Arena negotiation discussion. UPD: Flames release their proposal

[nik-]

Ah yes, intangibles and emotional pandering.

[stamps]

Originally Posted by nik-

Ah yes, intangibles and emotional pandering.

Lol !!! I will survive ...

[Reneeee]

I know I threw this out awhile back but why not plebiscite the general taxpayers on whether or not we would take the deal?? Or is the current council nervous that we would vote in favour?

It's interesting to note that the Vancouver Olympic bid went to a plebiscite

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[Brad Marsh]

I think people are being way too hard on the Flames here. They seem to be transparent about their expectations from the city, they have outlined to the city how it stands to benefit from investment in this project, and they are looking to the city as an investment partner. The return to the city for their investment is a combination of fiscal, social, and cultural benefits. I think they've been very clear that there may not be a 100% return from a strictly financial perspective, but such is the case more often than not when it comes to building and operating pro sports stadiums. The city needs to reconcile (or not) whether the social and cultural benefits bridge the gap that will exist on the financial side. That's the crux in my mind.

Additinally, the Flames are not asking for more than what nearly every other major sports team has received from the city they play in. The model is well established. Everyone agrees (including the Flames) that you don't make money off of building large arenas, which is why it doesn't make business sense for team ownership to do this without some level of government support. The city needs to decide whether or not they feel the combination of financial, cultural, and social benefits are worth some investment. Right now it seems as though they don't. And that's fine, but the consequence to the city is that in the long term there is a very real possibility of not having an NHL team playing in Calgery. Look no further than Oakland or other recent examples from the NFL if you think "it can't happen here".

I also don't think the characterization of this as greedy owners wanting the city to build them an arena so they can make more money is completely fair either. Any summary I've read about the team's proposal still has the owners making the major contribution.

The other concern I have is the sentiment that the Flames have somehow made this a campaign issue. While it certainly has become a campaign issue, the reality is that the mayor, as part of his campaign strategy, talked about his vision for an arena district in Victoria Park, a vision that implied some form of relationship with the team. This seemed incongruent with where the city and the Flames had actually left things back in July, and was not reflective at all of where this entire project was actually heading, and so I can't blame the Flames for clarifying with the public where the team stands in relation to that vision. I don't think there was a foul here at all.

Anyway, I can certainly understand why the city may not be interested in what the Flames are proposing, but in my opinion, the Flames aren't bad guys for proposing it, or for clarifying that they are not in alignment with a key plank in the mayors campaign platform that directly involves them.

At some point I do hope the city fully considers this project proposal (and I suspect they will). We love to make fun of Edmonton and the terrible arena deal the city of Edmonton agreed to with the Oilers, but i have yet to meet someone from Edmonton, Oilers fan or hockey fan or otherwise, who isn't proud of the building and the improved district it anchors. It has been transformational. I'm sure there are detractors out there, but I suspect they would be in the minority (or at least that's my impression). In fact, I would even suggest that the entire project has re-energized the city and its support for the team. There has been much public good come from the project that has justified city investment. The level of investment is certainly up for debate, but not all of the return (public good) can be measured in dollars and cents. That was never what the Flames were selling.

Anyway, this post is longer than I was hoping. I get why you may not support city involvement in the Flames arena project, and that's valid, but let's not make the team out to be the bad guys here. They are simply trying to operate within a funding model that is well established for this sector. For my part I'm glad they're trying. The saddledome will need to be replaced at some point, and the bottom line for me is that it will never happen in Calgary if the owners are required to fund it on their own. That just isn't a viable alternative either.

[You Need a Thneed]

Originally Posted by EldrickOnIce

^ should try to work Prime into a few of the titles

Optimist Prime Park?

[Backlunds_socks]

Originally Posted by stamps

It is suppose to be a partnership ... the Flames and the city benefit ... that is all ... hopefully they can come to an agreement ....

Yes, then CSEC should share in profits/losses.

[DFO]

I don't agree with what CSEC sees as the basline for any new deal - what came out of the 1994 situation. The city ended up paying for the renos and cut that deal essentially eliminating rent & property taxes. That was a big give on the city's part but it dealt with the terrible state of Canadian NHL economics at the time.

Fast forward post CBA and the situation for Canadian NHL teams is much improved. The Flames are producing profits and stand to substantially raise them in a new rink. I don't think it's unreasonable that the city feels that there has to be some return on the investment this time around. Any deal is going to be a gift to the Flames but it shouldn't be as one sided as last time.

[getbak]

Originally Posted by DFO

I don't agree with what CSEC sees as the basline for any new deal - what came out of the 1994 situation. The city ended up paying for the renos and cut that deal essentially eliminating rent & property taxes. That was a big give on the city's part but it dealt with the terrible state of Canadian NHL economics at the time.

Fast forward post CBA and the situation for Canadian NHL teams is much improved. The Flames are producing profits and stand to substantially raise them in a new rink. I don't think it's unreasonable that the city feels that there has to be some return on the investment this time around. Any deal is going to be a gift to the Flames but it shouldn't be as one sided as last time.

Also, from what I recall, most of the funding for the Saddledome renovation came from the federal government in the form of the infrastructure funding program that the Chretien government had recently announced.

Even though it's still tax dollars, I think that's an easier sell to Calgarians because we always feel that more money is leaving Alberta than is ever returned by the feds. Whether accurate or not, the perception is that we're just getting back what's ours.

[Table 5]

Originally Posted by stamps

It is suppose to be a partnership ... the Flames and the city benefit ... that is all ... hopefully they can come to an agreement ....

The problem is that the Flames viewpoint only sees the citizens of Calgary benefiting with fluffy things like civic pride and good vibes, while they themselves benefit with tangible things like land, cash, and profits. If the roles were reversed, would they feel that’s fair? How much is their responsibility as community and corporate leaders worth?

[Roughneck]

Originally Posted by Brad Marsh

I think they've been very clear that there may not be a 100% return from a strictly financial perspective

They've been clear all right:





The answer is "Yes, we need money from the city we don't have to pay back."

[Parallex]

Yes... it's very apparent that they're thinking is that the only "return" the city should get is smiles, rainbows, and dreams of colorful unicorns.

[Lanny_McDonald]

Originally Posted by Backlunds_socks

Yes, then CSEC should share in profits/losses.

There's the problem. The city, like anyone else, will happily take part in any profit taking, but they want no interest in taking any sort of loss. I don't blame them, as I don't want my city getting involved in any sort of schemes where there is significant risk. But this is the problem. There is no risk here as the City has already identified a new arena as a requirement, and a major cog in their “entertainment district.”

The issue here for the City is not about who is making how much money, or how much money is being lost, as that risk is taken up by the ownership of the hockey team. The issue here is providing needed services to the citizens and tax payers. It has been noted for about a decade that the city needs new facilities, both in an arena and a stadium, but the City has been woefully slow to address replacing the facilities they own. The City should be responsible for the upgrading or replacing of their buildings, no? Instead of footing the bill by themselves the reasonable approach on this is to partner with the business community to get this done. Partner with the major tenants and try to strike a deal that makes sense for all parties. We are currently watching this dance playout.

The City does have a problem in this process, because there are two deals that work against the City. Like it or not, the Edmonton deal is the bench mark. This is one the Flames, or any other team or interest coming to Calgary, is going to use as the baseline for any agreement. This sucks, because the Oilers got a new building and development opportunities in the area for a measly $26.5M upfront investment, and a $3.5M lease over 30 years ($105M over that period). The Oilers don’t own the building and have no responsibility to property taxes. For $131.5M (17% investment), the Oilers have secured their building and all revenues for the next three decades. This is unfortunately the baseline.

The other deal that hurts the City is the National Music Centre. The NMC was built with money provided from private enterprise and from all levels of government. The City of Calgary’s contribution is blended into the $75M government contribution (no payback required), each paying a third, which covered 50% of the initially estimated $150M for construction of the building. That estimate grew to $168M, then finally ballooned to $191M for completion. The feds then had to kick in $5M in funding to cover cost overruns and get the building complete.

Worse, the NMC appears to be a developing white elephant. The NMC failed to meet its attendance goals, by 30%, attracting only 100,000 people to its concerts and exhibitions. Not only that, they were $60M short in their fund raising, forcing City of Calgary to kick in $2M in relief funding to keep the place afloat.

This is important because it establishes that the City will grant money to private interests to further their goals of meeting their larger development plan. The NMC is prominently featured in the current Mayor's overview of the entertainment district, where he also prominently identifies the location of the new arena. The only question is what type of investment should the city make in a facility that draws 1.25-1.5 million patrons a year? What value does that bring to the citizens, and what potential revenues can it generate for the City?

Here's where things get complicated. The City needs a strategy to recoup the money invested, no doubt. Do that do that directly, or do they do that indirectly? Sometimes you invest money in one area hoping to make the gains in others. Building infrastructure hopefully draws people and businesses into areas where you would traditionally have none. I would argue that the arena does just this. By having the arena there, and having a site that will draw that many possible customers, it makes the neighborhood more attractive to other businesses as well. This is where the revenue recovery should be targeted, and this is why the arena and its tenants mean so much to the area.


The question is why should the Flames get off the hook from paying property taxes? Because the building is is owned by the City of Calgary. The next question is the Flames are getting a ridiculous deal by only having to put up $185M to get this built (33% investment). I'll just remind people that the Oilers are getting their building for almost half of that. I think that based on comparison, this could be a great deal for all parties involved.


The final point I hear is the argument that Calgary can't pay for this, that they have no money to do so. It is not widely known, but the City of Calgary is sitting on a rather substantial reserve fund, worth almost $2B. This puts the city reserves in the Toronto stratosphere, a city almost five times the size in population. For comparison sake, the City f Edmonton has a reserve of $375M. Now I am not suggesting that the City dip into that reserve. I'm suggesting they could use this as the backing required to finance this project and get the facilities Calgary needs. They are going to recoup their money through taxes on lands around the arena, and then the levy on every ticket sold, so as long as hockey remains viable in Calgary the City will quickly recoup their investment.


There is the rub of this whole exercise. The Calgary Flames need to remain viable and competitive to keep the patrons happy and keep the people rolling through the turnstiles. This is important to the success of the owners, but also important to the success of the arena and the entertainment district. If the team is competitive it will mean more money into the district, and then more money into the City coffers. A team that can't afford its talent, and has to relive the 90's again, is not going to benefit anyone. Cutting a deal that helps the team remain competitive (on all fronts) meets the goals of everyone.

[Rollin22x]

The city did say they would be interested in a possible ownership stake in the Flames so I think that shows some willingness to accept potential losses.

[transplant99]

Originally Posted by Rollin22x

The city did say they would be interested in a possible ownership stake in the Flames so I think that shows some willingness to accept potential losses.

That would be interesting.

I wonder how negotiations would go AFTER the city ponies up say... 125 Million for a 25% piece of the team?

[DiracSpike]

Arenas might not be the investment catalyst they're hyped up to be, but it would certainly be more of an area draw and generate more investment and money than the NMC.

[Flash Walken]

Just what the team and the league wants, a municipal stake to review their financials independently.

It makes so much sense I wonder why the entire league isn't run that way...

[Locke]

Okay, I think we all know that the absolute last thing that is ever going to happen is the City taking a stake in the Flames.

Do we all recall 'Jabroni-gate' many pages back? (Go Juggalos) This would be like 100x worse. Largely because the representatives of 'The City' are not always the same people but that wrinkle is just the tiniest of scratches on the surface of a nightmare the likes of which I cant even possibly imagine.

There are few times when I would classify something as 'Off the Table' but that is not even in the same solar system as 'The Table.'

[sureLoss]

Today is nomination day for the Mayoral race sounds like the arena issue is getting a lot of press as expected.

Lucas Meyer‏Verified account @meyer_lucas
Nenshi will release donors today, calls on others to do the same. On arena, says opponents should give position on City offer #yyc #Flames

Lucas Meyer‏Verified account
@meyer_lucas
Bill Smith is in. Asked multiple times about the arena offer, wouldn't say if it was fair or not, wants to see the #Flames offer. #yyc

[Brad Marsh]

Originally Posted by Roughneck

They've been clear all right:


The answer is "Yes, we need money from the city we don't have to pay back."

I think we all agree that this is the CSEC position. They clearly are asking for money that they don't have to pay back. What the City is looking for is a full payback on their contribution. CSEC is arguing that there is a payback for the City but it's a combination of financial, cultural and social benefits. CSEC is also arguing that a deal based strictly on a financial payback to the City isn't financially viable from CSEC's perspective. That seems to be their line in the sand. It also seems like that is a reasonable position to take given that these stadiums don't generate sustainable profits, and given that these kinds of deals in most other pro sports cities do involve (and require) some form of government subsidy. Otherwise it doesn't work from CSEC's perspective. And fair enough.

The City now needs to determine if they are willing to subsidize the project without any expectation of fully recovering that investment (in actual money). The Flames are arguing there are other non-monetary benefits that might appeal to the city, but that's for the city to determine. So far it doesn't look like the city are interested in a deal that doesn't fully recover their contribution. Again, fair enough. There are reasonable arguments that support that position (and many of them have been put forward in this thread).

My only point is that agree or disagree with the model they are proposing, CSEC has been clear, and their position seems to be the "norm" for how these projects get done across North America (and likely beyond). That they have taken this approach doesn't make them evil, greedy owners (IMO).

I just think that this is all part of the process. There are hundreds of millions of dollars at stake, and there will be some rough patches as they continue to try to figure all of this out. This is clearly one of those patches.

[Manhattanboy]

I really do believe Ken King as the lead on the Flames negotiating team has damaged the Flames position, at least in the eyes of the public (and several season ticket holders). Obviously his bosses disagree. I know I sound like a broken record on this point, but often times the personalities at the table do make a real difference to getting a deal done.