A proposal to construct a National Hockey League (NHL) for Michigan Titans team. The is need of constructing an arena in the Michigan city that will be able to house a professional franchise within three years. This follows a memorandum understanding between the Michigan Titans team and the Michigan. This proposal will be presented to the mayor and city council of Michigan for funding and other support. Conducting a financial analysis of the proposed project will identify if the project is worth the financial investment (Lursadi and Mitchell, 2014)
We are proposing to construct an arena with improved state of art design that have improved viewing angles, and with markedly enhanced sight lines for all seating categories. Other considerations include a flexible seating capacity, extensive outdoor public service, modern premium suites and comfortable concourses. Constructing such a modern arena will not only boost the Michigan Titans Hockey Team but will also open the city to international grounds and economic benefits to the locals.
The proposed arena will take approximately three years to construct and will be located at the Northern part of the Michigan City. The reason for this locality is due to its accessibility to other parts of the city. The location is also significant as it has a vast land where the arena will be constructed. The reason for the timeline is that the arena will be built to NHL standards rather than upgrading it in future
The project is likely to cost a total of $640 million dollars including a $40 million dollars to improve transportation in the city. Opening an NHL arena will not only attract the locals but also the nationals. There is need of improving some infrastructures in the city and transportation is one area requiring improvement. Currently, the available area for constructing the arena is open for leasing. The team has bargained, and the land owner agrees for a 40- year lease agreement.
Currently, the Michigan team are liable for $170 million in capital investment which can be, located to the lease duration. For financing, the project will attain their capital from a mix of revenue streams. The Michigan Team is expected to pay approximately $2.5 million every year for rent. There City council of the Michigan is expected to pay for the displacement and relocation of tenants around the area during the construction of the arena.
The current project will follow a trend analysis where the stakeholders will review financial statements of there or more periods (Hess, Iyer and Mam, 2001). The estimated operating cost for the arena is as illustrated below for five years after construction
|Calendar Year||Annual estimates Operating Cost|
|2025||$ 14.6 million|
|2026||$ 14.6 million|
Financial Risk to Michigan City
The Michigan Titans requests for more than $550 million from government subsidies. The subsidies are inclusive of admission tax, landmark designation benefits, utility relief, parking tax, lease excise tax, and construction. This will cost the Michigan City overruns costs related to “risks beyond the reasonable control”. Risks beyond the reasonable control are termed as the causes or issues that are beyond human control like disasters, war and, others (Sunstein, 2002). Another risk to the City is changes or enhancements that are of “for the benefit of the City.” Engaging the Municipal Council, in the construction and funding of the NHL standards arena opens the aspect of exclusivity. Rappa (2004) defines exclusivity as a marketing tool applied by many businesses to their loyal customers. If Michigan Titans are granted exclusive rights to build an arena in Michigan, it will push other NHL prospective to invest and builds arenas outside the city of Michigan to embrace the benefits of attaining more economical opportunities of arenas.
The Titans will adopt “sports first” model. The finance model for Titans is structured in a way that revenue will stream directly to support the construction of the NHL standard arena. Supporting the acquisition of NHL teams to Michigan city will benefit the investors and the team. Such a model is likely, to attract financial proposals from majority of prospective professional sports clubs.
Parking and Transportation
The multimodal transportation and parking options in Michigan are more constrained around Michigan City centre. In Michigan city, the parking space is less in comparison to the number of residents as well as the surface street congestion. Constructing an NHL standard arena will attract more people in the city including investors. These factors and opportunities call for improvement in the parking and multimodal transportation options in the city.
Building an NHL standard arena for our team Michigan Titans will not only motivate the team and other youths but will also benefit the city at long last. Although the cost of construction is high, the NHL standard arena will open Michigan City to foreign investors and tourists. We are thus requesting the Mayor and the city council of Michigan to support the project financially and socially. Socially, we are requesting for community mobilization so that our community will be part of our stakeholders.
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of economic literature, 52(1), 5-44.
Hess, A., Iyer, H., & Malm, W. (2001). Linear trend analysis: a comparison of methods. Atmospheric Environment, 35(30), 5211-5222.
Rappa, M. A. (2004). The utility business model and the future of computing services. IBM systems journal, 43(1), 32-42.Sunstein, C. R. (2002). Beyond the precautionary principle. U. Pa. L. Rev., 151, 1003.
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