I try not to write too much about the arena, mostly because it makes me feel like I should be working at an alternative newspaper and because it makes me depressed about the state of society, that people argue so vigorously to comfort the wealthy with hundreds of millions in tax dollars in return for such questionable benefits. Every time a government (or anyone) spends a dollar on something, it’s a choice not to spend that dollar on anything else. It’s insane to me that a society with the problems that ours has (and we aren’t doing half bad!) concludes that the most pressing social issue that requires the expropriation of funds is ensuring that the local billionaire has a new ice palace with ermine rugs but so it is. People decide on their priorities by a complicated internal process that nobody else can really understand.
What you can do though, is call them on any nonsense that gets spewed in support of the idea. “Nonsense that gets spewed in support of the idea” is long form for “David Staples’ latest piece.” It’s funny; when someone like Terry Jones or John MacKinnon writes something asinine in support of the arena, it doesn’t really bother me. Those guys aren’t around to dig deep into issues. They’re employed, in Jones’ case, because they can whip off good lines and because the ladies love him (see screen capture that demeans everyone in it at left), and in MacKinnon’s case, for reasons that elude me. Staples is different though. I’ve had differences with him on analysis but I’ve always respected the extent to which he digs into the facts. He’s written a bunch of fantastic non-hockey stuff in the Journal; stuff that shows that he has the capacity to really dig into a subject. For whatever reason, on the arena, he just seems to have no interest in doing so.
His latest piece serves as a fine recap of his arguments in favour of the arena. I did Lowetide’s show over the weekend and the arena was a planned topic (the segment can be found here, which prompted me to really go through David’s piece. Unfortunately, a 15 minute segment on radio isn’t really the place to go through stuff in detail.
(Aside: before you go to court, you generally have to tell the court how much time you need. Lawyers are notoriously horrible at estimating this because it always takes way longer to deal with anything slightly complicated. The amount of detail gathering I did before a 15 minute chat with Lowetide was excessive.) I figured that I’d turn it into a couple of posts – it’s sort of long.
David helpfully summarized all of the reasons that the City of Edmonton should give money to the Oilers in a paragraph, which can be gone through point by point.
In this case, numerous factors should guide Stelmach and his successor: a new arena is needed to keep the NHL in Edmonton; a massive public investment in fixing up Rexall Place makes little sense; the proposed downtown project enjoys popular support; it will provide a huge benefit to Edmonton’s neglected downtown; it is normal for the government to help build this kind of infrastructure; it’s a fair deal by NHL standards; and, finally, a $100 million investment is much less than other provincial governments in Quebec and Manitoba are now set to pay for NHL arenas.
1. A new arena is needed to keep the NHL in Edmonton
This has been an Oilers’ talking point for which nobody has produced a scintilla of evidence. The Oilers refuse to open their books but warn of doom. Fortunately, there’s a newspaper in Edmonton that has documented some information in relation to the Oilers’ finances over the years. It’s called the Edmonton Journal. I wrote a lengthy post some time back in which I went through the Journal’s archives and pulled out quotes about their financial position from guys who would know. A writer evaluating this claim today has already had a lot of the legwork done.
(A further aside. Some of you will recall a post last fall in which I discussed a quote from Alan Watt, in which he stated “…we’re a $120-million business and there are no borders in our business.” The comments blew up with people trying to explain how he didn’t mean that the Oilers were a $120MM business, mostly notably from occasional commenter Gerald. It all seemed absurd to me.
In looking back at the post with all the excerpts from the Journal, I came across an interesting comment from Cal Nichols from what appears to be the summer of 2005 (updated: as per his comment, John MacKinnon was the guy who wrote the story I’m citing; I noted this in the original piece but not this one):
Nichols acknowledged that revenues league-wide are projected to fall to $1.74 billion from $2.1 billion US in 2003-04. He reckoned the Oilers, who pulled in about $85 million Cdn in gross revenues the last NHL season, will derive something closer to $70 million in 2005-06.
Some sponsors have fallen away, or committed funds elsewhere, at least for this year, Nichols explained. And the small-market equalization fund that delivered about $2.5 million to the Oilers most years does not exist under the new CBA.
As we all know, the NHL actually didn’t suffer a big dip in revenues in 2005-06 – it was in the same range that it was in before the lockout. If the Oilers did suffer a big hit, which seems impossible given the playoff run, one suspects that they made it all back in 2006-07, coming off an appearance in the Stanley Cup finals.
$120MM is 141.5% of $85MM. I was able to find the Oilers’ season ticket prices for the aborted 2004-05 season and they’re now about 130% of the amount that they were then. If you factor in other things, like increases in TV rights and the fact that the rink is sold out every night now whereas it was not before, the $120MM number does not seem all that unbelievable to me, although it’s a pretty healthy increase in revenue when you consider that they’ve been in the playoffs once since 2002-03.
I should acknowledge that there is some possibility that the Oilers are losing money because the capital structure of the team has changed, although I have my doubts. Assume, for the sake of discussion, that they were a debt free team when Katz bought them and that he took on $150MM in debt to purchase the team. At 4% interest, that’s $6MM in interest payments per year, with each point of interest being worth $1.5MM.
There’s a point to be made here. When you as a community decide that you’re going to care about the profitability of a private business, you open yourself up to circumstances where the business is sold to the guy with the most aggressive projections, who immediately starts screaming that he’s suffering a loss because he took on so much debt to buy the thing in the first place. If Katz is telling the truth about losing money, you can blame the EIG for this – by demanding the price that they did from Katz, he then needed public subsidies in order to survive. In effect, the premium pocketed by the EIG in the form of a price that could not be justified on the basis of the substantial revenues will come from the pockets of Edmonton taxpayers. Swell group of guys. Local heroes.)
ANYWAY, David will concede, when you press him, that he’s more worried about the Oilers in the future than in the present. I’m not sure, therefore, why he wrote that Edmonton needs to build a rink to keep NHL hockey when what he meant was that maybe a rink will prevent a problem with keeping NHL hockey at some point in the future, if something comes up. This is a wise concession to make, given that it’s hard to take their fearmongering at face value. I’ve written before about the circumstances surrounding the Oilers prior near-departure from Edmonton – they involved a 60ish cent Canadian dollar, an owner whose empire was crumbling, a booming US economy and a bizarre taste on the part of American cities for building arenas in places where hockey isn’t very popular.
Could these circumstances happen again? I can’t say they can’t. Nobody who is being honest can say that they can’t. At the same time, there’s some reason to suspect that the gilded age of publicly funded stadia, at the very least, has come to an end in the United States. It is, at the very least, something that nobody can sensibly predict will happen.
Does it make sense to spend money on the basis of possibilities without anyone identifying how likely they are? Most people don’t behave that way. Most people take all sorts of minute risks every day without worrying about it. If hard times come and money isn’t so readily available in Edmonton, does it make sense to have money tied up in an arena that may no longer be appropriate for Edmonton? I have difficulty with this variant of the argument because it amounts to saying “If Edmonton is someday in a tight spot financially, we want to be sure that we’ve spent a bunch of money on the Oilers because we might not have it then.” Where’s the morality in saying “In the event of a crisis in the future, we want to be certain that the policy preferences of today’s residents, many of whom will be dead or no longer living in Edmonton, have been cemented?” It’s insane.
In addition, if we’ve learned anything from the Coyotes’ situation, it’s that once you’re relying on the team being present to generate revenue to pay the bills associated with the free money you gave them, they own your soul. If things go bad, you can bet that they’ll be back, cap in hand, demanding more money from the city.
If even the biggest believers in the arena don’t buy the Oilers’ bald allegations of financial trouble and the best that they can come up with is some scenario of future doom that requires limiting the capacity of the city to respond to whatever crisis might arrive, I question the extent to which we should take it seriously. Baffling that a journalist can write “A new arena is required to keep the NHL in Edmonton” without any qualification.