A solution to finance professional sports facilities in Alberta : public-private partnership model

Modest public funding is reasonable if governments take the right steps

OTTAWA, July 9, 2014 /CNW/ - Alberta has been considering the question of how best to finance professional sports playing facilities — an issue that is a political hot potato across North America. A recently-published Conference Board of Canada book Power Play: The Business Economics of Pro Sports, examines the economic, financial, and socio-political dimensions of recent arena and stadium development in Canada — and concludes that there is no single right answer.

One issue that frequently arises is whether financing for pro sports facilities has to be an all-or-nothing proposition — all publicly-funded or all privately-financed. The Conference Board analysis suggests that funding of facilities can be shared, particularly if governments make use of well-designed financing and governance structures.

As has been done elsewhere in Canada,  private-public partnerships (or PPPs) are one way for locations in Alberta to share the costs and risks of developing pro sports facilities, engage private sector project and risk management practices, and thereby reduce the overall costs to taxpayers.

HIGHLIGHTS

• Some public funding for sports facilities can be justified on the basis of what economists call 'public goods'.
• Arenas in Montreal, Toronto, Ottawa, Winnipeg, and Vancouver were built largely with private money, while Quebec City's is being built with government money and Edmonton has opted for a mix of public and private funding.
• Cities need to take a detailed look at their individual market conditions to determine whether and how much public funding might be justified. 

"A reasonable starting point for communities facing this issue is to determine whether a facility could be privately financed, as has taken place in some cities in Canada," said Glen Hodgson, Senior Vice-President and Chief Economist, and co-author of Power Play.

"In an ideal world, franchises and their playing facilities would be privately financed and would operate profitably. In reality, it seldom works out that way. In many communities, some level of public support for sports facilities is required and can be justified on the basis of what  economists call 'public goods', or assets that serve the broader public interest."

The Conference Board's analysis notes that arenas in five Canadian markets --Montreal, Ottawa, Toronto, Winnipeg and Vancouver — were largely constructed as private ventures. The Air Canada Centre in Toronto, the Bell Centre in Montreal, the Canadian Tire Centre in Ottawa, the MTS Centre in Winnipeg and Rogers Arena in Vancouver are all homes to National Hockey League franchises. But not every case is an unqualified success.          

Financing new pro sports facilities requires detailed case-by-case analysis and discussion. In Quebec City, the city government is footing the bill for a new NHL-quality building. Ottawa's renewed sports facility is being financed and managed through a complex public-private partnership arrangement. Edmonton's new arena is being built with a mixture of private finance and public funding from the City, as part of a larger plan to renew Edmonton's downtown.

Power Play lays out the criteria and management tools that public officials should use when deciding whether to provide public money for new playing facilities. The Conference Board recently applied its economic analysis capability to assess the impact of a new baseball stadium in Montreal for the Montreal Homerun Project.

Released in March, Power Play: The Business Economics of Pro Sports is authored by economists (and passionate sports fans) Glen Hodgson and Mario Lefebvre. It examines the economic conditions of the communities that host professional sports franchises, looks at the operating conditions for pro sports leagues, and discusses franchise ownership and management.  

Power Play: The Business Economics of Pro Sports is available in printed and e-book formats. For more information, visit http://www.conferenceboard.ca/powerplay.

SOURCE: Conference Board of Canada

Yvonne Squires, Media Relations, Tel.: [phone] ext. 221, E-mail: [email protected]