lowell), and LeLacheur Park, a 5,000-seat baseball stadium that’s home to a short-season Single-A Red Sox affiliate and UMass Lowell’s baseball team as well.

These obviously do not carry the cost of a CalgaryNEXT, but they are instructive in a way. The city and University paid a combined $35 million or so (in 1998 dollars, so more like $52.5 million today) for the two buildings. But the city and school owned the buildings, not the teams that inhabit them. You can bet that wouldn’t happen with CalgaryNEXT, which, yes is a project that’s going to be at least 20 times larger, but bear with me.

Even then, with the pro teams not owning the facilities, things didn’t always work out. The AHL team’s lease was, shall was say, extremely favorable to it. They got a huge amount of revenues from every event held there, to the point where the city was losing a lot of money every year. And then the AHL team (originally affiliated with/owned by the Islanders, then the Islanders and Kings, then the Carolina Hurricanes, then both the Hurricanes and Flames, then both the Hurricanes and Avalanche, then the Devils; it was a weird 12 years) basically started making a bunch of noise about how if they didn’t get a better deal they’d leave. So the city said, “Good riddance, we’re losing a ton of money anyway,” sold the entire arena to the university for $1 (in addition to a land swap), and washed its hands of the whole affair. UMass Lowell likewise couldn’t strike a lease deal with the AHL team — which then moved to Albany, New York — and has since turned the arena into a money-maker.

Again, all these deals are in many ways different from CalgaryNEXT, due to their size, the eras in which they happened, and so on. But they do show that, if things are done correctly between city and franchise (essentially a private business in which locals feel invested for reasons that do not on their surface make sense or, as it concerns costs, matter), everyone does well at the end of the day.

Calgary doesn’t need to pay $790 million-plus to reap the benefits of CalgaryNEXT. The Flames’ ownership would like the city to pay that much anyway, but that’s only because they feel like they can push taxpayers around by threatening to leave, and pointing to Edmonton’s ridiculous arena deal, and saying, “Well they got this!” a lot. (The province also set a bad precedent for the people of Calgary here.)

This initial gambit by the team is garbage, and most people seem to recognize that even in saying that they need a new football stadium and rink. These two ideas are not necessarily connected in such a way that they are inseparable, no matter how much you’ll be told they are.

I will once again advocate: Don’t give billionaires a penny of your money. But given that this is unrealistic in the current climate, please understand you have more bargaining power than you’re going be told you do. Wield it with every ounce of strength you can muster. You can have a new arena for your beloved team without paying for almost all of it. Don’t listen to the people who stand to profit from your loyalty.

  • Burnward

    Here’s a question fans: would you rather the Flames pay for the arena in full if it meant them operating with an internal cap at 65 million?

    Purely hypothetical.

    • Colin.S

      And why should that factor into any decision to spend almost 900 million dollars of public money.

      OH NO GUYS!!! If we don’t give the Flames 900 million dollars they won’t be able to sign Engelland to that 4 million extension he deserves.

    • mk

      Yes. It would suck from a fan perspective.

      I doubt it would ever get there however. If the team were forced to pay for everything, the fans will pay the price (they have to get the money from somewhere – its a business). And that makes sense. It is an entertainment form (a great one) that people are paying for.

  • Ramskull

    Any threat to move the team is toothless. There are no greener pastures that sell out a 20k person arena for the NHL to relocate too. It’s not just the ownership in Calgary that makes the relocation call and, as Bettman has shown, the league is committed to the cities they are in no matter how ugly things get.

    • Colin.S

      There is ZREO threat of relocation unless the Toronto Maple Leafs decide they are okay with the Flames moving the team to that new arena just north of Toronto (forget which suburb just built a 18,000-20,000) seat arena. I mean let’s look at the possible destinations they could go:

      Quebec City: Didn’t their team have to leave last time the dollar got this low? They also have almost half the population the city of Calgary does. They also have to compete with the Canadiens in the province and that’s an entire different ball game than having to compete with the Oilers for the rest of the province.

      Las Vegas: How are things going in neighbouring Arizona…… yeah I don’t see them giving up their about top 10 revenue in the NHL for that.

      Seattle: If they can’t get public dollars from a Canadian City that bleeds the NHL, what chances do they think they have getting anything from Seattle that’s already said they won’t give up public dollars?

      Atlanta: Third times a charm?

  • Colin.S

    Copy and paste of my comment from the last Flames Nation about Calgary Next and the Flames “contribution”:

    I said it a few times in the other post about this and I’ll say it again. Ryan that 200 million is the biggest smoke screen that the Flames are putting up about the project.

    Lets look at the link you gave about Katz’s 130 million he put up: “The Katz Group will provide $130-million of financing for the arena.” Oh well that doesn’t look so bad, well how about we look a little further into the deal: http://www.edmonton.ca/city_government/projects_redevelopment/arena-funding-model.aspx

    Hmmmmm…… something seems odd here, the 130 million doesn’t seem to be an upfront 130 million to be used to fund the construction of the building: “•The Katz Group will pay the principal and interest costs for $112.81-million of their contribution as rent over 35 years. The remaining $17.19-million will be paid as cash.” So they are not actually putting up 130 million, they are only putting up 17.19 million and the rest get’s spread out over 35 years. So of a 480 million project (just the arena) the Katz group put up 3.5% of the initial building costs.

    So anyone saying that the Flames are putting up 200 million of their money, wait until the Flames release their funding scheme for that 200 million because I’m willing to bet cash that they are probably looking at something similar to what Katz did. That means the city has to put up even more of their own money to build this building. If the funding scheme is the same as Katz, then the Flames will only be putting up 36 million of the estimated 900 million. That’s pathetic if they want to control the whole of the project and receive all revenues.

    END COPY AND PASTE.

    So Ryan, they are not just asking for 690 million they may be asking of upwards of 850 million up front.

    As for the creosote waste. It’s fine that the city owns the land and cleans it up. No private enterprise was ever going to buy that land with the contamination there and who in there right mind would trust private enterprise to do it properly anyways. It’s in the cities best interest for them to take care of it because they are the ones that will benefit the most in the long run anyways from future developments that will go there once it’s taken care of.

    And I think your estimate of 500 million for infrastructure is low IMO, the needed upgrades and changes in order to accommodate the level of traffic that all those buildings and future living spaces would generate in an already congested area could easily cost as much as the project itself.

    The solution to this project is simple, if the Flames are fine with the City of Calgary owning the building and taking all the parking revenues, LRT revenues, concession revenues, signage revenues, concert revenue and all other associated building revenues and the Flames only get their gate tickets for their events then sure, the City can put up the billion dollars and call it a day, with all the revenue and new taxes they’ll probably end up recouping the costs or making money over the life of the project.

    But if the Flames want complete control and revenues, build the damn buildings yourselves.

  • Bean-counting cowboy

    Now this is a 5 Things I can get behind!

    Although I live in Lethbridge, and it does not affect me whatsoever how much the City vs. the Flames pay, I am opposed to the City paying such a large piece based solely on principle. I would be one pissed taxpayer if I lived in Calgary and the City agreed to the current proposal.

    And if the Flames pull a Katz and make a trip to Seattle, or wherever… If I’m Nenshi, I laugh in their face. How long before someone else brings the NHL right back into the Calgary market?

  • Parallex

    “for the two buildings. But the city and school owned the buildings, not the teams that inhabit them. You can bet that wouldn’t happen with CalgaryNEXT, which, yes is a project that’s going to be at least 20 times larger, but bear with me”

    Actually they were very explicit about that… the city would own the buildings and the land.

    Personally I don’t see any big benefit to that… actually it strikes me as a good way for the Flames to avoid being stuck with the white elephant that the facilities will become once they’ve outlived their usefulness in 30-40 years time while presumably taking the Lion’s share (if not all) of the revenue made in the meantime.

    • Colin.S

      100% this , want an example of what happens to a stadium after the tenant leaves:

      https://en.wikipedia.org/wiki/Astrodome

      Harris County is now stuck with a giant eye sore that costs them money. The Flames ownership group doesn’t want to be stuck with that and that’s why they don’t want to be the ones to own it. They’ll just try to get the same revenue agreement that Katz got though (ALL the revenues) without having to take any of the risk.

      But it sounds good in presentations that the city will still own it.

  • wot96

    Good article, Ryan.

    @JB1213, I happen to agree in the sense that I think that cleanup is not the responsibility of the team or whoever develops that site. That ship has sailed and, sadly, remediation costs will fall upon taxpayers and taxpayers alone.

    Remediation costs should not be an externality to the economics of building the facility there, whether that is an arena or any other community that will eventually go there. Neither, however, should the costs be held against the developer. If clean up is required, it is required and that is a factor in whatever gets built there.

    As I have said elsewhere, I just don’t think that’s the site for it. Having thought about it for a bit, I would have thought that repurposing parts of Foothills Athletic park to put in a new field house first and then tearing down McMahon to build a new arena might have been a better way to go.

    But that would require making a deal with the University and therefore splitting revenue. So, clearly a no go.

  • KACaribou

    Why is everyone making such a big deal about the Creosote contamination? Let’s say, for argument’s sake, the flames DO NOT build on this parcel of land.

    Guess who will be ultimately responsible for the cleanup? the TAXPAYER! So why is everyone getting bent out of shape because “billionaire owners” want to build on the land. We aren’t getting away from paying for the contamination cleanup no matter what gets built there. The City shouldn’t have purchased this land anyway (there was ample studies showing extensive contamination here).

    • SmellOfVictory

      Well, the area has gone decades without being cleaned up, so my assumption is that, if there is nothing new built in the area, there will be no cleanup cost.

      But either way, I don’t hear a lot being made of taxpayers paying for the cleanup; it’s more an issue with the expectation that we’ll be helping pay for the stadium itself. If the offer was “the Flames will pay for the building, if the taxpayers pay for the cleanup”, no one would have any complaints at all.

    • The problem is… The Flames want this “right now” and their argument is that by being an anchor tenant in the area it will spark the redevelopment of the area, contrary to any evidence that has ever shown this to actually work anywhere.

      The City cannot afford this “right now” maybe in 10 years when East Village is done the city can put together a CRL request with CMLC and redevelop the West Village and clean it up properly and add the infrastructure required to the area. Right now they can’t afford it. Moreoever, there’s no need for more inner city development at this time. Downtown core residency has dropped off and there’s an abundance of space available for rental and or purchase.

      So yes, this is true. They would need to do it anyhow and need to do it eventually. But this argument is a slippery slope as predicated by need. The fact is our need right now does not outweigh the necessity to clean it up and pay for this project at this moment.

      • Colin.S

        The cost of cleaning up the contamination made by a company no longer in existence is the responsibility of the Province. Contaminated parcels of land have to be cleaned up whether or not the Flames build there; therefore, it should not be factored in the cost.

        • Parallex

          It’s a cost involved with the implimentation of the project… it’s true that it isn’t the responsibilty of the Flames to clean it up but it’s part of the cost of the project and should be included in any project estimates regardless of whose side of the ledger it shows on. If the Flames choose almost any other site in the city that cost is not there.

          When you get down to it I have no objection to the use of public funds… on the condition that those public funds are in due course directly returned to the city. Meaning that the city ought to get a significant percentage of the event revenue until such time that the taxpayer is made whole on his/her investment.

      • mattyc

        Not sure it should be the city picking up the creosote remediation bill. Should be a provincial/federal clean-up. Either way it should be taxpayer-funded, and something that should have already happened.