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]

Tuesday, May 5, 1998

• 0906

[English]

The Chairman (Mr. Dennis J. Mills (Broadview—Greenwood, Lib.)): Good morning, ladies and gentlemen.

I'd just like to remind committee members that we meet with the trade lawyers on Tuesday, May 12. That will be the morning when we have the debate on the issue of NAFTA. We'll have a lawyer from the department, who will be putting forward the position that the NAFTA does not apply to the professional realm, especially the National Hockey League; and we'll have another lawyer, who wrote the book Navigating NAFTA, who believes it's an open-and-shut, clear-cut case that there is a NAFTA challenge.

Good morning, Mr. Brochu, and welcome to our committee analysing the industry of sport, the linkage of sport to job creation in this country. We appreciate your taking the time to prepare your brief. We certainly appreciate the fact that we had it in advance. We now turn the floor over to you.

Mr. Claude R. Brochu (President, Montreal Expos): Thank you very much for the opportunity to come and visit with you.

[Translation]

Good morning, ladies and gentlemen.

[English]

Good morning, ladies and gentlemen.

[Translation]

I will first give you an overview of my responsibilities. I am a shareholder partner in the Montreal Baseball limited partnership. I am the President of the Montreal Inc. Baseball Club. I am a member of the board of the National League, of the executive council of major league baseball, and I was elected, together with three other National League owners, to govern baseball. I think I am the first Canadian to be a member of this group in the history of major league baseball.

I would like to begin by giving you an overview of the Expo situation. Baseball fans know that this year we are celebrating the 30th anniversary of the Expos. We were the first franchise outside the United States granted by major league baseball.

Although we were the first major league club, professional baseball in Montreal goes back 100 years. From the short historical studies I have been able to carry out, it would appear that there was professional baseball in Montreal from the late 1880s. I believe that in 1900 Montreal won an International League championship as a professional club.

Baseball in Montreal also had some very exciting times during the 1940s and 1950s. As you know, in 1946 Jackie Robinson came to Montreal to play. In my view, that was an event of historic importance because Jackie Robinson was the first black professional player. He played first for the Royals and moved up a notch the following year when he went to play for the Brooklyn Dodgers. Those were fantastic years for baseball in Montreal. During the first 22 years of the club's existence, the main owner was Mr. Charles Bronfman. Mr. Bronfman left the Expos in 1991. It was then that we purchased the club. In fact I had 14 partners. The first slide, which is a bit difficult to see, shows this in the first table. You also have it in your copy of the brief.

• 0910

The 14 partners are the City of Montreal, nine Canadian and Montreal companies and four individuals. They purchased the club in 1991, for $104 million.

The commitment of that group essentially reflected their sense of civic responsibility: they wanted the club to stay in Montreal. The situation was that the club had simply been put up for sale. It had been stated on a number of occasions that no one in Montreal would be able to purchase the club and that it would move. It was announced every week in the media that the club was going to move to a city in the United States. We were often said to be moving to Buffalo, Orlando and many other cities. But we managed to remain in Montreal.

Among the corporations on this list, and they are large corporations, not one had any plan to become the owner of a baseball club. I remember going to meet Raymond Cyr, who at the time was the President of the board of BCE, with one of my colleagues, Jacques Ménard. We really set up the partnership together. Mr. Cyr simply told me that it was important for the Expos to remain in Montreal. He donated $5 million so that the club could remain in Montreal, and he made it clear that it was a gift. He also told us not to come back and ask for more money, because what he was doing was purely and simply an expression of public spiritedness.

Basically, the other corporations took the same approach. They did not want to be in a situation where they would be constantly solicited, the subject of cash calls, to support the club and keep it alive. So there was no doubt that we had to manage with the means available at the time, which are the same today.

The Montreal Expos Organization is among the most respected in the world of baseball. I'm talking about the organization as a whole, not only as regards the way it plays. We were named Organization of the Year for baseball in 1990, 1993 and 1996. It is the best organization of all 28 teams. We were named Team of the Year in Canada in 1994. Last year, the organization USFANS chose us as the team closest to its fans.

In view of our situation, our financial resources are very modest. In fact, we are not even defined as a small market, but as a micromarket. That was stated by a journalist in Milwaukee, a city which I have always considered to be a small market.

As a result, we have to be very careful with our management, particularly as regards spending. We have to be very innovative. Therefore, we have had to do a lot of work, as regards reception services, the stadium, financing and marketing. We have always had to be very precise, very exact.

Even though the average salary in major league baseball is $1.25 million US, we've never been able to pay that. We've never been able to afford to. Our average salary this year is closer to $368,000. But we are fortunate to have the best manager and one of the best organizations as regards training and talent sporting, and we've always had a strong club.

This year things are a little difficult, as I fully appreciate. But over the past six years since 1992, the club has had the fifth best overall performance in baseball as a whole. This means that only such large clubs as Atlanta, New York, Cleveland and Baltimore performed better than us, won more games than we did.

I would just like to make a comment about the next slide, which I find very interesting. It's as if we were patting ourselves on the back. If you compare the number of victories the club has achieved with the millions of dollars invested, we are twice as good as the average in the industry and far stronger than the club just behind us, the Padres.

• 0915

We have managed to barely survive as a club. We have no margin of error. We have succeeded so far, but I must tell you that we are starting to get a bit tired. It's very difficult because every year the club loses its star players. In my view, the club we built in 1994 was probably the best in baseball of that decade.

If you look at the performance of the players we had in 1994, you could see that they went on to achieve extraordinary honours elsewhere, with other teams. In 1996, we rebuilt a club which competed right up to the last week of the season. Although 70% of our supporters back our style of management, some nevertheless are discouraged.

The organization also finds that very difficult. As you know, building something and then having to break it up and rebuild it year after year is very difficult for those people who follow us and have, of course, the well-being of our organization at heart. Therefore, to keep my club and the organization together, at the end of last year when we released Pedro Martinez, who had won the Cy Young trophy as the best pitcher in the National League as well as other awards, I promised my organization to rebuild, but for the last time.

That is the promise I made. I said: We will rebuild our club, a club which will be competitive, and I hope we will win the World Series. I hope we'll be able to do that in Montreal, but if we don't do it in Montreal, we will do it somewhere else. In order to keep everyone, I had to do that. In my view, that is an important promise I made.

The Expos also played an important role in establishing a transfer system in major league baseball in the United States. This is a Canadian system with which we are very familiar, and I can tell you that in negotiations and discussions regarding baseball as a whole, some people saw it as being a little un-American. But we managed to set up this system in 1995.

It is a very simple system: the larger clubs help the smaller. That is to be expected. Last year, for example, the biggest major league baseball clubs transferred $65 million US to the smallest clubs, and that is a significant amount of money. The amount will increase considerably in the next few years. But for our club, that meant that $9 million was transferred to us last year from the United States. This year, $13 million will be transferred.

In all honesty, I must tell you that this amount is not enough to enable us to really compete, but it is a beginning. I think that baseball as a whole will look again at this transfer system, and larger amounts could be involved over the next few years.

Another very important point is that we share equally in all contracts for national television and radio, trademark rights, and promotions in the United States. As you know, there is very little Canadian involvement in this regard. Of course, Fox, NBC or ESPN are not very interested in broadcasting Expos games in the United States. They focus more on the major cities so as to achieve the high viewer ratings they are looking for.

But we receive our fair share. We're talking here about large amounts because US baseball contracts are very substantial. Last year, 51% of our revenue as a club came from the United States. That means that over half of our revenue came from the United States. That is really extraordinary. This is money going to us in Montreal. This year, the proportion will probably be around 60%. That is quite a large amount. I'll come back to this a little later, when discussing the economic impact. Obviously, if 60% of our income is from outside the country, this is not something we can just ignore.

• 0920

Please allow me to make one short digression, because I believe this is something which must be done in the context of baseball. The sport is very important to people's lives. In Quebec, seven out of every ten people follow professional sport. No other activity is followed to that degree. Seven out of ten people follow hockey, and six out of ten follow baseball. Therefore, we are not a society which follows only one sport, hockey. Baseball is followed very closely.

Look at the table and you will see that it's quite simple. Last year, the radio audience for baseball was 2.5 times bigger than for hockey. If you look at television, Radio-Canada and particularly TQS, if you take into account the fact that baseball is played in the summer, when the viewing audience for television drops by 20% for obvious reasons, you will appreciate that the number of people who watch baseball is pretty close to that for hockey. For the evening games, there are over one million viewers who watch the Expos on Radio-Canada or TQS. That is a lot of people.

Major league baseball—and I think everyone is aware of this but I will give you the details anyway—comprises 30 clubs located in 28 cities in North America. There are two leagues. We are fortunate in that the National League has a club in Montreal, and the American League has a club in Toronto.

Of course professional baseball has problems. I consider that the main problem is one of competitive balance. We have to make sure that every club has a chance to win. This is a problem that has to be resolved now. We will resolve it. But professional baseball is still the sport with the largest number of spectators in North America.

Last year, major league baseball in North American attracted 63 million spectators, and this year there will probably be over 70 million. That's a big number. It is the North American sport.

Although some people would have you believe that baseball has enormous problems, I can tell you that the polls we regularly conduct in the United States and Canada indicate fan satisfaction is at 75%. That is important. That's tells me that we have more or less got over the problems we experienced particularly in 1994 and 1995 as a result of the strike.

Therefore, the competition is North American. Major league baseball has players from 17 different countries. The Expos have players from ten countries. You have to understand that baseball is somewhat different from other sports. I will explain to you what happens when you pick up an amateur player from the draft. It usually takes a ten-year training period before the player can get to the majors. We have of course a major league club in Montreal, but we also have seven minor league professional clubs in Canada, the United States and the Dominican Republic. That means there are almost 200 professional athletes being trained for the major league club.

I mentioned to you that one of our advantages as a club in Montreal is that since we participate in a North American competition, we are equal partners with the other clubs. We share equally. That is fantastic. But there are also some disadvantages. Basically, the salary scale is North American. So a player with certain skills in Montreal has to be paid according to the same salary scale as a similar player in New York. That is how things work. This is not normally the way things work in a competitive structure. A plumber in New York probably charges more than a plumber in Montreal. But that is not the case with baseball. The scale is a national one.

• 0925

What is somewhat strange and sometimes even worrying is that this is the opposite from what happens in all traditional businesses. The system is such that in baseball and sports in general, if an owner does something stupid and agrees to pay an unreasonable salary to a player, he is not punished, but the problem he has created becomes a problem for the sport in general. This is something we have to live with, it must be appreciated that it is difficult to control.

I'd like to explain to you how the industry has evolved and talk to you briefly about salaries, revenue and costs other than players' salaries. The first table shows how things have changed since 1989. The red line represents the average for clubs. This is the average revenue for a baseball club. The line at the bottom shows the situation for the Montreal Expos. In 1989 we were $10 million short of the average revenue in baseball. Today, the difference is over $34 million. So, generally speaking, there has been a significant increase in revenue. In the case of the Expos, there has been hardly any increase in revenue. The second table shows the average payroll and how it has changed in major league baseball. In 1989, our average was equal to the average for the industry. Today, there is a difference of $33.6 million between our average and that of the industry. That's an enormous disparity. There has been a decrease in our average salary, whereas baseball as a whole has seen an increase of almost 200%.

This year's salaries are given in table number three. This year, the Baltimore Orioles have a payroll of $70 million, whereas in the case of the Montreal Expos, it $9.2 million. That is an enormous gap. It makes things quite difficult.

The other table indicates the club costs and the average for the industry, excluding the players' payroll. Once again, you can see that there is an increase for the industry as a whole. As regards spending, the Expos have remained at their 1989 level.

As a club, we are facing an impossible situation. Where is the industry going? What is happening in that regard?

We've had to be very disciplined, very realistic and especially clearly understand where the industry is heading and what we can do in that context.

We have had to make projections for the industry covering the next five and ten years. We must be sure of what we're doing. We must be careful not to indulge in any wishful thinking here.

The next table indicates how we, the Expos, see baseball developing. We expect revenue to have doubled between 1996 and 2002. That is the red line that you see on the table. Between 55 and 60% of revenue goes to players' payroll. We expect salaries to double by the year 2002. That is frustrating. We think that makes no sense, but that is the reality of the situation. If we want to be part of that community, we have to live with that.

• 0930

As you know, this is difficult for a club like the Montreal Expos. We are a community club. Some clubs in the sport are there for different reasons. In some cases, it is an important aspect of programming. The club is linked with a television network, a superstation. For example, there is the superstation WTBS, which is associated with the Atlanta Braves. This reaches 60 million households in the United States; it represents 500 hours of programming a year. It is the club which made it possible for Ted Turner's empire to be built. We now see that Disney has also become an owner for its own programming purposes. In Chicago, in the case of the Cubs, the Tribune Company is the owner together with WGN.

There are all sorts of clubs which are becoming very big and very powerful, but particularly in small cities there are still community clubs which have to try to compete with these big clubs.

We must consider what is causing these skyrocketing salary and revenue levels. Projections regarding the growth in television, at the national and local levels, indicate that there will be some growth, but the bulk of the growth in sport and in major league baseball will take place at the local level. The main reason for this is the new ball parks.

Thus at the present time, North America as a whole is rebuilding its sports infrastructure. The next table shows that there are 18 new ball parks recently constructed or to be constructed over the next two, three or four years in North America. I read a few months ago in the Boston Globe that for sports in general there are 44 new parks, arenas or amphitheatres being built across North America.

Therefore, this is reality. We must make sure we can live with that. Of course, in the current situation, we are looking at the projections for the next five or ten years. I can tell you that the first reaction of my partners was to say: "We have to get out. We have to sell the club. We have to sell it to someone in the United States as quickly as possible so as to avoid all these upcoming problems."

But before doing that, we'd have to be sure about our analysis and give ourselves the time to think and understand what is taking place.

[English]

One of the things that to me is very important—and this is very important for people within our business, people in the media, people politically, and our fans to really understand—is we did not set out with the idea that we wanted to sell ourselves a new ballpark. That is absolutely not the case. Quite the contrary: we were heading more in the direction of saying we needed to sell rather than build. We had to ask ourselves the question: can we be in reasonable financial shape and can we have a competitive ball club if we do something to correct the situation and, as we were beginning to see it then, build a new ballpark downtown?

There's a nuance there, but it's an important one, because we're not a ball club trying to justify by whatever means the building of a stadium. We're saying the best business decision is probably to sell; we admit that. But we're saying, “You know, this just might be important enough. Can we find a way to survive in the context of everything that's going to be happening in this industry?”

So of course the first thing we did was to conduct a market study, as any good businessman would do. We went to Montreal and asked the question: would there be increased attendance if we stayed at Olympic Stadium and tried to create and have a winning ball club, if we made Olympic Stadium a nicer, friendlier place, or if we built a new ballpark downtown, which would be natural grass, open air, small, and intimate?

• 0935

We did a major survey. We did three surveys over a period of two years. We spoke to 10,000 respondents. I think you know politically, when you speak to 1,000 you're getting a pretty good idea of how people feel. We did a survey of 10,000.

We came to the conclusion—to me, it was a revelation, because I have to tell you, I worried; I always worried in Montreal, because it was thrown at us constantly that Montreal is not a baseball town, only a hockey town, and that's why you're having the trouble you're having. It became clear to me as we were doing the studies that if we relocated downtown, a customer base that we didn't have, never had in Montreal, would be there to support us.

Essentially, it meant that our season ticket base, our corporate involvement with the ball club, would go from what was then, in 1996, 6,000 season tickets to 18,000. Our regular fan base would essentially follow us there, which meant that downtown we would get that 200,000 or 250,000 or 300,000 workers in the downtown area. They would be prepared to buy tickets and support us with a downtown stadium. To me, that was a significant move.

We were also very conscious, obviously, that baseball is probably the most populist sport of all. When you have 63 million people watching baseball, baseball is very family-oriented. It has to be very affordable. That's the nature of the game.

You can come to see the Expos this year, if you like; a family of four can come and get a very good bleacher seat for $20. That's not expensive. Nobody is going to tell me that's expensive. But this is available; this is what baseball is all about. Essentially, in a normal year, we have 14,000 people—we're not the biggest, but we're still very well supported by our fans in general—on any average night, come and purchase a ticket. That's pretty exceptional. You don't see that in any other sport. It is extremely important to us that this be maintained. So as we are talking about a new stadium, of course we are talking about making sure that the Expos stay very affordable.

I can tell you right now, we know if we build a stadium in downtown Montreal, we'll have about 11,000 seats that will be available at $10. That's three years from now, and these prices will stay in effect for a good period of time after that—and those are good seats.

Our market study convinced us, that yes, Montreal is a baseball town. Yes, downtown, with the support of the business community, we could make it. We'd have the base, and we'd have the revenue that would allow us to compete.

We then proceeded to do economic impact studies, as again any business would do. We did it a little differently, but all kinds of companies produce economic impact studies. It's normal. If you want to expand a plant, if you want to build a business, if you want to do something, you get somebody to put together an economic impact study for you.

We did the same thing, obviously. We asked Ernst & Young to do a study for us. These were specialists in the Chicago office, because we wanted it to be very disciplined, very rigorous. But then we took that study and we brought it to Quebec to Raymond Chabot Martin Paré, and we asked them to validate the study, to go through everything, with the Quebec economic model.

Then, as a third step, because we know what economic studies are like—they create battles of numbers: This is not that important; no, these jobs aren't created; no, this isn't the impact at all; this isn't the revenue that government will get—and you end up debating numbers, as a final step, we submitted our study, in detail, with all the hypothesis, all the givens, to the Ministry of Finance of Quebec and we asked them to validate these numbers. Are these numbers we are projecting reasonable? Are they acceptable to you as a government and as a department of finance?

We went through it all. We discussed it. They came back with the conclusion that yes, these numbers were acceptable. They were prepared to go with that. So if you notice in Quebec, I've been trying to bring forward economic data, and we haven't had all kinds of rebuttal or argument from the Government of Quebec. These numbers are acceptable. The numbers you see in your book are numbers that I'm very pleased with.

• 0940

If you look at the first level, there are comparisons between 1996 and the new ballpark downtown in 2001 or 2002. The numbers are there, essentially.

First, in terms of gross domestic product, the $105 million now in economic impact would increase to $180 million.

In terms of the number of jobs, you have to understand that at Olympic Stadium, for those of you who come there, we employ a tremendous amount, especially of students, on a day-game basis and on a seasonal basis. During a game we can have up to 2,000 employees, most of whom are kids. A lot of these people also are retired people looking for work to supplement whatever income they have. It represents a significant level of employment. In terms of full-time equivalent, however, we represent 1,252 jobs. In the new stadium it would be slightly more than 2,000.

When you look at annual provincial and federal tax revenues generated by the ball club, these revenues now are $23 million provincially and $20 million federally. These would increase to $41 million provincially and $36 million federally. It's clear to me that the single biggest beneficiary from the Expos is government.

The next slide is also an important one. It relates to the point I made originally. In discussions I had certainly initially with the Ministry of Finance— I've also had these discussions in the past. It's very easy to say that a ball club is essentially neutral to the economy in that if the money spent on the Expos was not spent there, it would be spent somewhere else. It's thus neutral to the economy.

But as I think I mentioned to you earlier—and this is outlined here—there are two primary reasons, from an economic perspective that is easily quantifiable, that make this not so.

One, as I described to you before, being an equal partner in baseball, sharing equally in television revenues, with this system of equalization—and more than 50% of our revenues are derived from the United States—if we're not here, in Montreal, these revenues are not coming in to the city.

Second, we took the time—again, we knew it was important and we knew it was going to be an issue, although we do this pretty well every year, in any case—to monitor our fans at Olympic Stadium. I can tell you, last year 11% of our fans came from outside the province of Quebec. For two-thirds of these fans, the principal reason for their visit to Montreal was to see a ball game. There are some, sure, coming from Ottawa or coming from Plattsburg or coming from Burlington, who come up for a game, buy a ticket, buy a beer, buy a couple of hot dogs, and go back. You're right. But a good number of fans as well—and that's also quantifiable—will spend a night, and spend two nights, and spend three nights. Some will spend up to ten days in our province visiting as a result.

The incentive to get them there was essentially baseball. That has a value. That's what we've indicated there as well. In terms of tourist expenditures—and I think we're pretty conservative in our numbers—last year that would have represented over $22 million, and in the new ballpark I think it would be in the area of $36 million.

Some of these things are not totally quantifiable. The number of Quebeckers, for example, who, out of a love for baseball, will leave Montreal and go to Boston or Toronto to watch a game can't be quantified.

Perhaps some of you last year happened to have had the good fortune to be in Toronto when Montreal played the Blue Jays over three or four days during the Canada Day week. I was there. I lived it. I saw Jeff Juden pitching against Roger Clemens in a classic ball game. We won, which I was happy about, but it was tremendous; the Skydome was filled. Half the Skydome was cheering for the Expos and half the Skydome was cheering for the Blue Jays. It was really quite incredible.

As we talked to people around the concourses and what not, I became convinced that 10,000 of the 40,000 people there came from Montreal. They were down there to cheer the Expos. They were doing that out of a love of baseball.

• 0945

You can't quantify that from an economic perspective. You're not going to put numbers on that, but it's a fact. That's exactly what would happen. That's also part of the economic equation that, to me, you can't measure, but believe me, it's there. You just have to go to a ballpark and see where people come from to see that this is exactly what's happening.

The third element we took the time to assess was the aspect of construction. If we build a ballpark, there's an economic benefit, obviously. If we don't build it, then basically that benefit isn't there.

Building the ballpark itself over a period of three years will create almost 3,800 jobs. It will provide revenues to the province of Quebec in the order of $37 million and to Revenue Canada in the order of $22 million. It will also have an impact on our gross domestic product of just about $180 million.

We then went into an area that is probably a little more difficult to quantify, yet it's probably just as important as the economic impact. We did urban studies. We asked a very reputable firm, the Institut national de recherche scientifique, which is in Montreal, to conduct major studies for us. Of course, the Montreal Board of Trade proceeded to do its own studies as well.

The board of trade had their committees on urban development, housing, and tourism conduct their own independent studies. Each committee of the board of trade studied the proposal of a downtown ballpark from its own particular point of view. They evaluated the project in terms of its impact on greater Montreal's urban fabric and the tourism industry. Together, they struck a joint committee that met several times over several months.

I can tell you that the board of trade committee's recommendations offer full support for the Expos project for the following reasons. The Expos' departure would be costly to Montreal's reputation and would harm both its socio-economic climate and the quality of its tourism products. Moving the Expos to the downtown core would not harm the Olympic Stadium in their estimation and also in the estimation, by the way, of the Olympic Installations Board. In fact, it might be beneficial to it by providing more revenue for them.

They concluded that the Expos generate spinoffs for Montreal. Moving the Expos to a new downtown stadium would promote the integration of tourism products related to Montreal's heritage and cultural, sporting, and entertainment events located near the Old Port, Old Montreal, Lachine Canal, as well as cultural sites, such as Place des Arts.

The creation of a new sports access in downtown Montreal, incorporating the Molson Centre and the proposed ballpark, would promote the revitalization and urban redevelopment of the downtown core in partnership with the expansion of the Montreal Convention Centre, the development of the Cité internationale, and l'École de technologie supérieure, the redevelopment of the Faubourg des Récollets, and the work carried out along the Lachine Canal as part of what Montreal is calling its blue and green plan.

The National Institute of Scientific Research, the NISR, also did a major study for us. Again, if it's the wish of this committee, I'll make this study available, because it's a very good study. Their objective was to study the sociocultural impact of a new ballpark for the Expos in Montreal. It's a very good study. They identified the issues surrounding the debate on stadia. They studied urban tourism and professional sports in Montreal in terms of its impact on our cultural identity. They studied, of course, the southwest sector of Montreal, which is where we want to place this ballpark.

I can't do justice in a few words to this report, but as they were reviewing the literature and the debate, they came to the conclusion that the debate on stadia and professional sport is dominated by a handful of American university researchers who are convinced that public investment in new urban stadia is not profitable.

• 0950

We know them; there are five of them: Robert A. Baade, Roger Knoll, Benjamin Okner, James Quirk, and Mark S. Rosentraup. These are the five who are continuously projecting studies that they do, or their opinions. They're essentially picked up by any number of economists internationally.

But NISR considers their arguments very incomplete because their arguments are based essentially on direct economic benefits generated by a stadium in terms of employment, revenues, and immediate benefits. There are many indirect benefits, be it in areas of tourism or retail establishments. It could be something as simple as the increase in property values for a municipality when you generate growth in an area that was not producing significant tax revenue. Those are quantifiable numbers, in my estimation.

I'll read you a quote by Mark Rosentraup, who is a critic of public involvement in facilities:

In a society that places such an extraordinary value on sports, what is the cost to cities without major league sports franchises? Does the city without a team become a second-, third-, or fourth-tier community?

Any community or city in our society that is striving to become a major centre must also establish and maintain its sports identity. Cities establish identities through teams and their facilities. We know that factors such as costs, infrastructure, transportation, energy, and education drive locational choices that people will make in selecting cities where they want to live. We also know that when company executives select places to locate their firms, they want a high quality of life for their employees and themselves.

The absence of museums, an orchestra, or fine education facilities can retard economic development because people want to live in areas that have these attributes. People also want access to sporting events, and they want sports to be an important part of their lives. A city needs sports to establish itself as a prime location for development as a player in North American society.

[Translation]

The NISR reached a number of conclusions in its study. For example, the Expos' new downtown ball park will become an important development axis and will further the expansion of the downtown core of Montreal. It will contribute to the socio-economic revitalization of the old manufacturing area known as Griffintown by encouraging the creation of new businesses. The park is expected to become a major gathering place. The new park will make a contribution to the quality of life of citizens and will have a festive character distinguishing Montreal on the international tourist scene.

A new park will also enhance the image of Montreal and help it remain one of North America's leading cities. The presence of a downtown stadium also has a social and cultural impact that cannot be quantified with the classic economic and financial parameters. Figures cannot be put on qualitative elements such as civic virtues, symbolism, collective pride, contribution to the quality of local life, power of attraction, international image and many other indirect benefits.

The NISR clearly states that it does not agree with the claim that the departure of the Nordiques did not mean any loss for Quebec City or the acquisition of the Avalanche mean any benefit for Denver. That is not acceptable.

Visibility is the last factor we examined and although it is not often considered quantifiable, we've attempted to indicate some figures. What value does the existence of an international North American club represent for the city of Montreal as far as the presence of the media is concerned? I was surprised, but not overly surprised, to note that a club in Montreal results in the city being mentioned over one billion times in North America. Montreal gains reputation as a baseball city.

• 0955

There are 10,000 radio stations, 1,800 newspapers and thousands of television stations and everyday they talk about sports, all of this having a definite impact. There are some people who claim that this doesn't amount to anything, that it doesn't result in any sales.

You know that in advertising the first thing you have to do is create an impression. In advertising it's often said that 50% of the advertising material goes to waste, but the important thing to know is which 50%. The more a city is mentioned, the more credible it becomes. It's part of a certain mind set being created in North America.

The best example I can give you is when Tiger Woods came to visit Montreal for the first time last year. He was asked whether he knew the city. He gave a little smile and said that the Canadians were the Montreal team, along with the Expos, and that it was very cold in the winter. That is what he knew about Montreal. That is the sort a thing known by a famous athlete. That's the reality. Whether we like it or not, in North America our image depends on sports.

All this information was very revealing to me. It is true that if we want to settle our problems once and for all, the proper business decision would probably be to sell the club. But as partners we are willing to take a risk and stay in Montreal. We want to stay in Montreal, we must stay in Montreal, provided certain conditions are met, of course.

We've made our choice in favour of the new ball park in downtown Montreal. It's $250 million project and I'm convinced, and I hope I'll make you think about this, that the future of major baseball in Montreal depends on the construction of a new ball park downtown.

We have concluded we can field a winning ball club and be in reasonable financial health if a new open air, natural grass, 35,000 seat ball park is constructed in downtown Montreal.

Funding for the new ball park must take the form of a partnership among all sectors of the community. First of all, we took the business community at its word. It is willing to support the club in its relocation. The business community is being asked to contribute the first $100 million through the purchase of seat licences.

Our objective is to sell 18,000 seat licences to the Montreal business community. These licences range in price from $500 to $10,000. Our message is a simple one. If a small company wants to support the club and become a founding member, we're asking for eight payments of $63 over four years. My message to the business community is very clear and I don't think there are many companies that cannot afford this cost.

As far as the larger companies are concerned, we are trying to sell seat licences for $10,000. This is how we are trying to raise the first $100 million we'll need for construction. The remaining $150 million requires the involvement of governments in a form yet to be determined.

The existing ownership of the Expos will commit the team to Montreal for the next 25 years. I can tell you that this particular asset will not have a very large yield.

Given the existing financial situation, I think that we must make an attempt to come up with solutions to keep the club in Montreal as was the case in 1991, and we're desperately trying to find such solutions.

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We are prepared to take the risk and, as I mentioned, to commit the team to Montreal for the next 25 years but not at any price. The ball club, it is clear, cannot assume any debt service on the new ball park and that is something that we have maintained since the beginning. We've been trying to get this message across for a year. Nor can we be burdened by excessive property taxes in Montreal.

You are aware of the fact that the Expos are at a distinct disadvantage in relation to the American club. I think you heard testimony to this effect during the National League's appearance. I do not need to overemphasize this point but there is no doubt that as a club we are not able to compete with publicly financed ball parks. I can tell you that since 1989, 80% of the ball parks that were built, or rather all ball parks that were built were 80% publicly funded.

As far as property taxes and consumption taxes are concerned, we are not able to compete either. Because of the QST and the GTS, there is a 10 to 12% gap with the average for American cities. In some cases, there are no such taxes in the U.S., and there is also the exchange rate differential.

Although we have not defined the exact type of assistance we would require, it is clear to us that we must come up with solutions that are acceptable to government, taxpayers and the Expos. There are examples of such solutions in North America. There is no reason why we should be unable to find one if we put our mind to it. We also realize that in our present economic and financial situation, direct subsidies are probably not acceptable. This is something we can accept quite well but there are other solutions. I think that we must take the time to reflect on this calmly and in depth.

Thank you, Mr. Chairman.

[English]

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

I want to say to you that even though our committee's responsibility is to listen and learn the linkage of sport and job creation at the amateur level and the professional level in all sport in this country, all of us on this committee and many members of Parliament have strong views that we should explore every opportunity to look at economic revitalization in Montreal, because we're all aware, as national members of Parliament, what the city has experienced in the last few years. Thank you very much for your presentation.

Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay (Rimouski—Mitis, BQ): Mr. Brochu, I'd like to thank you for the documents you provided as well as for your presentation. Although it may be a surprise to some, having been brought up next to the Royals' stadium, I'm quite familiar with baseball. We could hear the crowd's roar from our balcony when we didn't go to the game.

I found your presentation very interesting. Unfortunately there are lots of tables that we'll have to analyze in detail since we only received the documents this morning. As I listened to you, a thought came to my mind that I would like to share before asking you a question. It seemed to me that you were in the same situation as our governments, that is always in deficit. When governments are in deficit year after year, they go looking for money in the pockets of taxpayers to make up the difference. But the one thing they forget is to control expenditures.

I'd like to refer you to one of the tables you've given us, unfortunately since the pages are not numbered I'll have to describe it to you. It's the one with the pretty dark green and light green colours giving the impression of being in a forest and a state of profound hope. It's the table where you indicate that your income will be increasing.

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You claim that there will be a considerable increase in your revenues by the year 2002. Salaries already doubled between 1990 and 1993 and they will double once again by the year 2002. Four years from now, salaries will be twice as much as they are now.

If we were able to announce to the people in Canada and Quebec that their measly incomes, their income security, their welfare benefits or unemployment insurance benefits, or the average wages of those living under the poverty threshold will double four years from now, I think people would be pleased. But we are not able to make this kind of projection. I'm rather disturbed to see that such hope can be maintained in a business that is unable to control its spending.

What are you waiting for to control and place a ceiling on players' salaries? You claim that you have no choice and that salaries will be doubling in four years. I don't see how you can come and tell us that the average baseball salary is now $1,179,000 U.S. and that it will be $2.2 million in four years and at the same time ask us for help with a straight face.

Mr. Claude Brochu: Ms. Tremblay, I can tell you that I'm quite serious, the situation isn't at all funny. I can tell you that our club will never be in a position to afford stars at outrageous prices. But basically sports is a part of show business and this is a situation we cannot control.

At the end of the 1980s an umpire claimed that the owners were attempting to control players' salaries. A judgment held that there was collusion and a $300 million fine was imposed on us. The market is considered to be a free one and it is supposed be able to evolve accordingly.

If that is the only thing we look at, then of course it can appear to be shocking. It is shocking to me. I can't understand it and it's frustrating. But we cannot dwell on this single aspect. Yes, it is something I deplore and that I dislike but what is the other side the story?

Basically, if revenues increase, salaries increase but salaries will not increase without an increase in revenue. Whenever there is an increase, everyone wants his share; if there's more revenue, there are more jobs, and more tax revenue for governments. The more revenue there is, the greater the impact.

I concede that there is a negative element I dislike but on the other side, if we are successful, we can increase or even double the number of jobs as well as the amount of tax revenue. So there are definite advantages. We must remember that the income earned by sports professionals in Canada is taxed at 40% and this is a significant amount.

I think that we have to understand the equation in all this debate. In my view, it's a business decision. We have to take the time to look at the benefits and the costs and determine whether the equation is positive or negative. If we study the matter in depth, if we understand the situation and conclude that it is a negative equation, then we refuse. If we take into account the economic and social aspects and still consider that it is a negative equation, then we simply decide that we are not going to go along with this project and the team can move. There is no problem, we can manage quite well.

But I think that is not the case. The more I study this issue, the more I realize that there are absolutely extraordinary benefits.

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Yes, I can understand it's hard to swallow, particularly when we talk about players' salaries. But as I attempted to explain, this is something that we cannot control in Montreal. We are responsible, although we are often criticized as being cheap by the media. We do not pay huge amounts of money and we've always refused to do so. I'm often strongly criticized because of this. We'll continue to live within our means. I'm still convinced that what we're trying to do is very beneficial for the population at large.

Ms. Suzanne Tremblay: During the time the Expos have been in Montreal, you can't say that taxpayers have not helped keep the team. You know as well as I do that when the Olympic stadium was being built, the Expos wanted a roof because there were too many games that had to be postponed because of cold or snow sometimes in April. Then we were asked to bring the bleachers closer, to set up a giant screen and also to come to an agreement about the lease you were paying to the RIO. In addition, people who buy boxes or tickets can claim 50% tax deductions, that were previously at the level of 80%. All this amounts to something.

The cost of a new ball park is assessed at $250 million. Does this amount include infrastructure, water, sewage, road access, landscaping of the grounds and connection with public transport, if necessary? Will we be required to build you a metro station and to add all these expenses on to the $250 million?

Mr. Claude Brochu: You've asked me several questions and I'll attempt to answer them.

First of all, when the franchise was granted to Montreal in 1968, the mayor at the time, Jean Drapeau, promised that there would be a stadium for baseball. This did not work out and we found ourselves in Jarry Park, which was really a minor league park adapted for the Expos.

Ms. Suzanne Tremblay: It's very convenient with 30,000 people.

Mr. Claude Brochu: Yes, that is true. But that is part of the good old days. We can remember Jarry Park in the month of July when the weather was great and the sun was shining but we forget what it was like in April and the end of September when we were freezing our buns off. Then it wasn't so much fun but we forget about that.

I can also add that with respect to the Olympic Stadium, there were no broad consultations with the baseball club. That was before my time, but I can tell you that that stadium was not built for baseball, and our supporters are telling us that today. Bear in mind that while our relations with the Régie des installations olympiques are very good today, they have been quite strained. The Régie has its own culture, it is more bureaucratic. So it is a bit diffirent. The Régie was focussed on shows and exhibitions, where we were focussed on baseball.

I agree that some investments were made. But in many cases, it was easy to blame the club. It is easy to say that this or that has been done for the club, that a screen was put up for us and that the seats were brought forward, but I can assure you that the Régie benefitted from that and was able to afford all kinds of structural changes to accommodate shows and exhibitions.

If a single pole is put up to display or hook up an electronic score board and then behind it all kinds of exhibit rooms are set up and the score board, with all of these new constraints, ends up costing five or six times more than it would have cost if a simple board had been put up, we should not be held responsible. If the field is moved up to make things better for spectators and the Régie decides to install all of the electrical and water hook-ups for the kiosks during the fairs or whatever, we are not responsible.

With respect to the good lease that you talked about, I feel we pay our share.

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Although the Régie will not acknowledge it, I consider that when it collects $10 for each parking space and sells 4,000 during a baseball game, that $40,000 represents a form of rent. If the baseball game had not taken place, the Régie would not have that revenue. And inasmuch as other stadiums throughout North America would turn those revenues over to the clubs, I consider that a form of rent. If we look at all of those things, including capitalization expenses that we pay for the food concessions, everything that is set up for events not linked to baseball and all revenues that are collected and returned to the Régie, I think we do our share.

We do not think that much will have to be done in terms of infrastructure in building the new stadium. Investments may be required to improve the sewer system because we have been told that the sewer system in lower town is old and outdated. It is clear that the increased flow due to the arrival of 37,000 people at the stadium will require some adjustments, but with respect to access to the Bonaventure and Ville-Marie highways, I don't think much needs to be done.

I don't think it will be necessary to extend the metro line, because baseball is a summer sport. The weather is generally good and hot. We want people to be outdoors. They will leave the metro at the Molson Centre or elsewhere and will be able to go down Peel Street to come and watch a game. I do not foresee there being any major infrastructure costs.

I think I have answered all of your questions.

Ms. Suzanne Tremblay: Yes, I will have more later.

The Chairman: Thank you. Mr. Coderre.

Mr. Denis Coderre (Bourassa, Lib.): Thank you, Mr. Brochu. In Montreal, the only major infrastructure program currently underway is the work being done on Ville-Marie highway, as we have seen this morning. So there's a serious problem. We must not close the door on new investments and oppose a professional franchise revitalizing Montreal.

I feel that since Montreal is floundering, we cannot afford to lose the Montreal Expos, like we cannot afford to lose the Montreal Canadians or any other professional franchise. That's the first thing.

Secondly, I would like to say that it is true that salaries are exorbitant, but as a baseball fan, I have also noted that there is not necessarily a direct link between a high payroll and the number of wins. Just because a club has a payroll of $70 million does not necessarily mean that it will win the World Series. We all clearly remember that in 1994, if there had not been a strike, with the low payroll that the Expos had, they could have won the World Series. I'm convinced of that.

Now, I would like to go directly to the Expos revenues. And I asked Mr. Corey the same question last week. I asked him if, inasmuch as they were in agreement to set up a partnership— I'm personally open to that. I'm against any direct subsidies, but I am open to the setting up of a partnership. Contrary to the Bloc Québécois that thinks that no direct or indirect assistance should be provided, I think that a professional franchise has an impact, protects jobs, creates other jobs and brings in additional revenues to the government that can be used to pay for social programs and our health care system.

Are you prepared to open your books to the government so that expenses and revenues can be examined, with a view to setting up the best partnership possible that is fully transparent?

Mr. Claude Brochu: To answer your question directly, yes. You know that we are a private corporation, and I have always tried to avoid revealing the figures out of fear that we will subsequently end up with a problem, or in a discussion that leads nowhere.

That happens often. I experienced it in the past, during the consultations, mainly in the United States, with the players' union and some economists to determine what should be done for baseball. If the numbers don't suit someone, they are subsequently rejected.

Having said that, I'm absolutely prepared to share these numbers with you and to discuss our financial statements in detail. There is no doubt about that.

• 1020

Mr. Denis Coderre: There has also been a lot of talk about a fiscal pact. Some say that indirect means must be found, because taxes are too high. We could talk about tax points or all kinds of other things. How do you foresee potential negotiations with the federal government?

I know that the site where you want to build the new stadium belongs to Canada Land, so to the Canadian government, and that it is worth $16 million dollars. There is also the whole issue of taxes. A sport like horseracing, for example, is exempt from the GST. Would that be an option? Basically, it seems to me that the Expos, a major league baseball team, play a sport that is readily accessible. It can't be said that the tickets are too expensive. It's a family sport.

You have also clearly shown us, using studies that have been conducted, that 60% of the team's revenues come from the United States and that is new money injected into the city of Montreal.

So what tax measures do you foresee negotiating?

Mr. Claude Brochu: Mr. Coderre, you have asked me a rather difficult question. I admit that in all honesty it seems to me that you are in a better position than I am to say what should be done, and what solution we should move towards. Up until now, we have assessed everything that is being done elsewhere. It is clear that something could be done with respect to the land on which we currently have an option.

In Montreal, we are not just planning to build a baseball stadium. We want the stadium to be part of a larger entertainment area, or entertainment complex. When we look at what's going on in the United States, we see that this sort of structure is undergoing important changes. Stadiums are becoming part of a complex, a gathering place that provides atmosphere, offers music and entertainment and sometimes games. I don't mean something like La Ronde, that's not what I have in mind. What I envisage is a complex that will attract people to the neighbourhood, will provide enjoyment and entertainment, and encourage them to spend money there. The complex development will go forward at the same time as the stadium.

In answer to your question, partnerships could be envisaged in that context. To my mind, the entertainment complex part should be even more profitable than the stadium itself, but it will be part of the project as a whole.

Now we have to find the means to do this. I'm not taking any position, nor am I making suggestions to you. Last year, in Jupiter, Florida, we built a new stadium, a new complex for the spring training camp and for two of our minor-league clubs. Would you like to know how that was funded? Ninety-eight percent of the project was funded by the county. The federal system in the U.S. makes it possible to issue bonds on which the interest is non- taxable. They are infrastructure programs, if you will. So the U.S. government allowed the county to issue bonds in the amount of $29 million U.S., on which the interest is non-taxable.

This is done in the U.S. for roads, schools and culture. On the local level, it promotes the construction of infrastructure. Then, you can ask yourself how you will be paying off the debt. Since people there knew that taxpayers wouldn't want to pay for the project, they thought about what assets their county had. They realized their major asset was tourism, and came up with the notion of adding a one dollar tax per night to the stay of each tourist in Palm Beach County. So 1% of every tourist hotel bill is earmarked for the project. We were competing with a conference centre and a congress centre, but they chose us, us and our stadium.

So there we have a sports project financed largely by the county, using a hotel tax. In Candem Yards, they are still using those tax-exempt municipal bonds, as well as $20 million of lottery revenue annually.

• 1025

They have established the Maryland Sports Authority, and with the $20 million that come in each year from the lottery, they have built Candem Yards, the conference centre, and a new stadium for the Ravens, their NFL team.

Mr. Denis Coderre: So we could establish that sort of partnership, since lotteries are under provincial jurisdiction, as you know. For example, we could establish a partnership with the province of Quebec, and work with the city of Montreal and the federal government to find the sort of package that could provide financing for the stadium.

A direct contribution is a donation, so let's talk about a loan here. We seem to be saying that providing a loan is not necessarily profitable for a government, since in any case your profits will go solely to paying players' salaries. If the federal government were to approve a loan for you, could you guarantee that stadium revenue and profits from Montreal Expo activities would not just go towards players' salaries, but also be used to reimburse the federal government loan as quickly as possible?

Mr. Claude Brochu: Insofar as we will be able to reimburse the loan, that of course is what we shall do. We will try to manage it as we always have, that is, by taking the responsible approach. If we have obligations, we will have to do our best to fulfill them.

As you saw on one of the tables, if we go by the industry average—though we don't necessarily always do that—a specific percentage goes towards players' salaries. However, though this may be very frustrating sometimes, the very fact of having a competitive club can in itself become an economic generator. Having a competitive club, one that attracts people and satisfies them emotionally, generates more goodwill, more customers, and more revenue. It is therefore better for the government. However, we do have a short-term responsibility. In the short term, we must be responsible for fulfilling our obligations. And we have to think about what that represents in a more macro-economic context.

Mr. Denis Coderre: Mr. Chairman, in conclusion, I'll take this opportunity to announce that I will be in Washington in early June to meet with the U.S. government representatives and discuss the very issue of antitrust legislation. In my view, though we have to find our own solutions to help Canadian hockey clubs and the Montreal Expos, we still have to talk to our U.S. colleagues. The issue of salary capping affects us as well. If we could have some influence on antitrust legislation, that could solve quite a few problems.

Insofar as we could have some influence on antitrust legislation, do you think changes there would settle the salary capping problem?

Mr. Claude Brochu: I don't know, because I'm not an expert on antitrust legislation. It has had an enormous impact in the United States, and I'm therefore interested in it. U.S. antitrust legislation is making it possible for us to develop as a sport, as we are doing now. It makes it possible for us to have our drafting system, and to control all aspects of our subsidiaries. If we didn't have antitrust legislation in the United States, we could not do what we do.

That said, the issue fully merits consideration and discussion. We have established a sort of salary cap: we've made a start, where the five clubs with the highest payrolls have to pay incredibly high taxes. We tried to establish a type of salary cap, and found ourselves in the middle of a devastating strike that badly hurt the industry and frustrated fans throughout North America.

I think hockey clubs that would have liked to do the same thing as well, also had problems. They were not able to go ahead with it.

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I don't know what we'll use to establish a salary cap, where we can fit it in between federal labour legislation and antitrust legislation. I don't know how we will settle the issue.

[English]

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

We now move to Mr. Riis.

Mr. Nelson Riis (Kamloops, NDP): Thank you, Mr. Chairman.

Mr. Brochu, your presentation this morning was excellent. You shocked us when you said the Expos may be forced to move and we must find a solution. I couldn't agree with you more, and I'm sure all my colleagues here feel exactly the same way. We have to find some solutions.

You mentioned in your presentation the sports infrastucture that's necessary these days, and I think we can say this is an ongoing crisis in communities across the country at the amateur level and the professional level: the necessity of getting a new, appropriate sports infrastructure in place. You mentioned that you have assessed what's being done elsewhere. You've laid out some of the options that others are considering or using.

We're looking at a set of millennium projects. What would you think about a millennium project for the country, in cooperation with perhaps the provinces, where we would be able to set up a number of sports bonds that would be either tax free or at least modestly taxed? This would enable all the Canadians who want to see sports infrastructure put into place to buy, rather than a particular mutual fund or any of the thousands of other investment options, a sports bond to ensure that sports infrastructure is built across the country. Wouldn't this be one way for you to come up with the $150 million for your stadium?

Mr. Claude Brochu: Obviously to me that's a tremendous idea. The details and the costs would certainly have to be established by the competent authority. I've been asked that question many times: what do they do in the United States? The tax-exempt municipal bond concept, which is a little bit of what you're referring to, seems to be very good, because it forces local initiative—municipal, county, and state—and results in infrastructure being built.

Mr. Nelson Riis: Are you aware that the province of Alberta is looking into this as an option for their province?

Mr. Claude Brochu: No, I'm not, but it's a very smart way of looking at things. Obviously I don't have at hand the details, but it has to be a very positive step, in my estimation. Again, if we look at the equation, somehow the benefits have to significantly outweigh what that differential would be of a non-tax status of interest.

Mr. Nelson Riis: Thank you.

You mentioned the stadium would be used for a variety of purposes as well as baseball. When you think of the legacy we could leave to future generations in terms of athletic and sports infrastructure across the country, it would be a great millennium project.

Mr. Claude Brochu: You're absolutely right. As I look at this thing—

We can always look at what we're trying to do with the economics and with the numbers, and it's very important that we do that, but we have to sometimes dream a little bit. When I look at Montreal, it's a city I love, and the idea of having a stadium just down below Peel Street on a summer night when the lights are on— The whole city will know we are there and the whole city will hear when we hit a home run. You'll be on Sainte-Catherine Street or you'll be on Sherbrooke Street— It's going to be a source of light. It's going to be alive.

When you talk to people and urban developers in Montreal, they're saying the access of development in Montreal for the next 10 or 15 years has to be south on Peel Street towards the Lachine Canal and the old port. That's where Montreal should build itself, and we'd give it the kick-start. We have to sometimes just try to visualize what we're trying to do and dream a little bit.

This would just be dynamite for Montreal. That's why I'm so enthusiastic about this project.

Mr. Nelson Riis: Claude, I'll make a statement and then ask a question that is a little dicey, quite frankly, but it has to be asked.

First of all, I have a comment about federal and provincial support. I suppose one could make the case as well that when you're out selling your 18,000 corporate sponsorships for seats or season's tickets and so on, considering the tax exemption nature attached to that, that is in fact a way the governments encourage corporations to participate in the development of sports infrastructure.

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I think one could— well, I don't want to get into that area because it's a little dicey, but I think the amount of business that's transacted necessarily during that game, whether it be hockey or whatever, is somewhat questionable, but we'll set that aside. That's just a reality, and we'll deal with that in another fashion.

You're out there raising funds, developing support, and you mentioned there are many things that aren't quantifiable at this point. With all due respect for my colleagues here on my right, a lot of things could happen in Quebec in the next few months, or in a year or two, to coincide exactly with what you are doing—raising funds and a lot of money from the business sector to make this possible.

I'm not sure you could even comment on this. You probably don't want to and probably even shouldn't. But it is a factor, is it not? I mean, with a provincial election coming up and with the possibilities of what could happen after that, this must cause you some worry in terms of fund-raising in the private sector.

Mr. Claude Brochu: As I've gone through the business community right now—and again, I didn't mention it during my presentation—we were able to get the Chamber of Commerce, the Board of Trade of Metropolitan Montreal, Montreal International, and the Greater Montreal Convention and Tourism Bureau to back us. They support the project.

We went out and got three blue-chip leaders in Montreal to back us. We've since created about 20 subcommittees, by sector of activity, with high-profile business people, and they are all behind us. They're forming committees. We're probably going to have 200 to 300 senior business people in Montreal behind us, trying to help us raise this $300 million.

In my estimation, it's probably the greatest— it's the biggest mobilization of the business community in Montreal that has been undertaken. Every single one of them, in my estimation, is doing it because this is vital to Montreal, and they're saying, “We cannot lose our ball club under any circumstances. We have to do this.” So they're doing it, again, out of a civic form of commitment.

It's a fascinating thing. It represents probably the element, because if you look south on Peel Street in Montreal, you don't see any cranes. There's nothing going on there. This is an opportunity for us to see them again on our skyline.

Interesting thing—Jean-Marc Léger, who does a lot of research for us, from the firm Léger & Léger in Montreal, said to me last week, “I'm trying to tell people this. I'm trying to tell our politicians this in Quebec.” He said that he feels the project in Montreal, because of the symbolism it represents, if we get this thing done, will on its own help Montreal turn the corner and move in the right direction.

He said if we don't do it, we're going to have to live in Montreal for the next 20 years with the reputation, justified or otherwise, that we are a city in decline. He said this is the single most important project now that this city is looking at, and its symbolism goes far beyond just a simple stadium. He said, “I'm trying to tell people in Quebec that. They have to understand this.”

I think that reflects a little bit of what you're saying. This is absolutely vital, but I think it's really, in a lot of ways, a win-win for everybody. It's kind of an apolitical thing, in my estimation.

Mr. Nelson Riis: I agree. I agree it is apolitical. Perhaps it's the kind of project that is most needed of all right at this point, for all sorts of reasons.

Mr. Claude Brochu: Yes.

Mr. Nelson Riis: You mentioned, interestingly, Claude, that you're building a topless building, or not a topless, but a—what do you call it?—a roofless stadium.

This seems to be going against the trend. In our northern climates, in our northern cities, we've always felt that building a roofed stadium was preferable. Obviously a great deal of thought has been put into this. This is not going to be a problem, having a roofless stadium in downtown Montreal?

Mr. Claude Brochu: It's not going to be a stadium with a retractable roof. We're looking to see if we can put up a light structure that would simply be—we're calling it an umbrella at this point. If it's going to rain, we would like to be able to have a structure in place that would allow us to simply pull a skin over and allow us to do the game.

We want to also be able to guarantee, if we can do it, I don't know, 10 or 15 open-air concerts that would take place over the course of a summer. We are planning on something, but obviously it can't be a roof.

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Mr. Nelson Riis:

[Editor's Note: Inaudible]

Mr. Claude Brochu: That's right. It's not something that could support snow and things of that nature. That would be out of the question.

We're also looking at something that will be a little bit distinctive. We're going to see if we can heat our seats from the floor; whether we can set up a system—and it won't necessarily be that expensive—that would heat to a level of two and one-half to three feet that would allow us to be comfortable. We wouldn't be in golf shirts in April, but if it's bitterly cold our fans could somehow be comfortable. We're very conscious of that because Montreal in April can be a little tough on baseball.

Mr. Nelson Riis: The salary levels of the Expos are quite shocking in terms of how low they are and how well the Expos do. Presumably people come out to games to watch stars. Can you tell us the linkage between the new stadium and the additional revenues and so on occurring as a result of that, and the likelihood of being able to afford more pricey players?

Mr. Claude Brochu: We will never ever be part of that group of clubs that plays the free agent market. In our estimation it's a bad investment and it's too risky. We're not sure it produces the way it should.

We believe fundamentally in scouting and development. While it costs about $4 million for an average club to produce one player from its minor league system for the major leagues, we tend to do it at almost half the price. We're one of the top three organizations in all of baseball, in terms of number of players we've produced and drafted who are now in the major leagues.

We do it very efficiently. I still prefer to pay, even if it's $3 million a year, to produce a young player for the major league club than go out on the free agent market and risk $8 million, $9 million or $10 million on a player. Our objective will always be to scout and develop our players, but hang onto the players we develop. These are players our fans have become used to. These are this year's players—the Brad Fullmers, the Vasquezes, the Hermansons, and the Guerreros.

The young team we have this year reminds me a great deal of the great club we had that was just beginning in 1976. We had the Carters and the Cromarties and the Dawsons and the Valentines and the Steve Rogers. This team in 1976, which was a disaster on the field, went on to become one of the greatest teams Montreal has had. We have the makings of this team now. All we want to do is keep these kids with us and bring us a championship with these kids.

The Chairman: Thank you, Mr. Riis.

Colleagues, we have a few minutes left. Mr. Wood has a couple of short questions, then we're coming back to you and Mr. Brien and Madam Tremblay.

Before we do that, I want to pick up, Mr. Brochu, on one of the comments you made about the corporate participation, that you're pulling together over 200 business leaders from your community. Presumably many of those men and women would be part of national corporations that are resident in Quebec.

About two months ago we had the head of CBC Network Sports before our committee, Mr. Alan Clark. It was obvious to us that CBC television really only focused on the Toronto Blue Jays and didn't have much play for the Expos. It seems to me, and you mentioned in your remarks earlier, you do not generate a lot of income from your radio and television packages because presumably it's more regional presentation rather than national.

Why doesn't the Canadian Broadcasting Corporation sports system play more of the Expos games from coast to coast?

Mr. Claude Brochu: It's a very good question, Mr. Chairman. You're absolutely right that we have been effectively regionalized to Quebec. There are some games on TSN, but it's not a full schedule. It's a hard thing to understand, but the reason I'm given basically is that CBC feels they can't sell Expos baseball.

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We have to realize that to have an English-language network in Canada, you absolutely have to have southern Ontario. We've gotten permission from major league baseball—as a matter of fact we pay an amount to the Toronto Blue Jays every year for the rights to be able to broadcast into the southern Ontario region, because it's technically their territory.

But you can't have a network in Canada without southern Ontario. CBC English language is located in Toronto, effectively. That tends to become their total orientation. I can tell you—this is old research, unfortunately, and maybe I should take the time to conduct more recent research, or do research now—but I did research on that about ten years ago and I found that throughout Canada, in every single major market, with the exception of Toronto, the Expos were as popular as the Blue Jays.

We're lucky enough in Canada to have two teams, but they're in different leagues. I think almost every fan will have a favourite team in the national league and a favourite team in the American league. I think there is room for both of us across Canada. I think it's unfortunate that Canadians don't get the benefit of seeing teams—I think in all sports—nationally. It doesn't matter if it's the Edmonton Oilers or the Toronto Maple Leafs, or whatever.

Essentially, they say you can't sell the Expos. I can't debate that. I don't agree with it.

The Chairman: Maybe it would be useful if you could bring your research up to date in terms of Montreal Expos' popularity across Canada. If that is the case, then we'd be happy to pass it on to the CBC sports group.

Mr. Claude Brochu: Thank you very much.

The Chairman: Mr. Wood.

Mr. Bob Wood (Nipissing, Lib.): Thank you, Mr. Chairman.

Mr. Brochu, to pick up maybe on what the chairman was saying and what you said in your opening remarks about Montreal being a hockey town and baseball obviously taking second place, I'm coming at this from maybe a slightly different angle, to try to revitalize the sport and to obviously get more people into Olympic Stadium. I think right now you're averaging 10,000 or 12,000 a game. You talked about the series between the Toronto Blue Jays and the Expos. Do you think the realignment that is projected will help the Expos in getting a little bit more interest in the game? Right now, everybody has been playing in the same division for years. Do you think that is going to help your cause in getting more people out and revitalizing it and being able to project some of the figures you hope to achieve in a new stadium?

Mr. Claude Brochu: It's an interesting point. As you may be aware, about a year ago major league baseball proposed what was being called radical realignment. The Expos would have been moved to the American league with Toronto in the eastern division, with the Yankees, Boston, and Baltimore. That would have been kind of interesting because there would be natural rivalries, which is always what you're looking for in a game—especially with Toronto, Boston, and the Yankees.

I think, yes, it would be interesting. It would be worth studying and looking at.

That being said, the problems we have with Olympic Stadium are an issue of venue. In other words, fans are unhappy with Olympic Stadium as such. They don't like the roof on it in summer. Our summers are too short; we want to be outside. Baseball is outdoors. It's cavernous. It's too big. There is nothing around there that we can do.

There are a million reasons why people don't want to go there. I guess our problem is essentially a stadium problem. If we stay in the National League East, if we move downtown, I still think we solve all our problems.

The Chairman: Any other questions, Mr. Wood.

Mr. Bob Wood: No, that's fine.

The Chairman: Mr. Brien and then Mr. MacKay.

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[Translation]

Mr. Pierre Brien (Témiscamingue, BQ): Mr. Brochu, I am a baseball fan, like many other people, and I have a great deal a sympathy for you. However, I find it very difficult to support the notion that public or government funds can be used to do indirectly what we do not do with them directly—invest in sports clubs. To my mind, indirect and direct assistance come to the same thing.

One aspect of the studies you have submitted troubles me a lot. You have not put things into perspective. You talk about funding from the U.S. government, tourism, and other sources, but there is one further aspect that should be considered. A considerable part of the Expos' payroll cannot be considered as capital inflow. Though 40% of the payroll may be taxed, 60% remains, and is largely spent outside Canada.

You say that investing in the Expos rather than in another sector is not neutral. But we must also take into account the fact that, when we invest in another sector, the payroll stays here. With a sports club like the Expos, however, baseball players don't spend their salaries here. In fact, they often do the opposite. Yet, those data do not appear anywhere in your study. You don't talk about the outflow of a major portion of the payroll, which itself constitutes a major portion of your expenditure. Could you comment on this, please?

Mr. Claude Brochu: When we make that assessment, we have to look at the net result of the equation. You cannot earmark revenue from certain sources to specific expenditures. You have to look at the situation as a whole.

I can do that this year. Right now, we are receiving some $25 million U.S. from the United States, while our payroll is on the order of $5 million. So a good part of that money stays in Quebec. We can't get all of it back, but we can get some of it back. That's good.

So let's look at the net result. With respect to the use of public funds, I sincerely believe that we have to make a well- founded business decision. If people start seeing this as a donation, we will have a problem. I see it differently. Perhaps I look at it from the standpoint of a business person. I tell myself that we are not talking about donations here, but rather about investment. We have to ask ourselves whether we should invest the money. Do we invest one dollar to make ten? Does it make sense? If it doesn't make sense, we don't invest. So take your revenue, take your jobs, take your business, and go elsewhere. I will accept that decision, though I do not think it's the right approach. We have to ask ourselves whether investing is the right thing to do. As a government, what sort of return on our investment are we looking for? If the return makes sense, we invest. If it doesn't make sense, we don't invest.

Mr. Pierre Brien: We cannot use this year's figures to make the comparison. This year's payroll is exceptional, and you'll see that this year's contributions are in line with it. So we cannot take this year's payroll and compare it to revenue inflow from the United States for this year. We have to use a standard year, such as the year 2002. So then your payroll will be some $30 to $40 million, if you want to be competitive. Almost 60% of that amount will be capital flowing out of the country. So this is the figure we should be putting in our equation—not $9 million, but $35 or $40 million.

The other aspect of your study I find very troubling is the 25-year guarantee. You say that you'll be staying put for 25 years. You are telling us that club payrolls will have doubled in four years. You project a payroll of I don't know exactly how much, a payroll that will be in line with current average salaries, yet payrolls will have doubled. So it is not true that you can keep your best players, as you claimed in your presentation. Nor will you be able to pay star players.

How can you guarantee that people will buy that product? There is nothing to show that we will indeed be able to keep star players, and that people will identify more with the club. We will have built an infrastructure that will generate short-term benefits, but we might end up with an empty Olympic Stadium available for fairs or shows, and a downtown stadium that may be empty as well, since we have no guarantee we can keep the club. I have a lot of trouble with this 25-year guarantee. If in ten years you're in the red, you'll be back here saying: "We built all this, and we can't just let it go now. You have to invest more."

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I have very little faith in your 25-year guarantee. It bothers me.

Mr. Claude Brochu: I'll come back to your first point, because I think it's very important. I often say that we have to assess revenue influx, be it from the United States or elsewhere, by considering the situation as a whole. We should not be looking at payroll alone. And that's why I say the equation has to be positive. Look at the inputs, regardless of whether they come from the U.S. or elsewhere, factor in everything else, and see if the result is positive. We cannot focus solely on payroll, even though it is an indirect and valid element. If 11% of the crowd comes from outside Quebec, the United States or Ontario, well—that's revenue. But if the club isn't there, we can't count that. We have to factor in everything. And we have to make sure we get all the factors, then see what our net result is.

I can tell you that we have no doubt we can have a competitive club in 2002, and 2007. In professional sports, we expect salaries to stabilize as of the year 2002, since the whole infrastructure will have been rebuilt. This is something we are pretty sure about.

As far as we are concerned, the decision isn't about whether we should be building a stadium or not. The worst mistake we could make is to build the stadium and then find out in four or five years that we were wrong. If we have taken on obligations, we will be in trouble. We'll be stuck with the infrastructure. So we have to be really sure about what we're doing, and we are sure.

We will never be the New York Yankees, with a $90-million payroll. Our club will always have to maintain its operational philosophy of scouting and training.

In 1994, we built the best major league baseball club with a payroll of $18 million. In 1996, we rebuilt our club with $18 million. So with the money we will have, and with our system, we will have a competitive club. It won't be a bad club.

[English]

The Chairman: Thank you, Mr. Brochu.

We'll go to Mr. MacKay for a question, then we'll go back to Madame Tremblay, and then we will be adjourning, because I know many members also have to go to the heritage committee.

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, PC): I'll be very brief. Thank you.

Thank you very much for being here. We appreciate your presentation. You obviously have put a great deal of time and effort into your presentation.

It occurs to me that the biggest marketing tool any professional franchise can have is a winning team. Sadly for the Expos in 1994, had that strike-shortened season not occurred, you would probably have a World Series banner hanging from either the Olympic Stadium or your proposed new stadium.

But you've also had the benefit in the past of a lot of characters on your team. I think of Rusty Staub and Spaceman Bill Lee. You've had some players who you spoke of in your presentation as players people identified with. But I guess the biggest problem you have faced is not the development of new players or the bringing in of quality players, but keeping them on the team.

So the first question I have for you is what sorts of efforts or what long-term planning is there to further development of players, particularly in the area of Canadian player development? Can you address that, please?

Mr. Claude Brochu: Sure. We're very much committed, obviously, to player development. The building of a sports complex in Jupiter, which is probably one of the finest—well, it is the finest—in all of baseball, to me is testimony to that. That is our lifeblood, and we're going to continue that way.

From a Canadian perspective, obviously we would love to be able to develop a Canadian player. We did with Larry Walker, who was probably the most outstanding Canadian baseball player, one of the most outstanding we've ever had. He won National League MVP last year. Larry Walker is a credit to baseball in this country. The saddest part of 1995 for me was allowing Larry Walker to leave, but we didn't have a choice, because if we hadn't done it, we would have been bankrupt as a ball club.

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We continue, on a more regional level, to be very much oriented towards amateur baseball. We provide funds to the Canadian Academy of Baseball in Montreal, we provide funds to Baseball Québec on an annual basis to buy equipment and things of that nature, and we're very much oriented towards the development of baseball as it relates to kids.

We do have some Canadian players in our system. We unfortunately don't have any Quebec players in our system at this point. We'll continue to scout and we'll continue to develop. Believe me, finding a Canadian player now who we could keep is a very high priority for us.

Mr. Peter MacKay: Rhéal Cormier was certainly a good prospect from New Brunswick.

Mr. Claude Brochu: He was an outstanding pitcher. Unfortunately he developed elbow problems, but again, he was terrific. He would have been a great asset, even though he was out of the bullpen more than anything, so that's less dramatic.

Mr. Peter MacKay: I have just a very short question.

The Chairman: Just a short question. We only have about two minutes left, colleagues.

Mr. Peter MacKay: What is the seating capacity of the new stadium, and would you be including plans to have the Alouettes play there as well?

Mr. Claude Brochu: The seating capacity would be 35,000, and the answer is no. We want this to be a proper baseball stadium. We don't think we can accommodate the football club.

The Chairman: Thanks, Mr. MacKay.

Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay: Mr. Brochu, I have a few more questions.

If I understood correctly, you said that you feel salaries will have stabilized by the year 2000.

Mr. Claude Brochu: I think they will stabilize after that date.

Ms. Suzanne Tremblay: So according to your projections, your revenues will rise from 27.2 million dollars to almost 62 million dollars.

But are those figures in Canadian or in U.S. dollars? Have you converted them to U.S. dollars?

Mr. Claude Brochu: We tend to go from one to the other. Unfortunately, we have the bad habit of giving salaries in U.S. dollars. But our total revenue is on the order of $57 to 60 million Canadian dollars.

Ms. Suzanne Tremblay: That's Canadian dollars.

Mr. Claude Brochu: Yes, Canadian dollars. A new stadium will generate at least $50 to 60 million more. That's the sort of thing that happened when the Molson Centre opened two or three years ago.

Suzanne Tremblay: So your revenue minus the payroll figures you give—even if the payroll doubles—will still leave you with considerable profits. In your presentation, you said you could not support the debt that funding construction of the stadium would involve. What do you plan to do with your profits? Will you be sharing the amount among your shareholders?

Mr. Claude Brochu: I doubt very much there will be any profits. Payroll is a major expense, but there are other things too. As I said, we have a whole scouting and training system in Canada, in the United States, and in Central America. We also have all our baseball operations. We have to travel, take planes—that means costs. The stadium itself has to be operated as well. If we build a stadium, stadium operations alone will cost $10 million a year. Then we have all kinds of services, including marketing, reception and sales. We also have stadium employees. All that has to be paid for.

Ms. Suzanne Tremblay: When you say that it will cost you $10 million to operate the stadium, you are excluding real estate taxes.

Mr. Claude Brochu: Yes.

Ms. Suzanne Tremblay: This brings up another question. An article appeared in the daily Le Journal de Montréal, in February. You had perhaps left for your training camp. There was a Quebec baseball player, who could not be transferred to the Ottawa Lynxes, as he would have wished it, because of American protectionism. We're dealing with a very American sport, which seems to have its own rules to its own advantage, but to the disadvantage of anyone else who is not of the same point of view.

We consulted various persons to try to understand this situation. How come a Quebecker cannot work in Ottawa? Of course this was a rather paradoxical situation. And so, it drew our interest.

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If I understand you, you have six subsidiaries and, as these are American subsidiaries, in order to keep too many foreign players from coming in and in order to favour Americans, so as to keep baseball truly American, the Americans authorize farm clubs to have a certain number of work permits. In the case of the Ottawa Lynxes, you didn't have enough of them to bring a Quebecker to work in Ottawa because they had all been taken up by the non-Americans whom you had sent to the Ottawa Lynxes.

Could you clarify this situation for me first of all, tell me whether it is really so or not, and secondly, tell me if you were to stay whether you would really be ready to have a Canadian farm club to allow players from Quebec and the other provinces to do their training at your farm club here, even though I hope that it will be somewhere abroad at that time?

Are you really ready to do something so that this rather paradoxical situation does not repeat itself some other year?

Mr. Claude Brochu: To answer your first question, I must say that the Quebec player you mentioned did not play for the Lynxes because he was not good enough. That is the real reason. We have to make a choice, and my baseball players were of the opinion that this player was not competent enough. If he had been good enough, he would have played here.

Having said all this, you are absolutely right. This is really a deplorable system. We have quotas of Canadian players or players from outside the United States who can advance and play in the United States.

We have 20 or 21 player quotas, and I find that this system is unjust because we have absolutely no quota for the American players who can come to play with the Ottawa Lynxes. That, in my mind, must absolutely change.

This is presently being discussed in Washington and also at the legislative affairs committee on baseball. I therefore recommend that Canadians be exempted from any kind of quota because I find it unacceptable.

Ms. Suzanne Tremblay: I will take this opportunity, Mr. Chairman, to ask the ambassador who is leaving for Washington to raise this question regarding protectionism with our American neighbours.

Thank you, Mr. Brochu.

[English]

The Chairman: We're going to have one last question from Mr. Coderre and then we will adjourn.

[Translation]

Mr. Denis Coderre: Thank you, Ms. Tremblay, for having called me an ambassador. If she wants to accompany me, she is welcome. I think that she has quite an open mind after having heard Mr. Brochu's fine arguments.

Mr. Brochu, please talk to us about the economic impact of school franchises. I don't want to be suffering from "constitutionalitis" as was the case with the Ottawa Lynxes, but I'd rather like to understand the economic advantage of having a school club. The Expos are also associated with the Ottawa Lynxes and the Vermont Expos. This has some impact which is good for the city of Ottawa. To get a better understanding of this, it would be essential to hear about these things.

Mr. Claude Brochu: Fine.

Mr. Denis Coderre: To conclude, I'd like to tell you how much we appreciated the clarity of your statements. I have reached a better understanding because I think that by helping the Expos, we are helping the city of Montreal. Thank you.

[English]

The Chairman: Thank you very much.

Mr. Brochu and Mr. Lelay, thank you very much. Your presentation has been very helpful in advancing this debate. We'll get back to you over the next couple of months if we require further information.

Mr. Claude Brochu: Thank you.

The Chairman: Thank you. This meeting is adjourned.