CITY COOL TO PLAN FOR FLAMES’ ARENA
Wealthy franchises expect taxpayers to help pay for players’ high salaries
When Calgary ultimately considers whether it wants public funds used for the construction of a new hockey arena, the question taxpayers really need to answer is: how much of their money do they want to go toward Mark Giordano’s next contract?
As the Calgary Herald reported in detail Tuesday, the Flames are looking at city-owned lands for a new arena development. While details are so far not being disclosed, a source told reporter Jason Markusoff that it was an “ambitious project” and Ken King, chief executive of the NHL team, said the proposal would require a “public-private arrangement.”
So Calgary will become just the latest market to be targeted by a profitable sports franchise that wants to increase its profits further by having public dollars subsidize its costs.
The city’s elected officials have, so far, been quite cool to the concept. They have every reason to remain so, not least of which is the $5-billion TV contract the NHL signed last year that, according to a Forbes estimate released Tuesday, has pushed up the value of franchises by close to 20 per cent. The situation in Calgary appears set to unfold in a typical fashion. Rather than straight-up ask the city to contribute funds to the construction of a new hockey facility, the Flames would instead promote their vision as an urban renewal project. There would be restaurants and condominiums and maybe a nice plaza to help reshape a downtrodden neighbourhood. Yes, the city would contribute land, or funding, or tax breaks, or some combination of all of that, but in the end there would be this whole grand vision where once there was just blight. This is, of course, more or less what happened in Edmonton, where resistance to public funding for its new arena was ultimately overwhelmed by the idea of downtown revitalization. (And also by Oilers owner Daryl Katz’s public dalliances with potential relocation sites like Seattle, which had all the subtlety of a sledgehammer.)
Whatever else comes with such an arena project, though, what remains in the end is that a wealthy hockey franchise gets a new facility, with new revenue streams, without having to pay for all of it. Or even most of it. The business case here should be simple: if the team would make enough new money off the benefits of a new arena, it should build one itself. And if it wouldn’t, don’t build one.
Sports, though, makes governments do crazy things. Over and over again, they fall victim to the false promises that franchises, and their stadiums, are said to bring. A new arena would have a positive economic impact of hundreds of millions of dollars, a study will inevitably conclude. But arenas don’t actually create new economic activity, beyond the construction phase. They simply move discretionary dollars spent on entertainment from one part of the city to another.
In the Toronto suburb of Markham, plans for an NHLsized arena that was to be halffunded by a new development levy were buttressed by studies that claimed a great economic boost from a new facility; the studies were never released, though, and when it became clear that the city was at best a long shot for an NHL team, public opinion flipped and the proposed deal was killed.
In Quebec City, an NHL-ready arena built entirely with public money should be open next fall, minus the niggling detail of an NHL team. In the meantime, the league has said that if it expands at all, it will be in the Western Conference, which has two fewer teams than the East, and the arena’s operator, Quebecor, is now owned by someone who wants to become the country’s leading separatist. So that’s going well.
From Hamilton to Kansas City to Seattle, there are myriad examples of cities shovelling public dollars into arena projects so that prospective team owners don’t have to take on the risk of building the facilities themselves, but the emotions run even higher, and the potential for extortion is greater, when dealing with the potential loss of a franchise. (Hello, Edmonton.) In Miami, the threat of relocation from Marlins owner/loathsome individual Jeffrey Loria spurred Miami-Dade county in 2009 to kick in most of the $600-million used for construction of a new baseball stadium. Officials last year disclosed that the county acquired its funding from highinterest bonds — really high interest — that in one case will require payments of $1.2-billion on an initial bond of $91-million. Local taxpayers will still be paying off the loans more than 30 years from now. The Marlins, meanwhile, last week signed outfielder Giancarlo Stanton to a 13-year, US$325-million contract extension. That’s how these things work: taxpayers give owners money, owners turn around and give it to players. And if the owner decides that player costs are too high, payroll can always be slashed. You can’t slash arena costs, which is why it helps to have a city take on the burden.
In Calgary, a star player like Giordano, up for a raise after next year that could easily net him $8 million annually, could become their version of Stanton: well paid, and publicly subsidized, even as the value of the team has increased dramatically. The twist in the Calgary situation is that its elected officials appear to be refreshingly clear-eyed about the whole deal. Calgary Mayor Naheed Nenshi has said he would help with development approvals, but that’s it.
Whether that survives the prospect of, say, the Las Vegas Flames, is another question. Stay strong, Mayor Nenshi.