Arena negotiation discussion. UPD: Flames release their proposal

[Mass_nerder]

The Flames must be winning some hearts, as someone spray painted "Nenshi hates the Flames" on the big rock on the U of C campus.

[mikephoen]

Originally Posted by Mass_nerder

The Flames must be winning some hearts, as someone spray painted "Nenshi hates the Flames" on the big rock on the U of C campus.

My money is on KK doing it himself.

[sureLoss]

Originally Posted by Wormius

Why is a ticket tax even being floated? The Flames simply need to pay back x-amount to the City. Let the Flames figure that out if they find a ticket tax so abhorrent.

Who says the Flames find the ticket tax abhorrent? Especially since it sounds like they want the city to front the money for a ticket tax.

The issue for many people here are the Flames are claiming the ticket tax as part of their contribution to building a new arena.

In terms of public funds financing an arena, it is a better option because a ticket tax means the actual users of the facility are financing the facility instead of say an increase to the property tax of everyone in Calgary.

Ticket tax is fine. The issues with it is a) who is fronting the money and b) are the Flames being disingenuous claiming it is part of their contribution.

[GGG]

Originally Posted by sureLoss

Who says the Flames find the ticket tax abhorrent? Especially since it sounds like they want the city to front the money for a ticket tax.

The issue for many people here are the Flames are claiming the ticket tax as part of their contribution to building a new arena.

In terms of public funds financing an arena, it is a better option because a ticket tax means the actual users of the facility are financing the facility instead of say an increase to the property tax of everyone in Calgary.

Ticket tax is fine. The issues with it is a) who is fronting the money and b) are the Flames being disingenuous claiming it is part of their contribution.

Is the flames owners 186 million contribution also paid for by the users? I mean a portion of every ticket will be going to pay back the owners 186 million. So isn't the entire portion of the Flames contribution as user fee? And if the city is recovering their contribution through property taxes paid for by the Flames then the entire stadium is funded through user fees.

So either the proposed stadium is 100% user funded or we can quit being absurd and recognize that taxes are opportunity costs that prevent the maximization of revenues. And the best way to describe that opportunity cost is as a Flames contribution

[Frequitude]

I guess we can add a third element to a ticket tax. Since it is not considered part of HRR, a ticket tax is also, in part, a transfer of wealth from the players to the Flames. No?

Though that might be more than offset by incremental HRR from a shiny new arena. So maybe not. Perhaps more of an investment by the players into arenas to generate more salaries.

[Robbob]

The tax % I think does make a difference, just go to any thread for STH renewals and there is a discussion about how that increase was a cause for pause. An increase (which there will be with a new stadium) and the ticket tax may price people out.

[Lanny_McDonald]

Originally Posted by Frequitude

I guess we can add a third element to a ticket tax. Since it is not considered part of HRR, a ticket tax is also, in part, a transfer of wealth from the players to the Flames. No?

Though that might be more than offset by incremental HRR from a shiny new arena. So maybe not. Perhaps more of an investment by the players into arenas to generate more salaries.

In that same thought, the ticket tax could be considered a transfer of wealth from the ticket purchaser to the city, who is using the ticket tax to cover building construction. Oh wait, that's kind of exactly what it is.

[Boreal]

Originally Posted by GGG

I think one interesting thing that hasn't come up is the current annual subsidy of the Flames.

The city has effectively gifted the Entertainment business in the city to the Flames. If it auctioned off the Arena Management contract what is the value of that deal? I think one of the repayment misconceptions comes from people not realizing theflames currently receive a 5 million to 10 million dollar subsidy from the city in the terms of minimal rent and the right to host events.

Good point. Say it's an average of $5 million over 34 years, that's $170 million they have accrued. Looks like the city had already contributed their share if we're using accounting techniques for the clinicly insane & property tax amounts to cost recovery in Ken King's eyes.

[longsuffering]

Originally Posted by Frequitude

I'm as pro-city as they come in this debate, but the bolded is 95% wrong. A ticket tax is absolutely a Flames contribution. It's basic economics.

Assuming a $100 ticket with a $10 ticket tax on top, the market price is $110. Its not like the Flames would benevolently reduce ticket prices to $100 if there were no ticket tax. They'd still charge $110. A ticket tax is simply the Flames borrowing against their future revenues.

Now I said 95% for two reasons:
1) There is some truth to the fact that the psychology of the purchaser changes when they see the price as $100+$10 vs $110. So a ticket tax may marginally shift the demand curve. This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the user (i.e. the fans).
2) If the City fronts the ticket tax loan at an artificially low interest rate, this would represent a transfer of wealth from the city to the Flames (or from whoever the lender is to the Flames). This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the City.

However those two subtleties pale in comparison to how much of a ticket tax is born by the Flames.

Originally Posted by corporatejay

Bang on. I will mention that there will be a ticket tax for non-flames events so I'm not sure it is ENTIRELY their revenue, but in principal, I agree.


Frankly, the real way this could be funded is entirely through a ticket tax. Perhaps the city puts up the capital and then backstops it on a ticket tax and locks the flames into a 35 year lease. That would be a truly "user pay" system and frankly probably the fairest way to do it. It will never happen though.

Originally Posted by corporatejay

He's right. If the market for a ticket to the flames game is $110. Whether all of that revenue goes to the flames or 100 goes to the flames or 10 goes to a tax, the market is set.

I mean, technically the flames "contribution" is from general revenue anyway so that's also contributed by the fans.

Originally Posted by Bingo

I think another way to put it is ...

the ticket tax comes with an assumption that the Flames either a) haven't or b) won't max out the ticket price including the tax when the building is ready to go. If they raise all ticket prices by 40% and then tack on a 7% tax (like Edmonton) they may hit that ceiling.

If they do then the tax is completely coming out of their bottom line. If they haven't, then it comes out of the fans pockets completely.

Either way it's the team's risk to bare going forward.

Originally Posted by Calgary4LIfe

I believe the only way that you can look at the ticket tax portion as NOT being paid by CSEC is if you feel that CSEC isn't inclined to price their tickets to the maximum amount that the market would purchase them at.

Flames are wanting a new arena simply to increase their revenues, no? I think it is only logical that an increased ticket price - approaching that of the maximum that the market would purchase them for - is a practical guarantee to me. If there is additional costs involved on each ticket, whether it is visible as a 'ticket tax' or invisible as just one single price, is still the total cost to a customer purchasing the ticket. No?

Therefore, the Flames (under the assumption that they intend to maximize their profits) would have to lower the price of their tickets to factor-in the ticket tax to have the total amount in-line with what the market is dictating as the price-point for sell-outs or near sell-outs.

Am I missing something here? The accounting on the tax is of course different, and that is important for stuff like HRR, taxable income and so on, but it means absolutely nothing to a fan who has to decide where or not he can afford to go to a game or not.

I am surprised that Ken King pushed that out in his statement last week actually (about the Flames being the ones that would end up having to pay for nearly the entire thing), as to me it also stated that the Flames are indeed going to increase ticket prices to the maximum that the market will accept.

Originally Posted by jammies

It's quite simple, a $100 ticket will cost $130 + $10 ticket tax in the new arena, and that is the Flames losing out on revenue. How could anyone argue?

Originally Posted by Parallex

"Paying the ticket tax is a Flames contribution"... less the amount that would go into HRR.

I don't really think of it as a Flames "contribution" (unless CS&E are the ones fronting it) I more think of it more as just a Fee paid to an investor.

I'm amazed that the Flames have created a world where they can claim the payment of a TAX as their financial contribution.

The Flames CANNOT impose a ticket tax. Only the tax collecting authority can.

Yes there is an opportunity cost for the Flames but, so what? What makes them different from any other business when considering elasticity of prices?

If it's Flames revenue its HRR, simple as that. They don't 'get' to divert a revenue stream to hide HRR.

You do know that the ticket tax is not considered an owners contribution in Edmonton, right? You'd think this would matter this the Edmonton deal is the blueprint, right?

If the Flames can't accept that ticket taxes (user fees) are a separate stream and not their money, they are free to jack up prices as high as they feel the market will bear and fund their share out of THEIR own revenue. Opportunity cost is not relevant. Every business has opportunity costs.

Why would the Flames receive a guarantee that unlike any business they are exempt from considering taxes when determining how to price their product?

The ticket tax would be a pass through tax.

Just like GST. Just like PST.

The other analogy that has been made and which no one has yet to dispute is that there is fundamentally no difference between the proposed ticket tax and the airport improvement fee imposed on all travellers using YYC.

The Airport Authority determines the charge. The airlines collect it from passengers (users) and remits it to the Authority.

No one argues this is airline revenue, nor is it an expense for the airlines.

No one is concerned about what the opportunity cost to the airlines is (they could price their tickets higher without the tax).

The fee collected is used by the Authority for maintenance, upgrades and expansion of the airport. Sound familiar?

No one cares about the airlines opportunity cost because they don't provide the same emotional connection that the Flames. But fundamentally, whether it's the arena or the airport, both facilities are in place for the public's use, yet the airlines don't shout "we're funding 100% of airport improvement fees!"

Don't drink the Flames kool-aid.

And before anyone jumps all over me, remember I'm on record as saying I'm happy with a $150 million contribution from the City with no recovery mechanism. I do believe the Flames should pay a FMV rent but no property taxes.

[longsuffering]

Originally Posted by jammies

It's quite simple, a $100 ticket will cost $130 + $10 ticket tax in the new arena, and that is the Flames losing out on revenue. How could anyone argue?

It's quite simple. A new iPhone is roughly $1000. With GST it's $1050. Apple is losing out on revenue. How could anyone argue?

It's quite simple. My flight to Vegas is $400, with the airport fee it's $550 (numbers from my butt). Westjet is losing out on revenue. How could anyone argue?

[iggy_oi]

Originally Posted by New Era

But you should, as it is the baseline and sets a precedence.

This isn't accurate. We are talking about 2 very different situations. Edmonton's arena was used as the centrepiece of a complete revitalization of their downtown. It created major investment incentive and Katz also invested a lot of money in the area beyond the arena. As good of a deal as it was for the oilers, it has been and will continue to be a good investment for the city of Edmonton. But it's an apples to oranges comparison just because of the impact that the building had on the surrounding area in downtown Edmonton is and will continue to be much more significant than the impact of building a new rink beside the dome.

[corporatejay]

Originally Posted by longsuffering

It's quite simple. A new iPhone is roughly $1000. With GST it's $1050. Apple is losing out on revenue. How could anyone argue?

It's quite simple. My flight to Vegas is $400, with the airport fee it's $550 (numbers from my butt). Westjet is losing out on revenue. How could anyone argue?

You have established that you are willing to pay $550 to go to vegas, so any smart business person will tell you to charge $550

If there was no tax, Westjet could charge you $550 and pocket $550.

If there's a $150 tax, in order to pocket $550, they have to charge you $700. But you haven't established you're willing to pay $700 to go to vegas.

To ensure you go to vegas, they will have you pay $550, $150 goes as a tax and Westjet only pockets $400, $150 less than they would pocket if there was no tax.....see how they are losing out on revenue.

[longsuffering]

Originally Posted by corporatejay

You have established that you are willing to pay $550 to go to vegas, so any smart business person will tell you to charge $550

If there was no tax, Westjet could charge you $550 and pocket $550.

If there's a $150 tax, in order to pocket $550, they have to charge you $700. But you haven't established you're willing to pay $700 to go to vegas.

To ensure you go to vegas, they will have you pay $550, $150 goes as a tax and Westjet only pockets $400, $150 less than they would pocket if there was no tax.....see how they are losing out on revenue.

Of course I can see they may not be maximizing revenue but, so what? I don't care. They play by the rules of the game. WestJet isn't crying about it and neither are their customers.

They're not ENTITLED to maximize revenue, they have to determine pricing based on all the factors in play.

Why is the Flames opportunity cost an issue to anyone except the Flames?








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[jammies]

Originally Posted by longsuffering

Of course I can see they may not be maximizing revenue but, so what? I don't care. They play by the rules of the game. WestJet isn't crying about it and neither are their customers.

They're not ENTITLED to maximize revenue, they have to determine pricing based on all the factors in play.

Why is the Flames opportunity cost an issue to anyone except the Flames?








Sent from my Pixel XL using Tapatalk

This is it exactly, we aren't arguing that the flames are not suffering from a cost, we are pointing out that an opportunity cost is not entirely the same thing as lost revenue.

The whole point of making it a tax is that it is not treated as normal revenue. The Flames are trying to have it both ways, claiming it as "lost" revenue when it suits them to do so, and claiming it is not revenue when it suits them to do otherwise. There is certainly a portion of it that would accrue to them if the tax did not exist, and perhaps even a significant majority of it, but claiming it is 100% their money is a gross misrepresentation.

Sent from my ASUS_Z01BDC using Tapatalk

[Snuffleupagus]

Originally Posted by jammies

This is it exactly, we aren't arguing that the flames are not suffering from a cost, we are pointing out that an opportunity cost is not entirely the same thing as lost revenue.

The whole point of making it a tax is that it is not treated as normal revenue. The Flames are trying to have it both ways, claiming it as "lost" revenue when it suits them to do so, and claiming it is not revenue when it suits them to do otherwise. There is certainly a portion of it that would accrue to them if the tax did not exist, and perhaps even a significant majority of it, but claiming it is 100% their money is a gross misrepresentation.

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Just like Edmonton, The City of Edmonton gets a 9.5% ticket tax but yet Oiler tickets are between 16 and 60% higher in Rogers Place then they were in Rexall. I highly doubt anybody got a better deal on an arena than Katz

If it's the Flames idea to charge $425 for an upper lower bowl seat on the blueline or $550 in the lower corner I hope the owners choke on saddledome poop.

[Lanny_McDonald]

Originally Posted by iggy_oi

This isn't accurate. We are talking about 2 very different situations. Edmonton's arena was used as the centrepiece of a complete revitalization of their downtown. It created major investment incentive and Katz also invested a lot of money in the area beyond the arena. As good of a deal as it was for the oilers, it has been and will continue to be a good investment for the city of Edmonton. But it's an apples to oranges comparison just because of the impact that the building had on the surrounding area in downtown Edmonton is and will continue to be much more significant than the impact of building a new rink beside the dome.

Except is exactly the same situation. This is the exact plan the Flames proposed for the west village, tailored for the special needs of the site. The city is proposing the arena to be smack dab in the middle of their entertainment district in the east village, again tailored for their site and specific needs. Both plans rely heavily on the arena to be the anchor to bring in new investment and revitalize a part of downtown. All three proposals have been designed with the intent of revitalizing spaces in the city core. The only reason it is an apples to oranges comparison is your belief in the scope of the projects and thinking Calgary's downtown is something special.

[Roughneck]

Originally Posted by New Era

Except is exactly the same situation. This is the exact plan the Flames proposed for the west village, tailored for the special needs of the site. The city is proposing the arena to be smack dab in the middle of their entertainment district in the east village, again tailored for their site and specific needs. Both plans rely heavily on the arena to be the anchor to bring in new investment and revitalize a part of downtown. All three proposals have been designed with the intent of revitalizing spaces in the city core. The only reason it is an apples to oranges comparison is your belief in the scope of the projects and thinking Calgary's downtown is something special.

It's apples and oranges because the East Village is already being redeveloped without an arena as an anchor tenant, and would continue to be without a new arena.

There is absolutely no way you can pretend that Rogers Place's location for redevelopment is anything remotely close to what the East Village has gone through.

[GGG]

Originally Posted by longsuffering

Of course I can see they may not be maximizing revenue but, so what? I don't care. They play by the rules of the game. WestJet isn't crying about it and neither are their customers.

They're not ENTITLED to maximize revenue, they have to determine pricing based on all the factors in play.

Why is the Flames opportunity cost an issue to anyone except the Flames?


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Again if the Flames owned the whole Arena the flames Arena Corp could charge a $12 ticket fee on any ticket sold to the Arena and the Calgary Flames would have their ticket price. You have the exact same scenario as a
Ticket tax. In this Scenario it should be clear that it is a Flames contribution and just part of the ticket price.

The ticket tax isn't a tax or a user fee it's just a way to separate the money from HRR

[calgaryblood]

Originally Posted by corporatejay

You have established that you are willing to pay $550 to go to vegas, so any smart business person will tell you to charge $550

If there was no tax, Westjet could charge you $550 and pocket $550.

If there's a $150 tax, in order to pocket $550, they have to charge you $700. But you haven't established you're willing to pay $700 to go to vegas.

To ensure you go to vegas, they will have you pay $550, $150 goes as a tax and Westjet only pockets $400, $150 less than they would pocket if there was no tax.....see how they are losing out on revenue.

This would make sense if west jet was the only airline in Canada.

It's a competitive business and there is no way they would charge $550 a ticket if there was no tax. Companies would be lining up to beat that price and in the end you'd get the price the market dictates.

[Bingo]

Originally Posted by taxbuster

First GST is 5%.

Second, I seriously doubt that anyone considering going to a Flames game is dissuaded by the GST charged. If you've got the funds to pay for a game, you've got the funds to pay the GST.

Only when one gets into bigger money (say purchasing a new car or especially a new house) does GST significantly affect a purchasing decision for the vast majority of people.

As well, fans relate quite differently to "suffering" through a GST hit than they do the same amount charged by already affluent ownership group perceived as "gouging". (Not saying they do this - just about the perception by the public.)

I think many would be think renewing season tickets at say $7000 for the year a big ticket item. You move that up to $9,800 for the new building in inflated prices by 40% then add another 7% to it and suddenly that person has a $10,486 season ticket decision to make.

If they have a line in the sand of say $10,000 they either say pass, or the ask for a seat relocation into cheaper seats.

Either way that user tax was a trigger point.

I agree that a 5% GST shouldn't matter, but it does to some people. My dad once told me to make sure I removed the 5% from my bill before I did my tip calculation. I laughed. He was puzzled. I said dad 5% on a $100 bill is $5 of which you are likely only going to tip 5% anyway. You just saved yourself 25 cents!