[URBAN NOTE] A second NHL team in southern Ontario? (Part 2)

[rfmcdonald]

Back in May 2009 I'd explored the interest of Jim Balsillie, ex-co-CEO of troubled Blackberry makers Research in Motion, in bringing a second NHL team to southern Ontario, perhaps to Kitchener-Waterloo. This never materialized, not least since the appearance of a second NHL team in the Maple Leafs' hinterland would lead to decreased profitability and/or require the team to become better. Now in 2012, the southern Ontario city of Markham, in suburban York Region just north of Toronto, is interested in building a hockey arena with a sufficient number of seats to support a NHL team.

As the Toronto Star noted, this is part of a substantial project aimed at making Markham a coherent city. It's a rather risky gamble, though.

For decades, Markham has been planning to create a downtown where there was none before. Because the town was cobbled together from three smaller municipalities, it never had a natural core.

Nearly 400 hectares of vacant lands straddling Highway 7 provided an opportunity.

A big chunk of that area was owned by development company Remington Group, whose chairman is Rudy Bratty.

Remington and the town hashed out a downtown core to rival any forward-thinking metropolis, with high-density dwellings, dedicated transit lanes, and ample green space. In 2007, a 20-plus year construction process began.
[. . .]

As [Brad Humphreys, a sports economist at the University of Alberta] points out, a large and expanding body of academic research shows that arenas are not the boost they might seem to be.

Humphreys, who was hired by Markham as a consultant to evaluate the town’s financial contribution, said he could not comment on the specific advice he gave.

But a report prepared by town staff echoes his basic point: that “building such an event facility does not generate significant tangible economic benefits for cities.”

As Humphreys explains, most consumers have a fixed budget for entertainment spending. A Markham resident who pays for a ticket to see the new hockey team play is probably not going to buy a movie ticket that week too. If she buys a jacket from the new team’s store, she’s not going to buy another jacket on Main Street.

The largest benefit of an arena, both Humphreys and the report agree, are intangibles: civic pride, a heightened sense of community.

[. . .]

If Markham succeeds, it could be another Winnipeg, whose “intangible” benefits from getting the Jets back would probably rival the GDP of Canada.

Or even a mini-Brooklyn, the borough Manhattanites once loved to snub, whose cool status was cemented by the acquisition of the Nets NBA team.

As in Markham, the private group which brought the Nets to Brooklyn and built the team an arena is also building a significant downtown neighbourhood centred around the sports facility.

Scott Stinson at the National Post, meanwhile, seems almost certain that any new hockey arena capable of supporting a NHL team would be used by the NHL only as a pawn in negotiations with the Toronto Maple Leafs.

Could an NHL team come to Markham? It could, but only after significantly compensating the owners of the Toronto Maple Leafs, and only after Bettman has exhausted all other options. He’s made no secret of being loath to move teams. More likely, Markham’s council has put up $162.5-million just to help the NHL’s current owners gain some negotiating leverage.

It is a baffling turn of events. The town has tried to reassure residents that this is all no big deal, since its share of the arena costs are to be recouped via development levies that are tacked on the construction of new residential units. It won’t cost taxpayers a thing, council has purred.

Except it will. Once those millions start to roll in, it becomes public money. It could be used on pools, libraries, garbage collection, whatever. It will be used to pay down the cost of a new arena. Taxpayers, that is, will be paying for it.

Don’t worry, the town assures soothingly: There’s a business case for it. Think of the economic benefits! Except arenas don’t spur growth. Last year, I spoke with Judith Grant Long, a Harvard professor who wrote a book about public-private arena deals. She summed up her research like this: “It is very difficult to make a case that significant economic benefits are to be derived from developing new major league sports facilities.”

So there’s that. Meanwhile, what if development slows and the funding isn’t easily recouped? What if the arena runs over budget, as such things are wont to do? What if the NHL stays away? The councillors of Markham might want to talk to their counterparts in Kansas City, which built an arena in 2007 that was intended to host an NHL or NBA team.