NHL: Why It Doesn't Make Sense for Owners to Expect the City to Pay

Steve SilvermanFeatured ColumnistOctober 18, 2012

A deal between Edmonton Oilers owner Daryl Katz and the city for a new arena appears to have collapsed.
A deal between Edmonton Oilers owner Daryl Katz and the city for a new arena appears to have collapsed.Bruce Bennett/Getty Images

There are many advantages for any city government to offer its backing and support to professional sports teams.

That includes NHL teams, who may need tax breaks, bond issues, loans and city money to complete arena projects.

However, no owner should make his purchase of a team contingent on getting city help when no agreement exists previously.

Hockey teams don't have divine rights to backing from the local government. Trying to leverage their hometowns to lower the costs of arena building or renovation certainly makes the investment that much more attractive to the the team owner, but financial inducements can't be expected.

Here's why:

The investment of capital into a new stadium or arena rarely pays off for the city.

According to Adam M. Zaretsky of The Economist, the rate of return on sports stadiums is less than that of other projects. "In addition," Zaretsky added, "evidence suggests that cities and metro areas that have invested heavily in sports stadiums and arenas have, on average, experienced slower income growth than those that have not."

Those same politicians may try to point as an arena venture with a team as a money-making scenario for the city, but Zaretsky points out that is rarely the case. He said that it's not simply a matter of an arena being profitable, but whether the arena would be more profitable than another private business that would be situated in the same location.

Sometimes a city government will back an arena proposal that will benefit a National Hockey League team, because the city fathers believe it will generate more civic pride and give the residents something to look forward to and something to feel good about.

Politicians are also not above using a stadium or arena venture as a political victory that they can use to maintain their jobs.

Team owners are not above using the threat of moving out of a city to get what they want from the local government.

That may be going on right now in Edmonton, where Oilers owner Daryl Katz had come to an agreement with the Edmonton City Council on a new $475 million arena last year with construction to start in 2013.

However, Katz is asking for additional money, and the Edmonton city fathers have questions about the project that the owner has not answered.

As a result, the deal collapsed Oct. 17, according to the Toronto Star.

Katz had earlier expressed interest in a new arena that is going to be built in Seattle, and then apologized for that interest.

However, he has not said that he would never move the Oilers.

Therein lies the problem for governments that want to say no on stadium an arena projects; taking a team out of a city is often akin to taking the soul out of it.

The Dodgers left Brooklyn, the Colts left Baltimore and the Browns left Cleveland.

In hockey, the beloved Nordiques left Quebec City.

There are decent owners who would never rip a team away from the city it calls home. But there are many owners who have shown that they are willing to do just that in order to make more money.

That's why it's so difficult for cities to say no. No mayor or city government wants to be known for letting a team leave.

That becomes a legacy that is nearly impossible to overcome.