When it comes to the most underserviced hockey market in the world, two things are going to eventually happen. The first is that an NHL-style rink will be built at some point in suburban Toronto. The second is that there will be an NHL team in that arena someday. Perhaps not quite as quickly or as seamlessly as some people would hope, but it will come eventually.
So where does that leave things now? Well, it’s at that awkward stage where there’s a lot of posturing and threats, which those who know much more about business than I do claim are all part of the process.
This much we know. Graeme Roustan, the former chairman of the equipment giant Bauer, is heading a group that includes one of Canada’s most successful developers in an effort to build an NHL-style rink in Markham, an affluent suburb located northeast of Toronto. The cost of the project is estimated to be about $325 million, half of which will be paid by Roustan’s group. The other half will be paid by the City of Markham, most of which it plans to recoup by charging developers a voluntary levy on new condo developments in the area. The city would own the building and it would be operated by Roustan, who would reap any profits or absorb losses and pay rent to the city.
The City of Markham, meanwhile, would borrow the entire $325 million for the project, with Roustan’s half being paid back over a period of 20 years.
And here’s where things get dicey. In what looks like a classic case of cold feet, the same politicians who were behind the project only months ago are now saying they won’t support it because they don’t like the financial framework and because there is no guarantee that an NHL team will ever play in the building currently known as the GTA Centre. In fact, a majority of the 13-member council now says it will vote against the financial proposal, a basic framework it voted 11-2 to accept six months ago.
Take deputy mayor Jack Heath, for example. He recently added his name to the list of those who will turn down the financial proposal because, among other things, there is no guarantee the building would attract an NHL team. That’s fine, but there’s a curious change of mind here. That’s because it was Heath who organized a meeting with NHL commissioner Gary Bettman and deputy commissioner Bill Daly to discuss the possibility of Markham getting an NHL team. He was also in attendance at the meeting in which Bettman made it crystal clear that if Markham did go ahead with the project, it would do so with absolutely no guarantees that an NHL team would ever play there.
The city and Roustan also commissioned a study that suggested a 20,000-seat arena could be profitable without an anchor NHL tenant.
And that has consistently been Roustan’s message to city council and the public over the past two years as he has pitched the project. At no time has anyone ever hinted that the NHL would either expand or relocate to Markham even with a 20,000-seat building in place. And anyone who thought the NHL would suddenly change its mind doesn’t know Bettman very well. If there were a rink in place, Markham would look as attractive to the NHL as Winnipeg did in the summer of 2011, but the last headache Bettman needs is to make a promise to a hockey-starved Canadian city that it’s going to get a team. And if anyone thought differently, that’s where the discussion should have ended.
“I thought it was very important that we investigate it as an economic development opportunity,” Heath said. “It was important we let time move forward and see if there was a change in (the NHL’s stance). It became more and more clear that was not going to happen. We had to study it carefully and let time work through it. The important aspect of it is we’re now about to make a decision.”
Is the Markham proposal a perfect one? Probably not. In an ideal world, no public money or guarantees would be part of the process. But this is not Edmonton Oilers owner Darryl Katz here, putting his hand out for public money, then demanding more. Under the financial model, all the money would be paid back to the city. And the levy on developers is only in place if a new arena is built, so it’s not as though any public money is being diverted from schools or police officers. As it stands, any cost overruns will be absorbed by Roustan’s group and any losses the building would sustain would not be offset by a rise in property taxes.
Now, if the politicians and the people of Markham see Roustan as a snake-oil salesman trying to separate them from their money, they should run him out of town. In fact, that’s their duty as elected officials. The last thing any hard-working person needs is to be funding a white elephant with property taxes. But they should have done it far earlier in the process, two years ago to be exact when it was made clear to all of them that there would be no guarantees.
It looks now as though Markham wants all the benefits of having an NHL arena – and the eventual team that will come with it – without any of the risks. And that’s all right. Heath said if there were a guarantee of an NHL team, investors would be beating down the doors trying to get a piece of the action and the city wouldn’t have to lend a nickel to the project.
Well of course the investors would come. But that will not happen because this city will not be seen as an NHL destination until it gets a rink. The NHL makes it clear when anyone talks about luring a team that three factors must be solidly in place – it must have a sustainable market (check), it must have a suitable arena and it must have an ownership group in place (check).
Roustan and his group are in this to attract an NHL team, there is absolutely no doubt about that. And there’s a good chance it will happen someday. But not if everyone involved does not find a way to work this out.
Ken Campbell is the senior writer for The Hockey News and a regular contributor to THN.com with his column. To read more from Ken and THN’s other stable of experts, subscribe to The Hockey News magazine.