The Cost of Love

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JOE BRYKSA / WINNIPEG FREE PRESS archives Jim Slater of the Winnipeg Jets collides with Craig Adams of the Pittsburgh Penguins.The team�s owners shouldn�t be feeling a cash crunch any time soon.

Barely a minute into the second period of Friday night's Winnipeg-Pittsburgh NHL contest, speedy Jets winger Blake Wheeler carries the puck across the Penguins' blue-line and passes it over to Dustin Byfuglien on the right side.

The big, skilled defenceman barely takes a stride forward before he tips the puck back to Wheeler, who slides a pass across the slot to Evander Kane on the left side. When Kane does what he was born to do -- bury the puck in the net and do it often -- 15,000 fans at the MTS Centre scream in delight and hundreds of thousands of TSN viewers either follow suit or curse at their TV screens.

If you're a Winnipeg hockey fan, there's no way to put a price on the moment the Jets turned the tide on a Penguins squad that was up 2-0 at the time. Hockey is a religion in a city that loves the Jets almost as much as it loves clean drinking water and regular garbage collection. But there are ways to cost out the love of the game.

A basic cable-TV package that includes TSN costs about $35 a month. A single ticket to see the Jets play, if you can find one, will set you back $50 to $206. If there was no lockout this year, Wheeler would have earned $2.65 million, Kane would have been able to hold $3 million to his ear and Byfuglien could have taken $4.25 million to his favourite fishing hole. The MTS Centre cost $133.5 million to build. True North Sports & Entertainment spent $170 million to purchase a team to play in the Portage Avenue building.

And once a new mini-casino at Cityplace mall is up and running, taxpayers will contribute a total of $12.7 million to the Jets every year, when you tally the combined total of city-provincial tax breaks enjoyed by True North, entertainment-tax rebates and the Jets owner's average expected annual share of gaming revenue.

Compared to clean drinking water and garbage collection, that's a heck of a bargain. Water-and-sewer ratepayers will spend $95.5 million to treat water at Deacon Reservoir and distribute it throughout Winnipeg this year. Property owners will spend $19.5 million to get their garbage hauled away and another $10.9 million to dispose of it.

NHL hockey is just another basic city-provincial service, as enshrined by the original deal to build the MTS Centre. And this goes beyond the $40.5 million spent directly by all three levels of government on the construction of the MTS Centre. Every year, True North receives two tax breaks, one tax rebate and direct funding in the form of gaming revenue.

The smallest break enjoyed by True North is a business-tax rebate that will be worth $258,300 this year, according to city budget documents. True North also enjoys a city-provincial property-tax break that flows from a special designation for the MTS Centre, which is considered a public space, not a commercial building. That break is worth $816,140 a year, based on the arena's 2012 property assessment.

True North is also set to receive a $6.17-million entertainment-funding tax rebate from the city this year. The city levies a 10 per cent tax on events at all for-profit movie theatres as well as at Shaw Park, Investors Group Field and the MTS Centre. The city keeps the money from the movies, but rebates taxes that flow from Winnipeg Goldeyes, Blue Bombers and Jets games, as well as other events at their venues.

As a result, it's fair to argue the $6.17-million entertainment-tax rebate is not actually a form of public funding for the Jets. But the reality is the city enables all three of its pro sports clubs to charge taxes on top of their ticket prices. In theory, a future city administration could attempt to hold on to this revenue.

Gaming revenue, the final source of subsidies for the Winnipeg Jets, is a far more complicated issue. The Selinger government's line is this revenue is intended to support the MTS Centre, not the Jets, and thus allow True North Sports & Entertainment to better weather future economic storms, such as a devaluation of the Canadian dollar.

In reality, the gaming revenue is a subsidy and an old one at that. A 2001 deal between True North and Manitoba Lotteries allowed the owner of what was then the Manitoba Moose to reap the financial benefits of 50 video lottery terminals. That number was increased to 140 gaming machines in 2011, as part of a deal to bring the National Hockey League back to Winnipeg.

True North will soon renovate a space in Cityplace mall into what Manitoba Lotteries calls a gaming centre. It is in fact a very small casino, as the 5,000-square-foot facility will include VLTs, slot machines and a few gaming tables.

All 140 of the gaming machines promised to True North will be housed in the facility. How much money they will generate for the Jets' parent company is determined by a somewhat complex funding formula.

For starters, the gaming tables are not expected to generate any revenue. "They're there for flash," said a Selinger spokesman. All the actual profits will flow from the VLTs and slot machines.

If they generate less than $6.1 million a year, True North gets to keep 90 per cent of the house, which works out to a maximum of $5.49 million. If the gaming revenue is somewhere between $6.1 million and $7.3 million, True North will receive a flat payout of $5.5 million. And if the machines generate more than $7.3 million, True North gets to keep 75 per cent of that first $7.3 million (in other words $5.48 million), plus 20 per cent of any revenue beyond the $7.3-million threshold. Manitoba Lotteries takes the rest of the cash under all three of these scenarios.

What this means is True North expects to receive an average of $5.5 million a year from the scenario. That's worth almost an entire Byfuglien, who will earn $5.75 million next season, and will go a long way to re-signing Wheeler, who becomes a restricted free agent at the end of this season. But provincial officials cringe at this sort of talk, insisting the gaming revenue was simply envisioned to ensure the long-term stability of a Winnipeg NHL franchise.

Looking back to 2011, it's easy to see how Premier Greg Selinger would be able to rationalize the use of gaming to subsidize professional hockey. After 15 years in the NHL wilderness, the city was desperate to have its Jets back. Bringing home hockey, using cash you don't collect yourself, must have seemed like a no-brainer from a political perspective. And if you ask many hockey fans, they'll say they'd rather see money spent on the Chipman-family enterprise than on any number of other government priorities.

Of course, the average hockey fan may not be the ultimate arbiter of provincial fiscal policy. And the average provincial policy analyst may not be a good arbiter of hockey, either. It appears obvious no one at the Manitoba legislature expected Jets tickets to sell out in minutes in 2011. It also seems likely the NDP's advisers failed to do any political math that involved True North turning a modest profit after the NHL's first season back in Winnipeg. Handing over the gaming revenue was simply the correct choice at the time.

Manitoba's Progressive Conservatives, who once promised to bring the Jets back, did not respond to a request for comment about the new mini-casino. True North also declined to comment, promising instead to make a statement about the gaming centre at some point in the future.

Now, Manitoba chiefs say it's unfair to allow True North to access gaming revenue when First Nations have been told to hold off. And there's something unsettling about creating a public mechanism that benefits one of the world's richest men -- David Thomson is a True North partner -- in a province undergoing severe financial stress.

On the flip side, NHL hockey generates tax revenues and economic spinoffs such as the sale of alcohol and cable-TV packages. And there is no denying the electrifying effect of the Jets on the city in general.

Who knows whether Selinger would have cut the same deal if he had the chance again. The lesson he's likely learned: Never play poker with a man named Chipman.

bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 27, 2013 A1