Quebec arena could cost public $370m after city pays half its operating losses

Quebec City is not getting an NHL expansion team today (Las Vegas is), but it still has the $400 million arena that taxpayers put up around $330 million to build. And quelle surprise, it’s already losing money:

The $400-million arena opened its doors to the public last September and ran an operational deficit of $1.4 million in its first four months.

That’s not good.

The contract states that the city has to pay 50 per cent of the operational deficit incurred by QMI Spectacles, an affiliate of Quebecor, up to the amount of the arena’s rent.

That’s even worse! CBC News says this will cause Quebec to have to pay the arena operators $730,000, but if you project it out over a full year, it’ll be a $2.2 million check, or a rebate of almost the entire $2.5 million annual rent payment from Quebecor. That would bring the total public subsidy for the new arena to around $370 million, which would be a crazy-high amount to get an NHL team (you could buy a slightly used one for less than that price), if they were getting an NHL team for that price.

The lesson here is … well, all the usual lessons about not spending so much public money on a sports venue and hoping you’ll earn it back on new revenues, and not building on spec, and so on. Mostly, though, it’s that when the mayor jokes that his cousin will be the main attraction at your city’s new arena, be afraid, be very afraid.

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6 comments on “Quebec arena could cost public $370m after city pays half its operating losses

  1. Disclaimer: I’m from Montreal, not from Quebec city. I have a neutral view of the situation.

    Let’s make sure the facts are right here.

    1. Budgeted construction cost of Videotron Center were $400M CAD. Final cost is $370M CAD ($30M less than expected).

    2. 50% of construction costs are funded by the provincial government, the other half by Quebec city.

    3. Main reasons for this investment is related to the old Pepsi Colisée, too old (build in the 60’s), maintenance and renovation costs to high to have a major entertainment/arena facility in the East of the province. A NHL team is part of the business plan, but not the only reason. Thos extra costs should be considered in the overall ROI.

    4. NHL will announce today that Las Vegas is getting an expansion team, probably that Quebec city will not get one. However, lots of rumours for a team relocation into Quebec city in the next few years.

    5. Quebec city will pay half of yearly losses for the Videotron Center, for a maximum amount of the rent paid by Videotron per year.

    6. Quebec city get revenue for parking and probably other elements part of the contract.

    7. 1.4M CAD loss (Quebec city pay 50% of it, $700K CAD) includes higher fees for the launch and less revenues (tickets sold) for the events during that period.

    8. Montreal had lot’s of investments in the last few decades (OSM House investment, Saputo Stadium, Percival-Molson Stadium, …), Quebec city did not got it share of such investments.

    9. Still some question about size of corporate market in Quebec city to support a NHL team considering that the Montreal Canadiens get lot’s of advertising and support from corporation across the province and adding anew team in Quebec city may cut part of those revenues for the Nordiques benefits. The pie will not be bigger if a second team is added.

    Bottom line, There are pros and cons related to the Videotron Center construction, with and without a NHL team.

  2. $370M is a small price to pay to provide important leverage to other NHL teams so they can get similar sweetheart deals from their cities.

  3. The worry for taxpayers should be that if/when an NHL team does land in Quebec (and I believe it will within 5-7 years, but through relocation rather than expansion), it won’t change the arena revenue picture all that much.

    None of us are privy to the details of the arrangement between Msr. Peladeau and the Quebec government(s), of which he was part (opposition MNA), but it seems highly likely that most of the revenue generated by the team will be kept by the team. This means that QC may not have to feed this building $2.5m/yr if there’s a major tenant in it, but they probably won’t earn anything on their $300m+ investment either.

    And if the NHL takes longer than 5 years to place a team there, who’s to say that further “upgrades” won’t be required?

    It is worth remembering that the new Arena in Edmonton will open this fall (allegedly), just six years after Pittsburgh’s arena opened. It will cost nearly double what Pittsburgh’s arena did (and I mean the city’s arena, not the Penguins… the paid for almost none of it).

    The only thing Quebec has bought thus far is the “opportunity” to spend more money. In fact, they have all but guaranteed it by putting their money/cards on the table before the NHL did.

  4. Still blows my mind that Quebec built an arena of this size without any guarantee of an NHL team.
    I know Le Colisee is old, but it was fine for the types of events Quebec was landing without an NHL tenant. They should have gotten a promise of a franchise first and then commenced on construction using the Colisee as a stopgap home for the first few seasons of the new team. Quebec trusting Gary Bettman to give them an expansion team by building the new arena is right there with mixing ammonia and bleach together to form a powerful household cleaner. Especially since many of Canada’s economic conditions that contributed the the Nordiques and old Winnipeg Jets moving in the 90’s are starting to rear their ugly heads again.
    As it is, whatever minor league team plays in Quebec is going to have one snazzy home, even if it’s only half full.

    1. I partially agree with you. However, without a new arena, Quebec city would not be able to attract international hockey games as well as important events/shows.

      The old Pepsi Colisée needed important investments to maintain it and improve it and at some point, a decision was made to build a new one rather than fixing the existing one.

      With major boxing events, hockey games, shows, … Quebec city is able to attract more events than before. Videotron already paid up front to the city $33M for the naming rights and on the long term, the arena will be profitable for the city (considering all the revenues from tickets, parking, …) and for Videotron even if for the first few years, the city will need to pay for the losses (50% of $1.4M for the first year).

      Looking back at the expansion process and how Quebec city expansion application was received by the NHL, I doubt that the 32th expansion team will land in Quebec city in the next 3-5 years. Most probably, a team relocation will happen in the next few years (Hurricanes or another team in the East).

      1. The city is projected to bring in $1.5m a year from parking, etc. Even if it eventually had to stop covering half of Quebecor’s losses, that’s still never going to come close to paying off the city’s construction bond payments, which are going to be at least $20-25m a year. So no, the arena won’t be “profitable for the city.”

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