Ownership/Stadium Question a Gordian Knot for Winnipeg

The question of privatizing the ownership of the Winnipeg Blue Bombers after 77 years of being in public hands has Winnipeggers in knots. Currently, there is one proposal on the table from David Asper to assume 100% control of the team in exchange for a $65 million investment into a new stadium/commercial complex. Is the exchange of ownership worth giving up to get a new stadium built? Is a bold, swift stroke the only solution to this problem?

Asper’s proposal calls for a $40 million one-third investment in a new stadium with the other two thirds coming from the provincial and federal governments. Asper also proposed contributing an additional $25 million to develop commercial space around the stadium. In exchange, Asper would assume control of the Winnipeg Blue Bombers, including their control of acres of prime retail land ready for development.

The Blue Bomber board of directors warmly welcomed Asper’s proposal, but they were not ready to sign away the club just yet. They are calling for other development proposals, specifically partnerships that allow the club to stay in public hands. The football club has a plan for development to increase their revenue streams and an agreement with the city giving them control of prime land at the current stadium site. Unfortunately, they do not have the capital strength behind them to orchestrate a new stadium and commercial development themselves. This leaves them to rely on private partnerships or takeover deals. Partnerships are much harder to come by as they are very restricted by the asset they have (the land) that a developer wants and what they want (a new stadium) that has no value except to the community and football club. In short, why would a developer invest their cash to develop a costly stadium and retail space, if they are not to get control of the revenue streams from all development? It appears to me that the only partnership option for the Bombers would be turn over development to a third party who would control the property and the Bombers pay to lease the stadium. This does not fit with the Bomber plans to grow and expand their non-football revenue streams.

In an effort to attract other proposals, a feasibility study on a new stadium conducted on behalf of the Blue Bombers and others was released this week. This study concludes that a new stadium would provide the revenue streams to offset the operating costs of the stadium. There are some differences between the Asper stadium plan and the Bomber stadium feasibility study. Asper’s stadium would cost around $120 million for 40,000 permanent seats while the Bombers’ plan estimates the cost to be around $200 million for 30,000 seats, which would be expandable to 45,000 for events such as the Grey Cup. The Bomber proposal includes an attached hotel and indoor water park along with internal exhibition space, meeting space and a restaurant. The Asper proposal includes retail and restaurant space. Both proposals call for most seats to be covered, providing partial protection from the elements. Asper wishes to build near the current stadium while the Bombers’ study has 12 proposed locations. If action were taken immediately, Asper would start construction in 2007 and divide it into two phases, with the stadium ready for the 2008 football season. The Bomber study calls for the stadium to be ready in 2009.

While local politicians have supported the idea of a new stadium plan, no one is ready to commit money just yet. At least one reporter feels the Asper deal should be rejected. A lack of cash contributed to the project and options surround the club ownership are sited as reasons the proposal is lopsided in Asper’s favour.

When dealing with such a complex situation it is very hard to determine what is fair. Asper’s bid appears generous, effectively shelling out $65 million for a team worth at most $15 million. Looking at the details of the proposal reveals additional benefits to Asper. He is asking the city of Winnipeg to donate the land to him as part of the deal, the land currently controlled by the Bombers in a lease with the city. He is asking for two thirds of a new stadium to be funded by federal and provincial levels of government. That new stadium and commercial development will be in private control with all revenue staying private. It would be a very hard decision for governments to contribute to a stadium project when it was to reside in private hands right from the start, no matter how soon the economic payback in taxes could be achieved. The Asper proposal does provide for a much more economical stadium with more seating. Asper has also stated he is willing to donate the existing turf to the University of Manitoba, and help the U of M build a new stadium if necessary. Asper’s statement that

… if I build the stadium and then I go broke, they can’t lose. They can resurrect the team as a community-owned entity again and they’ll be able to do it with a brand new stadium.

is comforting, worrying and misleading all at the same time. It is meant to comfort the board of directors about the future of the Bombers under private ownership, that the community can gain control if it does not work out. It is worrying to the public who would wonder why Asper would think he could go broke on this deal. It certainly is tilted in his favour with public money and revenue streams and his net worth. It is misleading to the public as well as Asper knows he will not part with a stadium and football club for nothing, even if he is in financial difficulty. It is easy for institutions to go from public to private, but much harder to go from private to public.

Besides their feasibility study, the Blue Bombers do not have anything concrete in terms of options. Even their study is filled with estimates and options and does not provide answers to questions like location and stadium configuration like Asper provides. With no other bidders stepping forward, the Bombers will be faced with either accepting Asper’s bid or waiting, perhaps years, to find suitable development partners to work with them and the three levels of governments to get a destination complex built. While stadium seat licenses have been proposed to raise capital to allow the Bombers to start a project in cooperation with the provincial and federal governments, at the proposed $500 a license, only $10 million is raised with 20,000 licenses. That is only a quarter of what the Bombers need to get serious interest on the project. Therefore, the choice the Bombers have is whether they cut the Gordian knot in one bold stroke and accept Asper’s takeover or continue to look for an end in order to unravel the knot some other way.

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