Who will pay for it?
It all seems so easy now right? We’ve decided that a downtown arena is best for the team, we’ve worked out the logistics of how it could happen at LeBreton. Let’s go!
One small problem, how do we pay for it?
This is a tricky subject, one that, in my humble opinion, doesn’t have a simple answer. On one hand, sports facilities are the playgrounds of millionaires and billionaires. They are castles of indulgence and excess that are hard to justify when people are without homes and food. On the other hand, it’s clear that arenas and stadiums are important pieces of civic infrastructure, much like theatres, concert halls and art galleries.
What is abundantly clear is that there is no way Eugene Melnyk can pay for an arena at LeBreton himself. Although he is often referred to in the media as a billionaire, many reports suggest his net worth has slipped in recent years, and a large portion of it is tied up in assets–like the Sens themselves. An arena at LeBreton would likely cost in the range of $500 million when all things are factored in. The NCC isn’t just going to allow any old rink along the banks of the Ottawa River. Any winning proposal will need to incorporate world-class design, the highest standards of sustainability, and some kind of secondary use or partnership that brings a national institution along with it (more on that in part 3).
Even if Melnyk were still a billionaire, that’s half his net worth, no smart businessman takes on that kind of risk alone. So how does he pay for it? He could go to a bank for financing, however news reports suggest he has already refinanced the Sens several times, and as a business man with a questionable track record (he was sanctioned by the Ontario Securities Commission in 2011 for questionable actions while with Biovail) he likely can’t command the favourable interest rates he would need to finance such a large project profitably.
Leaving aside the question of public money for a minute, it’s clear that the best course would be for Melnyk to take on a partner for the development. Whether that partner would simply be in it for the arena development, or would take a stake in the team as well, is uncertain. One thing is clear, bankrolling the Sens is no longer a simple transaction for Melnyk. Rumour has it that he has been searching for an equity partner for a while now. The deal with Canadian Tire announced last season had some people wondering whether or not the retail giant had more than plans for naming the arena (and everything else inside) in mind.
While Melnyk insists that his decision to fall to the bottom of the NHL in payroll is a strategic one, and that he will spend when the time is right, it’s clear that there is a pattern of frugality surrounding the team. This isn’t an organization that can just pull half a billion in financing (or even a quarter of that if they had government help) without a significant partner backing them.
Which brings us to the most contentious issue of the entire debate–public money. Some will suggest the government shouldn’t be helping build arenas for millionaires. This is a fair argument until you remember that millionaires grace the walls of every art gallery, dance on the stage of every arts centre, and sing at every concert hall. Sports, like the arts, has its amateurs and its professionals and they all need a place to perform.
Does this mean the government should just hand over the cash? Not exactly. It’s clear that the federal government has no interest in funding arenas. While sprinkling money around Québec has been a national hobby for federal politicians, the Conservative government declined to support the new arena in Québec City.
However when you look at Québec City, and the new arena in Edmonton, both have funding from either provincial or municipal governments. The debate about arenas being for millionaires ignores a very important aspect about such facilities–their value as civic infrastructure. Ottawa competes with cities across Canada, and around the world, for citizens, capital, and business. Any great city is more than just roads and buildings, the civic infrastructure that provides citizens with entertainment, enrichment and education creates an atmosphere that encourages students, entrepreneurs and families to live here. Creating that atmosphere is absolutely the responsibility of government.
So how could the funding go down? The Québec model is unlikely, mainly because neither level of government has that kind of cash to drop on a new arena. A better example would be Edmonton, where a combination of private money, municipal money, and a ticket surcharge are providing the bulk of the funds.
In Ottawa’s case, a contribution from the federal government and the NCC could be as simple as a one dollar lease on the land for 50 years (similar to what was done with the planned Civic Hospital expansion). Of course this lease would be dependent on the quality of the submission from the Sens, and the inclusion of some kind of national institution in the plan. If the Sens could find the right institutional partner, a strong case could be made for the lease, and the public funds. The question is: Can Melnyk pull off such a plan (more in Part 3).
The idea of an arena on a nationally significant piece of land such as LeBreton requires a plan that includes more than just a rink, and will require a degree of planning, humility, and partnership that may be difficult for Melnyk. That said, if the right mix can be achieved, the Sens have a strong case to make to the City of Ottawa that they should be involved in the project. The value of placing such an important piece of civic infrastructure in the downtown core, where it belongs, is enormous. It will help reanimate the downtown core, take pressure off the city to extend LRT to Palladium Drive, and finally provide Ottawa with the kind of central facility all great cities have to host major international events.
Many are still uneasy about the idea of building sports facilities with public money after the contentious Lansdowne debate. However, despite the consternation from the narrow-minded around us, Lansdowne has turned out to be an unqualified success. The stadium is beautiful, the traffic nightmare was avoided and the urban park is a huge hit. Much like the National Art Gallery and National Arts Centre (both built with 100 percent public money), any major international capital should have a central facility for hosting events, not an arena 30 km outside the city.
Ottawa is growing up, and it’s nice to see, hopefully the parties involved can come together on a collaborative but ambitious plan to take the next step towards making Canada’s capital a national stage for the world. The problem is: could there be two worse parties to make such a deal than Eugene Melnyk and the NCC?
(To read Part 3, click on Page 3 below)
