Over 100 years to pay for arena

In looking at the arena contract between the Windsor Spitfires and the City of Windsor, one could take one of two positions - it is an investment into the community that could improve the quality of life for residents or from a strictly economic point of view.

First, let’s be clear - the purpose of filing the Freedom of Information request was to gain access to a confidential contract agreed to by the City of Windsor.  I don’t believe spending tens of millions of taxpayers dollars should ever be shrouded in secrecy.   It is our money and we have an absolute right to know how it is being used.  We now have the contract, and lets hope that in the future the City makes private corporations aware that confidentiality clauses are a no-go.

But let’s be honest - this arena was built primarily for the Windsor Spitfires - a for profit corporation. The Spitfires need to have an arena to conduct its business.   The contract between the City of Windsor and the Spitfires amounts to a public subsidy of a for-profit corporation.

And according to Jan Wilson, in Friday’s Windsor Star, the only reason the arena complex may be profitable is because of the rental income and user fee’s from the seniors centre, community ice pads and auditorium:

But we have more revenue streams. We have the rental fees from the (three) community rinks, the senior centre and community centre activities.

Therefore, residents are paying twice for the arena - once through the capital costs and twice through user fees with a successful private partner paying next to nothing. 

All told, the City expects a profit of more than $300,000 per year which equates to about $70-million over 130 years.

Considering that Mayor Eddie Francis campaigned on a P3 arena in 2003 and that the City of Windsor had budgeted just $15-million towards the cost of a new mulitplex arena - this is a terrible financial deal. 

In fact, Councillor Brister and current Arena Committee Chair  back in 2005 stated:

Brister, who groans at the thought of taking a public stand that will get him in hot water with the mayor and his council colleagues, sees “a number of big-dollar issues on the horizon that lead me to believe we should not be proceeding this way. I don’t think we need to be spending more tax dollars on bricks and mortar at this point. In my opinion, we’re going to need those funds…

…”That logic that it’s already budgeted escapes me,” said the financial analyst. Compared with real needs like deficient sewers and pothole pandemics, he said an arena would be far down on his list of priorities. “Not even my 10th or 20th choice.”

The biggest problem I have with the deal is that the City of Windsor assumes all of the risk and nearly all the expenses, while a private corporation pays a measly $150,000 a year in rent and $210,000 in the first year only for suite fit-outs; team room maintenance and hockey related staff. 

While there is no question in my mind the Spitfires have every right to capitalize upon their brand through merchandise sales and to some extent advertising revenue - it should not come at the expense of residents.  All other revenue generating activities belong to the city such as concessions and pouring rights.

That is to say they could probably pay more in rent (Even the Sarnia Sting in a city of 73,000 pay about $500,000 per year) and/or give up some of the lucrative side deals in the contract such as suite licencing fees and alcohol pouring rights to name but two.

Even Jan Wilson agrees on CBC (clip below) that perhaps could have received a better deal but quicky (and very quickly) highlighted the benefits of the Spitfire’s benefiting:

Could we have gotten a better deal?  Maybe.  But we are very pleased with the deal that we got.  We feel the Spitfires are going to benefit and by having them benefit they’re going to make more investment into our community.

What we haven’t been told yet is what we are paying Global Spectrum to conduct:

 ”Event promotion including marketing, programming and negotiating events, establishing relationships with event promoters and event sponsors, evaluate the profitability of their acts and negotiate event contracts; and the operation of on-site food preparation anad licensed beverage service in the restaurant area, concession areas and catering to suite areas.”

And based upon the City of London’s experience with Global Spectrum, Global Spectrum does not care for ticket surcharges on events - according to the London Free Press, July 21, 2005:

But there’ll be no surcharge on tickets bought at the box office, because JLC officials warn performers would object, since the higher price could discourage buyers.

That could seriously eat away at the profit margin (if there is one) of the City of Windsor if Global Spectrum objects to the ticket surcharge.  We then have to account for the fee paid to the company.  There are also the one-time administrative start-up costs that could see the city taking a loss for the first couple of years (assuming of course we truly are making a profit).

Essentially, I believe the City of Windsor could have negotiated much better. 

The community benefits of the seniors centre are an entirely separate issue.  The issue with the contract is that despite residents providing a multi-million dollar facility for the Spitfires to play in, residents lose revenue creating opportunities such as alcohol pouring rights and suite licensing fees to support a corporation’s bottom line. 

Especially when we have more urgent infrastructure needs.  While the agreement is similar to some others in the province - the debate as to whether or not public dollars should support private sports teams is one that could make this blog even longer.

What the Spitfires Receive:

• Ownership of the Jumbotron
• 50 Parking spaces with 20 controlled spots for the team
• 2 Complimentary suites
• Exclusive operator of the Pro-shop with additional rent to be negotiated
• 8% of all food and beverage sales generated from concessions, restaurant, catering for the entire facility, though does not include revenue from the community centre portion
• 300 Complimentary tickets per game, team is entitled to all other hockey season ticket revenues
• Exclusive sales agent for the purposes of marketing and selling all suite licenses in exchange for 50% of the gross sales revenues
• Exclusive license to sell merchandise
• All revenue from advertising and sponsorship opportunities
• Receive 6% commission on naming rights team helped to broker or arrange
• Alcohol pouring rights revenue
• Media revenue related to Hockey Games

What this amounts to is roughly $3.8 million in gross revenue including ticket sales of an average of 4,700 at $24.00 per game. 

What the City Receives:

• $150,000 a year in rent which may be increased or decreased on the 5th, 10th and 15th anniversary at the inflation rate but not greater than 12% per period.
• Use of the Jumbotron
• A $1.00 surcharge on tickets for hockey to fund future improvements and maintenance of the facility and can only be increased twice by a combined maximum total of 60 cents to $1.60 by the 10th anniversary - which would translate into approximately $141,000 per year for hockey; and if the same charge applies to non-hockey events at 30 events per year or about $150,000 per year.
• $210,000 from 50% share of suite licenses
• $25,000 per year from the team as an advertising fee
• Naming rights revenue - roughly $100,000 per year
• Non-alcohol pouring rights
• Undisclosed percentage of concessions revenue

What this amounts to is approximately $1.2 million in gross revenue.

The Contract:

• Facility Licensing Agreement
• First Amendment
• Second Amendment
• Lease Amending Agreement

CBC News Story