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Net costs

Legal, financial considerations after buying NHL season tickets

By: Joel Schlesinger

Posted: 06/18/2011 1:00 AM | Comments: 0 (including replies)

ALEX BRANDON / THE ASSOCIATED PRESS ARCHIVES Enlarge Image

NHL tickets can have an effect on a family's budget.

To all of the naysayers doubting Winnipeggers' willingness to front the dough on the NHL, you couldn't have been more wrong.

The frenzy for season tickets has proven one thing: There's no shortage of enthusiasm to spend thousands of dollars on the return of big-league sports to Winnipeg.

Big-league team doesn't mean big profits

Bostonian Bob Haber, profiled in last week's Money Matters, is part of the ownership group that owns the NBA franchise the Boston Celtics.

Owning a pro sports team is more of a passion than a prudent business venture, he says. "I look at so many businesses, and it's funny how small pro sports franchises really are, especially in basketball and hockey, as far as revenue, but obviously, they get a lot of attention," says Haber, an investment fund manager. "My guess is the revenues won't even be $100 million a year, even though you'd think it was a multibillion-dollar kind of thing from the attention it gets." The Celtics ownership has reinvested its profits back into the team, which Haber says is essential to success. Having an ownership group with deep pockets is a big plus, too. "You have to nowadays with all the vicissitudes in sports and the economy." Fortunately for Winnipeg, the part-owner of the team is media mogul (Reuters and the Globe and Mail) David Thomson, whose family is No. 17 on Forbes' list of the world's richest, is worth about $23 billion.

Ownership has its rules

People with deposits on season tickets are allowed to share ownership with others, says Scott Brown, spokesman for True North. And those who purchased tickets on the Saturday following advanced sales to Moose season ticket holders can even have separate accounts set up when they come down to select their seats. So, if you bought four tickets with your credit card for yourself and three friends, True North will set up separate accounts for each ticket so the responsibility of payment will fall on the owner of each seat. The rules for season ticket holders who purchased tickets during the Moose season ticket-holder pre-sale are different, he says. Tickets could only be purchased under a Moose season ticket-holder credit card. The whole cost of the tickets must be paid for on the former Moose ticket holder's account, Brown says. "Their credit-card information that we have on file with them will be charged all charges for the first year, and to get out of that they will be charged significant amounts," Brown says, adding the transfer fee is $250 a seat. But that doesn't preclude those ticket holders from deciding to sell their tickets to others -- so long as they don't scalp them.

"Once you follow all the steps and you follow them properly, they're your tickets, and what you do with your tickets afterwards is entirely up to you." They just need to remember the buck stops with them for payment, so they might want to get an agreement in writing.

What remains to be seen, however, is how many people fortunate enough to get their hands on season tickets can really afford the long-term contracts they signed off on earlier this month.

The average family income in Winnipeg is about $70,000 a year before government takes its share, according to Statistics Canada figures released last year.

Undoubtedly, a number of families can completely absorb the cost of season tickets without a noticeable effect on the household budget.

Still, the demand for tickets and the speed at which they sold out earlier this month likely has many personal finance experts scratching their heads and wondering whether the gusto for the NHL has drowned out the meek, yet reasonable voices in our heads that may have pled for fiscal temperance.

"I think we're kind of in the middle of a sociological event here," says Uri Kraut, a financial planner with Assiniboine Credit Union. "Judging by the comments from people whom I've spoken to, this is not money that was earmarked toward savings and is now being redirected."

The irony likely isn't lost on most financial advisers or planners who often engage in gentle arm-twisting with their clients, urging less spending and more saving for retirement, their children's education or a rainy day.

It's tough to compete with the allure of the NHL. It's practically a religion for most Canadians, and season tickets are a form a pilgrimage -- costs be damned.

"If I would have asked those same people to increase their contributions by $1,000 a year, they most likely would have said no," Kraut says.

The fervour for tickets even has shocked the folks at True North, says spokesman Scott Brown.

"I think anyone involved in pro sports anywhere would tell you that the response for tickets was surprising," he says, adding some critics have slammed True North management for failing to do adequate market research.

But the fact is the market research was pretty darn good. What business wouldn't want a long waiting list for its product -- not to mention a product for which they have exclusive rights?

Still, even Brown says management suspects some of the would-be buyers on the 8,000-person waiting list will be season ticket holders sooner than later.

"We have encouraged people to be careful with the decisions they make because we hope that they won't be backing out of their commitments after year one, considering there's an expense to that," he says, adding those who decide they want out could lose their deposits, ranging from $500 to $1,000 per seat.

"But I do believe that we'll be dealing with that situation because there were probably some people that made decisions that were not all that wise with their money."

Kraut says he has little doubt some are financing the cost with the equity in their homes. We're a house-rich city right now -- average resale values have more than doubled in the last decade -- but he cautions those who go that route to have an eventual plan to pay off their debt.

"The danger is you'll put the tickets on your line of credit because that looks like a floating savings account," he says. "And this is precisely why banks give out line of credits -- so people make imprudent financial decisions that are generally emotionally impulsive, so they earn interest on it."

But season tickets aren't just a cash expense; there's a cost to our social capital, too.

"We're talking about a whole rebalancing of social priorities for people's lives, marriages and families," Kraut says.

Then there are the additional outlays of cash with each outing.

"There's a multiple on the ticket that is the real cost of going."

Parking, beer, hotdogs, babysitters, beer, merchandise and more beer can easily double the cost of the night out.

Splitting the cost of season tickets with others is a good way to ease the burden on the household budget, but partnerships leads to legal issues that bear contemplation, says lawyer Adam Herstein, a partner with Pitblado Barristers and Solicitors.

Problems can arise when one party in the partnership is purchasing the seats on his or her credit card and the rest of the group are paying that individual their share for the tickets.

"If I was buying season tickets with a group of people, I would want some sort of agreement in writing," he says, adding it would have to be signed off on by all paying parties.

The agreement doesn't need to be drawn up by a lawyer to be official. "You might want to run it by a lawyer, but I'm not sure that many lawyers have experience with season ticket sharing agreements," he says.

If you do draft the agreement without legal advice, it should at least address all the potential monetary issues that can crop up in a partnership.

Among financial issues to deal with are: How much is each party paying? Will payment for tickets be all at once or over the course of the season?

Basically, a payment schedule needs to be clearly set out in the agreement, and it must also discuss what happens when things get dicey.

"The big thing is 'What if someone doesn't pay?' because if that happens and you have an agreement that they should be paying you and when they've breached the agreement," he says.

"Then you need to enforce that agreement, and you may need to go to court to do that, so that's one reason you might want to run it by a lawyer to make sure you've got what we would call an enforceable agreement."

Despite the legal and financial considerations, most season ticket holders will likely enjoy their investment and have few difficulties, even those sharing ownership. That doesn't mean it's not important to consider carefully the full impact of signing on the dotted line for a three- to five-year investment that can cost more than $60,000, Kraut says.

Still, he says, even he was beguiled by the lure of the NHL and was ready to find room in his budget to join the party.

"By the fortune and grace of Ticketmaster not pulling up my IP address, I went from being frustrated and depressed to very interested in how this is going to work out over the next few years from people who were fortunate enough to get them."

giganticsmile@gmail.com

Hockey, business or pleasure?

If you're a business owner purchasing season tickets for business purposes, up to 50 per cent of the cost is tax deductible, says certified general accountant Tanis Olafson. But to qualify, the tickets must be used for actual business purposes. "Everybody thinks 'Oh, how lucky! It's a write-off,' " says the accountant with Olafson and Jones in Winnipeg. "It's not if I just take my family because it's only a write-off if you're using the tickets to earn income." Employees of companies that purchase tickets and take clients to games to drum up business can also apply for the deduction, but their employer must sign a T2200, stating the expense is incurred to earn income.

Republished from the Winnipeg Free Press print edition June 18, 2011 ??65524

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