Danny’s shot at subsidy goes wide

Brian Jones
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So much for the lack of a government subsidy being a deal breaker.

Public money wasn’t needed after all for Danny Williams to convince the Manitoba Moose to amble down the Trans-Canada Highway to Newfoundland.

Before we debate whether the new American Hockey League team in St. John’s should be called the Moose, the Swilers, the Caps or the Dannys, let’s send to the penalty box the invalid and illogical arguments that were presented in favour of handing over taxpayers’ money to a pro hockey team.

Most are minor penalties, although some warrant a misconduct.

Williams’ histrionic exaggerations last week earn him a five-minute major for high-shticking.

• “The team will create $10 million in spinoffs.” That word, “spinoffs,” gets tossed around more than a puck at practice. It does not mean $10 million — or whatever amount someone declares the “spinoffs” will be — will come back to government coffers, as many people think. The word is slang for the “multiplier effect,” a concept in economics that says Activity A will lead to Activity B which will bring about Activity C, and so on, all of which involve spending money.

The multiplier effect — or spinoffs — means spent money will circulate through various people and companies. A spinoff is not a tax or revenue that accrues entirely to the government. You go to a game, pay for parking, buy a beer, get your kid a Moose/Swilers jersey — that’s the multiplier effect in action.

Only a portion of that money makes its way to the public purse.

• “The payroll tax will enable

the government to earn back its $500,000 subsidy.” No, it won’t.

Suppose the Moose/Swilers have a payroll of $10 million. The provincial payroll tax is two per cent. That’s $20,000 payroll tax per

$1 million of payroll.

Some of my fellow hockey fans apparently live in a universe where $200,000 is equal to $500,000.

• “The tax on ticket sales will give the government back its $500,000 subsidy.” No, it won’t.

The Moose/Swilers will, hopefully, create some magic on the ice, but they won’t magically inject cash into people’s pockets and provide them with more disposable income. That’s another economics term, describing the amount of money a person can spend on wants rather than needs — after taxes, rent/mortgage, food and such are paid for.

A hockey team will provide people with one more option for entertainment spending. Go to a hockey game or go to a movie? Hockey game or bowling? Wherever entertainment dollars are spent, the sales tax total going to the government will be the same. Disposable income, not a hockey team, determines whether the government’s sales tax take goes up.

• “A $500,000 subsidy is less than $1 per resident of the province.” It sounds convincing, but is irrelevant. By this logic, Worthy Cause B should receive $2 per resident, and Worthy Cause C should get $3. Oh, look — Acme Inc. has an economic proposal just as good as Danny’s that needs only $1 from each resident. Before you know it, you’ve hit $100 or $500 or more.

• “If we don’t provide an annual subsidy, we won’t get an AHL team.” That is, like, so last week.

Pro minor hockey

Here’s the best reason not to provide public money to a pro hockey team: imagine it is 2031, and you’re at the local rink to watch your grandson — or granddaughter — play hockey.

Like most St. John’s arenas, the facility is decrepit. The ice is bumpy and rutted. The boards are worn and splintered. Rusty droplets fall from the rafters onto the discoloured ice.

Another hockey parent comments, “You know, instead of giving Danny Williams’ hockey team

$10 million over the past 20 years, we should have built a twinplex.”

Brian Jones is a desk editor at The Telegram. He can be reached by email at bjones@thetelegram.com

Organizations: Manitoba Moose, American Hockey League, Moose/Swilers Trans-Canada Highway The Telegram

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Recent comments

  • james
    June 04, 2011 - 08:27

    by the way nobody else wanted this team

  • james
    June 04, 2011 - 08:21

    why did the other teams leave st, john,s better not ask that question

  • Taxpayer
    June 03, 2011 - 18:29

    I am not certain how it when with the Leafs, but who pays the salaries of the hockey players. Does their pay come out of proceeds of the ticket sales? I seem to remember some talk of the NHL team paying the salaries, but was it just in from the ticket sales and out to the players. Perhaps we could get a definitive answer from some one in authority not just the know it all posters. It seems that with the arenas and the teams it is always confusing who is paying for what. If the salaries come out of the gate sales and other concessions, then the gain for the province is ZERO. Just another case of the great minds of Newfoundland not being able to tell the forest from the trees. And so it goes in Newfoundland.

  • David
    June 03, 2011 - 14:52

    I think Mr. Williams should explain how, after threatening the general public with dire warnings about how this was "our last chance" and that this opportunity would "slip away", that he then went ahead and did it without one cent of the "absolutely necessary" public subsidy. That now looks like an absolute, 100% bald faced lie. But it couldn't be....St. Danny would never do such a thing to his beloved flock?! Baaaahhhhhhh.

  • Ed Hollett
    June 03, 2011 - 14:31

    Oddly enough for all the economics whiz-kids making comments here and criticising Brian, it turns out the provincial government won't invest a penny and will make all the taxes and other similar revenues it was promised if it spent $500K annually some people originally wanted them to spend as an "investment".

  • Debates are critical to good economics
    June 03, 2011 - 14:10

    Brian you have created a good debate on this subject! That is what we need in our Schools, Colleges and University in the province of Newfoundland and Labrador. Debates in our Schooling Institutions have always been absent in our province, but now, with articles like yours, if our educators have one iota of sense, and they read this, they will see how important debates are, and they will ensure that this debate carries on. It is what makes a knowledgable and intelligent populace. Long may The Telegram's big jib drawl, as long as it allows articles such as this one. Thanks Sir!

  • sb
    June 03, 2011 - 13:46

    Agree with Glenn...Mr Jones should really brush up on his economics and tax facts ....the provincial income tax alone on this volume of compensation would "payback" the 500k...and the spinoffs or multiplier effect (call it what you want) are exactly that...."buy a jersey..buy a beer"...is that not a spinoff for the individual selling this stuff? I'd say yes!

    • BB
      June 04, 2011 - 00:06

      Talk about not knowing your tax facts, the players will be paying income tax from their province of residence which more then likely won't be in NL but their home province. Like the NL's working out west and living here they pay NL tax not the province that they are working in income tax.

  • chief
    June 03, 2011 - 12:16

    Glen, could not have said it better myself.. this "Brian" fellow is looking at the tree instead of the forest.... takes all kinds to make the world go around..... haha... how about "more slips than rabbits" haha

  • Taxpayer
    June 03, 2011 - 09:55

    Your poll on Thursday said that 18% would buy season tickets and we know that some of those will back out when the time comes to put the money down. It looks like our sure thing AHL team may have a hard time surviving. It is a fact that all business plans not just those for sports teams are 50% hope.

    • Wince
      June 03, 2011 - 10:53

      Did it occur to you that the poll isn't only open to St. John's residents? You do know people on the West Coast, Ontario or where ever can vote, right? 18% makes perfect sense to me... I would expect people on the West Coast, Ontario or any location that is not the North East Avalon to vote no. Stop looking for a smoking gun when there isn't one... Telegram web polls... web polls in general, are hardly scientific and should be taken with a grain of salt.

    • Taxpayer
      June 03, 2011 - 18:10

      Wince just to clarify that logic goes for the YES vote also.

  • Glenn
    June 03, 2011 - 09:30

    Hi Brian, You mentioned the Payroll tax of 2%, but you forgot about the Provincial Income tax o the salaries paid to these players, coaches, support staff, etc. It's going to add up quickly to return the $500,000. Also you mentioned moving around entertainment dollars but it's always a choice. I have no intention of spending $1000/year on movies, but I will definitely put a large dent into that number to attend hockey of this quality. So my choice is saving or spending. There are not 6000 people attending the theatres 40 mights during hockey season. A higher ticket price is definitely a solution, nothing wrong with user pay. Here's to a successful, long-term hockey team that we can call our own. Good luck Danny.

  • Stop having the wool pulled over our eyes.
    June 03, 2011 - 09:14

    The statement that this Manitoba Moose Team was the last shot at the can for St. John's ever getting another AHL team , if it didn't accept this present homeless team was poppycock. At the moment no other city wants it or else St. John's would not be in first place running for the prize, unless, of course, it offered a substantial amount more with more generous terms for that team . In other words I will aver that Anything Anywhere by Anyone is up for grabs if the terms and price offered are right. Who was bribing Newfoundlanders and Labradorians in this case? I want this type of pressure on Newfoundlanders and Labradorians to stop immediately, we lost our country and our natural resource base through this type of black-mail tactics. Today we learned the Muskrat Falls loan assurance is not in the Federal Budget, is that the same type of past tactic being used here in order to put pressure on those who are against this project, which is great for the Maritimes and the rest of Canada, but not for Newfoundland and Labrador, since it will end up paying the bill for it again, just as we did for the Upper Churchill Project? Newfoundlanders and Labradorians have to become much in tune with their surroundings than they have been over the past 550 years, or we will lose the rest. The time is long over due for Memorial University of Newfoundland and Labrador to point out what is going on here and what has gone on for the past 60 years under the sly and deceitfulness political manoeuvres of Canada . MUN, too, was far too quiet over the past 61 years and because of its silence a lot of wool has been pulled over Newfoundlanders and Labradorians eyes. Yes, my fellow Newfoundlander and Labradorian before it really is too late take notice of what is percolating around you, you will be all the better for it down the road!

    • W McLean
      June 03, 2011 - 11:22

      Hi, Agnes!