December 16, 2010
The Blue Bombers' long and tumultuous road towards a new stadium came to a partial end Wednesday night when Winnipeg city council voted 14-2 to approve a $190-million plan for a new stadium for the CFL team, the University of Manitoba Bisons and other community groups. The approved plan will see the city making direct contributions of $12.5 million ($7.5 million for the stadium, $2.5 million in services in kind and traffic improvements around the new site, $2.5 million for new recreation facilities at the university) and using an estimated $37.5 million in development taxes on the site of the old Canad Inns Stadium (pictured above) to repay the province for fronting the construction costs.
The city is also expected to spend millions on traffic improvements around the old site, but they're projected to make that amount of money and more from the sale of the 26.2 acre parcel of land around the old stadium. That land could be used for any number of projects, including David Asper's former plan for an extensive shopping mall, and its sale could net around $30 million.
As the above chart shows, the majority of the money for construction will be put up by the province, which also will recoup an estimated $37.5 million from development taxes on the site of the old stadium. The province's net contribution towards the stadium that isn't expected to be repaid is $22.5 million, with another $5 million towards the recreational facilities (which are being largely funded by the federal government). In the final analysis, the Bombers are actually contributing more money than any level of government, but their $85 million contribution will come over 45 years. The first $15 million of that is interest-free if it's repaid by 2016.
Of course, this deal is far from the original plan, which featured a $115-million stadium. That soon increased to $160 million, and that precipitated David Asper (pictured, right, at the May 2007 press conference announcing his proposal had been selected) from the solution. Talks seemed to stall for a while, despite CFL commissioner Mark Cohon's double declaration that a deal would come the week after the Grey Cup. That prompted everyone's favourite taxpayers' federation to chime in on the evils of stadium construction. Finally, last week saw the news leak that the involved parties would announce a deal this week; interestingly, that report had the total figure of $190 million correct, but said the team would be paying $70 million instead of $85 million. That makes you wonder if there was another last-second change to the plans.
Few stadium deals are perfect, and this one hardly falls into that category. Yet, despite the predictable protests of the CTF (it's notable that CTF Prairies director Colin Craig was the only citizen to speak against the deal at the city council meeting Wednesday) and the more legitimate concerns about the process and secrecy involved, this looks like a pretty reasonable deal for the municipal and provincial governments involved, which are contributing just $7.5 and $22.5 million respectively towards the stadium in actual cash. The $70 million they're expected to contribute to the stadium from development taxes on the old stadium site isn't insignificant, but if you're putting up money for a stadium, that's a pretty good way to do it. Keep in mind that this move also lets the city sell that massive parcel of land around the old stadium, which will provide revenue they wouldn't have received if the Bombers stayed at Canad Inns. The stadium's also going to be used for university football and will have a dome covering that will allow it to be used for community sports and events during the winter, so there are benefits to the local community on that front as well.
The group that might have come worst off here is the Blue Bombers, but they also have the most pressing need for a new stadium. They've also got a reasonably long period of 45 years to pay off the loan, and having the first $15 million be interest-free if they pay it off by 2016 is certainly helpful. However, there are significant concerns about if the team will be able to handle these kind of payments. $15 million by 2016 would be $3 million annually; I don't know what the Blue Bombers are hauling in each year, but it's worth noting that the Saskatchewan Roughriders were reported to have made a record profit of $3.1 million in 2009, and they're widely considered to be the most financially successful franchise in the CFL. Their stadium is owned and managed by the city of Regina, so rent costs are probably already factored into that (their gross revenues were in excess of $30 million that year), but it's just worth noting that even the most successful CFL teams aren't exactly printing money. The Bombers' revenues will undoubtedly increase in a new stadium with expanded corporate seating and the like, but it isn't clear if they'll go up enough to pay off that $15 million that quickly.
However, one factor that might dramatically change that is the Grey Cup. Hosting the Grey Cup game tends to bring in big profits for both the city and the team, and if the Bombers are able to play host to a Grey Cup before their first $15 million is due in 2016, that might be enough help to cover that. Winnipeg did host the game in 2006, so it's not like they're at the top of the queue from a time standpoint, but at his state of the league address during this year's Grey Cup week, Cohon did say that "Every market will have a Grey Cup." He particularly singled out Winnipeg and Hamilton as likely to host one with a new stadium, so there would seem to be a good chance the championship could head to the prairies before 2016.
If the Bombers are able to pay off that $15 million by 2016, the picture presumably gets much better for them. That would leave them with 40 years to pay off $70 million, which translates to $1.75 million per year. There are significant debt servicing and interest costs that would come into play and increase those numbers, but the team is saying that the deal is structured in such a way that they can handle the debt without skimping on the football product. The proof, as always, will be in the pudding, however.
The financial picture of the CFL as a whole is constantly evolving, though, and at the moment, it seems to be trending up. The league's done quite well as a whole lately; the CFL's revenue from national partnerships with sponsors increased by 29 per cent this year, and net royalties from licensed products went up 32 per cent. The league is also drawing incredible television audiences on TSN and RDS, which could lead to a jump in revenue when it comes time to negotiate a new TV deal, and there's also likely to be more revenue from new sources like cellphones (ads on the free CFL Mobile app, perhaps) and the league's website down the road. It would be foolish to assume that the prosperity would last forever, but considering the length of the timeframe we're looking at here, it's quite possible these loan payments could become less and less burdensome towards the end of the deal. The Bombers will certainly be hoping that's the case; we'll see if they're proved right or not.