Markham arena developer’s “NHL connections” turn out not to involve connections to NHL

Remember when two city councillors in Markham, Ontario were calling for an investigation of would-be NHL team owner Graeme Roustan, on the grounds that he hadn’t revealed his personal finances, has previously been found guilty of statutory fraud in an arena case in Texas, and lied about being a finalist to buy the Montreal Canadiens? And remember how the Markham council just went ahead and voted to give Roustan $162.5 million to help build a new arena anyway? Well now the NHL is getting into the game, asserting that — surprise, surprise — Roustan and Markham Mayor Frank Scarpitti lied about Roustan being a finalist to buy the Canadiens, as well as that he had the right connections to get an NHL team:

Minutes of a private council meeting show councillors saw documents of a “confidential nature” and other reports, including one from Mayor Frank Scarpitti, two months ago that upheld the business integrity of promoter Graeme Roustan.

The minutes, obtained by the Star, also say Roustan was a finalist in bidding for the Montreal Canadiens in 2009 and someone with the right connections to secure a franchise for the 20,000-seat arena project…

Frank Brown, group vice-president of media relations for the NHL, said the league and Bettman have never endorsed Roustan as a franchise owner or indicated any positive view about a second NHL club in the Toronto area market.

“In summary, insofar as these minutes refer to the league and to the commissioner, we do not believe they are accurate,” said Brown.

This isn’t all that big a surprise, since it looks like the Toronto Star obtained the minutes, asked the NHL, “Hey, did you say this guy could get an NHL team?” and the league replied, “Hell, no, Markham is still Maple Leafs territory until we say otherwise.” Still, given that the minutes indicate that Roustan wasn’t actually promising any financial backing for the arena, and that his main role was to “provide the connection with the NHL and bring a team to Markham,” the fact that he doesn’t actually have any connections to bring an NHL team to Markham would seem to be a wee omission.

There’s still no actual construction agreement for the Markham arena, and no word from the council on how negotiations are going. Two councillors complained earlier this year about all the arena meetings taking place in closed sessions; you’d think city councils would learn their lessons eventually about private meetings, but apparently not.

Markham refusing to release arena economic projections, citing gag order from developer

Wondering what’s been up in the Markham arena controversy since councillors in the Toronto suburb gave preliminary approval to the $325 million arena plan in January? For one thing, the city council is refusing to release the consulting reports that it says provided the economic rationale for committing $162.5 million in public funds to the project:

[Graeme] Roustan, chief executive officer of GTA Sports and Entertainment, has insisted that estimates from project partner Global Spectrum show the facility could attract 131 events and 780,000 users annually — numbers sufficient to make it economically viable. But some industry players say those numbers would be impossible to achieve without a major league sports tenant.

Councillors have seen the reports but signed confidentiality agreements that prohibit them from disclosing or discussing the contents. They had also agreed not to disclose information about the project for two years after Roustan approached them with a public-private partnership plan for an arena in early 2011.

Both the Markham Village Ratepayers Association and the Toronto Star have filed freedom of information requests for the documents, but have been refused on the grounds that they contain sensitive financial information. It will now be up to the province of Ontario to rule on whether Markham has to release the documents.

Markham residents spend 8 hours hating on arena deal, council okays it anyway

As noted yesterday, the Markham city council met last night to debate whether to rescind approval of a funding plan for a $325 million arena in that Toronto suburb — and it turned into a marathon, with developers and local residents debating the merits of the plan until 3 am. And while those testifying were by all Twitter accounts overwhelmingly opposed to the deal — tweet of the night: “A Grade 11 kid is talking to Markham council now and showing a much better grasp of economics than the mayor” — the final vote was 7-6 to confirm the council’s support of the arena financing plan, after councilor Logan Konapathi unexpectedly switched his vote to nix the nixing of the deal.

If this sounds like the council had its mind made up before the eight hours of testimony, you could certainly make a case there. Though most of the press coverage focused on the impact of the testimony of the very first speaker: former NHL players’ union chief Paul Kelly, who was brought in by Graeme Roustan (Kelly got to go first, it was explained, because he “had a plane to catch”) and who all but promised Markham an NHL expansion team if it builds a new arena:

Kelly revealed that while he ran the union, the NHL not only wanted to expand the league to 32 teams, but had directly discussed doing so with him…

“I’ve discussed it with many owners, the commissioner and many players,” Kelly said in a conversation after his presentation. “That’s given me a strong sense that at some point there will be a second team [in the greater Toronto area].

Kelly added he believes expansion will take place in the next two or three years, “most likely” to Quebec City and Toronto.

All that was missing was Kelly intoning, “If you build it, they will come.” Oh wait:

Whether this is what swayed the council from its prior opposition or not, the Markham arena plan lives to fight another day. There’s still a lot to figure out — whether the special development fees that the city plans to use to fund its half of the arena project are possibly unenforceable, for one — but if the council can resist being schooled on arena economics by smart high school students till all hours of the night, that’s a sign that the lure of even a vaguely rumored NHL franchise is strong indeed.

Markham council to vote tonight on calling do-over on arena deal

The $325 million Markham, Ontario arena plan could be sent back to the drawing board tonight, as the Markham city council is set to vote on whether to rescind the plan it approved last April for the Toronto suburb to pay for half the construction cost, mostly via special fees levied on new development. The last time anyone checked, a majority of the council was having second thoughts about the deal, so it’s entirely possible the motion to rescind will pass. Councillor Jim Jones, who has opposed the deal from the start, told Torstar News Service, “It will probably be a no-holds-barred meeting. People should come out because it will be educational, entertaining and maybe confrontational.” And it looks like there’ll be an audio webcast, at least, so tune in to be educated, entertained, and confronted!

Of course, even if the council ditches this deal, it could just decide that what it really needs is to build an arena some other way. Councillors met with former Montreal Canadiens owner George Gillett yesterday, and he told the Toronto Star that he’d be willing to discuss getting involved with a reworked arena deal that was done in “a broader-based way.” Old arena plans never die, they just turn into new arena plans.

Markham councillors call for investigation of arena backer

The Markham arena deal continues to fall apart: Now two city councillors are demanding a financial probe of developer Graeme Roustan, who’s proposed the $325 million arena project, half of which would be paid for by the city government via possibly illegal fees on future development. (The other half would be borrowed by the city and then repaid — hopefully — by Roustan and his private partners.)

Given that Roustan hasn’t revealed anything about his personal finances, and was found guilty of statutory fraud in an arena case in Texas in 2009, and apparently lied about being a finalist for purchase of the Montreal Canadiens, plus that this is the NHL, which historically tends to attract some dubious characters, yeah, maybe some due diligence might not be a bad idea.

For the record, Mayor Frank Scarpitti still loves the arena deal, and argues thatit doesn’t matter how much money Roustan himself has, since he’s only being relied on to bring together the actual money men, and “I’ve been impressed with who he has brought in as partners.” The city council, though, looks to be growing less and less enthused. This deal could still happen, but it looks a hell of a lot less likely than it did a few months ago.

Markham deputy mayor, most of council now oppose arena plan

Don’t look now, but the proposed arena in the Toronto suburb of Markham may be going from about to break ground to nobody wants to touch it with a ten-foot pole in record time:

[Deputy Mayor Jack] Heath, who has backed the project since its inception more than two years ago, stunned the city on Thursday by announcing council should cancel the arena’s current “financial framework” and not provide any public funding.

“The proposed financial framework has become extremely controversial in our community,” Heath said in a statement. “I believe that discussions on it should be discontinued.” …

It now appears a majority of the 13-member council opposes the 20,000-seat arena in the city’s new downtown, in the Highway 407-Kennedy Rd. area, without significant change in the funding formula. That is in stark contrast to last April when council voted 11-2 for the financial framework.

Since then, opposition has slowly increased. More than 200 residents attended a public meeting recently where every speaker criticized the city’s financial involvement.

It’s way too early to call the Markham arena plan dead — these things almost never fully die so long as there’s hundreds of millions of dollars in public funds up for grabs — but it certainly looks like all the talk of illegal taxes and money-losing on-spec arenas is starting to take its toll. If nothing else, the arena developers are likely to need to attempt some fancy footwork to come up with a revised financing plan that sounds better to elected officials and the public, without, you know, actually requiring elected officials and the public to put in any less money. I recommend shouting, “Hey, look over there!” and then quickly erasing all the minus signs on the economic projections.

Economist Humphreys: I warned Markham against building arena with no tenant

The National Post ran a long article on the Markham arena plan on Saturday, and while the headline was about how the Toronto suburb’s new building could end up a stalking horse for teams’ arena demands in other cities, I’m more interested in the revelation that our old friend Brad Humphreys was one of the economists who drew up the economic impact study that predicted “substantial intangible benefits” from the project — and that that wasn’t the main finding of his report:

“I think they wanted to take some of my advice, but not all of my advice,” he said. “They wanted to cherry-pick it.”

The sticking point, he says, is that the city wants to proceed with the arena — half of which would be paid for by a private-sector group led by businessman Graeme Roustan and half of which would be funded through money raised by Markham — even though it lacks an anchor tenant.

On the question of economic viability, Humphreys said, you can’t evaluate an arena without taking into account its tenants, or lack of same. “Without an anchor tenant, it’s a lot more difficult to make an economic case,” he said. “I certainly told them in my report that it’s not a good idea to build the arena without a team in place.” He said he hasn’t heard from anyone with the city since April.

Humphreys indeed warns that by building an arena on spec, “you set yourself up to be the place everybody threatens to move to,” citing St. Petersburg’s relationship with MLB in the 1980s and ’90s as an example. (Kansas City would be another good one from the 21st century.) But he also points to another suburban arena that hasn’t gotten nearly as much attention:

Humphreys noted the more analogous case for Markham, located about 40 kilometres from downtown Toronto, is that of Hoffman Estates, a suburb about 40 kilometres from downtown Chicago. Sears Centre Arena — it even has the Canadian spelling for some reason — was built there in 2006. At a more modest 11,000 seats, it had plans to lure concerts and host minor-league sports — about the same business case as Markham’s proposed GTA Centre, even though the latter will be much larger and more expensive to build.

Sears Centre Arena lost boatloads of money and, according to The Chicago Tribune, was on the verge of foreclosure in 2009 before the village of Hoffman Estates stepped in to keep it afloat. Its roster of former tenants includes the Chicago Hounds of the United Hockey League, the Chicago Storm of something called the Xtreme Soccer League and the Chicago Bliss of the Lingerie Football League. An ECHL team, the Chicago Express, played there in 2012 but was last in league attendance at fewer than 3,000 fans per game. The franchise folded in April. Sears Centre Arena’s current tenants are the Chicago Slaughter of the Indoor Football League and the Chicago Soul of the Major Indoor Soccer League. The latter is an expansion team, and so far its first coach resigned before the team began play.

Other scheduled Sears Centre Arena events include the state “Cheerleading and Poms Competition” and a bull-riding championship. A Markham arena might do better — it’ll be bigger than the Hoffman Estates venue, and while Toronto is roughly the same size as Chicago, it doesn’t have an equivalent to the Allstate Arena to suck up events that don’t go to the Air Canada Centre. But Humphreys’ warning is still a useful one — as well as a good reminder that even legitimate economic impact reports can end up turning into PR documents in the hands of government officials.

Markham arena’s special development tax could be unenforceable

Looks like even if Markham, Ontario gets around the little problem of not having a team for its new arena, it could be facing a new dilemma: The city’s plan to pay for its half of the $325 million arena cost by levying special fees on developers could be illegal. Or actually worse than illegal, unenforceable, as several local officials and tax experts say that since the development fee didn’t go through the usual public approval process, developers could sign on to it and then just refuse to pay it:

“It can be unwound, if someone goes and challenges it. Even if you pay it now, you can run back after the fact — ‘I shouldn’t have paid it because I was compelled to pay it and I want to get out of this deal,’ ” said [John] Mascarin, who was an in-house town solicitor for Markham a decade ago. “And it could happen that Markham would be ordered to pay them back. It could be very precarious.”

Markham city investment manager Mark Visser told the Toronto Star that he wasn’t concerned about anyone suing to get out of the special tax levies, and added, “If we are slightly off our assumptions, we will have to deal with it at the time.” Now that’s reassuring.

Live Nation says Markham arena can’t work without pro sports

At least one arena expert is skeptical about the plan to build a $325 million pro sports arena in the Toronto suburb of Markham without an actual pro sports team to play there:

Riley O’Connor, chair of Live Nation Canada, told the Star on Monday that the arena will need an NHL franchise, other pro hockey or basketball team, because concerts won’t be able to generate enough revenue for a successful business.

“You really need a major tenant to make that happen,” he said. “In almost all major Canadian arenas, that’s an NHL team, an AHL team, a major junior hockey team. You can’t do it on concerts alone.”

That’s significant in large part because Live Nation Canada is a “partner” on the Markham project, which apparently is Canadian for “consultant.” They’re also, of course, one of the largest concert promoters in North America, much beloved for their attentive care to providing a fan-friendly experience.

GTA Sports and Entertainment, which would help fund and then operate the city-built arena, insists that they can make a go of it with 133 events a year; Frank Russo of Global Spectrum, yet another arena manager consulting on the project, told the Toronto Star, “We certainly feel the arena can be viable with 130-plus nights of activity, including some form of hockey — whether it’s NHL or not remains to be seen.”

O’Connor counters that an arena would need more than 200 event days a year to break even, which would require a major sports tenant. Two hundred events a year, where have I heard that number before? Oh, right.

Markham now thinks it can open new arena by 2014

It looks like the Toronto suburb of Markham really is dead set on building a $325 million NHL-ready arena, with private developers GTA Sports and Entertainment formally submitting an application for the project yesterday. According to Markham Mayor Frank Scarpitti, the goal is to have construction underway by as soon as the end of this year, with the arena open by late 2014 — both of which sound pretty ambitious, especially given Ontario winters and what they mean for construction timetables, but maybe Scarpitti is planning on some outside help in that department.

Under the plan approved in April, Markham will borrow the $325 million cost of the arena, then be repaid by a combination of rent from GTA, arena revenues (whether this means actual revenue streams from arena sales or taxes on arena spending never seems to be specified) and revenue from “future development” around the arena, which would effectively be a kind of TIF.

If Markham does go ahead with the arena even without an identified team to play in it, it would potentially be a relocation target for some of the teams currently engaged in arena subsidy battles (Phoenix Coyotes, New York Islanders), though there’s still the major obstacle that the Toronto Maple Leafs would scream bloody murder if anyone tried to horn in on their media market. Could Markham make a go of an arena without a major sports tenant? Maybe, but the existing evidence isn’t promising.