Stadium deal isn’t without political risk

Opinion

Hey there, time traveller!
This article was published 01/04/2010 (5656 days ago), so information in it may no longer be current.

There were chickens and there were eggs. But unfortunately, there was no football stadium.

Late last year, after months and months of effort to find the money to build a new stadium to host the Winnipeg Blue Bombers, entrepreneur David Asper began a series of critical meetings with Premier Greg Selinger and Winnipeg Mayor Sam Katz.

Asper had proposed building a new stadium at the University of Manitoba in exchange for the land at Polo Park where the existing stadium now stands. Asper would develop that land into a new retail power centre, and use the revenues, in part, to pay for the stadium and cover some of the costs of running the team

The city had agreed to turn over the Polo Park land. The federal and provincial governments came up with some funding.

But Asper was still desperately short of cash, trolling for an investor in a capital market that was still crippled by the global recession.

This is where the chickens and eggs come in. Asper was stuck, unable to make either the stadium or the retail centre a reality. Without the retail centre, it was impossible to investors to pony up the remaining money needed to start construction on the stadium. However, until construction started, Asper couldn’t get the anchor tenants to commit to coming to Winnipeg. And without the anchor tenants, the retail centre was stalled.

No stadium, no retail centre. No retail centre, no stadium.

"When I explained the chicken-and-egg situation to the premier, the problem that the U.S. recession had created in drying up capital markets, he very quickly moved to the type of solution we unveiled (Wednesday)," Asper said. "I explained it to him and he said, ‘OK, here’s what we can do.’ "

The solution Asper is describing involves a pledge by Selinger to provide a $90-million bridge loan to start construction on the stadium. If Asper can repay the loan, he will get ownership of the team. If he doesn’t pay back the loan, the team remains community-owned. Either way, the new stadium remains a publicly owned asset.

One might wonder how the province would secure such a loan. If Asper can’t make good on the debt, the province will receive all the property taxes generated by the new retail development until the loan is paid off. This will be done under the auspices of the province’s Tax Increment Financing (TIF) legislation.

Standing in the bowels of the old stadium amid the pigeon excrement and dampness, Selinger sold the deal as a "win-win-win" for all involved.

The Bombers get a new stadium, and taxpayers are saved the costs of patching up the old facility. The province’s loan is secured by future revenues from redevelopment of the Polo Park site. And the U of M gets a new home for the Bison football program and a new $25-million fitness centre.

However, this deal is not without political risk, particularly for Selinger.

By invoking the TIF legislation, Selinger has broken a pledge by former premier Gary Doer not to use this tool for the football stadium. TIF was designed to encourage developers to build in less desirable parts of the city. Developers get incentive funding up front to help pay for the cost of the development, and local government gets new, tax-producing tenants.

Using TIF to develop a new retail power centre to be located on what is likely the most valuable real estate in the city makes sense in this particular case. But it’s a broken promise and a manipulation of the TIF law.

The simple facts are that this project needed to get done. The city will get a valuable new facility; the economy will benefit from the economic activity generated by construction of both the stadium and retail centre. And the bridge loan is secured by a valuable asset. And yet, there are some nagging optics to consider.

Selinger must deal with the fact that just two weeks after he announced a deficit-laden budget, complete with a proposed wage freeze for 13,000 civil servants, he is now lending $90 million to build a football stadium. The truth of the matter — the low risk and high payoff — could very easily get lost in the sound of thousands of Manitobans scratching their heads trying to resolve the economics of this deal.

Football fans will rejoice, but other Manitobans may be given pause. Mayor Sam Katz suggested that once the stadium was opened, and the first kickoff had taken place, everyone would agree this was a great deal. Unfortunately, that kickoff doesn’t happen until 2012, one year after the next provincial election.

And by that time, the chickens and the eggs may have both come home to roost.

dan.lett@freepress.mb.ca