The cash-strapped government wants to put an end to a policy that allows businesses to write off up to 50 per cent of all tickets and luxury suites for sporting events and is asking the federal Conservatives to help.
The tax writeoff also applies to other live performances like theatre and concerts and costs the province about $15 million a year.
But the Senators, which operate in a smaller market than the Maple Leafs, can't survive without the tax deduction, said team president Cyril Leeder.
"We have a sizable portion of our operation that's run based on corporate support for suites and for tickets," he said.
"So if we had a 10 per cent to 20 per cent loss of that business, we would be out of business."
Corporations lease 120 of the 150 luxury suites at Ottawa's Scotiabank Place, he said. About half of their season ticket holders — who take up 11,000 of the arena's 19,000 seats — are businesses.
And there's no waiting list for suites or season tickets, he said. If someone pulls out, there's no one waiting in the wings to take their place.
"I just know that in our case — and I think in the case of a lot of other sports teams in Ontario and in Canada — we're not completely sold out and we don't operate with waiting lists and we operate very close to the margin of viability, and we can't afford to take a big hit to the support that we rely on," he said.
Infrastructure and Transport Minister Bob Chiarelli, a former Ottawa mayor who holds one of the city's ridings, played down the prospect of driving his home team out of business.
There are a lot of elements that determine the sustainability of the Senators, including the rise of the loonie, which is a "huge bonus" for teams that pay their players in U.S. dollars, he said.
"Certainly the governments have been very supportive in a number of ways over the years to the Ottawa Senators, the Canadian dollar has been very helpful to the Ottawa Senators," Chiarelli said.
"So I think we're jumping the gun in terms of assuming that it might be a done deal."
The province will work "collaboratively" with the Senators on the tax issue, he vowed.
"It's not a done deal, it's a list of possible considerations on which the federal and provincial governments would have to work together," Chiarelli said.
Ontario Finance Minister Dwight Duncan sent a letter to his federal counterpart, Jim Flaherty, requesting co-operation on a list of proposed changes to the tax system.
"It is not clear that taxpayers should be subsidizing certain business expenses for income and sales tax purposes, such as private boxes and corporate seats at sporting events," Duncan wrote.
Duncan said Thursday that he'll respond to Leeder's advice in his upcoming spring budget, which is expected to be tabled before the end of March.
"Obviously, we want the Senators to continue and hopefully eventually win a Stanley Cup," he said.
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