Chatham-Kent staff will be seeking direction from council this year, whether or not an OHL-sized arena is something the community wants.
Don Shropshire, the Chief Administrative Officer for Chatham-Kent, made a presentation to council on Monday night, which included details about the recent situation with the Plymouth Whalers and the tax impact if Chatham-Kent were to ever pursue an arena suitable for the OHL.
“We don’t want to be in a position where we do this reactive response,” he said.
“Administration would like to come back to this council and get some direction, whether that is to move forward putting money aside for the consideration of an OHL franchise. If that is council’s direction, we are pleased to do that. We might want to start building a nest egg instead of borrowing on a 20-year debenture.”
“If the decision is not to seek an OHL franchise, that is also another decision we can make. Then we can stop entertaining proposals that come forward, because everyone of these things requires a fair bit of time and energy to respond to and it created expectations in the public, either positive or negative depending on people’s perspective.”
Shropshire said Chatham-Kent has been in OHL talks several times in the past.
“There was an initial offer from the Hunter brothers to bring a franchise in the 1990s… that was not accepted,” Shropshire said. “There were also three expressions of interest by the Ice Dogs, the Otters and most recently the Whalers. In each case, the franchise required the Municipality would build a new arena and depending on the franchise, the requirements ranged from a 4,200 seat arena to a 5,500 seat arena.”
Shropshire said this generates a lot of excitement in the community and many people in the private sector stepped up and were willing to purchase 10-year leases for luxury boxes.
However, Shropshire said there is also a lot of angst among the Junior ‘B’ and Junior ‘C’ teams in the community about “how this is going to impact them.”
Shropshire said the current “formal position” by staff, as noted in the parks and recreation master plan, is to build a twin pad arena when it was time to decommission two of the three arenas in Chatham.
“Our existing arenas, while they may not be as attractive as some of the existing arenas in southwestern Ontario, they are all very functional and there is no reason why any of them need to be decommissioned, they have lots of life left,” Shropshire said. “It’s just a question how much we want to invest in them and how we would like those arenas to continue operating.”
During the past three discussions with OHL teams, Shropshire said C-K spoke to three different builders and the cost to build a brand new arena to house a OHL team, varied from $28 million to about $55 million.
Shropshire said borrowing that money with a 20-year debenture would raise the overall cost to the tax payer from $28 to $41 million, or for a $55 million facility to $81 million.
“That would result in an increase in taxes, if we were to pick up the entire cost ourselves, we would need to raise our taxes 1.5 to 3 per cent for the next 20 years,” he said. “That is a huge impact on the tax base. We’re not going to come back and make a recommendation to council like that that unless we’ve got some really good numbers on the table.”
Typically, if an arena is going to be built in a community, they ask the other levels of government to participate in the funding on a one third each basis, Shropshire said.
“If there were some programs in place where we could attract that level of support from the province and the Federal government, administration would be a lot more likely to bring to council a recommendation to replace our arenas, but in the absence of those type of funding programs, administration can’t in good conscious some to the tax payers and say fund the entire amount,” he said. “Whereas, if we were more prudent with our timing and scheduling we could get up to two thirds of the cost covered.”
Private/public partnerships are another option, but with no arena in the province of Ontario that makes money, nobody is interested in operating or investing in something that requires on-going subsidy.
“Most recently, when the Whalers were coming to us and they had some very tight time frames… we posed the question, whether they would be interested in a public/private partnership and they said no they were not interested, they were just interested in renting a facility,” Shropshire said. “Any recommendations by administration coming forward would be to maximize levels of funding from either the government or other members of the private sector.”
Shropshire said staff surveyed cities that have OHL franchises, and if those arenas are to get close to break-even, about 80 to 82 large events a year would need to be held.
“This would be something that would not fit in the Capitol Theatre, it would have 2,500 number of seats being filled,” he said. “An OHL franchise gives you 34 regular season games and three exhibition games. In any given year you may be in the playoffs, but that is not where you’re going to build your business case.”
Shropshire added: “You’re looking at about 45 addition events a year, but we talked to the people running the other facilities, and they said a community the size of Chatham-Kent could expect to achieve 10 to 12 additional events a year.”
He said this would project to an operating subsidy of $600,000 to $1 million a year.
The current subsidy for all 10 arenas in Chatham-Kent is approximately $1.8 million.
Shropshire said staff will be coming to council with a report in 2015, sometime after the budget deliberations.
