Arenas are built for sports teams, concerts and other big entertainment events. Sometimes exhibitions and conventions are included. My point is that arenas are facilities for rent. In our case and I'm guessing in most cases, those facilities are owned by the teams who play in them.
I'm trying really hard and I can't seem to come up with any other examples of facilities owned by a private organization, that doesn't pay for the construction fully and completely on their own. I was thinking about arts centres, but I don't think these centres are owned by the artists or artist groups that perform or exhibit in them. In fact, one could say that typically, artists rarely have the financial capital to be able to outright own a performanc facility.
Getting back to sports arenas, they are owned and operated by the teams. When the facilities are rented out, the revenue goes to the owners. When concessions are sold, the profit goes to the owners. When the teams play their games, the ticket sales and box sales goes to the owners, some of which is used to run the team and pay everyone's salaries.
So I fail to see why public money is required or even justified. That's not to say that I don't support sports teams. I love my hockey. My chosen team doesn't play in the city I live in, so I must watch their games on TV. Which brings up an interesting point. Rogers paid for the right to control broadcasting of all NHL games in Canada, which means that teams get revenue from those broadcasting rights as well. So teams earn money from tickets to games, things sold in the arena during games, and team merchandise. And yet they can't seem to afford to build themselves new arenas. Why?
After reading a few articles, I discovered that most NHL teams lose money. Combined, the Canadiens, Leafs, Canucks and Rangers had an operating profit of $212 million. But the rest of the teams combined were $86 million in the hole. There is revenue sharing, but not enough to get everyone out of the hole. By the way, this problem isn't exclusive to hockey. But the lopsidedness goes deeper. The 6 Canadian teams earn 33% of the entire league's ticket revenue. That would suggest to me that Canadian teams are doing alright in terms of incoming revenue.
Yet they still can't afford new arenas on their own. I think one overarching fact might point to the real culprit. The salary cap for 2017 was US$75 million per team. That means that a typical NHL team can be spending upwards of CDN$100 million dollars to pay their players, assuming they have the money. One would have to assume it's feasible if the team is in the top 5 of ticket sales. I have always thought that top athletes got paid way too much money. Considering how much top athletes can earn in endorsements, I don't think there's a real need to pay them upwards of over US$12 million.
So, imagine, if given the same revenue stream, teams were only allowed to pay their players a sum total of $25 million per year. That would free up $50 million per year that could be invested. After 10 years, a team could have $500 million stashed away toward paying for a new arena. After 20 years, they'd have a billion dollars.
I'm starting to think that the problem isn't that arenas are too expensive. I think it's just that teams are being allowed to live beyond their means in terms of salaries and hoping their host cities will bail them out every time. Incidentally, giving Las Vegas a team didn't help. They will likely never make money and depend on Canadian teams' profits to keep them alive, just like Arizona.
The NHL business model is broken and I don't think it's up to Joe Public to suffer the consequences.
After hearing the City's offer and then why the team didn't like it, I've made some observations. Ken King dismissed the infrastructure work as something that needed to be done anyway. Point taken. But then he said that the team ends up paying for everything in the end. They're basically saying that a user fee would eat into their revenue because fans wouldn't pay extra. Also that a tax eats into their revenue. So it seems that they want any money from the City (and they seem to want a lot of it) with no strings attached. Again, I don't know of any other business that can expect this.
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Mitch and I were discussing this after we read this post. I did a little research on Safeco field where the Mariners play. It was financed by the citizens of Seattle but the facility is owned by the city. It was paid for by basically tourist taxes and is operated jointly by the Mariners ownership and the City of Seattle. Initially a financing package failed in a vote in a special election, then a month later, when the Mariners we're actually in the playoffs, the Legislature held a special session to approve financing (tourist taxes) with cost overruns being paid by the Mariner owners. After a little more research the bonds were paid off in 2011, five years earlier than expected.
Overall I guess it's been a win/win for everyone. We still have a baseball team, however, they've yet to make it back to the playoffs. Maybe next year?
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