North American professional sport is a giant extortion scheme, designed to take money from people who work 9-5 jobs and transfer it to wealthy people who own teams, play professional sport or who can afford $150 tickets to sporting events. It’s an ugly process to watch play out, as we’ve seen over the past little while and it gets even uglier as you get towards the end.
I was amused when I read Pat LaForge’s email to friends that got leaked to the Edmonton Journal the other day, which contained the following:
The Edmonton Oilers play in the second oldest and, with the return of Winnipeg, the third smallest arena in the League. Winnipeg, where the Jets receive a $5.5 million annual gaming subsidy guaranteed for 20 years, is the only market smaller than Edmonton.
Now, we all know that the bit about Edmonton being a small market is nonsense. Someone should ask Pat LaForge how many markets generate less revenue than Edmonton. The answer is going to be, in all likelihood, “More than twenty.” That’s because Edmonton is an awesome hockey market, which is the relevant thing here.
But a subsidy for the Jets? LaForge is speaking too truthfully. The proper spin is as follows:
The city of Winnipeg and the province of Manitoba’s initial investment in the MTS Centre, the new home of the Jets, will amount to $165 million over 20 years when you add up tax breaks and rebates, VLT revenue, and a $40 million upfront investment, reports Colin Craig of the Canadian Taxpayer’s Federation.
In addition, Premier Greg Selinger just announced that as much as $4 million more per year will be reallocated from VLTs to pay off the arena’s mortgage, as much as $80 million more in total.
That’s $5.5 million each year of government gambling money for the MTS Centre. Why not the province do the same here? Or do something else that is reasonable to close this deal.
It’s not a subsidy for the Jets, you dummy LaForge. It’s an investment in the MTS Centre, a building that creates economic growth and better quality of life for Winnipegers.
Except, of course, it actually is completely a subsidy to the Jets. The owners of the MTS Centre now have an additional $5.5MM to spend on other things. Like hockey players. Or profits. Or political donations (warning, pdf).
Every time a city or province or state caves in and gives more money to these extortionists, they raise the water level, leading other teams to go and plead their case for more free money. “But…but…but…the Jets receive a $5.5 million annual gaming subsidy guaranteed for 20 years,” they say, with a quiver in their voice and a plane ticket to Quebec City in their hands. A dystopian future is forecast by the people who dine on their ice cream sandwiches: “Has anyone involved given any thought to what Edmonton will not only look like but BE to the world if this arena deal blows up? DEADmonton!”
There’s so much public money in the NHL now that it’s effectively immune from competition – nobody’s going to build WHA2 a bunch of rinks so that they have the necessary cash to compete with the NHL for talent. This means that the NHL owners can now engage in fights with the players about the division of the excess profits every six or seven years. Every journalist, every voter, every politician and every fan who has supported this nonsense over the years is responsible for the continual demand for more money from government. They have enabled this pillaging.
Speaking of pillaging…the release of this email that the President of Northlands wrote, apparently in response to a request for a number that it would take for Northlands to enter into a non-compete agreement is high comedy too. This from the email:
Let’s say that for the sake of discusson the City were to ask for a 35-year “non-compete.” … this of course would need to be clearly defined. I can assure you we will not move at any speed towards agreement to shutting down our arena business without the following understanding:
* Provision of a new and nicely refreshed facility on the site of our current Rexall facility.
* Seating bowl of 8,000 seats minimum — focus on attracting small shows and convention support business.
In addition, we would requite a CASH buyout in the neighborhood of $250 million.
* start with this …. $175M cash (35 years X $5M annual net contribution) plus value related to inflation and interest.
Now, I don’t like to agree with David Staples on the arena stuff – it’s people like him who are responsible for such a healthy percentage of North American GDP being diverted into the pockets of industrialists and athletes as well as the fact that actually attending live sporting events is basically for fat cats – but he’s right to find this outrageous.
Northlands’ annual report contains a little bit of explanation about the company:
Edmonton Northlands is incorporated under Part 9 of the Companies Act of Alberta as a non-for-profit organization. Edmonton Northlands’ purpose is to provide programs and facilities to benefit the residents of Northern Alberta in the fields of agriculture, racing and gaming, trade shows, exhibitions, entertainment and community service.
A little bit of corporate law (this is literally the extent of my knowledge of corporate law): at law, corporations are people. Generally speaking, they have the same rights as people. They are creatures of statute though – the only reason that corporations can exist is because there are statutes that provide for their creation. Before the invention of corporations, people used to trade under their own name or in partnerships. Corporations are great, because they provide limited liability and some other advantages to persons operating businesses through them.
The part of the Companies Act under which Northlands is incorporated is a part that permits incorporation of a non-profit corporation where “…it proves to the Registrar that it is formed for the purpose of promoting art, science, religion, charity or any other useful object.” You’ll note that Northlands expresses its purpose as being the provision of programs and facilities to benefit the residents of Northern Alberta in the fields of agriculture, racing and gaming, trade shows, exhibitions, entertainment and community service.
Now, assume for a second that it was clear that Katz needed a non-compete agreement (why he needs a non-compete with a facility that is economically unviable is completely beyond me). Assume that the City, the politicians who are elected and accountable to the people of Edmonton had decided that this was a good and necessary thing for the future of Edmonton, something that does not yet seem to be the case. It is outrageous that a non-profit corporation, which has consumed tons of grants and subsidies and exists to promote art…or any other useful object is in effect saying “Hold on there…give us $250MM of public money or we’ll prevent you from doing this thing that you have determined to be in the public interest in order to provide trade shows, exhibitions and entertainment to Northern Alberta.”
Remember though – corporations are creatures of statute. It strikes me that one easy way to deal with this, at a cost of $0, would be to simply legislate Northlands out of existence. There are no constitutional property rights in Canada, so I’m not entirely sure what would stop the provincial legislature from doing that. In the (less draconian) alternative, it strikes me that the province might be able to simply pass a law voiding the lease of Rexall Place to Northlands. There have been variants of this tried in the past that have run afoul of the law due to jurisdictional issues – the Churchill Falls thing between Quebec and Newfoundland comes to mind – but I can’t think of any reason off the top of my head why this wouldn’t work. Provinces have the right to legislate on these matters and there are no inter-jurisdictional issues.
There are usually good reasons for government not to interfere with property rights – nobody wants to invest in a place where the government might take your stuff – but those policy rationales aren’t applicable here. Northlands appears to be what the British would call a quango in that it suckles at the public teat and exists to serve a public need and for such an organization to be looking to be paid off in order to go along with a democratic decision (if such a decision had been made, which it hasn’t) is outrageous. I’d never endorse such draconian steps from government if we were dealing with an actual private actor, but in this case, Edmonton isn’t.
Of course, taking these draconian steps would be in service of setting up a publicly subsidized monopoly over the concert industry in Edmonton, something Daryl Katz apparently expected to get along with the Oilers when he slapped down his money. As causes go, this isn’t exactly liberating Europe from the Nazis.
All in all, I find the whole thing pretty hilarious. And I’m glad it’s not my money. (Although I don’t get off myself: my money is taken from me to subsidize soccer stadia and practice rinks in Toronto. They bleed us everywhere.)