Arena negotiation discussion. UPD: Flames release their proposal

[GGG]

Originally Posted by Snuffleupagus

So every employee of the Flames added together only pay 20m in taxes? Players alone probably pay 25-30

It depends on how the money spent on the Flames is redistributed. The argument is that all the corporate entertaining would now be spent elsewhere. The season ticket and other monies spent elsewhere would enrich other people and businesses.

So the theory is zero lost in taxes and maybe even an increase. When you give 70 million dollars to people who don't live here you are taking a lot of money out of Calgary. The luxury goods purchased by these rich people again more leaves than lower income people.

So the answer to how much in tax the province and Canada would lose is somewhere between none and a lot depending on how you model the economic value of an NHL team.

You could argue that the TV deals moving from Canada to the states is a direct loss from Calgary and say at a 50% marginal rate you end up with 500/30*.5 which is about 8 million in lost taxes. But it really would need much more advanced modelling to really know the impact.

[simmer2]

Originally Posted by GGG

It depends on how the money spent on the Flames is redistributed. The argument is that all the corporate entertaining would now be spent elsewhere. The season ticket and other monies spent elsewhere would enrich other people and businesses.

So the theory is zero lost in taxes and maybe even an increase. When you give 70 million dollars to people who don't live here you are taking a lot of money out of Calgary. The luxury goods purchased by these rich people again more leaves than lower income people.

So the answer to how much in tax the province and Canada would lose is somewhere between none and a lot depending on how you model the economic value of an NHL team.

You could argue that the TV deals moving from Canada to the states is a direct loss from Calgary and say at a 50% marginal rate you end up with 500/30*.5 which is about 8 million in lost taxes. But it really would need much more advanced modelling to really know the impact.

Someone I am fairly close with was working quite closely with the rep from the City of Edmonton involved in the decision to invest in the arena on behalf of the City.

He said 1.5 years later they are pleasantly surprised how much more tax revenue they are getting from the arena anf surrounding area...everyone is happy.

While I agree the Flames approach hasn't been good, the City needs to recognize how much money can be generated.

[Backlunds_socks]

Originally Posted by simmer2

Someone I am fairly close with was working quite closely with the rep from the City of Edmonton involved in the decision to invest in the arena on behalf of the City.

He said 1.5 years later they are pleasantly surprised how much more tax revenue they are getting from the arena anf surrounding area...everyone is happy.

While I agree the Flames approach hasn't been good, the City needs to recognize how much money can be generated.

So yes Edmonton was struggling for ages to get that area going. Calgary does not have he same problem

[PeteMoss]

Originally Posted by Oling_Roachinen

Predators to Hamilton was thoroughly squashed.

Coyotes to Hamilton was a "done-deal" that required the NHL to go to courts to stop it.

Penguins to anywhere had a deal in place that the team could be relocated if an arena deal did not go through prior to Lemieux deciding to keep the team and the arena being funded.

These all happened in the last decade.

Winnipeg, Seattle and Quebec have something in common with those southern states though....available arenas.


Don't be absurd. If a team is willing to locate or construct a privately funded arena, that's on them and everyone is happy. But when the NHL has been 'given' literal billions of public funds for their arenas, they are going to continue to support teams that fight for public funding and support municipalities that have contributed public money (so others will continue to do so).

It's not Gary Bettman going in front of the cameras to fight against Nenshi and Calgary for his own personal satisfaction, it's as the face of the NHL ownership group who as a whole support his argument.

All those teams have something in common as well. They were struggling attendence wise or their owners were bankrupt.

[Regorium]

Originally Posted by simmer2

Someone I am fairly close with was working quite closely with the rep from the City of Edmonton involved in the decision to invest in the arena on behalf of the City.

He said 1.5 years later they are pleasantly surprised how much more tax revenue they are getting from the arena anf surrounding area...everyone is happy.

While I agree the Flames approach hasn't been good, the City needs to recognize how much money can be generated.

The Flames proposal involves not paying any taxes.

How could City of Calgary ever be pleased with "how much more tax revenue they are getting from the arena"?

[getbak]

Originally Posted by Oling_Roachinen

This is the NHL for decades.

Quebec City refused to fund a new arena. They left.
Hartford refused to fund a new arena. They left.
Winnipeg refused to fund a new arena. They left.

St. Louis agreed to fund a new arena only after they nearly moved to Saskatoon. They stayed.

Quebec, Hartford, and Winnipeg all refused to fund new arenas, and the teams also struggled to sell tickets in their old arenas. They weren't exactly thriving markets at the time they moved. Say what you will about the Saddledome, but it's still a functional arena that can (and does) support some of the largest crowds in the NHL (with some of the highest ticket prices).

Those moves also all happened in the mid-late 90s, when cities were getting stupid trying to keep the pro sports teams they had, or woo away teams from other cities. That doesn't really seem to be happening anymore.


The Blues to Saskatoon thing had nothing to do with an arena in St Louis (just like the Flames move to Calgary or Thrashers move to Winnipeg weren't about new arenas). The former owner wanted to sell and couldn't find anyone locally who wanted to own an NHL team, so they made a deal to sell the team to Canadian investors. The league prevented the move, which squashed the sale, and eventually the league took over the team and sold to ownership who agreed to keep the team in St Louis. https://www.stlouisgametime.com/2009...lues-the-story The new arena in St Louis came a full decade after the Saskatoon thing was settled.

[Oling_Roachinen]

Originally Posted by PeteMoss

All those teams have something in common as well. They were struggling attendence wise or their owners were bankrupt.

Yep. So why is that the Coyotes stayed in Glendale for as long as they did? The NHL could not have done more to keep the bankrupt and failing franchise in Glendale despite offers to buy it and move it. Of course they hosed the city of Glendale over the eventual deal that was recently cancelled by the city. But the point remains.

This is 101 stuff. Don't bite the hand that feeds. Why would any municipality, state or province invest millions and millions into a product that would get up and go whenever convenient? Why would the NHL allow one team to compromise potentially every other current and potential future team out of these sweetheart deals? The NHL has to go out of its way to try and keep NHL teams that have publicly funded arenas in those arenas, when they don't get it, they don't really care what happens.

But, as we've seen, they have no problem moving or threatening to move a team when teams don't get their way when it comes to arenas.

Not unlike the Coyotes leaving to Glendale, don't forget that the Islanders moved to Brooklyn after they were refused funding for a new (or improvement of an) arena as well. It might not mean much to us, but to the counties there it was election issues all the same. Sure, it wasn't quite Quebec City, but it wasn't completely insignificant. Once again, the NHL showed that if an arena deal can't be reached, it has no problems with the team moving - fortunately Wang wanted to stay in New York. And obviously we know how it will eventually turn out now.

[Oling_Roachinen]

Originally Posted by getbak

The Blues to Saskatoon thing had nothing to do with an arena in St Louis (just like the Flames move to Calgary or Thrashers move to Winnipeg weren't about new arenas). The former owner wanted to sell and couldn't find anyone locally who wanted to own an NHL team, so they made a deal to sell the team to Canadian investors. The league prevented the move, which squashed the sale, and eventually the league took over the team and sold to ownership who agreed to keep the team in St Louis. https://www.stlouisgametime.com/2009...lues-the-story The new arena in St Louis came a full decade after the Saskatoon thing was settled.

Sorry, you're right. I confused the two stories.

There was the Saskatoon relocation which was rejected and the 1985 relocation threat.

From the arena website itself:
http://www.scottradecenter.com/about-us

In 1985, the then-owner of the St. Louis Blues hockey team contemplated relocating the team out of St. Louis. The pending move prompted members of the St. Louis business community to formulate a plan to purchase the Blues and keep the club in St. Louis. In 1990, however, it became evident that the long-term viability of the Blues required building a new hockey arena, one in which there was common ownership between the team and the facility.

As for Flames out of Atlanta, even that was in part due to the arena - of course more financially:

"Then Nelson Skalbania offered him $16 million so they could move the team to Calgary," Fletcher said. "It was the biggest price for an NHL team to that time. I was very disappointed about leaving Atlanta. Personally, they were some of the best years of my life. The unfortunate thing was the Omni was out-of-date when it opened. It was a great building in which to watch hockey and the atmosphere was second to none in the NHL, but it had only 15,000 seats, no standing room and no private boxes. It was the second-to-last arena of its type to be built in North America.

"Sports franchises realized how much they were leaving on the table without private suites, restaurants and extra clubs, revenues necessary to be competitive. Atlanta was behind the eight-ball before it started. We were also the only market getting more money for our radio rights than TV. The fan support was good but the team was sold for a very big price."

[rage2]

Originally Posted by ClubFlames

Bettman keeps fighting for teams in Florida, Arizona, Carolina, telling media they won't move under any circumstance even with attendance under 75% on average for each of those teams.

Some Flames fans think we only have 2 more years left to enjoy hockey in Calgary. We are moving to Houston even with 97% attendance rate to our home games.

Don’t look at attendance numbers. Look at overall profitability.

Carolina has a sweetheart arena deal that extends to 2024. They need the team there to reap the profits from non hockey revenue from events. Plus the team is still profitable.

Florida, same deal. The panthers might be losing money, but it’s a loss leader so that the ownership group makes money overall on events from cheap rent even accounting for Panthers loss.

Arizona, no clue why NHL is so hard up on staying. Math doesn’t make sense at all.

Flames currently have a sweetheart deal at the Saddledome similar to Carolina and Florida. Flames want a new arena with similar sweetheart deal. City wants them to pay much more rent or property taxes (depending on arena ownership structure) or share revenues, so from Flames perspective new arena loses sweetheart deal. That’s the gap between the 2 right now. That’s why the flames will do nothing.

[Roughneck]

Originally Posted by Oling_Roachinen

Yep. So why is that the Coyotes stayed in Glendale for as long as they did? The NHL could not have done more to keep the bankrupt and failing franchise in Glendale despite offers to buy it and move it. Of course they hosed the city of Glendale over the eventual deal that was recently cancelled by the city. But the point remains.

There were two key things at play with the Coyotes.

The primary reason:

The league stepped in to prevent their relocation rules from being circumvented. To do that they needed to take Moyes and co. to court, and pay for the team and assume its debts. This was the price of being able to dictate where they have teams. As much as the likes of Toronto, Buffalo and Detroit wouldn't want another Southern Ontario team encroaching on their turf, they definitely weren't going to accept such a move without getting compensation for it either. This is forgotten when talking about the Coyotes bankruptcy, but this is what was at stake; the NHL did not want to allow somebody to circumvent their rules and not 'pay to play.'

How much they wanted to stay in Glendale is also overstated. TNSE was lined up, and a deal in place that was only scuttled because the city of Glendale ponied up the money. This gave the league another year to try to work something out, and even got that ridiculous deal with Glendale and Hulsizer on the table (the one where Glendale would pay $100M for the parking rights that they already owned in addition to the arena management fee to the arena they built and were financing). After that fell through TNSE was on the verge of getting them again, pending a city of Glendale vote on covering losses, which the league really needed them to do because they needed TNSE for something else, which brings us to the second point:


The Atlanta Thrashers needed a home.

The league knew how the Thrashers were doing and that their owners wanted them out of their arena. This wasn't just a team struggling and needing help with losses or an owner needing to get out, hoping somebody would be willing to take on a lease. It was the team getting the boot. That's why the relocation fee was so low. TNSE was just paying what they would have for the Coyotes. The league got some of their money, and TNSE got their team, but the benefit was that the league got the most pressing problem solved after more time was bought to deal with Arizona.


Now the league is fighting to keep the Coyotes in Arizona by trying to get a new (free) arena somewhere else after only staying because they kept getting cash, hardly what I'd call loyalty to the groups that build arenas for you.

[Eric Vail]

Originally Posted by Oling_Roachinen

Sorry, you're right. I confused the two stories.

There was the Saskatoon relocation which was rejected and the 1985 relocation threat.

From the arena website itself:
http://www.scottradecenter.com/about-us


As for Flames out of Atlanta, even that was in part due to the arena - of course more financially:

So the Flames have gone from being worth $16 million in 1980 to over $500 million in 2017 and have made a nice profit most years along the way. That is a nice business.

If I calculate correctly, which I may not as I am not an investment guy, the return would be 13.5%/year with a 3% inflation factored in. Yearly profits are on top of that. What did they get for expansion this year? Another 15 million or so...

Pro hockey teams should be able to contribute more to their buildings.

[ReinhartonD]

Something that I don't think has been mentioned are the TV deals north and south of the border. Calgary is a team that generates TV ratings much greater than ratings for most U.S. teams--you can move a team to Houston, and while you might be able to sell a lot of tickets for the game, in most American cities TV ratings for hockey are well below baseball, football(NFL and college), basketball and even motor sports.

And while relocation fees might be attractive, owners really want expansion fees. Now that any potential investors from Houston or elsewhere have seen what Vegas has created from the very favourable expansion draft rules, why would they want to pay half a billion for a team and add over 150 million for transfer fees when they can get a better team for the cost of the expansion, and the owners all get to split the whole amount.

Calgary is simply too good a hockey market--not just for tickets, but for merchandise and TV--to give up when there are lame ducks like Arizona still not being moved.

An article on the TV deals is here:

https://www.forbes.com/sites/christi.../#56a32bd574e8

[sureLoss]

Originally Posted by Regorium

The Flames proposal involves not paying any taxes.

How could City of Calgary ever be pleased with "how much more tax revenue they are getting from the arena"?

The key in simmer2's post is surrounding area.

The Edmonton arena deal caps property tax paid to the city for the arena itself:

Through a Council-approved tax agreement, EAC and affiliates will pay the City a maximum of $250,000 in municipal property taxes annually, for EAC arena operations that are open during event hours, and will be responsible for paying all required provincial Education Property Taxes. This tax agreement excludes areas held by third parties, public parking, gambling and restaurants, bars, and other retail and commercial operations operated outside of event hours or open to the general public.

[PeteMoss]

Originally Posted by rage2

Don’t look at attendance numbers. Look at overall profitability.

Carolina has a sweetheart arena deal that extends to 2024. They need the team there to reap the profits from non hockey revenue from events. Plus the team is still profitable.

Florida, same deal. The panthers might be losing money, but it’s a loss leader so that the ownership group makes money overall on events from cheap rent even accounting for Panthers loss.

Arizona, no clue why NHL is so hard up on staying. Math doesn’t make sense at all.

Flames currently have a sweetheart deal at the Saddledome similar to Carolina and Florida. Flames want a new arena with similar sweetheart deal. City wants them to pay much more rent or property taxes (depending on arena ownership structure) or share revenues, so from Flames perspective new arena loses sweetheart deal. That’s the gap between the 2 right now. That’s why the flames will do nothing.

Legitimate question - how does the having a money losing hockey team help earn revenue for non-hockey events?

Usually for other events - the arena either buys the show (basically guaranteed funds to the show) or they get a tiny sliver of the profits after the promoter/arena factor in their costs (equipment, labour, entertainer cost, etc).

[Oling_Roachinen]

Originally Posted by Roughneck

Now the league is fighting to keep the Coyotes in Arizona by trying to get a new (free) arena somewhere else after only staying because they kept getting cash, hardly what I'd call loyalty to the groups that build arenas for you.

The Coyotes signed a lease that would have kept them until the 2028 season. It was the City that cancelled the lease. Of course the NHL is taking it to the city on many of these deals. That's pretty much my point. I'm not suggesting the Flames should contribute to the arena, I'm saying that when Cities do that usually means they keep their teams...but get screwed over in the process.

http://www.cbc.ca/sports/hockey/nhl/...otes-1.3108840

[rage2]

Originally Posted by PeteMoss

Legitimate question - how does the having a money losing hockey team help earn revenue for non-hockey events?

Usually for other events - the arena either buys the show (basically guaranteed funds to the show) or they get a tiny sliver of the profits after the promoter/arena factor in their costs (equipment, labour, entertainer cost, etc).

SSE (Panthers ownership group) has full control of the arena, much like the Flames today, so they make all the money from the events, concessions, etc. at the arena. Even accounting for the Panthers yearly loss, SSE still makes around $30m per year. SSE needs the panthers to continue this deal, without the money losing hockey team, they wouldn't be able to run events there.

The hilarious part in all this, is because the Panthers keep losing money, they convinced Broward County to give them an $86m bailout package to stay in Florida till 2028, but they can opt out of the lease extension 2023 if they can show a loss of over $100m between 2016 and 2022. All while SSE is profitable.

So yea, they aren't going anywhere for the next couple of years.

[Cecil Terwilliger]

I just want to say that when I read pylon's post the first thing I thought of was the plot of Major League and I'm glad someone else caught on to that.

The idea that Murray Edwards was sitting around his London mansion one day and Major League came on TBS for the 57000th time and there he is sipping his brandy and lighting cuban cigars with $1000 bills when all of a sudden he shouts eureka! and concocts his plan.

Actually stealing the villain plot from a movie kind of reminds me of office space where they use the same plan as Superman III. Maybe it was an Office Space/Major League double header on TBS.

[PeteMoss]

Originally Posted by rage2

SSE (Panthers ownership group) has full control of the arena, much like the Flames today, so they make all the money from the events, concessions, etc. at the arena. Even accounting for the Panthers yearly loss, SSE still makes around $30m per year. SSE needs the panthers to continue this deal, without the money losing hockey team, they wouldn't be able to run events there.

The hilarious part in all this, is because the Panthers keep losing money, they convinced Broward County to give them an $86m bailout package to stay in Florida till 2028, but they can opt out of the lease extension 2023 if they can show a loss of over $100m between 2016 and 2022. All while SSE is profitable.

So yea, they aren't going anywhere for the next couple of years.

To be clear - the county gave them the $86 million because they thought they'd end up owing more if the team left due to the original terrible deal the county signed (although this is probably justifying paying the money rather than an actual fact).

Also - the analysis showed the arena would be profitable with or without the Panthers according to other arena management firms.

So its more about being good for the current owner rather than being much if any better for the arena itself.

The Consulting Team Attempted to Contact the Three Major National Arena Management Firms
 AEG
 Global Spectrum (as of June 2015, Global Spectrum is now known as Spectra)
 SMG
 The Consulting Team Spoke with Two Major National Operators of Arenas, Both with a Cursory Knowledge
of the BB&T Center, and a Strong Knowledge of the Regional Market
 Both Operators Expressed an Interest in Operating the Arena Should the Opportunity Arise and Under the
Right Circumstances – We Would Expect All Three Would Ultimately be Interested
 Both Operators Acknowledged
 Miami Regional Market is Very Competitive
 BB&T Center Should be Able to Generate an Operating Profit Even Without the Panthers
 Managing and Keeping Fixed Costs Low will be Key Driver of Profitability
 A Willingness to Explore Non-Traditional Operator/Owner Arrangements

http://www.broward.org/Arena/Documen...rt10-13-15.pdf

[Roughneck]

Originally Posted by Oling_Roachinen

The Coyotes signed a lease that would have kept them until the 2028 season. It was the City that cancelled the lease. Of course the NHL is taking it to the city on many of these deals. That's pretty much my point. I'm not suggesting the Flames should contribute to the arena, I'm saying that when Cities do that usually means they keep their teams...but get screwed over in the process.

http://www.cbc.ca/sports/hockey/nhl/...otes-1.3108840

My point is that the NHL didn't show loyalty to Glendale for building them an arena, as simply getting the arena for free wasn't enough. They also needed the city to cover losses and a deal to move the team was ready and waiting. The arena was a little more than 5 years old when this started happening.

[Nacre]

Originally Posted by simmer2

Someone I am fairly close with was working quite closely with the rep from the City of Edmonton involved in the decision to invest in the arena on behalf of the City.

He said 1.5 years later they are pleasantly surprised how much more tax revenue they are getting from the arena anf surrounding area...everyone is happy.

While I agree the Flames approach hasn't been good, the City needs to recognize how much money can be generated.

This is just incomprehensible to me with a cap on property tax of $250,000 and rent of $2.5-3 million per annum. Even with the province collecting roughly $4.5 million from sales tax on tickets sold there is no way government can make enough to justify the construction cost.

The only way you can argue that the city has broken even is if you attribute all of the property development in downtown Edmonton to the addition of the arena and the Oilers. But this does not make sense as similar development and post-recession housing recovery is seen in cities without the NHL. Housing prices are increasing in 80 per cent of all local markets in Canada thanks to global recovery from the recession.

I'm sorry to use another American example after discussing Seattle, but look at the Sharks and San Jose. San Jose became wealthy and populous because of the growth of tech companies and thus tech jobs. And then major sports teams started moving there so they could sell tickets and corporate suites to workers at Intel, Apple, etc. The NHL similarly wants the Seattle market so they can sell luxury suites to executives at Microsoft, Amazon, Boeing, Starbucks, etc.

Professional sports is an entertainment industry. Teams do not generate disposable income for people in the community. They consume disposable income.