Show us the fine print
We pose questions -- and get some answers -- about the stadium deal
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Hey there, time traveller!
This article was published 10/04/2010 (4559 days ago), so information in it may no longer be current.
OVER the past 10 days, friends and foes of the idea of spending public money on a new CFL stadium have been consumed with the question of whether would-be Winnipeg Blue Bombers owner David Asper is getting a sweetheart deal from the Selinger government.
But there’s a simpler question to ponder: Whether Asper will ever get more than a seat on the Bomber board out of this deal.
Two weeks ago, the province decided to kick-start the construction of a $115-million, 33,000-seat football stadium by providing a $90-million loan to the Winnipeg Football Club. Asper’s Creswin Properties must pay back $75 million of this loan if it wants to assume control of the team.
To put it mildly, this won’t be easy. First, Creswin must find enough tenants for a mall at Polo Park to trigger a loan that will allow the company to buy the land below this very same mall.
Then, this mall must generate enough revenue to allow Creswin to take out another loan to pay off the bulk of the $90-million loan to the Winnipeg Football Club.
Nobody says this is impossible, but it is unlikely. And that’s why Premier Greg Selinger and Mayor Sam Katz have agreed to use future property taxes to pay for the stadium in the event that Creswin fails.
If you’re confused by this, well… you should be. The deal on the table is anything but simple.
In an effort to illuminate what will hopefully be the final plan to build a new home for the Winnipeg Blue Bombers, the Free Press submitted 18 additional questions to the city, province and Creswin this week.
The following exchange is based on their responses, as well as what’s already been made public:
"Ø OK, so who’s paying for this football
That depends whether Creswin Properties can build an upscale shopping centre called The Elms.
"Ø What are The Elms, again?
Creswin describes it as a 650,000-square-foot commercial development with "high-end retailers, unparalleled amenities and personalized services." It’ll go where Canad Inns Stadium is right now. There are supposed to be two anchor tenants — presumably U.S. department stores, such as Macy’s or Nordstrom’s.
Creswin needs to secure enough tenants at this place to get the financing it needs to buy the Canad Inns Stadium site from the city — and then start paying for the stadium. I’ll tell you more about that later.
"Ø No, tell me now. Who’s paying for the stadium?
For starters, Creswin is putting up as much as $10 million cash as well as the money it’s already spent to plan, design and otherwise make the stadium "shovel-ready." Creswin would also supply its services as general contractor.
The Selinger government is putting up $15 million and last week agreed to provide the Winnipeg Football Club with a $90-million loan to get construction started next month.
"Ø Who’s paying back the loan?
The Winnipeg Football Club is on the hook for $15 million. The money will come from the sale of luxury boxes at the new stadium, the sale of naming rights for the building and revenue from a Grey Cup that will be held there within five years of its expected opening in 2012.
"Ø What about the remaining
That’s the big question. If Creswin gets The Elms off the ground, they’ll pay it off, with interest. Asper says he’ll use a combination of revenue from the new mall and a loan based on his equity in the mall to pay back the cash. Creswin must pay off the entire loan by March 2016 if it wants to assume control of the Winnipeg Football Club.
"Ø And what happens if Creswin doesn’t get The Elms off the ground?
Then whatever else winds up taking shape at the Canad Inns Stadium site will eventually pay for it. The city and province plan to devote future tax revenue from the Polo Park land to pay back the $75 million, using a funding mechanism called tax-increment financing.
"Ø How would that work?
Right now, the Winnipeg Football Club doesn’t pay the city or province a penny of property taxes on Canad Inns Stadium, thanks to a deal worked out with the Bombers when the team was bailed out of financial ruin 10 years ago. So anything new on the Polo Park land — whether it’s an upscale mall or a burger joint — will generate new taxes. The city believes those new taxes could be as much as $7.5 million a year.
"Ø Has this sort of thing been tried
in Winnipeg before?
Sort of. The city expects to recoup about $45 million it sank into the first phase of the Southwest Rapid Transit Corridor from new taxes that’ll flow from new residential and commercial buildings that spring up along the busway. But the idea of using tax-increment financing in a commercially hot neighbourhood like Polo Park is controversial.
"Ø Why is that?
Normally, tax-increment financing is used to stimulate development in blighted neighbourhoods, such as empty pockets of downtown. Former premier Gary Doer promised never to use this sort of financing to fund the stadium, but Selinger and Katz needed a backup plan for the possibility Creswin fails to build The Elms.
"Ø How much is the annual interest on the $90-million loan?
It’s the Crown borrowing rate, which is 5.5 per cent right now.
"Ø So how much will the debt be on Creswin’s portion of that loan, once the company starts making payments?
Excellent question. Creswin says it’s impossible to predict the total debt because "at this point it will depend on the final interest rate and status of leasing at The Elms."
"Ø And when does Creswin start making payments?
That one’s up in the air, too. Obviously, Creswin has to get The Elms off the ground first. "Due to the confidentiality and commercial sensitivity of this issue, Creswin is not in a position to disclose its financing technique and timing," the company says in a statement. All the money must be paid by March 2016.
"Ø What happens if Creswin only pays back some of that money?
That’s the biggest question mark. The city and province concede they still need to figure out what happens if Creswin pays back a portion of its $75-million responsibility by the 2016 deadline.
Creswin is calling this a "hypothetical circumstance" that will be dealt with when the time comes. But city councillors such as St. Norbert’s Justin Swandel are pushing for the fine print to be worked out right away.
"Ø How about the Bombers? When do they start paying back their $15 million?
As soon as the money begins to flow from the new stadium. The team has five years from the stadium’s opening to come up with its cash.
"Ø What happens if the stadium costs more than $115 million?
Creswin has assumed responsibility for all stadium cost overruns.
"Ø Can you actually build a stadium for $115 million?
The University of Akron, in Ohio, built a 27,000-seat stadium last year for $61.6 million (US). But that stadium has a more conventional design.
Factors driving down the cost at the U of M site are the provision of free land, the pre-existence of parking lots and, Creswin claims, the use of less steel in the design of the stadium. Part of the stadium will sit below grade.
"Ø Who owns the stadium?
The city will own the building and the University of Manitoba will own the land below it. Creswin will only start managing it once it pays back its end of the stadium loan and assumes control of the Bombers.
"Ø So Creswin doesn’t get to own the team unless it ponies up another $75 million?
Yep. The Bombers will remain a non-profit organization for the time being. For now, Asper merely has a seat on the board.
"Ø Who gets revenues from the stadium?
Unless Creswin takes over, the Winnipeg Football Club will collect all revenues from the building, except for those flowing from U of M events such as Bison football games. Amateur sports groups and community groups will also be able to use the stadium’s "bubble" during the off-season, on a cost-recovery basis.
"Ø What happens when Creswin
The club still gets the revenues — but Creswin owns the club. Creswin will not, however, gain access to any surplus funds amassed by the non-profit organization over the next few years.
"Ø What happens to that money?
It’ll go into a "community interest fund" that’ll be used to help the team revert to non-profit status, if Creswin ever wants or tries to unload the team. Creswin has agreed to top up this fund to $10 million over time.
"Ø What about the rec improvements at the U of M? When do they get going?
A development schedule is coming within months, the university says.
"Ø And what about The Elms?
Again, that’s up in the air. Creswin needs to land enough tenants to make it possible to purchase the Canad Inns Stadium site from the city. Without tenants, there’s no financing for The Elms — and no purchase of the existing stadium land.
"Ø How much is the Canad Inns land worth?
In 2009, the city and Creswin agreed on a process to determine the "fair market value" of the land, which could easily be worth $30 million. Transcona Coun. Russ Wyatt wants the city to make the sale for "fair market value" plus 20 per cent, given the fact the city is sole-sourcing the sale of a valuable piece of property. But that won’t be part of the stadium deal that will come before council later this month.
"Ø How can you call it valuable when the former Winnipeg Arena site has remained empty for five years?
It may be empty, but it’s still valuable. Real-estate observers believe property manager Shindico is merely waiting to see what emerges at The Elms. Polo Park remains the busiest retail area in Winnipeg.
"Ø But isn’t it too busy? Who’s going to pay for traffic improvements in Polo Park once The Elms is up and running?
The city has asked the province for $10 million to pay for traffic improvements in the Polo Park neighbourhood. But the province wants to spend that money on phase two of the Southwest Rapid Transit corridor. Stay tuned for the answer to this one.
"Ø What effect will the IKEA development along Kenaston Boulevard have on The Elms?
Excellent question. The long-term plan for the Seasons of Tuxedo along Sterling Lyon Drive calls for 1.5 million square feet of commercial development. No matter what Creswin says, the IKEA-led big-box development will compete with The Elms. And shovels are already in the ground down there.
"Ø So level with me: Can Creswin build The Elms?
I’m not going to call this one. Asper says he’s confident and the company says it expects "it will be able to announce a number of tenants and unveil detailed design plans in the coming months." But retail experts believe it could take years to assemble an upscale mall.
Quietly, government officials say it really doesn’t matter, as the current deal to build the stadium no longer hinges upon Creswin’s success. The stadium is going up — the only question is who will wind up paying for it.
The broad strokes of the $137.5-million deal to build a new home for the Winnipeg Football Club
COMPONENTS OF THE DEAL
$115-million, 33,000-seat football stadium at the northwest corner of Chancellor Matheson Road and University Crescent.
$22.5 million in other recreation improvements at the University of Manitoba. They include a new fitness centre and the refurbishment of University Stadium.
Sale of the Canad Inns Stadium land to Creswin Properties, which plans to build The Elms retail centre on the Polo Park site.
Transfer of ownership of the Winnipeg Football Club to Creswin, if a stadium loan is paid back.
WHO’S PAYING FOR THE REC IMPROVEMENTS?
$15 million from Ottawa
$5 million from the province
$2.5 million from the city
WHO’S PAYING FOR THE STADIUM?
$90 million loan to the Winnipeg Football Club from the province
$15 million in a grant from the province
$10 million in cash and services from Creswin Properties
WHO’S PAYING BACK THE LOAN?
$15 million from the Winnipeg Football Club
$75 million from Creswin Properties if it succeeds with The Elms
$75 million in future property taxes from new commercial development at the Canad Inns Stadium site if Creswin fails to develop out The Elms
Sources: Winnipeg Football Club, Creswin Properties,
City of Winnipeg, Province of Manitoba