Do you hear that loud sigh? That is the sound of Ottawa Senators president Cyril Leeder and his colleagues breathing collective relief.
Earlier this month, federal Finance Minister Jim Flaherty nixed the provincial Liberal government’s bid to cancel a corporate tax break for sports and entertainment tickets.
And the provincial economy is better off for it.
Ontario is coping with a $16-billion deficit, and has said that this particular corporate subsidy costs $15 million annually.
Under the current rules, companies are allowed to write off 50 per cent of all live sport and concert tickets.
Surely, Premier Dalton McGuinty could have picked another one of economist Don Drummond’s 362 recommendations to try and reduce the deficit.
Sport and tourism are effective economic drivers; putting butts in the seats and the suites is good business.
Earlier this month, Leeder argued that the tax deduction was crucial to Sens ticket sales and that the franchise would flounder if the tax break were scrapped.
As a small market team, Leeder said the Sens organization relies on corporate sales at Scotiabank Place – the team’s home rink – to survive.
Corporations currently occupy all of the arena’s 120 luxury suites and account for 50 per cent of all season ticket sales.
Ontario’s other hockey team – the hated, yet obscenely profitable Toronto Maple Leafs – would have no trouble existing without the tax credit. The National Basketball Association’s Toronto Raptors and the Major League Baseball’s Toronto Blue Jays would also be able to survive the proposed cut.
The Senators’ profitability is on thin ice. Their $2.8 million in operating income pales in comparison to the Leafs’ $81.8 million.
It’s too bad Warren Buffett wasn’t part of Drummond’s economic task force. The legendary investor could have adapted his ‘tax the rich’ budget-savings theories to save the province some money. Recommendation number 363: tax the Leafs – er – rich.
For a small market team like Ottawa, sold out arenas, and sold out luxury suites in particular, are crucial to economic sustainability.
When the Winnipeg Jets were resurrected this past off-season, NHL Commissioner Gary Bettman stressed that in order for the team to be sustainable in such a small market, it would have to sell out every box and seat for every game.
Winnipeggers answered the call and have their team locked up for at least five years. But as with the Senators, any hit to corporate commitments will affect revenue and the future of the franchise.
The Ottawa team is currently seventh in league attendance and is in the minority of teams that have sold more than 100 per cent of its home tickets this season, according to ESPN’s 2011-2012 NHL attendance report.
On top of boasting sterling attendance numbers, the Senators also have the cheapest tickets of all seven Canadian NHL teams.
The organization is doing something right.
The 50 per cent figure has been the source of much debate since it came to light. Opponents of the tax break would argue that taxpayers are paying for half the private box or season ticket, but that’s not how it works. The actual public contribution is a lot less damaging on the books than people think.
It would be interesting to learn how many people actually knew about the tax break before a couple of weeks ago. For sports fans, ignorance is bliss.
If the ruling had passed, corporations might not have chosen to cancel their ticket subscriptions after all. In this sense, Leeder may have been a bit presumptuous.
It’s hard to sympathize with a sports franchise that rakes in millions of dollars in profit and pays its players accordingly, especially in today’s fiscal climate.
But it’s indisputable that sports teams with committed fan support – like the Senators – bring economic development to the community. In a small market like Ottawa, the economic benefits from a sold-out arena outweigh the corporate sports and entertainment tax burden on the government’s books.
Hockey fan or not, Jim Flaherty helped out the Ottawa Senators organization.
Score one for the little guys.