Building successful stadiums is not easy!
By Bob Young
Caretaker, Hamilton Tiger-Cats Football Club
When the City insists that they are building a stadium, and the Tiger-Cat Football Club is simply a tenant, they are correct. On the other hand, all successful landlords always take the needs of their tenants into consideration when they decide important issues such as location, size, and accessibility.
The success of any new building is dependent on the success of your tenant. Without successful tenants, landlords do not have a hope of getting a return on the investment they are making in their building. This is true whether it is an office building, a shopping center, a condo apartment building, or a stadium. As just one taxpayer in Hamilton, I am counting on the City to ensure the financial success of building the new stadium.
There are many examples around the world where the wrong building in the wrong place does not succeed financially and does not improve the area in question. The Olympic Stadium in Montreal is just one example of misplaced public investment. The difference is that the big “Owe,” as it has come to be known, was built without consulting either of its future tenants, the Expos or the Alouettes. Both teams went bankrupt trying to play in the wrong stadium in the wrong part of town. Whereas a much smaller investment in Percival Molson Stadium, also in Montreal, is turning out to be a great success thanks to the collaboration between the City of Montreal, McGill University and the Alouettes Football Club.
Simply put there has been no collaboration in Hamilton’s stadium project to date. The Tiger-Cats have pointed out many unresolved problems with the West Harbour location. These concerns include:
- a) No visibility outside of the immediate neighbourhood. Stadium “naming rights” can sell for millions of dollars per year. But no company will pay to put their name on a stadium if no one knows where the stadium is.
- b) Traffic only has access to the West Harbour from one direction. This could be resolved with new roads, but the City has made the commitment to the local residents not to build any additional roads. This is just going to ensure that the residents are subjected to hours of traffic jams before and after every event held in the City’s new public facility.
- c) No Parking. The City assures us rapid transit will be built to the site, but there is no funding for the proposed rapid transit. So the only access for many years after the stadium is built will be by foot or by car.
- d) Neighbours. We try to point out that the majority of the neighbours are families whose quiet enjoyment of their neighbourhood will either be damaged by additional roads and parking lots, or by hours of traffic before and after every event held at the stadium if no other roads are built.
Whenever we try to point out any of these problems to the City our concerns are summarily rejected, with the claim that it won’t be any worse than Ivor Wynne — but Ivor Wynne is a drain on the City’s of Hamilton’s budget, and is the cause of the Tiger-Cats financial instability for more than 40 years. More on this in a minute.
The City is relying on reports (such as the “Deloitte Report”) that were commissioned to study the wrong factors which have little or nothing to do with the economic feasibility of their anchor tenant, the Tiger-Cats. Deloitte (www.deloitte.com) is one of the great consulting firms in the world today, but they were only asked to consider the economics of expanding a facility in the West Harbour from 15,000 seats to 25,000. Deloitte did a fine job in assessing that simple mandate. Unfortunately, the City did not ask Deloitte if that site or any others would work for a CFL football team, much less outdoor music concerts, political rallies, and other public events publicly-funded stadiums should be used for.
Furthermore, the Deloitte report cautions that the old adage of “build it and they will come” has not always proven to be true. In fact, that philosophy has ended in disaster in many cases. A famous example is the Miami Arena. It was constructed in the Overtown district of Miami in 1988. Constructed on the basis it would rejuvenate the area, they built it without consulting their prospective tenants in the private sector and public never came. Only ten years later, both major tenants (the NBA’s Miami Heat and the NHL’s Florida Panthers) had vacated the premises leading to the demolition of the building in 2008.
The report also indicates that Hamilton would need to develop a massive sports and entertainment precinct in the area in order for the stadium and surrounding projects to be successful. The Tiger-Cats have spoken to several of the largest and best retail and commercial developers in Ontario and not found any interest in the West Harbour concept as it exists. The City has yet to introduce us to any reputable developers who indicate they might invest in the West Harbour site.
The City also commissioned a traffic study of the area surrounding the proposed West Harbour location but no one involved in this traffic study of fans going to a football game was asked to talk to the football team. In effect, both studies were not asked if the proposed stadium location had the necessary elements to ensure the success of the tenant of the building, in this case a CFL football team.
I asked my financial advisor and Chartered Accountant, Doug Rye (a member of the CFL’s Board of Governors as well as the CFL Audit and Finance Committee), to provide an analysis on the proposed West Harbour location and its impact on the Tiger-Cats business operations.
He discovered the Deloitte’s Report assumed more than $2,000,000 dollars of current Tiger-Cat revenues (such as some of our ticket revenues and some of our corporate sponsorship revenues) were expected to be used by the City to cover new Stadium operating costs on an ongoing basis in the West Harbour. The report also suggests that all of the naming rights revenue for the stadium should belong to the City, although the City has no experience in selling naming rights successfully, and are proposing a location for the stadium where naming rights will have little value.
Not unexpectedly, the report assumed a substantial increase in Stadium rent. More surprisingly, the report proposes Tiger-Cat fans pay a per ticket surcharge to the stadium fund. This amounts to the same thing as a special Tiger-Cat tax. Imposing tax increases on money losing businesses is not a reliable source of funds for the City.
We have calculated financial projections for the 2014 fiscal year (the first year the stadium might be completed) based on historical averages, stadium capacity, information from the Deloitte report and estimated inflationary impact. Using the allocations suggested by Deloitte and our estimate of expenses and revenues in the 2014 fiscal year, operating out of a 20,000 seat stadium in the West Harbour our franchise could lose in excess of $7,000,000 per year. We have shared both our analysis and the conclusion that the stadium as proposed will not succeed as a venue for a CFL team.
I do have to admit to a personal stake in the outcome of this debate.
I bought into the Hamilton Tiger-Cats for a whole bunch of illogical personal reasons. They include my personal experience of having grown up in Hamilton until I was 10 and then being dragged around the world for the next 10 years. My answer to the question of “where are you from,” no matter where I have been living ever since, has always been Hamilton. I continue to have friends and family in Hamilton, and as you know I’m a passionate Tiger-Cat fan. So when the Tiger-Cats finished 1-17 and went bankrupt in 2003, I made the very silly emotional decision to put my money where my heart was.
Financially it has been one of the worst ideas I’ve ever had. No, scratch that — it has been easily the worst financial idea I’ve ever had. While we have trimmed the losses of the team every year we are still losing a huge number of dollars every year.
The problem is that we don’t have a viable stadium. Every Tiger-Cat fan loves Ivor Wynne, but it is simply no longer a viable stadium for generating the revenue required to run a competitive CFL team, much less other sports teams, and even less so for music concerts or other community events. The reasons for Ivor Wynne’s lack of success for anything, even CFL football, is the lack of visibility and the lack of access.
Just ask anyone in Ontario where Ivor Wynne is. If they don’t live in Hamilton or didn’t previously live in Hamilton, they’ll simply have no idea. The reason the stadium is still named Ivor Wynne after all these years is no one is willing to pay enough for the naming rights to justify the cost of the scaffolding needed to change the sign. The only reason Hamilton has had a football team for the last 40 years is that a long line of foolish but wealthy and philanthropic citizens have been willing to pay the losses.
The City has an opportunity to build a public facility to host all manner of public events, and to do so profitably. The new stadium should increase the tax base of the city and ensure the success of the city’s sporting, entertainment, and tourist industries, while at the same time providing the city with a necessary public meeting space. To do this, the City needs to listen to the experts, whether those experts are future tenants of the stadium or world class stadium building consultants. This is Hamilton’s opportunity to build a superb, sustainable, and financially successful infrastructure project.
The good news is that I am committed to participating in a winning concept. As Caretaker, my definition of a “winning” concept is one that meets both the City’s and the Tiger-Cat’s financial goals.
Furthermore, we as an organization are convinced we can help build a profitable and sustainable business in the right location. We know this project will work and we look forward to working together with the City to come up with the right solution.