This Week At City Hall: About That $25 Million From The Riders….

This Week at City HallIn 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?

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FOOTNOTES
* 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?

Author: Paul Dechene

Paul Dechene is 5'10'' tall and he was born in a place. He's not there now. He's sitting in front of his computer writing his bio for this blog. He has a song stuck in his head. It's "Girl From Ipanema", thanks for asking. You can follow Paul on Twitter at @pauldechene and get live updates during city council meetings and other city events at @PDcityhall.

17 thoughts on “This Week At City Hall: About That $25 Million From The Riders….”

  1. Sadly this wasn’t news to me. My understanding has always been that the Rider’s contribution was largely selling the naming rights to a stadium that the taxpayers built for them. Pretty sweet deal for them, terrible deal for the taxpayers.

  2. No mention of the fact the Riders are signing over the facility fee they currently collect from fans? Over 30 years, that is projected to be 100 mil. That is assuming it doesn’t increase from the $12 that it will be when the stadium opens.

  3. I still get sick about the cities priorities. We are the sick bastards of privellege (sp.). We have the homeless and people struck my extreme poverty right in our own city… but we NEED a stadium right? It’s a NECESSITY. Wake the hell up people. Define necessity. How self absorbed as a community can we really be?

  4. JB: I wouldn’t call that money from the Roughriders. I’d call that money from Reginans.

    A tax on liking football, if you will.

  5. Why would you exclude it? It is one of the Riders current revenue streams. Basically what they did was say that they would sign over this fee that they collect in exchange for a new stadium. Currently that money is spent on their football operations, mainly focused on leasehold improvements (which the Riders will be responsible for in the future in addition to their contributions).

    There is no reason to not include the facility fee as part of the Riders’ share.

  6. Maybe I will in the next installment, JB.

    But then I’ll have to make a deal out of how the Riders aren’t really giving up anything at all.

    They’re getting a brand new facility out of this deal. And any maintenance or improvements that it needs over the first 30 years will be covered by a mill rate increase of 0.45 per cent (that is boosted by two per cent per year and compounds — say goodbye to zero per cent property tax increases).

    So once they move to the Mosaic replacement, there won’t be much cause for them to charge a facility fee. Anything that it should have been covering before the move will be covered by the city in the new location.

    But if you want me to point out how they’re coming out ahead on this, I can do that.

  7. Kudos Paul! You hit the nail on the head about the Riders “contribution” being simply a funneling through of sponsorship money. This is what I’ve been trying to tell many supporters for some time, but they continue the mindset that “that money wouldn’t exist without the Riders”. ARRGHH.

    On a similar note, did you know that the current $8 fee on tickets is actually held by the Riders in a trust fund, to be used for maintenance or capital items, which is up to the Riders admin to decide. When this new agreement comes into play, that $8 turns to $12, and it’s 100% paid to the City in repayment of the $100M loan.

    So, there’s two things in this. The first being that the $14M that the “Riders” invested into the current Mosaic Stadium, in preparation for the Grey Cup? That’s actually money that was collected through that fee, and not actually from the Riders bottom line. In effect, since the money was held in trust by the Riders, that is City money. We’ve been lied to again by the City on another convoluded issue, and this was only discovered today when Councillor Fraser was kind enough to ask Admin about this.

    The second being that the Riders now lose out on this $8 fee that they’ve been accumulating for some time, which has been intended to be used for maintenance and/or capital items. So, who pays for those, now that the Riders aren’t getting those monies? You guessed it, US, the taxpayers once again. On the hook. ARRGGGHH.

    Rest assured Paul, you haven’t misheard anything along the way. What you believed to be true was the propaganda that current and past council and City Admin have been touting over and over and over again like a broken record, the same as they did today. Council asks the SAME questions again and again and again of City Admin, and City Admin only is too eager to oblige and provide the answer that you thought you heard above, about the Riders providing the $25M and the sponsorship being over and above that. Sadly, many taxpayers are also under that impression.

    I must do my obligatory tongue lashing on you though. This statement – especially when you consider that if we attempt to repair Mosaic, the province will revoke the $80 million grant and $100 million loan. – is completely and utterly false. I imagine you believe this because that’s what you’ve been TOLD. But….have you EVER seen any documentation to support this lavish claim by the City? I mean, come on, realistically, let’s say they axe the grant, like the province would say no to giving them a loan, even if it were $50M, still plenty to do for a nice juicy reno that could last 20-30 years.

    And THIS:
    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.
    PURE.FUCKIN.GOLD!!

  8. The Winnipeg Blue Bombers are to pay $85 million towards the cost of their new stadium. Why are the Roughriders only paying $20 million for a facility that is projected to cost, by even the most conservative estimate, almost half again as much?

  9. Novak, it is hilarious that you leap to the conclusion that there’s no proof that the province wouldn’t fund a renovation simply because you haven’t seen it. Judging by your occasional overtly-Christian retweets on Twitter you seem to believe in God — have you seen proof that God exists?

    Just because no one actively refutes your endless bloviating doesn’t mean your baseless assumptions are correct.

  10. Ron – You betcha! BUT be prepared to pay thousands, if not millions of dollars. And, I only know of the request for me to pay over $10,000 on my most recent request. I know Tim Siekawitch was quoted to pay over a couple million I believe (he showed the letter on his website). Sadly, unless you are as specific as possible, these requests are pointless and costly. They are smart enough people to have already censored any documents they don’t want you to see, simply because they can say “privacy of information”, and there is NO WAY to prove that it’s not. Sad, sad day of “democracy” we live in.

  11. Chad: Don’t know what you’re doing wrong. I’ve never paid more than $80 for an access to info request. And the people downtown who’ve handled them for me have been crazy helpful.

    As for Tim S’s request that reputedly cost millions, he was asking for an insane number of documents over a crazy number of years — some of which were so old they were never on computers and would have had to have been retrieved from storage at the city archives if they existed at all.

    The city would have had to hire extra people to find everything he was looking for.

    The trick to FOI requests is to make them specific as possible and request narrow date ranges. You shouldn’t be going on fishing expeditions with a net.

    That said, the number of loopholes in the information laws are legion and so it’s common that a lot of information you’re looking for will be withheld for various reason.

    And then when you appeal to the provincial information minister, you find out that because of underfunding in that department, it will be a minimum of 18 months before they can even look at your case.

  12. Yeah, so far the Rider’s “contribution” seems to be a pretty good shell came.

    Have you heard anything more about the hotel/tourism tax that they tabled last year? It was supposed to be a 2 or 3 per cent tax on all hotel rooms to be funneled towards maintenance of the stadium. -Not city infrastructure in general. The stadium. When I last asked about this (in October), city council was apparently still debating it. It might not happen, but when you consider the pitiful state of some of this city’s infrastructure (and the fact that a significant percentage of those staying in Regina hotels over the course of a year don’t necessarily go anywhere near the stadium), it’s pretty galling.

  13. Paul – the thing is, with my request, it was pretty specific, but since it was sensitive information that “technically” had nothing to do with City business (even though it would involve City employees using City resources), the reasoning they provided was that it would take $10,000 worth of time to search “all the databases” to get that information. That said, of course you never truly get a breakdown of WHY they think it would take that long. The information I requested was pretty specific, and within a pretty confined timeframe. I even offered to filter the information myself, so they wouldn’t have to go through thousands of documents to find the information I needed.

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