One thing to keep in mind is that the flames could easily afford to build its own arena.
Simply spending to the floor rather than the cap would give them 20 million USD per year of cash flow to build what ever they wanted. Now would we want to watch a team only spending to the floor? Maybe not, but corporate support likely stays the same and that is what really pays the bills. But the important take away here is the NHL produces enough money in every one of their markets to build their own arenas and turn a profit.
If the NHL decided to fight the players to have a 30 million cut to the salary cap they could open a 900 million dollar facility every year and the average player salary would still be over 2 billion.
The cities of North America need to agree to not be suckered into building these facilities. Given current team valuations and player salaries there is more than enough money available within these businesses.
The sports leagues are awful corporate citizens.
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Very fair, and maybe that needs to be part of the deal. This is where I try not to venture into what makes sense, because IMO I don't know enough of the key details to know what makes a fair deal for all parties involved. I just get frustrated when people act like CSE are crooks trying to milk the city for funds on an amazing investment for them that they should be willing to pay for. That's not the case at all.
The only thing I'll say, is your thoughts, while valid, also create a bit of a circular argument. A bit of what end do you pay for it on.
- If the city gets a stake in profits... then theoretically that make the "investment" opportunity worse for any private investor. So in theory, that just pushes the amount they'd expect the city to contribute up front higher..........which in turn would push up what the city should expect to get out of the stake in the franchise........and so on until it doesn't make sense for either side.
Really for the city it comes down to a few items I think:
- How much would they invest in an Event Centre (if anything) if the Flames weren't around and they weren't going to have an anchor tenant of the Flame caliber in it.
- How much is having an NHL franchise and a potentially upgraded Event Centre for other events worth to them in regards to attracting and retaining major corporations to set up shop here (so create tax dollars for them) and how much does it help keep other businesses viable (create tax dollars for them).
The answer to the two questions above certainly isn't the full cost of the project I'm sure, and it may very well be 0. But if it's 0, or it's too far apart from what the CSE needs to make it worth while for them to invest their portion, then likely time for the city to divorce from the idea having a major league sports team in Calgary, and accept we won't be a destination for major league arena concerts. Again that's a totally viable position, it's a lot of public funds that could go elsewhere, but we just need to be honest about what it means.
An equity stake wouldn't necessarily have to exactly proportional to the investment (valuation being particularly tough in this case), nor would it need to pay dividends. The equity would simply be an appreciating asset on the books...next time the extortion game comes around the city is in a better position should circumstances make the threat of moving more realistic than present.
I'm not exactly sure who you mean by private investor...is that Murray, or someone else who might buy in? And I think most of us recognize that owning a franchise isn't really about year-to-year profits...it's a low-risk/moderate yield luxury hobby-investment. The fact that it generally pays for itself is icing on the cake. Alternatively, some billionaires might find it fun to collect vintage Ferraris...but unless they open a museum and charge admission, it's a luxury hobby-investment with significant operating costs (garage, maintenance, insurance, etc.). The true value in both cases is from scarcity.
They are a minor league city with a great arena. The economics, language and realities of NHL in the 21st century are factors that they will never overcome.
I wouldn’t say never, but the demographic transition model negating the city’s natural population growth, the Province’s cultural protectionism, and the casual xenophobia towards new Canadians and indigenous people doesn’t exactly make the scenario likely.
Quebec City’s chances of an NHL team are basically Saskatoon’s with a better population starting point and a newer arena.
The TV market for Quebec City is an issue as far as North American cities go. The NHL probably wants to focus on filling in those gaps first, so Houston, Portland and KC are likely near the top for relocation if anyone ever shows interest. Atlanta may even get another chance.
Quebec City is the next big TV market in Canada that doesn't have a team. It is #7 (Calgary is #6 and Winnipeg is #8).
It is a terrible investment. It's a money losing venture for all involved. The City has to decide if it wants an event centre and an NHL franchise long term and if they see benefit in that or not.
If they don't, likely time to tell the CSE and the NHL that when the Dome truly stops being a tolerable solutions for the Flames to look a selling the team.
The City has decided that yes, they do want an event center.
One thing to keep in mind is that the flames could easily afford to build its own arena.
No, they could not.
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Simply spending to the floor rather than the cap would give them 20 million USD per year of cash flow to build what ever they wanted.
And when the cap goes up to $100 million, they'll have to spend that money anyway. You can't project future cashflow on the assumption that it is going to be 2022 forever.
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Now would we want to watch a team only spending to the floor? Maybe not, but corporate support likely stays the same and that is what really pays the bills.
The last time the Flames could not afford to ice a competitive team, season ticket sales collapsed.
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But the important take away here is the NHL produces enough money in every one of their markets to build their own arenas and turn a profit.
That is absolutely wrong. Small markets are marginal at best, and several NHL markets are perennial money-losers.
As I've pointed out based on Forbes' data, the top three teams in the NHL (Toronto, Montreal, Rangers) earn more than half the total profits. The top third of teams earn 100% of the profits. Any earnings from the teams in the middle of the pack are cancelled out by the losses of those at the bottom. Owning an NHL team is not a licence to print money.
And that's with most of the teams in arenas they did not pay to build themselves.
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If the NHL decided to fight the players to have a 30 million cut to the salary cap they could open a 900 million dollar facility every year and the average player salary would still be over 2 billion.
And the NHLPA would go along with this why? It took two catastrophic lockouts to get them to agree to the deal they have now.
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And when the cap goes up to $100 million, they'll have to spend that money anyway. You can't project future cashflow on the assumption that it is going to be 2022 forever.
The last time the Flames could not afford to ice a competitive team, season ticket sales collapsed.
That is absolutely wrong. Small markets are marginal at best, and several NHL markets are perennial money-losers.
As I've pointed out based on Forbes' data, the top three teams in the NHL (Toronto, Montreal, Rangers) earn more than half the total profits. The top third of teams earn 100% of the profits. Any earnings from the teams in the middle of the pack are cancelled out by the losses of those at the bottom. Owning an NHL team is not a licence to print money.
And that's with most of the teams in arenas they did not pay to build themselves.
And the NHLPA would go along with this why? It took two catastrophic lockouts to get them to agree to the deal they have now.
The only point you are making here is that the NHL is entirely dysfunctional.
That is not a good reason for taxpayers to give the the NHL and its players a gift of hundreds of millions of dollars.
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CSEC/City arena deal UPDATED: Third Party Facilitator
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Originally Posted by SebC
If the governments get their act together and cut the NHL off from subsidies, the NHLPA won't have a choice.
I would love this but the Americans have proven time and time again they will subsidize pro sports with insane amounts of tax dollars- so your point doesn’t really go anywhere.
We need to decide if an nhl team, and the benefits of an nhl quality stadium is worth $300M of tax dollar (or more given the reason the flames acted in bad faith and canceled the last deal)
I don’t. Let them walk. I truly don’t think they will but if they do, oh well. My ego isn’t so tied to them it’s worth paying them off.
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The only point you are making here is that the NHL is entirely dysfunctional.
No, the point I am making is that Murray Edwards does not own the NHL. He is a franchisee, and does not get to tell his franchisor how to run its business.
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That is not a good reason for taxpayers to give the the NHL and its players a gift of hundreds of millions of dollars.
So what? You have not given a good reason for Murray Edwards to give the City of Calgary a gift of hundreds of millions of dollars, which is essentially what you are demanding.
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If the governments get their act together and cut the NHL off from subsidies, the NHLPA won't have a choice.
How do you propose that governments do this? Pass a law that somehow applies in both Canada and the U.S., evicting every NHL team from every arena that was built with public money, and then force them to buy the arenas at the original cost of construction?
Because the only subsidy that most NHL teams are receiving is the ability to play in a publicly-funded arena that has already been built – decades ago in the majority of cases.
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How do you propose that governments do this? Pass a law that somehow applies in both Canada and the U.S., evicting every NHL team from every arena that was built with public money, and then force them to buy the arenas at the original cost of construction?
Because the only subsidy that most NHL teams are receiving is the ability to play in a publicly-funded arena that has already been built – decades ago in the majority of cases.
Your points are becoming less and less coherent.
It's not really of great interest to me what has happened in the past or how other cities might be making ill-advised gifts to pro sports teams. What I do know is that the CoC should not be giving hundreds of millions of dollars in gifts to the NHL and the players.
I do not think the NHL/NHLPA as a league/franchisor has a good business model if it is restricted to the 15-20 american markets that are able to get public gifts or are large enough to justify a privately owned building. But they are are going to have to make that decision on their own.
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One thing to keep in mind is that the flames could easily afford to build its own arena.
Simply spending to the floor rather than the cap would give them 20 million USD per year of cash flow to build what ever they wanted. Now would we want to watch a team only spending to the floor? Maybe not, but corporate support likely stays the same and that is what really pays the bills. But the important take away here is the NHL produces enough money in every one of their markets to build their own arenas and turn a profit.
If the NHL decided to fight the players to have a 30 million cut to the salary cap they could open a 900 million dollar facility every year and the average player salary would still be over 2 billion.
The cities of North America need to agree to not be suckered into building these facilities. Given current team valuations and player salaries there is more than enough money available within these businesses.
The sports leagues are awful corporate citizens.
It's not about public subsidies for all teams. A large number of teams are located in areas that have sufficient population bases to make arenas work without the need for public subsidies. They get enough concerts and conventions. Many of them have overlap with an NBA team. The private economics work. The threshold seems to be around 2m-2.5m people.
Calgary is not one of those cities.
So if you want flames ownership to build this without public money, you are asking for a private subsidy. You're basically asking private actors to finance a non-economic investment. No one is going to do that. This isn't a charity.
Likewise, if the flames demanded the City of Calgary pay for the entire facility, that wouldn't be fair to the public, because we'd be asking the public to subsidizes a private business so they can make excess profits.
The solution is to have cost sharing where the flames pay for the most that can be economically justified via private business case. And the public picks up the rest.
This isn't rocket-science. While I cared less about this 10+ years ago when the dome had a good amount of life remaining on it, that is no longer the case. There is now an urgency to get a new arena built as the Saddledome reaches the end of it's useful life.
How do you propose that governments do this? Pass a law that somehow applies in both Canada and the U.S., evicting every NHL team from every arena that was built with public money, and then force them to buy the arenas at the original cost of construction?
Because the only subsidy that most NHL teams are receiving is the ability to play in a publicly-funded arena that has already been built – decades ago in the majority of cases.
In Canada it would only take 5 provinces agreeing to amend the municipal governance act to ban Canadians subsidizing nhl arenas. That likely would be widely supported as if you remember when the feds gave the NHL teams a tax break it didn’t last long as it was overwhelmingly panned.
If Canada did this the NHL would have to seriously ask itself if it needs the Canadian market outside of Toronto, Montreal and BC. It might conclude it doesn’t.
Now to get the US involved would likely be more difficult but you would start by working through the North American Mayors Summit to get buy in on ending the stupidity.
You don’t need to evict existing owners as the NHLs likely response would be something around extracting money from the NHLPA.
It’s funny you talk about how the NHLPA would be tough to extract 900 million per year from. The only reason cities are easy to extract that from is that they don’t act like a union. It starts by getting all the existing locations on board and then working against poachers.
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It's not about public subsidies for all teams. A large number of teams are located in areas that have sufficient population bases to make arenas work without the need for public subsidies. They get enough concerts and conventions. Many of them have overlap with an NBA team. The private economics work. The threshold seems to be around 2m-2.5m people.
Calgary is not one of those cities.
So if you want flames ownership to build this without public money, you are asking for a private subsidy. You're basically asking private actors to finance a non-economic investment. No one is going to do that. This isn't a charity.
Likewise, if the flames demanded the City of Calgary pay for the entire facility, that wouldn't be fair to the public, because we'd be asking the public to subsidizes a private business so they can make excess profits.
The solution is to have cost sharing where the flames pay for the most that can be economically justified via private business case. And the public picks up the rest.
This isn't rocket-science. While I cared less about this 10+ years ago when the dome had a good amount of life remaining on it, that is no longer the case. There is now an urgency to get a new arena built as the Saddledome reaches the end of it's useful life.
This is incorrect. The flames more or less break even with roughly a 80 million dollar payroll. A 30 million dollar payroll cut pays for the arena quite easily. Just change HRR to 20% arena, 50% owner, 30% players.
I am asking the flames and the NHL as a business to manage their payroll so they don’t need public subsidies. Now you might argue that the demand for players makes them worth what they are paid but in that case we shouldn’t have any cap whatsoever. So if you are pro cap then the cap should be set such that competitive balance is achieved and the league can afford the run it’s business.
In Canada it would only take 5 provinces agreeing to amend the municipal governance act to ban Canadians subsidizing nhl arenas. That likely would be widely supported as if you remember when the feds gave the NHL teams a tax break it didn’t last long as it was overwhelmingly panned.
If Canada did this the NHL would have to seriously ask itself if it needs the Canadian market outside of Toronto, Montreal and BC. It might conclude it doesn’t.
Now to get the US involved would likely be more difficult but you would start by working through the North American Mayors Summit to get buy in on ending the stupidity.
You don’t need to evict existing owners as the NHLs likely response would be something around revenue sharing to subsidize new arenas.
It’s funny you talk about how the NHLPA would be tough to extract 900 million per year from. The only reason cities are easy to extract that from is that they don’t act like a union. It starts by getting all the existing locations on board and then working against poachers.
I wish this was feasible. I really do. I never see the provinces in this much unity over and issue much of the populace would be in outrage over
It's not about public subsidies for all teams. A large number of teams are located in areas that have sufficient population bases to make arenas work without the need for public subsidies. They get enough concerts and conventions. Many of them have overlap with an NBA team. The private economics work. The threshold seems to be around 2m-2.5m people.
Calgary is not one of those cities.
So if you want flames ownership to build this without public money, you are asking for a private subsidy. You're basically asking private actors to finance a non-economic investment. No one is going to do that. This isn't a charity.
Likewise, if the flames demanded the City of Calgary pay for the entire facility, that wouldn't be fair to the public, because we'd be asking the public to subsidizes a private business so they can make excess profits.
The solution is to have cost sharing where the flames pay for the most that can be economically justified via private business case. And the public picks up the rest.
This isn't rocket-science. While I cared less about this 10+ years ago when the dome had a good amount of life remaining on it, that is no longer the case. There is now an urgency to get a new arena built as the Saddledome reaches the end of it's useful life.
Your solution is not at all obvious to me. The NHL has created the problem and is also suffering from the problem of their broken economics. It has nothing to do with the taxpayer at all.
The solution is to have cost sharing where the flames pay for the most that can be economically justified via private business case. And the public picks up the rest.
This isn't rocket-science. While I cared less about this 10+ years ago when the dome had a good amount of life remaining on it, that is no longer the case. There is now an urgency to get a new arena built as the Saddledome reaches the end of it's useful life.
This seems to get the ordering wrong. I do agree cost sharing is fine. But it should start with how much would it cost the city to make a new event center. Then that is the money the city contributes with say a small percentage added for the cost of working out a new plan. Then the Flames pick up the rest of the cost.
I would love this but the Americans have proven time and time again they will subsidize pro sports with insane amounts of tax dollars- so your point doesn’t really go anywhere.
We need to decide if an nhl team, and the benefits of an nhl quality stadium is worth $300M of tax dollar (or more given the reason the flames acted in bad faith and canceled the last deal)
I don’t. Let them walk. I truly don’t think they will but if they do, oh well. My ego isn’t so tied to them it’s worth paying them off.
Yep, American sports owners have gone absolutely crazy in holding cities hostage with threats of their teams leaving to get hundreds of millions in handouts. And Canadian cities by proxy and being part of major American sports leagues get brought into the craziness as well.
I wonder if everyone in here has watched this segment with Jon Oliver? Nenshi was awesome for how he stood up to these guys, so much so that he was making the news in the US during the last round of negotiations with the Flames. Frustrated American cities took notice and loved it, as all municipalities need to start saying enough is enough.
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