Arena negotiation discussion. UPD: Flames release their proposal

[Demzy84]

Originally Posted by tvp2003

Oh great. Somebody let in the advanced stat guys.

Bring on the HERO charts

Hahaha, just thought I'd include the fine print that Forbes had on their site

[MisterJoji]

I haven't waded through every post in both threads so don't know if this has been touched on but could the city offer up a scenario where they make the same percentage in revenue generated by the new facility as the cost they're willing to commit? I.E. City puts up 33% of the project cost (not a loan) but then get 33% of all revenue generated by the new arena.

[calf]

Originally Posted by MisterJoji

I haven't waded through every post in both threads so don't know if this has been touched on but could the city offer up a scenario where they make the same percentage in revenue generated by the new facility as the cost they're willing to commit? I.E. City puts up 33% of the project cost (not a loan) but then get 33% of all revenue generated by the new arena.

It's possible but a few things would have to be negotiated, which is really what this standstill comes down to.

First, it would have to be earnings, not revenues (account for operating expenses, interest, taxes, etc).

Second, whoever operates/manages the facility won't do so for free. That fee has to be high enough to make the effort worthwhile. It also has to be low enough to not cut into the 'silent partners' share of the profits too much. And the formula has to be agreed on. Flat amount + inflation each year? Thats not lucrative enough. . A cut of concessions, parking, advertising? Determining that share is tough but possible, but can fluctuate each year too. Or a hybrid of both. But the Flames will want to keep it all, but the City wants a fair share for what they invest, even if they don't operate it.

[GioforPM]

Originally Posted by simmer2

https://en.wikipedia.org/wiki/Barbar...of_RJR_Nabisco

A great book describing one of the largest deals ever made.

Well, sure details can come out if people breach confidences. But you were, I thought, asking that the details of offers come out now, before a deal is done. I would sure not want to negotiate in public like that. I can't think of much good that comes out of that. It becomes a PR game and not a business deal. Participants try harder to spin than to bargain.

[CorsiHockeyLeague]

Originally Posted by MisterJoji

I haven't waded through every post in both threads so don't know if this has been touched on but could the city offer up a scenario where they make the same percentage in revenue generated by the new facility as the cost they're willing to commit? I.E. City puts up 33% of the project cost (not a loan) but then get 33% of all revenue generated by the new arena.

I doubt the Flames would be on board for that anyway, but I don't really want the city getting into the arena business.

[bob-loblaw]

I'm looking forward to hearing what the Flames proposed. I imagine it's a copy of the Katz deal.

[Snuffleupagus]

Originally Posted by Bingo

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

1/3 + 1/3

Owners won't pay much if any in the end, In Edmonton the city is suppose to get some of their money back from 9.5% of ticket sales but (drumroll...) the ticket prices went up anywhere between 15% and 60%

In the end Katz not only won't pay a dime in rent he'll make a huge profit

[Weitz]

Originally Posted by Snuffleupagus

Owners won't pay much if any in the end, In Edmonton the city is suppose to get some of their money back from 9.5% of ticket sales but (drumroll...) the ticket prices went up anywhere between 15% and 60%

In the end Katz not only won't pay a dime in rent he'll make a huge profit

Well yah. The whole reason for a new arena is to remove the cheap seats, add more seats you can charge more money for, add more luxery seats, and raise all ticket prices.

[SebC]

Originally Posted by Bingo

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.

But if the things the city wants are the best choice the Flames have anyways, then from their perspective there's no need to pay the Flames to do what they'd be doing anyways. And actually, if you compare this plan to CalgaryNext, it seems the city actually will get more of what it wants by taking money off the table. Furthermore, because the Flames are dependent on the city for supporting infrastructure, and subject to the city's zoning regulations, the city has the means to influence the project without paying to do so.

If the Flames had a business case for Balzac that was better than the one for Victoria Park, then you might see the city needing to make a contribution that tips the balance.

[GioforPM]

Originally Posted by GGG

The city just voted to disclose the negotiations is I think what he is referring to.

That's amazing. I get they want to gain support, but who would ever negotiate with them in the future?

[Kjesse]

Bingo, I don't think I can accept the approach even though I agree EBITDA is needed to compare to top line revenue.

Only because the approach suggests private owners in Vancouver sunk 200 million with full knowledge of doing so. Doesn't there have to be another explanation? Are they true philanthropists?

Also, isn't Ottawa privately funded? By your calculation, over $400 million. Who spends money on that? It doesn't pass the smell test. There has to be more to explain the figures.

One reason I used top line figures is, that's probably the most reliable estimation Forbes can obtain. Although its interesting they claim EBITDA knowledge. And I would agree in general that EBITDA is as important to the equation as the top line, or even moreso, as it informs real profit or losses.

[Kjesse]

Originally Posted by GioforPM

That's amazing. I get they want to gain support, but who would ever negotiate with them in the future?

Yeah, kind of a big problem. If they're only disclosing their OWN offer, that's one thing. They had better not be disclosing details of the Flames' offer. So much for negotiating without the media or public involved.

That being said, King kind of invited it, as did Nenshi, by Nenshi first making a publicity release. With Jon Cornish of all people also.

Nenshi says, "we're going to do this". Flames say, "Really, you agree with us". Nenshi's staff says "No". So Flames respond, what they are proposing is not acceptable to us and is being used for political purposes.

This has some parallels to the Nenshi defamation debacle with the home builder.

[GGG]

Originally Posted by GioforPM

That's amazing. I get they want to gain support, but who would ever negotiate with them in the future?

I'm sure you could have non disclosure agreements that are beyond councils ability to disclose them. It's definately wierd. But King not stating the flames offer andvtge city ready to state theirs on the surface leads me to believe the city is more palatable.

[Conroy4Mayor]

Originally Posted by dustygoon

Why would CSEC go for repaying the 1/3 to city? They can go get a loan for that 1/3 in a heart beat and then own the whole damn thing.

CSEC doesn't want to own the arena because they'd have to pay property tax, which for commercial buildings runs about 2% of their assessed value.

So we're talking $8 million a year. This is the deal breaker.

CSEC wants the City to own the arena so they save the property tax. The City wants someone to pay the property tax to recoup the $200 million gift to the team, plus the land value, plus any infrastructure improvements.

[Flame On]

So let me get this straight.
The 1/3 that the city is going to come to the table with has to be paid back to them by the Flames, and for this they get a new stadium in their city which they'll shove all over their tourism Calgary videos and point to as a visual landmark.

They already want a stadium, Flames or not, and even include it in their East village Entertainment plans. (you know cause it's nice to not have a Stadium that can't actually entertain due to age and design layout). Plus it's part of their legacy building Olympic Bid plans.

Not to mention any jobs, construction jobs, revenues from the obvious bars and lrt fairs and non-flames related events that will bring people to town and hotels + whatever other intangibles their are annnnnnnd the Flames will pay all the upkeep and maintenance costs. And all eventually, for nothing after the loan is repaid!?

[DownhillGoat]

Originally Posted by Flame On

Not to mention any jobs, construction jobs, revenues from the obvious bars and lrt fairs and non-flames related events that will bring people to town and hotels + whatever other intangibles their are annnnnnnd the Flames will pay all the upkeep and maintenance costs. And all eventually, for nothing after the loan is repaid!?

- don't think they'll have too many more ticket checkers or beer vendors because of a new arena
- construction jobs are good, but will last, what? Two years?
- already discussed, that's a finite pool
- I don't know what an LRT fair is.
- Yes, the 6 concerts a year we don't get that every one is tripping over themselves to earn that lost revenue over. Hotels are booked here far more often for Stampede, the Oil Expo, and other random conferences than the Flames will provide.

[Robbob]

Lrt fare I think. If I had to guess at least 6000 people take transit to the game. Probably adds close to 50k per game/event for calgary transit. Maybe add a little more to the coffers for cpa.

I also think you underestimate the amount of rooms one nhl game brings in. CBA mandates vets get their own room, so team plus coaches, plus support staff, plus traveling media, plus scouts, plus traveling fans adds up when you multiply by at least 50 plus days.

[DownhillGoat]

Originally Posted by Robbob

Lrt fare I think. If I had to guess at least 6000 people take transit to the game. Probably adds close to 50k per game/event for calgary transit.

6000 people taking transit both ways per game is $37,800. If absolutely none of those same users have a monthly pass or ticket books. So maybe 30k?

Hotel rooms for 3/4 of an NHL team and support staff are... 28?

Travelling media that would stay here is... 6?

So for 1.5/10 of the year we have less than 40 extra hotel rooms booked, plus the odd out of town fan.

And it's not 50+ days. Since you can barely convince STH to go to pre-season games, we sure aren't getting tourism dollars here in October.

Free park passes bring more tourism dollars to Calgary than the Flames do.

[Bill Bumface]

Originally Posted by Flame On

So let me get this straight.
The 1/3 that the city is going to come to the table with has to be paid back to them by the Flames, and for this they get a new stadium in their city which they'll shove all over their tourism Calgary videos and point to as a visual landmark.

Like the Bow? Or the Calgary Tower in its day? What did the city pay for those?

[Lanny_McDonald]

Originally Posted by Bill Bumface

Like the Bow? Or the Calgary Tower in its day? What did the city pay for those?

Lots of incentives are cut for private business in Calgary. I can't speak to the two in question, but two that come to mind were the PetroCanada and CP relocations. The city gave them massive incentives to relocate their offices to Calgary including monetary inducements and tax breaks. Let's not think for a second that the City does not bend over for private business. They can bend zoning restrictions, change the classification of historic buildings (I do believe they did this for the Bow?), provide "free land," provide "free loans," incentivize through development deals, provide infrastructure upgrades, not charge taxes, etc. Many of these incentives never make the light of day because they are protected by NDAs. The city can't let these details get out because they establish a baseline for future negotiations with other interests. The city has and will continue to use these mechanisms to incentivize business to come to Calgary, build new buildings, and then to stay in Calgary. This is what municipalities do.