Calgary looks set to throw public money at a private hockey team. Alberta remains the only place in Canada this happensIf he did it again, Arthur Griffiths still wouldn’t ask for government help in building his own hockey arena.When Rogers Arena, then GM Place, opened in 1995, long-ago Canucks owner Griffiths financed construction entirely through private means.That the Calgary Flames look set to wrangle money out of the City of Calgary to help build a new arena doesn’t change his mind, either.Public money means diminished control; the Canucks’ long tenure as a tenant of the Pacific National Exhibition taught Griffiths plenty about having government as a landlord.“Why in the world would we ever have wanted to go back down that road?” he responded this week.But having government as a partner isn’t something that appears to daunt the Flames, who count billionaire Murray Edwards as their lead investor.In a plan presented this week by Calgary’s city council, the Flames will put up half the cash toward what’s currently projected as a $580-million arena. The city will cover the rest. Residents have just a week to provide feedback to their municipal leaders.Griffiths may not be one to take government money for a new arena, but he can still understand why others might.“It’s a public amenity,” he noted. The public could derive a benefit from a new venue, plus new arenas can have a lifting effect on a city’s public spirit, for a time anyway.
Calgary’s Scotiabank Saddledome is shown cloaked in wildfire smoke on May 31, 2019.
But economists will warn against claims there’s a real economic case for throwing public funds behind it. Studies have shown time and again that arenas don’t really produce broad economic benefits.“There is some concrete public good to a new arena,” University of Calgary economist Trevor Tombe admitted this week. “The arena will be used by the Stampede, for example. But I’m embarrassed about how our government is proceeding.”The proposal also has some notable flaws, he said. Its projections don’t reflect the reality of inflation, nor is the opportunity cost of how the money could be spent in alternative ways is not present; and there are very rosy assumptions about ticket sales and how busy the new venue will be.“The right way is accounting for future cash flows,” Tombe said. “What are the opportunity costs of the foregone alternatives?”The public money that’s being diverted to the project could, for example, simply be placed into an investment fund, which would likely return better profits than building an arena ever could.The new arena proposal comes the same week Calgary’s city council is debating $60 million in cuts to city services, including 911, the fire department and libraries.“We have a huge long-term challenge,” Tombe said of the budget hole. “Council needs to be clearer about the trade-offs.”The Saddledome is outdated and does need replacing; a new arena with corporate suites would be far better at generating revenue. But those dollars will end up in the team’s pockets, not the public’s.Cast aside the idea the Flames could move. The NHL already has weak members in Arizona and Florida; they’re not going to abandon a profitable market.The question, then, is what is the project worth to the city’s residents? They’d be accepting heightened civic spirit but still losing other public assets.Startup costs for private projects are challenging, but the potential for profit over the long run is good for arena owners.
Arthur Griffiths with plans for a new Canucks arena, then called GM Place, in 1992.
Nick Didlick /
“I’d never taken on a project of this size, but I remember meeting with a banker from CIBC and he said think of it as a shopping mall,” Griffiths told Postmedia News in 2016. “You have an anchor tenant, the Canucks. You’re going to have sponsorship revenue, suite revenue, food service contracts — all of those things are credit-worthy. I learned very quickly how to finance something that complex.”Rogers Arena cost about $250 million in today’s dollars to build; the new arena in Calgary is currently projected to cost more than twice that. A further comparison would be the renovation of Seattle’s city-owned Key Arena using entirely private funds: the Jerry Bruckheimer-Tod Leiweke-led consortium is spending upwards of $900 million of their own money and not a cent of public cash.So why is Calgary set to follow Edmonton — despite being in a province that prides itself on a DIY spirit — in bucking a national trend by helping a hockey team build an arena? Canada’s five other NHL squads built and own their arenas all by themselves.“That’s a political question … but there’s no fundamental reason,” Tombe replied.By getting the city to foot half the bill of the new arena, the Flames, who will operate the arena and keep the lion’s share of the profits, are reducing their own overhead and risk.
The benefits of an arena include heightened civic spirit, but much of the profit from it will go to the Flames franchise, not the taxpayers who will be helping finance it.
Grant Black /
And the team has further reduced its risk by getting the city to collect a ticket tax that will go toward the public portion of funding instead of adding the cost into the price of the ticket. That’s a revenue figure that will be subject to some variability; while demand for hockey tickets in Alberta is pretty constant, the projections rely on all the other events at the arena providing strong sales, too.Tombe said the city could have set the ticket-tax rate higher and thus drawn less — or even nothing — from the public coffers to cover their $290 million portion of the arena budget, or they could have looked at simply raising annual residential tax rates by $20 to $25 on average.Either way, of course, the city is still going to be making service cuts.Rogers Arena remains a counterpoint to all this. As a private company, Canucks Sports and Entertainment don’t share their figures, and while the hockey team may be struggling to generate revenues, you can presume they’re doing well overall based on how busy the arena is.It’s been two decades since Griffiths held an active stake in the Canucks or the arena, but he still speaks proudly of what it did for the city and his old team.“The building obviously does well for the Canucks.”email@example.com/risingactionCLICK HERE to report a typo. Is there more to this story? We’d like to hear from you about this or any other stories you think we should know about. Email firstname.lastname@example.org.