What’s The Truth, Eugene?

Ottawa Senators owner Eugene Melnyk went in front of an Ottawa City Council committee threatening legal action if he is not allowed to bid on the proposed casino that will be coming to the City of Ottawa.  He claimed that in naming Rideau Carleton Raceway as the lone option, that the city was guilty of sole sourcing.  I do not want to get into the politics of the casino and whether or not the bidding should be open.

May 22, 2013; Ottawa, ON, CAN; Ottawa Senators centre Jean-Gabriel Pageau (44) clears the puck following a save and rebound by goalie Craig Anderson (41) in the first period in game four of the second round of the 2013 Stanley Cup playoffs against the Pittsburgh Penguins at Scotiabank Place. Mandatory Credit: Marc DesRosiers-USA TODAY Sports

What I want to focus on is the fact that Melnyk stated he needed the revenue from such a project to ensure the viability of the team.  This raises a lot of red flags about the future of the franchise under Melnyk.  Melnyk said the decision of council reduced his ability to make capital upgrades to the arena and the property and will limit his spending on the team.

Currently the team has an alleged internal salary cap of around $50M .  That total is just $2M above the salary floor, and that will be forced up as revenues increase next year, and the floor could be as high as $56 for 2014-15.  This number is just going to go up as the league grows, and Melnyk is going to be forced to grow with it or get left behind.

I find it hard to believe that a team that, in the last full season of NHL hockey, was 13th in the league in overall revenues (116M) and 8th in operating income ($14.5M) has had the tables turned on it so quickly.  Obviously there is interest to pay on loans and other expenses after the operating revenue, but less than 2 years ago, said in an interview that the Senators were at a point where they “don’t have to make the playoffs any more to make money”.  With that said, and going on the conservative estimate that a home playoff game means an extra $1M in revenues then the Senators have made at least an extra $7M in the last 2 seasons.

So while he is the owner of the team and can do what he wants to set a budget, it is hypocritical to hold the city hostage and try to bully his way to get what he wants using his team as leverage.  And if he lost money on the club this season because of the salaries etc that he still had to to staff during the lockout, that needs to be treated as an aberration rather than an expectation going forward.  Every team in the league had those problems and it was the cost of doing business and getting the CBA done.

When Bryan Murray addressed the media following Paul MacLean’s signing of his contract extension, he scoffed at the notion that there were any money problems and was frustrated that the club had been called “cheap” in recent days. Then the owner faces City council a little over a week later and states that the Senators lose money and “if you heard a number, it would be staggering”.

So which is it?  Obviously a casino development would put more revenues in Melnyk’s personal portfolio, but even if he had got his way, would the revenues be turned into spending for hockey?  I don’t know what to believe any more.

The Senators should be at least a break even proposition as it is set right now, and with such a low payroll should be turning a tidy profit. .  If, as has been speculated, he is using club revenues to offset losses in other struggling areas of his business portfolio, that is his prerogative, but shouldn’t be crying poor because of it.