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The $400 Mill Nordiques Question: Should Public Funds Finance NHL Arenas?

September 6, 2010, 9:58 PM ET [ Comments]
Shawn Gates
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It goes without saying that sports fans are crazy about their teams. Even the word “fan”, derived from “fanatic”, implies an extreme enthusiasm directed towards a sport, whether it be as a whole or specific to a single team. Many theories abound as to why people develop this fanaticism towards these activities, although that most generally accepted is that this focus allows for the individual to engage in some form of escapism from their day-to-day grind, a release from the expectations surrounding their performance or worth as an individual, whether it be based on the outcome of their schooling or employment.


While there is a definite necessity in being able to take these pauses, whatever it may be, it is arguable that the aforementioned fanaticism surrounding these sporting-based vacations from reality is being used to the advantage of other interests by those in positions of power. This is, of course, nothing new. It was the Roman emperor Nero who stated “Give them bread and circuses”, touching upon the truism of human nature that as long as individuals are being fed and entertained they can be pacified and overlook the majority of their governments dealings. This is not unlike current times where, when push comes to shove, the majority of people will remain passive and uninvolved in most matters of true substance as long as they can be entertained through TV, fast food, alcohol, movies or...sports. Indeed, the desire for a sports franchise or hero to call one’s own can regularly override any logical opposition for how this goal is achieved.


Case in point: Numerous news agencies are reporting that at some point tomorrow the government of Quebec will announce approximately $400 million dollars in funding to assist in the construction of a new arena suitable for playing home to an NHL franchise, while the possibility of additional funding from the federal government is, at present, unknown. Should this in fact come to pass, let it be known that the original request from Quebec City to the provincial and federal governments was a contribution of $175 million each. This makes a $400 million dispensation from the province approximately 230% of what was requested from them alone, and 114% of the combined request.


Quebec premier Jean Charest is quoted in an article written by Karine Gagnon of the QMI Agency that “A city the size of Quebec should have modern facilities”. While there is some truth to this (Quebec City is the only city out of the top nine most populated in Canada to not have either a relatively new facility, or one that has major refurbishing in the works), the general consensus is that the real drive for the construction of this facility hinges on a single hope: regaining an NHL franchise. This hope has gained significant steam over the past 12 months since the public announcement by NHL commissioner Gary Bettman that the city is a top contender for getting a franchise, expressing his confidence in the financial viability of such a placement and in the ability to procure strong investors in this hypothetical franchise.


This is the type of thing that sets hockey fans in Quebec into a frenzy! Since losing the Nordiques franchise to Colorado in 1995 only for them to win a Cup during their relocation year, fans have held out hope that their beloved Nords would someday return. While economically unviable during the 1990’s due to the state of the Canadian dollar relative to that of the US, many were encouraged to see the return of franchises to Atlanta and Minnesota, raising optimism that maybe, just maybe, lightning could strike thrice. The implementation of a salary cap (although one can argue that it did not bring the economic stability it promised) and the upswing in the Canadian economy and dollar following the 2004-05 lockout season further stoked the dreams of Nordiques fans everywhere who now saw the landscape as ripe for a return to the NHL. Bettman’s statements brought the hopes of the populace to a fever pitch and truly set the wheels in motion for the economic support of the province to be realized.


But isn’t this “fever pitch” or “fanaticism” exactly where the problem lies? Specifically, has the desire of individuals in Quebec to see the Nordiques, their “bread & circus”, return blinded them to how this potential $400 million investment should actually be spent? Remember, this is $400 million on an arena that, while increasing the chance of an NHL return to the city, does NOT guarantee it. Listen no further than the words of Quebec City mayor Regis Lebaume himself for how this is, in essence, a multi-million dollar NHL gamble: (quoted by Angelica Montgomery of CJAD 800 in Montreal)


"We have no guarantee at all that a professional hockey team will come in Quebec city with a new building, but we have a guarantee that without a new building, there won't be any professional hockey team here."



Again, there is no doubt that the facilities in Quebec City are inadequate, with the Colisee Pepsi at an age of 60 years old, warranting serious upgrades at the very least. But to anyone thinking that this heavy investment guarantees anything, you are sorely mistaken. Even if all things remain equal, the NHL may simply choose to not place a franchise there. Economically, it is completely plausible that the Canadian dollar could drop well below the parity it currently enjoys, regardless of how sound it appears currently, which would result in a significant shift in how feasible it would be to develop and support a franchise there. At the same time there are the societal implications to an investment this size. While numerous individuals will speak to the positive impact of investing in a sports franchise for a city (both in terms of economics, jobs and civic pride), a growing number have begun to argue that the benefits are not as explicit as proponents present. The following argument is presented by Robertson in the Winter 2009 edition of the Sport Digest:


Many of these studies point to the substitution effect. The substitution effect argues that “as sport- and stadium-related activities increase, other spending declines because people substitute spending on sports for other spending” (Coats & Humphreys, 2004). Therefore, not all of the spending resulting from the construction of the new facility is new spending. When ignoring the substitution effect, many believe that the economic value of the facility is vastly overstated (Coats & Humphreys, 2004).


Opponents also argue that the multiplier for sports spending is often substantially less than the multiplier on other entertainment spending. Most of the revenues generated from sports are used to pay players, managers, coaches and trainers. Unlike the employees of local restaurants, theatres and stores, many of these players, managers, coaches and trainers do not even live in the city full time. Therefore, these large salaries are spread into other city and state economies (Coats & Humphreys, 2003)



In addition to this, one must also consider what the money is not being spent on. The provincial debt was estimated to hit over $125 billion in 2009 and the GDP, 20% lower than in neighbouring Ontario, ranks 54 out of 60 provinces and states in North America (just ahead of Mississippi but behind Arkansas and Montana)(Maclean's March 19, 2007). While the province does offer its populace some huge advantages over other areas (i.e., heavily subsidized daycare and frozen university tuition), its health care system is currently growing by leaps and bounds in terms of monetary needs, an aging population is draining workers from the workforce faster than they can be replaced, and young, educated individuals are leaving the province at a rate not seen in close to 20 years. While these issues may not be unique only to Quebec, they do raise questions as to whether the money is best invested into an arena or on preparing for an increase in the budgetary shortfall that the aforementioned factors will inevitably create.


While it has become increasingly normative to invest public funds into the construction of these arenas, one need look no further than the NHL’s most recent champions for proof that it can be done otherwise. The United Center, home to the NHL’s Chicago Blackhawks and the NBA’s Chicago Bulls, opened in 1994 at a cost of $175 million. Of that, zero dollars came from the public, with Bill Wirtz and Jerry Reinsdorf footing $35 million and borrowing the remaining $140 from banks. The Columbus Blue Jackets arena, Nationwide Arena, was also privately funded by its namesake company Nationwide Mutual Insurance without drawing off public funds. The interesting question for Quebec City would be this: Would a private company/conglomerate be willing to finance an arena with their own cash without a guarantee of a team to play in it in the near future? Were the answer to be no, one must question why the public should then take such a gamble with their money when such an outcome is clearly being hoped for.


All this being said and we come full circle to the masses and their “Bread and Circus”. Are we made blind, or better yet “choose” to be blind, by the prospects of an escape from the doldrums of our day in – day out? Better yet, do people realize the spending to be “frivolous”, albeit in the grand scheme of things, but feel powerless to do anything about it? I don’t pretend to have an answer or suggest that it is limited to either of those just proposed. What is most intriguing to myself is what you think as a fan. Should huge amounts of taxpayer money be spent on endeavours such as this or are they something that should be limited to private companies and/or individuals? Are there other options altogether, or perhaps it’s a pipedream to assume that this is something that could be successful under any structure. You tell me folks as I’m done working and am heading off for a beer and some TV...


Shawn Gates
[email protected]
Twitter: ShawnHockeybuzz
Facebook: Shawn Gates
BBM: 311A4F7D

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