Tailor-made for Expos
by DAVID JOHNSTON
The ability of the Montreal Expos to attract money for the club's proposed downtown stadium will receive a major boost if two key recommendations contained in a House of Commons sub-committee report are adopted by the federal government, sports economists say.
The first recommendation would give small and medium-sized companies that buy seat licenses for the new stadium the right to deduct the full cost of the licenses from corporate income for tax purposes. At present, all companies are entitled to a 50-per-cent deduction.
The second recommendation - far more significant, the economists say - would effectively allow the Expos ownership consortium to transfer to a major investor or investors a tax deduction equal to the stadium's construction cost.
Efforts by the consortium to buy out managing partner Claude Brochu and relaunch the downtown-stadium plan are proceeding well, club chairman Jacques Menard said in an interview before the sub-committee issued its report in Ottawa Thursday.
Menard said the Expos have shelved the original blueprints for a $250-million stadium and are entertaining bids from three competing engineering consortiums to build a different, cheaper stadium on federally owned land two blocks south of the Molson Centre.
He also said that "negotiations with Brochu are progressing" and major-league baseball has been monitoring those talks over the past 10 days. He said he expects the Expos will have a new ownership consortium and lead partner by Christmas, and the winning bid from the three engineering groups should be unveiled to the public by mid-January.
Denis Coderre, a Liberal member of the sub-committee that made 69 recommendations to help professional and amateur sport in Canada, said in an interview yesterday that the sub-committee had the Expos in mind when it formulated its recommendation calling for a loosening of attribution rules for capital-cost allowances arising from stadium construction.
Under current tax rules, the Expos ownership consortium, as owners of a new stadium, would be able to claim capital-cost allowance at a rate of 4 per cent a year. In the first year of operation in, say, a $200-million stadium, it would be able to deduct $8 million from revenues, and 4 per cent of $192 million in the second year, and so on.
But the sub-committee is recommending that the Expos be allowed to claim the full $200 million right away - or transfer it to any third party it wishes.
This transfer right "is really the answer to the Expos' problems," Coderre said.
Marc Lavoie, a professor of economics at the University of Ottawa, said in an interview: "It means the Expos could, for example, approach General Motors and say, 'We're building a $200-million stadium, and we'll transfer to you our right to $200 million in capital-cost allowance - at a 40-per-cent tax rate on corporate profits, that's really worth $80 million to GM - and sell it to them under less than its real value, for, say, $75 million.' "
Patrick Dery, a tax-policy researcher for the Bloc Quebecois, which is opposed to public funding of stadiums, said the Expos probably would try to spread the capital-cost-allowance transfers to more than one stadium investor.
"Bombardier, for example, which has nothing to do with the consortium, could put up $10 million for the construction and have transferred back to it $10 million in capital-cost-allowance entitlements," he said.
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