Arena negotiation discussion. UPD: Flames release their proposal

[Ozy_Flame]

Originally Posted by Bingo

he said location, grandeur and costs. That's total control.

Eh, they'd lose total control if the City said they didn't want the Flames playing there - the main thing that generates revenue.

[GGG]

Originally Posted by Bingo

Pretty common to be told things are off the table in a negotiation. Certainly doesn't mean they are off the table permanently, or that parts of said deal can't be on the table.

These guys are sharper than that.

It's a clear cut comparable, and a logical first position for the Calgary group.

And the logical response for Calgary is No, come back to the table when you would like to present a reasonable offer.

[Hot_Flatus]

Originally Posted by Bingo

Well then brace yourself!

If the city gets to decide location, grandeur and cost they clearly need to be a bigger stake holder in it.

Why would a private company give up complete control in a project and then pay 100% of the costs?

And the Edmonton model is what it is. It's recent, it's nearby, it fits into the same industry ... of course they're going to refer to it. You would too.

Using the Edmonton model the city would be on the hook for 2/3's of the cost ($400M) plus an understanding that CSEC can take 35 years to complete playing their 1/3 share ($200M). I believe that's something like $5.5M per year to the city....what a disgrace.

Is that not a monster contribution by the city in your eyes when they would absolutely be responsible for the entire financial burden of the project?

[Strange Brew]

Originally Posted by Bingo

Pretty common to be told things are off the table in a negotiation. Certainly doesn't mean they are off the table permanently, or that parts of said deal can't be on the table.

These guys are sharper than that.

It's a clear cut comparable, and a logical first position for the Calgary group.

Locking in on a single comparable won't get anyone anywhere though.

[FlamesFanTrev]

Originally Posted by Bring_Back_Shantz

Are you saying that the city saying it's offer to pay 1/3 is disingenuous because the city wants to recoup it's cost?

Because if that's the case then you need to apply the same logic to the Flames.
They are going to recoup their costs too right? So they aren't paying anywhere near 2/3 or even 90%.

If the criteria for "Paying" is that you don't get any of your money back, then neither side is being very genuine with what they are proposing to pay.

Imagine that you and I started a business. We both put in 30k, but yours is a loan that the company has to pay back. Why would you be a partner when that amount is paid back? If you got half the business for nothing, why would that be a good deal for me? You could run around and tell everyone that we built a business together but I'm the only one with any skin in the game at the end of the day. That's the discussion ESSENTIALLY being had, simplified.

Now back to the flames situation, the CSEC is paying 1/3rd out of pocket, the city is putting 1/3rd as a non-interest bearing loan, as well as 1/3rd upfront costs for the ticket tax (really a usage charge). Because the 2/3rds are essentially two different loans, tax payers are on the hook for NONE of the costs of the arena. The ticket tax is not paid by tax payers , it's paid by service users. So the 1/9th that people are talking about the city paying has to do with the "opportunity cost". The money that the city is lendng to the building has a cost associated with it; that is, if the city put the money in the bank, rather then lending it to CSEC, they would generate interest, which they won't lending the money to CSEC (similar if the city borrowed the money to lend to CSEC for the building, they would pay the interest). In effect, this lost opportunity (to generate interest or the cost of bodrrowing) is their investment in the facility. The rest of the actually invested money is being contributed by CSEC (2/3rds of the 600mil) and users (1/3rd). This is all fine and good, but now imagine a scenario where the team leaves town, or the NHL/flames folds, or the city of Calgary forces the flames to leave town, or some other Force Majure occurs that shut down the flames ability to use the facility. Can the team take the asset with them? No. And the primary tenant is gone, so how does it generate revenue to make these payments? How long before the city owns the asset FOR FREE besides the opportunity cost of not being able to lend their Money? Essentially the city has no skin in the game, but could end up being the sole owner? Although unlikely to happen, this essentially puts the flames at a dsadvantage in future dealings with the city. They have all the skin in the game, the city has none. If the team leaves because the city is being unflexable in future dealings, how would they recoup their 2/3rds investment? Would you give them 400 million for their stake in a 600 million dollar building that is generating practically no revenue without the primier tenant? Nope. The value of the building as an investment drops and your selling it for pennies on the dollar.

Without some sort of public investment, the city ends up holding all the cards.

[dustygoon]

Originally Posted by Locke

Then why havent they?

Because they don't want to pay $400m? 200m up front and repaying loan of 200m? They just want to pay $200m? The city offer gives them financing which they can already get elsewhere.

[Bingo]

Originally Posted by Hot_Flatus

Using the Edmonton model the city would be on the hook for 2/3rds of the cost plus an understanding that CSEC can take 35 years to complete playing their share. Is that not a monster contribution in your eyes?

Guys don't put words in my mouth.

I'm not saying they should get the Edmonton deal, but I have a tough time understanding why people think it's blasphemy to not table that as a comparable in a negotiation.

I'd do it.

I'd tell my ownership group we need to keep bringing it up, every chance we get. It's a bad deal, we're not going to get it as its another example of the massive inferiority complex that seems to be inbred into every Edmontonian, but it's in our favour to keep hitting it vocally.

Then you swap pieces out of it to get a Calgary solution.

[Locke]

Originally Posted by Bingo

Pretty common to be told things are off the table in a negotiation. Certainly doesn't mean they are off the table permanently, or that parts of said deal can't be on the table.

These guys are sharper than that.

It's a clear cut comparable, and a logical first position for the Calgary group.

Cool. But are we not past 'First Position' by now?

Its a starting point, but its also a mutually acknowledged outlier and not much use for negotiations.

Katz got his arena for free because Edmonton's Mayor at the time was a moron.

At some point you have to analyze, interpret and understand your environment.

This Calgary is not that Edmonton. That dog just wont hunt and that deal just isnt in the cards.

"But we want it!"

Fine. Go to bed without any supper.

[GreenLantern2814]

Originally Posted by dustygoon

Because they don't want to pay $400m? 200m up front and repaying loan of 200m? They just want to pay $200m? The city offer gives them financing which they can already get elsewhere.

Who else is going to give them a 0% loan with free land, and can I bank with them?

[Bingo]

Originally Posted by Locke

Cool. But are we not past 'First Position' by now?

Its a starting point, but its also a mutually acknowledged outlier and not much use for negotiations.

Katz got his arena for free because Edmonton's Mayor at the time was a moron.

At some point you have to analyze, interpret and understand your environment.

Well I think the fact that the deal is already 2/3 on the owners and the fans suggests they've already moved off the model doesn't it?

[Locke]

Originally Posted by Bingo

Well I think the fact that the deal is already 2/3 on the owners and the fans suggests they've already moved off the model doesn't it?

No, its 1/3 on the owners. 1/3 on the fans and 1/3 on the City. With debate about who floats the financing costs of the fan's percentage.

What seems unfair about that? I want to know who would actually own the building itself.

[direwolf]

What annoys me the most about this s--t show is that it's gonna be a huge distraction all season long if the two sides can't find a way to come together. This is the last thing this team needed as they head into what is supposed to be an exciting and promising season for the team and the fans. This crap has really put a damper on my excitement level.

[Redlan]

I am under the impression that at the end of the day, a new arena would be in the ownership of the City...not the Flames. Am I wrong?

[Parallex]

Originally Posted by Bingo

Well I think the fact that the deal is already 2/3 on the owners and the fans suggests they've already moved off the model doesn't it?

Does it? What are the fractions/percentages on the Edm arena deal again? Although really, I think the city wanting some means by which they can recoup their investment is hardly an outrageous demand.

[MoneyGuy]

Originally Posted by Tyler

I believe municipal bonds are not a thing in Canada

They exist but they're extremely rare.

[Hot_Flatus]

Originally Posted by Parallex

Does it? What are the fractions/percentages on the Edm arena deal again?

I posted this in the other thread but here it is again. Staggeringly terrible for Edmonton.

https://www.edmonton.ca/projects_pla...agreement.aspx

[CliffFletcher]

Originally Posted by direwolf

What annoys me the most about this s--t show is that it's gonna be a huge distraction all season long if the two sides can't find a way to come together. This is the last thing this team needed as they head into what is supposed to be an exciting and promising season for the team and the fans. This crap has really put a damper on my excitement level.

It's just a reminder the NHL is above all else a business. The fact these tactics will sour fans and put a pall over the team on the ice doesn't really matter to billionaires trying to save themselves 1.4 per cent of their net worth.

[Bingo]

Originally Posted by Locke

No, its 1/3 on the owners. 1/3 on the fans and 1/3 on the City. With debate about who floats the financing costs of the fan's percentage.

What seems unfair about that? I want to know who would actually own the building itself.

Thought I was saying the same thing ... 2/3 on owners and fans

1/3 + 1/3

[Locke]

Originally Posted by Bingo

Thought I was saying the same thing ... 2/3 on owners and fans

1/3 + 1/3

Okay...right, so how is that an egregiously unfair deal that warrants walking away from the table?

[Parallex]

Originally Posted by Locke

I want to know who would actually own the building itself.

That the Flames were demanding a property tax exemption would suggest that the Flames would own the building nah?