The price of getting what you want, not what you need

Hey there, time traveller!
This article was published 05/01/2016 (3599 days ago), so information in it may no longer be current.

It may or may not come as a shock to you that in 2058, when all of the loans needed to build a new stadium for the Winnipeg Blue Bombers are finally paid off, the total cost of the project will be nearly $376 million.

Most likely to be shocked are those who remember that, on opening day in 2013, the “cost” of the stadium was pegged at $209 million. Almost no one thought at that time to divulge, or ask for, the total cost of borrowing money to build the stadium.

Scandal? At this point, there is no reason to believe the province, or city, or football club made any attempt to conceal the full, capitalized cost of the stadium. We know that because, for the most part, government never reveals and the public rarely demands to know the full and final cost of big public construction projects.

Whether it’s a bridge in the city of Winnipeg, or the expansion of the Red River Floodway, most public and media attention is focused on the upfront construction costs. The cost of borrowing money and paying it off over many years, if not decades, is an afterthought.

It’s not unlike how we think about our home finances. When we talk about our mortgages, we tend to fixate on the price we paid for the house, or when we pay off the bank and own the house outright; we rarely give a moment’s thought to the total cost of borrowing the money to buy that home.

Still, notwithstanding the revelation of the full and true cost of the stadium, there are several important points to remember here.

First, taxpayers are not on the hook for the majority of the total capitalized cost. Thanks to a complex financing arrangement, city and provincial governments will be responsible for about half of the principal, interest and direct grant support needed to build the stadium. The other half is being carried by Triple B, the consortium that oversaw construction and now manages the facility. It will use operating profits to service its part of the debt.

Second, despite the fact there have been unforeseen events that have impacted the timetable for construction and the final product, the stadium project is still proceeding more or less within the original cost estimates.

Triple B was forced to take out a $10-million bridge loan to complete work that was not part of the original design. As well, the province had to provide an additional $35 million to repair problems created by the original design; the province is counting on a lawsuit and insurance to ultimately recoup that money. And thanks to an aggressive repayment schedule on the bridge loan, there has been little impact to the estimates of final, fully capitalized costs, according to provincial officials.

All that said, there are still a number of variables that could threaten to derail this complex and somewhat delicate financing arrangement — variables that could lead to greater taxpayer exposure.

To keep up with principal and interest payments, the city and province need the site of the old Canad Inns Stadium fully developed to produce property taxes necessary to serve its portion of the construction loan. The new private owners of the land — Cadillac Fairview and Shindico — claim the deadline will be met. This, despite the fact the anchor tenant of the redevelopment — Target — abandoned its newly built store last year with no plans to return.

On the Triple B side, the biggest unknown is whether football fans will continue to pay high prices to watch a Bombers team struggle. Without a significant improvement in the team’s on-field performance, it is also quite likely fans will resist the temptation to buy tickets. That would put the Triple B loan repayment schedule at risk.

On both sides, these variables raise the possibility of refinancing to repay the construction loan, something that would add significantly to the interest charges.

What does it all mean? A new football stadium was never something Winnipeg needed. It was, and remains, something many people wanted.

It has not been without its net benefits. Football fans are generally happy with the game-day experience, even if they can hardly watch the on-field results. The new, larger stadium has attracted bigger and better rock concerts. The stadium also served as an excellent venue for the Grey Cup and women’s World Cup soccer last summer, events that would have struggled to succeed in the old stadium.

However, taking into account all those positives, has it been worth all the money? That is a much harder question to answer.

The issue here is not the financing, it is the magnitude of the project. From the outset of discussions around a new stadium, proponents were fixated on an elaborate vision. They fashioned a stadium that is bigger than we need for all but a handful of events, with various design features, such as canopies that have more aesthetic than practical value.

If proponents had focused more on what we needed and less on what they wanted, there is little doubt the upfront cost could have been contained. There were options on the table to strip away some of the bells and whistles to hold down the cost of the project. They were summarily rejected.

We ended up with an impressive $209-million stadium that will cost, when all is said and done, nearly $376 million. That is not scandalous. That is the end result when we get what we wanted and not what we needed.

dan.lett@freepress.mb.ca