Canadiens Having Trouble Building Success

Montreal Canadiens fans hoped the ghosts of 23 Stanley Cup winners would follow their team when it left the Montreal Forum for the new Molson Centre.

So far, it looks like only the bill collector pursued hockey’s most storied franchise when it moved further into the heart of the city about two years ago.

The Canadiens are in last place in the Northeast Division, and their owner, Molson Cos., is faced with paying off the new $178 million building and a local tax bill twice the size of the National Hockey League’s 21 U.S. teams’ combined. Unless the team reverses its fortunes on the ice and makes a deep run into the playoffs, the Canadiens will post a loss for the second consecutive season, President Ronald Corey recently told Bloomberg News.

“If you look at the investment, the return is not there. No question about it,” Corey said.

According to a financial breakdown provided by the Canadiens, Molson lost US$2.34 million on hockey operations last season, down from a $6.63 million profit in 1996-97 when the Molson Centre hosted several World Cup hockey games and the Canadiens were eliminated in the first round of the playoffs.

The Canadiens, after cutting their player payroll by $7 million to an-eighth-in-the-league $33.5 million this season, currently are the 12th-seeded team in the Eastern Conference. Missing the playoffs and the additional home games they provide would hurt the team’s combined revenue from arena and hockey operations. It fell to $87 million during the 1997-98 season from $92.3 million in 1996-97, the team said.

The Canadiens are contesting an annual $6.24 million arena property tax bill with the city of Montreal at a municipal board that reviews pleas for tax revisions.

The team said that in 1997, the Canadiens’ total federal, provincial and municipal tax burden was $35.8 million out of $92.3 million in revenue. Add $5.2 million in interest on the arena debt and almost half the Canadiens’ revenue is eaten up by taxes and interest payments.

“I think everybody agrees that the tax bill doesn’t make much sense,” Corey said. “The tax burden is a real problem for us.”

Montreal doesn’t stand alone in that fight. The NHL’s six Canadian teams are all complaining that they face a daunting battle against teams in the U.S. where local governments underwrite most arenas and communities give tax breaks to keep those teams anchored for decades.

In contrast, arenas in Vancouver, Ottawa and Montreal were all privately funded and are all subject to local property taxes. Canadian teams also face the struggle of having to pay their players and many of their bills in U.S. currency. Meanwhile, they generate most of their revenue in Canadian dollars, which fell 7.7 percent against U.S. funds this year and is now worth around 65 percent of the U.S. dollar.

In Montreal, “we paid for the cement, the equipment, the infrastructure, and we operate the building,” said Fred Steer, the club’s vice president in charge of finance. “There was no public help whatsoever and we still have to pay the taxes.”

Opponents, though, of tax breaks in Canada have decried any plan for relief as public welfare for professional sports franchises.

“Montreal, in particular, has a very difficult situation,” NHL Commissioner Gary Bettman said. “Asking for that situation to be addressed is not a subsidy, it’s asking for fair treatment.”

The team turned a $4 million profit in 1995-96 at the Forum, Corey has said. The old building didn’t have luxury suites, club seats and the revenue-generating capability of the Molson Centre, where proceeds from all events goes into Molson’s pockets.

The Canadiens, though, didn’t have the tax problems, either. They played in the Forum on a 30-year lease held by a private company that owned the building. When the Canadiens terminated that lease, they exercised a purchase option that put the building in Molson’s hands for $13.6 million, the financial documents showed. Molson subsequently sold the Forum to another local developer, which is turning it into an entertainment complex.

On the ice, the Canadiens also seem to have left their history behind.

Since a run of four cups in a row ended in 1979, the Canadiens have won only twice, the last time in 1993. This season, they are farther away than ever, their lone victory on the road coming in New York’s Madison Square Garden on Nov. 4.

Though Corey recently endorsed Rejean Houle, the general manager’s hold on the job is at best tenuous. Alain Vigneault, Montreal’s fourth coach in the 1990s, knows that he’s in the same precarious position.

Montreal’s ardent hockey fans don’t care as much about the bill collector as they do about the ghosts of championships past. They continue to fill the 21,273-seat Molson Centre near capacity, although even the fans can see that finance affects the product on the ice. The Canadiens are on a 10-game winless streak, their worst in 51 years, and can’t afford big-ticket players.