Arena negotiation discussion. UPD: Flames release their proposal

[PeteMoss]

Comparing Calgary (a top half hockey market) situation to San Diego and Oakland (bottom 5 nfl markets) doesn't work. If this same situation was playing out in Carolina then the moving threats are much more of a concern.

[PeteMoss]

Originally Posted by sureLoss

Agreed.



I don't get Cali's point. The average consumer isn't going to care about what the ticket tax pays for.



They are going to look at the bottom line of the total price of a ticket and then decide whether to buy a ticket.

Can almost promise the Flames will say the ticket tax is why the new arena tickets are so expensive. It gives the Flames an opening to try to avoid blow back when they jack up prices in the new arena. City should take a page from Flames book and call it an social or PR benefit.

[sureLoss]

Originally Posted by PeteMoss

Can almost promise the Flames will say the ticket tax is why the new arena tickets are so expensive. It gives the Flames an opening to try to avoid blow back when they jack up prices in the new arena. City should take a page from Flames book and call it an social or or benefit.

I don't see how they can blame it, when the ticket surcharge will need to be a government issued tax/surcharge otherwise the Flames will need to include it in HRR and share it with the players.

In Edmonton the surcharge is determined by the city manager.

They can't increase prices by 50% and say that is all ticket surcharge.

[transplant99]

Originally Posted by PeteMoss

Comparing Calgary (a top half hockey market) situation to San Diego and Oakland (bottom 5 nfl markets) doesn't work. If this same situation was playing out in Carolina then the moving threats are much more of a concern.

What metric are you using for these rankings?

Cause, other than existing stadium, San Diego and Oakland simply cannot be classified as bottom 5 market....which is why they have moved/are moving.

St Louis also falls into that category.

[GGG]

Originally Posted by Stay Golden

Oakland started talking with LV loosely in 2015. But when the NFL screwed them in 2016 about LA they quickly turned to LV in 2016 and in less than 6 months
they announced to Oakland a deal had been reached.
The only reason they are not leaving next year and playing at UNLV is they sold out ST this season at The Oc The fans have rallied because they love their Raiders but they hate Mark Davis and the mayor Libby Schaaf for not coming to an agreement.
They will be physically moved by 2020.

As a Raiders fan I thought there is no way in hell the NFL would agree to have a team in LV as they have been dead against it for the gambling reasons and I thought there was no way Oakland would be that team yet it happened and quickly.
Point being anything is possible when a city and a sports franchise ownership can't be reasonable with each other.

After 9 years of negotiations you'd expect something to break. We are in year 2. It's not going to happen fast. It is a false threat for now. The NHL wants 600 million from Seattle not 200 million. So there is no immediate place to move the flames to. Maybe Quebec City but that tossing away revenue even with their building.

My general point is we have 3-5 years before having to worry. Nenshi won't run for a fourth term so it is possible the Flames might even spend 4 years waiting him out then put on a high pressure Build or Move on a new mayor.

More likely the flames are at least waiting until the Olympic bid decision as then the city will need a partner and the flames have leverage. Either way we have 3-5 years to finish this. Now is not the time to panic.

[VladtheImpaler]

I may have misunderstood, but per the City proposal the Flames would front the 1/3 attributable to the "ticket tax"/user fee. Then they would recoup it from the patrons. Thus, I can see why King would say the Flames are paying for it. Whatever price the Flames wind up charging for the tickets is what they could have charged regardless, whether they are trying to recoup $185M or $370M - thus, clearly it comes out of their pocket from their perspective. If the City fronts or loans or guarantees a loan for that 185 and recoups it from the surcharge, it's a different story.

[Passe La Puck]

Is Ken King going to come out and claim GST is their contribution as well so the Government of Canada should help foot the bill? Ticket tax is not their contribution, if it is they need to give half to the players.

[jayswin]

Originally Posted by Cali Panthers Fan

I don't understand why this ticket tax thing is so hard for some to understand, but I'll try and break it down.

1) The Flames are currently charging what they believe to be the balanced price point that maximizes revenue by having the most people attend every game, while maximizing individual ticket prices.

2) A ticket tax would be ON TOP of that already maximized ticket price.

3) As per #1, an increase of ticket prices of...let's say 10%...across the board without naming it a ticket tax would not necessarily maximize revenue for the Flames anymore. Why? Because increasing ticket prices would give some people pause on how to spend their entertainment dollars, some potential customers would simply not attend games anymore, thus lowering potential revenue or demand for tickets. So any increase in ticket prices by the Flames without an understanding from fans that it is specifically to help pay for a new arena may not end up as Flames revenue because those fans would not buy the ticket at the new price.

4) However, as per #2, fans being told that the extra price they are now paying for tickets is directly going to fund a new arena, then it becomes a LOT more palatable to the consumer of those services, and they make different choices based on that information. People don't have a problem contributing a small amount of money to a piece of infrastructure that they will be using directly: See airport improvement taxes.


No Mr. King, a ticket tax is NOT Flames revenue because fans wouldn't be willing to pay for higher ticket prices in order to make owners richer, but they would be happy to pay a tax that helps to build a new arena that they can enjoy. It's not hard to figure out.

Try to leave out the condemnation in absolutes towards the other of side of a debate like this. Not only is it unbecoming but as responses to your posts have shown there's smart people that have opinions to the contrary.

Not trying to say you're necessarily wrong (although, I agree with sureloss that the average buyer doesn't give a **** what portion of a ticket is going to what, they just make a personal decision on whether they can afford the product) just that you should try to cut that crap out as it degrades discussion and makes you appear like you think you're the smartest guy in the room. If you don't think that's case then try not project it.

Originally Posted by sureLoss

Agreed.

I don't get Cali's point. The average consumer isn't going to care about what the ticket tax pays for.

They are going to look at the bottom line of the total price of a ticket and then decide whether to buy a ticket.

[GGG]

Originally Posted by Cali Panthers Fan

I don't understand why this ticket tax thing is so hard for some to understand, but I'll try and break it down.

1) The Flames are currently charging what they believe to be the balanced price point that maximizes revenue by having the most people attend every game, while maximizing individual ticket prices.

2) A ticket tax would be ON TOP of that already maximized ticket price.

3) As per #1, an increase of ticket prices of...let's say 10%...across the board without naming it a ticket tax would not necessarily maximize revenue for the Flames anymore. Why? Because increasing ticket prices would give some people pause on how to spend their entertainment dollars, some potential customers would simply not attend games anymore, thus lowering potential revenue or demand for tickets. So any increase in ticket prices by the Flames without an understanding from fans that it is specifically to help pay for a new arena may not end up as Flames revenue because those fans would not buy the ticket at the new price.

4) However, as per #2, fans being told that the extra price they are now paying for tickets is directly going to fund a new arena, then it becomes a LOT more palatable to the consumer of those services, and they make different choices based on that information. People don't have a problem contributing a small amount of money to a piece of infrastructure that they will be using directly: See airport improvement taxes.


No Mr. King, a ticket tax is NOT Flames revenue because fans wouldn't be willing to pay for higher ticket prices in order to make owners richer, but they would be happy to pay a tax that helps to build a new arena that they can enjoy. It's not hard to figure out.

I disagree when I purchase something I include the GST in my consideration of the price. I don't say because 5% is tax I'm okay spending a little more. And my entertainment budget doesn't magically expand by that amount when you call it a tax. I do agree that some people only look at the sticker and ignore taxes and fees. But in that scenario the owners could just call in an arena maintenance fee and people would be okay with it and they would collect said revenue.

Ticket tax is 100% an owner contribution.

[GGG]

Originally Posted by Passe La Puck

Is Ken King going to come out and claim GST is their contribution as well so the Government of Canada should help foot the bill? Ticket tax is not their contribution, if it is they need to give half to the players.

See you have hit the nail on the head. The only reason the ticket tax exists is so that the owners can avoid paying HRR on it..

The other is so that the city finances it

[FurnaceFace]

Originally Posted by sureLoss

Agreed.

I don't get Cali's point. The average consumer isn't going to care about what the ticket tax pays for.

They are going to look at the bottom line of the total price of a ticket and then decide whether to buy a ticket.

I'm sure a real economist could say this better but my view is it's about utility. I'm willing to pay x to get a perceived benefit (or enjoyment). At some point the price is too high and the utility too low in comparison and demand drops. Since the Flames have raised ticket prices yearly they haven't reached a significant tipping point where the utility drives down the demand enough.

I think what Cali is saying is if as consumers we know there is a ticket tax, and we either perceive we will get more utility (benefit), assuming there is a tax before the new building is built, or directly see there is more utility when we are in a new building with better amenities, then our max price point changes.

Perhaps to use the airline example if I fly to Vancouver and I have to fly a prop plane or have a stopover the enjoyment or utility of the flight is lower therefore I'm willing to pay less than if it were a direct flight. If it is $199 and I have to fly a dash 8 or stop in Kelowna vs paying $225 to go direct on a 737, I'm paying the extra $25.

[oldschoolcalgary]

i would be interested to see what happened with the Oiler season tickets.

i found this https://www.coppernblue.com/2015/7/2...s-rexall-place

but i believe that this was still speculative at the time of its writing...

i mention it as the price jumps stated are significant and people still anted up for them because there was a tangible benefit to their game day experience - or at least they felt there was as they still bought tickets.

for those who know, do the oilers ticket separate out arena costs as a separate number like and airport tax/levy does.

[OldDutch]

Originally Posted by transplant99

Remember what set all this off to begin with was the mayor rolling out his campaign video on Monday in which he states his vision for a VP entertainment district which included a new arena with the Flames included. I think that really PO'd the ownership when Nenshi was attaching their name to his campaign on a project they emphatically want no part of....at the price being offered. Hence the rebuttal on Tuesday, Nenshi holding his presser on Thursday and then another rebuttal by KK yesterday.

The amatur nature this has played out on both sides is frankly a bit shocking. Any corporate business person who is good at what they do, knows you socialize you ideas to stakeholders before you present them. No surprises, a presentation should be a formal review to what has been agreed upon.

Both sides massively failed here. Flames with CalgaryNEXT blindsided council. They bypassed their most important stakeholder to take it to the people and it probably upset council quite a bit.

Not learning from that mistake Nenshi blindsides the Flames on Monday.

We are where we are because both sides are not respecting the other. What really bothers me is how normally smart people have thrown best practice out the window becuase they can't contain themselves and take time to do it right.

There needs to be a reset after the election. My hope is Nenshi and King can do that and get back at it. Enough with the hurt feelings.

[Bunk]

Originally Posted by VladtheImpaler

I may have misunderstood, but per the City proposal the Flames would front the 1/3 attributable to the "ticket tax"/user fee. Then they would recoup it from the patrons. Thus, I can see why King would say the Flames are paying for it. Whatever price the Flames wind up charging for the tickets is what they could have charged regardless, whether they are trying to recoup $185M or $370M - thus, clearly it comes out of their pocket from their perspective. If the City fronts or loans or guarantees a loan for that 185 and recoups it from the surcharge, it's a different story.

In price theory - assuming maximizing revenue, whether the City or the Flames fronts the ticket tax recovered portion - the (profit-driving) revenue the Flames see is the same. In either scenario money is earmarked to pay back the lender. The matter is more who backstops the loan - I.e - whose debit obligation - City or Flames. It's the presence of the ticket tax that affects ongoing revenue - but it was their proposal from the start.

[sureLoss]

Originally Posted by FurnaceFace

I'm sure a real economist could say this better but my view is it's about utility. I'm willing to pay x to get a perceived benefit (or enjoyment). At some point the price is too high and the utility too low in comparison and demand drops. Since the Flames have raised ticket prices yearly they haven't reached a significant tipping point where the utility drives down the demand enough.

I think what Cali is saying is if as consumers we know there is a ticket tax, and we either perceive we will get more utility (benefit), assuming there is a tax before the new building is built, or directly see there is more utility when we are in a new building with better amenities, then our max price point changes.

Perhaps to use the airline example if I fly to Vancouver and I have to fly a prop plane or have a stopover the enjoyment or utility of the flight is lower therefore I'm willing to pay less than if it were a direct flight. If it is $199 and I have to fly a dash 8 or stop in Kelowna vs paying $225 to go direct on a 737, I'm paying the extra $25.

That is only for the hard core consumer who understands and looks into the economics of paying for an arena.

The average fan will still not look that closely when they buy a Calgary Flames ticket and breakdown the independent costs.

To the average consumer paying a $100 ticket with a $10 ticket tax or paying for a $110 ticket is the same thing.

[Par]

There is also the question of who will get the naming rights money, if the Flames get to keep the naming rights money and get property tax relief, than it might work.

[FiftyBelow]

Sigh* microeconomics. I'll try and take a stab at it. Thinking about tax incidence, the burden of the tax depends on the price elasticity of supply and demand. From what the Flames are saying, I would believe that the price elasticity of demand is relatively inelastic. They've indicated that the amount of the proposed tax is a value that they could have charged either way, implying that consumers are price takers; I'm assuming within the limits of what a realistic tax rate would be. So my understanding is that the burden of the tax would ultimately fall on the consumer, as everyone here is intuitively suggesting. From this perspective, I'd feel like CSEC is simply trying to distort this understanding and have got it ultimately wrong... assuming I've got this simplified view right.

[jayswin]

Originally Posted by FurnaceFace

I'm sure a real economist could say this better but my view is it's about utility. I'm willing to pay x to get a perceived benefit (or enjoyment). At some point the price is too high and the utility too low in comparison and demand drops. Since the Flames have raised ticket prices yearly they haven't reached a significant tipping point where the utility drives down the demand enough.

I think what Cali is saying is if as consumers we know there is a ticket tax, and we either perceive we will get more utility (benefit), assuming there is a tax before the new building is built, or directly see there is more utility when we are in a new building with better amenities, then our max price point changes.

Perhaps to use the airline example if I fly to Vancouver and I have to fly a prop plane or have a stopover the enjoyment or utility of the flight is lower therefore I'm willing to pay less than if it were a direct flight. If it is $199 and I have to fly a dash 8 or stop in Kelowna vs paying $225 to go direct on a 737, I'm paying the extra $25.

I think you're describing a small group of wealthier fans that really break down why they're giving their spending dollar and to what, because it matters to them.

The average citizen will not go through this, they'll look at a price and decide whether they can afford to pay it for the product they want. You could tell them 20% is an air tax and they'll just say, "whatever, you want $100, right", and then they'll decide if that price is palatable.

[Flash Walken]

Originally Posted by sureLoss

Yeah just like when people are outraged when a NHL player's reported initial ask for a contract is so much higher than fan expectations and then settle for something more reasonable.

It is a negotiation, regardless of what King says. What was the context of those ridiculous demands? Were they in CSEC's initial ask and something they really didn't expect to get? Were they in response to something the city insisted on? For example, if the city insists on CSEC paying for item X did CSEC respond by saying the city needs to pay for extra police during game days? Is it even something they are still looking for?

The context somewhat matters, but probably will get overlooked by most by the outrageousness.

So, I have been trying to absorb this but...

The idea that the city of Calgary would pay a significant portion of the security costs of 42+ games a year for the 25-35 year life of the arena, any arena, is absolutely ludicrous.

I get arguments about moving people efficiently to and from the arena and could understand some negotiations about that, but paying millions of dollars for extra cops for routine, predictable events is, to me, outrageous. There is no real context I can think of that would justify that.

Outside event? One off exhibition? Sure, maybe there is a benefit to the city to supply extra security and enforcement. A regular component of overhead to run a predictable event?

Maybe the flames should ask the city to help with flights? Fuel for the Zamboni? Lightbulbs for the rink?

[EldrickOnIce]

Originally Posted by FiftyBelow

Sigh* microeconomics. I'll try and take a stab at it. Thinking about tax incidence, the burden of the tax depends on the price elasticity of supply and demand. From what the Flames are saying, I would believe that the price elasticity of demand is relatively inelastic. They've indicated that the amount of the proposed tax is a value that they could have charged either way, implying that consumers are price takers; I'm assuming within the limits of what a realistic tax rate would be. So my understanding is that the burden of the tax would ultimately fall on the consumer, as everyone here is intuitively suggesting. From this perspective, I'd feel like CSEC is simply trying to distort this understanding and have got it ultimately wrong... assuming I've got this simplified view right.

The entire cost of the building is ultimately on the consumer and/or taxpayer.