Unless I've misunderstood the entire scenario, Terrace did not have the money for an NHL team and nobody else at the time was stepping up to bring a team to Ottawa.
Terrace creating enough equity to fund an NHL team hinged on the arena being in Kanata because by building an arena in Kanata, Terrace could get farm land they bought surrounding the arena rezoned which would cause it to go up 100s of times in value which would then allow Terrace an asset to leverage either for development or to borrow against in order to afford the 50M expansion fee and build an arena.
At the time, no group with money was trying to bring a team to Ottawa. Maybe a more ideal group would have showed up a few years later when the NHL expanded again but there are no guarantees. Not to mention, if the Senators didn't get a team when they did and another Ontario city like Hamilton received a team instead, it may have significantly lowered the odds of the NHL being interested in expanding to Canada later on with how weak the dollar was in the mid 90s/early 00s and Gary Bettman's directive to grow the game by expanding to non-traditional markets.
It wasn't a short cut. Someone came around at the right place at the right time with a great idea that would only work if the team was in Kanata.
There were a lot of hitches along the way, and Firestone didn't end up owning the team for very long with other investors eventually coming in. But again, no Kanata arena=No Senators in 91, and given the landscape of the NHL perhaps no Senators for a very long time if ever. So you can't really say it arguably hurt the team because the choice is less than ideal arena location or no team to hurt at all...
Well, unless I too "misunderstood" youve got it alrighty, good post, exactly what went down, how things transpired. Heavily leveraged. Didnt quibble with the NHL's asking price of $50M the way Hamilton & Karmanos did who was then bidding against Exposito's group for a Tampa team. Ottawa enthusiastically sending down a "fan club" complete with brass band to the Breakers Hotel in Palm Beach where the BOG's were meeting to decide on who gets in....
What wasnt known, made public at the time & for obvious reasons was that Esposito who also didnt quibble over the $50M Expansion Fee had lost his backing shortly before he won the Tampa bid, leaving him scrambling to find replacements, money needed not just for the fee but also for an arena. Phil finding his Sugar Daddy in the form of erstwhile Tokyo based golf course developer Kokusai Green, a front for the Japanese Yakuza's money laundering operations.
As for Ottawa, there were many at the time (myself included) who thought Firestone & his group were absolutely on drugs, total Moon Shot Artists. Leveraged to the hilt, building an arena out in the middle of nowhere, apparently never heard about Cleveland's Richfield Coliseum (the site today a Bird Sanctuary) & other suburban/rural horror stories, I guess taking Kevin Costners Field of Dreams movie literally, like it was a documentary, a plan. Just mindblowing. No question Ottawa an excellent hockey market, one of the cradles of the game in Canada going back over 125++ years. But its not a super-wealthy market, location & convenience critical, climate also a big concern.
You dont go building your shop miles from the city center, expecting your customers to deal with the notoriously wicked winter driving for which Ottawa & the Ottawa Valley are very well known as was the case with Richfield's location which was subject to the Lake Effect. One exit, on & off-ramps, a turnoff specially built as was the case with Kanata & in Richfields case if you missed it... which was easy to do crawling through a Whiteout on Black Ice... what do you expect? Combine that with the CDN$ cratering in the 90's, short-pocketed desperate owners, nightmare...
Enter Eugene Melnyk. Eugene bears watching. Rogue. "Colorful" to be kind. Tried to buy Maple Leaf Gardens from MLSE and no, no I dont believe it was to house his St. Michaels Major Junior team as he claimed at the time.... However all that being said I'm quite confident a new building gets done, and despite the mistake that was Kanata as others have expressed it served its purpose in providing the foundations for Firestones winning bid, acquisition of a team. Unlike elsewhere, Glendale Arizona for example with similar challenges at least in this case the taxpayers arent on the hook for hundreds of millions.