Arena negotiation discussion. UPD: Flames release their proposal

[ComixZone]

Originally Posted by KootenayFlamesFan

I guess they're not going to stop using Edmonton as a comparable. That's too bad, because they're not going to get the same deal. They should just stop bringing Edmonton up.

Sorry, but Calgary isn’t getting a privately funded arena - and if we, the city of Calgary, aren’t prepared to see that reality, then we’ll eventually lose the Flames (not any time soon), and then eventually build a 100% publicly funded arena...which is just stupid. Also, the Flames aren’t proposing the Edmonton deal - this deal is a much better one for the City.

But, hey, who cares. Let’s paint “big business” as bad and evil and trying to screw over the little guy.

[calgaryblood]

In the Edmonton graphic they use the city of Edmonton as paying the user fees but they're paying it in Calgary?

[ikaris]

Originally Posted by ComixZone

But, hey, who cares. Let’s paint “big business” as bad and evil and trying to screw over the little guy.

In what scenario is what the Flames presenting an actual representation of the city's true contribution? The Flames are expecting to pay no rent (with the city owning the facility) and they keep 100% of the revenue. The foregone property tax/rent amounts to a direct city contribution, and directly out of the citizen's pockets.

What is not clear is who is financing the ticket tax; which applies to all events. Regardless, any revenue derived from this tax that is not Flames related is not a Flames contribution.

Also, the land contribution and Saddledome demolition is completely ignored in the Flames' "math."

The presentation that the Flames have also says the CRL should pay for this; are we seriously going to build more office towers there? (lol!)

[Lanny_McDonald]

Originally Posted by calf

My God...the Flames really are saying they are paying 120% of the arena...their share plus property taxes. You can't say "we have to pay this expense" to pay back the city and conveniently ignore that you keep the rest of the earnings from the arena. That's not how this works.

You got that out of reading that proposal? Here's what I got out of that proposal.

* The Flames are putting up $275M for the construction of the arena.
* The City will front the rest and the recover their money through the CRL.
* The building will be City of Calgary owned, meaning the Flames will not have to pay property tax.
* The Flames up front contribution is also their long term rent obligation, over 35 years ($7.85M per year).
* The Flames argument against the City's proposal was that the Flames would pay $185M, be the revenue source for $185M via the ticket levy, and then still have to pay property taxes, on a building they don't want to own, meaning they are paying the full boat.

Originally Posted by KootenayFlamesFan

I guess they're not going to stop using Edmonton as a comparable. That's too bad, because they're not going to get the same deal. They should just stop bringing Edmonton up.

Why shouldn't they bring it up? It is the most applicable comparison. It establishes precedent in the province. Like it or not, Calgary and Edmonton are joined through a long ugly umbilical chord and what happens in one directly affects the other. The Edmonton deal is a very relevant deal and should be discussed. The Flames proposal is based on a similar model, but is so much better for the city in comparison, it is hard to fathom that anyone would not look at this and say, yeah, this is a fair deal too.

What the Flames have done is put up their rent, up front, for construction purposes. They are making a commitment to the city of $7.85M of rent, and assuming all operations costs, for use of, and revenues from, the new arena. The Oilers put up $26.5M up front (including the exhibition hall space) and are paying $3.5M a year for all use and all revenues. They also got development rights around the building. So this is a substantially better deal for the City of Calgary, and I think a much better proposal than the City's rule of thirds proposal. I can understand why people could have a beef with it, because there is no property be generated by the building (it shouldn't, as it is a City owned property being rented). I get that, but the rent on the building is fronted for construction, meaning the city doesn't have to front those monies themselves, which is a great value to them.

One thing that is missing from this presentation that fans should like, is no ticket tax. The money is recovered from a CRL rather than a ticket tax. For all the people that were concerned about being priced out of their seats because of a ticket levy, that is not there.

The Flames have placed the onus on the City to generate the revenue through the CRL, meaning if the City does want that money back, they have to make a commitment to getting the entertainment district around the arena built out as quickly as possible. I think this is smart, as the City has a history of being slow in delivery of the back end of deals. It would suck to have a new arena built, then the city drag their ass on getting the amenities and infrastructure around the building completed.

The sad thing about this is it doesn't matter what was proposed. It wouldn't have mattered what the Flames presented, the vast majority of the minds here are already made up. The Flames are the bad guys and the City are the good guys. The issue here is not finding a solution that meets all needs, its about there being a winner and a loser in this ridiculous fight. I think this proposal is a winner. I think it addresses everyone's wants and desires, and is fair to both the hockey team and the City. It also places the onus on the City to deliver the infrastructure and services to support the entertainment district the City claims they are so hell bent on providing Calgarians. I would like to know what specifically this does not address and where it is a bad deal for the citizens of Calgary, and I mean more than Ken King was involved in it?

[GullFoss]

Originally Posted by ComixZone

Sorry, but Calgary isn’t getting a privately funded arena

I have brought up this point many times before over the past 10 years. When you run the economics, a new arena is worth about $200-300m to the flames from an NPV perspective which - SURPRISE - is about the amount the team is has put forth as a starting point for negotiations. The takeaway is that Calgary isn't getting a privately funded arena today!

But there are three points worth making on this:

First, half the math on the incremental economic value of a new facility depends on the economic value of the old facility. And the bottom line is that the Saddledome is really good from a revenue generation capacity. Do the flames lose out on some quality seats, boxes, and concerts? Yes - and thats where the incremental revenue comes from. But, do the flames have one of the largest facilities in the league that they come close to selling out each night? Yes - so you don't get the large jump of adding 5000 new seats, which is what really boosts incremental revenue (say going from 15000 seats to 20000 seats). And from a physical standpoint, the Dome has 25-45 years of life remaining. So...there is no real urgency to build a new stadium. Which is why its taken the flames 10+ years since first investigating the issue to come up with a proposal.

Second, the starting offer from the flames is the incremental value of a new facility to the team ($200-300m). Assuming negotiations lead the two parties to meet in the middle, the final share paid by the flames will actually be above what the arena adds to the franchise. So, from a financial perspective, the owners are willing to throw away some cash for a legacy building project. Its just not going to be $300m.

Third, the economics of a new facility aren't any different than they were 5 or 6 years ago. The difference is that oil prices suck and most of our owners are in the oil and gas industry. They were probably willing to fund more in an era of US$100 WTI (maybe even all of it) than they are today. So, Caglary isn't getting a privately funded arena today. But it sure could 5 years from now if oil prices rebound and thats what Ridell and Edwards want part of their legacy to be.

On point 3 - if you look at some of the quotes from the flames, they talk about changing up the ownership mix. That could mean changing the ownership mix so that the owners are willing to put up the 100% cost of the arena. For example, if a minority owner owns 10% of the team but only wants to put up $30m for a new facility, there is a shortfall. But if he sells out to a new owner that is willing to put up $50m, then the team inches closer.

[calf]

Originally Posted by New Era

You got that out of reading that proposal? Here's what I got out of that proposal.

* The Flames are putting up $275M for the construction of the arena.
* The City will front the rest and the recover their money through the CRL.
* The building will be City of Calgary owned, meaning the Flames will not have to pay property tax.
* The Flames up front contribution is also their long term rent obligation, over 35 years ($7.85M per year).
* The Flames argument against the City's proposal was that the Flames would pay $185M, be the revenue source for $185M via the ticket levy, and then still have to pay property taxes, on a building they don't want to own, meaning they are paying the full boat.



Why shouldn't they bring it up? It is the most applicable comparison. It establishes precedent in the province. Like it or not, Calgary and Edmonton are joined through a long ugly umbilical chord and what happens in one directly affects the other. The Edmonton deal is a very relevant deal and should be discussed. The Flames proposal is based on a similar model, but is so much better for the city in comparison, it is hard to fathom that anyone would not look at this and say, yeah, this is a fair deal too.

What the Flames have done is put up their rent, up front, for construction purposes. They are making a commitment to the city of $7.85M of rent, and assuming all operations costs, for use of, and revenues from, the new arena. The Oilers put up $26.5M up front (including the exhibition hall space) and are paying $3.5M a year for all use and all revenues. They also got development rights around the building. So this is a substantially better deal for the City of Calgary, and I think a much better proposal than the City's rule of thirds proposal. I can understand why people could have a beef with it, because there is no property be generated by the building (it shouldn't, as it is a City owned property being rented). I get that, but the rent on the building is fronted for construction, meaning the city doesn't have to front those monies themselves, which is a great value to them.

One thing that is missing from this presentation that fans should like, is no ticket tax. The money is recovered from a CRL rather than a ticket tax. For all the people that were concerned about being priced out of their seats because of a ticket levy, that is not there.

The Flames have placed the onus on the City to generate the revenue through the CRL, meaning if the City does want that money back, they have to make a commitment to getting the entertainment district around the arena built out as quickly as possible. I think this is smart, as the City has a history of being slow in delivery of the back end of deals. It would suck to have a new arena built, then the city drag their ass on getting the amenities and infrastructure around the building completed.

The sad thing about this is it doesn't matter what was proposed. It wouldn't have mattered what the Flames presented, the vast majority of the minds here are already made up. The Flames are the bad guys and the City are the good guys. The issue here is not finding a solution that meets all needs, its about there being a winner and a loser in this ridiculous fight. I think this proposal is a winner. I think it addresses everyone's wants and desires, and is fair to both the hockey team and the City. It also places the onus on the City to deliver the infrastructure and services to support the entertainment district the City claims they are so hell bent on providing Calgarians. I would like to know what specifically this does not address and where it is a bad deal for the citizens of Calgary, and I mean more than Ken King was involved in it?

I was going on their infographic which I saw first, and caught my attention. Hadn't read through and digested the rest of it yet. I just know they are being either obtuse or disingenuous when their criticism of the city's proposal omits a significant piece of the pie

[PeteMoss]

Well that is giving the least information possible by the Flames.

[getbak]

Originally Posted by New Era

One thing that is missing from this presentation that fans should like, is no ticket tax. The money is recovered from a CRL rather than a ticket tax. For all the people that were concerned about being priced out of their seats because of a ticket levy, that is not there.

Good one. You really think there wouldn't be a ticket tax/price increase?

[Lanny_McDonald]

Originally Posted by calf

I was going on their infographic which I saw first, and caught my attention. Hadn't read through and digested the rest of it yet. I just know they are being either obtuse or disingenuous when their criticism of the city's proposal omits a significant piece of the pie

What piece if the pie are you referring to?

[PeteMoss]

Originally Posted by New Era

* The Flames argument against the City's proposal was that the Flames would pay $185M, be the revenue source for $185M via the ticket levy, and then still have to pay property taxes, on a building they don't want to own, meaning they are paying the full boat.

City said they are open to owning the arena and the Flames paying rent.

[Strange Brew]

Originally Posted by New Era

* The Flames up front contribution is also their long term rent obligation, over 35 years ($7.85M per year).

So the Flames contribution is limited to prepaying their rent?

[Lanny_McDonald]

Originally Posted by getbak

Good one. You really think there wouldn't be a ticket tax/price increase?

That isn't what I said. Of course there is going to be an increase on tickets. It is the levy that would be on top of that increase that is missing. Catch up. As Bingo pointed out, it is the $10-15 levy that is most crippling, regardless of the cost of tickets. That addition $2-3K in ticket levy can force a lot of fans out of their seats. That ain't there.

[burnitdown]

Originally Posted by New Era

What piece if the pie are you referring to?

I think your question answers itself. You don't see the piece of the pie he's referring to because they fail to mention anything associated with land costs and other costs the city will need to pay.

[KootenayFlamesFan]

Originally Posted by ComixZone

Sorry, but Calgary isn’t getting a privately funded arena - and if we, the city of Calgary, aren’t prepared to see that reality, then we’ll eventually lose the Flames (not any time soon), and then eventually build a 100% publicly funded arena...which is just stupid. Also, the Flames aren’t proposing the Edmonton deal - this deal is a much better one for the City.

But, hey, who cares. Let’s paint “big business” as bad and evil and trying to screw over the little guy.

Okay? I'm just saying I'd prefer they leave Edmonton out of it. Concentrate on the facts and what can be done between the city and the Flames. Continually telling people to look at what another team did is not going to speed up the process at all imo.

[Resolute 14]

Yeah, sorry New Era, but "no ticket tax" means only that the increased ticket prices goes into the team's pockets rather than toward the arena. Don't sit there and try to pass this off as saving the fans money. It won't.

Anyway, reading that infographic, I think the Flames and city are actually presenting the same things, just looking from different ends of the spectrum. The city is presenting the up-front costs as 1/3 1/3 1/3 (and which may be disingenuous given I'm not sure who fronts the 1/3 covered under 'users'). The Flames are presenting the end-of-life costs. And while heavily biased, is logically sound. To their perspective, the user fees/ticket taxes is just ticket prices redirected from them to the arena. Likewise, the city's contribution is intended to be profitable to the city, and thus ultimately paid for by the team. Honestly, if it wasn't for the fact that the Flames have already spent several years fumbling this thing badly, this might have been a good rebuttal.

To me, the Flames really effed up here in how they presented the Oilers funding model. CSEC is clearly trying to wow us with the fact that they are offering to put $275 million up front against just $20 million from Katz. What they were hoping nobody would notice, however, is that they are trying to claim both rent/taxes and user fees as their contributions in the City's proposal while not offering the Oilers the same credit in their model. Based on their earlier arguments, the Flames should be noting that the Oilers will ultimately fund $258 million for Rogers Place.

Edit: And to join this to ComixZone's argument - the Flames are, in fact, trying to propose exactly the deal Edmonton got. Using their own pie charts, they claim that Edmonton funded $226 million toward that city's arena, and that the City of Calgary would fund $225 million to ours.

[Roughneck]

Originally Posted by New Era

* The City will front the rest and the recover their money through the CRL.
* The building will be City of Calgary owned, meaning the Flames will not have to pay rent.

Or property tax, meaning the most valuable building in the CRL zone won't be contributing to the CRL, which is why the West Village proposal wasn't feasible either.

The biggest contributor to the East Village CRL? The Bow with its $30M/year in property taxes.

BTW, this area is already in a levy zone, so the Flames want another one? Not sure that's gonna happen.

* The Flames argument against the City's proposal was that the Flames would pay $185M, be the revenue source for $185M via the ticket levy, and then still have to pay property taxes, on a building they don't want to own, meaning they are paying the full boat.

And it is a stupid argument.

"We don't want to pay rent OR property taxes, why isn't the city being reasonable?!"

Why shouldn't they bring it up? It is the most applicable comparison. It establishes precedent in the province. Like it or not, Calgary and Edmonton are joined through a long ugly umbilical chord and what happens in one directly affects the other.

Why?

The Edmonton deal is a very relevant deal and should be discussed. The Flames proposal is based on a similar model, but is so much better for the city in comparison, it is hard to fathom that anyone would not look at this and say, yeah, this is a fair deal too.

Yeah, it is fair for a business to not pay rent or property taxes.

What the Flames have done is put up their rent, up front, for construction purposes.

So they're not paying rent at all.

They are making a commitment to the city of $7.85M of rent, and assuming all operations costs, for use of, and revenues from, the new arena.

This is a crappy deal for the city.

The Oilers put up $26.5M up front (including the exhibition hall space) and are paying $3.5M a year for all use and all revenues.

Good for the ####ing Oilers. The Flames can ask Edmonton to build an arena for them, then.

I can understand why people could have a beef with it, because there is no property be generated by the building (it shouldn't, as it is a City owned property being rented).

THEY AREN'T PAYING RENT!

I get that, but the rent on the building is fronted for construction

SO THEY AREN'T PAYING RENT!

meaning the city doesn't have to front those monies themselves, which is a great value to them.

"We are doing them a favor by not paying rent."

One thing that is missing from this presentation that fans should like, is no ticket tax. The money is recovered from a CRL rather than a ticket tax. For all the people that were concerned about being priced out of their seats because of a ticket levy, that is not there.

You can't possibly be this ####ing gullible.

The Flames have placed the onus on the City to generate the revenue through the CRL, meaning if the City does want that money back, they have to make a commitment to getting the entertainment district around the arena built out as quickly as possible.

What are the Flames committing in this, again?

Oh right, half of the minimum expected of a business.

I would like to know what specifically this does not address and where it is a bad deal for the citizens of Calgary, and I mean more than Ken King was involved in it?

Because the CRL zone already exists, and likely can't handle a $225M hit whiel still being able to provide the actual public infrastructure in the Rivers District in addition to everything else it is committed to (and only applies to new construction).

[getbak]

Originally Posted by New Era

That isn't what I said. Of course there is going to be an increase on tickets. It is the levy that would be on top of that increase that is missing. Catch up. As Bingo pointed out, it is the $10-15 levy that is most crippling, regardless of the cost of tickets. That addition $2-3K in ticket levy can force a lot of fans out of their seats. That ain't there.

Call it a ticket tax (which it will almost certainly be so that it won't count as HRR), or call it something else, a price increase is a price increase and there will absolutely be a price increase.

Notice how they don't break down the city's offer to show up front vs ticket tax. It's all Flames contribution in their mind.

[ikaris]

Originally Posted by New Era

You got that out of reading that proposal? Here's what I got out of that proposal.

* The Flames are putting up $275M for the construction of the arena.
* The City will front the rest and the recover their money through the CRL.
* The building will be City of Calgary owned, meaning the Flames will not have to pay property tax.
* The Flames up front contribution is also their long term rent obligation, over 35 years ($7.85M per year).

So using Flames logic, the $275M is actually a public contribution because the rent is actually public revenue. Essentially Flames put up nothing (except perhaps the interest cost of that amount assuming they are borrowing it).

Also with respect to ownership, the city proposal seemed open to who owned the facility and if there would be property tax versus rent (it was a negotiating point that the city would likely discount versus actual value).

[Lanny_McDonald]

Originally Posted by burnitdown

I think your question answers itself. You don't see the piece of the pie he's referring to because they fail to mention anything associated with land costs and other costs the city will need to pay.

You mean the land the City already owns? And what other costs? I thought the City wanted this site because they already had all the infrastructure costs and improvements on the plan and with funds to move forward on those improvements? You fell for the old slush as many costs into our proposal move by the City. Christ, someone even asked why the raising of the Saddledome costs were not included in the Flames proposal. Because it is an unrelated cost to the project or one that is the responsibility of the City. That was one of the things from the City's proposal that was out there. They included a whole bunch of stuff irrelevant to the actual discussion, let alone the project. What exact costs are you referring to?

[Roughneck]

Originally Posted by New Era

You mean the land the City already owns? And what other costs? I thought the City wanted this site because they already had all the infrastructure costs and improvements on the plan and with funds to move forward on those improvements? You fell for the old slush as many costs into our proposal move by the City.

The land has value.

As it is already in a CRL zone, anything developed on that land would contribute to the Rivers District CRL. So by giving the land for an arena (of say, $500M in value), that is $9M a year in property taxes the city is losing out on for the Rivers revitilization by 'owning it themselves.'

Christ, someone even asked why the raising of the Saddledome costs were not included in the Flames proposal. Because it is an unrelated cost to the project or one that is the responsibility of the City. That was one of the things from the City's proposal that was out there. They included a whole bunch of stuff irrelevant to the actual discussion, let alone the project. What exact costs are you referring to?

So the city can keep the Saddledome operation as a part of this proposal, and use it to potentially compete with acts and events in the new arena?