SINS Committee Meeting

SUB-COMMITTEE ON THE STUDY OF SPORT IN CANADA OF THE STANDING COMMITTEE ON CANADIAN HERITAGE

SOUS-COMITÉ SUR L'ÉTUDE DU SPORT AU CANADA DU COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 23, 1998

• 0915

[English]

The Chairman (Mr. Dennis J. Mills (Broadview—Greenwood, Lib.)): Order. Good morning, ladies and gentlemen, and welcome to our committee as we continue to move forward on the analysis of the industry of sport in Canada.

We're delighted to have the National Basketball Association here this morning, represented, of course, by the Vancouver Grizzlies and the Toronto Raptors.

Before you begin, on behalf of the committee members, the brief you've given us, in both official languages and well in advance of the committee hearing, was appreciated. As well, I must say, the quality of the brief has been, to date, second to none. Thank you very much for taking this time.

Who would be the chair of your group? Maybe you would like to formally introduce your colleagues and then begin.

Mr. Ken Derrett (Managing Director, NBA Canada, Inc.): Good morning. Thank you, Mr. Chairman, members of Parliament, ladies and gentlemen.

As managing director of the NBA Canada office in Toronto, I would like to take the opportunity to thank you for the opportunity to appear before the subcommittee on the study of sport in Canada today. The National Basketball Association considers this a valuable opportunity to both present who we are and open a dialogue with the federal government and this committee.

I would like to begin by introducing my colleagues joining me today. Jeffrey Mishkin is here from New York, representing the league's head office, where he is the executive vice-president. From Vancouver, we have Stephen Bellringer, president and CEO of Orca Bay Sports and Entertainment, owners of the Vancouver Grizzlies. As well, Richard Peddie is president and CEO of Maple Leaf Gardens, owners of the Toronto Raptors.

We have distributed an agenda this morning to go along with your report, outlining our presentation format. You will see that the first item we will address will provide an overview of basketball and the NBA in Canada. Secondly, we'll demonstrate the economic impact of an NBA team on its local community. Finally, we'll describe the community relations activities undertaken by the Canadian teams in their respective markets.

Before we go forward, though, I'd like to share a brief video to provide some insight into basketball and the NBA in Canada.

[Editor's Note: Video presentation]

• 0923

Mr. Jeffrey A. Mishkin (Executive Vice-President and Chief Legal Officer, National Basketball Association): Good morning, Mr. Chairman, and members of the subcommittee. On behalf of the NBA, I want to thank the subcommittee for this opportunity to describe our sport to you and to tell you about our hopes and aspirations for its continued development in this country.

Canada has always been an important part of the history of the NBA. The game of basketball itself, as you saw on the video, was invented by a Canadian, Dr. James Naismith, from Almonte, Ontario. The first game in NBA history was played in Toronto more than 50 years ago.

Until recently, all of the NBA's teams were based in the United States. That changed in early 1994, when the NBA board of governors unanimously approved two applications for expansion teams from Canadian ownership groups. Beginning play in 1995, the Toronto Raptors and the Vancouver Grizzlies became the first NBA teams to represent cities outside of the United States.

The decision of the NBA to expand into Canada was based on several important factors. First, this country has a long history and tradition of supporting other professional sports organizations such as the National Hockey League, of course, and major league baseball. Second was our firm belief in the growth potential of basketball in Canada. Finally, locating teams in Canada was consistent with the NBA's goal of promoting our sport on an international basis.

While Canada remains the only country outside of the United States to have its own NBA teams, the sport of basketball has truly become a global game. With the exception of soccer, basketball is the most popular team participation sport in the world. Among teens, a vitally important demographic group for us, basketball is already the world's most popular sport.

The NBA currently has 31 players from 21 countries outside of the United States, including 3 from Canada. The Women's National Basketball Association, the women's professional league launched by the NBA last year, has 14 players from 13 countries outside of the United States. Although there are at present no Canadian women in the WNBA, we hope and expect that to change soon, as two Canadian players were invited to the WNBA pre-draft try-out camp last week and will be eligible for the WNBA draft on April 29.

On behalf of all the NBA's offices around the world and the NBA's 27 U.S.-based teams, I would like to express our sincere gratitude to the people of Canada for the manner in which they have welcomed the NBA into this country.

• 0925

Largely because of this warm reception and support, the Grizzlies, Raptors, and NBA Canada have been able to add to the solid foundation underlying basketball in Canada and begin to build what promises to be an exciting future. Today provides us with an excellent opportunity to show you how committed we are to that objective.

Now, to take a closer look at the league and the sport in this country, I will return the microphone to my colleague from NBA Canada, Ken Derrett. Thank you very much.

Mr. Ken Derrett: While it is now our intention to provide insight into the role of the NBA and our two franchises playing in the Canadian market, I would like to start by describing the three different levels of basketball—you saw this within that video—we have in Canada today.

First, there's obviously the professional level, specifically the Toronto Raptors and the Vancouver Grizzlies. Players on these teams hail mostly from the United States. Of note, there are currently three Canadians, to whom Jeff alluded, who play, although they are on U.S.-based teams.

Second, we have a growing number of people who play basketball on the amateur organized level. Organized basketball refers to community, school, and other leagues with scheduled games. There's a built-in infrastructure and dedicated coaches. Our top amateur athletes play in international competitions, such as the world championships and the Olympics.

The third group is the largest group by far. It consists of those who play unorganized basketball, such as children or adults playing in parks, front driveways, gymnasiums, or church halls. It's the accessibility of our sport, which requires little equipment or facilities, that has been a contributing factor to this surge in unorganized play in Canada.

This situation presents us, though, with some interesting opportunities and, at the same time, some key challenges. We're excited to se the popularity of this sport on the amateur unorganized level. It shows that basketball is popular and people like to play the game. In fact, some research undertaken over the last couple of years with our two teams has shown that basketball is the fastest-growing team sport in our country, particularly among women, among whom, from 1992-95, it actually grew 24%.

This same research also showed that among the key teen demographic that Jeff alluded to, the NBA is ranked very close to the National Hockey League as the most preferred professional league in this country. In fact, in some provinces the NBA is the preferred professional sport league. Teens really do love our game.

Nevertheless, we've identified three areas we think require attention to ensure the future viability of basketball in our country.

First, we need to ensure accessibility and support for our young players. What we need to do is to create an amateur basketball infrastructure that will create more organized opportunities for people to play the game. Sports such as hockey, figure skating, and soccer are all very well organized in this country, and you can see their results as people in these sports succeed at international competitions on a regular basis. We need to recruit and maintain the volunteer coaches and organizers who support the game and ensure that there are inexpensive facilities available in which to play the game.

Second, Canada needs to support its national team programs. Our men's and women's teams have not historically fared well in international competition. We don't have the programs in place to identify top players at a young age or to nurture them. Our player development programs receive less funding than those in many countries that show more success in international competition.

Success at the international level is very important as it can provide the inspiration and the motivation for young players and coaches and lead to more funding for these teams as they become more competitive and more well known around the world.

Finally, the third area that we believe requires attention is in attracting the adult fan. It's critical for the NBA to develop a stronger fan base among Canadian adults who did not necessarily grow up with the NBA and who are still just discovering our sport. Our short-term successes will rely heavily on attracting adults, who are those who purchase tickets and make decisions on corporate sponsorships and television advertising.

Later in this presentation, my colleague, Mr. Peddie, will describe some of the youth basketball initiatives organized by our two Canadian teams in the last two and a half years.

In the meantime, I think it's important to know that the NBA, in concert with our two franchises in Canada and working closely with Basketball Canada, which is the national sport governing body, has been reaching out to communities outside Toronto and Vancouver to provide Canadians of all ages with the opportunity to experience our game where perhaps geography might be an inhibiting factor, such as if they lived in places in central or eastern Canada.

• 0930

We've staged pre-season games in Winnipeg, Calgary, Ottawa, Montreal, Saint John, and Halifax. We've also started to take our events program across the country, including a three-on-three tournament that now runs from Vancouver through to Montreal.

More recently, we launched a program in concert with Kellogg Canada and Basketball Canada that provides young children with the chance to experience our game in a recreational and fun environment while at the same time ensuring that they receive a nutritious breakfast before going to school. This program, called breakfast basketball, will hopefully be re-launched in the fall across Canada.

To attract fans from a broad-based perspective, we're working closely with those networks you saw in the video, CTV, TSN, Réseau des Sports, and YTV, to provide programming aimed at educating and providing a much broader awareness of the game of basketball and the NBA.

In summary, we have a sport with tremendous interest, but also the need to develop a greater infrastructure and organized opportunities to play it. Our abilities to do this collectively will ensure that we can continue to make the economic and community-based impact my colleagues will talk about.

To speak on the economic side of that, I'd now like to introduce Stephen Bellringer from Orca Bay Sports and Entertainment.

Mr. Stephen Bellringer (President and CEO, Orca Bay Sports and Entertainment): Thank you, Ken.

Thank you so much for letting us join you this morning.

As previously mentioned, Orca Bay Sports and Entertainment owns and operates a 19,000-seat, state-of-the-art public venue in downtown Vancouver. In addition, we own and operate the National Basketball Association franchise, the Vancouver Grizzlies. We also own the Vancouver Canucks. Similarly, Maple Leaf Gardens, represented by Richard Peddie, owns and operates the NBA Toronto Raptors and the soon-to-be-completed Air Canada Centre.

In 1994, following local initiatives, the NBA awarded franchises to Toronto and Vancouver. The positive impact of these new businesses has been felt in this country and in many sectors. Just as a new manufacturing plant or business in your home riding creates jobs, economic activity, and tax revenue, so does the NBA in Canada.

Look particularly at the significant economic benefit of the Vancouver Grizzlies and Toronto Raptors. As a direct result of the NBA coming into Canada, two new facilities have been privately built for public use. The total direct construction activity will be some $440 million by early 1999.

It's worthy to note that more than half of the event dates in our building in Vancouver are not for sporting events. We have hosted such international televised events as the Juno Awards, World Figure Skating Championships, world gymnastics events, an international conference relating to AIDS, and significant religious and cultural events representing Vancouver's diverse nature. Nearly two million spectators visit our building every single year.

Specifically, the NBA itself has supported Canada in holding the important U.S college draft in Toronto. This June, it will be held in my hometown of Vancouver.

All of the above events had a substantial positive impact on tourism, not only in our local market area of the two teams but in projecting all of Canada internationally. On an ongoing basis, more than 500 hours of NBA Canadian television programming and production originating from our two teams and venues has been broadcast outside of our great country of Canada.

Just as the film industry and other broadcast programming add to the Canadian economy, so do our productions. In terms of technical support jobs, many of them are entry-level positions that come from our community colleges.

Speaking of the economic impact our business has, the highly regarded accounting firm of KPMG, alias Peat Marwick, has just completed their own assessment of the impact of the Grizzlies and our arena on British Columbia. While a similar study has not been done for the Raptors and the yet-to-be-completed Air Canada Centre, it can be reasonably assumed that the analysis for Toronto would be at least as great as that for Vancouver.

This independent study supports the view of most experts that the entertainment business, whether it be film production, broadcasts, or professional sports, adds significantly to our economy here in Canada.

• 0935

Specifically, our operations alone, excluding Toronto, create some 1,600 full-time equivalent jobs. This ranges from more than 1,200 part-time individuals, be they college students or working men and women generating a second income for their families. We have some 185 direct full-time staff on our payroll, excluding the professional athletes. Many of these positions are entry-level clerical and operating positions, rising up to more professional marketing and engineering jobs.

Our building in Vancouver is assisting in the overall economic stimulus in rejuvenating our city's eastern core area. The overall value added of our basketball and arena operations alone is more than $90 million each and every year. As each of you probably know better than I, there are not many 1,600 job-creating, $90 million operations suddenly springing up across our country or, in particular, in your home ridings.

Another, and mercifully the last, statistic I would present today is that our operation alone generates some $30 million in taxes. If one were to double this for Toronto, which I believe is a reasonable assumption, it would climb to some $70 million per year in tax revenue, be it municipal, provincial or federal, to be redistributed to the many demanding needs of our citizens, whom all of you know so well.

As I mentioned earlier, the NBA in Canada is a significant economic engine.

Having said all of the above, we have several business issues adding to our challenges. I'll mention three in particular, if I may. First is the high cost of providing public infrastructure in which we house our events. These are high-cost structures that require high-occupancy utilization.

The second is the high tax levels, such as capital and sales tax, and particularly regulations in respect of the interpretation of tax policies regarding many of our key athletes.

The third is the low 70¢ dollar. The low Canadian dollar is an interesting public policy issue here in Canada, as I know so well. I believe it is generally judged that our low Canadian dollar helps certain export industries, be it forest products in British Columbia, oil and gas in Alberta, grain in the prairies, auto assembly in Ontario, dairy farms in Quebec, or tourism or other industries in the maritimes. However, for competitive reasons, a substantial part of our costs is paid in U.S. dollars and the majority of our revenue is in Canadian dollars. The change in exchange rate alone can be the difference between economic success or failure.

We are trying to better understand all of these economic issues we have discussed today. We are trying to better understand our long-run impact on our industry and the thousands of Canadians who depend upon it for their livelihoods and their families' futures.

Richard Peddie of the Toronto Raptors will now outline our collective involvement in the communities we serve.

Mr. Richard Peddie (President and Chief Executive Officer, Toronto Raptors): Thank you, Steve.

Good morning, Mr. Chairman and members of the subcommittee. My name is Richard Peddie. I'm president and chief executive officer of Maple Leaf Gardens Ltd., and as of yesterday we purchased the Toronto Raptors and the Air Canada Centre.

Thank you for the opportunity to speak to you today regarding the community and charitable efforts the NBA, and more particularly the Vancouver Grizzlies and Toronto Raptors, have initiated or participated in during their brief three-year history. The Grizzlies and the Raptors have each established community relations departments and have devoted significant human and financial resources to them.

These departments organize and are responsible for our many community outreach and educational initiatives. They focus extensively on the grassroots levels to foster the development of the sport of basketball. Importantly, they also serve the community by educating children in a non-traditional and non-threatening way.

While the Grizzlies and Raptors have not yet enjoyed the success on the court we aspire to—namely making the play-offs and some day winning an NBA championship—we have clearly succeeded in contributing in meaningful ways, off the court, in the community.

• 0940

Essentially, there are three primary ways that we pursue our efforts. One is community outreach, most noticeably in the area of education. Second is basketball development, through clinics and Raptorball and junior Grizzlies leagues. Third is charities, through both the Raptors Foundation and the Grizzlies Foundation.

Our basketball players have an ability to attract attention to what they do and what they say simply because they play an exciting, attractive and very visible professional sport. Moreover, like other team sports, basketball provides an excellent opportunity to communicate fundamental life skills. Basketball offers the forum to teach the importance of teamwork, discipline and commitment, of facing challenges, experiencing defeat and celebrating victory. Combine these two facts and you have a unique and powerful opportunity to benefit children in our communities.

These opportunities are available to the Toronto Raptors and the Vancouver Grizzlies because they are professional sports franchises. A list of the programs initiated or conducted by the teams is provided in appendix 6 of our submitted report.

It is, however, worth while mentioning just a few of the programs—and you saw a number of them on television before—to illustrate the type of initiatives we have undertaken.

It has been shown that children who are exposed to the importance of reading at an early age, or who are regularly read to, will be more proficient readers, and proficient readers are more likely to stay in school while poorer readers are less likely to. The Read to Succeed program in Vancouver challenges children in grades 1 to 4 to read books. It also encourages children to bring used books for distribution to other children who can't afford them. There have been approximately 10,000 participants in this program to date.

The Raptors also have a reading-based program entitled Reading Time Out, where grades 3 to 6 are challenged to read books. The class that reads the most books gets to have a Raptor player come and read books to them. We have focused on reading because we have learned that drop-out rates rise through each subsequent year of high school, beginning in grade 8. Early intervention programs like our reading initiatives are one of the most effective strategies for increasing school completion.

Staying with that first point, we have also a league-wide initiative called TeamUp, which encourages youth to become involved in their community by volunteering on service projects. Initiatives such as TeamUp receive significant support from the NBA in the form of public service announcements and print materials. The PSAs run during nationally televised games on CTV, Réseau des Sports and The Sports Network. These telecasts are viewed by millions of people, generally from January to June.

These are but a few of the programs offered in the area of education. There are many others, including those involving the players who reinforce the importance of staying in school.

In addition to the education theme and community programs, the teams also conduct initiatives such as coat drives at a number of their games. At one of our games we collected over 5,000 coats. These coats were directed to homeless shelters and other organizations who assist those people in need. Similarly, both organizations hold numerous food drives.

The second primary way the NBA pursues its community obligations off the court is through basketball development programs. For instance, the Grizzlies' Night Hoops program is a prime example of how government can partner with the teams to benefit the community. The Grizzlies, in partnership with the three levels of government and Basketball B. C., have developed Night Hoops, a unique late night program for youth that promotes community development and encourages fair play, sportsmanship, education skills and, importantly, fun. Night Hoops is the first program of its kind in Canada and will reach over 1,200 youths at 19 locations around Vancouver this year.

There is also a variety of basketball development clinics such as the Speedy Free Youth Clinics and numerous basketball camps supported by the Grizzlies and the Raptors. Perhaps, however, the most significant contribution to developing the sport of basketball in Canada at the grassroots level is our concentrated efforts to develop and grow youth leagues.

• 0945

Raptorball is an Ontario-wide program for children primarily between the ages of 5 and 13. It is designed to provide recreational basketball in a controlled setting, and it currently has approximately 5,000 participants in 60 sites in the greater Toronto area with a goal to some day reach 50,000 children in Ontario.

The Grizzlies have instituted a similar program for youth between the ages of 6 and 12. The Grizzlies' program today has 800 participants with a goal to reach 20,000 in British Columbia by the year 2000.

But the objective of those programs is even greater than the development of the sport. Each week in the Raptorball clinics there is also a lesson regarding life skills such as health and nutrition, mental training, social pressures and how to deal with the police and others.

Recently, as part of the Raptorball program the participants in Toronto were invited to attend an open Raptors practice one Wednesday morning. Much to our delight and even some surprise, over 7,000 people, mostly children, showed up.

Another way that the teams connect with the grassroots level of the sport is the access to their practice facilities. The Grizzlies have literally opened their doors to amateur basketball leagues by making their practice facility available to them. When the Raptors' practice facility at the Air Canada Centre is completed in early 1999, it is similarly our intention to make it available as much as possible to Raptorball leagues as well as to many other amateur organizations.

The third area of our team's significant involvement in our community is their charitable foundation. The Grizzlies Foundation operates under the umbrella of its community relations department. On the other hand, the Raptors Foundation is a separate charitable foundation established to focus exclusively to help people who help kids. In the four years since its creation, the Raptors Foundation has donated in excess of $4 million in cash and merchandise to over 1,500 registered charities that assisted children in need. In its short history the Raptors Foundation has become the model charitable program for other NBA teams and now ranks first amongst all 29 teams in revenues generated and distributed.

Examples of some of the charities that benefited from the foundation's support include Ontario Special Olympics, Basketball Canada and the Kids Help Foundation. The success of the foundation is due largely to the substantial involvement of corporate Canada. It receives over $700,000 annually in direct corporate contributions from Raptors' sponsors. This amount does not include the corporations' cost to participate in the foundation's fund-raising initiatives. It also excludes their gifts and merchandise donations. We have brought copies of the foundation's financial statement from 1995-96—we're working on this year's right now—and it was called “Hope”. It captures some of the challenges that face those whom the foundation aspires to help as well as eloquently describes the goals and hopes of our foundation.

In conclusion, as I have illustrated, our two franchises have been very active in our broad communities. As Ken Derrett said at the outset of today's presentation, we welcome the invitation to have an open dialogue with your committee and the chance to educate you on Canada's newest professional sport.

In summary, we have two core messages to you today. One, professional basketball is a powerful economic engine in the markets it participates in. Our teams have a very positive impact on employment, gross domestic product, tax revenues and tourism, as Mr. Bellringer explained. Core message number two is that the NBA Grizzlies and Raptors are excellent corporate partners and citizens. With our community outreach work on basketball development and the significant dollars generated by our charities, we actively participate and give back to the communities we live in.

In our brief three-year existence we are extremely grateful for the way we have been embraced by our respective cities, provinces, and by the territories that go beyond our immediate border. We appreciate that our fans have a choice. They have a choice whether they come to our games, to wear our merchandise or watch us on television.

• 0950

While our team continues to struggle on the courts, like most young expansion franchises, off the court we are clearly already a winner. We have been successful in becoming part of the fabric of our cities and contributing to our communities, especially our children.

However, there is still much work to be done. For our teams to be successful, we must be competitive on a North American stage. For our programs to continue, we must prosper financially off the court.

While we believe our future is bright, we do have a few concerns and a few ideas. Basketball, despite its 107-year Canadian history, is vastly underdeveloped. Programs, facilities, organized leagues and coaching lag far behind other Canadian sports.

We welcome dialogue with you on how to partner with the federal government to grow the sport. Canada's national basketball team, as Ken pointed out, has not fared very well in recent international competition. Our franchises are committed to doing their part, but we need a commitment on the part of government to develop talent at the national level.

We need to discuss how to help the Grizzlies and Raptors compete with the other 27 teams south of the border. Our ability to attract top players is threatened by several factors, including an unfavourable exchange rate, higher local property taxes and, in most instances, higher player taxes than those our players have in the U.S. We need to discuss how to address those barriers to success.

However, it is not our purpose today to make specific propositions or suggest that all of these issues are for the federal government to resolve. Again, we are pleased to have the opportunity to stimulate dialogue and to educate you on a game created in 1891 by a Canadian, Dr. James Naismith.

Mr. Chairman, we would now be happy to answer any questions the subcommittee might have.

The Chairman: Thank you very much, Mr. Peddie. Thank you, gentlemen.

We will go to questions right away. We'll begin with Mr. Solberg.

Mr. Monte Solberg (Medicine Hat, Ref.): Thank you very much, Mr. Chairman.

And thank you to representatives from the NBA and the Raptors and the Grizzlies for being here today.

I think the growth of the NBA has been pretty phenomenal over the last several years, and I can tell you that it's a big hit in my household. My oldest boy is quite thrilled with basketball.

I can also tell you that we were recently at GM Place to watch a hockey game. It's a great facility, and as it turned out, the Canucks even won on that particular night. We beat Dallas coming from behind and Bure scored a couple of goals, so it was a great evening.

I do want to say that while we appreciate how quickly basketball has grown in Canada and how it is doing extraordinarily well, I think we have to keep a weather eye on the future. We know now that basketball is well established in these two cities, but we need to find ways to ensure that it not only stays there but even possibly expands down the road. I don't want us to get too far ahead of ourselves here, but I think that's one way to ensure that it continues to be strong across the country.

You've listed some of the impediments to the sport, things like high taxes and the exchange rate, and I'm wondering what it would take down the road to see the sport expand in Canada so that cities that are of similar size to some of the smaller cities in the States that have franchises...what would it take for this sport to expand in Canada? Would we have to see the exchange rate come right up to on par? Would we have to see our tax rates fall to meet the American levels? Just what would we need to do?

Mr. Ken Derrett: I'd like to defer to Mr. Mishkin from New York, who really works on expansion matters.

Mr. Jeffrey Mishkin: None of the issues that have been raised here as concerns about the Canadian teams being fully competitive with the U.S. teams in any way inhibited the NBA from putting teams in Toronto and Vancouver, so I don't know that we necessarily want to focus on those concerns. They are legitimate and true concerns, but we think the two teams we have here are on very stable footing. There's no danger of their not being here. And we think their future is very bright.

• 0955

In terms of expansion, I assume you mean additional teams elsewhere. We would be happy to entertain applications from any group anywhere that wanted to put an NBA team in a city. There are many cities in the United States and elsewhere that would like to have teams.

Expansion is a very important, difficult business decision. We have expanded by a number of teams in the last 10 years. To be candid, there are no immediate plans for expansion anywhere in the world right now, but that can always change as the sport does become more popular. There is also the issue of enough talent at the highest levels to field teams that can play and succeed in the NBA. We are open always to the issues of expansion.

Mr. Richard Peddie: I might also build upon that and tell you a little bit of how we got into Vancouver and Toronto. In 1992 Canadian businessmen and Canadian businesses took the initiative to approach the NBA. We wrote an application when there was no expansion process and we put a cheque in for $100,000. So we really started it.

I suppose someone could take a page from that book and do it again in another city. It does take organizations and individuals, though, with the financial resources not only to purchase a franchise but also to build a state-of-the-art facility, as both of our franchises are or have.

Mr. Monte Solberg: Your focus right now seems to be more on getting the game well known in Canada. Is that essentially right?

Mr. Ken Derrett: I'd say right now it very much is. We recognize we do not have that infrastructure we alluded to; other sports have a lot longer history than we do. We need to build the infrastructure so those people grow into future fans, future television viewers, and they eventually become decision makers who can work with us at the corporate level.

Mr. Monte Solberg: So what role do you see the federal government playing in making that happen? You talked a little bit about the national basketball team.

Mr. Ken Derrett: As Richard alluded to in his closing remarks, we didn't come with a specific in that area. We wanted to present it as a directional area for long-term growth, where we would welcome the opportunity to work closer. The Night Hoops program is a classic example of how we can partner up with various levels of government and corporate Canada.

Why did we mention the national team programs? If you look at some of the other successful sports—and we're very happy to acknowledge the efforts of hockey, soccer, figure skating and alpine skiing and the pride they've given us on the Olympic stage, on the world platforms—we need that level in the long term. It's the one level below the professional level. Having only two pro teams right now in Canada, it gives us the opportunity to showcase the game right across Canada, versus a little narrower basis in Toronto and Vancouver.

Mr. Monte Solberg: I just have one final question, Mr. Chairman. I'm digressing a bit here. When the NBA considers a city for a franchise, just how important is the facility? I suspect it's fairly important. The question that is implied is to what degree is it necessary for municipalities to jump in and support these facilities? I appreciate very much the fact that in both your cases you're doing this with private money. To what degree is it important that you have a good facility?

Mr. Jeffrey Mishkin: The quality of the facility in which our teams play is critically important to us. In considering expansion or relocation, one of the first things we do is take a very hard look at where that team is going to play. We want people to enjoy NBA games in the most comfortable, modern and pleasant settings possible. It is very important to us.

That's a very different question in whether or not municipalities need to support the arena in particular ways. As we all mentioned several times now, the facility that is built and the one that is being built in Canada are being financed privately. Many of the new NBA arenas are being financed privately.

Other cities have decided as a matter of free choice that they think the economic returns from having an NBA team or keeping an NBA team justify certain public expenditures. From the NBA's point of view, that is entirely a matter of choice by the communities. They don't always come to the same conclusions about that. We have recently had an example in Minnesota where that state chose not to provide any public support to the football team and to the baseball team.

• 1000

We understand that is a difficult and often controversial issue, although we are very concerned about having state-of-the-art facilities. How those get financed is a matter that needs to be decided by the team owners and by the municipalities in which they play. We do want the best facilities.

Mr. Monte Solberg: Thank you very much.

The Chairman: Thank you, Mr. Solberg. Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay (Rimouski—Mitis, BQ): Mr. Chairman, you beat me to it. However, I also want to say that I was very happy to get a document written in such good French. I would like to thank you for that, as well as for your presentation.

Before asking any question touching upon the substance of your presentation, I'd like to get some very quick information from you. What's the value of a basketball player?

[English]

Mr. Richard Peddie: The top would be Michael Jordan.

[Translation]

Ms. Suzanne Tremblay: The maximum. The level where salaries are frozen. Are some salaries frozen?

[English]

Mr. Jeffrey Mishkin: There is no salary cap on individual player contracts. There is a salary cap for each team, but there is a very important exception that is giving us a lot of trouble with our teams right now. That permits a team to re-sign its own player for any amount of money that team chooses to spend on its player.

Right now, the highest salary in the NBA is $36 million for Michael Jordan.

[Translation]

Ms. Suzanne Tremblay: What's the players' average salary?

[English]

Mr. Jeffrey Mishkin: The average salary per player now is $2.6 million U.S.

[Translation]

Ms. Suzanne Tremblay: Right. Now, in the States, is government support coming from the national, state or municipal level? Who grants benefits, whether in terms of tax credits, tax exemptions, emphyteutic leases and so on? Is it the municipality, the state or the United States' government?

[English]

Mr. Ken Derrett: Stephen, do you want to address that, please.

Mr. Stephen Bellringer: When you get into the area of taxes, you really have to break it out municipally, provincially and federally to be fair to the various levels of government.

Currently, as Jeff already indicated, many of the municipalities in the U.S., for their own personal interest, to generate the economic benefits in their communities, do come forth with various tax abatement programs. They ensure that various civil works around their buildings are provided at public expense in order to provide an overall economic engine to their area.

Particularly, I think you have to look at, whether it be dairy farmers in Quebec or other industries across Canada, where they receive varied federal supports. The same can be true—

[Translation]

Ms. Suzanne Tremblay: They were cancelled. They are not granted any longer. They were cancelled in the last budget. They don't exist any longer.

[English]

Mr. Stephen Bellringer: We're here to talk about basketball and not the dairy farmers, whom you probably know more about anyway. I have enough trouble understanding basketball.

You have to look at the difference between what I'll call tax legislation in the U.S. and Canada. That is the point I really want to make. There are some issues we have regarding federal policy.

One is not even a tax issue; it is in terms of some of our immigration laws in terms of spouses. We have individuals who come up here...and it is the same as the artists. So whether they are in the film business in Vancouver or whether they come to assist us in our entertainment venue, many of them have very highly qualified spouses. We had one particular case where the spouse was much more highly educated than the individual we wanted to hire. It put a lot of strain on their personal relationship to be in Canada because of the fact that the spouse couldn't work right away. That's one federal initiative that could be of some assistance.

As for the federal tax policies in terms of how we look upon professional athletes or artists, for that point of view there's been a change in terms of how the NBA players are looked upon, from when the franchises were originally granted in respect to duty days and game days.

The way the calculation is made is that we look upon it as Canadians, that the only time a player is working is during the season. I would respectfully say that is ludicrous. We have many events through the year that we ask our players to attend. In our case we're also a sponsor of a PGA tournament. We have a big Pro-Am that raises a lot of money for Canuck Place, which is a hospice for young children. Our players come out and participate, I think, in their minds, as a natural extension of their job. That is not considered to be a duty day.

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Mark Messier in Vancouver recently announced a new charity event himself. He is going to pull in players from around the various leagues. That is not considered to be a duty day by the federal government here in Canada.

I think this issue is becoming even more critical. We recently announced in Vancouver that our training camp for next fall, which we previously held in Vancouver or even in Calgary, will be moved out of Canada. We're going to hold our training camp for the Vancouver Grizzlies in California. As a Canadian, I've got to tell you, this tears me apart. We're going to move it to California strictly because of the interpretation of our tax laws.

Here we have one of the great economic engines in Vancouver and one of the great, I think, sports franchises in Canada, but because of the interpretation and how we lean upon—and I put it that way—some of our professional people, that particular organization will be leaving this country this fall.

There are lots of different things. So really my point is you have to compare what happens in the U.S. with what happens in Canada—and it's no different whatever business you're in—and ask, is there a level playing field?

That's a long answer to a short question. I apologize.

[Translation]

Ms. Suzanne Tremblay: No, because there are still a couple of things I'd like to explore further. You should do more than going through a list; you should clarify things for us so that we understand what it's all about.

I read somewhere that Revenue Canada had changed its position regarding taxes to be payed by your players two years after coming to some kind agreement with you. However, you just said that when your players participate in a golf tournament, it's not considered as a duty day. So it means it's not taxable. This is an advantage, won't you agree?

[English]

Mr. Stephen Bellringer: No, no, that's a misinterpretation. Obviously they're taxed on their total income, but there is a calculation that is made in terms of how many of their duty days they spend in Canada versus the U.S. It has no impact in terms of what I will call where the tax is paid, but the question is where the tax is paid in terms of being in Canada or being in the U.S. in terms of the allocation.

[Translation]

Ms. Suzanne Tremblay: Alright. So when they participate in a golf tournament off season and this is not considered as a duty day, it means that, on that particular day, they can be in Canada without having to pay one cent in taxes.

[English]

The Chairman: No, there's still a differential. Is there a differential in the rate, Mr. Bellringer?

Mr. Stephen Bellringer: Yes, there's a differential between our rate and the U.S. rate. Let me give you another example, if I can.

Obviously when players show up for training camp they have to be in shape. We literally send our trainers down, whether it be in Alabama, Oklahoma, California, wherever the players might be, and actually put on summer training programs to have those people in shape. Those days that they spend are not considered to be duty days even though.... Just as I'm sure all of you in this room get ready to come here to Ottawa and do homework, if we merely looked at the days you're sitting in the House as duty days and said that is the only time you work, you spend no time off this hill doing any work whatsoever, I think you'd probably sit around this room and say that is ludicrous.

It's the same with our professional athletes. They have obligations beyond playing the game. They have obligations beyond the season to fulfil their responsibilities. That is the key point I'm trying to get at.

[Translation]

The Chairman: Ms. Tremblay, you can ask a quick question.

[English]

Could you please explain, Mr. Bellringer, what the tax differential or what the rate is. You're obviously talking about a differential here. What is that differential rate?

Mr. Stephen Bellringer: It's hard to give an exact answer, Mr. Chairman. It depends upon what state in the U.S. in which the player is a resident.

The Chairman: Is there an approximation between a working day versus a non-working day?

Mr. Stephen Bellringer: Let me put it this way. You'd have to look at each individual state. I'm reluctant to try to quantify it here. In some cases, it is up to or more than a 10% differential.

The Chairman: Fair enough.

Mr. Richard Peddie: With the best comparison, we're still a couple of percent offside. And when the individuals are making the kind of money they are and are weighing whether to come to the Grizzlies or go to Dallas, it is something that's not in our favour.

The Chairman: If I understand it correctly—Madame Tremblay, it's a very good point you raised—if I'm coming up to play a golf game, which is a working day, I'm actually penalized because Revenue Canada's regulation doesn't recognize it as a work day.

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Mr. Stephen Bellringer: It will depend upon whether the charity event is in Canada or somewhere else.

The Chairman: Thank you.

Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay: "Somewhere else" means "outside Canada", right?

[English]

Mr. Stephen Bellringer: Yes. What I'm saying is those particular functions now are not considered to be duty days.

[Translation]

Ms. Suzanne Tremblay: But still, there is...

[English]

Mr. Stephen Bellringer: So it would be the same—

[Translation]

Ms. Suzanne Tremblay: To be sure, I am not a born financial expert, but this is what I understood from what I read. A player pays taxes according to the number of days he works. It's on that basis that he pays taxes in Canada. It is therefore an advantage for him to play golf on a non working day; he doesn't pay taxes that day. How could this be a disadvantage? This is what I don't understand. How come playing golf on a non working day could be a disadvantage for a player? I don't understand.

[English]

The Chairman: Because it's a higher rate.

Mr. Stephen Bellringer: The fact of the matter is they do not want to spend days in Canada. Every day they spend in Canada costs them more in tax. It changes the weighted average of the number of days they spend in Canada versus the U.S.

I'm being very blunt. I appreciate that. But they actually go through a detailed calculation of how many days they stay in Canada and how many days they stay in the U.S. when they're on duty, and each additional day they spend in Canada while they're on duty costs them more tax.

Ms. Suzanne Tremblay: So when they come to play golf

[Translation]

they would prefer to be on duty.

[English]

Mr. Stephen Bellringer: Can I just change the context? They're not coming to play golf. They're here to support a charity event. In this particular case it's a charity event supporting Canuck Place, which is a hospice for young children. In fact they would not come to play golf. It is not worth their while to come to Canada just to play golf. They're coming out of their hearts to support a charity.

[Translation]

Ms. Suzanne Tremblay: Why should you stop holding the training camp in Canada? What's the tax differential? Because of taxes, you decide to hold the training camp outside of Canada. I find that quite strange.

[English]

Mr. Stephen Bellringer: That's a very good question, but let's suppose there's a gap in between the state we may go to and Canada.

This is for illustrative purposes only—I'd have to look at each individual state—but let's suppose there's a 10% differential in tax. The training camp probably lasts seven to 10 days. That is seven to 10 fewer days, if I'm a professional athlete, that I'm staying in Canada. I take the seven to 10 days over my total duty days for the year and I get a 10% differential on that weighted average.

If I am talking to the management of our team—and Toronto has their own situation—they will say, “I prefer not to spend an extra seven to 10 days in Canada, because it does not matter. I can surely train just as well in California or Washington State, which is only a 45-minute drive from our training facility.”

Just think about it. They move 45 minutes down the highway and there's that type of change. We aren't sure if we're going to Washington State or California, but we go somewhere down the west coast. That is a disadvantage for Canadians.

Last year we had our training camp in Calgary at the University of Calgary campus. We had an open practice one day where we had 4,000 people come out and watch our team literally just practise for the season. A donation was made, and that donation went to support a worthwhile charity in Calgary.

We would like to do the same thing throughout western Canada, picking various cities to bring our team in to support the types of community programs that my friend Richard was talking about. Again, that's just one example of small things that affect our business.

[Translation]

Ms. Suzanne Tremblay: But when you decide to put a basketball team together, you already know what's the difference between Canadian and American taxes. If the tax differential is, let's say, 10%, you still have to move your players to another location, to provide room and board for them, etc., when you already have all the necessary infrastructure in Canada. Wouldn't it be to your advantage to pay that 10% tax differential? At the end of the day, what is the difference between the cost of holding your training camp outside of Canada and this 10% tax differential? It is truly a tax issue? You want us to believe that's the only reason.

[English]

Mr. Stephen Bellringer: Categorically, to answer your last question, absolutely yes. That is the only reason we're taking our training camp out of Canada. It's due to taxes.

[Translation]

Ms. Suzanne Tremblay: As far as I am concerned, I would not move to Ontario because of the tax differential.

[English]

Mr. Stephen Bellringer: Keep in mind also there's a public policy issue here. The regulations were changed after the franchises were awarded, in terms of the definition of duty and game days.

Say somebody has come into your riding and set up a business under one understanding of tax regulation interpretation; the plant is built, the investor has invested his money, and then the tax regulation interpretation is changed. If somebody came into your riding office and explained that, how would you feel?

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[Translation]

Ms. Suzanne Tremblay: I would not have any problem with that because you should have enough experience to know that each year, the Finance Minister tables a budget which changes the financial playing field. But I would not move from Quebec to Ontario because of the tax differential.

[English]

The Chairman: Thank you very much, Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay: I have other questions, but I'll let others have a chance to ask a few.

[English]

The Chairman: Before we go to Mr. Coderre, Mr. O'Brien, do you have a specific question on that tax issue?

Mr. Pat O'Brien (London—Fanshawe, Lib.): I have several. Beyond the issue, I'm just curious whether an appeal of that has been attempted. I have some sympathy for the point you just made, Mr. Bellringer, and I just wonder if any appeal has been considered or if there's one under way.

Mr. Stephen Bellringer: We have ongoing discussions with the Department of National Revenue on a number of issues, in terms of interpretation of various policies and various interpretations regarding the way our ownership structures work, Mr. O'Brien.

The Chairman: We don't have to remind you that the Minister of National Revenue is from Vancouver and is a Grizzlie fan. So you have pretty easy access to him to plead your case.

Mr. Stephen Bellringer: As I said, we have ongoing discussions.

The Chairman: Mr. Coderre.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): To make basketball more attractive to Francophones, I am going to use the language used on RDS and speak French myself.

First, thank you for a presentation of such quality. I also believe, however, that it is important to hold such a debate precisely to show what role a professional sport team can play at the community level, the impact it can have on its own community. A professional sport team is not only a group of young millionaires who are having fun; it also has an impact on the community because the franchises bring money to that community.

That being said, let me follow-up on some comments by Ms. Tremblay. So, a basketball player who, as I understand, is almost always from the States, who is therefore an American, is paid in US dollars. Just to satisfy ma curiosity, I would like to know if that player brings a lot of money to Canada. Let's forget the tax issue and the percentages. Let's forget the franchises. Does the basketball player, when he is in Canada, spend a lot of money? Or—and I'm going to play the devil's advocate—are we right in thinking that, when he comes and plays in Canada, he just takes the fans' money and spends it somewhere else?

That's probably where the shoe pinches. It is often very difficult to argue in favor of a tax agreement when some people are convinced that, in the end, basketball players are a gang of young millionaires who take our money and spend it elsewhere.

[English]

Mr. Ken Derrett: Steve.

Mr. Stephen Bellringer: I have two or three comments there, Denis. First of all, in terms of what we've done for the economic study, I'd like to separate my answer into three parts.

For each $1 million of salary, we've only included a $60,000 expenditure within Canada, so we try to be very conservative and not assume their total salary is spent in Canada. That's already been taken into consideration with respect to these numbers.

Let's suppose, as was mentioned earlier by Jeff, the average player makes somewhere north of $2.5 million Canadian. Of that amount, depending on what state they're in and the duty day calculation, they are probably paying several hundred thousand dollars per year in Canadian taxes. If our teams were not here, those taxes would not be paid, period, end of conversation. So you could almost say, if I'm a Canadian I hope to get paid a zillion dollars because as long as we have those two teams in Canada, we are getting a good share of those zillion dollars, or whatever it might be.

The third comment I would make is if we did not have those 15 professional athletes on the Vancouver Grizzlies and the 15 professional athletes on the Toronto Raptors, my other roughly 1,600 job equivalents would not be there. The young individual who is just graduating from UBC's sport management program would not have a job with us. The two co-op students we currently have in our building would not have part-time employment. The young broadcast technician we just hired from Vancouver Community College would not have a job, and the hundreds of people who come into our building to provide part-time service would not have jobs.

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So we have to look beyond just the macro gross salaries to what Canadians get from these athletes—a substantial amount of tax revenues—and whether they support the job mechanisms of these hundreds of other Canadians.

[Translation]

Mr. Denis Coderre: I appreciate your answer because we hear a lot of demagogical arguments. I think that most of us consider professional sports as an industry. It's important to tell the public that, in fact, both the players and the jobs which are created generate a lot of revenue for the government which, in turn, reinvests these monies in social programs. So I think your clarification was indeed needed.

However, the committee heard two economist who said that in the end, the impact of a professional franchise is not that important and does not have any real economic impact because people who spend money on it would have spent their money somewhere else in any case.

I am going to ask you a series of questions which might clarify further this ambivalent aspect of the issue. First, in Toronto or Vancouver, what is the percentage of people who come from outside theses cities to watch the games? Did you determine the amount of money which comes from outside, how much new money you are making?

Let's also talk about revenues. The committee heard the Canadian Football League say that ticket selling represents 80% of the league's and its teams' revenue. I'd like to you to tell me what percentage of the total revenue of the basketball league ticket selling generates.

Can you also tell me whether the NBA has an equalization system for broadcast rights, suppliers' rights, marketing expenses and everything which has to do with merchandizing. For instance, how much do the Grizzlies and the Raptors get from the NBA for that kind of thing, so that we can appreciate how much profit each professional team makes?

I'll have more questions later. In fact, I have several.

[English]

Mr. Ken Derrett: Maybe we'll take those one at a time. Steve, you can take the first one and then Jeff can maybe take the second one on revenue sharing.

Mr. Stephen Bellringer: I'll take the last question first. There are no profits from NBA basketball in Canada, as we sit here today. We recognize the fact that we have a growing business, like a lot of other businesses, and quite frankly we're losing very significant amounts of money on the basketball operations.

In terms of the expenditures you're asking about, I think first of all we referred to a couple of economists who visited this committee. I've not seen the report. I would humbly suggest we operate the largest sports organization in Canada in Vancouver, soon to be exceeded by my friend here when he gets his Air Canada Centre up and running. I've not spoken to individuals. They've made no effort to contact us, so I don't know what they base that on. I certainly respect their right to their own opinion.

I would say, though, going back to some comments I made earlier, I'll challenge any member in this room—I'll take out my personal Visa card right now and you can fly back to Vancouver with me, and walk the building with me tomorrow—to look into the eyes of those 185 full-time people and 1,200 part-time people and say “What's happening here has no economic impact upon your life”. That defies gravity, as far as I'm concerned.

In terms of asking where those jobs would be somewhere else, you could say that in respect to anything that might happen to drop into your riding and provide economic activity. It came into my riding, but I don't really want it or encourage it because it could go somewhere else and still have an impact on Canada.

As members, you would probably go to that individual and say, “Why don't you move it to another riding?” because it might be better in your riding than in my riding. I think we've effectively enlarged the market for entertainment.

[Translation]

Mr. Denis Coderre: I'll ask you the same question next week, when you wear your other hat and we talk hockey.

[English]

Mr. Stephen Bellringer: I have to be careful what I say today.

[Translation]

Mr. Denis Coderre: You might as well get ready right now because next week, it will be the same thing.

In fact, do you believe that basketball encourages people to spend money or that this money will be spent anyway?

[English]

Mr. Stephen Bellringer: I think it's entertainment. We have actually done research, and people coming to a basketball game look upon it as entertainment. They are looking at their entertainment dollars and saying, first of all, what percentage of my income do I want to spend upon entertainment? Do we want to go to the theatre? Do we want to go out for dinner? Do we want to go to a basketball game? Do we want to go to a baseball game?

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So I think they look upon where they want to spend their entertainment dollars, which is a function of what happens within a family. Effectively, if a major league team comes to a city, you expand the market for those particular dollars and you generate the economic activity to expand those dollars.

Perhaps I should let Jeff comment—

Mr. Denis Coderre: I'd like the specifics now.

Mr. Stephen Bellringer: —regarding the other part of your question in terms of NBA programs.

Mr. Denis Coderre: Show me the money.

Mr. Jeffrey Mishkin: The collective revenues.

The way it works in the NBA is that all revenue generated from national TV and the national sale of merchandise, or international TV or international sale of merchandise, is shared equally by all the teams. It does not matter how successful the team is on the court and it does not matter whether you're the Chicago Bulls or not in terms of the sales of merchandise. Everything the league can generate on a national and international basis is shared equally by all the teams.

This past season that will amount to approximately $13 million per team. Because we have just negotiated very large increases in our television packages, and also because our international television is doing very well—we are seen in 196 countries—we are going to be able to substantially increase the amount the league is distributing to each team. Next year, I believe, it's going to go up to about $20 million U.S. It will continue to increase each year—

Mr. Denis Coderre: Not bad.

Mr. Jeffrey Mishkin: This is very good news, I know.

Mr. Denis Coderre: Is that a scoop?

Mr. Jeffrey Mishkin: No, it's not a scoop. It shouldn't be, if it is.

It will continue to increase over the next four years of our new contract. By the fourth year—and I don't have it precisely—it will be in excess of $30 million per team.

Mr. Richard Peddie: As a point of clarification, even though the league office has done a wonderful job, and our revenue is increasing, it by no means guarantees profitability.

The other thing is that even though the moneys coming in are U.S. dollars, they do not make up what is going out in U.S. dollars in player salaries. We have to collect that money locally through ticket sales and through sponsorships with Canadian companies.

So there's still a lot of work to be done. Obviously it puts us on a good foundation, but it doesn't get us over the top.

[Translation]

Mr. Denis Coderre: I haven't heard much about the Raptors. It's closer to Montreal. I saw the document on the Grizzlies. May be Stephen could give us more information later. Specifically, as far as the Raptors are concerned, what percentage of revenue comes from ticketing and broadcasting rights across Canada? How much money do the Raptors make, in millions of dollars, of course, from the sale of merchandise, from marketing activities and from related rights? How much profit does all that represent for the company? Is this information of a confidential nature?

[English]

Mr. Richard Peddie: The numbers are private, but I can tell you that ticketing makes up about 40% of our revenue. We sell merchandise in the building, but the great amount of merchandise dollars come from the league, and that's shared by 29 teams. So all the teams get the same share.

Mr. Denis Coderre: So it's equalization.

Mr. Richard Peddie: Yes. I mean, we're out there on City and the new VR in Ontario with advertising. We're doing promotions in our arena. We're doing consumer promotions. We're working very hard to generate significant sponsorship dollars.

But still, as Steve said, we're like the Grizzlies; even though we've had a good three years, we are investing in the future. We are not making money now, we're losing money, but we believe it's in the best long-term health of the franchise and the sport.

[Translation]

Mr. Denis Coderre: In conclusion, if we wanted to look at a tax agreement, if we tried to find a satisfactory operating process, for instance, regarding taxes—it could also include immigration, but let's say only a tax agreement for the time being—, would you be willing to open your books and make public the total of your revenues and of your expenses? Second, are you willing to determine what the government will get out of it in practical terms? Can you guarantee that more money will be spent within the community? Did you think about what concrete results a tax agreement would bring? With that kind of an agreement in place, the government will lose money. These are revenues which would be used, for instance, to support hospitals. So what revenues can you guarantee the government would get? Would this also mean more jobs?

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[English]

Mr. Richard Peddie: I'm not sure we have to open our books to address that tax issue. Maybe we can give you more clarification on that, show you the rates versus by state, etc.

What we've said is that the ability to attract and retain players is really the central point to our ability to compete. If we can compete and get into the play-offs and compete for an NBA championship.... One just has to look at what happened in Toronto when they brought two World Series to that city, or when Montreal last won its Stanley Cup.

Compared to the tickets we're selling now, we will sell dramatically more tickets. People will come from further away. They will come from other cities in the United States to go see our team. They will spend more at the arena. They will spend more. They will stay in the city and stay in hotels. Attendance will go up during the year. It will bring all kinds of awareness to the city.

The events Steve talked about that they've already had in their building, such as the AIDS conference and stuff, bring recognition to the city. That's very valuable to tourism in Canada. That was the same case with the World Series and with the all-star game they had at SkyDome with the Blue Jays.

Mr. Denis Coderre: But are you going to create more employment, for example?

Mr. Richard Peddie: Yes, the more people there are, there's a direct correlation between the number of people who staff the events. You have so much to do. But also there will be more money spent. The economic multiplier will kick in. More taxes will be paid. The more successful we can be, definitely the communities we're in will benefit from it.

Mr. Stephen Bellringer: Just to be very clear, we're not here today asking for any changes in the tax code. We were asked to come and explain our issues, and that's all we're trying to do. We have some real issues. You'll probably read in the media that certain things are happening.

Mr. Denis Coderre: That's next week.

Mr. Stephen Bellringer: We just want to, out of interest, make sure the federal government understands our issues, and that as our industry evolves, together we'll have a public dialogue. That's important. We're not asking for anything here today, but we are watching some of these issues very closely.

Mr. Denis Coderre: Thank you very much.

Mr. Stephen Bellringer: Our sport is still new.

The Chairman: Thank you very much, Mr. Coderre.

We will now go to Mr. Provenzano.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): Mr. Chairman, I have actually two categories of questioning. One of them follows up on Mr. Bellringer's most recent comments.

I think this committee would not want to miss the boat with respect to a couple of the items you mentioned. They fall into the category of taxation and immigration specifically.

With respect to taxation, whether it's taxation of owners, players, or the consumer, the fan, the committee needs to know in clear terms whether there are glaring differences. Those differences should be clearly identified and put to the committee in such a way—perhaps in a subsequent submission, if you gentlemen would agree—that it's easily understandable so the committee can get a hold of these things. Where the glaring differences are, if it involves the federal level of government, we could decide what recommendations we might deem appropriate in that regard.

Your presentations sort of skimmed these items. We read in the newspaper, for example, that not too long ago, a player said, “I'd tie myself to the goalpost before I'd move to Canada and play there”. I think the problem he was indicating was he didn't want to face the differential in tax.

You've mentioned the duty days, and those are interesting submissions, but what we need to have is a comprehensive analysis of these differentials. If there is specific relief you'd like to see, let's ask for it in clear terms. So as I said, the question is, are you willing to provide that to the committee?

Mr. Stephen Bellringer: Certainly if you're inviting us to do that, we will do that, but I do want to put it into context.

Mr. Carmen Provenzano:

[Inaudible—Editor].

Mr. Stephen Bellringer: Some of these issues are unique to our business. Some are unique to professional sports, but some are not. I see Mr. O'Brien sitting there, and I spent four great years living in London. But if you take any sort of head office company in this country, be it 3M or something like that, that attracts very highly skilled professionals to come up here and help develop the Canadian economy, and you talk to those particular industries about tax differentials between here and the U.S. in particular states, that particular issue is not unique to our industry.

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We do have a couple of issues we have discussed that are unique to our industry. One of them is that if this committee feels there is some economic benefit from having businesses such as our own in Canada, then I think even a strong public statement per se, or a strong conclusion per se, may have some impact on other government jurisdictions in terms of how much they try to cultivate our particular business in this country.

I think the other area where we could be more specific, and I think we would be happy to do so if so invited, would be the fact that we clearly believe our key athletes perform year-round, that effectively it is a year-round job, just as your job is year-round but certain people only see you when you're in the House and live on TV. They don't see the many other committee meetings you may be going to that may not be broadcast, and meetings you go to in constituencies.

Unfortunately, at this point in time our particular government does not recognize that our athletes are year-round working individuals, just as you are year-round working individuals. That is an area on which we could give a specific recommendation.

Mr. Carmen Provenzano: That would be appreciated.

Mr. Stephen Bellringer: Excellent.

Mr. Carmen Provenzano: My second question actually relates to the representations that were made by Mr. Derrett and to some extent by Mr. Peddie.

It's very interesting to hear that you realize the need to increase your fan base. Your community outreach programs, your involvement in charities, your basketball development programs really are an attempt to increase your fan base, to develop the committed fan who will go and pay the price at the arena, and to develop the fan who will be the viewer that increases market share, which all translates to more revenue.

My question is, are you able to indicate with respect to, first, the Raptors and the Grizzlies, and then the league, what percentage of revenue is dedicated to that area, to the development of the committed fan? I would imagine it varies from team to team, but can you indicate up until now what percentage of revenue you have been prepared as a team to dedicate to the development of your fan?

Mr. Richard Peddie: I can't cite. I don't have the numbers at my fingertips on what we've done, but it's very broad, from marketing and staff to clinics and all the things we talked about. I simply don't have the numbers at my hand, but the one thing we're very proud of is observing other sports and, let's say, other franchises. I believe we're doing substantially more.

We kind of go out there and look at our visibility in the community, what we're giving back, and we really haven't felt the need to quantify it, because we know it's significantly more than almost anyone else.

Mr. Carmen Provenzano: On your Night Hoops program, for example, you mentioned that was a joint partnership between federal, provincial and municipal governments. I think that should be really interesting information to this committee. If the government, levels of government, any one of them, acting together, can partner up with a professional sport to help in those ways, it's probably easier to be of assistance than to tackle some of the other problems that you're talking about, because they have many tentacles.

Does the league have a policy with respect to a minimum amount of revenue that an individual team should inject into the community for these types of programs to develop fan support? Does the league have a policy on what ways it will partner with governments to achieve an expanded fan base? Are these things...?

• 1040

Mr. Jeffrey Mishkin: They are talked about all the time and they're very, very important. They're not quantified in a way you are suggesting. The league does not have some minimum requirement that the teams must spend on either community involvement or promoting and marketing the game.

I will tell you that on a league level it's tens of millions of dollars every year in terms of the creation of public service announcements, the use of broadcast time on national television to promote the Reading is Fundamental program, other programs that the NBA is involved in. We expect our teams, as a matter of good business practice—I don't mean to put this on a level of sheer charity—to be good corporate citizens. We think that being a good corporate citizen, a good business presence, requires teams to spend a lot of money and effort in their communities, and some of it is difficult to quantify.

I don't know what value you place on a player's appearance at a hospital, on a player's appearance serving food at a shelter. I'm not sure how you can exactly quantify that. But in terms of a policy, of a cultural view of the NBA, we expect all of our teams to be very involved and devote a lot of resources and energy, time and attention to their communities.

Mr. Carmen Provenzano: I guess what I'm saying is if you're looking for governments, any levels of it, to partner up with the NBA or individual teams, then you should be telling government how to do that. You should be getting specific and saying here's how you can partner up with us—whether it's a basketball development program, community outreach, Canada's national team—to help us out here and, in the end, benefit the entire sport.

Mr. Ken Derrett: I would like to add to that.

I think we appreciate the comments and welcome the opportunity. I think in this presentation we maybe got to the stage of giving you information without getting into lots of detail. We're certainly not hiding anything in terms of the commitment we've made as a league in this country by having an office here and probably spending hundreds of thousands of dollars on the public service time on air in developing event programs with our two teams. That certainly can be quantified.

I think getting feedback from you today and, hopefully, subsequent discussion will allow us to perhaps come back with a specific, because I think to come in with a list of five or six things might have been premature, in our minds.

The Chairman: Absolutely.

To intervene for a moment regarding those three specific areas in which Mr. Provenzano has raised the specifics in terms of tax regime comparisons, if we could get something in that area it would be most beneficial to us in preparing our report.

Also, there is the example of Night Hoops, the notion that we always feel good when we can see living, workable, positive examples in all three levels of government working together. We seem to gravitate to that a lot more these days, partnerships with other governments. If we could have some more detail on that specific example, it would be helpful.

Finally, there is the last example of the national basketball program that you recommended. You may want to flesh that out a little bit more, Ken, and even dare attach some numbers to it, because around here everybody asks, as the first question, what kind of money will it cost?

Mr. Ken Derrett: We should add, for the information of committee members, that there is a partnership there. I would not want to walk away from this meeting leaving people to feel there's not that partnership. With the federal government, through Sport Canada, Basketball Canada, there is support there.

The Chairman: Sure.

Mr. Ken Derrett: I think what we were trying to say earlier was that because of the level we are at currently with this sport, more is required. We are very immature, we believe, versus some of the other sports, and that's not to criticize anybody involved with the amateur game in this country.

The Chairman: If I could dare to make a little bit of a comparison or maybe think of another model, I have a volunteer function in my other life where I work with a major junior franchise in Toronto, and that Canadian hockey league, that major junior league, provides tremendous infrastructure and support for the National Hockey League system. Maybe we've got to sort of think about—if I hear you correctly—reinforcing that level of high performance in the basketball realm in Canada.

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Mr. Richard Peddie: Actually, we quite admire the whole MTHL approach and what they're doing in Toronto. They have 40,000 kids playing that sport. When we look at what we aspire to in our Bell Raptorball, it's using that as a model, because we need that type of infrastructure.

The other thing I might say is that we'd be quite delighted to come back with specific ideas on how we'd partner. We're already working very closely with Basketball Canada and Basketball Ontario. Just recently I spent a whole Saturday with Basketball Ontario. We had 619 teams of young men and women under 12 years old out on a Saturday. I had a number of volunteers there. I spent the day there. Our mascot, our dance pack, our performers were all there. One of our players was there.

We're not only giving time; we're also giving money. We give substantial donations to both those bodies. We're prepared to continue that. I think our relationships are even better.

But they need help. If we come back, I'd like to come back with them, showing how we do it together.

The Chairman: Thank you very much, Mr. Peddie.

We'll have a short question from Mr. Solberg and then we will go to Madame Tremblay.

Mr. Monte Solberg: Thank you very much, Mr. Chairman.

First of all, I would like to say I appreciate how much the NBA is doing without partnering with the federal government. You're doing a tremendous amount on your own.

With respect to the tax issue, what percentage of your total expenditures would you say is spent on players' salaries?

Mr. Jeffrey Mishkin: I can answer that specifically—

Mr. Monte Solberg: I guess I'm talking about in Canada especially, because it would be different from the U.S.

Mr. Jeffrey Mishkin: Oh. Yes, it would be.

Mr. Monte Solberg: If you're making up for the difference in expenditure or in the tax system by increasing salaries, then it would be more in Canada.

Mr. Stephen Bellringer: If I understand the question right, the high 50% area of our revenues would go out the form of players' salaries.

Mr. Monte Solberg: In other words, given the fact that income tax in Canada is about 50% higher than in the U.S., that would amount to many millions of dollars a year. If you're making up the difference with higher salaries, that would amount to many millions of dollars a year in expenditures, I would think.

Mr. Stephen Bellringer: Without getting into the exact numbers, directionally, sir, you are correct.

Mr. Monte Solberg: Rather obviously, then, that pretty significantly impedes your ability to compete. It impedes your ability to make a profit but also to compete and attract the best possible players.

I guess what I'm trying to do is at least attach some kind of number to what type of disadvantage you're at because of the taxation system.

Mr. Richard Peddie: The other thing I might point out is that we're new expansion franchises. If you were to look at 29 teams to see where we ranked in player salaries, you'd see us near the bottom.

Mr. Monte Solberg: I see.

Mr. Richard Peddie: For us to compete...and there is a correlation. There are some teams that are paying a lot of money and not succeeding the way you would expect, but there is definitely a correlation. For us to be competitive, we have to be prepared to spend more. We're in about the 55% to 60% range.

We could easily spend another $10 million U.S., but that would just take us up to 80%. We can't do that. We have to have revenue coming in at the same time.

So the positive economic impact for Canada is only going to get better, and the burden for us will only get worse, as we need to compete.

Mr. Monte Solberg: Thank you.

The Chairman: Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay: First, I'm going to make a brief comment and then, I'll ask my question because I have to go to another committee meeting at 11 o'clock.

First, in our society, two things count: bread and games; you provide the games, but we also have to think about the bread. We can't really feel sorry for people who earn, on average, a salary of 2.6 million dollars. If you establish foundations, it's also because you get some advantages out of that. It's good advertising and it helps you to do certain things.

In my view, the questions asked and the additional information which we may get as a follow-up are very interesting, but I would like to talk about something entirely different.

In your league, are many players injured? How did you manage to find referees who agree to work in such a small area with such tall players moving around? Either they are paid very well or they are better trained or much more intelligent than the average referee we have, for instance, in hockey. How do you manage to get the league' rules enforced?

This morning, I attended a breakfast meeting. A Senators fan told me: "The referee was excellent last night; he gave enough penalties, even in overtime, to ensure that the Senators would win." It gives you an idea of the kind of opinion people have of referees working in the National Hockey League. We'll talk about that again next week.

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However, I'd like to understand how the man who was responsible for your present activity, who now presides over the National League and has turned it into a Roller Derby, has managed to have those absolutely extraordinary referees working for the basketball league. I am truly impressed because I am a basketball fan.

I want to ask something before you answer my question. Let me tell you, Sir, that in Quebec, basketball was always the most popular sport in universities. When I was a university student, there were excellent basketball teams. The Rouge et Or de Laval was always an excellent team.

[English]

Mr. Jeff Mishkin: On behalf of the NBA referees, I want to thank you for that comment. They don't usually receive that sort of endorsement about their work.

We have many rules in the NBA that try to minimize contact between the players. It is not, obviously, at the level of hockey. There is much contact in basketball, but it is controlled contact. We have many rules that minimize it.

We also have very strict rules about fighting, and we have automatic suspensions from complete games and large fines if there are any punches thrown at all. Players may not leave the bench if there is an altercation on the court.

There are many injuries in basketball, like all sports, but thankfully they tend to be of the kind generated by running up and down the court and jumping, and not because of contact between players.

[Translation]

Ms. Suzanne Tremblay: Do you think that the penalty shot, which is often used, can have an important impact?

[English]

Mr. Jeff Mishkin: It can certainly have a big impact. Many games are decided at the free throw line.

Mr. Richard Peddie: You talked about injuries. The Toronto Raptors this last year were either number one or number two in the league with injuries. I can remember for a long run we had six of our top seven players sitting on the bench in suits, not in uniforms. We had a young fellow who injured himself and we had to pay his salary for the rest of the year. That does happen. It's a very physical game. Injuries really do have a bearing on the outcome of the team's success.

The Chairman: Madame Tremblay, we have another committee coming into this room at 11 a.m. and we have about four minutes left.

So Mr. O'Brien, we'll go to you right away.

Mr. Pat O'Brien: Thank you, Mr. Chairman.

Thank you for the presentation, gentlemen.

I'm sorry I was late. One of the things some of our critics don't know about this job is they not only schedule one committee, they schedule two at once. I had to do some voting at the defence committee and that's why I was late.

I've been watching NBA for 35 years, and from what I've observed it's improved itself as a corporate entity. I think the franchises are excellent corporate citizens, led by the Raptors and the Grizzlies, but I'm biased. So I commend you for the quality of the presentation and the attention to giving back from the sport to the community.

In a similar vein, to my friend Mr. Provenzano—and I understand you weren't here to give it today—as you submit further information I'd be interested in knowing what happens in the U.S. What municipalities and states in the U.S. support NBA franchises? What does the federal government do? I'd like to see it in two categories, financial and non-financial, following on the theme of my colleague.

How does that compare to Canada, if you can provide the Canadian example in your two cases, with regard to municipal, provincial and federal financial and non-financial assistance? What is the status quo now, and what suggestions would you like to make to us in terms of where we could go in those two areas? It's just a request for further information.

I have one question before we run out of time. There are some Canadian NBA players, if I'm not mistaken, such as Rick Fox, Bill Wennington, and eventually the Magloires and people like that. Is there an attempt by the Raptors and Grizzlies, whether they're your players or not, to involve them in promoting the game in Canada and carrying out your objectives in Canada?

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Mr. Ken Derrett: I might be a little premature in stating this, but I'm happy to say that as a board member of Basketball Canada, as both teams have been over the last few years, we've been able to get agreement from Steve Nash, who you saw in the video, to serve as a spokesperson for a program called Future Hoops, which is a new marketing initiative between Basketball Canada and the NBA to do exactly what we've been talking about this morning—help grow the game.

This is the kind of thing we need long term. We do not have an inventory of former NBA players or former coaches living in Canada. We have three players right now, all playing in U.S.-based operations. Steve has a very warm spot for this country and for the game and he wants to help. I believe Rick and Bill would like to as well, and they've both expressed a desire to play for our country this summer at the world championships. We have to build the system, though, so we won't be relying on three individuals, two of whom could be retiring in five years.

Mr. Pat O'Brien: I understand that. I think it's just great when you see a young man like Nash's commitment to not forgetting his own country now that he's making a lot of money in the States—money he deserves, given the going rate. But that all the more reinforces my point, and you've answered it, that if there are only three, let's make sure they're front and centre in Canada. Let's hope there are more than three in the future.

Thank you very much, Mr. Chairman. Those are all the questions.

The Chairman: Thank you, Mr. O'Brien.

Gentlemen, I just want to wrap up. You have served your sport well this morning. You've given us a terrific brief and great information. We thank you. We're all being educated here so that ultimately we can come forward with some substantial and doable recommendations. On behalf of all the committee members, thank you.

The meeting is adjourned.