Quebec breaks ground on arena, but now what about a team?

As promised, the city of Québec broke ground on its new $400 million arena yesterday, with plans for it to be up and running by 2015. Amid all the talk of how many blue plastic shovels were sold and which politicians were cheered or booed and how many Stastnys showed up, the CBC’s coverage buried the important information deep in the article:

Pierre-Karl Péladeau, the CEO of the Québecor empire, was also present at the groundbreaking. His company gets naming rights to the arena and will help pay for operating costs — an amount to be determined, depending on whether an NHL team ever moves in.

This is going to be the key question for Quebec: Will Quebecor be successful in landing an NHL team, and if so, when? This is important not just because the whole damn point of building a new arena (right next to the old one, which will remain) is to lure a pro hockey team, but because if there’s no team, Québecor only has to pay about $70 million worth of present value for naming rights and rent. If a team does arrive, Québecor’s payments jump all the way to $130 million — still nowhere near the $400 million that the city and provice are putting up, but better.

There are certainly plenty of teams rumored to be in play for a move: The Phoenix Coyotes if they can’t get their new lease deal and sale worked out, the New York Islanders if they decide they’d rather be the big fish in a smallish market rather than keep their cut of the New York City media haul … okay, maybe “plenty” is overstating it. And then there are other cities seeking a team as well, including Kansas City, likely Seattle if it builds a new arena, and maybe those crazy kids in Virginia Beach.

Clearly Québecor is motivated to get an NHL team — it wants the TV rights, even if it’d mean a few million dollars a year in extra payments to the city — and with the massive subsidies it’s getting on the arena, it can probably afford to overpay for one vs. some other cities. Still, it’s not a sure thing yet, and whether they’re successful will determine whether Québecois at least get a new Nordiques for their troubles, or whether this expensive new arena project just leaves Québec as a cold Kansas City.

Quebec’s new arena to leave taxpayers at least $250m in hole, with no guarantee of NHL team

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.

Quebec mayor, Quebecor reach NHL arena agreement

Seven months after announcing plans for a $400 million hockey arena to be paid for entirely with public money — but with plans for the public to get some of its money back via arena revenues — Quebec City Mayor Regis Labeaume and Pierre Karl Peladeau, president of the communications giant Quebecor, announced yesterday that they’d reached a deal for Quebecor to operate the facility. According to reports over the weekend, the contract would look something like this:

  • Quebecor would get full control of the arena through 2040, with an option to extend its rights until 2045.
  • Quebecor would get to sell naming rights to the building, and presumably keep other arena revenues as well.
  • The company would pay the province $63.5 million up front, plus $4.5 million a year in rent, if it lands an NHL team to play in the arena. Without a team, it would pay $33 million up front, and $2.5 million a year in rent.

Without seeing more details — the agreement is apparently close to 200 pages long, and I haven’t been able to find it online — on the face of it this sounds a lot like AEG’s lease to manage Kansas City’s Sprint Center: The city hands over all arena revenues to a professional manager in exchange for fixed rent payments. And while it looks like Quebecor will be paying a fair bit more than AEG for that privilege, the amount of money headed Quebec City’s way is still a pittance compared to its costs: Even if you ignore the $200 million that the province is putting in for construction costs, $63.5 million in a lump sum plus $4.5 million in rent is still going to leave the city losing several million dollars a year on its own $200 million construction debt.

And that’s if Quebecor even bothers to bring in an NHL team — making their rent higher if one is present certainly isn’t a good way of incentivizing their new arena managers to bid high to lure, say, the New York Islanders.

The Quebec city council is scheduled to vote today on the arena deal, and is expected to approve it. Hopefully at least the council meeting will shed a little more light on what exactly they’re agreeing to.

Quebec considers bill to block arena lawsuits

Add Quebec to the list of cities that could face legal challenges to their arena deals on the grounds that they did an end run around proper public process. Former city official Denis de Bellevale and another city residents filed suit last week charging that the city’s $400 million arena plan is illegal because media giant Quebecor was given the rights to manage the building without an open bidding process.

[De Bellevale] said the deal amounted to cash pay-out to Quebecor of $40-million a year for the next 20 years.

“The futility and the absurdity of this financial package is enough to scandalize even the most hardened capitalist,” Mr. de Bellevale told the committee.

That committee, by the way, was one holding a National Assembly hearing (the National Assembly being, logically enough, the government of the province of Quebec — o, you wacky Canada!) on Thursday on a bill that would explicitly block the lawsuit by declaring the Quebecor contract as “deemed not to contravene” provincial law. Mario Bedard, who’s leading a drive to raise $40 million for the arena via seat pre-sales, testified that getting the provincial government to change its laws for the project was necessary because, as the Montreal Gazette described it:

Bedard said Seattle, Houston and Las Vegas also want NHL teams and that the failure to adopt Bill 204 would cast doubt over Peladeau’s bid, hurting Quebec City’s chances.

That’s right: Seattle doesn’t even have an NHL-ready arena or any serious thoughts of building one, but it’s already being waved as a threat to steal Quebec’s as-yet-nonexistent team. I mean, if you’re going to go that route, why not say that Quebec has to change its laws to avoid losing an NHL team to Chattanooga or Walla Walla? At least they’re more fun to spell.

Vegas arena plans, Anaheim Kings subsidies, and more

A few items that fell through the cracks over the last week:

  • Those plans for a tax-increment-financing-funded arena on the Las Vegas Strip got officially killed last week by the Nevada legislature — which then immediately expressed its intention to put a different arena plan on the ballot in 2012.
  • The Anaheim city council is considering paying for upgrades to the Honda Center if the Sacramento Kings move there. No word on how much the renovations would cost, how they would be paid for, or why the city would have any reason to pay for them in the first place.
  • Bronx borough president Ruben Diaz Jr. reiterated his call for a new hotel near the Yankees‘ stadium to help bail out those money-losing parking garages. Diaz presumably is more interested in using the garage fiasco as leverage to get more development for his borough; why city taxpayers should want to throw good money after bad is another question…
  • A Canadian government analysis projects that for the federal government to pay for a Quebec hockey arena and a Saskatchewan Roughriders stadium, it would require ticket taxes of as much as $42 per ticket to pay off construction costs. That sounded crazy to me at first, but given that we’re only talking about a million fans a year (combined NHL and CFL), it actually makes sense: A $42 ticket tax would generate $42 million a year, which is about enough to pay off $600 million in costs spread across two stadiums. It would also be insane, of course, but it’s a good reminder of why teams don’t generally jump to build stadiums with their own money — new sports facilities face a hugely uphill battle to earn back their own construction costs.

Liberal Party: We’d fund Canadian sports arenas

Canada’s Liberal Party is now trying to use the Quebec arena fight to score political points, as party leader Michael Ignatieff has declared that he’d be happy to provide federal funds for the project — or, for that matter, sports stadiums and arenas in other parts of Canada — if only he were, you know, prime minister:

“It’s not a question of giving little gifts here and there,” he said. “I think the project is important because it’s a public space. That’s what counts, a public space to present the culture, to present the economic success of the region.

“And if the same case arises in Regina or Vancouver I’ll say the same thing … If we’re talking about a public space that contributes to the development of that region, then the federal government can contribute.”

“A public space that contributes to the development of that region” — that’s a pretty broad category, considering how far stadium boosters like to stretch the meaning of public benefit. And it’s a way more lenient standard than that used by the federal P3 fund, which in any case explicitly excludes sports facilities for consideration.

The real goal, presumably, is to woo Quebec voters who are steamed that the feds aren’t going to be chipping in to try to bring a new version of the Nordiques back to their city. Whether it plays as well in the rest of Canada — where, let’s not forget, the prospect of federal subsidies to NHL teams previously prompted an all-out citizen revolt — is another story.

Quebec arena federal funds still dead, Quebec-Canada fight lives on

Quebec City may have decided to move ahead with hockey arena funding without federal help, but that doesn’t mean local officials are going to end their war of words with the feds. Last week, Quebec City Mayor Regis Labeaume called the decision not to provide federal funding “suicidal” for the federal government — which was followed by more controversy when the feds blacked out most of the documents explaining their verdict before turning them over to the press. It doesn’t look like anything is going to change any funding decisions here, or the fate of the Quebec arena or the return of an NHL team to Quebec, but it’s fun to watch, anyway.

Quebec: Screw it, we’ll just pay all $400m for an NHL arena

Not even three weeks after declaring that he’d look for a new source of funding for a Quebec hockey arena, Quebec City Mayor Regis Labeaume announced today that the source would be … himself. Okay, really his city’s and province’s taxpayers. Ladies and gentlemen, your Plan B:

Quebec’s government Thursday announced it would pour $200 million into a new coliseum in Quebec City, whose raison d’etre is drawing back a National Hockey League team, something the NHL has warned is not guaranteed.

It amounts to a near 50-50 financing arrangement with Quebec City for the estimated $400 million venue, placing the burden almost entirely on taxpayers.

“An arena financed with 100 per cent public money is unacceptable,” said Claire Joly, executive director of the Quebec Taxpayers League. “There are a lot of people who want an arena and a hockey team in Quebec City, but not at any price.”

The risk for Quebec City is going up dramatically. It had originally committed $50 million. Now it’s on the hook for $187 million. (A group of citizens has raised $13 million to “reserve” seats in the new venue.)

The federal government hasn’t ruled out chipping in as well, but nobody’s holding their breath that they’ll do so, especially not when the latest idea floated — allowing cities to use existing federal gas-tax payments on arenas — drew jeers from city officials, who rightly point out that allowing them to use money they already have isn’t much of a federal subsidy. Meanwhile, that offer from Quebecor’s Pierre Karl Peladeau to put in “tens of millions of dollars” was apparently rejected, as neither Labeaume nor Quebec Premier Jean Charest said anything about private money.

What they did indicate, though, was that in exchange for paying 100% of the arena costs, the city and province would be looking to get a cut of the vig. From the Globe and Mail:

Future private revenue from the Quebec City arena will be evenly split between the city and the province. This includes the commercial naming rights for the building, marketing revenues, and operating rights. All of this could total several million dollars a year, according to the mayor.

That’s all well and good, and it’s nice to see elected officials putting naming rights money in the “taxpayer” pile instead of letting teams get away with considering it their private stash (something they do even when the building the name is going on is owned by the public). Still, “several million dollars a year” is going to be a drop in the bucket in paying off $400 million in arena bonds, unless 30 counts as “several” in Canada. And that’s even assuming that a team relocating to Quebec — remember, this arena doesn’t have even a glimmer of a tenant yet — agrees to turn over those revenues to its public landlord.

All in all, it’s a stunning amount of money for public officials to commit, especially in a nation which doesn’t have nearly the same history of funneling taxpayer dollars to sports teams as the U.S. And to do it on spec, without a team in place — as I’ve noted before, you might as well stick a “kick me” sign on your back.

Harper on Quebec arena funding: Wait for it…

So much for Plan B: The administration of Canadian Prime Minister Stephen Harper now says it will consider federal funding for a Quebec hockey arena — but it wants to hear more details first.

“My Quebec caucus colleagues and I support the amphitheatre project and the door is not closed with the federal government, far from it,” Harper’s political minister for Quebec City, Josee Verner, said yesterday. (She was speaking in French, which is presumably why she said “amphitheatre.”)

Harper, you will remember, said just last month that no federal funds would be forthcoming. The change of heart was apparently sparked by Quebecor owner Pierre Karl Peladeau’s promise of “tens of millions of dollars” towards an arena.However, Verner added that the government needs to see details of Peladeau’s plan before it can move forward: “We do not have everything we need.”

In the meantime, Quebec City officials plan to spend the next six to nine months evaluating the projected $400 million arena cost. Can you say, “Stall until the threat of an election is over”?

Everybody’s got a Plan B for Quebec arena

Quebec City Mayor Regis Labeaume declared last week that he’s given up on federal funding for a new hockey arena, and “it’s time to move on to Plan B.” And what would that Plan B be, Postmedia News?

He declined to give details on the so-called plan B, but has said the city could increase its financial contribution to the project.

Given that the city has currently only proposed chipping in $50 million, and there’s a $175 million funding gap, that’d have to be a hefty increase.

Likewise, Quebecor media titan Pierre Karl Peladeau announced last night that he’d be willing to put “tens of millions of dollars” in private money into the project, which likewise sounds more impressive when you don’t take into consideration that the whole shebang is supposed to cost $400 million. Also, Quebecor would likely want the right to manage the arena as part of any deal, which means it could end up recouping its money via a cozy lease with the public owners. No way to say for sure, as Peladeau said he wants to “keep these talks private,” which is no doubt why he announced their existence to a reporter for the Globe and Mail.