New Edmonton Arena Construction will begin in March 2014

[Enoch Root]

Tinordi: simple question...

If Edmonton lost thier team, do you think there would be:

a) a positive impact for Calgary
b) a negative impact for Calgary
c) no impact because Calgary's aggregate entertainment budget remained unchanged?

[Robbob]

If the oilers really want the money they should do the same thing tehy did back in the dark years where they made a scratch lotto ticket with a portion going to save the team. That way the people that want to support the team can.

[Tinordi]

If an NHL team in Edmonton is dependent on a subsidized arena to be a valid business then it is not a valid business and should move.

[Vulcan]

The way I look at it, these sports teams are toys that some cities can afford and some can't. On principle I don't believe that governments should subsidize them but the facts are, in order to compete with other cities for these toys, they need to subsidize the facilities. It seems that most franchises get their facilities subsidized, if not completely financed especially if the city is looking for a team. If Edmonton loses the Oilers, in a few years the city will be building a new arena in order to lure a new team and it will cost them a lot more. Half a billion dollars isn't chicken feed even for a billionaire, they need some subsidy to make it work.

[seattleflamer]

Originally Posted by Tinordi

But it's very important to understand that a dollar spent on arenas means a dollar not spent somewhere else. For the City of Edmonton $100 million is alot of scratch. How many swimming pools, after school programs, etc. is that? How much road maintenance is that? Or provided that you keep the same level of service how much additional property tax revenue per household is that? And is it equitable to be charging higher property tax on people who aren't even hockey fans?

The recently deceased Art Modell, owner of the Baltimore Ravens, answered your question this way when asked about cuts to the library budget when Baltimore was in a bidding war for tax payer subsidies with Cleveland for the Browns in 1996:

"The pride of having a professional football team is worth more than 30 libraries."

[Tinordi]

Words defy me.

[Enoch Root]

Originally Posted by Tinordi

Words defy me.

well, if the Oilers leave, you will have an opportunity to see if you agree with Mr Modell

[Cecil Terwilliger]

Originally Posted by Tinordi

Words defy me.

If only there were more libraries so you could find the words.

[valo403]

Originally Posted by Vulcan

The way I look at it, these sports teams are toys that some cities can afford and some can't. On principle I don't believe that governments should subsidize them but the facts are, in order to compete with other cities for these toys, they need to subsidize the facilities. It seems that most franchises get their facilities subsidized, if not completely financed especially if the city is looking for a team. If Edmonton loses the Oilers, in a few years the city will be building a new arena in order to lure a new team and it will cost them a lot more. Half a billion dollars isn't chicken feed even for a billionaire, they need some subsidy to make it work.

Agreed, these are luxury goods that cities need to make decisions on in terms of how much they're willing to spend. There are many things that cities spend on that are luxury goods, concert halls, museums etc. aren't necessities, they're entertainment venues that cater to a different audience. That a private entity is going to be making money off of the investment shouldn't be a deciding factor, what matters is whether the dollars invested are found to be worth the returns provided, both financially and in terms of things like moral and civic pride.

[Tinordi]

Actually the fact that a private entity is the primary beneficiary of a publicly subsidized stadium is the deciding factor. Museums, libraries, etc are public goods, in that they aren't privately viable but still considered to be in the public interest. Or where museums and libraries may be privately viable we make the decision to open them up and make them non-exclusive for anyone to use because that's an optimal public outcome. That means there's a case for the public to support it.

No one answered my question though. What about the taxpayers that aren't hockey fans that would be virtue of public subsidy be paying for the private gain of a business that they have no interest in supporting or using? Is it fair to burden that taxpayer with the costs?

[Thunderball]

Originally Posted by Tinordi

Actually the fact that a private entity is the primary beneficiary of a publicly subsidized stadium is the deciding factor. Museums, libraries, etc are public goods, in that they aren't privately viable but still considered to be in the public interest. Or where museums and libraries may be privately viable we make the decision to open them up and make them non-exclusive for anyone to use because that's an optimal public outcome. That means there's a case for the public to support it.

No one answered my question though. What about the taxpayers that aren't hockey fans that would be virtue of public subsidy be paying for the private gain of a business that they have no interest in supporting or using? Is it fair to burden that taxpayer with the costs?

What about taxpayers who have no interest in subsidizing artists and the arts? The average person can't afford their works, and yet they pay for them to live that lifestyle.

What about taxpayers who have no interest subsidized post secondary education? Particularly when the outcome isn't a career required for society, such as education, healthcare, engineering, law or accounting? The average person sees no benefit from someone else's Social Science, Fine Arts, Humanities, or Communications degrees...or worse, non-University diploma level versions of those. Yet, we pay to the tune of 70% of the tuition per student.

What about taxpayers who have no interest in bilingualism? Most provinces have less than 10% francophone speakers, and would be better served funding programs to help new Canadians learn English, or to fund Spanish or Mandarin immersion schools, languages with far more foreign commercial/trade value, and in many cases, more native speakers than French in Canadian provinces.

Point is, society works because we don't listen to every dissenting voice when there are reasonable policy arguments.

Why does Calgary (or Edmonton) need a fancy world class Arena/Stadium? The same reason we needed a designer pedestrian bridge instead of a cheap concrete version, or a world class National Music Centre instead of a small cheap venue, or a grand Central Library (likely to have an International architect I'm sure) instead of keeping the existing one and building a couple cheap ones in the suburbs. Because it makes us special. Its the dick waving that any City that wants to be special does. Is it a waste of money? Sure, but so are many other things that others may value.

It attracts attention (and usually tourists), they attract non-sporting events, it improves quality of life and it adds an aspect that promotes workers to call a city home. This is a problem places like Calgary and Edmonton face when so many migrant workers from other provinces and countries come here. World class cities spend on world class luxuries. Stadiums are near the top of that list.

Does it really make it so bad that someone might make money? Stadiums and their host teams create a ton of tax revenue. If governments took that money and put it aside for when teams came calling, I'm sure you'd find ample amounts for new facilities.

[Northendzone]

it would be interesting to see if the government gave people a choice what they would ultimately select - for example if the city was to build a new rink for the oilers, we then can't afford to repair streets for x years. do you choose to have pro hockey in edmonton and rough streets, or maintained streets and no hockey.

everyone drives on the streets, but only a slect few (relative to the total number that drive) go to an oilers game.......

[morgin]

Originally Posted by Tinordi

If an NHL team in Edmonton is dependent on a subsidized arena to be a valid business then it is not a valid business and should move.

The fact is that keeping a team in Edmonton isn't dependant on a subsidized arena (katz could pay for the whole thing himself and earn it back over probably 10-15 years), but other regions ponying up funding drastically changes the model. (edit: I should add that I realize there is massive risk built into this for Katz given profitiability of the Oilers depends probably 20% on things the Oilers can control and 80% on external factors. Obviously this should factor in, but it factors in equally to every region.)

Worst prisoners dilemma for municipalities ever.

Either spend public money and give in to the threat of relocation, or don't and watch as some other region offers a sweetheart arena deal and makes the economics of the team in your region less favourable.

If every public body just stopped funding sports complexes, owners would have to only account for potential profitablility of the region.

The other problem though is that even if you don't have spinoff economic benefits, the attraction of concerts and other entertainment that is only possible with an arena gives the owners this public good argument that society seems to have a difficult time refuting. (And quite frankly, the public policy argument that while arenas may be a net negative in terms of revensue for the city, they add cultural value, is a pretty solid one.)

[EddyBeers]

Originally Posted by seattleflamer

The recently deceased Art Modell, owner of the Baltimore Ravens, answered your question this way when asked about cuts to the library budget when Baltimore was in a bidding war for tax payer subsidies with Cleveland for the Browns in 1996:

"The pride of having a professional football team is worth more than 30 libraries."

In other shocking news, Art Modell was a high school dropout.

[Tinordi]

Originally Posted by morgin

The fact is that keeping a team in Edmonton isn't dependant on a subsidized arena (katz could pay for the whole thing himself and earn it back over probably 10-15 years), but other regions ponying up funding drastically changes the model. (edit: I should add that I realize there is massive risk built into this for Katz given profitiability of the Oilers depends probably 20% on things the Oilers can control and 80% on external factors. Obviously this should factor in, but it factors in equally to every region.)

Worst prisoners dilemma for municipalities ever.

Either spend public money and give in to the threat of relocation, or don't and watch as some other region offers a sweetheart arena deal and makes the economics of the team in your region less favourable.

If every public body just stopped funding sports complexes, owners would have to only account for potential profitablility of the region.

The other problem though is that even if you don't have spinoff economic benefits, the attraction of concerts and other entertainment that is only possible with an arena gives the owners this public good argument that society seems to have a difficult time refuting. (And quite frankly, the public policy argument that while arenas may be a net negative in terms of revensue for the city, they add cultural value, is a pretty solid one.)

Good read and describes the basic dynamic. This has nothing to do with economics but is basically a bluff call between the owner and a municipality operating in a race to the bottom context.

Politically losing the team is probably bad for politicians, owners know this, so the threat of relocation is real even if it is an empty threat.

If you sat and thought about it, what are the actual odds of Katz relocating the team? First there's basically nowhere for him to go that's better than where he currently is. He could move to Kansas with their new arena but whatever gains he made there he loses goign to a pillow soft market. There's not a whole lot of landlords left. He could go to Phoenix...

So yeah, the City is most likely calling his bluff because they think that a) the immediate threat of relocation is very slim and b) Katz wouldn't have the stones to relocate a storied franchise (and one that he grew up as a fan of).

If I'm the City I offer him some additional chicken feed like some municipal bonds but pretty much tell him to take a hike and pay for it himself. The thing is that the City must know how valuable the subsidy is. It's basically the net present value of expected profit from the new arena minus the NPV of avoided financing charges over the amortized life of the arena, a huge figure and the reason why Katz is playing dirty.

[homestand]

Thursday September 13, 2012




Edmonton arena

Plans to build a new 450-million dollar arena in downtown Edmonton could be in jeopardy. The Katz Group is asking for additional concessions, saying the current deal isn't sufficient. Edmonton city council has refused. Edmonton Journalist Paula Simons weighs in on the issue, and takes calls from listeners.



Audio



http://www.cbc.ca/albertaatnoon/epis...dmonton-arena/

[morgin]

Originally Posted by Tinordi

Good read and describes the basic dynamic. This has nothing to do with economics but is basically a bluff call between the owner and a municipality operating in a race to the bottom context.

Politically losing the team is probably bad for politicians, owners know this, so the threat of relocation is real even if it is an empty threat.

If you sat and thought about it, what are the actual odds of Katz relocating the team? First there's basically nowhere for him to go that's better than where he currently is. He could move to Kansas with their new arena but whatever gains he made there he loses goign to a pillow soft market. There's not a whole lot of landlords left. He could go to Phoenix...

So yeah, the City is most likely calling his bluff because they think that a) the immediate threat of relocation is very slim and b) Katz wouldn't have the stones to relocate a storied franchise (and one that he grew up as a fan of).

If I'm the City I offer him some additional chicken feed like some municipal bonds but pretty much tell him to take a hike and pay for it himself. The thing is that the City must know how valuable the subsidy is. It's basically the net present value of expected profit from the new arena minus the NPV of avoided financing charges over the amortized life of the arena, a huge figure and the reason why Katz is playing dirty.

Houston I guess has a relatively new rink, but given the situation in Dallas...

As you basically have said, the other problem is that from Katz's perspective, absent any emotional investment in his investment (and not caring about the economics) or a variety of other soft factors, he is going to be looking at an exit strategy at some point in order to realize on this investment.

If you use moving into a new market like Kansas as an example, Katz has to work out whether the value of the franchise will ultimately improve or not improve. In Edmonton, he would be looking debts of X cost financed over Y time for the capital improvements required, plus yearly revenue that can be forecast relatively decently for the new few years (pending resolution of the lockout ayway). In Kansas, he can ignore capital costs and financing costs, but revenue forecasts become much more difficult and the value of having luxury boxes in that market is far less than a place like Edmonton. I would be shocked if there is currently any other market that right now, even absent capital costs for a new rink and the financing costs associated therewith, could result in a better return on investment than Edmonton, especially if the owners are willing to dig in re: CBA to improve their numbers in terms of HRR and the like.

If I'm Edmonton, I'd probably be pissed that we even agreed to fund what we did. Short of Katz trying to sell the team to another owner willing to take a chance in another market (which given the instability a lockout will cause - great long term for current owners, but I can't imagine is all that appealing to potential suitors) he has no real options other than to swallow the cost of a new rink and then roll in the extra revenue coming from improved revenue sharing and the ability to gouge the #### out of Edmontonians on ticket prices with the "upcoming dynasty". (Of course, fans can be fickle and it could all backfire spectacularily if the team continues to be #### and fans stop coming, but hey, that's sports).

[Flacker]

Originally Posted by Tinordi

No one answered my question though. What about the taxpayers that aren't hockey fans that would be virtue of public subsidy be paying for the private gain of a business that they have no interest in supporting or using? Is it fair to burden that taxpayer with the costs?

Hockey is the building's primary purpose, not the sole purpose. Lots of other diverse events will be held there.
As a tax payer do you regret spending tax dollars to build the Saddledome? What benefit did taxpayers outside of Calgary gain? The Saddledome was 100% publicly funded by all levels of government.

[MoneyGuy]

How can any of you think that the loss of the Oilers would have ANY benefit at all for you or your team? That's what I hate about sports. It brings out the stupidity in people. It would be utterly devastating for the Flames, the NHL and hockey in general.

[BlackRedGold25]

Originally Posted by MoneyGuy

How can any of you think that the loss of the Oilers would have ANY benefit at all for you or your team? That's what I hate about sports. It brings out the stupidity in people. It would be utterly devastating for the Flames, the NHL and hockey in general.

How would it be devastating? The Oilers have been a joke of a franchise since their dynasty ended.

If anything a hypothetical loss of the Oilers (I really don't think there's much chance they'll ever leave Edmonton) would help the Flames since they'd have their broadcast region all to themselves which would translate to richer broadcast deals.