Government Proposal

There has been much optimism lately, without much fact to back it up, from the group of owners trying to keep the Expos in Montreal.
But a new ingredient was added to the mix yesterday: a healthy dose of passion.

And along with that passion, some details emerged about what will be contained in the economic plan to be presented to premier Lucien Bouchard within the next two weeks.

While embattled president Claude Brochu took in the Expos' 1-0 loss to the Atlanta Braves yesterday, partnership committee chairman Jacques Menard and vice-chairman Raymond Bachand spent the day in Florida on conference calls, working on details of when and how the stadium plans will be presented, how non-profit organizations like Baseball-Quebec will be involved in a stadium that will ultimately belong to the people, and when negotiations with the federal government will begin on a long-term lease for the land on which the proposed downtown stadium would be built.

It's now clear that the business plan to be submitted to Premier Lucien Bouchard upon his return from a European trip will include a loan from the government - perhaps $100 million - that would be repaid with the income taxes collected from the players.

It's also clear that the politically connected group has been working behind the scenes to ensure that the proposal ultimately presented to Bouchard will not be rejected.

The argument is, of course, that if the team leaves Montreal, those millions in income taxes will also disappear. Bachand threw out the following numbers yesterday:
The Expos players pay income tax on 41 per cent of their salaries to the various levels of Canadian governments. With a payroll near the league average by the time the team moves into its new stadium - $50 million U.S., or $80 million Canadian - and an estimated 50-per-cent marginal tax rate, Bachand said that's $8 million per year that can be used to pay off a loan. Menard estimated that interest and principal payments on a $100-million loan underwritten by the government would amount to $8 million a year for 20 years.
"Just with that, the loan is paid," Bachand said. "Add the publicity value for the city, the 500 jobs, add all the rest; it's a no-brainer."

Menard and Bachand were like Laurel & Hardy yesterday: both talking in rapid-fire French at once, their eyes literally aglow with enthusiasm. And every time Menard would itch to reveal more details, Bachand would rein him back in.

It appears more will be revealed early next week. But it also seems certain that, in some form, the new stadium will ultimately be owned by the community. The model is the DuMaurier tennis stadium, estimated by many to be one of the finest facilities of its kind in the world. Menard sits on the board of Tennis Canada, and the stadium was conceived as a partnership between amateur sport and the city of Montreal. For two weeks of the year, the stadium hosts a world-class tennis event. The rest of the time, it is used as a training centre for the best amateur tennis players in the province, and as a facility where players can rent court time without having to shell out expensive membership fees.

Add the fact that the construction project itself came in on time, under budget at about $24 million, and at a cost 30-per-cent less than what had been originally anticipated - and built by the same contractors who are bidding on the downtown stadium project - you can see where the optimism comes from.

Menard has been in contact with Baseball-Quebec over the last few weeks, looking at ways the proposed downtown stadium can be used for amateur baseball on days other than the 81 home dates needed for the Expos.
"Will it be a donation to the community? In one way, yes," Menard said. "Say it's built for $200 million. $70 million will be paid for by people who buy seat licenses. The remainder will be paid by the owners and new shareholders. Once we have done that, as long as the government does its part from a business point of view, then the stadium is donated to the community, a bit in the spirit of what we did with Tennis Canada.
"Baseball-Quebec is a partner we'll be involving more as times goes on, as well as other community associations that are interested in baseball, that are interested in getting kids out of doors to learn what competition is all about."

Another thing that became clear yesterday is that when Menard and Bachand finally meet with Bouchard - which they hope to do the week of March 22 - they will have done their homework.

When Bouchard says he hasn't yet seen a new business proposition, that might be splitting hairs.
"Bouchard can say he didn't see it, even if four people around him might have seen it," Menard said yesterday, before being hushed by Bachand. "It's clear that what we're presenting is not a request for a subsidy; it's not a donation from government; it's something that is fundamentally profitable for the state.
"Claude (Brochu) asked for $150 million in cash in a bunch of shoe boxes," Menard added. "It wasn't quite that, obviously, but it wasn't much more nuanced than that. Understand that there had been dialogues with people with the Ministry of Finance, in which I didn't participate. There were some discussions on the substitution effect (where if people don't spend money on going to a ball game, they'll spend those same dollars on some other entertainment value). There was a host of scenarios: the model of dedicated taxes (on rental cars, hotel rooms)." That was not, according to Menard, where the problem lay in the original proposal.

The Expos chairman was amazed that there was no prospectus prepared that took into account the losses incurred while the team operated at Olympic Stadium.
"The risk factors, and there are many," Menard said. "An economic model with all the hypotheses, like the rate of exchange, that takes into account three years in the current stadium, and five years in the (new) stadium. I hadn't seen that when I saw Bouchard the first time (on Oct. 5). We hadn't had a prospectus prepared. I wonder how we could just do that, without capitalizing ourselves."

Menard described the two aspects involved in any financial plan to keep the team in Montreal. The first is to finance the stadium, and the second is to re-capitalize enough to absorb the losses in the current stadium. "Even if someone just gave us the stadium, you still need capital to stay in the old one," he said. It appears that was a major hole in Brochu's earlier proposal to the government, given that Brochu refused to dilute his share of the team to allow a fresh infusion of capital to see the team through the building stages.

There was more talk yesterday: of urban renewal; of the cost of convincing tourists that if the baseball team left, that Montreal isn't a city in decline; of plans next week to meet with Canada Lands, the crown corporation that owns the land just south of the Molson Centre, to begin negotiations on a 20-year emphyteutic lease.
"Maybe we're naive, but we have a quiet confidence that it will succeed," Bachand said. "It cannot do anything but succeed. And it's clear there are problems, but I welcome the opening from the federal government, the openness of premier Bouchard, and even Mr. Brochu, who repeated that for $15 million, he'll step aside."

Menard was just as upbeat.
"It sends a sign to (baseball executives in) New York that the federal government shows proof of interest, that premier Bouchard will consider the possibilities," he said. "That's all positive."



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