[CP Story] Calgary Can't Afford an Arena

[Bingo]

Originally Posted by Finger Cookin

The least valuable team in 15-16 was the Hurricanes at $230M, which is up from $177M in 08-09. That's 4.01% annually. The least valuable team in 13-14 was the Panthers at $190M, which is up from $159M in 08-09, a 3.63% annual return. The Rangers are estimated to be worth $1.25B in 15-16, from $416M in 08-09 - a 24.61% annual return.

Even averaging out the appreciation of a club in 15-16 gets to a return of about 4.2%, and that was with the dollar in the tank around $0.76 to a USD, compared to about $0.815 today, which would account for a lot of the decrease in value of CA based teams year-over-year.

I think it's not unreasonable to suggest that a 5% annual appreciation in value of a CA based NHL team is on the low side, especially over the medium term.

Once again I come back to what I'd be comfortable with, and personally I fear pro sports has jumped the shark.

NFL stadiums not full. Backlash on moving franchises. Huge TV deals that have led to layoffs in the rights holders. I don't know if this gravy train is expanding as it did from 2009 to 2014.

Holding somewhat stagnant may be a better number, but even with a modest grown of say 5% and running it out for the whole life of the new building at 35 years, and then selling it that year the discounted value of that increase is only $62M

Doesn't do much to the $285M loss to go it alone.

[Hot_Flatus]

Originally Posted by FlamesFanStrandedInEDM

After seeing Edmonton's new arena built and ticket prices sky-rocketing (cheapest seat being $120 FV). I'm quite content staying in the Saddledome finding decent seats for $50 a ticket.

This is the worst part of it all for taxpayers and fans alike. Not only are you getting bungled on the tax side of things, you're now getting hit again by simply trying to take in the team you enjoy in the new building. It's a lose-lose situation that no-one should want to be apart of.

If the Flames were at all smart, they would have asked fans to start paying a ticket tax when this whole debacle started years ago that was to be invested into an arena fund. By now the team would have most definitely stashed away a huge lump sum to finance the majority of the project.

[Flash Walken]

Originally Posted by Bingo

Once again I come back to what I'd be comfortable with, and personally I fear pro sports has jumped the shark.

NFL stadiums not full. Backlash on moving franchises. Huge TV deals that have led to layoffs in the rights holders. I don't know if this gravy train is expanding as it did from 2009 to 2014.

Holding somewhat stagnant may be a better number, but even with a modest grown of say 5% and running it out for the whole life of the new building at 35 years, and then selling it that year the discounted value of that increase is only $62M

Doesn't do much to the $285M loss to go it alone.

I think this is the impetus to get something done now.

[Muta]

Originally Posted by Bingo

Believe King has said 4-5 years as an estimate, but then that was CalgaryNext. I can certainly look at tightening that up.

Hi Bingo, if we're just getting an arena (a stand-alone building and not integrated into any sort of surrounding development), the process can take anywhere from 2-3 years (design and construction).

[Torture]

Originally Posted by Hot_Flatus

This is the worst part of it all for taxpayers and fans alike. Not only are you getting bungled on the tax side of things, you're now getting hit again by simply trying to take in the team you enjoy in the new building. It's a lose-lose situation that no-one should want to be apart of.

If the Flames were at all smart, they would have asked fans to start paying a ticket tax when this whole debacle started years ago that was to be invested into an arena fund. By now the team would have most definitely stashed away a huge lump sum to finance the majority of the project.

But it's all the Flames money, not yours.

[MolsonInBothHands]

Originally Posted by Torture

But it's all the Flames money, not yours.

Can we have ONE thread on this topic WITHOUT this useless and worn out rhetoric? Leave that for the negotiating parties please.

[jayswin]

Originally Posted by Bingo

NFL stadiums not full.

Not to derail, but genuinely curious - What teams are actually not selling out games in the NFL? I hear this narrative a lot, but all the games look sold out on TV and the attendance always seems to be in the 65-75k range. Granted, I don't know sell out figures for NFL stadiums and I know they vary greatly.

[Finger Cookin]

Originally Posted by Bingo

Holding somewhat stagnant may be a better number, but even with a modest grown of say 5% and running it out for the whole life of the new building at 35 years, and then selling it that year the discounted value of that increase is only $62M

Doesn't do much to the $285M loss to go it alone.

To me, anyway, that's the biggest takeaway from this exercise. It doesn't make sense for ownership to got it alone. As you pointed out earlier, it doesn't make sense for the ownership to break even and hand the entire loss to the city either. It demonstrates that the City/Prov/Fed or whatever combination thereof need to contribute something less than zero to make this work. Which I think (hope) everyone knows.

I would contend something similar with regards to the gravy train of the past vs. the jumping of the shark today. The truth probably lies somewhere in the middle.

Figuring out where in the middle with any degree of accuracy what that growth might be, what the government should/could chip in, what that means to the return ownership gets and how much of that franchise appreciation it enjoys when/if it sells - that's why the deal is complicated. The stakes are high, and calculating wrong could really sting any involved party.

[Parallex]

Originally Posted by Hot_Flatus

If the Flames were at all smart, they would have asked fans to start paying a ticket tax when this whole debacle started years ago that was to be invested into an arena fund. By now the team would have most definitely stashed away a huge lump sum to finance the majority of the project.

Yeah, that's the most annoying part of the "ticket tax" it's backwards financing of a past product instead of forward financing of a future one. The City/Flames should have put one in as of the last lease agreement to pay for this arena.

[MolsonInBothHands]

Originally Posted by Parallex

Yeah, that's the most annoying part of the "ticket tax" it's backwards financing of a past product instead of forward financing of a future one. The City/Flames should have put one in as of the last lease agreement to pay for this arena.

Could a "future tax" be separated out of HRR just the same as a conventional one?

[getbak]

Regarding the construction timeline, if you look around the league, most buildings were built in the 24-30 month time frame.

Detroit's new arena was almost three years from groundbreaking to grand opening. That seems to be a bit misleading though. They had their groundbreaking in September 2014, but site excavation didn't actually begin until the following spring. The actual construction timeline was about the same as Edmonton's.

Montreal's construction was the longest in the league, at roughly 33 months. Ottawa's building went up the fastest, in roughly 18 months. Ottawa actually had its groundbreaking a full year after Montreal and opened 2 months before.


Here's all the buildings that have opened in the last 15 years (groundbreaking to grand opening):

• Detroit: 35 months (28 months of construction)
• Edmonton: 30 months
• Las Vegas: 23 months
• Brooklyn: 30 months
• Pittsburgh: 24 months
• Newark: 25 months
• Winnipeg: 19 months
• Glendale: 21 months

Since the Victoria Park site is currently a large parking lot, site prep time should be minimal, so the new arena should be on the faster side of the time lines.

I suspect we'll see a groundbreaking in March/April 20XX with a grand opening for a Stampede Concert series in July 20XX+2. About the same timeline as Edmonton.

[Bingo]

I'll adjust the model tomorrow.

I'll assume a ground break in 2019 and 3 years to build

Tonight I'm at the Utica Stockton game

[jayswin]

Originally Posted by Bingo

I'll adjust the model tomorrow.

I'll assume a ground break in 2019 and 3 years to build

Tonight I'm at the Utica Stockton game

Even that seems like a lot. Detroit was the only one close to three years and as someone mentioned that was only because they broke ground in Fall and actually started in the spring. (actual build was two years, four months)

Two years to get a deal done and then the longest build of any team in the league in the last fifteen years seems like a pretty long overshoot.

[EldrickOnIce]

Originally Posted by MolsonInBothHands

Could a "future tax" be separated out of HRR just the same as a conventional one?

I expect not, or I'm sure every team would be doing it to circumvent HRR.
And that's why it wouldn't have been done previously, because if the proceeds of a ticket tax on new arena construction aren't subject to HRR, you would certainly choose that.

[transplant99]

Originally Posted by jayswin

Not to derail, but genuinely curious - What teams are actually not selling out games in the NFL? I hear this narrative a lot, but all the games look sold out on TV and the attendance always seems to be in the 65-75k range. Granted, I don't know sell out figures for NFL stadiums and I know they vary greatly.

Here are the attendance figures from last year. Note that of the bottom 5, one team was in the first year of a temporary stadium, 2 were in no mans land as teams that are/were moving, and one of the others is that factory of sadness known as the Browns.

27 of the 32 teams are over 90%...pretty damn strong numbers in the day and age of HDTV/Home theater IMO.

http://www.espn.com/nfl/attendance/_...6/sort/homePct

[Lanny_McDonald]

Originally Posted by Hot_Flatus

If the Flames were at all smart, they would have asked fans to start paying a ticket tax when this whole debacle started years ago that was to be invested into an arena fund. By now the team would have most definitely stashed away a huge lump sum to finance the majority of the project.

Except they can't. The Flames can't institute a "tax." If they upped the cost of tickets to start building a war chest for a future building, that become HRR and they have to give 50% to the players. Doesn't make sense. They are better to go through the process and have the City institute the ticket tax and recover the casts that way.

[getbak]

Originally Posted by jayswin

Not to derail, but genuinely curious - What teams are actually not selling out games in the NFL? I hear this narrative a lot, but all the games look sold out on TV and the attendance always seems to be in the 65-75k range. Granted, I don't know sell out figures for NFL stadiums and I know they vary greatly.

ESPN has a good attendance tracker. Here's last season's NFL attendance: http://www.espn.com/nfl/attendance/_...6/sort/homePct

13/32 teams playing in front of sold out or better crowds. 5 teams below 90% capacity.


For comparison, here's the NHL: http://www.espn.com/nhl/attendance/_...7/sort/homePct (15 teams averaging sold out or better, 8 teams below 90%).

NBA: http://www.espn.com/nba/attendance/_/sort/homePct (9 teams 100% or better, 8 teams below 90%).

[Bingo]

OK easier than I thought.

Moved the building inception up from 2024 to 2021 meaning they broke ground at some point in 2019 and finished in time for the 2021-22 season.

CSEC NPV loss on 100% model is now $221M, down from the longer build model that was $283M

[GGG]

I think the other interesting point is that you want a 10% discount NPV. If you accept that you just want to break even rather than have a return on invenstment what do the numbers come out to. So an NPV using a 3% would give an interesting bench point.

I think you do kind of rig the numbers to get the outcome. Basically you are saying that the 30% number gives the owners an 10% NPV so lets use it. Then if you use any other proposal with more ownership spending it forcasts as a loss.

From a negotiating position I suspect the flames initial offer is much richer for them so making a % assumption of outside revenue enough to give them a 15% or 20% discount rate would be interesting. If 10% is there hill to die on then they won't start negotiationis there.

The other piece is using 600 million as a cost number is high. 550 million is the current figure being used including saddle dome demolition and land. That would also push the break even point down as well.

As others have said 3 years instead of 5 years.

So running the numbers on a high revenue side of
1) enough other revenue to give a 15% and 20% break even point on the owners current offer
2) 3 yr construction time frame with 33%, 33%, 33% payout rate
3) 550 million cost

[Bingo]

Originally Posted by GGG

I think the other interesting point is that you want a 10% discount NPV. If you accept that you just want to break even rather than have a return on invenstment what do the numbers come out to. So an NPV using a 3% would give an interesting bench point.

10% is a pretty standard downtown Calgary capital hurdle for today. It was 15% as early as three years ago. I doubt prominent Calgarians would be that much different on their own holdings as they have access to investments that suggest it should actually be much higher.

Originally Posted by GGG

I think you do kind of rig the numbers to get the outcome. Basically you are saying that the 30% number gives the owners an 10% NPV so lets use it. Then if you use any other proposal with more ownership spending it forcasts as a loss.


From a negotiating position I suspect the flames initial offer is much richer for them so making a % assumption of outside revenue enough to give them a 15% or 20% discount rate would be interesting. If 10% is there hill to die on then they won't start negotiationis there.

The other piece is using 600 million as a cost number is high. 550 million is the current figure being used including saddle dome demolition and land. That would also push the break even point down as well.

As others have said 3 years instead of 5 years.

Don't think anything is rigged. The model was run to solve for an unknown using a possible outcome of zero profit on 10% NPV, which to me is a logical starting point.

I'm happy to run any version of the non hockey related revenue though.

Have seen cost over runs on the building suggesting $600M on a few occasions.