Quebec and the NHL arms race

Subsidizing NHL arenas is ultimately a means of subsidizing a cartel

by Colby Cosh

Quebec and the NHL arms raceYou knew that when the smoke of an arena controversy became visible, the sports-as-culture warriors would soon come riding over the hill. David Asper pops up in today’s National Post to observe that most of us accept the idea of government funding for high-culture venues like concert halls, theatres, and galleries. “To define ‘culture’ narrowly, without including sports, is elitist,” he complains. (Strictly for form’s sake, I should offer the riposte: what’s so bad about elitism?) “If we are to have a legitimate definition of our national culture, it must be based on the totality of who we are and what we do. Places where professional sports teams play are no less houses of culture than the opera, the theatre or the art gallery.”

The question you should be asking Mr. Asper is “So what, rich guy?” He is, in my view, quite right; sports are part of our culture. I would even argue that they are a morally elevating part of that culture—a medium for the cultivation and display of courage, duty, justice, and fair play (a crucial, almost defining element of our civilization that is not at all the same thing as “justice”). But that premise is not enough, not nearly, to establish that massive public funding for professional sports venues is proper or necessary.

Turn his argument on its head and set aside high culture: what important cultural institutions don’t we depend on governments to build? Would Asper argue that restaurants don’t define a city or that they aren’t places where highly civilized imaginative pleasures are expressed? Doesn’t a good clothing store or a furniture shop have a clear cultural dimension? A shoe store? Aren’t hairstylists, skate parks, comic shops, Apple Stores, recording studios, and the parlours of small-town piano teachers all enablers of cultural expression? Should all these things be nationalized and paid for by the state?

The relevant fact about live National Hockey League games is not that they are not “culture” but that they are owned by a profit-maximizing cartel which limits access and squeezes every penny it can get out of that access. Here in Edmonton, where the owner of the Oilers is trying to get an arena built at staggering municipal expense, you often hear arguments to the effect of “Oh, we bought an art gallery for a non-profit company, so we can certainly buy an arena for a billionaire.” It already sounds preposterous when you put it in plain English like that, and it’s even sillier if you pause to compare the function of an art gallery to the function of an NHL hockey rink.

I am the last person on earth the Art Gallery of Alberta would pick as a defender, but an art gallery is at least intended to provide a public good in the strict technical sense: it takes assets nominally owned by wealthy people and makes them available, at a low price not set in a profit-maximizing way, to virtually unlimited numbers of people—without affecting the value of the assets. That, in fact, is the historical origin of public art galleries; they were designed to multiply the benefits of a shared cultural heritage by extracting paintings and sculptures from vaults and putting them before the public in a safe, secure, orderly manner.

NHL hockey is simply not a public good according to an economist’s definition. Game attendance, at least, fails both tests: it’s both rivalrous and excludable, in the sense that you don’t get to attend if you don’t have a ticket, and buying a ticket (at a market-clearing price or lower) excludes someone else from having one. That does not mean there aren’t external benefits from the sale of that private good, in much the same way that there might be positive net external benefits from living near a good bakery even if you don’t buy bread. But using public funds to subsidize that good would still constitute a relatively pure transfer (a theft, some might say) from the people who have no use for it to the people who do. It would be like specifically underwriting pumpernickel production on the premise that bread is, in general, a good thing that is an important part of Western culture (as it certainly is).

Asper, of course, doesn’t come close to acknowledging the wider point that subsidizing NHL arenas is ultimately a means of subsidizing a cartel—of using the gullibility and open-handedness of politicians in one city to threaten those in another. Nobody is discussing expanding the league, and further expansion is difficult in principle; even leaving aside the state of the NHL’s overall finances and the current health of the economy, about thirty teams seems to be the natural upper bound for a competitive structure that isn’t organized like soccer (with meaningful parallel competitions and relegation/promotion between divisions). Quebec’s arena proposal is a means of darting ahead in the queue for troubled franchises in other cities, franchises that are ceaselessly seeking their own sweetheart deals for cheap rent, non-hockey revenues, and other subsidies.

This action is understandable, since Quebec has already been cheated out of NHL hockey by a richer urban rival in the past. But the overall effect is to create an inane arms race, a contest to see who can throw the most money at NHL owners and players. It’s bad enough that cities behave in such a sordid, compromised manner; we really don’t need all three levels of government working together to raise revenues and salaries for a private profit-maximizing business.

Quebec and the NHL arms race

  1. Govt has already paid for thousands of hockey arenas across the country, so if hockey is counted as part of our culture, it's been well taken care of.

    When it reaches the professional level, where billions of dollars are involved, it simply becomes another sport and Canadians aren't interested in footing the bill for millionaire players.

  2. If the government was spending this money upgrading the thousands of centennial/memorial arenas in the cities across the country then I think Mr. Asper might have an argument. As it stands, you're right, he's defending a cartel's right to squeeze as much money out of local government as possible.

    (and I love hockey, specifically the Canadiens, and would be absolutely giddy if the Nordiques returned ;)

    • But..after 10 years in Edmonton the city will see in the ball park of $100 million/year increase. Its a good long term investment, and think of 104 ave and downtown?…like a new whyte ave.

  3. When I see a line-up around the block to buy the latest $180 Fringe Festival Home Jersey, I'll start equating hockey with culture, Mr. Asper.

    Don't you have a museum that needs funding somewhere?

    • Actually it's a CFL stadium he's interested in.

      Gail is the one with the museum.

  4. Yeah, the Aspers have had their hands out to the tune of literally millions in public funding for a weird, subjective "museum of human rights" — sure it's in Winnipeg, but call it national and get some public monies. Just how many of the Canadian public that paid for this will ever have access?

  5. Okay, Colby, now can you make the same argument using the more comparable theatre where a for profit business operates instead of seizing on Asper's incorrect inclusion of museums? While you do, you might want to take note that these endeavours often hit the taxpayer with a double whammy; not only is the building funded with taxpayer dollars, but in some cases so is the for profit production itself. On the other hand, the hockey team wouldn't directly be receiving taxpayer dollars.

    • I can't. But then, I'm opposed to public funding of theatre too.

      • I pretty much figured that and I think therein lies the real problem. We spend too much time arguing about whether or not we should fund these types of things instead of accepting that they will be funded, regardless of who is in power, and setting up guidelines to decide what will or will not be given consideration for funding. If we did that we wouldn't end up with every Tom, Dick and Péladeau holding their hand out.

  6. I admit to being torn about this – I agree with much of what Cosh says, but also have no trouble viewing municipal arenas/stadiums as "infrastructure" that does benefit a city as a whole, even if a greedy for-profit business is the primary tenant. Edmontonians like Cosh need look no further than the municipality owned/government-funded edifice a few blocks south west of Rexall Place to appreciate the dichotomy.

    I do think that, if some degree of subsidization of Cdn professional sports by the fisc is acceptable to Canadians, that things could be made a whole lot simpler and politically-palatable – just eliminate the express restrictions on claiming "entertainment expense" as a business write-off. These restrictions are difficult to defend as tax policy on any basis other than misguided sense that certain types of business expenses are "good" (i.e. buying stationary and office equipment) and others are "bad" (i.e. trying to gain new business/preserve existing business by taking clients for lunch). What presumably represents the major policy argument in favour of restricting tax deductions for marketing/entertainment – there is invariably a "personal element" that is realized when employees take clients to the ball game – is already accounted for through the taxable benefits regime. As to the actual impact on the federal budget, I suspect restoring full tax deductibility for entertainment expenses would cost the budget considerably more than, say, giving every Cdn city with an NHL team (or legitimate shot at getting one) $100M toward a new/upgraded arena), but it might still be an easier political "sell" than handing cheques over to the likes of Darryl Katz, et al.

    • There is a huge difference from a community arena, where minor associations of various sports and the odd private event, take place, and a great giant privately-held (and it is expected to be that way) which is held under intense lock-and-key unless one has paid a cartel-set market value price to enter.
      An art gallery has the benefit of having multiple events and long runs of shows; the maxim is being dictated by inflated salaries of $7m-a-year painters who hold out for more cash when they have the opportunity. Many galleries require subsidies because without them, they'd have to either raise the cost and then reduce its accessibility, or worse, close down.
      NHL teams have been preying on our taste for the pro game and essentially been run by carpetbaggers of the incompetent kind — where else would you have savant owners signing players to 50-80% raises and terms of 10+ years in a game where the variables change so rapidly season to season?
      Tickets are unaffordable for most and the owners provide no incentives for seniors or children to attend. I'm in agreement (for once) with Cash on this.

    • I feel like +1ing you for using the term fisc.

  7. David Asper is trying to get the government (any and all levels) to cough up more public money for his new stadium in Winnipeg…so of course, sporting venues = 'houses of culture' and therefore must be funded by the federal government!

    • Agreed! That's what I thought too.

      Why do Canadians have to fund the vanity projects of billionaire businessmen?

  8. Actually Johnny, if that is your real name, no amount of theoretical subsidy can make the Oilers arena non-rivalrous, or non-excludable for that matter (the secondary market for $8 tickets would be rather lively). Or maybe I'm just not fully appreciating the subtleties of your position on the irrelevance of economics textbooks.

    • If you subsidized it to the point that supply out-stripped demand, you wouldn't need to worry about rivalry. Imagine two NHL games a day, every day of the week, in an enormous arena. At some point, you'll have enough NHL and seats to keep the arena nearly empty – just like a gallery! Both a gallery and an arena are excludable (that's how they keep the pretty pictures inside them, rather than having them wander off to other homes).

    • Maybe you can explain to me how an art gallery is non-rivalrous and non-excludable then. It very much is excludable and rivalrous in the same way a hockey game is. The only difference between the two is that there is a surplus of demand for hockey games, whereas there is no surplus of demand for the AGA. I can charge for entrance into an art gallery and keep you from seeing the art if you don't pay, just like I can for a hockey game. The fact that the art gallery is subsidized to point where the admission price is nominal does not make it a public good. If there was a surplus of demand, the art gallery would very much be rivalrous.

      If we stretch the definition of public good to include things like art galleries, then the definition loses all meaning. This is such a stupid and pointless discussion. It's like Cosh learned a new word and couldn't wait to stick into a column.

      • And if art galleries are non-rivalrous and non-excludable, how come there are private art galleries all over the place? Public goods arise because market failures due to free riding. Where is the free rider issue with art galleries? I build a wall around the art and charge admission. Problem solved. We're not talking about the Eiffel Tower here.

        You guys don't know what you're talking about.

      • Certainly the art gallery would be rivalrous and excludable if it were actually run in that way (with, presumably, attendees having to pay for a fixed number of "seats"). Since it's not run that way, what's your point?

        • His point is the definition of excludable and rivalrous. You've confused statements about art with statements about art galleries and it's made a mess of your post.

          • No, you're imagining I said something I didn't. Art can be a private good, but when viewership of it is provided to the public in the way that public art galleries do, it's clearly a public good.

          • Well, I don't think either of those assertions are true. Providing free access to a place does not create a public good. It creates a public space. And, as for imagining what you've said, let me set out the quotes I imagine are wrong (in two separate comments).

            "NHL hockey is simply not a public good according to an economist's definition. Game attendance, at least, fails both tests: it's both rivalrous and excludable, in the sense that you don't get to attend if you don't have a ticket, and buying a ticket (at a market-clearing price or lower) excludes someone else from having one."

          • Colby, rivarous and excludable do not depend on how the good is managed. As long as art galleries have doors and you can get in my way, attendance at the gallery is rivalrous and excludable. These concepts depend on the naure of the good. Game attendance and gallery attendance have the same intrinsic characteristics. If access to the arena were subsidized (which it is when the costs of the arena are subsidized), you have the same situation you described for the art gallery: "it takes assets nominally owned by wealthy people (sometimes called team owners) and makes them available, at a low price not set in a profit-maximizing way (because it is publicly subsidized – and galleries can certainly be revenue-maximizing if they like – have you never paid extra for a special exhibit?), to virtually unlimited numbers of people (because arenas are rarely physically full and, when they are, the game is usually broadcast (often on a publicly subsidized tv station)".

            There is an argument that *art* is non-rivalrous, but, unfortunately, it's non-rivalrous in the same way a hockey game is non-rivalrous, The fact that you are enjoying it, does not detract from my ability to enjoy it (unless you stand in front of me).

          • The number of crazy parentheticals you have to drop in there to make the analogy work speaks for itself, I'm afraid. (Hockey games aren't rivalrous because someone might accidentally block the entrance to the rink. And since we're talking about game attendance, you aren't allowed to mention television; the benefits available from TV broadcasting of hockey would be just the same if Edmonton collectively decided to cheer for the Leafs.)

          • Why is attendance at a hocky game rivalrous then? Non-rivalry means that consumption of the good by one person does not reduce availability for others. Watching the game doesn't mean there's less game for others. Taking up a seat means there's less space in the stands for others, but that's true in any confined space (even an art gallery). I think if you're rejecting my argument because it has too many parantheses, you're basically conceding on the substance. It would be admirable if you coudl bring yourseld to admit it.

          • Um, yeah, it's true in any confined space, but a live hockey game occurs at and for a fixed time (while lasting long enough to require people to be allocated a particular space).

            And now you will say that if a particular painting were to come to Edmonton, it would also be available for live viewing for a (presumably much longer) fixed duration, and who knows, it might always be popular enough to require allocated standing room. So, yes, you're right: if we pretend hard enough and imagine improbably extreme scenarios involving the Mona Lisa, we can blur the distinction between art in a gallery and NHL hockey. The "substance" of my argument is that in the real world, art galleries don't function, in any relevant way, like a hockey arena.

          • And it's simply nuts to say "rivarous and excludable do not depend on how the good is managed." Of course they depend precisely on how it is managed: a road is a public good when it's open to the public, and becomes a club good when it's guarded by tollbooths.

          • Right, driving on a road is clearly non-rivalrous. That's why the English language has no word for "traffic jam". A publicly provided good is not the same as a public good.

          • Well, sure, economists refer to public roads an "impurely public good" because of the possibility of congestion. That doesn't mean the general categories don't exist. Maybe you can accept, in spite of my oversimplified presentation, that there's a continuum: some goods are almost totally public and others are hardly public at all.

          • Okay, so is it still nuts to say the definition of public goods doesn't depend on how the good is managed? Because the rivalrous nature of roads remains whether you impose fees or not…

          • Yes, it is definitely nuts not to accept the difference in degree of publicness between a toll road and an open-access public road. Or, for that matter, between a public art gallery and an NHL arena.

          • I'm not arguing that a toll road is as public as an open-access road, and I'm not arguing that an NHL arena is as public as a public gallery. I'm surprised you would pretend that I am. I'm pointing out that none of the them are public goods. "Public good" does not mean a good which is publicly provided. A school does not meet the definition of a public good, for example, but education is a public good – that's one reason we subsidize schools. Why do journalists find it so unbelievable that one of their readers might know enough about a specific topic that they could correct the journalist? You can keep insulting me by saying I'm nuts, but I can't imagine what you think you gain by that.

          • I can't imagine what you think you gain by pretending that we are talking about your definition of a "public good", rather than an economist's. If you think "education is a public good" irrespective of what kind of education it is and under what conditions it is provided ("how it is managed"), you are off on your own little island.

          • Colby, you are truly nuts. My definition of a public good is Hal Varian's definition – which I even double-checked in my little "Economics of the Environment" compiled by Robert Dorfman right now. You have no grasp of this concept at all and I would suggest you talk to an economist before you try to use it again.

          • Right – and how is the limited duration of a hockey game linked to the concept of rivalry in consumption? I think what you're saying is that sports arenas are often more crowded than art galleries And that really has nothing to do with whether they are public goods. Anyway, the public good aspect of a hockey team is tied more to concepts like civic pride, much like the public good of art galleris is cultural enrichment. Those are the non-excludable, non-rivalrous "goods" provided by the excludable, rivalrous spaces of arenas and art galleries.

            Also, you really should go to more art galleries when there's a special exhibit on – choose a weekend to make my point really clear.

          • Cosh,

            If the Oilers were owned by the city and were so bad that you could come across tickets for free with minimal effort (like the Flames in the 90s) and the stands were at best half full, how would that be different than an art gallery as it pertains to being a public good?

            Whether or not a good is a public good cannot be contingent on demand. The AGA does not have unlimited space. If there was sufficient demand, and there is for many galleries and museums, people would have to wait in line to get in. Just like I did at the Royal Museum of Ontario two weekends ago. It is excludable by its very nature. Not unlike an arena. The fact that exclusion does not occur because of insufficient demand is irrelevant as it pertains to it being a public good or not.

          • Those last two sentences should say rivalrous instead of excludable.

  9. Your not really being fair Cash… this is the NHL not the NFL. The entire league has to scrap by on a few billion a year in revenues. Moreover, the players barely make a living wage as it is, with salaries dropping dangerously low. This has resulted in players feeling forced to sign away many years of their lives and play well into their middle age simply to take care of their families. If for example the league was forced to invest a few percent of revenues towards maintenance of essential infrastructure like other industries, why scores of players would immediately retire and go into other more lucrative positions like warehouse operations, construction or improv theatre.

    • The suggestion that professional hockey players "barely make a living wage" is frankly absurd. Last I checked the poverty line wasn't in the six (or more) figures

  10. I have trouble equating Rembrandt to soccer, Shakespeare to Gordie Howe or Mozart to Raphael Nadal.

    Must be my age – I make a difference between culture and art.

  11. I think there are more "hockey" votes that there are "cultural" votes in Canada … besides, most of the cultural votes are in the cities who already vote Liberal, and of course in Quebec which values it's unique "Fremch" culture. The irony is that the new arenas will go into Liberal cities..!!!

    I say go ahead and make the investment in big hockey arenas across Canada and get the money from the Liberal cultural cabals .. as well as ridding us of those nepotistic Liberal activist NGOs who provide little to no value for Canadian taxpayer's dollars spent on futile causes.

    • Another thought … why doesn't Charest just pony up the federal gov'ts share and take it out of the Billion$$$ of transfer payments flowing into Quebec from the RoC … enough is enough …!!!!

    • -Liberal cultural cabals
      -nepotistic Liberal activist NGOs
      -no value for Canadian taxpayer's dollars spent on futile causes.

      Ladies and gentleman, what we have here is a textbook case of generalization. Tomorrow, we'll learn that all conservatives are religious fundamentalists who throw rotten eggs at pride parades.

      Labels: Helping us avoid issues since 1867

  12. I'm not sure where I stand on any of this – but the discussion of the nature of an NHL team as a public good has LESS to do with access to the arena, and much MORE to do with having the team in the city. Supply/demand argument about attendance is irrelevant when everyone can watch the games on TV!!

  13. Anyone ever see the documentary the Art of the Steal? – I know I am off topic a bit, but whatever

  14. I don't think Colby Cosh makes the case that popular sporting events should not be subsidized and unpopular art places should. He states that attendance at an NHL event is exclusive. Most people cannot attend whereas many people can attend art places. The art places and museums are generally meant for the public good whereas NHL games are designed to maximize profits for the teams' owners.

    • It's actually quite expensive to buy and present art, but art galleries are subsidized to make them accessible. We could stop subsidizing them and make them inaccessible, I suppose, and then Colby could make the case that we shouldn't subsidize them because they would then be expensive and profit-oriented…

      • Hockey games are exclusive, but by means of television, radio, hockey cards, etc an exclusive product becomes available to the masses – much like art in a gallery.

        I am the elitist, I enjoy watching elite hockey players cropped from a pool of hundreds of thousands. A game that requires awesome strength, agility, and hand-eye coordination – much more than watching some schmoe pluck away a 300 year old tune on a piece of wood with strings ;) – but I love art galleries,I love smokin a doob and wandering around .

  15. How exactly is gallery attendance rivalrous? When I buy admission I'm not depriving anyone else of a spot. Situation very different over at the hockey rink.

    • Depends what's on, surely? It is possible to find a nearly empty arena and a nearly full gallery…

  16. I'm just about all the way there with you, Colby, but I keep getting stuck on contemplating the huge amount of utility that having an NHL team brings to a Canadian city. I absolutely agree (with just about everyone I've seen or heard opine on this, I think) that pro sports should operate on their own in a free market, and frankly I think most of them would do very well if they did. Unfortunately, though, from the point of view of a city that wants to retain or gain an NHL team, it's not a choice between having the team play in an opulent taxpayer-funded arena or in a less-opulent privately-funded arena, but between having a team in an opulent taxpayer-funded arena or watching the team play in an opulent taxpayer-funded arena in some other city. Hardly anyone, I'm pretty sure, enjoys spending taxpayer money on these things, but so long as one city is willing to pony up, more and more will have to play catch-up to keep their teams; it's not an easy choice, but given the place that these teams have in their respective communities, I can't really blame cities for going to great lengths to keep them there. I am, personally, against such spending, but I know that there is potentially a very high cost for avoiding it. Short of having every state and province that might conceivably host a major sports team collectively agree to restrictions on arena spending, I'm not sure that there's an easy answer to any of this.

  17. I keep getting stuck on contemplating the huge amount of utility that having an NHL team brings to a Canadian city.

    Obviously the "huge utility" is less than the fans are willing to pay to actually see the games, else there would be no need to subsidize the arena, now would there? I think I can more plausibly posit the "huge utility" of lower taxes. When I attend a Canuck game I have to pay enough to repay (a portion of) the debt incurred by a private owner in building their facility; I think it is a bit rich to expect me to subsidize a competing team in Quebec, Winnipeg, or Edmonton.

    • This is the problem dcardno…you don't want to subsidize the competition in Quebec, Winnipeg or Edmonton? The people in those cities are already subsidizing your arena. The Sattledome was basically paid for entirely by the federal government.

  18. Everybody out west is blinded by the picture of conservative deputies wearing the nordiques jersey it seems.

    Quebec needs a new arena for sports, shows, conventions, you name it. The Colisée is an old smelly relic that isb’t suitable for international competitions, the nhl or most musical venues. It isn’t a luxury to replace it. The time gas come to replace it, it dates from the 40′s.

    That has been aknowlwdged by the municipal and provincial govts. Now, there is hope building because of this that with the failing NhL teams in the south, one may be moved to Quebec and that has generated a lot of passion in the public.

    Tge real issue is still to give Quebec, a pretty big city by Canadian standards, an Arena worthy of of that name. Nobody doubts for a second that if it were ONLY. for the NHL, the project wouldnt have the support it has.

  19. Brian – the Canucks don't play in the Saddledome (that would be the Calgary Flames), they play in the "Rogers Arena" (formerly GM Place), which was built entirely by the then-team owner, Northwest Sports and Entertainment. I believe there was some assistance from the City (that would be Vancouver, btw) in providing the required zoning, but no financial contribution from any level of government.

    Ben – I am equally opposed to the Federal government pissing money into a football stadium in Regina, although at least in the CFL the transfer from tax payers to millionaire players and multi-millionaire (or better) owners is much less, in absolute terms – possibly not relative to the players / owners net worth.

    Every serious study of the impact of stadiums and convention centres concludes that from the taxpayer point of view they are not much better than taking the money in small bills and burning it. Costs are invariably underestimated, while benefits are inevitably overstated and claim credit for huge amounts of activity that would've happened with or without the facility. If the good citizens of Quebec want a value-destroying toy, they are welcome to dig into their own wallets for it.

  20. "…and makes them available, at a low price not set in a profit-maximizing way, to virtually unlimited numbers of people—without affecting the value of the assets."

    Sounds like the CFL.

  21. Your view and post hits the nail on the hammer!…even though i dont agree on some points

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