Business case non-existent
A year ago this month, I questioned in a column the proposal for a football stadium in Halifax. The recently released update from Schooners Sports and Entertainment (SSE) confirms some of the year-ago concerns and adds new ones. Some of today’s text is repeated from a year ago.
1. The proponents now pitch the stadium as a 12,000-seat “community” facility, plus 9,000 semi-permanent seats to make it big enough for CFL games. There is no indication that the CFL has agreed that this satisfies their needs, even as a temporary measure. It would always look second-rate.
2. The cost is estimated at $110 million. This assumes that the project is not charged HST, property tax, deed transfer tax, or permitting fees. No estimate of how much this is worth is provided, but it would be well north of $20 million by the time the stadium is ready for its first game. Who covers that?
3. There will be perhaps 10 CFL football games a year. On the other 355 days, it is available for community use.
Why do we need a community stadium with 21,000 seats? If we do want more community resources, why locate them in Shannon Park?
We need only look at the successful Wanderers Grounds facility to imagine what a useful community stadium might look like, though that one only needs fewer than 6,000 seats. A number of such fields could be built in other high-density areas for far less than $110 million.
4. The entire construction cost is to be financed by debt, which would be serviced by:
• A two per cent cent tax on hotel rooms and rental cars said to be worth $4 million per year. This has been roundly condemned by tourism operators who understand that 10 home games a year will not sell many rooms.
• “Tax increment financing,” which means taking a chunk of the normal property taxes on commercial and residential properties near the stadium. This is alleged to be worth $15$20 million up front, or $2 million a year for 30 years.
It is based on the entirely false assumption that without the stadium there would be less property developed in HRM.
If there is demand for commercial or residential buildings, they will get built somewhere, whether or not there is a stadium.
If there is no demand, new buildings beside the stadium will create excess supply that drives down assessment values, and therefore tax revenue, everywhere. That is what happened with the office component that was supposed to pay for the new convention centre.
5. New high-capacity roads would be needed at taxpayers’ expense. Given the small parking area, so would mass transit for the 10 days a year that a football game is happening.
6. The report has the audacity to title one section “Proposed Ownership Structure — Public Benefit, Private Risk.” Nothing could be further from the truth. Taxpayers bear all the risk.
• HRM would be responsible for any construction cost overruns, which are virtually certain to occur based on the experiences of other CFL cities, and HRM’s lack of capacity or experience to manage such a project.
• The football team could fold. This has happened in much larger cities. Montreal was without a team from 1987 to 1996. Ottawa was without a team from 1997 to 2001 and again from 2006 to 2013. If the team folds, HRM is left with an empty site and all the bills.
• HRM will be on the hook for all maintenance and repairs. Hamilton is already spending millions to repair deficiencies on its new Tim Horton Stadium.
• HRM would be at risk for whether and when buildings which purportedly contribute “tax increment financing” are constructed.
• If the operators are having financial trouble, they could raise the prices charged to community groups to an unaffordable level. • The stadium would be owned by a shell company with no other assets. The proponents expect HRM or the province to guarantee the entire loan.
• Construction times from groundbreaking of 22 months (Hamilton) to 36 months (Regina and Winnipeg) mean that it could be 2024 before financing is established. Borrowing costs could easily be much higher then.
SSE’s document is an advocacy piece, not a business plan. There may be even more unacknowledged cost and risk implications.
Municipal council came close to killing the project even before receiving a report from staff. When they receive it, there should be little hesitation about saying no and moving on to other business.