Winnipeg Free Press - PRINT EDITION

Is this a major fumble?

New stadium's delay disappointing for fans and a blow to team's bottom line

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As Blue Bombers fans streamed Wednesday night into a stadium that was supposed to have hosted its last game last fall, the disappointment could not have been more profound.

The old gridiron at Polo Park was supposed to be rubble by now, wasn't it? Fans spent the summer celebrating the end of urinal troughs, limited concessions, crammed seating and crumbling concrete. Lamentably, Mother Nature ganged up on the crews working on the new stadium, giving the old stadium a stay of execution.

And really, is a one-year delay in completion of a new stadium that big of a deal? Its proponents don't think so. The team, and its government sponsors, have been resolute in assuring us that while the new stadium will open a year late, it will open. And it will be spectacular.

Now, on with the season.

But is that the end of it? A closer look at the terms of this deal suggest the delay, while not enough to derail the project, has simply made a tough job tougher.

The first thing to understand is the complexity of the deal. The province anted up $190 million for the new stadium, now under construction at the University of Manitoba. The province expects to be paid back partly by the football club through the operations of the stadium, and partly from property taxes generated by the development of the old stadium land near Polo Park.

This deal has required almost flawless management of both the construction and operation of the new stadium. As well, the city would have to be cunning in the redevelopment of the Polo Park land to ensure a substantial and steady flow of property taxes well into the future.

So far, it would be tough to say the execution of the plan has lived up to the expectations on which it was based. That much was obvious when the Bombers took to the old field Wednesday night.

Long-term, how does this delay affect the deal? To answer that question, it's important to consider two distinct issues: the cost of the new stadium and redevelopment of Polo Park land. And, let's be clear about one thing. This is not a $190-million stadium. With interest and principal added together, this is closer to a $300-million stadium.

The Bombers are responsible for paying down $85 million of the total cost of the new stadium. Most of the remainder of the stadium costs -- $75 million -- will be covered, or so the theory goes, by property taxes collected on the redeveloped land at Polo Park. The province expected to receive payments from the Bombers of $3.86 million annually starting this year. In addition, there would be $7.44 million annually in property taxes on the Polo Park land starting in 2016-17, for a total annual payment of $11.46 million.

The delay has pushed back the repayment schedule by one year. That means the province has to cover an additional $7.44 million in interest and principal in the first year. Spread out over the entire term, the province requires an additional $169,000 from the team and property taxes to cover the loan.

All in all, that doesn't seem like a huge impact, until you consider the size of the fiscal obligation they already carry.

The team is being charged an interest rate of 4.65 per cent on its share; over a 45-year term, the Bombers are expected to make total payments of $169.3 million -- $85 million in principal and $84.3 million in interest.

The Bombers believe they will make substantially more money operating the new stadium. Not just from football operations, but also from hospitality events such as receptions and conferences and from special events such as rock concerts. (The team earned $2 million last summer for hosting the U2 concert.)

Will all that be enough to handle a nine-figure mortgage with a $4-million annual mortgage payment? That is the $170-million question.

Consider last year, when the team posted a record profit of $3.014 million. Even with the new sources of revenue from a new stadium, the Bombers must avoid the lulls in attendance that have plagued the team during its weaker seasons while maximizing ancillary revenue sources. It appears the Bombers will need near-perfect conditions to cover this enormous debt.

On the other side of the stadium-financing coin, there is the issue of redevelopment of the Polo Park land.

At first blush, it seems like quite an opportunity, given this property is among the most lucrative retail real estate in the city. As such, it is expected to fetch a sale price of as much as $35 million. Given that it generates no tax revenue in its current use, the sale would be a huge windfall for the city, and a source of millions of dollars of heretofore-unrealized tax revenue.

Ah, but there are hurdles. Although the land is valuable, it is expected to be costly to develop. It sits landlocked in the city's densest retail zone. As a result, it cannot be fully developed without significant traffic improvements that could cost tens of millions of dollars.

Has the lack of certainty about the occupancy date and the cost of traffic improvements limited interest in the property? City officials have already told the Bombers the delay is making negotiations with developers problematic. Even worse, there is evidence Polo Park is losing the war for new retail tenants to a dynamic blue-and-yellow competitor.

The awkwardly named Seasons of Tuxedo, a massive retail power centre surrounding the upcoming Ikea outlet at Kenaston Boulevard and Sterling Lyon Parkway, is actively recruiting while Polo Park languishes. It has even started to poach some of the Polo Park area's marquee tenants. Cabela's, the outdoor gear superstore on Ellice Avenue near Empress Street, recently announced it was relocating to the Seasons of Tuxedo.

The Cabela's relocation also raises another troubling scenario. It is essential the Polo Park land makes a new, net contribution to property taxes to help pay down the stadium mortgage. And that means attracting new retailers to the city. If the land is used to relocate an existing retailer, even if that involved a larger footprint, the net increase in tax revenue could be much less. That would mean the city and province would effectively be using existing tax revenue, not new tax revenue, to pay down stadium costs.

There is little doubt the Bombers were victims of their own enthusiasm when it came to the stadium-construction schedule. We can be just as confident that when the new stadium eventually opens, the sheer excitement surrounding that event will likely obscure many of these concerns.

However, opening a new stadium will not change the gargantuan task of paying down the costs of building that new stadium.

Proponents may argue it's no big deal, but the one-year delay in opening has only succeeded in making what was already a difficult task more difficult.

Republished from the Winnipeg Free Press print edition June 21, 2012 B1

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