Mile One, the money pit

Show me the money.

Show all of us the money. Because something’s not going right here.

Last week in this space, I wrote (in part) about the St. John’s Growlers hockey team and the basketball team the Edge, and their new tentative deal with St. John’s Sports and Entertainment (SJSE), the cityowned offshoot corporation that runs the arena, along with the St. John’s Convention Centre.

I didn’t say it in so many words, but I did imply — as, to be fair, did the city — that the new deal would mean an increased city subsidy to the teams, because that’s the way it reads.

But the word subsidy rankles team ownership every time, and I think I’m beginning to understand why.

The city did release information that it said showed the “projected impact of the 10-year lease,” which included the fact that the city will have to increase the $1.9-million subsidy it pays to cover the arena’s operations every year. That increase, averaged out across the 10-year term of the contract, comes out to $229,000 per year, for a total of $2.3 million.

So, on the face of it, it looks like a simple pass-through: if the city is having to subsidize its arm’s-length company SJSE so the teams will stay, it isn’t all that different than subsidizing the teams. It’s just a matter of the name on the cheque.

And complaining about it being reported as a subsidy just sounds like semantics.

But what if it’s actually different?

Consider these hard little facts.

Counting revenue from all of its sources — parking, rentals, SJSE’S share of sponsorship revenue and food and beverage — every individual game the Growlers played at Mile One Stadium turned a profit for St. John’s Sports and Entertainment.

Under the new lease, counting all of the game-day revenues, every single Growlers game is still forecast to turn a profit for SJSE.

So, if that’s true, why is the amount of the subsidy that the City of St. John’s is paying to SJSE still going up?

The only real explanation is that not much else at SJSE is profitable, and the teams whose games supply the largest share of profitable SJSE nights (teams that claim they are currently losing money) simply said they wanted to pay less.

Or they’d leave.

Have a look at how the city explained the increased subsidy for SJSE in a news release: “It is important to be clear that sport teams are only part of the operation which impact the operating grant. Events such as concerts, ice rentals, and the like also contribute toward the cost of operating Mile One. These events, in addition to regular maintenance, utilities and fixed costs, all contribute to the $1.9M figure.”

Mayor Danny Breen and several senior city officials confirmed that the above scenario is exactly the case — that Growlers games do turn a profit for SJSE, and will continue to under the new deal.

The average of $229,000 a year in increased city subsidy is to make up for the reduction in what the Growlers and Edge will be paying SJSE every year.

Is it still a subsidy?

At the very least, it’s a discount from a city business (SJSE) that apparently can’t afford to give discounts, because it’s losing money hand over fist in its other operations.

Money will have to be found somewhere else — in this case, taxpayers — to cover what the Growlers and Edge would have paid if the contract had stayed the same as last year. And that money will subsidize the proportion of taxpayers who buy tickets to watch live hockey, because they’ll have part of what should be their ticket price essentially paid by the city.

The city has avoided killing two geese that were laying golden eggs.

But all that raises an interesting question: what is going on at SJSE?

Mile One’s operations are eating up $2.2 million a year in subsidies, plus the remaining profits they’ll winkle from the Growlers and Edge. (In their defence, the city says the facility may make more money than it currently expects if there’s an increase in concession sales or if SJSE has better success landing popular entertainers for concerts.)

The Growlers and the Edge, in a way, had SJSE over a barrel: without the two teams, the subsidy from the city to continue Mile One operations would have to have been even higher that it is now.

Maybe it’s time for a big ol’ review of Mile One and SJSE.

And maybe one of those forensic audit thingies.

“The city has avoided killing two geese that were laying golden eggs. But all that raises an interesting question: what is going on at St. John’s Sports and Entertainment?”