The city of Quebec announced yesterday that construction of a new $400 million hockey arena will begin in September, and be complete in time for the 2015 season. The announcement was a long time coming: It was more than a year ago that Mayor Regis Labeaume announced the arena would be built, and six months since he declared that communications company Quebecor would pay to operate the arena.
While it was originally announced that the public cost — split evenly between the city and province — would be repaid by arena revenues, “repaid” has turned out to be a slippery concept. The final agreement calls for the following:
- Quebecor will pay $2.5 million a year for operating rights to the arena, plus an additional $2 million a year if it lands an NHL team. In exchange, it will get all revenues from events at the building.
- Quebecor will pay $33 million in cash for naming rights to the building, plus an additional $30.5 million in an NHL team is present. (It’s not entirely clear what happens if a hockey team arrives halfway through the lease.)
So add it up, and the public will be putting up $400 million for the arena (or about $25 million a year) and getting back between $70 million and $130 million in present value (roughly $5 to $10 million a year) from Quebecor. Plus, maybe it’ll get a hockey team, if Quebecor decides it’s worth giving up an extra $5 million a year in rent and naming rights money in order to lure an NHL franchise — something that arena operator AEG hasn’t deemed worth it for Kansas City’s Sprint Center, and they don’t even have to pay added millions if they get a team. It’s possible, of course, that Quebecor thinks that the added value of having its name on an NHL arena instead of just a concert venue would make it worthwhile, but still, you have to worry about the disincentive it creates to actually bring in a team, especially considering that most NHL franchises are going to be looking at paying little to no rent, and sharing little to no arena revenues with the arena manager.
And even in the best case scenario, we’re looking at Quebec taxpayers taking more than a $250 million loss on the deal. For that kind of money, the nouveau-Nordiques had better win boatloads of Stanley Cups.