Vegas would be “disaster” for NHL expansion, Seattle not much better, according to Fivethirtyeight’s numbers

Fivethirtyeight has taken a look at the hard numbers behind the possible NHL expansion targets [or at least as hard as you can get from counting up Google searches for “NHL” — see comments], and pretty much concurs with what I said off the top of my head the other day: Quebec could work, as could Toronto (leaving aside the pesky problem of the Maple Leafs wanting that market all for themselves), but Seattle and especially Vegas would be pretty lousy NHL sites:

Teams in markets with fewer than 300,000 hockey fans, however, have tended to lose money, and that’s where the wisdom of adding franchises in Seattle and (especially) Las Vegas gets iffy. We estimated that Seattle contains about 240,000 NHL fans — fewer than that of Phoenix and Florida’s Tampa Bay, home to two franchises that have struggled to turn a profit for many years. And if Seattle is an enigmatic choice by this metric, Las Vegas would be a disaster. According to our estimates, there are only 91,000 hockey fans in the Vegas media market, which is nearly 40 percent fewer than even Nashville, Tennessee, the least-avid current NHL city, has.

Interestingly, Fivethirtyeight estimates that Kingston and Halifax, and maybe even Moncton, Sherbrooke or Sudbury, could viably support an NHL team better than the U.S. cities under consideration — and better even than five current NHL cities, Phoenix, Columbus, Raleigh-Durham, Miami, and Nashville — thanks to the fact that there are actually people who like to watch hockey in Canada. No doubt there are other factors here at work as well — TV networks, in particular, care as much about overall media market size as whether the market contains any actual hockey fans — but it’s still a worthwhile reminder that just because a city has possible arena plans and some name recognition doesn’t mean it’s necessarily a good place to start up a sports franchise.

NHL to add four new teams for $1.4B by 2017 purple monkey dishwasher

If you loved last March’s unsourced rumors about how the NHL is ready to expand, expand, expand, you’ll love today’s similarly unsourced rumors about the exact same thing! Take it away, Tony Gallagher of British Columbia’s The Province:

Sources close to the situation have indicated Las Vegas is a done deal, the only thing to be determined being which owner will be entitled to proclaim that he brought the first major league sports franchise to Sin City…

A new team close to the newly renamed Arizona squad and California’s big three is all but assured, the only question being when and with which other city. Or should that be plural?

With all the activity going on in the Seattle area in the last little bit it would be quite a stretch to imagine that much time and effort being spent by so many wealthy men being frittered away for nothing.

(Is it just me, or does this entire thing read like a gossip column? I kept waiting for “What mid-sized city was spotted on the dance floor, cavorting with NHL deputy commissioner Bill Daly?”)

As Deadspin notes, Howard Bloom of Sports Business News then upped the ante by predicting that Quebec, Seattle, Las Vegas, and a second Toronto team will all be joining the NHL by 2017, in exchange for $1.4 billion in expansion fees.

This is simultaneously crazy and not-crazy. On the not-crazy side, $1.4 billion, people! In a world where Steve Ballmer is willing to plunk down $2 billion for an NBA team, and MLS franchises are going like hotcakes, it would be foolish not to at least consider taking some of the money that the world’s billionaires are waving around like drunken sailors.

On the crazy side, with the exception of Quebec, all of these are seriously problematic markets. Seattle doesn’t have an arena that really fits hockey, and any hopes of building one would depend on the NBA first approving a new basketball team for Seattle, which doesn’t sound like it’s happening anytime soon. Vegas is Vegas, which is a small, poor city with a bunch of people with lots of spending money visiting all the damn time, which isn’t a great recipe for season ticket sales. Toronto would run up against the Maple Leafs corporate buzzsaw, which would undoubtedly try to seize a chunk of that expansion fee as payment for incursions into its territory.

So, there are some stumbling blocks that make one wonder if Gary Bettman has really thought this thing out. (Not that thinking things out in advance has exactly been Bettman’s strong point in the past.) If the reports are true, and NHL officials are thinking clearly, it seems far more likely that this is a trial balloon designed to see what arena concessions they can get by waving a possible expansion team under a few municipal noses. Guess we’ll find out soon enough — 2017 isn’t that far away.

NHL ready to expand to Seattle as soon as it builds arena that it’s not going to build for hockey

It’s time for another round of “Where will the NHL expand next?” with your old pal, David Shoalts of the Globe and Mail! Shoalts reports that expansion talks are “happening at the highest level,” with Seattle, Las Vegas, and Quebec City “the cities in play.”

Quebec has a ready-made fan base for a reformed Nordiques and an arena already under construction; Las Vegas has more arena plans than you can shake a stick at and a couple of potential ownership groups (one of which, alarmingly, is the Maloof brothers). Seattle, meanwhile, says Shoalts, “seems to be the darling of many NHL governors (even though its arena plans are tilted more to the NBA).”

That’s a revealing little parenthetical, because right now the Seattle arena plans actually require the NBA: Would-be builder Chris Hansen has only committed to the project if he first gets a basketball franchise that he can turn into a revived Sonics. That deal could be revised for hockey, but Seattle city council president Tim Burgess says it probably won’t be:

Responding to an email from Sportspress NW, City Council president Tim Burgess wrote Tuesday that the memorandum of understanding is unlikely to be changed because the financial risk is too high.

“I don’t believe the MOU could be modified to allow an NHL team to go first,” Burgess wrote. “During our initial consideration of the MOU, it was quite clear that the financial risk to the city increased dramatically with the NHL-first scenario.”

And:

A source within the group helping Hansen, the Seattle native who has proposed a $500 million basketball/hockey arena in SoDo, said Hansen has given no consideration to asking the city to change.

“Chris has not proposed changing anything,” he said. “He’s always said he’s a basketball guy.”

What’s so special about basketball, anyway? For starters, Hansen actually likes the sport — all signs are that he’s willing to overpay for both a franchise and an arena if it gets him a hoops team to sit courtside for. Also, Seattle has a proven track record with basketball that it doesn’t with hockey (most of the fans of the 1917 Stanley Cup-winning Seattle Metropolitans aren’t so much around anymore), and the NBA is in general a more profitable entity than the NHL — leaving more money floating around to potentially fill in all those gaping holes in the arena construction spreadsheet.

All this is, of course, subject to change. But right now, it looks more like the NHL is using Seattle for leverage with the other expansion candidates, while holding out hope that somehow an arena deal will emerge overnight once Hansen, Burgess, and the rest catch hockey fever. Shoalts can talk all he wants about how adding two West Coast teams would make conference scheduling easier, but when it comes down to it, this decision is going to be made based on what plan makes Gary Bettman’s owner friends the most money.

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.