[longsuffering]

Originally Posted by Frequitude

I'm as pro-city as they come in this debate, but the bolded is 95% wrong. A ticket tax is absolutely a Flames contribution. It's basic economics.

Assuming a $100 ticket with a $10 ticket tax on top, the market price is $110. Its not like the Flames would benevolently reduce ticket prices to $100 if there were no ticket tax. They'd still charge $110. A ticket tax is simply the Flames borrowing against their future revenues.

Now I said 95% for two reasons:
1) There is some truth to the fact that the psychology of the purchaser changes when they see the price as $100+$10 vs $110. So a ticket tax may marginally shift the demand curve. This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the user (i.e. the fans).
2) If the City fronts the ticket tax loan at an artificially low interest rate, this would represent a transfer of wealth from the city to the Flames (or from whoever the lender is to the Flames). This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the City.

However those two subtleties pale in comparison to how much of a ticket tax is born by the Flames.

Originally Posted by corporatejay

Bang on. I will mention that there will be a ticket tax for non-flames events so I'm not sure it is ENTIRELY their revenue, but in principal, I agree.


Frankly, the real way this could be funded is entirely through a ticket tax. Perhaps the city puts up the capital and then backstops it on a ticket tax and locks the flames into a 35 year lease. That would be a truly "user pay" system and frankly probably the fairest way to do it. It will never happen though.

Originally Posted by corporatejay

He's right. If the market for a ticket to the flames game is $110. Whether all of that revenue goes to the flames or 100 goes to the flames or 10 goes to a tax, the market is set.

I mean, technically the flames "contribution" is from general revenue anyway so that's also contributed by the fans.

Originally Posted by Bingo

I think another way to put it is ...

the ticket tax comes with an assumption that the Flames either a) haven't or b) won't max out the ticket price including the tax when the building is ready to go. If they raise all ticket prices by 40% and then tack on a 7% tax (like Edmonton) they may hit that ceiling.

If they do then the tax is completely coming out of their bottom line. If they haven't, then it comes out of the fans pockets completely.

Either way it's the team's risk to bare going forward.

Originally Posted by Calgary4LIfe

I believe the only way that you can look at the ticket tax portion as NOT being paid by CSEC is if you feel that CSEC isn't inclined to price their tickets to the maximum amount that the market would purchase them at.

Flames are wanting a new arena simply to increase their revenues, no? I think it is only logical that an increased ticket price - approaching that of the maximum that the market would purchase them for - is a practical guarantee to me. If there is additional costs involved on each ticket, whether it is visible as a 'ticket tax' or invisible as just one single price, is still the total cost to a customer purchasing the ticket. No?

Therefore, the Flames (under the assumption that they intend to maximize their profits) would have to lower the price of their tickets to factor-in the ticket tax to have the total amount in-line with what the market is dictating as the price-point for sell-outs or near sell-outs.

Am I missing something here? The accounting on the tax is of course different, and that is important for stuff like HRR, taxable income and so on, but it means absolutely nothing to a fan who has to decide where or not he can afford to go to a game or not.

I am surprised that Ken King pushed that out in his statement last week actually (about the Flames being the ones that would end up having to pay for nearly the entire thing), as to me it also stated that the Flames are indeed going to increase ticket prices to the maximum that the market will accept.

Originally Posted by jammies

It's quite simple, a $100 ticket will cost $130 + $10 ticket tax in the new arena, and that is the Flames losing out on revenue. How could anyone argue?

Originally Posted by Parallex

"Paying the ticket tax is a Flames contribution"... less the amount that would go into HRR.

I don't really think of it as a Flames "contribution" (unless CS&E are the ones fronting it) I more think of it more as just a Fee paid to an investor.

I'm amazed that the Flames have created a world where they can claim the payment of a TAX as their financial contribution.

The Flames CANNOT impose a ticket tax. Only the tax collecting authority can.

Yes there is an opportunity cost for the Flames but, so what? What makes them different from any other business when considering elasticity of prices?

If it's Flames revenue its HRR, simple as that. They don't 'get' to divert a revenue stream to hide HRR.

You do know that the ticket tax is not considered an owners contribution in Edmonton, right? You'd think this would matter this the Edmonton deal is the blueprint, right?

If the Flames can't accept that ticket taxes (user fees) are a separate stream and not their money, they are free to jack up prices as high as they feel the market will bear and fund their share out of THEIR own revenue. Opportunity cost is not relevant. Every business has opportunity costs.

Why would the Flames receive a guarantee that unlike any business they are exempt from considering taxes when determining how to price their product?

The ticket tax would be a pass through tax.

Just like GST. Just like PST.

The other analogy that has been made and which no one has yet to dispute is that there is fundamentally no difference between the proposed ticket tax and the airport improvement fee imposed on all travellers using YYC.

The Airport Authority determines the charge. The airlines collect it from passengers (users) and remits it to the Authority.

No one argues this is airline revenue, nor is it an expense for the airlines.

No one is concerned about what the opportunity cost to the airlines is (they could price their tickets higher without the tax).

The fee collected is used by the Authority for maintenance, upgrades and expansion of the airport. Sound familiar?

No one cares about the airlines opportunity cost because they don't provide the same emotional connection that the Flames. But fundamentally, whether it's the arena or the airport, both facilities are in place for the public's use, yet the airlines don't shout "we're funding 100% of airport improvement fees!"

Don't drink the Flames kool-aid.

And before anyone jumps all over me, remember I'm on record as saying I'm happy with a $150 million contribution from the City with no recovery mechanism. I do believe the Flames should pay a FMV rent but no property taxes.