Fig
Absolute Horse Shirt
- Dec 15, 2014
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This article contains the proposal and the city's response to it: Calgary Flames CEO says city's arena proposal would leave team footing full bill
The Flames say that they'd be paying the Flames back through either property tax, rent or lease, but the city's offer involved property tax and neither rent nor lease. And property tax isn't a matter of "paying the city back" in the same way that citizens buying tickets isn't "paying the team back" for construction of the arena.
I looked at that proposal before and I've always laughed at how certain things are buried which may explain why the Flames aren't willing to jump on this deal.
It has everything to do with the green part of that pic.
My understanding is that 555 mil is required to build the arena.
Red = 185 mil Cash from the city (Essentially up front)
Grey = 185 mil Cash from Flames ownership (Up front)
Green = 185 mil cash from ??? Because even if users pay it afterwards, who fronts the 185 mil? Are we writing a cheque? No.
There's a major timing difference there. My guess is that it's obviously Flames ownership taking on that 185 mil up front (City argues they have the "indirect costs" to deal with in excess of 150 mil) and I am wondering if they don't have the ability or unwilling to take on an initial 370 million to get the ball rolling and hope to be closer to 185 mil, or are ok with taking the 185 only if somehow they can lock in a good interest rate long term vs risk interest rates potentially spiking.
That extra 185 mil has always been something I've wondered about. 185 mil a year at 3% is 5.5 mil in interest, so Flames ownership is paying at least double that in interest alone per year. Depending how long it takes to repay that 185 mil (which already isn't factoring the initial 185), that's a lot of interest that eats away at profitability, even if you get 100% of revenues. That's a calculation that's not even considering if interest rates continue to go up.
The city's proposition isn't as generous as they try to say IMO. It rightly places most of the risk and reward in ownership's hands. Ownership trying to negotiate a better deal is what a good management group does.
My issues are thus:
- It annoys me that the city is exaggerating the narrative. I think it's a bit dishonest.
- It annoys me that Flames group is not forthright, cloak and dagger. It also annoys me the stuff they release is pretty low quality as if they sit around stomping their feet and only throw something together at the 11th hour if needed.
- Not knowing where the arena will be. I believe part of the confusion is whether it's Victoria Park or East Villiage (something in Nenshi's elec
I think both sides are idiots and I take neither side. I do think Flames group have legitimate reasons not to take the city's "generous deal". I think the City is dishonest in saying the deal is generous, especially when we don't even know the exact location of the arena will be or who is actually funding the "user" portion of the 185 million up front.
I think it's fine if both sides disagree in the negotiations, but we're at the point essentially where the sides are going, "MOOOOOOOM, he poked meeeeeee!" "HE POKED ME FIRST!"