Latest / Backchecking the Bolts / Victor Matheson Explains NHL Salary Caps, No State Income Tax & Arena Financing

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Victor Matheson Explains NHL Salary Caps, No State Income Tax & Arena Financing · Backchecking the Bolts

• Jason Linkes: Coming up on Back Checking the Bolts. What's another city that you could see being asleeper to try to get a franchise? In the NHL, the the city that makes more sense by far, by like a factor of a million than any other city, is the second franchise in Toronto. That's that's a no-brainer. Welcome to Back Checking the Bolts. Back Checking the Bolts is your cup of coffee to get you the latest on the Tampa Bay Lightning. Join host Jason Lincas and the managing editor of Raw Charge. Justin Godfrey, as they break down the Lightning's most recent games and go beyond the highlights, telling you what the box scores didn't. It's time to drop the puck. Hi everybody, Jason Lincoln from Back Checking the Bolts. With all of the talk of teams that come from no income tax states having an advantage when it comes to the NHL salary cap, now we're talking Texas, Tennessee, Florida, Nevada. Also, when you take a look at the last ten years, the most successful franchises in the NHL have been the Vegas Golden Knights, Tampa Bay Lightning, and Florida Panthers. We wanted to bring on someone who could really dig into this issue and give us real information. So we've decided to bring on Victor Matheson. He is a sports economist. He's a professor at the College of Holy Cross. You could see him on NPR, the Wall Street Journal, CNN, ESPN, USA Today, and countless other media outlets. We're going to ask him about the perceived advantage of teams that come from no income tax states when it comes to the salary cap. We're also going to ask him about economic issues the NHL could face in the next 10 years. Finally, we want to talk about the benchmark arena. It's thirty years old. Will the bolts go to the city of Tampa and to the state of Florida looking for a new arena anytime soon? We're gonna talk about all that and more coming up. Right here's our interview with Victor Matheson. Joining us today is one of the world's leading sports economists, Dr. Victor Matheson. He's a professor of economics at the College of Holy Cross. He's an author of the Economics of Sport, a nationally recognized expert who's been featured on outlets like USA Today, The New York Times, Wall Street Journal, NPR, and ESPN. And today we're gonna dive into the business of economics and hockey. Victor Matheson, thanks for joining us today. Well, thanks for having me. Always happy to talk a little sports econ and a little hockey econ. First of all, you got the Alberta Bears jersey on right now. Yeah, how about Everyone at home can see that. How did you get that one? ⁓ so ⁓ was invited to a conference in in Edmonton, Alberta, maybe fifteen years ago, and as a as a as a gift, they gave me a hockey jersey and it's always nice to have a chance to to really bring it out for the right ⁓ the right occasion. So, how did you get into studying the economics of sports? What initially drew you into that? Well, so kind of two sides here. ⁓ number one, I'm I'm a standard ⁓ economist, right? So I have a PhD from University of Minnesota. ⁓ obviously some hockey ⁓ interest there for those reasons, right? and ⁓ I I'm actually not a gigantic hockey fan. I'm really more of a soccer fan. I I was even a referee in major league soccer for a bunch of years, and I still referee college soccer. Yeah, so ⁓ you know, it's a little bit different job than ⁓ standing up in front of ⁓ the classroom talking economics. ⁓ but but so I I have interest in sports. ⁓ but the way I became a sports econom ⁓ economist is because is one of those things you just can't plan in life. And I tell my students this all the time, as I I took a job, ⁓ a temporary job in Lake Forest, Illinois, at Lake Forest College up in the northern Chicago suburbs. ⁓ and the guy in the office next to me was ⁓ the person who wrote the seminal articles on whether stadiums ⁓ have positive economic impacts on local economies. ⁓ he and I basically hit it off. He says, Hey, do you want to ⁓ start working together? And I said, Of course. I had no plans to be a sports economist, but ⁓ pure serendipity ⁓ puts me in an office next to one of the guys and and here I am. ⁓ twenty over twenty five years later, ⁓ doing sports econ still. So Lake Forest, Illinois, that's where the Bears had training camp back in the day, wasn't it? I actually still have it to this day. And as a matter of fact, ⁓ Hallis Hall is literally on the campus of Lake Forest College. So I could I could walk right by their ⁓ training camp facility on my on my way to work any day that I wanted. ⁓ also the ⁓ the ⁓ the ⁓ home of Mr. T. Right? So I I really I Mr. T's house ⁓ every day on the way to work and every day as I drive by his place I'm I would say I I pity the fool. I pity the fool and don't eat my cereal. Hey, for for people who haven't studied economics, what are the biggest misconceptions about how professional sports leagues actually operate? Okay, so a couple here. ⁓ so my research ⁓ is in economic impact of sports. It turns out sports Actually, aren't a very big piece of the economy. We think it's gigantic because it's a whole section of the newspaper. There's all these channels on TV related to it, but it's actually not very big. ⁓ as a matter of fact, the biggest, richest league in the world is the NFL, right? This is about a twenty-two billion dollar ⁓ company in terms of total revenue generated every year. That's roughly the same size as Sherwin Williams paint stores, right? The average person buys more stuff from Sherwin Williams every year than they buy from the NFL. So that's ⁓ that's an example of of things being too big. ⁓ I think another one is that ⁓ players are overpaid. ⁓ players are paid what they are because they generate gigantic amounts of revenue ⁓ for the league. And and the reason you're paying high ticket prices is not because the players are overpaid, it's because The NFL, the NHL generate this great ⁓ this great ⁓ product that people are willing to pay a huge amount for. And because they're willing to pay a huge amount for it, ⁓ that's what they charge. And and and you know, good on the on the players to negotiate contracts and negotiate collective bargaining agreements with the leagues that make sure the players get to share in this money and not just ⁓ and not just the owners. Remember, if you say the ⁓ the ⁓ ⁓ the players are overpaid. What you're basically saying is not that tickets should be lower priced, because lower paid players aren't going to mean lower ticket prices. You're basically meaning you're basically saying the owners are underpaid. And I don't think anyone actually thinks that's that's true. So there's two big misconceptions ⁓ in sports, ⁓ two big myths, I think, ⁓ that are pretty common. Of the four major sports, only baseball is the one that still does not have a salary cap. And there's talk in the new labor deal, which ends after this season, that a salary cap could be coming, at least that's what the owners want. From an economist perspective, how successful or unsuccessful has a salary cap been for the owners? So I think what's super important to understand is in the absence of anything else, a salary cap is a way for owners to cheat players, right? And the NCAA, for example, has been cheating players for decades and decades and decades by having a salary cap that's effectively zero, right? It's only in the last five years of ⁓ the world of NIL and now the world of direct payment to players that the salary cap has been been lifted to some extent. So a salary cap in the absence of anything else is absolutely greed on the part of owners designed to steal money from hardworking workers. Who sacrifice their bodies on the pitch, on the field, on the hard court, or on the ice. That being said, a salary cap in conjunction with other aspects can be a great thing that ⁓ basically makes the pie bigger and everyone can benefit. So ⁓ the salary caps in the NHL, NFL, and and NBA are salary caps that are also associated with an agreement that the ⁓ owners will share a percentage of the total league revenues with the players. And in all three of those leagues, it's it's roughly 50%. For for practical purposes, the players get half, the owners get the other half. Everything else is a detail that that is that is too obscure even for a podcast, right? what we've heard so far from Major League Baseball is they want to be like everyone else and that they want to have a salary cap. But they are not willing to guarantee ⁓ that the players get a fixed amount of the revenue at the same time, or are not ⁓ they're not willing to do the other things that ⁓ allows teams to survive given ⁓ a salary cap and and revenue sharing. So again, what works in the NFL and as well as the NHL, but particularly in the NFL, is that There's this very high salary cap, but there's gigantic revenue sharing as well between teams, which means that every team out there can afford to pay the full salary cap. ⁓ Major League Baseball says, well, let's have a salary cap, but let's not do anything ⁓ to mandate that those low-paying teams actually ⁓ you know, pay anywhere close to the salary cap. So the salary cap in Major League Baseball owners' minds is let's try to make sure that the Yankees and the Dodgers and the Mets ⁓ don't have to spend too much money, but there's no there's nothing in there suggesting that the the A's and the Royals and the Rockies ⁓ have to do anything to raise their ⁓ the amount that they spent. ⁓ so again, the reason the NHL works pretty well is that they have a salary cap, but they also have a salary floor that's not that far away from the cap, which means that, you know, all of the teams are playing with roughly the same payrolls. And I know we're going to talk about that later in the in the Exactly. But we know that ⁓ you know, that everyone is playing with roughly the same payroll. ⁓ yeah, and so that's that's why ⁓ a salary cap works to maintain some competitive balance. It also works for the players because the players say, look, we agree that you know we can't make infinite amounts of money, but we're we're gonna we're gonna be full partners in here. Anything that makes the league a million more dollars makes us as players half a million more dollars, and so we're we're happy to go through with. Now, the NHL back in the mid nineties had a number of teams relocate. You had Quebec going to Colorado. You had Winnipeg going to Phoenix at the time, which is now in Utah. But the NHL has a lot of small markets. With the implementation of the salary cap, did this allow the small market teams, the Pittsburghs, the Columbuses, a chance to survive? Because I'm not sure some of them would have survived without the cap. Or at least moving to other cities. Do you think, especially with the NHL having more small markets, do you think that that cap was even more vital than the other sports? Right. So I yeah, I think that's an important issue. Of course, what we're talking here is the the famous Southern strategy, right? So ⁓ thirty years ago the NHL said, Look, we cannot be a league, ⁓ solely in the, you know, Midwest and ⁓ you know, northeast ⁓ plus Canada. That that's that's not gonna work. And then, you know, a handful of you then an LA team and Some of these things, right? But you you you just can't have a partial footprint, ⁓ at least in part because you can't get national news coverage, you can't get on ESPN, on the on ⁓ you know, ⁓ you know, on on sports ⁓ you know sports center tonight, ⁓ things like that, and unless you've got ⁓ a full nationwide audience. So you know the ESPN's not gonna cover something that only applies to a quarter of the people tuning in to these national broadcasts. The Sunday strategy has been of mixed success. The Places that are struggling in the NHL still to this day, at least struggling economically, tend to be in the South. You've had a hard time ⁓ getting interest in games, unless the team's good. I mean, obviously Tampa has had no problems ⁓ generating interest in the team because again, they've been good a lot for many. For the last twenty years, they've been a great team. ⁓ Florida, on the other hand, has had some really difficult economic years in the years that they're bad. ⁓ you know, ⁓ in in in Canada, look, you know, if you're a fan of the Canadians, you're going whether they're good or bad because ⁓ you know, ice is in your blood. ⁓ when you're in Florida, look, you may not have ever seen ice outside of a margarita, and therefore, you know, you're there when the team's good, but you're you you tend to be a much more fair weather fan, right? ⁓ and so we've had trouble. I mean, obviously, ⁓ you know, Phoenix is gone, right? ⁓ and and ⁓ relocated. ⁓ both once within ⁓ metro area now to now to Utah. ⁓ Columbus has had difficulties. Again, Florida's had difficulties. ⁓ the Atlanta team up and moved completely. ⁓ the Carolinas have had trouble, right? ⁓ so again, when they're good, they're good. ⁓ but when they're bad, they've they've had trouble generating revenue. And so, you know, again it remains to be seen whether whether the Southern strategy I I think it probably had to happen. You had to give it go, but again very mixed success. That being said, ⁓ you know, how do you guarantee teams in in potentially problematic markets, how do you guarantee that they make some money? Well, one thing is you make sure they don't overspend. You make sure there's also some fairly generous ⁓ you know revenue revenue sharing when you can get it. ⁓ and ⁓ and I and ⁓ quite honestly ⁓ what I'm hearing from the league is ⁓ if we have another expansion ⁓ It might be more southern strategy, right? ⁓ it very well could be either Austin or Houston, I think is the is the name that I'm hearing thrown about a little bit more than than almost anywhere else. Now, before we talk about expansion, I wanna go back to where you talked about the Floridas, the Nashville's of the world. They're in tax free states. Same with The Vegas Golden Knights. And when you look at the last 10 years, the three most successful teams have been Vegas, Florida, and Tampa. Is the fact that they have no state income tax, is that a structural advantage or is it overstated? So it is definitely a structural advantage because it in effect it makes the ⁓ the salary cap larger in Florida than it is in California, right? ⁓ the question is how much bigger is it? Well now we have to do a little bit of math to to know how big it is. ⁓ one important aspect that makes it smaller than it might seem is the fact that most states have jock taxes. And what a jock tax is, is when you're a performer, and it doesn't just apply to hockey players, doesn't just apply to Connor McDavid and and ⁓ and ⁓ Patrick Mahomes, it also applies to ⁓ artists Bruce Springsteen, Taylor Swift, right? ⁓ and so what a jock tax is though is when a performer comes and performs in a in a city or a state, they have to pay income tax based on the income they're earning while they're in a state. ⁓ so even if I work in even if I am a a Tampa player, ⁓ I still have to pay state income tax every time I go play the LA Kings, every time I go play the Boston Bruins, every time I go play the Colorado Avalanche. Right. ⁓ so I'm accountants must love that. ⁓ look, man, th there's one thing. I mean, it's hard to kill a two minute ⁓ five on three penalty. It's even harder to do the taxes of ⁓ a a professional ⁓ and a and a NFL NHL player, right? ⁓ let's really give a handout to the accountants in these because these are disastrous forms, right? ⁓ and and basically what this means is You're only you're only getting half of your money non-tax, right? So ⁓ just straight up from the beginning, pretty much everyone is ⁓ paying the same tax rate on half of their money, because half of their money is ⁓ is being earned on the road. And and that's actually how it works. ⁓ I I c I honestly don't know how it works with injuries if you're not actually in the lineup a night, ⁓ I honestly don't know that. And I've I've even looked into this. Basically, you're being taxed on the number of games you were normally expected to play during the regular season. So if you've got an 82-game schedule, ⁓ you are being taxed 41 of those for 41 of your 82 games of work, you're being taxed in your home state. The other 41 games are being taxed based on the states you're in during those other 41 games. So, first of all, again. It's not like you have no income tax. It's only those half of games you play at home. Does a person in Tampa play it pay a different tax rate than a person in in in California? On top of that, the big taxes that people pay are not your state income taxes, it's your federal taxes. And those are the same for everyone, right? ⁓ at least everyone, you know, in the in the lower forty eight here. ⁓ so you know, those tax rates max ⁓ max out. Somewhere around thirty-five to thirty-nine percent. ⁓ the highest ⁓ tax rates ⁓ by states is about ten percent. So California has a a a top marginal tax rate of about ten percent. ⁓ other states are significantly lower than that. So we're isn't wash isn't Washington going to a nine point nine percent rate starting in twenty twenty eight? Yes. Several states have increased their taxes on the on the wealthiest. In ⁓ recently, including my own home state here in Boston, ⁓ or you know, here in Boston, here in Massachusetts, we've gone to a millionaires tax where your your income over a million is taxed at a at a higher tax bracket. ⁓ so yeah, but you're talking at most about 10% on half of your games. So you're talking about a five percent differential. That makes some difference, but again, it's not gigantic. And think about this. You know, on a total salary cap, right? ⁓ total salary cap in the ⁓ NHL, what, about seventy five million ish, right? Okay. So ⁓ no, it's it's it's over ⁓ it it's over a hundred now. Boy, I'm ⁓ see, I just I just updated the textbook and I I I I think I was looking at my my old one and and ⁓ at seventy yeah, yeah. ⁓ so y but that means ⁓ so for at about a hundred million ⁓ as a as a salary cap. That gives you about a five million dollars extra to in effect play with. That might buy you a ⁓ you know, that might buy you ⁓ a decent ⁓ you know, third line ⁓ forward right, but that's not gonna be the difference between ⁓ yes, I'm able to afford Connor McDavid or I'm not. Okay. So let me give you player X. He's on the free agency market. You have Montreal, let's say the New York Rangers and the Tampa Bay Lightning all interested in him. Now In Canada, they still have to pay in US South in US dollars their players. But the each team offers him 10 million. How big of a difference is it truly to that player to play in Tampa versus New York or Montreal? So again, the total number there is roughly five percent ish, right? Okay. So if this is a ten million dollar a year, this ⁓ you know, this is a high paid player, ten million a year, that's an extra five hundred thousand dollars. ⁓ that being said, that's probably pretty marginal in the in the big picture, right? If I'm that sort of person who is making that sort of money, I'm almost certainly looking for the position that is right for me and the team that's going to work well with my skills. And again, if if it's a totally even deal between, you know, Florida and Texas, no tax states versus ⁓ Massachusetts and and California, then yeah, maybe. Right. Maybe I go with the ⁓ with the better deal. ⁓ but it it's fairly small. ⁓ certainly the ability to afford ⁓ these these ⁓ the salary cap in Canadian cities ⁓ where ⁓ where you know where exchange rates are an issue, that almost certainly has a ton to do with why Canada, which is a third of the league, hasn't won a Stanley Cup in the last two decades. Right. ⁓ that's certainly ⁓ the ability to attract ⁓ American players and foreign players to Canada based on exchange rate difficulties, ⁓ making those contracts absolutely is an issue. but yeah, there's a little bit of thumb on the scale, but it's not it's not gigantic. And it sure certainly shouldn't be the difference between, you know, why is this team good year after year? versus why is this team bad? ⁓ right? again, that that's about ninety five percent management coaching ⁓ and about five percent tax loss. You talked about the Canadian exchange rate back in the mid nineties when we saw Winnipeg move to Phoenix, when we saw Quebec move to Colorado. The exchange rate back then was a big reason why. Now there also wasn't a salary cap. The exchange rate is creeping back to those levels again. Are the smaller Canadian markets, in your opinion, possibly in danger of relocation if the Canadian dollar stays where it's at? Well, i it certainly that's an issue, right? ⁓ so not only is the exchange rate lower, but ⁓ you know, average incomes are much lower in Canada as well. So it doesn't mean that the standard of living is lower in Canada. It just means that that ⁓ total incomes in Canada are are lower. ⁓ and ⁓ you know, I I I think for most certainly most small Canadian cities. ⁓ the way that they're going to ⁓ g you know, keep teams ⁓ or gain teams in the first place has almost certainly gotta be angel owners and white knight owners, ⁓ rather than pure business decision sorts of things. Cause it it's it's hard to believe that the revenue potential isn't higher in Houston, fifth largest metro area in North America, you know, outside of Mexico, ⁓ fifth largest metro area in the in in America versus Winnipeg. Again, I you know, I think the Winnipeg, you know, sort of example is is, you know, kind of certain money. You know, those folks are going to those folks are gonna keep coming. You know, it's the only game in town, literally. ⁓ but you know, I think it it's I think it's very hard ⁓ to to it's very hard to stay in a Winnipeg when, you know, these these franchisers are selling for billions of dollars. ⁓ and ⁓ you know, if if the NHL is willing to sell a new franchise to to Houston for for, you know, billion dollars plus, right? It it's hard if you're sitting there as an owner in Winnipeg saying, you know, I could just sell my team my team to those owners and and and pocket the cash. So I think it really will take, you know, again, angel white knight owners ⁓ to keep to keep teams in places like ⁓ like Winnipeg in particular. ⁓ you know Maybe Ottawa, maybe the s you know, Calgary Edmonton as well. When I travel up to Winnipeg, one of the first things I noticed there's just not a lot of business. It's a government city, it's a railroad city. There's not a lot of big businesses coming in there sponsoring the team. So they need to rely on seasoned ticket holders. And when times are good, it's you can normally fill a building. But even back in the day in the eighties, Winnipeg was always one of those franchises that was a candidate for relocation because when they weren't good, they wouldn't fill the building. And I still think in the back of my mind, that's going to be that's going to be the death of that franchise, unfortunately. And I I've been up there for playoff games. It's a phenomenal atmosphere. Like you said, it's in their blood to want to watch hockey up in Canada. But I just don't see the economics working over and over again because the arena doesn't even hold fifteen thousand people. And there's a reason why it's six hundred thousand people total in that area. Right. And so even ⁓ and you know, the the real the real key is like what sort of multiplier do you have on that population, right? So, you know, you start with the basic saying, look, the way you make money is by putting a franchise in a place with a lot of people. So that's that's just the simple that's the simple one, right? Small market, big market. You'd rather put a a a franchise in in New York versus Winnipeg. And then you have to apply other things. Well Are there other competitors to that? So you say, well, look, Boston's a big market, but we already have the Bruins. Probably wouldn't make sense for another team in here. So ⁓ so you know that'd be a that'd be kind of lowering the multiplier on a new team in there. ⁓ you know, what is, you know, there are some cultural impacts, right? You know, ⁓ the culture in Winnipeg is a big increase of that multiplier. So it makes it makes Winnipeg hit at a at much above its population, right? It's the only game in town. It's ⁓ it's got cultural influence ⁓ there that it it's part of the hockey's part of the culture in a way that it's not in Houston, right? ⁓ no one's talking about putting an NHL team in in Mexico City, for example, right? but ⁓ the question is how big is that multiplier compared to, you know, that that size? ⁓ and and again, when you've got Houston, which is about a six million person metro area, that means that you know Houston's already ⁓ got a ten to one advantage there. ⁓ is is that cultural influence, that having that monopoly on the market, ⁓ not having any other big sports in the area, ⁓ is that enough to ⁓ to make ⁓ up for that 10 to 1 difference? And ⁓ I think it's it's hard to argue that that's true, ⁓ especially in a world where, you know, people move a lot more. It's not like the people who are living in Houston have been in Houston their whole lives. There's plenty of people from Canada living in Houston. Plenty of people from New York, from Chicago, from Boston, from original six cities living there. And and so it's not like it's not like everything in Houston has to be home grown back from the days of ⁓ you know, the the Lone Star and Texas independence again. You know, people do move and so there are there are there are real northerners in that city who ⁓ who would love that team. So I'll written You've written extensively about cities funding arenas, stadiums, and what the true economic impact of that can be and what it is. In Tampa, the Benchmark International Arena is thirty years old. Thirty years is always that time when you start hearing teams start saying, Hey, we have to look at our building. We're not g we don't have enough revenue streams. I read your article about the Buffalo Bills back in two thousand twenty two and I found it fascinating that what the Bills did to get their stadium and just how much of ⁓ an eyesore that bill really was when it got passed. Tell me a little bit about what the true economic impact is when a city when a team builds a new arena for a city, because I think everyone's under the impression businesses come in, restaurants come in, it's a big cash cow, but It really doesn't equate to that, does it, Victor? Right. So the the real issue is ⁓ is, you know, what would have happened if that if that team wasn't there? All right, right. So yeah, obviously you have the Lightning here who's ⁓ a relatively new ⁓ team in the in the hockey picture here, right? So you've got this expansion franchise and they generate a bunch of revenue. And you know, anyone who goes to an NHL game, they're like, Look, I'm surrounded by 17,000 other hockey fans here, and I go out in the streets ⁓ before and after the game, and it's full of people, and they've all spent a lot of money on dinner and tickets, and and how can this not be a gigantic economic impact? Well, the reason is this: it's what would those 18,000 people have been doing if there wasn't a hockey game in town, right? ⁓ and would they have been sitting in their house alone in the dark fasting? ⁓ well, of course not, right? Right? ⁓ they would be spending that money doing doing other sorts of things, right? And so the money you spend ⁓ at at these sort of places is money that is just substituting that would have happened somewhere else. And we call this the substitution effect. ⁓ a lot of times sports ⁓ franchises they don't increase the total amount of spending that occurs. They just ⁓ they just change where that spending takes place from that restaurant, ⁓ from that ⁓ raise game, ⁓ from that ⁓ Buccaneers game ⁓ from that Hamilton's touring show coming through, right? Or all the other stuff that you could spend your money on. And ⁓ and therefore it it just doesn't increase the total size of of the money much. ⁓ and and how do we know this? I mean it's theoretically true, but how do we know this? We actually go back and look at cities. You know, what happened to Tampa's ⁓ and and Miami's ⁓ economies when they added franchises back in the nineties and ⁓ it turns out not much. ⁓ and as a matter of fact, you know, they they didn't grow any faster than places like Jacksonville or Orlando that that didn't add cities, right? ⁓ and you you do this again and again and again on all the different kinds of comparisons. ⁓ you see what happens when the NHL goes on strike, for example, and you lose a whole season and you lose the Stanley Cup. Guess what? Not much. ⁓ obviously some sports bars, ⁓ you know, a a hockey themed sports bar right next to the arena, it didn't do well. But guess what? That that Italian restaurant a couple miles away did great. And actually it did a little better because, you know, I wasn't losing 18,000 potential customers every night and and the traffic didn't keep people away from my restaurant. So when we look at this, it turns out to be not that big. ⁓ so that being said, that's fine. You know, not every business has to increase the total size of the city economy, but If a business comes to the taxpayers and say, Hey, ⁓ I need a bunch of money from you because I'm gonna be doing these great things for you as the city, well, then they really need to justify those those answers in a in a really compelling way. ⁓ and and that's where most of these things fail, right? So again, I don't think anyone, ⁓ there's no economist out there ⁓ who is anti sports. ⁓ look, I'm in my Alberta jersey. How many people have How many people have an Alberta jersey, right? ⁓ so ⁓ you know, we're not anti-sports, but we are anti-public funding of sports. ⁓ because, you know, if if a movie theater came up to this taxpayers and said, Hey, I need you, I'm I'm planning on making all this money selling movies to people, ⁓ and selling them really expensive popcorn and and expensive ⁓ beverages, ⁓ but I I don't really want to buy the movie theater myself. I want you, the taxpayers, to pay for this movie theater and and I don't want to pay any taxes. ⁓ you know. I'll I'll t I'll I'll be happy to collect a bunch of taxes on the tickets, but I don't want that to go to the government. I want that to go to paying off my mortgage, right? ⁓ and ⁓ you know, everyone would say, You're crazy. What do what are you talking about? Or if a restaurant owner says, Hey, I'd like a million dollars to build a restaurant. ⁓ and yeah, and if the restaurant does well, I'm gonna make a lot of money. if it doesn't do well, well, I'll go out of business. ⁓ but you'd say, Well, that's crazy. No, this is your business. You should be you should be building your own factory, your own restaurant, your own movie theater, right? ⁓ But when it comes to sports, people lose their minds and they say, hey, ⁓ yeah, let's let's build a let's build the factory for ⁓ for these billionaire owners and these millionaire players, and ⁓ let's have the ⁓ little people pay for that, ⁓ a bunch of whom aren't even aren't even hockey fans. Well, let me ask you this you have t cities that clamor for sports teams left and right. And even now you have situations in Atlanta. The Northwest suburbs recruited the Atlanta Braves. They built a Huge entertainment center in the northwest section of Atlanta. The Dallas Stars are going to be moving to the suburbs of Plano. The Chicago Bears, I'm sure you've been following that saga. They can't figure out where they want to go. Is it Arlington Heights? Now Hammond, Indiana is one of the places they might be looking at. Why are politicians and cities clamoring to do anything they can to get a sports franchise? So you know, what's what's good for a politician is not necessarily what's good for the constituents, right? ⁓ I think ⁓ you know, one of the one of the real experts in in that Atlanta situation is actually a a local Atlanta economist named ⁓ JC Bradbury and and his and his his point is ⁓ the owner's box at every major sports stadium in the United States is big enough to host the entire city council and the mayor. But it's not big enough to host the entire voting population, right? So ⁓ you can always convince that ⁓ that city council to put the money in by saying, Hey, ⁓ we'd love to have an N an an NHL team here again in Atlanta. And you'll be first on our list of people to come meet, you know, Conor McDavid when he comes to town. You'll be the first on the list ⁓ to, you know, if we have some extra tickets for the owner's box. And and that's that's pretty tempting, right? ⁓ most of these deals ⁓ that happen behind closed doors, they all get done. The Buffalo Bills example you talked about. That was that was ⁓ done t completely in secret and then ⁓ announced and they said, Okay, you've got three days to vote on this or or the bills will explode and and we'll have to nuke ⁓ Buffalo, right? That's kind of that's kind of what they said. ⁓ and yeah and and that's that's very poor way to do public policy. On the other hand, In places like Kansas City, they say, look, let's vote on this. But ⁓ actually in in in Phoenix as well, where they were voting to put a bunch of money into a a new hockey stadium or not, ⁓ the voters said, You know what? ⁓ I I I I like the coyotes, but I don't like ⁓ enough to hand over five hundred million dollars of money. And if they want to go to if they think they can get a better deal in Utah, ⁓ you know, far be it from me to stop them. ⁓ and again, the the real problem with with sports here is they've got this monopoly, right? ⁓ and they've got a monopoly that allows them to ⁓ engage in in in in real you know in real strong armed tactic tactics here right ⁓ you know Walmart can't extort a city and say hey build me a new store or I'll go somewhere else because if they do, you know, Target will just come in instead, right? ⁓ but when you've only got thirty two franchises, thirty franchises, ⁓ you can play cities against one another, you can play suburbs against one another. you know that the stars aren't leaving Dallas, but you can play Plano against Fort Worth, against Dallas, against Arlington, and and and and that's what you have. ⁓ and and so really we need to be better as as governments to say we're not going to compete against one another and impoverish our neighboring community and our own people in order to get, you know, in order to steal business from back and forth. ⁓ Kansas City and Missouri had this long compromise there where they where ⁓ well they had a long history of of actually fighting each other for businesses and then they came to a compromise called the b you know ending the border war. What would happen is a s is a a business would locate in one side of the of the border, ⁓ get a bunch of tax breaks, and then once those tax breaks expired, they'd move to the other side for a whole new set of ⁓ tax breaks. And so basically you had businesses that would kind of swap corporate headquarters every fifteen years ⁓ for tax breaks. And of course that just impoverishes both sides of the of the border. And so they agreed to end the border war. ⁓ and they say they they're not going to try to steal businesses from one another until it came to an NFL team. And then they say, well, NFL team doesn't count as a business. Sure, we're gonna give them a billion dollars, but that's not really a business. And ⁓ that doesn't count ⁓ in the Border Wars. So ⁓ the you know it's it's unfortunate that when this sort of thing happens. We've seen the value not just of NHL, but all sports franchises. The value of the franchise has skyrocketed really in the last 10, 15 years. Is it skyrocketing just in value, or is it skyrocketing in terms of revenue generated as well and profits? Yeah. So ⁓ revenues have not been going up as fast as franchise values, ⁓ nor have profits been going up as fast as franchise values. ⁓ profits are pretty good in most places, especially when you've got a good agreement, like we talked about earlier, where Where you have a salary cap along with a fixed percentage of revenue towards the players, that kind of makes this a pretty safe investment, ⁓ especially when there's a lot of revenue sharing as well. So the the NFL is ⁓ is a money making machine ⁓ that's really safe for investors, but it's also very expensive. And I think what we're seeing in a lot of cases is that you know, a bunch of this money is ⁓ is ⁓ ego money rather than real money in some cases, right? ⁓ so people ⁓ you know think about the owner of the clip ⁓ the clippers ⁓ Steve Ballmer, right? ⁓ you know, nerd from Microsoft. ⁓ it's okay to be a nerd, good way to make a lot of money, right? ⁓ but ⁓ wants to be cool, so buys the Clippers and bought bought the Clippers for what at the time was a record amount for an NBA team, right? ⁓ he's not necessarily doing that to make money. ⁓ he's doing that because he's made all his money and and now he can he can play with it. Right. ⁓ Elon Musk, ⁓ at least on paper, could buy every team in the NHL ⁓ about ten times over, right? So if he wants to yeah, if he wants to be cool, he could ⁓ he could buy NHL teams or sports franchises. Instead he decided to buy Twitter. ⁓ but you know, for that same forty billion dollars, he could have bought, you know, the the premier franchise in each of the ⁓ each of the major leagues in the United States and thrown in an EPL team and ⁓ and ⁓ and a KHL hockey team as well, right? ⁓ so you know, so it's a way to kind of ⁓ be a toy. And we know Mark Cuban was like that as well. And of course Mark Cuban's his great owner. Everyone would want Mark Cuban as their owner, ⁓ because he's passionate about sports, but he really did that as y you know, the thing the fun thing to do. You and I we might collect we might collect baseball cards, right? ⁓ they collect baseball teams. ⁓ that's the difference between guys like us and finish that thought off. I mean, there's no reason to think that these franchise values won't keep going up and up in price. If we continue to have ⁓ this rapid growth in the ⁓ in the amount of money that ⁓ that billionaire, particularly billionaire tech owners have, ⁓ you know, there's really no upper limit to how much ⁓ these scarce number of franchises will go for because they're not being valued at the, you know, at regular valuations, they're being valued at ⁓ you know, kind of ego driven valuations and and and we think that's right. Again. Imagine you want to buy a garbage ⁓ company, right? The only reason you're buying a garbage hauling company is solely for the profits, right? ⁓ and so those should sell for exactly what that stream of profits is. ⁓ but when you go and buy a a soccer team, you know, it's not necessarily for the dollars. ⁓ it might be for the fame, for the excitement, for the fun of owning a team, you know, like like McAlaney and and and and ⁓ Ryan Reynolds with. with Wrexham, right? ⁓ so you know that's that's not necessarily a dollars thing. That's a fun and excitement thing for them. Do you think you're going to start seeing more cities balk at funding arenas, funding stadiums, and owners are going to be forced to dig into their own pocket more? I know that started to become a little bit of a trend. Cities would still kick in. The Buffalo Bills example is the complete opposite, but do you think As time goes on, do you think you're going to see that become more of a trend? ⁓ so my guess is yes. at least ⁓ in part because at least in the larger cities, right? ⁓ you know, New York, Boston, ⁓ you know, Dallas, ⁓ LA, they don't have any business throwing a bunch of money at these things because, you know, at the end of the day, you're still gonna be LA, you're still gonna be San Francisco, you're still gonna be Boston or or or New York, even if that team leaves. And so there's really no reason for them to kick in money. ⁓ you know, I I I think it's much harder for a Buffalo ⁓ to pass on that, right? ⁓ Buffalo back when the bills started out in nineteen sixty, you know, they were the twenty-fourth largest city in the United States. They belonged in an NFL that had twenty-four teams or so, right? ⁓ but nowadays, you know, they're the fifty-first largest city in the United States. And and in most ways they shouldn't have a team at all. ⁓ and so, you know, they in in order to keep that team, it's much more likely that they're they're going to wanna put a bunch of money in. Oklahoma City's been very, very f up front about this thing. Look, we're Oklahoma City, not New York City. How are we gonna get an NBA team to come here? Well, we're they're not gonna come here and unless we we sweeten the deal a little, and that's how we do things. So I think we're still gonna see arenas being built with public money in the Oklahoma cities of the world. ⁓ much less likely to see that in the New York cities. You know, ⁓ you know, the the Kraken are playing in a completely ⁓ privately financed facility. ⁓ you know, the Avalanche are looking to move to a new ball arena here sometime, but that's all looking like it's mainly private rather than than public money. So again, I think that's that's what we're gonna see is we're gonna see two different worlds. ⁓ we are gonna see a lot of deals happening in the last in in the next ⁓ ten years or so. you you mentioned this thing it it seems like magically ⁓ arenas tend to wear out after about thirty years. ⁓ that's not a physics thing. ⁓ that's a finance thing, right? Yeah. ⁓ look, ⁓ you know, the in in ⁓ in two thousand four they had the Olympics, ⁓ they had the shot put literally at Olympus in a stadium built in seven seventy six B C, right? So you can play games in old stadiums and it works just fine. ⁓ but the ⁓ what what The the magic about 30 is the vast majority of ⁓ lease deals are made for 30 years. And the reason the vast majority of lease deals are made for 30 years is because the vast majority of corporate bonds and municipal bonds that are issued to pay for stadiums are 30-year bonds. Why are they 30-year bonds? Well, because we also have 30-year mortgages. And why are there 30-year mortgages? Because that's the length of time we think people are gonna live. ⁓ and and so that they can pay off their whole house before they die. So 30 years is a magical thing in finance. ⁓ and therefore leases are made because for 30 years because they don't want a team to leave before the bonds are finished paying. Therefore leases are 30 years. As long as there's a lease, it's hard for teams to extort the cities ⁓ because the lease agreement will basically say you can move, but as soon as you move You have to pay back every single dollar of public money that's ever been spent on the stadium. That's pretty common, roughly, that that clause, right? So, you know, you could be on the hook for a billion dollars for leaving a year early, but as soon as that magic 30 hits, that lease is over and all the bargaining power shifts to the team, and the team can now start to court offers from everyone else, right? ⁓ so ⁓ yeah, we're gonna see a bunch of deals because we started to see a huge number of facilities being built. Starting in the 1990s, early 90s. and those 30-year leases, 30, 1990 plus 30 is 2020, right? So a bunch of those lease deals are starting to come up ⁓ here in the in the last five years. And that build that building boom kind of went through the 90s and the early 2000s. So over the next 10 years or so, we have a lot of stadiums ⁓ that have lease deals expiring. And so we're gonna see a lot of of maneuvering. We're going to probably see some franchise relocation and we're going to see a lot of taxpayers getting squeezed. You had mentioned franchise relocation and you had mentioned earlier the NHL is looking at the Houston-Austin area. Quebec City has always been whispered as a possible location, but I think that with the weakness of the Canadian dollar and just other bigger US markets without hockey teams, those are going to take preference. But what's one city that you think might be aggressive in trying to get another team other than we'll we'll throw out Vegas with the NBA, but what's another city that you could see being a sleeper to try to get a franchise? ⁓ in the NHL, the the city that makes more sense by far, by like a factor of a million than any other city, is a second franchise in Toronto. That's that's a no brainer. There's only one reason and one reason only that there's not two franchises in what's literally the biggest hockey city in the planet. And of course, that's the existing owner of the existing team in Toronto, doesn't want ⁓ to compete. But in any normal world, you'd have two hockey franchises in the biggest hockey city on the planet. ⁓ and that would be good for hockey, it would be good for Toronto, ⁓ it would be bad for the incumbent owners, right? ⁓ But ⁓ it would ⁓ but that's what makes sense. And if you want to talk about number ⁓ city number two, second franchise in Montreal, right? I mean, ⁓ that's what makes sense. ⁓ I think the reality is they'll probably try to put hockey in like Birmingham, Alabama before they put a second franchise in Toronto. ⁓ that makes no sense at all. ⁓ and again, look at every other sport, right? We've got We've got three franchises in New York City. We got two baseball teams there. We've got multiple hockey and baseball franchises ⁓ in in LA, ⁓ multiple football franchises, multiple soccer teams. London's got eight teams in London in the Premier League alone. You know, it it it doesn't make sense to not give people in Toronto more options for their entertainment dollar. But again, that such is the power of the league that they keep out ⁓ teams out of. What is obviously the place that should have more NHL ho ⁓ more NHL hockey? What is gonna be the biggest economic issue for the NHL in 10 years? ⁓ that's a good question. I haven't thought about that one. number one is you know, how much longer are we gonna be thinking of hockey as the big four? Yeah, we we already know that ⁓ among young people ⁓ soccer is is strongly identified ⁓ as as being much more prefer ⁓ preferable than hockey among the ⁓ the the majority of of young sports fans. ⁓ so I think there will be a question ⁓ you know, at what point do ⁓ does does soccer really overtake ⁓ hockey? And when we're talking about the big four, we're really talking about the NBA, ⁓ major league baseball, the NFL and maybe Major League Soccer and not ⁓ not the NHL. ⁓ obviously Canada's just had a great ⁓ great World Cup as well. ⁓ and and ⁓ increasing interest in the team ⁓ there. So I think competition from from soccer ⁓ is is certainly a a concern. if if Russia ever you know recovers from its descent into madness, ⁓ you know, a a strong competitor in Europe ⁓ for players, it would be a ⁓ would be a big thing as well. Again, no one in their right mind, ⁓ who's an American, Canadian, or quite honestly, most anywhere else should relocate from the NHL to the KHL in in any world. ⁓ and that's that's in some ways a dying league. Should you know Russia come out ⁓ from the darkness, ⁓ a big competing league in Europe would be would be rough, ⁓ especially if If all of a sudden we've got real economic growth in Eastern Europe, we have real freedom there, we have real, you know, kind of growth in capitalism. ⁓ you could really see the NHL struggling to keep ⁓ you know, some of those players that of course they have an easy time getting nowadays. Do you think in North America, hockey is hurt because of how expensive it is for kids to play? Hockey equipment is not cheap. And you look at soccer, and I know baseball bats are expensive. Hockey equipment is extremely expensive. And especially when your kids are growing and each year they need new sizes of different equipment. Do you think that hurts the game in North America? So so actually I think you're discounting what the real cost of hockey is, is that it's hard to find anywhere to play. The equipment's not bad. I mean, obviously it's expensive, but the equipment's not bad. The the issue is I can go and have soccer practice for zero dollars. ⁓ by ⁓ by going down to the local park and and getting everyone together and and knocking the ball around. ⁓ you can't do that in hockey. obviously you can play some pond hockey a couple places. Global warming is limiting the number of places that you can do that, right? ⁓ but but r right, it it's it's the fact it's not just the equipment, it's the ice time is wildly expensive for these ⁓ for these parents and these kids. And and that's tough. ⁓ there's a reason why I mean we're just we're just ending this wildly successful World Cup. ⁓ you know Hugely popular, without question, the biggest sporting event in the world. And why is soccer popular? Because it's the cheapest sport in the world to play. You don't need you don't even really need a ball. ⁓ you don't need goals, you don't need anything. A little piece of streeting and ⁓ and ⁓ you know a ball of rags tied together and you can play you can play soccer. The fact that you've played makes it easier for you to check into the game as a fan later. ⁓ so can can hockey can you be a fan of hockey if you've never If you've never played, I mean, I don't skate very well. I'd play a little tiny bit and I like it. ⁓ but is there a limit to how big a fan I can be, having never really played at any type of competitive level? Maybe. ⁓ but I have played soccer at a competitive level, right? And so, you know, that's the one I love. ⁓ I think we're I think hockey is gonna be limited by that. And and again, hockey's gonna be limited by the fact you can't go out and just skate cheaply in the backyard, ⁓ i in the vast majority of places. That makes it, you know, limited to the northern y the Nordic countries, Canada, you know, northern US. No surprise that, you know, that hockey grew up where you know, the NHL grew up where it did, ⁓ where where you could play and you could play cheaply without needing to buy thousands of dollars of ice time like you do anywhere else. So I think that's a that's an issue. ⁓ yeah, I think you can be a fan without having ever played. That being said, ⁓ I I think you know, soccer, for example, has just a gi much bigger potential fan base for exactly the reason you're talking about. Final two questions. Victor Matheson, you've just been appointed the new commissioner of the NHL. What's the first thing you do to try to grow the game? I think we've already done one. ⁓ let's let's throw another team in Toronto. That's ⁓ that's a good one. ⁓ I think that's right. ⁓ and and ⁓ And I think it's extremely important to make sure that we have ⁓ collective bargaining agreements ⁓ that are extended and keep working for both the players and the owners, right? So I think the I think the compet the collective bargaining agreements we have now are good. ⁓ they guarantee the players a percentage of income and they guarantee enough money for ⁓ owners that they can survive. So let's make sure we don't lose another entire season and another entire Stanley Cup because ⁓ billionaires are trying to rip off millionaires ⁓ i by by squeezing them for for for the money. So I think that's that's a big one there. ⁓ there's every reason to believe that you could have more franchises as well. It's not like the world hurts for for talented hockey players. There's tons of of guys who are really good ⁓ that are that that could be playing in the NHL. So so there's no there's no fundamental reason why we have to have 30 teams. Why not go to 40? ⁓ why not give I mean why are we talking about Houston or co Quebec City? Why aren't we talking about both? ⁓ so so there's a possibility. And the last one is ⁓ the ⁓ the ⁓ PWHL is not your competitor, it's your friend. Let's ⁓ let's partner with women's sports as much as possible. ⁓ and ⁓ that's only gonna help your product ⁓ by by having a healthy women's league as well. ⁓ so that just helps soccer. I think ⁓ excuse me, that just helps hockey. I think anything that helps hockey grow is gonna help ⁓ the NHL. And I guess I re related to that, man, ⁓ embrace the Olympics, right? Go all in. You know, the the NHL should be thrilled with the with the Olympics. The Olympics are not your competitor. The Olympics are your are your friend. ⁓ you know, there's a p bunch of people who would never watch hockey ⁓ other than the fact that you drape it in red, white, and blue or you d drape it in a a maple leaf, and all of a sudden people will start ⁓ start watching it. That's what and and then they're gonna say, Hey, that was great. That goalkeeper had just a s a spectacular game. Where can I watch that player once the Olympics are over? ⁓ so you know this spat between the NHL and and the Olympics, that's stupid. ⁓ it it you're you're not you're you're not the biggest game in town. ⁓ anything you can do to grow hockey is gonna is gonna help the NHL. I've always had this thought. Put the hockey put hockey in the Summer Olympics. And that way you don't have to shut down the season. Now I know there's gonna be tons of logistical nightmares. You have the arenas being used from gymnastics, all other types of sports. But if you had it in the summer, you wouldn't have to shut down your season and then you all of a sudden just have everybody's focus. Who's a hockey fan? Hey, my only focus right now is watching these games. They come at a time where you haven't seen the game in in a couple months. I'm just throwing it out there. I think it'd be worth worth trying. I I don't hate that idea at all. I think that's that is That is an outside the box idea, but that that's not a bad one at all. I mean, there have been people talking about ⁓ making things like basketball a winter Olympic sport. ⁓ take Yes, I've heard the same thing. You know, we play basketball. I mean, you want it as a summer sport 'cause ⁓ because it's you know, opposite the ⁓ NBA, but you know, there's nothing fundamental about ⁓ basketball being a summer sport. We we play it all winter normally, and it was invented to be a winter sport. It was invented right here in Massachusetts. To be a winter sport when we couldn't go outside and and ⁓ go, you know, go out and play. What's something we can do indoors and and basketball? Winter sport. I wrote this Dell when you were talking, but you mentioned Mexico City. Who is the first league that's gonna go to Mexico City and put a team there? ⁓ that's a good question. ⁓ if I were going if I were going to bet on it, ⁓ it would be let's go out on a limb and call it the NBA. Really? I thought you'd say the NFL. ⁓ I think so. I I yeah, I mean the NFL is is is is tempting as well, ⁓ but I think it's logistically easier to do ⁓ NBA rather than NFL. ⁓ plus you only need to attract, you know, smaller audiences and bigger internet and much bigger international names in in basketball than football, right? ⁓ there's no there's very few Mexicans playing ⁓ in the NFL. There's very few international players playing in the N N F L. Lots of international players ⁓ in the NBA. So yeah, I don't know how much I'm I'm not gonna s go to Calci right now and and start a market on that. I think I could quite ⁓ but ⁓ but I th I I I'd I'd go with NBA. Final question. If every NHL team had the exact same tax rate, would fans notice a difference in the competitive balance of the league? ⁓ very little. I I think I think teams like like Tampa are winning because they're well managed, not because they've got a tax advantage. ⁓ it's a tiny thumb on the scale, but you know, it it's just not that much. It's it's it it's You know, I I think when you're talking about the bad teams and the good teams in the in the NHL, ⁓ you know, sure ⁓ sure, you know, you're getting a little little bit of a head start on that on that hundred meters. But it's like it's like Usain Bolt getting a ⁓ getting a half second head start on me running the hundred meters. ⁓ he's beaten me and yeah, it's a little unfair that he got that head start, but let's be clear. The main reason I was beaten is not because he got a quick jump on the start. Victor, hey, thank you so much for joining us today. You really gave me a ton of insight on really what goes into the economics of sports. Again, I can't thank you enough for joining us and really look forward to talking with you in the future, especially when we start looking at a future lightning arena down the road. That's right. No, it's been lovely to have me ⁓ have being here and and thanks for having me. And and again, any Any excuse to wear my Alberta Bears jersey and I I'm thrilled to be here. Victor, appreciate your time. Great talking to ya. We would like to thank Victor Matheson for joining us today. Hope you enjoyed the interview and I hope you got some insight from an economist on the NHL salary cap and economic hurdles facing the NHL coming forward. We're going to be back the week of the twentieth. Justin Godfrey from Rodcharge is going to join us. We're going to talk about the latest news in the NHL. They just released the schedule. The Dylan Larkin saga is still going on, and Steve Eiserman is no longer the general manager in Detroit. You can read Justin's Insight on the Lightning each and every day at WWW dot rawcharge dot com. I'm Jason Lincas, thanks for joining us. Please hit that like and subscribe button and go bolts. Thank you for listening to Back Checking the Bolts. We are free and available on all platforms, including Apple, Spotify, iHeartRadio, Amazon, YouTube, and Deezer. If you enjoyed it, please be sure to subscribe and leave a review. You can follow Justin on Blue Sky at Rawcharge.com. You can follow the show on X at Tampa underscore bolts underscore pod and on Facebook, Instagram, and YouTube at Back CheckingTheBolts. If you're interested in advertising on the show or partnering with us, You can find more information in the show notes or email Jason at backcheckingthebolts at yahoo.com.