Arena negotiation discussion. UPD: Flames release their proposal

[Regorium]

Originally Posted by 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?

And you will note that this is once again a concession to the Flames.

An arena is a terrible investment (as noted by both sides of the argument). Its value decreases to $0 and into the negatives over time.

The City owning the arena means that there's no property taxes to be paid.

The city owning the arena means that if there are lingering construction issues, they have to deal with the lawyers and the liability.

There is no good reason from the City perspective to own the building except as a subsidy/concession to the Flames.

[Locke]

Originally Posted by Parallex

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

No.

If you rent commercial space part of your payments go to Property Taxes. Asking for an exemption means literally nothing one way or the other.

[Hot_Flatus]

Originally Posted by Locke

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

Because in the fine print Nenshi and council are likely balking at allowing them to put up nearly nothing and pay the rest of their 1/3 out until many fans/taxpayers will be long dead.

[Parallex]

Originally Posted by Locke

No.

If you rent commercial space part of your payments go to Property Taxes. Asking for an exemption means literally nothing one way or the other.

Thanks.

I thought that was strange. Regardless, I'm glad Nenshi is trying to make this at least near cost neutral for the city (in the long run) instead of just a billionaire welfare cheque.

[FlamesFanTrev]

Originally Posted by Locke

No.

If you rent commercial space part of your payments go to Property Taxes. Asking for an exemption means literally nothing one way or the other.

Yup. The bank technically owns my house until the mortgage is paid, but I'm have yet to receive their share of the property tax

[Locke]

Originally Posted by Hot_Flatus

Because in the fine print Nenshi and council are likely balking at allowing them to put up nearly nothing and pay the rest of their 1/3 out until many fans/taxpayers will be long dead.

I'm sorry, I'm not following. Most taxes are almost literally taxes on the next generation, why is this special?

In most cases it makes a lot of sense for the City to put up the initial down-payment and suck up the ticket tax financing because they get vastly better rates than a company and that reduces financing costs.

But then again, they need to be compensated for that.

[GreenLantern2814]

Originally Posted by Regorium

And you will note that this is once again a concession to the Flames.

An arena is a terrible investment (as noted by both sides of the argument). Its value decreases to $0 and into the negatives over time.

The City owning the arena means that there's no property taxes to be paid.

The city owning the arena means that if there are lingering construction issues, they have to deal with the lawyers and the liability.

There is no good reason from the City perspective to own the building except as a subsidy/concession to the Flames.

Is an arena really that poor an investment? An ~18-20K seat indoor facility that features 77 guaranteed regular season dates a year between the Flames and Hitmen, with another dozen combined pre-season events, another nine(?) Roughnecks games.

On the Saddledome's own website, it says they host over 150 events a year. Given the presence of a new, state of the art Rogers Place style facility, would it not be possible to get that number up to 250 or 300 dates a year?

Does anyone think the Saddledome has been a bad investment? I don't. I think the city's gotten more than its money's worth out of that building.

Some monolithic football or baseball stadium paid for almost entirely by taxpayers in nonsense. Nobody 'hangs out' by a football stadium that hosts nine dates a year.

An arena for a city that has a history of ardent use and support for such a facility is not a bad investment.

[Bingo]

Originally Posted by Locke

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

Did I say it was unfair?

I just suggested that the city has clearly defined gains in this that makes it less simple.

They want a building down town.
They have an arena featured in their East Village plan.
They have an olympic bid that features a new building and proximity to the old one for security cost savings.

[You Need a Thneed]

Originally Posted by 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?

Who actually owns the arena isn't really an important detail in this discussion. CSEC actually wants the city to own the arena, so that they don't have to pay property tax.

Whether it property tax, % of ticket revenue, or whatever else, the city isn't going to put money in without getting something back.

The current deal in the saddledome has the city technically owning the building, and the Flames paying for all operations/maintenance, and also getting all revenues. Essentially, the city subsidizes the Flames each year by whatever the property tax amount would be.

The Flames want to be in a new arena, and essentially have the same deal - all the while putting in as little money as possible into building the new arena.

For the city, this would mean putting in a large amount of cash, and getting little financial gain out of it on an ongoing basis.

The Flames are trying to frame this as - "the city owns the building, but its getting outdated. We want to continue on in the same deal as we already have, and we want to be generous by putting in $200 million of our own money to help the city build a new building."

However, While the city owns the building, that fact only means that the city is actually giving a subsidy to the team. Continuing on with the same deal structure in a new building means that the subsidy the city would be giving the Flames would be MUCH larger. The deal terms have to be revised to balance the subsidy amount to what it is now (or somewhere thereabouts).

[Locke]

Originally Posted by Parallex

Thanks.

I thought that was strange. Regardless, I'm glad Nenshi is trying to make this at least near cost neutral for the city (in the long run) instead of just a billionaire welfare cheque.

Thats all I want.

I have no problem with public funds for an arena, none at all, provided the price is right and we get paid back.

You want to borrow money from the City to help, you want the City to help pay, okay, I dont have any problem with that, so long as its within a framework that we can look at and understand and know what our contribution has been and how we're being paid back.

But just handing cheques and buildings to Billionaires isnt something I abide.

[Hot_Flatus]

Originally Posted by Locke

I'm sorry, I'm not following. Most taxes are almost literally taxes on the next generation, why is this special?

In most cases it makes a lot of sense for the City to put up the initial down-payment and suck up the ticket tax financing because they get vastly better rates than a company and that reduces financing costs.

But then again, they need to be compensated for that.

If you consider Edmonton's deal, Mr Katz fronted a mere $20M and pays the remaining share of his $130M over 35 years as "rent". There is effectively no financial contribution from the Oilers under this model at all unless you consider $3M a year much for a city of 1.2M people. The city of Edmonton meanwhile needs to find a way to re-coup half a billion tax dollars in the short term by hitting taxpayers between the legs.

If this deal is what is being peddled by CSEC, I can fully understand why council is releasing the details asap. Katz probably returns that yearly payment in interest while he's able to hold onto his 1/3 share for eternity. Edmonton's mayor should be shot out of a cannon for allowing that to happen.

[Incogneto]

I hate that I already know so much about financing an arena.

[GioforPM]

Originally Posted by Regorium

The City owning the arena means that there's no property taxes to be paid.

The city owning the arena means that if there are lingering construction issues, they have to deal with the lawyers and the liability.

There is no good reason from the City perspective to own the building except as a subsidy/concession to the Flames.

Who is responsible for taxes, construction issues and liability is completely down to whatever a lease or construction agreement says. My firm rents its downtown office and in our recent move we renovated the floors we are on from cement out. We paid for most of that cost. Of course because of the economy we wrangled great concessions on both rent and building costs. All that stuff is negotiable.

[crazy_eoj]

How much, and in what way, does the city recoup from other recent major capital projects:

Downtown Library
Music Center
City Hall Renovation ?

[Flacker]

Originally Posted by crazy_eoj

How much, and in what way, does the city recoup from other reject major capital projects:

Downtown Library
Music Center
City Hall Renovation ?

How are these comparable? None of the above are operated for profit, none of the above are owned by private enterprises.

[DJones]

So the City wants the owners to pay for it all.

Can't say that surprises me why the Flames aren't happy. Can't see anything being done unless the city actually pays for something rather than acting as a bank.

[belsarius]

Originally Posted by DJones

So the City wants the owners to pay for it all.

Can't say that surprises me why the Flames aren't happy. Can't see anything being done unless the city actually pays for something rather than acting as a bank.

The city wants to the owners to pay 1/3 and they will pay 2/3. They want to recoup their money from revenue. The Flames want to recoup their money through revenue. It's operating a business.

The difference is once the 400Mil the city has paid has been recouped they get no more, once the Flames recoup their 200Mil investment they continue to reap the rewards and once it's time to pay for the demolition of the building they get to walk away and put that cost onto the taxpayers.

[nik-]

Originally Posted by crazy_eoj

How much, and in what way, does the city recoup from other recent major capital projects:

Downtown Library
Music Center
City Hall Renovation ?

It's hard to compare, the corporate suites at the downtown library are definitely better than what the Flames have, but the Flames definitely have a better TV deal.

It would be interesting to find out.

[crazy_eoj]

Originally Posted by Flacker

How are these comparable? None of the above are operated for profit, none of the above are owned by private enterprises.

What other comparables from the City do you suggest?

If the answer is they do not recover ANY costs, which I suspect it is, then clearly the City presently expecting to recover nearly 100% of costs for the Arena project, which provides some of the same benefits as these other major projects, seems to be out of line.

[You Need a Thneed]

Originally Posted by DJones

So the City wants the owners to pay for it all.

Can't say that surprises me why the Flames aren't happy. Can't see anything being done unless the city actually pays for something rather than acting as a bank.

No, the city's offer isn't anywhere near having the owners "pay for it all".

Obviously, lets wait until we can see the whole offer, but the city's offer is worth somewhere between $50M and $100M - and we don't know for sure if land is included in that yet or not.