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]

Monday, May 25, 1998

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[English]

The Chairman (Mr. Dennis J. Mills (Broadview—Greenwood, Lib.)): Ladies and gentlemen, we will begin.

Madam Tremblay is on the way, but this room is being used at 5:30 p.m. by another group, so we have to have our deliberations completed by then.

Mr. Nicholson, Mr. Pollock, welcome to the committee. We are studying the linkage between sport and the economy.

Just before we begin, I would like to say how delighted we are and how appreciative we are, Mr. Pollock, that you would appear before our committee. I believe there is no one else in Canada who has done more for amateur baseball, amateur hockey, professional hockey, and now of course professional baseball. So your presence here, the experience you have, all the great things that you have done with the economy of sport in this country, has just been tremendous, and we thank you for coming.

Mr. Sam Pollock (Chairman and Chief Executive Officer, Toronto Blue Jays Club): Mr. Chairman, thank you for your kind remarks. We are delighted to be here today to respond to the invitation to address the subcommittee.

First I would like to introduce my associate, our executive vice-president of business for the Toronto Blue Jays, Mr. Bob Nicholson. As you probably know, I am chairman and chief executive officer. I would like to also recognize some of my associates: Mr. James Villeneuve, Mr. Bob Chant, and Mr. Bob Stellick.

[Translation]

I'd like to thank everyone here for their sincere invitation.

[English]

Our purpose for being here today is to enhance the federal government's understanding of the challenges undermining the economic competitiveness of operating the Toronto Blue Jays baseball franchise in Canada. I am fully aware that you have had many other distinguished groups who have appeared before this committee, and I understand that there are still a number to come in the future.

As I said, we are greatly honoured to have received this invitation and to provide you with an understanding of the business operation of the Toronto Blue Jays and the team's contribution to Toronto and Canada.

I must say, as the chairman mentioned, that I have been involved, for many more years than I would like to admit, with all aspects of minor hockey and amateur hockey. I spent more days in the beginning in amateur hockey than in professional hockey. Then, of course, I started in baseball. I have been involved in baseball for a number of years. I had the honour of becoming director of the Blue Jays in 1992, chairman in 1995, and chief executive officer, as well as chairman, in July of last year.

We want to deliver a clear message about the economic climate for the Blue Jays as a Canadian-based professional sports team.

I might say that we did not come here today with our hands out for anything. We don't expect that. We wanted to let you know exactly what the situation of major league baseball is in Toronto. I have a very good friend in Montreal, who I know has appeared before you. They have problems. They have a different situation. Our brief today deals solely with what the the Toronto Blue Jay situation is in the city of Toronto.

We believe and we know that we are an integral component of the Canadian sports scene. The more than two decades of Blue Jay baseball is just a fraction of baseball history in Canada, which began over 100 years ago in our various cities and towns across the country. From Babe Ruth's historic home run at Hanlon's Point on Toronto Island in 1914 to Rusty Staub, who emerged as the Expos' first modern baseball star, baseball has been part of the Canadian landscape. Since our inception, our club has built upon the Canadian baseball tradition while creating a new and unique relationship of our own.

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We are here today not to discuss the sentiment of sport, but rather the challenging financial realities that will accompany the operation of a professional baseball franchise in Canada over the next millennium.

We are proud of our franchise history in Canada since our inaugural season in 1977, some 21 years ago. From our beginning as an expansion club to the great teams of the 1980s and 1990s, the Blue Jays' philosophy of working to connect with our communities has resulted in one of major league baseball's most loyal fan bases.

I might say that we have a caravan every year, usually in January or the early part of February, that goes from coast to coast. We do not go into the province of Quebec, of course, because that is not our territory. That territory belongs to the Montreal Expos. They do their own caravan and their own promotion for their club. But we have an extensive following in western Canada. We also have some players from out there. And we have a very excellent following in the Atlantic provinces.

Consistent fan support is a hallmark of the Blue Jays. From our early days, as many of you will remember, at Exhibition Stadium to our new home at the SkyDome, we have enjoyed a tremendous following. Our attendance today continues to rank in the top third of the league. Basically the teams that are ahead of us are those teams that have had new ballparks built for them in the last five or six years, teams like Atlanta. Of course that was the Olympic Stadium down there, which was turned into Turner Field. There are new stadiums in Baltimore and Cleveland. There is Coors Stadium in Denver, and of course there are many others on the drawing board.

In 1997 our total attendance was higher—and this is an astounding fact—than the New York Yankees have enjoyed in all but two years of their 95-year history. I was amazed when I was in Yankee Stadium last year—and this is something that maybe I should have known, but didn't know—to learn that only three times in the history of the Yankees have they drawn over 2.5 million fans, and that in a huge city like New York. Up until 1957 of course there were three teams in the greater boroughs of New York: the Dodgers in Brooklyn, and of course the Giants at the Polo Grounds.

I think another interesting statistic is that major league baseball's total attendance in 1997 exceeded that of the NHL, the NBA, and the NFL combined. The three of them combined did not draw as many people as major league baseball. We ranked tenth out of 30 teams in overall major league baseball attendance in 1997 and we drew about 2.6 million fans.

Major league baseball is identifiable in another instance because it is a professional sport that is affordable for the whole family, with the lowest ticket prices of all four major sports leagues. That is a fact that can't be challenged.

We had successive World Series wins in 1992 and 1993, which elevated Toronto and all of Canada to a new plane of recognition in North America. We like to refer to them as the glory years. Never before had a team from a foreign country ever won the World Series trophy. Certainly our country had come of age in the sporting world.

The Blue Jays is the dominant non-winter sports franchise in this country. Our stable and visionary management and ownership has nurtured this pre-eminent position in the marketplace.

I would like to talk a bit about tourism. With over 11% of Blue Jays' patrons being visitors to Toronto, tourism benefits through incremental spending on hotel rooms, restaurants, and other amenities and attractions. Tourist spending augments local fan support and contributes to what is widely recognized as a valuable component of our economy. Studies conducted in the early 1990s indicate that the Blue Jays contribute more to tourism than any other Canadian sports franchise.

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In addition, our move to the SkyDome in 1989 has contributed to the revitalization of the adjacent business area. I think all members of Toronto and people who have been in Toronto know what has happened down by the Gardiner and the waterfront, and most of it has taken place since the SkyDome was built. It has become a very vibrant area for restaurants, clubs, and general tourist attractions, and of course there is a lot more going on down there now. It generates substantial tax revenues for all levels of government, which I am sure all honourable members will be interested in.

We have excellent community relationships and we have been deeply involved in baseball development. From our inception we have recognized our obligations and commitments to worthwhile community endeavours. The Blue Jays charitable foundation, whose mission it is to contribute to the enrichment of quality life in the community, is an example of one of our numerous charitable activities throughout Canada.

I want to stop there for half a second and tell you—and I have a lot of experience—that I have never seen so many requests come in to one organization as come into our organization. Bob, with his associates, really does a remarkable job in dealing with them. We try to oblige almost everyone we possibly can. Obviously we can't buy tickets for everything, we can't buy tables for everything, but I think we certainly do our share in this area.

The Blue Jays rookie league baseball teaches high-risk children not only the fundamentals of baseball, but also of living a healthy lifestyle. The Blue Jays also operate an extensive program of minor baseball clinics, bringing the game to young fans across the country.

I would like to talk a bit about our facility now. In 1989 the Ontario government partnered with a private consortium to build the SkyDome. The private consortium consisted of 28 companies and each contributed $5 million in exchange for limited future benefits at SkyDome. In 1992 the Ontario government sold the facility to a private ownership group to relieve the province of ongoing financial responsibilities.

SkyDome currently pays almost $7 million annually in municipal property taxes. As SkyDome's principal tenant, our lease indirectly pays a substantial proportion of the stadium's municipal property taxes.

Let me say, as I mentioned before, that there is a great deal of competition in major league baseball. There has been the building or renovation of new ballparks in eight major league cities in the 1990s. New stadiums are also planned and are under construction in an additional 15 cities. In fact, I think there is only one city that currently draws less attendance that doesn't either have a new ballpark under construction or one that is on the planning board. These teams are better able to compete financially because of favourable lease terms and the incremental revenue streams available to them.

U.S. cities tend to treat professional sport franchises as civic assets and tax them accordingly. As was indicated in an earlier submission, the Montreal Canadiens' arena municipal tax bill is greater than all 20 U.S.-based NHL teams combined. The SkyDome municipal tax bill is one of the highest in major league baseball. In comparison to the twelve newest baseball facilities, nine pay no property tax at all.

I just want to state some of these facts. The U.S. cities compete for professional sports franchises. In order to entice teams, U.S. cities offer a variety of financial incentives that enhance the financial viability of the franchise. The Blue Jays essentially compete in a U.S.-based business, with 28 of the 30 franchises located in the U.S.A.

The Canadian approach has been different. Sports franchises are not, rightly or wrongly, valued for their unique contribution to our cultural fabric. Can we imagine Toronto without the Blue Jays or the Maple Leafs, or Montreal without the Canadiens, or Edmonton without the Oilers? The social contribution of these teams to their communities is immeasurable.

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The SkyDome pays about $7 million annually in municipal property taxes. As the principal tenant the Blue Jays contribute to the payment of these taxes through their lease with SkyDome.

We use it for about 81 home games a year, a couple of pre-season games, and if we are lucky enough, as we were in 1992-93 and other years, to get into the play-offs, it is used for anywhere from another five to twelve games. Over and above that, it probably has eight or ten major concerts a year, which are decently profitable, like between $80,000 and $100,000 a concert.

The others are very marginal, and the place is dark a third of the year. Most arenas are dark at least a third of the year, because once you get over 200 events a year you are deemed to be doing very well in this type of business.

Ontario's 10% admissions tax on all tickets amounted to $4.5 million in 1997. I guess this is my only complaint. It may be viewed here as minor, but I cannot understand for the life of me why amusement tax is 2% higher than the Ontario sales tax. It costs us $900,000 additional annually.

The 7% GST on all tickets amounted to $3.2 million in 1997. The implementation of that tax in 1991, while resulting in a more level playing field for manufacturing concerns, has certainly negatived our service-oriented baseball operation.

We pay approximately $500,000 in employment health tax payments on behalf of our players, but due to the revenue requirements we get absolutely no benefit from this for the players or for their families.

Business taxes and other related municipal taxes come to about $500,000 a year.

In total, between us and our facility we pay about $15.7 million in direct taxes and property taxes. That was last year.

I would like to talk a little about where we are going and the economic picture. During the 1990s the financial picture for all major professional sports teams in Canada steadily worsened. This has particularly affected the two major league baseball franchises located in Canada.

Our owners have demonstrated a remarkable commitment in the past and in the present and have provided the financial resources to allow the team management to field competitive teams. This policy has been consistent throughout the 22-year team history. It is unique among professional sports teams in Canada and elsewhere.

Due to structural changes in our business environment—and I am sure we will talk about that later—the economic climate of the Blue Jays has deteriorated. These are figures I am not proud of.

For the 1997 fiscal year the Blue Jays lost in excess of $35 million. Our projections for this year are for the franchise to lose approximately the same, due especially to the foreign exchange differential. It is obvious that we cannot keep walking down this track, as any business cannot keep walking down this track. We have a big job ahead of us to address this.

The price of major league talent continues to increase. We compete in baseball. We compete in sports, but it is the whole entertainment industry that is U.S. and foreign dominated. We have to deal with that environment. We compete in a sport where players move easily based on financial opportunities.

Our fans, like all fans, expect a team that can compete with major U.S. market clubs. Back in 1993, one of the glory years, we had the highest payroll in the major leagues. Our payroll today is practically dollar for dollar exactly the same, but today the league-high payroll of 1993 is now 12th overall. It is more than $20 million U.S. below the top-spending team.

Major league talent—and this is something unique to baseball—unlike other sports, requires a much longer development process. Young prospects have to be moved through several levels of development leagues. This results in the Blue Jays maintaining several farm clubs and investing over $15 million U.S. annually in player development and scouting. This rate is five times higher than NHL teams and at best cannot even be compared to the NBA or the NFL, which by the nature of their games get their players right out of college and right into their line-ups.

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Two of our farm clubs are located in Canada. One is in Medicine Hat, Alberta, and the other one is in St. Catharines, Ontario. An example would be that last year our first draft choice was a young player from the southern U.S.A. We invested a considerable amount of money in signing this player. Last year that player was assigned to our lowest category team in St. Catharines, Ontario.

To contrast that, if that player were drafted by a National Hockey League team he would either be right on their team or they might send him back to his junior club for one year or they might send him to the American Hockey League for one year or part of one year. It is a huge development process, and it takes four, five, or six years. It is just the way baseball is.

For a Canadian club all these expenses are in U.S. dollars because of all the scouting. When I say “all”, don't hang me on to that last word. We scout Canada extensively, but the expenses in Canada are minor compared to what they have to be in the U.S. because it is so large. We scout around the world too, like in Australia, Korea, and even now to some degree in Europe. Those other operations are kind of minuscule.

We even get discriminated in this way by the U.S. government, which only allows us a certain number of visas for Canadian players to go on to U.S. teams.

Foreign exchange is an absolute killer for us. The decline of the Canadian dollar has been a boon to our resource-based industry, but we are what I call an importer with a difference, and we have suffered greatly with the decline of the dollar. Each one-cent decline in the U.S.-Canadian exchange rate results in an increase in team expenses of $600,000 per year.

As a result of our business climate, where 80% of the Blue Jays revenues are Canadian-dollar-dominated, while 83% of our costs are incurred in U.S. dollars, for the 1998 season this exchange rate exposure will cost our franchise a net of $25 million, or 71% of our forecast loss.

The decline of the Canadian dollar substantially increased exposure in recent years. The U.S.-Canadian exchange rate has averaged approximately 1.44 in 1998, versus 1.14 in 1992. This deterioration has increased our currency exposure by more than $18 million annually over the past six years.

As just another example, on May 13 the Bank of Canada announced—we all read it—that it had no plans to increase Canadian interest rates in the near future. On that news the Canadian-U.S. dollar exchange rate dropped by 0.5% and our team expenses potentially increased by $300,000 on an annual basis.

I am sure that many of you who were reading the paper this morning noticed that the Canadian dollar today was within one cent of an all-time low. That is tough when you are in a business like we are.

It would be very logical for some people to say “You talk about these losses, but are they real?” We are willing and able to demonstrate our current financial position. These are audited financial statements. They succinctly indicate the current financial health of our franchise.

The losses our ownership group has sustained are not the working of any accounting manipulations but are real dollar losses. In other words, we are not an organization funded by debt or something like that. These are straight structural and operating losses.

I am sure some of these questions may come later in our gathering here today, but I have listed, as you will see in the books, six myths that you keep hearing about. I would like to go through them.

The first myth is that the ball club has deep pockets, that money is not an issue. Ownership support of this club has been an independent business entity for two decades, but you just can't walk in, have yearly deficits, and sustain them indefinitely. People say “Yes, but back when the SkyDome was built you drew four million people”. That was definitely an anomaly.

Attendance now certainly would not solve all our financial problems. In fact, if we had to increase our payroll it would just provide higher losses. Our problems are much more complex than that, and they certainly cannot be solved at the gate alone.

There has been a lot written out of many of the submissions made to this committee about taxation. Let us have a look at it.

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In 1997, between us and the facility we planned we paid $15,700,000 in taxes to all levels of government. A 1991 economic study—and that is going back seven years, so I think it would be even more today—indicated the Blue Jays annually generated over $61 million in tax revenues.

We have to discuss and understand the level of the playing field between Canadian and U.S. professional sports teams. We have been going in different directions with the U.S. in the support and taxation of sport franchises. The increased support that sport franchises are seeing in the U.S. continues to make those franchises more competitive relative to the Blue Jays.

I would like to talk about another thing you hear a lot about: that the taxpayers footed the entire bill for the SkyDome, that the Blue Jays got a great deal. Nothing could really be further from the truth.

The SkyDome was built as a partnership between private and public interests. Our stadium income is the least favourable in major league baseball in terms of ancillary revenues—parking, advertising, suite revenue and concessions. When I say the least favourable, I mean we are right down there with Minnesota fighting it out for 29th and 30th. We are even lower than the Expos in this area.

Another thing I have read about is that sports teams benefit disproportionately from entertainment tax deductions. Once again, let us look at the facts. Many business expenses are 100% tax-deductible, while only 50% of entertainment expense is deductible for Canadian business. These deductions are not unique to the sports industry. Furthermore, we are only talking about corporations here; we are not talking about fans. Our fans who come and pay to buy our tickets do not get any deductions of any kind.

The ownership continues to be a loyal supporter of this baseball team. We have tried to present the facts and challenges today that our teams face and that the industry in Canada as a whole faces. The erosion of our ability to conduct a successful business is largely due to fundamental structural changes that have taken place in the business of professional sport and entertainment in North America.

The four key changes would include the increasingly high level of all forms of taxation in Canada relative to American-based competition, the escalating costs of operating a major league sports franchise, new venues and revenues streams for U.S.-based teams, and the currency exchange rate exposure.

We have to find solutions to address these challenges. We are very much committed to working with all stakeholders, whoever they may be, including all levels of government and private businesses, to find viable solutions for the long-term success of our franchise.

There is clearly no single solution to the difficult situation we have presented to you today, but by working with all our constituents we are very confident we will be able to find opportunities to address these financial challenges.

Mr. Chairman, that pretty well completes the presentation of the Blue Jays today. There are a few back-up schedules in here, but we would be more than delighted to respond to you and your colleagues this afternoon.

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

Madam Tremblay, with your permission, could I begin today with Mr. Ianno? He is from the riding of Trinity—Spadina in downtown Toronto, and this is the home of the Toronto Blue Jays.

Ms. Suzanne Tremblay (Rimouski—Mitis, BQ): That is fine. I will wait.

Mr. Tony Ianno (Trinity—Spadina, Lib.): Thank you for coming. I think it is very insightful of the chairman to include the Toronto Blue Jays in the subcommittee that I know my colleagues have been working hard on to try to see how sport works in Canada, and especially how amateur sport is the beneficiary of these machinations.

You indicated that tourism is major. Trinity—Spadina is one of the centres in Canada for tourism that benefits tremendously from all activities that take place in downtown Toronto. Many of our small-business people benefit from a lot of the activity that takes place with many of the spin-offs from the 200 dates you talked about at the SkyDome and some of the other new ventures that will take place, along with the entertainment district, etc.

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Looking at your presentation, I have a couple of questions. Could you explain what you meant by the stadium income is the least favourable in major league baseball?

Mr. Sam Pollock: I have to go back to when the SkyDome was built. The government of the day was not prepared to build a facility in Toronto solely with taxpayer money, so it insisted that there be private money put into the project, and 28 companies and firms in Toronto each contributed $5 million, for a total of $140 million to go along with the government in erecting the SkyDome. I guess the SkyDome was talked about as early as 1980. It finally got under way, I believe, in 1983 and construction started in something like 1987.

There were many aspects of it. Interestingly enough, the original project to build the actual SkyDome was $184 million. And what do you think the SkyDome cost? It cost $184 million. So where did all the rest of the money go? It went to a hotel. It went to a health club. It went to infrastructure, it went to overruns, and it went to a host of other projects.

Some of these consortium members were able to acquire market rights in the stadium. Other revenues were needed by the SkyDome to help finance this facility. It is an expensive building to operate. What I mean by that is, for example, last year in major league baseball, the Cleveland Indians, who have a new ballpark in Cleveland, about four years old, Jacobs Field, received $30.3 million from suite revenues, concessions, advertising, and parking. We received $3.5 million.

Including what I call older, second-tier ballparks that are going to disappear in the next few years, the average is about $14.5. We don't get any suite revenue. We don't get any parking. We get limited concession revenue and limited advertising. That is the way the SkyDome was set up back in 1989, and that is the reason our revenues are so low.

We operate very well with the SkyDome people, but the SkyDome itself does not make any money. At the very best, it is a break-even operation, so the SkyDome itself struggles.

Mr. Tony Ianno: The other part that is a bit of a concern for me is you indicated the total budget on salaries is $50 million. We know that most of that money disappears and goes south of the border. What are you doing to develop Canadian talent so that in effect with your farm teams there is some potential of reducing some of that money that disappears from Canada?

Mr. Sam Pollock: That's a very good question. Number one, at least 40% of those players' salaries stays here in Canada, is taxable in Canada.

As I said, we have two farm teams in Canada. Our two development clubs are in Canada. We have, I believe, at this time five Canadian players in our system. We have a permanent Canadian scout, Mr. Bill Byckowski, who works out of Toronto. We really look for talent. We have players from Fort McMurray. We have them from Medicine Hat. We are very interested. In fact, we had two players from Toronto, Rob Butler and Rich Butler. One was claimed in the expansion draft last year.

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Mr. Bob Nicholson (Executive Vice-President, Business, Toronto Blue Jays Club): You alluded to the 40%. The players are taxed and their income is split based on the number duty-days in Canada. So right now it is roughly 41% Canadian, 59% U.S. So 41% is taxed in Canada. And of course living here on and off over the course of the season, they certainly do tend to spend money as well.

One of the other challenges on the Canadian scouting side is that when the amateur draft did not include Canada, we were better able to develop players and then bring them into our own organization. Now that all Canadian players are included in the amateur baseball draft it is harder for us. We can develop them, but they can still end up getting drafted by U.S. teams.

Mr. Tony Ianno: Regarding salary caps, as they have in basketball, has that been contemplated by the association?

Mr. Sam Pollock: I had an experience in basketball, in the NBA. I was associated with a group who applied for a franchise. I say this kind of lightheartedly, so please accept that I'm glad we didn't get it. The salary cap in the NBA is very soft. In fact, it looks like there could well be, for the first time in the NBA's history, a labour walkout this summer.

There are so many exceptions to the NBA salary cap that it is almost laughable. When were putting together our bid for this franchise, we found out that six teams in the NBA had hired a lawyer whose specific and only job was to figure how to break the salary cap and get around it, because re-signing your own players did not count. That is what the big labour problem in the NBA is today.

The NFL has put in a salary cap. It is a division of the amount of money that goes to the players. I think it is 63% of the revenue that goes to the players.

Baseball, of course, has had more strikes than any other sport. And the last one was probably the worst of all, because it came in August, the first time in the history of baseball that the World Series was cancelled. Of all the unions in sport, I don't know any one that is well organized or least amenable to structural changes, or something like that. Although I must say in the last year or two, since the last labour agreement, things seem to be moving along better.

That's their job. There's no use complaining about it, because if we were wearing that hat, I guess we'd be looking at it in some other way. But it has been almost impossible to bring in this kind of legislation.

In major league baseball, you have a right to a player for his first three years as a professional player. There's a minimum salary. It's $170,000 this year, and it will go to $200,000 next year. But then the problems start. The next three years are what I call a double free agency almost, because you are subject to an arbitration process where that process is completely out of the club's hands.

I can give you an example of three players playing for our club currently, each of whom made $500,000 last year. This year they were eligible for and did file for the arbitration process. We negotiated with them before the actual arbitration took place. Our numbers were certainly in the middle of that range. Those players signed for $1.5 million, $1.8 million, and $2.4 million, respectively. If we had gone to arbitration, we would not have come out any better than those figures, and maybe worse. And then after six years players are eligible for total free agency.

Not so much the players but their agents have been putting in clauses about not being traded to Canadian teams, which we don't like. As I said, that has not become extremely prevalent. It has been more or less isolated because the Canadian cities are very well liked by baseball players, both Toronto and Montreal. They like to play here and they are well treated here.

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[Translation]

Ms. Suzanne Tremblay: First, Mr. Pollock, please allow me to thank you for the great years you gave us with the Montreal Canadians. There are days when I figure he must be heaving sighs over the salaries he was paying Henri Richard and Jean Béliveau.

Are the Blue Jays a publicly owned company?

Mr. Sam Pollock: No, it's not a publicly owned company. It is private. Two companies hold shares in it, one 90% and the other 10% of the shares. For SkyDome, it's a different matter. One company has 40% of the shares, another 10%, another 6.5% and 37.5% are held by a trust.

Ms. Suzanne Tremblay: I have a document here entitled Major League Losers, where it says the SkyDome was sold.

Mr. Sam Pollock: Could I explain that?

Ms. Suzanne Tremblay: Yes, please.

Mr. Sam Pollock: In 1992, the Ontario government wanted to get out of SkyDome because it was having problems in operating it. At the time, the government of Ontario had invested about $400 million and sold it for $150 million. At present, the government of Ontario's net investment in SkyDome is about $250 million. The government decided that it did not want to own the SkyDome anymore. It did require certain guarantees. For example, if the stadium is sold again, the government will be able to get back half the money involved in that transaction.

[English]

They were issued deferred shares that diffused over time. Basically it was the decision of the Ontario government of the day, which was a different government from when the SkyDome was built, that decided it no longer wanted to retain this piece of property.

I neglected to mention one thing in my earlier deliberations. The federal government did not put up any money for the SkyDome, but a crown agency at that time, CNR, granted a $1-a-year land lease on that property. That was the only position where the federal government in an indirect way came into the picture.

[Translation]

Ms. Suzanne Tremblay: Are the Blue Jays part owners of the SkyDome?

Mr. Sam Pollock: No.

Ms. Suzanne Tremblay: You pay rent?

Mr. Sam Pollock: We pay rent.

Ms. Suzanne Tremblay: You pay rent.

Mr. Sam Pollock: We pay 7.5% for the first 1,500 people and 10% for the rest. And as I said before, you have the boxes, parking, half the concessions and publicity.

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Ms. Suzanne Tremblay: Who are the people, businesses or organizations who accept to pay for those outrageous salaries you pay and lose $20 million a year? Who are those charitable souls?

Mr. Sam Pollock: The owners?

Ms. Suzanne Tremblay: Who are the charitable souls that accept that?

Mr. Sam Pollock: They're not really charitable souls. It's just a way of speaking. Ms. Tremblay, look at the table entitled "Jays Profit and Loss". To answer your question, Inter-Brew who holds 90% of the Blue Jays' shares owns a brewery, here, in Canada. The other 10% belongs to the CIBC. That organization is independent and there's a board of six directors following the club.

The difference between the Canadian and American dollars is even higher this year as you can see in the document and that's a big problem.

[English]

There are many things that we have to do. The first thing that we have to attack, of course, is what I call our operational loss. We have many things in mind and the best way to do that is to increase our revenues.

Our contract with the SkyDome is up for renewal this year. That doesn't give us a great deal of comfort, though, because we also recognize the position that the SkyDome is in. While we feel we are entitled to certain things and while they are perfectly content to sit down with us and discuss with us and do some things for us, there is a limit to what they can do because they themselves, as I said, are in a break-even mode. It is not hard to figure out why if you just look through it.

[Translation]

Ms. Suzanne Tremblay: Mr. Pollock, don't you think that it would have been good to have the Blue Jays and the Expos playing in the same league?

Mr. Sam Pollock: Yes, it's a very good idea and it's a proposition that Mr. Brochu and myself are going to be following up on. However, first of all, we have to look at the matter of keeping the Expos in Montreal, because if a number of things don't happen between now and the end of June this year, it will be impossible for the Expos to remain in Montreal. Last summer and during the fall, there were major discussions in baseball with a view to changing the league alignments. A lot of proposals were made to put Montreal and Toronto in the same division. Last year, over 40,000 spectators were present at each one of the three games played between Montreal and Toronto. This year, it will be even better because two games will be played in Toronto and two in Montreal. It would be very interesting for both teams to be in the same section.

• 1625

Ms. Suzanne Tremblay: You already have a stadium downtown like the one the Expos want. Why do The Blue Jays have so many problems? Mr. Brochu told us that if there were a stadium downtown, that would settle his problems. You have one downtown.

Mr. Sam Pollock: There are huge differences. First of all, I'm sure that a stadium in downtown Montreal would be a good thing. I was born in Montreal and I spent almost all my life in Montreal and I know the city well. If a stadium were to be built near the Molson Centre or close to downtown, it would be a new attraction with new, different activities as is the case in those cities where they get a new stadium. It will increase the interest of the fans. In my opinion, the city of Montreal is getting a new lease on life and I'm sure that there's a possibility that might happen. But Mr. Brochu also said that he didn't want any debts.

[English]

He wanted a stadium with no debt, which had a lease like the U.S.-based clubs have.

If we had that type of situation, where we had a lease like many of the U.S.-based clubs, and if the SkyDome were in a position to give us that type of lease, we would get at least another $11 million or $12 million a year. That would knock out all of the operational problems that we now have and it would leave us with the large but what we call structural problem of the exchange rate to deal with.

I will speak for myself, because I think I am older than most people here. I very well remember just a little over 20 years ago when the Canadian dollar was more than the U.S. dollar. Believe me, I would love to see that today, although most of my colleagues and most of my friends in the resource industry would just shiver at the thought.

The Chairman: Mr. O'Brien.

Mr. Pat O'Brien (London—Fanshawe, Lib.): Thank you, Mr. Chairman.

Mr. Pollock, you have outlined very clearly for us the four structural problems that you face. While this is very fascinating for us to hear, I guess the raison d'être of this committee is to look at what the federal government could possibly do to assist amateur sport and professional sport in Canada.

I wonder if you could address yourself to that. You said earlier that you were not really coming here with open hand, but if you had a wish list of actions for the federal government, what would the first couple be?

Mr. Sam Pollock: Mr. O'Brien, first I want to agree that your question is very valid. We were invited to appear before this committee, which we were delighted to do, and we felt that it was important for us to lay out exactly the situations as they exist.

We didn't come here with, nor do we have at this time, any preconceived notions. We know that many of these things are at the provincial or municipal level, but we wanted to put our case forward, as I believe 120 other groups, or whatever the number is, have done or will do, because we felt that professional baseball, major league baseball, as it exists in Toronto—and there are only two major league clubs in Canada—is in a situation. We are not the same as NHL hockey. We don't have the same situation as NBA basketball. The only teams we can relate to are these ten teams that have to operate—

Certainly I don't want at this time even to refer to the NHL as a U.S.-based league, although the reality is that 24 out of the 30 teams are there. But in baseball there are only two, and of course there are only two NBA teams here.

• 1630

We didn't bring here today, at this time, not knowing what resolutions you will come to, any thoughts on that particular thing; nor do we want to commence that sort of debate. What we tried to put across in this report was that we want to work with everybody. These are not just government issues. We have to hoe our own ground as well, but we wanted you to know what the predicament was we're in today.

Mr. Pat O'Brien: I appreciate that. Thank you. I think you've laid out your situation extremely well.

I wonder, Mr. Pollock, if you could speak to the currency exchange rate exposure that is so serious for all the professional teams in Canada. I think it was the NBA that indicated they get some help from the league. Is there anything major league baseball does for the Jays or the Expos to help address this problem?

Mr. Sam Pollock: First of all, I would like to give you some idea of the magnitude of the thing.

Our current foreign exchange exposure is about $29 million total. What we get back from major league baseball through properties and other things, we gain about $4 million. So the net is about $25 million. I would have to guess that the foreign exchange program for a National Hockey League club could be in the $5 million to $7 million range, and it may be the same for NBA basketball. We are, team by team, about maybe 80 versus 20.

A huge part of ours is of course that our payrolls are higher, but practically all of that $15 million development expense takes place in non-Canadian currency. That is the real problem.

I know that this question will be asked, so I might as well address it: “Why don't you price it through?” The fact is that you can't price it through. I would agree that we have been lax. We have been lax in the past in not trying to put it through, for not trying to put some of the price increase through. If you have a big show like Pavarotti or something that is coming for a one-night stand, sure that price is priced through. The tickets are $75 or $80. But this is a family-oriented business.

There are about 1,500 or 1,600 private-box tickets and about 4,500 club seats. If you eliminate them, the season ticket prices are $25, $20, $13, and $4. It goes up by $2.50 in the $25 seats. To price the full thing through, we would be looking at $55 tickets, and I don't think the traffic would bear it.

Mr. Pat O'Brien: No.

Mr. Sam Pollock: The other thing that has happened with a lot of sports in Canada—and I have noticed that a couple of teams in the NHL are attacking it in a different way—is that we simply absorb all the taxes in our ticket price. That is going to be very difficult to continue in the future.

Mr. Pat O'Brien: I have a last question, Mr. Chairman, if I might. It relates to an issue that my colleague, Mr. Ianno, raised earlier about Canadian talent.

I think one of the saddest things is when we see a Larry Walker, who is arguably the best all-around ball player in the major leagues, who happens to be from British Columbia, having to leave the Expos because they can't afford his salary. We are also seeing that in other sports. What is the answer, so that we don't have the Expos, in particular, being a developing ground for the teams that can pay the big salaries? Is there a solution that you can foresee?

Mr. Sam Pollock: I don't have a solution, really. I don't want to speak for the Expos, although I was a great Expos fan until I became a director of the Blue Jays. It's tragic to see a guy like Larry Walker, who is certainly one of the game's great stars, end up in Colorado.

• 1635

Once again, I think you are seeing or may have seen a situation in the way the team was financed. Not that I am criticizing that for one minute, because I am not, but basically the old owners of the Montreal Expos, after some great, great years, decided they no longer wanted to be involved with baseball.

Mr. Brochu was certainly very energetic in leading and forming a group of people to keep the Expos in Montreal. They have had some great competitive teams. I do not know what his ability was to call on capital to fund losses. It may not have been there. There was certainly money invested by the city and by various funds in the province of Quebec.

We have not been faced with the problem of losing Canadian players, or any players, for that matter, to other teams. There come times when teams have to make changes for one reason or another. Particularly as I have experienced in my many years in sports, if you have an older championship team you are always tempted to go a year or so thinking that it is going to go on forever. It never does, and you have to make changes and start back.

I am optimistic. I think there were five or six Canadian players claimed in the draft last year, as Bob mentioned. Unfortunately, we do not get a first call on those players. One of the top Canadian prospects last year was drafted by Baltimore. We do our very best, and so do the Expos, but there is no such thing as hiding a player. Everybody knows about him; they all have scouts. Anyway, we do not want to lose any Larry Walkers. Let's put it that way.

Mr. Pat O'Brien: No, we don't.

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

Mr. Riis.

Mr. Nelson Riis (Kamloops, NDP): Sam, you are a very happy fellow. You remind me of Clint Eastwood today, because I cannot imagine anybody remaining so cool with what you have delivered to us.

Mr. Sam Pollock: My owners aren't cool, though.

Mr. Nelson Riis: I appreciate your owners aren't cool. During the 1990s the financial picture for all major professional sports teams in Canada has steadily worsened.

You pointed out that the Blue Jays lost $35 million last year, and by all appearances will lose that this year. You pointed out on the graph that every time the exchange rate shifts you lose money. By all projections, I suspect that exchange rate is not going to change much in the foreseeable future.

When you say that there is clearly no single solution, you are certainly correct, but what I hear you describe is sort of a financial black hole, sort of a financial hari-kari that we are moving toward when it comes to professional sport.

I think we have to say that this is far beyond an exchange of pleasantries and niceties. What you are predicting, unless there is some major change, is that professional sports cannot last in Canada.

We probably cannot do much about the exchange rate, which is a crucial factor, but do you agree with my assessment that this is actually a financial crisis that we are facing when it comes to professional sport?

Mr. Sam Pollock: I do not like to use the word “crisis” or “panic”, but you are certainly close to being on the money. There is definitely a real problem.

Mr. Nelson Riis: Can I just elaborate on what I see as a problem?

Mr. Sam Pollock: Yes.

Mr. Nelson Riis: I mentioned earlier to you personally that I have a son who follows professional sport much more closely than I do. He is a whole lot brighter than his father. I asked him what question to ask you today. He said to me that your team was doing well in the North American market, that you were very successful, particularly very successful financially. That was my son's view, and I respect that, but I think he's wrong.

• 1640

Mr. Sam Pollock: He's certainly wrong financially. I hope he's right in the other areas.

Let me put it this way: If I could have brought you newspapers of not more than a month ago, you would have been reading a different story about how our team is going. I know one or two swallows don't make a summer, but I hope we can keep our winning ways.

Our idea was and has been to put a competitive, interesting team on the field. That's why you will notice in our graph here that we've increased our payroll in the last two years, actually, but particularly last year, to make ourselves more competitive. We signed an outstanding pitcher last year who is a true hall-of-famer, Roger Clemens. We've raised our payroll substantially because we wanted to put a really competitive and interesting team on the field.

It didn't work for us last year, and we're hopeful that this year, as I said— The sun has been shining a lot brighter and our baseball climate has been like the May weather here in Canada, in the east anyway, and we do hope that continues. That will help us to some degree; there's no question about that.

I've read and read, and I'm sure you have, Mr. Riis, about how good our economy is and how well things are, and they seem to be a lot better. Everybody seems to be happier in this country today, and so on. You still hear about people not working and so on and so forth, but generally the tone is really upbeat.

You keep reading that the Canadian dollar should strengthen. Less than four or five months ago, I read many analysts talking about an 80¢ Canadian dollar, and so on. So I don't want to sit here and believe we're going to be permanently sitting with a 69¢ Canadian dollar.

As I said, I know we're a heavily resource-based country, and I know how much that means to mining, oil, the forestry industries, and things like that, but—

Mr. Nelson Riis: That's very generous of you, and I appreciate your concern about the other sectors, but we have a number of things on our table. One is to identify how serious these issues are for people like you. I suspect there's a general mood out there that feels things aren't that bad. Like you say, there is this prevalent mood of sort of optimism, but when I look at your presentation today—and of course we've seen others—it's quite different.

Mr. Sam Pollock: It is, and that's exactly why—

Mr. Nelson Riis: We require you to tell us very clearly how different this is and how serious this is, because if we're going to ask our colleagues to make some major changes, which we presumably will, we're going to have to have them understand how severe this issue is.

Mr. Sam Pollock: As we were coming here today, our raison d'être was to put the issue before you as it actually exists today. We felt that this is only the very beginning of what could be quite a process to go through.

We have a lot of homework to do, too. I feel that once your committee gets through hearing all your submissions and starts putting together your findings, we'll be doing the same thing. I would hope that in our findings we would be able to narrow this gap and then maybe at that time be able to tell you a little more of how we see the situation at that time.

Certainly one of our foremost hopes is that there will be some improvement in the Canadian dollar. I'm not saying it's going to come back to one for one or something like that, but one cent is quite dramatic to us.

Mr. Nicholson will tell you that when we made our budget in November of last year, at that time we budgeted for the current season at $1.38. When we had our board meeting five days or six days later, that had already started to move. Our best advice was don't hedge, don't get in, because we don't think it's going anywhere. Well, you've seen what has happened. We're seven more cents, 700 basis points difference.

• 1645

I didn't come here today to cry about one particular item, strictly. The figures don't lie. The exchange rate is not the total part, but it's a big, big part of it. There is a difference in the way the industry has operated—there isn't any question about that—rightly or wrongly, and I'm not taking sides.

Mr. Nelson Riis: We heard from the Expos, as you've indicated, and we read the headlines in the paper just last week regarding our local hockey team, and a picture is beginning to emerge of a very serious financial issue here. If you're counting on the exchange rate to change appreciably in terms of rescuing that, or hoping for that, I'm not certain that is terribly hopeful.

Mr. Sam Pollock: I can assure you I'm not a dreamer. I've been around too long for that. But I will tell you one thing, and I mean it sincerely. One night last week I was quietly reflecting by myself, sort of meditating, and I said I have to get this Toronto Blue Jay thing out of my mind and just look at things.

It took me back to Montreal, and I thought, what would Montreal be if the Canadiens no longer existed in Montreal? You hear les Habitants, the Flying Frenchmen—Vézina, Morin, Joliat, Béliveau, Richard, Lafleur. The Montreal Canadiens are really a heart of Montreal, of Quebec, and of Canada. I asked myself, what would it be like?

Then I started thinking of the great history of some of these teams, like the Toronto Maple Leafs, the Edmonton Oilers, and the Toronto Blue Jays, who won two world championships. It has kind of a chilling effect, because, like you, I'm searching for the answers, and the picture isn't bright.

You can't just sit here and hope this line is going to go up like that. So we have a lot of solutions to find.

I think there's middle ground everywhere. We have to increase revenues. We have to find new revenue streams. If the dollar persists in the same manner as it does now, it's going to have to cost more. I don't mean it's going to cost $55 a ticket, because the traffic won't bear that; I know that. I'm glad to hear you raising these points, because it's one thing when you're talking about accumulating profits, but when you're talking about substantial losses— As I said, these figures aren't loaded with depreciation and amortization, interest charges, and things of that nature; these are genuine things.

Sure, we have to do things with major league baseball. There are areas we haven't explored. You can say to yourself, how much are you responsible for? Is it 10%, 20%? Maybe we've let things slide a bit, hoping things would get better, but not to any of the degree we're facing here today.

I would use those words: professional sport in Canada has really serious problems today. Make no mistake about it.

The Chairman: Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

First of all, to Mr. Pollock, welcome, and thank you for your candour. Your comments and certainly the financials that have been outlined here are very candid. It's very important, and as Mr. Riis had indicated, really it's the subcommittee's responsibility to understand basically what it means for professional sport in Canada.

I think we all agree with you that professional sports, whether they be the Habs—of whom I used to be a fan, by the way, until I moved to Calgary—or the Blue Jays or the other professional sports, are very important, not only financially and economically, but obviously for a psyche that we have as Canadians.

In saying that, I was also a little bit on the periphery of the Winnipeg Jets when they left Winnipeg, and I can appreciate the other side of the equation when you do lose a professional sports team.

• 1650

I have a couple of questions. You identified the four areas, and I just did some quick numbers: taxes, $15 million; arena revenues, $30 million—you mentioned that a new arena that was being developed with other revenues contributed $30 million to— I can't remember the team; and exchange rate at $25 million. That adds up to about $65 million. So if those areas were corrected in some fashion, you'd have about a $65 million turn in the finances of the Toronto Blue Jays.

Of those three—the exchange rate, the arena revenues, and the taxes—I see two over which you have some control. One is taxation, and I'd like to hear your views on that.

And by the way, Mr. Pollock, I recognize that you didn't come here with your hand out, and I don't want to see headlines saying “Toronto Blue Jays looking for tax concessions and tax breaks”.

Mr. Sam Pollock: No.

Mr. Rick Borotsik: No, and that's not to be. I'm telling you that right now.

But there are two controllables. One is taxes, to a degree, and the other controllable is the arena revenue you can generate. That's controllable through your own operation, through negotiating—and you talked about the SkyDome—a better lease agreement. We all know about lease agreements and how you have some leverage. If it weren't for the Blue Jays, the SkyDome obviously would lose substantial revenues.

Of those two—taxes and arena revenues—being some controllables, do you have any help for us as to how we should be looking at the big picture in Canada with respect to arena revenues and taxation?

I'd just like to clarify the arena revenues. You had indicated that in the American centres and cities, a lot of the capital for those arenas was developed or put in by states, municipalities, or counties.

Mr. Sam Pollock: Yes.

Mr. Rick Borotsik: So can you give me— I don't want you with the hat out.

Mr. Sam Pollock: No.

Mr. Rick Borotsik: I just want you to give me some understanding and idea of how perhaps Canada could look at making these two areas of revenue a little bit easier for you. Maybe Mr. Nicholson has some ideas as well.

Mr. Sam Pollock: Yes, I think we can both speak to that.

It's the mindset that has developed in professional sports, particularly in the last six, seven, or eight years. I'll give you a small example and get it down on this scale. Ten years ago, the Blue Jays—and Bob would know this very well—negotiated a lease in Dunedin, Florida for where we do our spring training. At that time the Phillies were in Clearwater and the Cardinals were in St. Petersburg, with facilities something like ours. Four years ago, the City of Tampa, Hillsborough County, decided they would like to bring the Yankees there. That's about a 15-minute drive from Dunedin Stadium. They built a major league-class stadium. Then last year of course Tampa-St. Petersburg got their own major league franchise.

So our attendance in Dunedin just went down like that, and whereas the Yankees in their spring training make about $1.5 million, we're losing about $1 million in Dunedin. That lease also was up for a year. That's $1 million that's going to disappear from our P and L. There are other things like that, but that's just one example.

In Canada there's been a different conception about arenas. I know very well one you're familiar with, the Saddledome, was put up for the Olympics we had in 1988. You know the situation up in Edmonton.

On the other end of the scale, you've had two privately financed arenas in Canada, one in Montreal and now one in Toronto, which started out with basketball and is now combined. I can't speak to those facilities and how they're going to do; I have enough on my own plate without being concerned about them. But the fact is that for us to get a much better lease at the SkyDome, the SkyDome is going to have to increase its revenues in what it can do.

Many competing facilities have come in there, such as this new Air Canada Centre, but you also have this amphitheatre out by the CNE.

• 1655

Mr. Rick Borotsik: Mr. Pollock, the largest cost in any type of arena construction is the debt servicing on capital, obviously.

Mr. Sam Pollock: Yes.

Mr. Rick Borotsik: It's being said to us, not just by you, that a lot of the capital is being funded and debt serviced by governments as opposed to by the ownership of the arena in American cities. Is that correct?

Mr. Sam Pollock: Well, what they do is sell government-backed bonds over many years. There are also many of them, of course, and you've seen that some are pro and some are con. A couple of them have been defeated recently, but a half a percent of hotel tax, a half a percent on rental cars and all that kind of stuff— There have been all those types of things. It's a competition almost between counties, states, and cities in various parts of the U.S.A. Nowhere is this more prevalent than in the NFL, where cities and states are literally fighting to get a team.

Mr. Rick Borotsik: That was my next question, Mr. Pollock, and I'm going to run into that right now because the chairman is going to cut me off. He never gives me enough time, but that's okay; that's part of being the fifth party.

We talk about what's going on in Canadian professional sport right now—losing the Jets, and we talk about the potential of losing the Oilers and what they've gone through. This is not just unique to Canada, though. There are many teams that leave American centres to go to other American centres, and they cite the loss of money as one of the major reasons they've left, or new arenas, or new revenue centres that are being developed in other American centres. It's not just unique to Canada.

Cleveland doesn't have an NFL football team any more because they went to another new stadium.

Mr. Sam Pollock: Yes, but I think that's instructive in what it says. Let's take some of these situations. Let's take Cleveland. Why did Cleveland move to Baltimore? Because the State of Maryland said here, we're going to put up a beautiful stadium for you, and so on. So the Browns left. They went to Baltimore. They're called the Ravens. It was within days that everybody in Cleveland was screaming.

So what happened? Next year you're going to have this beautiful stadium in downtown Cleveland. They bulldozed the old municipal stadium into the ground. Now you're going to have this beautiful stadium in Cleveland, and you've got people fighting to get in there.

But there really haven't been many moves. Staying with the NFL, you had the move of the Baltimore Colts to Indianapolis. In the NBA, the only move I can recall in recent years was the New Orleans Jazz to Utah. Major league baseball has had only one franchise move that I can recall. So there have been very few moves. In fact, baseball is very much against teams moving, unless it's a dire circumstance.

We have two things on the table right now. One is in Minnesota, and there is another one potentially in—

Mr. Rick Borotsik: But my point is, Mr. Pollock, that this is not unique to Canada. There is internal movement within the United States for the same reasons.

Mr. Sam Pollock: Yes—very little, though.

Mr. Rick Borotsik: Are all the American teams making money?

Mr. Sam Pollock: No.

Mr. Rick Borotsik: So even with these concessions they are still losing money in American baseball teams.

Mr. Sam Pollock: The teams that are losing money, though, are the teams that don't have stadiums. That's the point I'm trying to make, and I'm glad you are raising it, Mr. Borotsik.

If you look through here, these various clubs—and I could name them off here. Let's just start looking down the sheet where we're talking about opening day payrolls.

Baltimore, new stadium, Camden Park.

Yankees, no. They talked about a new stadium, but let's face it, the Yankees get $50 million today in television revenue, and that's massively more than anybody else.

Cleveland, new stadium. Atlanta, new stadium. Texas Rangers, new stadium.

Let's go down. We'll skip the Cardinals.

Seattle Mariners, under construction. Boston Red Sox, planning board. New York Mets, planning board. Colorado, new stadium. Houston is building a new stadium. San Francisco is building a new stadium. San Diego, on the drawing board. Anaheim, a $95-million renovation. The White Sox have the closest new stadium, built the year after the SkyDome. Philadelphia, on the drawing board. Tampa Devil Rays, new. Florida Marlins, new stadium coming up. In Kansas City, the club is being sold, but there will be a new stadium. Milwaukee is under construction. Arizona, brand-new stadium this year. Minnesota—you know all the problems there. Detroit is under construction. Cincinnati, under construction. Pittsburgh and Montreal—

• 1700

So we have all but two teams.

Mr. Rick Borotsik: For the majority of these new stadiums under construction, are they all municipality-, county-, or city-owned?

Mr. Sam Pollock: There is either a bond issue, a state tax, or something else involved in every one of these situations. Of course, with the two New York teams, I don't have to tell you; something will happen there. It's a much bigger issue in New York as to where the teams go, because you have the boroughs fighting about whether these teams ought to stay in the Bronx or go to Manhattan and so on.

The Chairman: Okay, Mr. Borotsik.

Mr. Rick Borotsik: I can come back after.

The Chairman: Terrific.

Miss Phinney and Mr. Provenzano.

Ms. Beth Phinney (Hamilton Mountain, Lib.): Thank you, Mr. Chairman.

Maybe I can go from an area of losing money to spending money that might make you some money.

Saturday I went to a game in this new league that has started for young 16-year-olds. In my riding they had some games this weekend. These kids are American and Canadian. Canadians particularly have signed up, mainly to get university scholarships—they hope they get seen by somebody—and with the hopes of getting picked up by one of the big teams.

I wonder if you could tell us how much money you spend in the amateur area—if you spend any—and what your contracts are like to young people like these. One of them mentioned that his contract would be that if he isn't successful, he will be given the money to finish his schooling after he has played. If he plays only three or four years, he will be given money if he'll sign up when he's 16 years old.

I wondered if you had any comments on that. How much do you spend a year at the amateur level, and do you encourage these people at this age?

Mr. Sam Pollock: I'll just make a brief answer and then let Bob reply to the rest of it.

First of all, of course many, many players are in colleges in the U.S., and we are prohibited from giving them money. We are not allowed to sponsor amateur teams, because there is a draft of all players.

In hockey 30 years back, that was the way it worked. They used to go all over Canada and sponsor teams, and tie up all the players in those teams. Then they decided, well, this isn't a very good system, and wasn't going to work. They devised another system whereby actually the NHL gave money through their teams into the CHA, the AHA in the U.S. and so on. They distributed money through these different teams.

In baseball, as I said, many of these players—all of them, basically—are in high school or college. Of course, the big amount of player talent really comes from Florida and California and the southern U.S. states, where you can literally play baseball all year long. That has a big bearing on it. Of course, like hockey, where a large number of players are now from Europe, in baseball, a large number of players are from the Dominican and Puerto Rico and South America.

Bob, would you just speak a bit on that?

Mr. Bob Nicholson: Certainly.

I think the greatest investment we make is in terms of some of the professional teams, as Sam had mentioned, that we operate in Canada, but we've also funded a number of amateur baseball associations across the country and local tournaments, both in Ontario and across the country. I would say our investment on an annual basis would run approximately $200,000 to $300,000 in those areas.

I don't think that really includes such things as the coaching clinics we put on. Sometimes we don't actually put a value on it, or track all the expenses related to it. Our scouts go across country and see kids in their communities. We also run a number of baseball camps. It's those types of activities that I'm not sure are all-inclusive in terms of that dollar value.

In terms of the scholarships you mentioned, baseball has a scholarship program where we draft a lot of talent out of high school. Because of the high number of players who go into the system but who don't necessarily always make it up to the higher end of the professional ranks and end up getting released somewhere along the way, rather than their thinking they've had to forgo their entire education to take a chance that they might make it in the professional ranks, there is a scholarship program teams can offer. Then they fund themselves individually where they would fund for a player effectively after his career in the baseball ranks to go back to school and get a college education.

• 1705

Ms. Beth Phinney: Thank you.

The Chairman: Mr. Provenzano.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): Mr. Pollock, your brief provides some very interesting information, and one of the points of interest is the salaries that the 30 major league clubs pay to their players. You've provided the opening day team payrolls and you were trying to make a point that the Jays are eleventh or twelfth in the 30 teams and that the Jays' payroll is about $20 million less than the first place team, the Baltimore Orioles, who are at about $70 million.

Mr. Joe Comuzzi (Thunder Bay—Nipigon, Lib.): They're the last-placed team. I'm sorry. It's the standings I'm talking about.

Mr. Carmen Provenzano: If I can get back to my train of thought here, because there is a train of thought— The last thing I wanted to appear, Mr. Pollock, is confrontational, so don't take me that way, but I'm having some trouble connecting the wires. The team ranked third is at $60 million, so when you get from the first to the third team, there's a $10 million drop in payroll. And then you get down to the last team, the Montreal Expos, which is $9.2 million. This would make the Toronto Blue Jays $39 million in payroll higher than the Montreal Expos.

We're told major league sport is a business. Major league sport at that level in all sport, whether it's the NHL, NBA, or major league baseball, is a business. It's supposed to be. When you have these discrepancies in payroll, there's a lot to be said about why those discrepancies exist and how teams with lower payrolls fare. I'm not sure of the point you're trying to make. It sounds like you're apologizing for the Jays having a payroll of $48.4 million, and that doesn't add up to me.

What I'm saying is if in major league sport any franchise owner is not prepared to operate that franchise as a business, then it's something that's far beyond the scope of this committee to even entertain. What we, I believe, or at least I as a committee member, would be very interested to hear about is where a franchise is legitimately attempting to operate as a business, not as something that's prepared to pay outrageous sums to put itself in a position where it's going to be financially not viable because of consistently losing money, and where there are glaring differences between teams that operate under the Canadian jurisdiction and the American one. Those are the things we need to hear.

The fact that the Blue Jays may not be viable next year or ten years from now because of the losses they're incurring—and you've alluded to the fact that this may be due to many other causes—is not really of interest, at least in my view, to this committee. What are the glaring differences, if any, where this committee could focus on in terms of being of some assistance to remedy in order to provide a level playing field? We've heard about the Canadian dollar differential. What else?

Mr. Sam Pollock: First of all, I'll do my best to answer your question, because there are really about six questions there.

Number one is we certainly don't apologize for our payroll. So let's get that off the table. There is no attempt here at any time to apologize for our payroll.

Number two is that, as I said, we received this kind invitation to appear before your committee to state things as they exist today, not five years ago or 25 years into the future. In terms of consistent losses, if two years is consistent, then two years is consistent. But the pattern is there over a period of years.

• 1710

As Mr. Riis spoke and demonstrated, what we're looking ahead at is to a changing situation, a situation that has changed and as to where that's leading us to the future. And as for the enterprise part of it, we're very much concerned with the enterprise part of it, and I think that is reflected at various points all through this presentation. We realize that a situation like this, and for other Canadian-based teams—and maybe there are some lesser degrees—cannot go forward.

We don't have the perfect solutions today, nor do you people, because you haven't even heard all the submissions yet, but you will hear them in the future. There is a great deal that could go into this mix. I think, though, that some of the points are very salient, very unassailable, that there is a serious problem in major professional sport teams operating in Canada that are coming out of U.S.-based leagues. In other words, in baseball 28 of the 30 teams are in the U.S., and for NBA basketball it's the same level. In the NHL there are six Canadian teams in a 30-team league, 24 of which are in the U.S. To just sit here and think that there are no problems—I think you're putting your head into the sand.

As I said, we—and I presume others—came here; it might have been transposed a different way, but we're here stating facts. We have work to do, make no mistake about that, but I think we're giving you some food for thought. Where you take that is another question, sir. But I welcome the questions, and I welcome the criticism. It may not be criticism, but I welcome it. And we'll certainly take note of those things. But we feel that this situation dictates something. You see lower payroll teams that are going into new stadiums to generate higher revenues, and they will be higher payroll teams.

I could have brought another chart here today showing you teams and what they've expended or committed out to the future. In that list, you'll see us right down near the bottom. We don't have commitments extending out to 2000, 2001 and out there. Our commitments in the next two or three years are very modest, because we don't want to be very ambivalent about this whole situation. We're not here for one, two, or three years, if you know what I mean. We've been here 22 years now, and we hope to be here, and I think we'll be here, for a long term in the future. But we have a situation that has to be dealt with at this time. I may be back here a year from now saying we're in exactly the same situation, but hopefully I won't be.

We feel that we've had a very successful organization in a great country in a great province in a great city. And we have a great fan base, believe me. We have a great fan base. It's among the very best. Even given the fact that the novelty of the SkyDome is now well worn off, we're still drawing 2.6 million a year. We'll draw more if we have a real winning team. We'll draw a little bit less, 100,000 maybe, if we don't do quite so well. But we have a great fan base. And as I said, we have dedicated owners who supported a club with equity, not with bank debt or something like that.

Bob and I and the entire management team have a real job ahead of us to brighten this picture. What role you people can play, I don't know at this stage. But you may have a better idea yourself when you're through hearing everybody and deciding which is on this side of the table and which is on that side of the table.

• 1715

There are many problems today, despite the wonderfully upbeat attitude of our country. We know we have great problems with hospitals and in the education field, and everybody's looking for a little something. The government's trying to make the balance, and I believe it's doing a pretty good job.

The Chairman: Mr. Pollock, I have to interrupt you, because we have a couple of members who really want to get on the board. They have special questions to ask you, and we're going to try to get it all in here today. We're pressing the clock.

Mr. Grose.

Mr. Ivan Grose (Oshawa, Lib.): Thank you, Mr. Chairman.

Mr. Pollock, I don't dance very well, so we'll get right to the point. If I didn't admire your experience, I wouldn't even bother asking this question. We've got a societal difference with the country we're trying to play with. We can't have tailgate parties here, so that hurts the fan base. It's just not our thing. We don't do that. You can't have a municipal bond issue, as it's against the law. Even if it were allowed, I think it would be a cool day in hell before you ever got municipal taxpayers to vote for a bond issue for a stadium or for any help to a professional sports enterprise.

Now here's the blunt question: Are we in over our heads? Would it be so bad to be a minor league to a colossus like the United States?

Mr. Sam Pollock: I suppose there are two schools of thought. I think you would find that the vast majority of Canadians are—as I'm sure you are—very proud people. Certainly where I sit, I don't like to be second to anybody. Canada's a great country. It has never been a second-rate country in anything. We're one of the G-7. We're all very proud of that. So I don't subscribe to that.

We have a great institution in Canada called the Canadian Football League. They have gone that route, and it has been a very difficult, tough row for them to hoe. Whether they'll make it, I hope and pray they do.

Bob's the president of the Toronto Argonauts Football Club. Very proudly, they've been the Grey Cup champions the last two years. I don't want to say anything rash, but really, I don't think I or my fellow Canadians have any interest in being second to anything.

Mr. Ivan Grose: I might add just one point.

The Chairman: Absolutely.

Mr. Ivan Grose: It's a bit of an analogy. It came to me because I'm on the transport committee. We've been having hearings on passenger trains. Everyone wants them, but no one rides on them.

This, I think, is our problem. I'm very proud of what the Blue Jays have done. I'm very proud of the people who have done what they've done with the Blue Jays, and I can't for the life of me see how they could have done any better. But you can't go on losing $35 million a year. No one has pockets that deep.

Mr. Sam Pollock: No one agrees with you more than that, but I think the analogy between VIA and the Blue Jays is somewhat different. Railroads have become mainly a transportation for freight and our natural resources. It's no longer for passengers. CNR—I wish I had bought a lot more of their stock—and CPR are doing extremely well, and we're very happy for them.

It's not as if people don't want us. We are drawing 2.6 million people. We're trying.

The problem is this. Look at Toronto. If you go down to the SkyDome to see the Blue Jays, you pay $25. If you go to Fenway Park, you pay $25. But you know it's the old story: it's $25 U.S. that they pay.

We're in the entertainment business. Make no mistake about that. Don't just limit this to players. In relative dollars, we're right in the top of major league baseball in our payroll if you look at it that way.

But we've got to figure out a way— I'll put the “we” as the Toronto Blue Jays and all of my other associates who are involved in professional and major sports in Canada. These are very proud teams. We in Montreal had a great run where we were recognized as one of the great teams in sport. The Maple Leafs have had a great run. I've alluded to the Argos.

• 1720

The Expos had fantastic years. Let me tell you that they've done a fantastic job, but it has been an unpleasant experience for them each year to have to move away for financial reasons. As I said, their ownership structure has been different in the last seven or eight years, so it has been very unfortunate.

Yes, we have to face reality, and we are going to face reality. But I think reality is for a term; it's not one year, two years, or three years.

The Chairman: Mr. Comuzzi.

Mr. Joe Comuzzi: Mr. Chairman, thank you very much for asking me to be here this afternoon, and I welcome our guest, needless to say.

I was pouring water when Mr. Grose suggested that maybe we should go into a triple-A team, and I was thinking of letting the pitcher slide over his head for a minute, although I agree with him on a lot of other things.

On more mundane facts, Mr. Chairman, I know we played an afternoon game today, but I can't find out what the score was.

Mr. Sam Pollock: Look, I'm scared to tell. We called the office, and my secretary said that we were winning. I asked by how much. She said she wasn't sure. She knew there hadn't been a lot of home runs. I said I hoped they were all ours. That was at 3.05, so I guess that would be about the sixth or seventh inning.

Mr. Joe Comuzzi: I couldn't get a score. I'm sorry I was late. If we take three games from Boston, we're right in the spin.

Mr. Sam Pollock: We had two out of three with Cleveland, but more importantly, Cleveland is coming in next weekend. Talking about tourists, that's a team that brings a lot of fans to Toronto. We sell tickets for Cleveland because it's less than a four-hour drive.

Mr. Joe Comuzzi: It's starting to heat up, and that's good for you. That may solve one of the problems we're both trying to correct here.

Mr. Sam Pollock: It would sure help.

Mr. Joe Comuzzi: It seems there are a couple of areas here, Mr. Chairman, over which we have no jurisdiction, such as the arena, the lease rate, and the SkyDome, and so on. But something that was brought to light today is that players come in and stay for six or seven months, and then they go back home. One exception, I guess, is Paul Molitor. They still pay a full share of the Ontario health tax, so that may be something we could draw attention to. There seems to be an inequity there with the huge payroll and the 3% health tax that we're bound to pay. That's just one thing.

This is more of a question to you, Mr. Chairman. We're having a problem with our exchange rate. The dollar hit something like 68¢. There's no reason why the Canadian dollar, given our fiscal position, strength of natural resources, and surpluses that are starting to generate and self-generate, is about 68¢. I think we have an idea. We still think in Canada that we can have an interest rate that's two points lower than that of the United States, and that has a tremendous bearing on your profitability.

I think if we're going to support the Blue Jays, Expos, Toronto Maple Leafs, Canadiens, Calgary, and Vancouver, and we insist in Canada on paying in American funds, then it's our responsibility to make sure that our dollar is not a Third World dollar and that there's a parity between the worth of the American and Canadian dollars. There's no reason why we, as legislators, should be happy going around with a 68¢ dollar. It really has a tremendous bearing on the success of these teams.

Those are really my only comments. I'd like Mr. Pollock or Mr. Nicholson to comment on that.

The Chairman: Mr. Comuzzi, just before you arrived Mr. Pollock had made reference to the fact that just a few months ago some of the top economists in Canada were saying that there's just no reason why our dollar should not be moving forward.

Mr. Joe Comuzzi: Do I finally have somebody who agrees with me today?

Mr. Sam Pollock: I read with interest this morning that Mr. Thiessen is going to be speaking on Wednesday. Some people—I threw my hat right into that ring—are hoping he might bring some news that may be encouraging. Maybe nothing is ever for never, and maybe people in other parts will start to recognize that Canada is still a great place to invest in and that we can attract foreign investment. If the U.S. doesn't further raise interest rates, which they didn't do at the last Federal Reserve Board meeting, it's just possible that there may be some improvement in that area.

• 1725

But I don't think we can be completely hung up on the exchange rate. I think we have to look at the facts as they exist. Is there a situation that exists today that imperils Canadian teams in their operation—and I'll put it this way—in world-class leagues? Do you know what I mean?

The Chairman: Mr. Pollock, I want to ask you a question, and I ask you this question because no one has engineered more successful championship teams at the pro level in this country over the last many, many years. Why is it that American leadership is so much more respectful and supportive of professional sport, whereas in our country we tend to almost shy away from wanting to support professional sport?

Mr. Sam Pollock: Well, I have to say that the main reason, as I see it, is that you have these towns and you have these counties and states that look upon a sport and say, what will this do for us? What will they bring to our community in all sorts of revenues, whether they be taxes or whatever they bring?

In Canada, I can't believe that the Winnipeg Jets and the Quebec Nordiques, when they left, didn't leave a big void in those cities. Maybe getting half tax is better than getting none. Do you know what I mean? And it's understandable. Christ, it's understandable. People say, well, we have bigger priorities; people are out of work, there are hospitals we have to fund, there's education we have to fund. Everything has its place in the proper perspective. I think that we, as citizens, as administrators and as government, have to weigh all this, and that's why I thought the formation of this committee was such a wonderful thing in order to hear all of these things, to see whether there's fact to this, is it myth or is it fantasy or what is it?

Whatever conclusion comes out of this, there has been a lot of good, sir. People will be more educated. The world isn't going to come to an end one way or the other, but I think it can be a lot healthier situation if we can maintain our major league clubs as healthy clubs that we're all going to be proud of.

People in Edmonton were proud when their team won the Stanley Cup, as were Toronto and Montreal, as were the Toronto Blue Jay fans when they won. And hopefully that will happen in Vancouver and other places where there are Canadian teams. For a long time, all Canada had was two teams in the NHL, Toronto and Montreal. We've seen that change over the last 28 years. Vancouver came into hockey in 1970, and then I guess it was the Expos and so on down the line.

The Chairman: Thank you, sir.

Madame Tremblay and then Mr. Ianno.

[Translation]

Ms. Suzanne Tremblay: Mr. Pollock, when there were only six teams in the National Hockey League, we enjoyed good hockey. Today, people say that hockey isn't as interesting, that the increase in the number of teams has diluted the teams' performance and so forth. A lot of room is being made for players from abroad because we can't get any here. During the 1994 strike, no city in the U.S. saw its income decrease. Even if baseball teams were on strike, the cities there continued to prosper. In Québec, people put their money somewhere else. They go see the juniors and other kinds of shows. That's the real problem.

• 1730

There's a limit, at some point, but Mr. Brochu, when he came here, told us that the players' payroll was over $1 billion. And it's not going to stop there. They told us it's going to double between now and the year 2002. You're going to have to come back before us to ask for more help again. It's just not possible anymore. Where is it all going to stop? It doesn't make any sense.

Mr. Sam Pollock: It's not just a matter of salaries.

[English]

You have all kinds of people in the entertainment industry. I mean, sports is a part of the entertainment industry.

Now, you talk about a six-team league,

[Translation]

a league with only six teams. I was there in those days.

[English]

If you have, let's say, a thousand hockey players and you're going to have the best players divided among six teams, it's a big difference compared to having them divided among 30 teams. I think there are a lot more better hockey players today playing than ever, but they're spread over 30 teams instead of six.

I remember I operated teams in Hull-Ottawa.

[Translation]

Those teams were better than some teams now playing in the National Hockey League.

[English]

But it's a different era. It's a different time. Everything has changed.

I remember when Atlanta was in the Southern League in baseball. We've had the expansion of all major sports in the last 30 years. The talent is certainly there, but the talent is spread thinner. That's the difference we have today.

I agree with you. If there are no sports, sure, life will go on, but will it go on in the way people enjoy? We were all kids; I was a kid many years ago. We grew up playing sports and one thing and another, and I think it's a proven thing that if kids play sports they're not doing other things.

I think sport is really part of the fabric of Canadians, and we have a great record. As I said, I'd like to see us able to continue what we've developed in the past, but we have to recognize that a lot of things have changed and that we have to do some changing too. When I say “we”, I mean everybody's part of that we.

The Chairman: Mr. Ianno.

That will be the final question and then we will adjourn.

Mr. Tony Ianno: Also, Albina has a question.

The Chairman: Okay, I'm sorry, I didn't notice.

Mr. Tony Ianno: On Mr. Comuzzi's point, before he leaves us—

Mr. Joe Comuzzi: —

[Editor's Note: Inaudible] —

Mr. Tony Ianno: No, I just think you have to put some things in perspective. A lower dollar does produce, when you take into account that close to 40% of our GDP comes from export and trade. Many of the small businesses are getting into trade in Canada and are having some viability because they're looking at markets abroad. So the lower dollar gives us a great deal of economic activity, people working, etc.

When you take into account that half a cent is $300,000 according to your numbers, five cents would be worth, what, $3 million?

The Chairman: It was $600,000.

Mr. Sam Pollock: Bob can speak to that.

Mr. Bob Nicholson: You're correct.

Mr. Tony Ianno: I'm correct. Thank you, Mr. Chairman.

Five cents is $3 million. At that point—when you take into account the number of tickets that would mean, if somehow the dollar goes up and economic activity goes down in terms of export and many of the small businesses that we have in the greater Toronto area—I think we would probably lose some ticket sales because of the economic activity hindrance.

So I don't want to place too much— that the dollar going to make the magic. As I stated in the early part of the question, as much as I know all the economic activity that you do in our community and the charitable works, etc., tourism to many of those small businesses, I think we have to keep the balance. Yes, it would be nice—

• 1735

Our dollar—I'm bullish on it—I think will go up, because of the fundamentals in this country. When you travel the world, you see how inexpensive it is here in Canada and in Toronto. I think we're going to benefit with our dollar in due time. But we also have to look at the economic viability of our Canadians so they can afford to spend their entertainment dollar with the Blue Jays. I just wanted to make that point.

Mr. Pollock, please.

Mr. Sam Pollock: I just want to clear one thing up here. I didn't come here today to fight about the Canadian dollar, because I have a great many friends in western Canada, and for that matter in eastern Canada, who are very resource-industry-minded, and I recognize that there's balance on both sides. Our position was only pointing out what it does to us. And it's not the only thing. When you sit down here, maybe there are 12 different things and there aren't 12 equal slices of the pie. That's certainly one of the major slices of the pie, but it's not the only thing.

I'm glad you raised that, because I didn't want to leave here with that cloud hanging there. This isn't just a rat-a-tat against the Canadian dollar vis-à-vis the U.S. dollar.

The Chairman: Well, it's precisely that type of discussion many years ago that led to an Auto Pact, and I suspect that eventually we're going to have to look at some kind of complex formula for sport in this country, not dissimilar.

Albina.

Ms. Albina Guarnieri (Mississauga East, Lib.): No, it's all right.

The Chairman: No, Albina, please.

Ms. Albina Guarnieri: Actually, Mr. Chair, I'd like to leave the last word to Mr. Ianno, because you've sat in your chair so patiently for over two hours, and certainly we've appreciated your candour and insights.

Perhaps we can have them come back again, because I have a feeling their presentation will provoke many more questions.

Mr. Rick Borotsik: Bring Roger Clemens with you when you come next time.

Some hon. members: Oh, oh!

The Chairman: But Albina—

Ms. Albina Guarnieri: So please come back again.

The Chairman: Please, if you have a question—

Ms. Albina Guarnieri: It's all right. It's been a long session.

The Chairman: Mr. Nicholson and Mr. Pollock, your experience and your insight today have been most valuable for all of us as we continue our analysis. Thank you to both of you very much for coming.

Some hon. members: Hear, hear!

Mr. Sam Pollock: Bob and I want to thank everybody around this table for your time and your interest. We certainly didn't expect this wonderful turnout. We greatly appreciate it.

The Chairman: We should speak about turnout. You had more MPs here today than the NHL and the NBA combined, so I'm sure that's a tribute to you, Mr. Pollock.

Some hon. members: Oh, oh!

[Translation]

Mr. Sam Pollock: Thank you, and see you next time.

[English]

The Chairman: The meeting is adjourned.