People are realizing the market failures. Sure maybe you make the $20 margin for flames games (that the flames agreed for a higher facility fee for flames games is evidence of this), but on other events a fee high enough make the arena pencil means the event doesn’t go ahead. So now the second least popular event has a higher fee, which destroys its margin and it cancels. This continues until you only have the Flames, but they can’t cover the arena cost with just flames games, so the facility never gets built.
It is an adverse selection problem, where the revenue maximum and utility maximization is still at a loss. It sucks. It is not unique to sports arenas.
The point of my example is that there are very few venues that have utilization and market power high enough to make money. The O2, Madison Square Garden, the Staples Centre, and the Air Canada Centre are the ones that come to mind. And the Air Canada Centre still had subsidies (cheap loans, a cheap as free land swap) and building at a generational low for construction costs (they got really lucky).
The venues that make money are in metros much larger than Calgary. Most have sports anchors which sell out for half their events or more.
Like I get we all want to not have to subsidize arenas right? But besides Toronto the private funded arenas of the 90s financially damaged their owners so much that they had to sell. The numbers today aren’t any better.
I have been thinking about this post. Yes, it is true there are market failures, but it seems to bake in the fact that there are no costs to be cut on the Flames operating side. I know it is probably a minor part of their operating budget, but a point that is often raised is due to the high profile nature of it is, paying someone in their 20s 8 figures a year to play a game is probably a decent place to start looking tp where you can cut costs.
But, I get it, that is the going rate for that kind of talent, which can be afforded by the larger markets. Calgary has no choice but to compete, so again, subsidy is required. But, with that line of thinking, why don't we as a society push even further, and make sure that markets like Saskatoon, or Saint John, can also compete? I mean, their market isn't large enough to handle those costs, but then, neither is ours apparently. Or, even more extreme, I bet if we offered up enough of a subsidy, we could land an NFL franchise here in Calgary. In those cases everyone could probably agree the subsidy would be too large, and therefore not worth it.
But this then goes back to
@CBBarnett 's post from a few days ago. How do you determine if it is worth it, when no real, hard economic data is fully offered up? Instead, it is a lot of insinuation, and stoking of emotions. Is that enough to make people who are already struggling to afford everyday life pay even more as their municipal taxes (and therefore, cost of living in the City) go up, all while those 20 year olds earn millions (again, not really fair to use that argument, but it isn't entirely unfair either....). I guess that is a decision for the politicians.
I would certainly be more on board if all the talk of these government expenditures increasing the GDP, and therefore allowing us to pay off the debt due to our larger economic earning power truly panned out. And maybe if you could boil it down to individual projects it would prove to be true. But given the dramatically faster growth of government debt vs. GDP (national level at least, in just about ever jurisdiction in the world), it is hard to see real truth in those claims either.
That is just some Sunday evening ramblings for me. No real conclusion or meaning to it, other than to continue to express my opposition to public subsidy to these kinds of projects and maybe point out some logic fallacies in the discussions, but a personal resignation I suppose that it is probably going to happen, and I just hope that it is a small enough increase to my personal costs that it only equates to the low- to mid-hundreds of the thousand cuts we are on course to dieing from.
