“If the team can get a new arena built then it can finally start turning a profit to compete against the other top clubs.” You hear a statement like that all the time but you don’t hear all the necessary steps needed to a) get an arena built and 2) make it a profitable entity for the team and city. Don’t you hate when people list things that way? I have two points 1) Blah blah blah and b) Blah blah blah. Let’s just stick to one form of measurement; we don’t say that picture frame is 8 inches X 22cm. 

I’m going to focus on the process of building an arena in the US because in Canada the necessary steps to getting a development project like that approved include: prayer, divine intervention and a miracle. Getting the Canadian government to subsidize a sports arena is a little like asking a lawyer to work pro bono. 

The Basic List 

• $200 to $250 million (USD) to build an 18,500-seat arena:  The money can either come publicly (i.e. Government sourced from taxpayers) or privately from investors. The likely scenario is a combination of both.
• An approved site: The land acquisition cost for the new arena depends entirely on the location and market value of the city. A downtown location will cost far more than a site in the middle of a cornfield past the ‘burbs. Now you know why it takes 45 minutes to drive to the middle of nowhere to watch a playoff game.
• Some form of corporate buy-in: Steve McNair and Saku Koivu stand a better chance of going through an entire season without injury than a team being able to secure 100% of the necessary funds publicly; it just doesn’t happen. Corporate buy-in also includes all the NASCAR type advertising you see plastered around the arena.
• Other sources of ticket revenue: A conservative estimate of non-sporting events and non-conventional sporting events (i.e. lacrosse, arena football) that will occupy the arena and supplement revenue while the hockey or basketball team is on the road or in off-season mode.

The Extras: Looking past the basic elements of building an arena there are plenty of extras that will help get the arena funded and start bringing in a profit.

  One-time Revenue Generators: 

	Would the Oilers fair better if they played in an "uplifting" arena?

• Corporate Naming rights: This is now commonplace and an instant revenue hit for the arena. The average naming rights deal for an NHL team is about $3.2 million (USD) annually.  Of course choosing the wrong corporate sponsor could leave your team as everyone’s running gag. I wonder if the Oilers would be able to get up for all their games if they played at the Viagra Centre?

Permanent Seat Licenses: PSL’s are a one-time fee that can be charged to fans to act as a sort of guaranteed reservation. When a fan purchases a PSL they are guaranteed a specific seat for the duration of the franchise.  This also includes the ability to transfer the seat reservation to other family members or friends rather than just giving it up. Of course yearly season ticket renewal charges still apply. In the NHL the Columbus Blue Jackets currently use the revenue generating technique and charge in the range of $500 to $4,000 per PSL. If you sell 12,000 PSLs at an average of $1,500 it equals $18 million of immediate revenue.

Funding Sources: 

• Rental Car & Hotel Tax: When you don’t want to furor the city’s residents with a tax hike, take it out on travelers and tourists to your fine city.

“Welcome to Colorado! Your hotel room total is $80 and with the tax it comes out to $320. By the way would you like a program for the Nuggets or Avalanche game? Not interested in attending a game? You should be. You just helped us land our latest free agent acquisition. Be sure to visit our hotel again around March - the Avs need to land a veteran goalie. ” 

	Revenue bonds can be as risky as a Tom Cruise movie.

·        Revenue Bonds: The most popular and emerging form of private funding is issuing revenue bonds staked against future revenues. Investors purchase revenue bonds against projected income streams that a new arena would bring such as attendance, luxury suites, and sponsorship. It’s a risky investment because sports is a such a fluctuating market so typically these bonds carry high interest rates. It’s a little like issuing a revenue bond against Tom Cruise’s next film. It could turn out to be another ‘The Last Samurai’ or ‘Jerry McGuire’ although you can’t discount he may produce another ‘Vanilla Sky’ or ‘Eyes Wide Shut’ (which interestingly enough is the motto of Chicago Blackhawks management.) 

Typically in the end, arenas never end up delivering the financial, economic or employment windfalls first forecasted. While they do positively impact a city in terms of more entertainment and increased tourism, arenas or ‘entertainment complexes’ should simply be viewed as necessary to compete in today’s sports world. What about the public money that was borrowed in the beginning to fund the arena? Well, you should look at the money the same way you do when you lend money to friend who never pays people back; I’m not expecting to get paid back but if I do it’s a bonus.