City council for Markham, Ont., will receive two memorandums of understanding from business groups on Monday that Mayor Frank Scarpitti claims will show the taxpayers will not be on the hook for a $325-million, 20,000-seat arena, but important questions about the deal remain unanswered.
One MOU is from Graeme Roustan, the controversial arena promoter who is the principal of GTA Sports and Entertainment, the company that wants to oversee the construction of the arena and then lease it from the city. Roustan told reporters the MOU calls for his company to be responsible for nearly $200-million – half of the arena’s construction cost, $162.5-million, plus $32.5-million in long-term lease payments for the arena and any cost overruns. The other MOU supposedly comes from a group of property developers that promises to raise $120-million plus interest over 20 years to cover the rest of the arena construction cost. However, this group is said to have raised just $70-million so far, which means Scarpitti needs to find another $50-million to get the arena built.
Under the original financial deal the city was considering, $162.5-million of the construction cost was to come from GTA Sports, with Markham raising the other $162.5-million through charges to developers. But opponents to the arena deal said the developers would simply pass those costs on to new homebuyers.
More details are expected to be revealed Monday night at a special Markham City Council meeting, which will allow the public to ask questions and speak to council about the arena project. Scarpitti and Roustan are seeking to have the city formally adopt a financial agreement with the arena promoter, but a vote on that seems unlikely until the Mayor can say where he will get the remaining $50-million.
One question is just where GTA Sports and Entertainment expects to get its share of the money. Roustan lists two investment banks, Canaccord Genuity and Jeffries LLC, as being part of the bid and he does have an association with developer Rudy Bratty. But the agreement with the city is conditional on financing and there is no sign the money has been nailed down.
Another question is the identity of the developers in the group that gave the second MOU to Markham. The makeup of this group is unknown and it is also unknown if the developers plan to recoup their costs through charges to homebuyers.
One provision in the MOU calls for the development group to take over the arena lease after 20 years. It would get the lease long enough to earn back 25 per cent of its contribution.
Finally, there is the big question of how the arena will pay for itself and not turn into a white elephant such as Copps Coliseum in Hamilton, which was built in the 1970s in hopes of attracting an NHL team but never did. Roustan is keeping quiet about the possibility of an NHL team after he brought former NHL Players’ Association executive director Paul Kelly to a council meeting several months ago. Kelly told council the NHL wants to put a second team in the Greater Toronto Area, but NHL commissioner Gary Bettman is adamant, saying it again last week, there are no plans for expansion.
Arena experts say without a major tenant such as an NHL team, a large arena cannot meet its operating costs. Roustan has argued the Markham arena would not need such a tenant because it can attract 130 other events per year, a number more than twice as high as Toronto’s Air Canada Centre gets. But Roustan has not offered any concrete financial evidence this would work.