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The Business of Hockey Discuss the financial and business aspects of the NHL. Topics may include the CBA, work stoppages, broadcast contracts, franchise sales, NHL revenues, relocation and expansion.

Ken King; Flames Ownership no longer pursuing new arena in Calgary

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Old
09-23-2017, 07:42 PM
  #626
blueandgoldguy
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I look at the ticket tax as a users fee - the public who are using the venue, whether for a sporting event or concert, are paying for it.

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09-23-2017, 10:38 PM
  #627
Jeffrey93
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Quote:
Originally Posted by wpgallday1960 View Post
I agree with this but the problems I have with the situation is this:
1. What is wrong with CoC offer?
2. Why does the arena have to cost $600M? Would a $400M arena not be sufficient?

Ultimately, I believe, there will be a shared cost deal but I have no idea what it will look like.
1. Dollar figures.....the Flames want a better deal. So they're going through the process of trying to get that. And don't think for a second the City tossed out that number as a 'final offer'....they know it was a starting point.

2. A $400M arena would be sufficient, yes. But, you need to acquire land...you need infrastructure for it....you need to finance it....you need transportation routes created/altered to accommodate it....etc, etc,. The building itself might only cost $400M....the cost of the project might be closer to $600M. The Flames can't negotiate a deal for a $400M arena with the City being a partner in that....then just expect the city to upgrade infrastructure, rearrange/build transit routes and parking, etc. for free.

The details are what derails things. The Flames say they will put in $275M to build a new arena....however, that means playing in a publicly owned building (to avoid property taxes) rent-free for 30 years.....it also puts most of the maintenance and upgrade cost on the city, while the Flames will manage and operate the facility and take nearly all of the profits.....possibly even taking their cut of profits before expenses get paid.

They'll get a deal done.....the Flames want more and the City wants to give less. They'll find middle-ground at some point.....because both parties require a new venue and both parties are better off with each other.

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09-23-2017, 10:42 PM
  #628
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Quote:
Originally Posted by blueandgoldguy View Post
I look at the ticket tax as a users fee - the public who are using the venue, whether for a sporting event or concert, are paying for it.
Nothing wrong with that. You use the facility more....you end up chipping in more for it.

Everyone will be chipping in for it as property tax dollars from that district will be diverted directly to paying for the building....instead of paying for public transit, road maintenance, policing, etc.

Nothing wrong with users paying a bit more. Considering each ticket would have a X dollar surcharge...if they have a tough time selling tickets to an event the prices might go down....but the per ticket surcharge would remain the same as far as I know. So if the surcharge is $5 and the Roughnecks lower prices by $5.....who is really paying the surcharge? The ticket buyer or the Roughnecks?

Depends on the deal too

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09-23-2017, 10:56 PM
  #629
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Originally Posted by InfinityIggy View Post
If they wanted to cash out wouldn't it be much simpler to just come out and say 'we want to sell the team to a local buyer'? Why this song and dance if that is the case? Doesn't make sense.
I agree, if they wanted to cash-out I'd think they would negotiate in the definition of 'good faith'....get a good deal (not a steal....not getting fleeced) and sell the team with a solid arena deal in place.

Unless they intend to sell the team as a 'portable franchise'.....which I can't believe any potential buyer would believe.

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09-24-2017, 09:11 AM
  #630
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Originally Posted by blueandgoldguy View Post
I know it will come from their ticket revenue and that's fine. They will get a loan from the city for the $185 million for the ticket tax which will probably be over 25 years. I wouldn't be surprised if the city ends up paying the interest on that loan which is very generous on their part.

It won't have to necessarily be $15 ticket tax either. They could do $5 on Flames tickets and concert tickets and $3 on roughneck tickets and Hitman tickets


Flames $5 * 45 games * 18,000 per game * 25 years = $101 million
Concerts $5 * 400,000 attendees per year * 25 years = $50 million
Hitmen $3 * 36 games * 9,000 per game * 25 years = $24.3 million
Roughnecks $3 * 9 games * 7,000 per game * 25 years = $4.73 million million

That brings it close to $185 million without too much of a burden on the ticket buyer. Seems reasonable to me.
It doesn't matter what the amount is or who you charge it to... it's still money that the Flames would/could normally be charging to their customers - just under a different name. But it's very disingenuous to try and credit that money to a 2nd or 3rd party.

I get it... it's a large sum of money and the Flames want everything for free (or close to free) just like Edmonton received. We all know they're not going to get that. But that doesn't mean King doesn't have a point in some of his grips. This is one of them.

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Old
09-24-2017, 09:40 AM
  #631
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Quote:
Originally Posted by Riptide View Post
It doesn't matter what the amount is or who you charge it to... it's still money that the Flames would/could normally be charging to their customers - just under a different name. But it's very disingenuous to try and credit that money to a 2nd or 3rd party.

I get it... it's a large sum of money and the Flames want everything for free (or close to free) just like Edmonton received. We all know they're not going to get that. But that doesn't mean King doesn't have a point in some of his grips. This is one of them.
It is considered a third source because the ticket tax is a method to repay construction debt that is predictable to help secure a favorable loan. This debt would be taken on by the city (under the Flames proposal) with the requirement the ticket tax is in place to repay it. If that is the requirement of the loan, and the loan isn't taken on by the team, then it really isn't their money. Because the city requires that cost to be passed onto users, they don't consider it their money either.

Hence, it is considered a user contribution. If the Flames want to consider it their revenue, they're more than welcome to finance that part of the construction funding themselves and not call it a ticket tax, dealing with the HRR ramifications and higher interest payments, but maximizing their revenue potential.

The team isn't doing this, because they don't want the added risk. So I'd say they forego that money being considered "theirs" by having the city mitigate that risk by taking on the debt.

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Yesterday, 03:43 PM
  #632
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Quote:
Originally Posted by Riptide View Post
LOL. Are you seriously suggesting that the Flames are knowingly selling tickets for less then what they could otherwise? This isn't some benevolent society... they're not a charity. They're a business, with shareholders.



I could give two ***** if it's a slap in the face - welcome to reality and business. It's a harsh world that isn't forgiving to the weak.
If you think they're charging the max they could charge then how do they keep raising prices? Clearly they are not charging the max.

As to your second point? If it's just business then build your own ****ing arena and don't try to pull on the heart strings of fans to try and get more money. What is a slap in the face isn't that they're asking for city money, it's the arrogance of how they're doing it, like saying that they're paying 120% of costs under the city proposal. This is a pretty much unanimous opinion in Calgary and is exactly why even the most passionate fans think Ken King and Flames Ownership are a bunch of P.O.S.'s and exactly why people are saying that CESC has totally dropped the ball in these negotiations and have pretty much guaranteed that Nenshi wins again. Exactly what they were hoping wouldn't happen by taking this mess public.


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Yesterday, 03:52 PM
  #633
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Quote:
Originally Posted by Roughneck View Post
It is considered a third source because the ticket tax is a method to repay construction debt that is predictable to help secure a favorable loan. This debt would be taken on by the city (under the Flames proposal) with the requirement the ticket tax is in place to repay it. If that is the requirement of the loan, and the loan isn't taken on by the team, then it really isn't their money. Because the city requires that cost to be passed onto users, they don't consider it their money either.

Hence, it is considered a user contribution. If the Flames want to consider it their revenue, they're more than welcome to finance that part of the construction funding themselves and not call it a ticket tax, dealing with the HRR ramifications and higher interest payments, but maximizing their revenue potential.

The team isn't doing this, because they don't want the added risk. So I'd say they forego that money being considered "theirs" by having the city mitigate that risk by taking on the debt.
Bingo. So far most in the argument have been pretending that borrowing money is "free" when in reality the interest charges alone associated with taking out a loan of that size would be significant.

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Yesterday, 05:10 PM
  #634
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http://www.cbc.ca/news/canada/calgar...eech-1.4305911

He said the team used to be among the top 10 revenue-earning teams in the NHL who, under the league's revenue-sharing agreement, contribute funds to the lower-earning teams.

"We have now crossed the line. We are now receivers. We'll get a cheque this year. Isn't that ridiculous, in this beautiful market?" he said.


Is this true? Are they really one of the bottom revenue teams now?

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Yesterday, 05:43 PM
  #635
dechire
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Quote:
Originally Posted by trick91 View Post
http://www.cbc.ca/news/canada/calgar...eech-1.4305911

He said the team used to be among the top 10 revenue-earning teams in the NHL who, under the league's revenue-sharing agreement, contribute funds to the lower-earning teams.

"We have now crossed the line. We are now receivers. We'll get a cheque this year. Isn't that ridiculous, in this beautiful market?" he said.


Is this true? Are they really one of the bottom revenue teams now?
Revenue sharing is way too complicated to answer that question with the information given. They can receive revenue sharing without being a bottom 5 revenue team.

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Yesterday, 06:05 PM
  #636
blueandgoldguy
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Quote:
Originally Posted by trick91 View Post
http://www.cbc.ca/news/canada/calgar...eech-1.4305911

He said the team used to be among the top 10 revenue-earning teams in the NHL who, under the league's revenue-sharing agreement, contribute funds to the lower-earning teams.

"We have now crossed the line. We are now receivers. We'll get a cheque this year. Isn't that ridiculous, in this beautiful market?" he said.


Is this true? Are they really one of the bottom revenue teams now?
It might be true but not solely due to the aging facility they play in. The Canadian dollar dropping from $1.00 US 5 or 6 years ago to 0.75 US the last few years played just as large a role in the Flames' revenues relative to other American teams.

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Yesterday, 06:11 PM
  #637
Mightygoose
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Quote:
Originally Posted by trick91 View Post
http://www.cbc.ca/news/canada/calgar...eech-1.4305911

He said the team used to be among the top 10 revenue-earning teams in the NHL who, under the league's revenue-sharing agreement, contribute funds to the lower-earning teams.

"We have now crossed the line. We are now receivers. We'll get a cheque this year. Isn't that ridiculous, in this beautiful market?" he said.


Is this true? Are they really one of the bottom revenue teams now?
They could be still top half but lower than 10th. With the Canadian dollar dropping compared to 3-4 years ago yeah they could fall off that pace.

But with the CAD coming back a bit, it could bring them back up but still on the receiving end due to how it's distributed. They wouldn't be a bottom end by and means but of course that depends on King's definition

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Yesterday, 06:31 PM
  #638
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The canadian dollar is up about 10 percent and rising over last season

Each penny rise is worth $400.000 a year to every Canadian team

No canadian team will lose money this season.

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Yesterday, 07:51 PM
  #639
Mike Jones
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Quote:
Originally Posted by trick91 View Post
http://www.cbc.ca/news/canada/calgar...eech-1.4305911

He said the team used to be among the top 10 revenue-earning teams in the NHL who, under the league's revenue-sharing agreement, contribute funds to the lower-earning teams.

"We have now crossed the line. We are now receivers. We'll get a cheque this year. Isn't that ridiculous, in this beautiful market?" he said.


Is this true? Are they really one of the bottom revenue teams now?
It's a negotiation and you'll hear a lot of stuff like this from the team. They want a free arena so they're going to be focusing their message towards that goal and pushing the worst case scenario. It's all a part of negotiations (And propaganda effort).

Calgarian's will be forced to listen to a lot of whining and sniveling from King and team mascots like Eric Francis leading up to an actual decision. Having heard King's assertion I hope the city sends in its forensic accountants to look at the Flames' books before committing to anything.

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Yesterday, 08:21 PM
  #640
famicommander
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Originally Posted by blueandgoldguy View Post
I know it will come from their ticket revenue and that's fine. They will get a loan from the city for the $185 million for the ticket tax which will probably be over 25 years. I wouldn't be surprised if the city ends up paying the interest on that loan which is very generous on their part.

It won't have to necessarily be $15 ticket tax either. They could do $5 on Flames tickets and concert tickets and $3 on roughneck tickets and Hitman tickets

Flames $5 * 45 games * 18,000 per game * 25 years = $101 million
Concerts $5 * 400,000 attendees per year * 25 years = $50 million
Hitmen $3 * 36 games * 9,000 per game * 25 years = $24.3 million
Roughnecks $3 * 9 games * 7,000 per game * 25 years = $4.73 million million

That brings it close to $185 million without too much of a burden on the ticket buyer. Seems reasonable to me.
Doesn't change much in the grand scheme of your post, but I thought I'd point out that the Roughnecks averaged 11,622 fans per game last season and 11,471 the season before that. They haven't been under 10,000 per game since the 2012 season.

Source:
http://d15k3om16n459i.cloudfront.net...seasonid=15914

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