In Monday’s post I wrote about how the Roughriders organization is going to be contributing $25 million in the first two years of the stadium project. They’ll also be responsible for coming up with $500,000 a year in sponsorship money for 30 years. It works out to a pretty substantial $40 million dollar investment from the team.
Or is it?
In the stadium project financial plan that went before executive committee today, there was more detail on that $25 million (the bold’s mine)….
The City is in the process of finalizing the $25 million [Saskatchewan Roughrider Football Club (SRFC)] capital contribution agreement, as agreed to in the MOU by the Province, SRFC and the City. The agreement will assume two instalments from SRFC, each in the amount of $12.5 million in midyears of 2016 and 2017.
The SRFC have agreed to lead a process to accumulate the $25 million in naming rights, sponsorships and related funding as the funding source to the $25 million contribution. There is a financial risk to the City if SRFC does not accumulate this funding before the completion of the construction of the stadium; SRFC will need to find alternative options to fund their contribution, otherwise the City’s stadium cash flow will be at risk.
And, on the subject of the $500,000 per year, in the Offer To Lease that the city is extending to the Riders….
The City grants the Club the exclusive and complete right to market for the benefit of the Club all naming rights and sponsorship rights associated with the Stadium or the Lands, in accordance with the terms and conditions of the Memorandum of Agreement between REAL and the Club dated as of November 1, 2012 and attached as Schedule “A” to this Offer to Lease. In consideration for the exclusive and complete right to market all naming and sponsorship rights associated with the Stadium, the Club agrees to pay the City, as additional rent, $500,000.00 annually during the Term.
Based on this language, it seems we aren’t so much receiving $40 million from the Roughriders’ coffers as selling them the naming and sponsorship rights — and letting the team resell those rights, to boot.
And I find that kind of surprising because for some reason — and in hindsight, I’m not sure how I came to be under this impression — I thought the city would be getting an investment from the Riders into the stadium project and then, on top of that, we’d be able to sell the naming and sponsorship rights to somebody else.
I thought that’s how the private sector was going to be involved in this project. Maybe I misheard something along the way.
Regardless, it would seem that every dollar the private sector invests by sponsoring Roughrider football, that’s effectively one dollar less that the Roughriders themselves will have invested in the stadium.
As an aside, I have to admit I’m not entirely certain the Riders are getting a great deal here. That $25 million up front plus $15 million over 30 years for sponsorship rights seems a little steep to me seeing as, from what I’ve been able to dredge up on the internet, Mosaic only paid $4 million for naming rights to the current stadium (although, I wasn’t able to determine what the term was on that, so it may have been an annual cost).
So, if they only got $4 million from Mosaic back in 2006, I don’t know how they’re going to be able to spin that into payments of $12.5 million in each of 2016 and 2017.
Sure hope somebody has this figured out because, as it says above, “the City’s stadium cash flow will be at risk” if the Riders can’t get that $25 million together.
You can probably guess that I find all this a little irksome.
And that’s not only because this is one more place in the financial plan where the city is exposing itself to considerable financial risk (and I thought the whole point of going with a Public Private Partnership was that it minimizes the risk to the city), but because we’re giving up an asset as valuable as the stadium’s name.
If we hung on to that, we’d have the option of naming the stadium anything we like. You know, we could name it after someone or something that everybody in the city loves and respects. Like, “The Fiacco Bowl” or, better yet, “The Prairie Dog Dome.”
Instead, we’re handing the name off to the Riders for them to do with as they please. As far as I can tell, we won’t have any control over who they sell the name to and could wind up with something silly like the “Lone Star Steakhouse Field” or the “Power Balance Bracelet Stadium” or the “Lipshitz and Sons’ Toilets Bowl”.
See? More risk!
“Oh, but why shouldn’t the Rider’s get something in return for their investment?” I can hear some people saying.
Well, I might argue that they are getting something in return for all those millions. A stadium.*
In the real world — you know, the one that operates under capitalism — private companies have to invest their own dollars in their own capital and even build their own facilities. They do this, in the words of my grandfather who was one of the first thousand people to join the Reform Party, by pulling themselves up by their own goddamn bootstraps. In other words, by saving up money and, more importantly, taking out loans. But sports teams seem to live in some kind of ivory tower where they can play their little sporty games and get handouts from the government.
Seriously, they’re worse than English lit majors.
Personally, I’d much rather the Riders just got an ownership stake in the facility for their money instead of us handing over control of the sponsorship rights. Considering this is a $278 million stadium, their $25 million would get them a nine per cent share. Certainly not a controlling interest but not insignificant either.
In fact, I’d much prefer it if they just built the stadium themselves and owned it outright. Maybe we could be the ones kicking in $25 million and getting a nine per cent share. That seems way more fiscally responsible.
Instead, we’re the ones sticking our necks out to pay for a stadium that’s being tailor made for the Roughriders.
And why exactly is it that we’re the ones taking on upwards of $200 million in debt? Our livelihood doesn’t depend upon the stadium’s existence. Sure, it’d be nice to have a new stadium just like it’d be nice to have an Ikea in town. But I’m not going to advocate that we should pay for and build an Ikea-sized box store on credit just to lure them here. No, I think Ikea should build it themselves if they think they can make a go of it.
That’s how the system is supposed to work.
Back in the 17th century, corporations (they called them chartered companies then) were specifically invented to undertake projects that were either too large or too risky for governments to handle. Things like canals, dams and, later, railroads. It was expected that they would have to find innovative ways to pull these projects off, but if they succeeded, they were able to keep whatever profits they earned.
On top of that, corporations were granted a couple other serious perks: limited liability for investors and personhood under the law for the corporation. (The first was so that people would gamble money on corporations knowing their personal fortunes were safe. The latter was so that corporations could manage projects that lasted longer than a human lifetime.)
Risk. Innovation. Profit. That’s what corporations exist for. At least that’s what the Rush Limbaughs and John Gormleys of the world have been telling me.
But somehow that calculation has been completely blown apart with corporations unwilling to invest their time and money when the road to profit isn’t obvious. And they certainly won’t take on any risk if a level of government is foolish enough to indicate that they’d be willing to do so instead.
The RRI is a perfect example of this.
The stadium is an obvious money-losing venture.° No city in North America that’s built a football stadium has managed to make their money back before the thing has depreciated to rubble. Consequently, no private company or sports team is willing to build one anymore.
And here in Saskatchewan, despite this being the boomingest boomtime we’ve seen in a century, the private sector has essentially abandoned the Mosaic-replacement project, leaving it up to the city to step in.
(The province has even backed away and won’t even take on half the cost despite having deeper pockets and being the catalyst for this project in the first place.)
But, council protests that where the private sector will be investing is in the development of the old Mosaic stadium site. Housing! Retail! Offices! That will be their contribution to the RRI.
Great. That’s the one element of this initiative that actually stands to make money. And the private sector is licking its chops, it can’t wait to bite into that.**
Look. I’m not opposed to the stadium outright. I even think it might make more sense to build new than fix the old — especially when you consider that if we attempt to repair Mosaic, the province will revoke the $80 million grant and $100 million loan.
But, I’m saying that the project is upside down with the city building something it shouldn’t be in the business of building and the private sector being maddeningly absent.
“But this is the way it works. Stadiums are always publicly funded these days,” I hear some people saying. In fact, according to Twitter, that’s exactly the line the Chamber of Commerce was using at executive committee today.
Well, so what? I. Don’t. Care.
If every city in North America decided to drive off the cliff of fiscal irresponsibility, should Regina follow suit?
According to the Chamber, the answer is yes.
According to me, the answer is, hold on, let’s think about this for a second.
I remember when I started covering city hall in Regina — lo, so many twos of years ago — and it was common knowledge that the city has some pretty significant infrastructure problems on the horizon. Among them, there’s that waste water treatment plant that needs rebuilding. And at the time, that was going to be the single largest infrastructure project that the city of Regina had ever taken on.
It has since lost the number one spot. Now, this stadium will be the biggest infrastructure project Regina has ever undertaken. A stadium. A building for playing games in.
As a newspaper writer, the simile I’m obliged to use at this point (it’s in my contract) is, “This is like a family buying an XBox and a big-screen TV when their credit cards are maxed and their house is falling apart.”
But it’s not like that at all.
No. This is like a family with maxed out credit cards and a house in ruins who takes out a 30-year mortgage so that they can buy the Very Fastest Super-Computer in the province — a goddamn Cray XK7 — on which to play John Madden Football.
That’s what it’s like.
Again, I’m not saying that we shouldn’t build a stadium. But I am saying let’s put this project into perspective. We are about to spend more money on a sports complex than we’ve ever spent on anything else.°°
And when council finally gets around to finding a way to solve the housing crisis, rebuild the waste water treatment plant, fix the roads and replace our crumbling water infrastructure, we’re going to find that we simply don’t have the resources available. We won’t be able to step up and attack those problems with the same enthusiasm we’ve invested in building a new stadium.
Gee, I wonder if the private sector will bail us out?
* Yes, I get that the Riders will also be paying rent on top of everything. But that’s only supposed to help cover maintenance and upkeep of the stadium.
Also, I don’t think we know yet how much the Riders will be paying in rent. I didn’t see it in the Offer To Lease. Whoops. Looks like rent is supposed to be $1.5 million a year.
° Money-losing unless, I don’t know, somebody were to innovate some way to turn a stadium into a money-making project. But apparently innovating isn’t something capitalism does anymore.
** Oh sure, the city will own the land and will be able to dictate that a certain percentage of the land, when developed, be turned into affordable — or even social — housing. That’s supposed to be the big “social good” to come out of the RRI. But don’t think for a second that the private sector won’t whine and cry and try to shift the definition of “affordable” up or lower the density guidelines or increase the number of luxury condos they get to build because of “changing market dynamics.” They will fight any affordability requirements tooth and nail. That’s what they do.
°° Meanwhile, we have a mayor who has indicated repeatedly that he would prefer that we should, by and large, let the market solve the housing crisis. Yeah… how’s that been working out?