The City of Abbotsford has wrested itself from a money-losing deal with the Calgary Flames by agreeing to pay the hockey team $5.5-million to avoid projected future losses of $11-million.
The deal, announced Tuesday, marks an expensive end to an expensive foray into higher-end professional sports for Abbotsford, which eight years ago envisioned a new modern arena and big-name tenant to draw fans to the building.
The building was finished in 2009 and the Flames agreed to move their top minor league team to Abbotsford. The city the following year agreed to a decade-long deal that had citizens subsidize losses and share in profits. There were no profits. With poor attendance and so-so performance, the Abbotsford Heat lost money every year and the city had already forked over $7.2-million to the Flames before Tuesday's deal.
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The Flames were persuaded to leave town for $5.5-million, as Abbotsford was staring at annual losses of about $2-million, estimated at a total of $11-million, before the deal expired. The hockey team likely will move to New York State. While Abbotsford has cut off potential losses, it is left with a gleaming arena – including 15 luxury boxes – with no primary tenant.
Abbotsford's experience is hardly unique. Cities across North America compete for professional sports teams and subsidize their operations to win favour. Abbotsford was the fourth home of the Flames' minor league team in less than a decade. On a bigger scale, cities such as Miami have heavily invested in a baseball stadium, only to be saddled with debts and a mostly empty ballpark. In Canada, Edmonton recently decided to underwrite the building of a new hockey arena, the result of an extended process during which the billionaire owner of the Oilers threatened to move the franchise.
What went wrong in Abbotsford is the result of ambition and unrealistic projections. Abbotsford, in the mid-2000s, was feeling confident and saw other smaller municipalities invest in similar infrastructure. City council backed the idea of an arena, but support among citizens was middling from the start.
A November, 2006, referendum saw about one-quarter of voters cast a ballot on a debt-funding proposal for the arena, and a little over half were in favour, 54.8 per cent.
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Boosters pictured a busy building, but it never happened. The main reason was the poor fit of the tenant, the farm club for the Flames, who are archrivals of the Vancouver Canucks. People in Abbotsford and the surrounding area are largely fans of the Canucks and the idea of supporting the Flames didn't resonate.
"This is a much stronger Canucks market than was anticipated," said Mayor Bruce Banman in an interview Tuesday. Mr. Banman was elected in 2011 and has previously said the business plan for the building was "overly optimistic."
Another geographic problem was that the Heat are by far the most distant team from any other in the American Hockey League, which is one rung below the NHL. The nearest AHL cities are in Iowa and Oklahoma, 3,000 kilometres away by road. Most AHL teams – such as the Utica Comets for the Vancouver Canucks – are located in the northeastern United States. The distance meant added costs for travel and less time for practice.
The City of Abbotsford has been considering a change for a while. The Canucks last year considered it as possible home for their AHL team but decided against it.
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While Abbotsford looks for a new tenant for its arena, and opens it up for more community access, the debt remains. According to city budget documents, the city is making annual interest payments of about $2.5-million.
The city is also chipping away at the debt, paying about $1.6-million annually against the principal, which stood at $47-million last Dec. 31.
The city's annual budget is about $260-million.