RX2: THE ARENA DEAL TAKES A POSITIVE STEP

Jason Gregor
July 22 2010 12:37AM

At 1:30 yesterday afternoon, Mayor Stephen Mandel addressed the near capacity audience at a hearing on the proposed Downtown Arena, depicted above in a crudely drawn 2008 mockup from an article outling the equally crude plans by OilersNation own Wanye.

Mandel tried to lighten the mood to start the afternoon's proceedings announcing “for those who haven’t been here before there is no clapping, no cheering or screaming. This will be a very interesting afternoon. Let’s go.”

I’m sure he didn’t expect it to last over four hours, but the Downtown Arena is a hot topic and there were lots of questions. John Karvellas, executive vice-president and general counsel for the Katz group did most of the talking and answered the majority of the questions, but Daryl Katz did address the Mayor and councilors right away.

“I know we haven’t always made it easy and I’ll be the first to apologize for that,” stated Katz in his opening statement. Katz surprised me with how passionate he was when he spoke. I sensed he truly is proud to be an Edmontonian, but he also has a goal to make this arena and surrounding entertainment district world class.

He mentioned that he was approached by the city in April of 2008, before he officially owned the Oilers, about a downtown arena and he has been focused on that ever since. He then committed to putting $100 million towards the rink and another $100 million towards the entertainment district.

I thought Katz was well-spoken and passionate and I bet if he addressed the fans once or twice a year that would help his cause. He doesn’t like the spotlight, and I respect that, but he owns a team that in his words, “Is a major part of the identity of Edmonton ,” so he needs to needs to realize that the fans want to feel like they know the man who runs this “Identity”.

He also mentioned the Oilers would sign a location agreement, meaning the likelihood of them leaving the city is minimal.

However, later in the proceedings Karvelles stated the Oilers and Oil Kings would not play in a refurbished Rexall Place . Their lease ends in the fall of 2014. Ted Tanner, executive director of real estate development of AEG opened up with a promotional video of AEG voice by Morgan Freeman.

It was meant to excite you and make you feel that AEG can build an arena, and the surrounding area, so exquisite that the entire world would want to come see it. The Staples Centre in LA and O2 in London were their prime examples in the AEG portfolio.

No doubt these are world class facilities, and if Edmonton ends up with something similar we’d be pretty ecstatic. The references to hosting the Grammys and being part of great movie production were off-base for this hearing, and I thought the video didn’t add much to the overall conversation.

The other contentious topic brought up by the Katz Group was how the Oilers currently don’t receive any non-hockey revenue at Rexall Place . They are the only NHL team with this agreement and noted this is a major reason why they have lost millions the past few seasons.

Reports suggest they lost four million last year, and then an additional three million went to the NHL subsidy program.

QUESTIONS AND ANSWERS

After the Katz Group was done their presentation each councilor had five minutes to ask questions. Jane Batty went first followed by Don Iveson. Batty showed her hockey knowledge and gave Katz the Lady Byng award for his generous commitment of $4 million (they included his original purchase of the team).

Her questions asked for more clarification on certain points, but Iveson came out swinging. He asked why this couldn’t be privately funded like the previous four arenas that were built in Canada . Bob Black, executive vice-president of sports and entertainment for the Katz Group informed him that only Toronto made that model work, while in Montreal , Vancouver and Ottawa the original investor suffered massive losses. “So you are asking the city to take on most of the risk,” replied Iveson.

I think it is imperative in this process that the city asks the tough questions. I’m in favour of a new facility, and I believe we will get one, but the city needs must do their due diligence and investigate every turn.

A FAIR DEAL. IS THERE SUCH A THING?

My one concern is the thought process that we need a deal that is fair. What constitutes a fair deal?

I am always interested in the notion of “fairness”. Do you think 100 people could ever agree on what is “fair?” Or would fair have everything to do with your point of view?

Many who oppose the arena, and even some who support it, keep stating there has to be a fair deal. “If Katz puts up 25% of the arena cost, then he should only get 25% of the revenue,” is a statement I’ve heard on my show numerous times the past few months.

In a very general and simplistic fashion that could be considered fair, but I don’t think it is that simple. What is the true value of the Oilers to Edmonton? Can we put an accurate value on how much having an NHL team helps the economy? I’ve yet to see an exact report, but if you ask people in Winnipeg they say it is significant.

Some think it isn’t fair if Katz makes too much money off of this deal, but what is too much.

The fact is Katz owns the Oilers. He paid $200 million for them and he has the right to make as much money as he can.

That is how it works in our capitalist society.

Some of you will say that is fair, while others will claim it isn’t. And what is this automatic assumption that business is unfair, always takes unfair advantage of people, and if you have made a lot of money you must be a crook. What’s up with that? This thought process really stumps me.

I honestly believe if Katz addressed the fans they would naturally trust him more, and after listening to him today I think he would come across just fine once or twice a year. I don’t think he has to be front and centre all the time, and it isn’t in his personality to do so, but if he had done so in the past I guarantee some fans wouldn’t be so hesitant to believe in his downtown arena vision.

FAR FROM OVER

Near the end of the hearing on Wednesday, City Council agreed to enter into negotiations with both the Katz Group and Northlands on the financing and operations of a Downtown Arena and entertainment district. However, these discussions must exclude increases in property taxes.

Council also informed city administration to set up a community consultation process and prepare a report on the financial impacts the new downtown site would have on Northlands. And Northlands will be allowed to respond to this report at a future hearing.

HOCKEY SNIPPETS

  • Oilers netminder Nikolai Khabibulin’s court case was postponed again on Wednesday.  He and his agent have two options now. They can stand before a judge with no jury in late August or wait until September 29th and face a jury. All this does is muddy the goaltending waters of the Oilers. Regardless of what happens in his case, the probability of both Jeff Deslauriers and Devan Dubnyk coming to camp seems likely.
  • And who was the arbitrator in the Clarke MacArthur arbitration ruling??? MacArthur was granted a one-year, $2.4 million contract after a scoring a career-high 16 goals and 35 points. One year with 35 points gets you $2.5 million? Was Mike Milbury ruling on this case? Gilbert Brule tallied 17 goals and 37 points last year, and he is two years younger than MacArthur. I bet the Oilers try even harder to get him signed before his August arbitration date, unless they want to pay him $2.5 million or more.
  • And I wonder what Mason Raymond is thinking right now. The Vancouver winger goes to arbitration on July 26th. He tallied 25 goals and 53 points last year. If this ruling is any indication he’ll be worth $3.6 million. Absolutely ridiculous.
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One of Canada's most versatile sports personalities. Jason hosts The Jason Gregor Show, weekdays from 2 to 6 p.m., on TSN 1260, and he writes a column every Monday in the Edmonton Journal. You can follow him on Twitter at twitter.com/JasonGregor
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#101 Ryan14
July 22 2010, 11:41AM
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Ogden Brother Jr. - Team Strudwick for coach wrote:

To go with Just Sayings talk of the art gallery and churchill. Were could one find a list of projects the city has invested in?

Does this help?

http://forum.skyscraperpage.com/showthread.php?t=101053

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#102 DeeDee
July 22 2010, 11:41AM
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Way I see it is that it's a partnership.

Katz pays about half the fee's with his $200 Million, let the city kick on the other half.

Let them split all income 50/50.

Cover the debt servicing with a ticket surcharge, I don't know what that would work out to, say $5.

That would generate upwards of $100,000 per event.

The city can choose to have Northlands look after their half, or not. That's the cities business.

Evil captialists makes half, the city makes half, everyones happy.

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#104 Sean John
July 22 2010, 11:53AM
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@ubermiguel

it is not just be the 'benefit of Katz'. All of Edmonton, even non-hockey fans, benefit from having an NHL franchise. this is not a pulp mill or widget factory where only the owners, customers and workers benefit. What is the price of community moral and pride? Ask Winnipeg.

Does anyone's tax dollars go to everything they support? Do you need housing for the homeless? Try complaining about the costs for that one.

Come Edmontonians!! Step up to the plate and be go-getters and can-doers, not selfish, boring, short-sighted hicks.

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#105 David S
July 22 2010, 11:53AM
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If we assume that the city is going to pay for the reno at RX1 (you seriously can't think Northlands would pay for it), then it becomes an issue of where best to spend the money if the excess required to build downtown is covered by a CRL, ticket tax and Katz' $100 million.

Make an existing building a bit less crappy or have a new building with condos, office space, restaurants and bars in an entertainment district that will (and has already - don't kid yourself) spur new development in our downtown core that we sorely need.

How is this not a no-brainer?

IMO, any dissension from city council is the result of Northlands' influence. Make no mistake, this is about money - ALOT of money.

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#106 Ender
July 22 2010, 11:55AM
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@Jason Gregor

Your point about optics is well-taken and one I hadn't considered, but I think it will come down to whether or not the Oilers believe at this point that Khabibulin will be able to deliver good hockey through the end of 12-13. If they still believe that, then perhaps they put on the face of concerned parent and bring him back into the fold. If, on the other hand, they are starting to have doubts that he can deliver the goods that they originally anticipated, I believe they might well look at this as an opportunity (indeed, the ONLY possible opportunity) to shed his contract and use the excuse that he brought it on himself. The NHLPA might have some sympathy for Khabi, but I think a lot of players in the league would see the viewpoint that Khabi did something incredibly stupid as well.

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#107 Chaz
July 22 2010, 11:55AM
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@Just saying...

Totally agree.

The city is currently spending about 250 Million on the Anthony Henday / 100 Avenue overpasses. Will this increase the standard of living for the average Edmontonian as much as a downtown arena will? Perhaps so if you use that route everyday, but not at all if you don't drive.

My point? The city of Edmonton spends hundreds of millions of dollars every year on projects that may or may not directly benefit certain people in the city. The amount to invest in a new arena is a drop in the bucket in the long term, and if the councillors are intent on not increasing taxes to pay for it, why would anyone be against it even if Rexall will benefit in the long run?

The freekin' Gun Registry cost us a billion dollars people. Don't let the big numbers scare you, and let's get this thing built already.

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#108 Archaeologuy
July 22 2010, 12:03PM
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@Ender

I also do not view the NHLPA as a well-oiled machine working together in unison. They dont have solid leadership and they are fractured as a group. Many people think they are the weakest Players Association in Pro-Sports in terms of solidarity.

I have many doubts that the players will unite against the Evil Oilers for voiding the contract of a player who is spending time in prison and may have passport problems when he returns from the clink.

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#109 TigerUnderGlass
July 22 2010, 12:09PM
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@Tyler

How valuable it is to the City to direct it to downtown.

This is precisely the question isn't it? Either Katz of the city will take a loss. Essentially Katz is asking the city to take the loss for the benefit of the city, and now the city needs to decide if it will be worth it.

I lean towards "worth it" but I have nothing to base that on and accept that I might well be wrong. I live in Calgary and really know almost nothing about what is happening in Edmonton other than the Oilers.

Here is Calgary city council has earmarked over 75 million dollars for 3 pointless designer footbridges.

Their entire reasoning behind these bridges is noting more than Bronconnier (Mayor for anyone who doesn't know) looking for something to point at as his legacy and because they think it will add to the "culture" of the city.

(Here is a link brochure for the first of the three if anyone wants to see what this thing will look like: http://www.calgary.ca/docgallery/bu/transportation_infrastructure/peace_bridge/peace_bridge_brochure.pdf)

What I am trying to say is that a top notch arena district in downtown Edmonton could do a lot of good for the city. It will cost them a lot of money to do it, but it could potentially be great for the cities image moving forward. One of the most common complaints I hear from visitors to both Calgary and Edmonton is the lack of an interesting downtown. This could help.

Cities regularly spend large sums on vanity projects, and this one could actually have a benefit, he question, as you put it, is will it be worth the cost?

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#110 @Oilanderp
July 22 2010, 12:11PM
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Chris. wrote:

On an even more insane note:

I grew up in Lethbridge, and when I graduated high school, I moved to Edmonton with a couple of friends to attend the U of A...

Q- How is that insane?

A- We did no research comparing the U of A to the University of Calgary... We chose to move to Edmonton because we were (and are) Oiler fans. (That truly was the deciding factor)

To this day, all three of us live, work, and raise young families in the capital region... The ONLY reason this happened is because all three of us were children of a Dynasty and wanted to be a part of the City of Champions.

Insane? How about the fact that I am planning a permanent move from Victoria, B.C. to the city of Edmonton, A.B.. Victoria RARELY drops below -1 even in the dead of winter, and I am trading this in for a -30 dry chill? THAT'S insane! What justifies this move for me? The Edmonton Oilers. That's it - there is no other reason. I'm not moving there for a job. I'll find one once I get there (hopefully). I have no family or friends there. All this simply because I was a "child of the Dynasty". Friends and jobs can be found anywhere, but the Oilers are in Edmonton.

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#111 TigerUnderGlass
July 22 2010, 12:13PM
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Archaeologuy wrote:

I also do not view the NHLPA as a well-oiled machine working together in unison. They dont have solid leadership and they are fractured as a group. Many people think they are the weakest Players Association in Pro-Sports in terms of solidarity.

I have many doubts that the players will unite against the Evil Oilers for voiding the contract of a player who is spending time in prison and may have passport problems when he returns from the clink.

Th PA will have no choice but to try and fight any voiding of any contract. It isn't a precedent they want.

I do agree however that it will have little effect on future player signings.

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#112 Forrestt
July 22 2010, 12:15PM
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I cannot believe that they consider the Staples Center in LA is a highlight of AIG's portfollio. Sitting in the cheap seats a year or two ago, it felt like a giant shoebox with no personality. Sure it had more space for more boxes, but for "Joe Fan" like me up in the bleeders the experience sucked. Just my 2 cents...

Forrestt

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#114 Milli
July 22 2010, 12:20PM
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Build it, please. RX1 is an accient beast of an arena. Van's new arena is a beauti. I'm thinking the impact of the OIlers must be substantail, I know how much cash I drop everytime I come up for a game.

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#115 mike
July 22 2010, 12:30PM
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No idea whether anyone assemble a package that leaves non hockey revenue with a Katz/AEG consortium WITH no impact the city taxes. To me that's the critical question and no clue what Northalands has to do with that. Unless Northlands is ready to assemble an alternate downtown site, don't see how they even enter the discussion. Katz kicks in $100 M + levy on tickets + levy on his redev properties. Northlands kicks in?

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#116 DJ Dynasty Handbag
July 22 2010, 12:56PM
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A couple of COMPLETELY off-topic items:

1) Florida Panthers General Manager Dale Tallon announced today that the club has acquired C Marty Reasoner from the Chicago Blackhawks in exchange for C Jeff Taffe.

chicago pretty much gave reasoner away here...i wonder if the oilers had any interest?

2) as per @dchesnokov(yahoo sports) - Former #Oilers forward Robert Nilsson confirmed he joined Salavat Yulaef of the KHL.

i wonder if we'll ever see him back in the nhl?

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#117 offside
July 22 2010, 12:57PM
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I think some people against the city contributing think that the city will simply take $250million out of the bank and pay for it all up front. I believe the plan is to have the city borrow the money (which is easier for a city to do than a single investor)and the money will be paid back by revenue from the arena as well as possibly the increased property taxes collected from the development, this loan would be amortized over 30 years or so. The only way that the average tax payer will be on the hook for it is if there is not enough revenue generated to cover the payments (and probably only the interest payments). The payments would probably work out to $20 mil a year or so, so in the grand scheme of things it would be pretty minor. The difference between this and a project (such as the Anthony Henday) is this is a revenue generating project.

People also feel that this project will simply move money from one area to another which may be true to an extent but as has been pointed out people will come from out of town to spend. Also, people may decide instead of putting money into their RSP or into savings, they will instead spend a few hundred to go to a game. Saving money is the real economy killer. I believe a rule of thumb is that every outside dollar that is spent in a city, the economic gain to the city is $10 as the money flows through the local economy.

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Reasoner bounced to Florida for jeff taffe. Would've been a good pickup to get Marty.

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#119 Wanye
July 22 2010, 01:40PM
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Crackenbury wrote:

Here's a history lesson: "Understanding the potentially far-reaching implications of the venture, the City of Edmonton, and the provincial and federal government became funding partners for the Coliseum by providing grants, land use, lottery funds, and other forms of support. All of these relationships facilitated the momentous task of bringing the Coliseum to life."

I've lived in this city my entire and am actively involved in the business community. There was a time in our not to distant past when Edmonton was seen as a progressive business oriented city, even ahead of Calgary in that regard. Government understood that to attract and retain businesses and people you had to provide an environment where they could succeed.

I'm not sure of the turning point, of when Edmonton lost it's focus on attracting and retaining big business. Some will point to Jan Reimer, but that is giving her far too much credit. I think the biggest sign of Edmonton losing it's business focus was the movement of Shaw head offices to Calgary.

It seems odd to me how the city can spend nearly 100 million on a non-revenue producing art gallery with little public opposition, but talk of participating in revitalizing an entire area of the city through development of an arena district gets the collective blood of the city boiling.

Sir, I applaud you.

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#120 ubermiguel
July 22 2010, 01:47PM
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Sean John wrote:

it is not just be the 'benefit of Katz'. All of Edmonton, even non-hockey fans, benefit from having an NHL franchise. this is not a pulp mill or widget factory where only the owners, customers and workers benefit. What is the price of community moral and pride? Ask Winnipeg.

Does anyone's tax dollars go to everything they support? Do you need housing for the homeless? Try complaining about the costs for that one.

Come Edmontonians!! Step up to the plate and be go-getters and can-doers, not selfish, boring, short-sighted hicks.

For the record I'm for a new arena downtown.

I think we agree, the financial benefit of a new rink in my pocket or yours is small to nil. That's why I think *economic* arguments for the new arena are invalid. A new arena won't bring in new money into Edmonton.

You've hit the nail on the head there...what is the price of community morale and pride? I'm willing to spend a some of my tax money on morale and pride.

I think Edmonton spends too little money on pride and beautifying the city. Edmonton reminds me of a plain looking girl that would be a knock-out if only she spent a couple of bucks on new clothes and some makeup.

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#121 Deep Oil
July 22 2010, 01:58PM
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gonadsgo wrote:

Katz's worst argument is that the team is losing money in its current state...

4 million dollars is the difference between not making the playoffs and making them. The team could have sold out most of the games and placed 30th without spending to the cap either. If the team was so concerned with money it wouldn't have given one-way deals to guys they don't want to play at the NHL level (Giroux, etc). They also wouldn't have paid a premium to sign a goalie with a cup ring for four years when the goalie they had only wanted two.

When the team is losing only 4 million, it's pretty easy to point at the inefficiencies in running the team. Not a good argument at all.

That said, I'm for building the arena but agree with some of what Gregor discussed yesterday in the terms that fans of the team should shoulder a larger burden than other tax payers, be it in ticket charges, $10 beers at the games, what have you. It's only "fair".

EIG was going to sell the team internally for $135 million, until Katz with borrowed money bid against himself to a higher price.

Recent sales of Florida Panthers of $120 million with land $80 million net, and yesterday "boots del bagio" was bought out for 15.2 million based on a 27% share. This puts the value of the PREDS at below $70 million.

Seems that the capital cost of the team, is justification for the losses. This purchase was made with the intention of a new arena, but with no SOLID PLAN in place for a home.

Question is - if the Oilers are not profitable, and Rexall is profitable, seems that a tax avoidance strategy would be to transfer monies in terms of advertising from one business unit to another.

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#122 ubermiguel
July 22 2010, 02:04PM
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Tyler wrote:

Guys -

I'm not going to go out and find a ton of links for you. This isn't a particularly interesting topic for me because I've already read a lot of the research. Google guys like Andrew Zimbalist and Mark Rosentraub. There's another guy at U of A, Brad Humphreys, who is a serious guy in this - here's a quote from an interview he did at BoA:

I have gone back and looked at the economic performance of cities, in terms of income per capita, employment and wages, since 1969 looking for evidence that professional sports generate tangible economic benefits. Over this long period of time, there has been a lot of facility construction and renovation, expansion, and franchise movement. These changes provide variation in the quantity and quality of professional sports in cities over time, and I have looked for statistical evidence that changes in the “sports environment” in cities explains any of the observed variation in economic indicators over time. The short answer is: they have not. Attracting teams and building bigger or newer facilities was not associated with economic growth, or changes in the levels of any of these economic indicators. Professional sports are not, and have never been, engines of economic growth in North American cities. They are effective at moving consumer’s entertainment from one part of the city to another, and raising employment and wages in one specific sector of the local economy, the Recreation and Amusements sector, which contains professional sports teams. People interested in providing government subsidies to sports teams – team owners, real estate developers, elected officials, and others who will benefit directly from these subsidies – loudly and consistently claim that large, important economic benefits flow from professional sports. Their evidence takes the form of (1) unsupported assertions (“of course these benefits exist!”) coupled with ad hominem attacks on opponents (“only an idiot, or an economist, would believe that sports aren’t great for the local economy”) or (2) Economic Impact Studies that are really promotional forecasts based on badly flawed methodology. My research does not mean that subsidies for new hockey arenas are bad. Sports clearly produce important intangible benefits in cities, which may justify government subsidies. My research just means that we – taxpayers, elected officials, team owners, and other stakeholders – should decide on subsidies based on these intangible benefits, not on overblown claims of economic benefits (“More jobs! Higher income!”) made by a few people who will benefit immensely from the subsidies.

It's you against academia Crash.

Exactly! I say let's build a new arena, but for the right reasons!

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#123 OB1 Team Yakopov - F.S.T.N.F
July 22 2010, 02:12PM
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Deep Oil wrote:

EIG was going to sell the team internally for $135 million, until Katz with borrowed money bid against himself to a higher price.

Recent sales of Florida Panthers of $120 million with land $80 million net, and yesterday "boots del bagio" was bought out for 15.2 million based on a 27% share. This puts the value of the PREDS at below $70 million.

Seems that the capital cost of the team, is justification for the losses. This purchase was made with the intention of a new arena, but with no SOLID PLAN in place for a home.

Question is - if the Oilers are not profitable, and Rexall is profitable, seems that a tax avoidance strategy would be to transfer monies in terms of advertising from one business unit to another.

Oh goodie, you're back.

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#124 ubermiguel
July 22 2010, 02:15PM
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@ Crash

"I don't know how to make this any clearer to you that this statement made by this economist is not entirely true...maybe in a place that stands alone and there aren't any other options close by but I'm here to tell you that if the Oilers don't exist in Edmonton that my money will NOT just simply move from one part of the city to another....and I'm also telling you that I wouldn't be alone."

I'm sorry but I have to believe a economist's opinion when talking about economic issues.

Remember there are variable costs to the city associated with hockey games such as impact on infrastructure and extra policing. They could easily negate the money coming from out-of-town.

I am all for paying for the intangible benefits of a new rink, but I don't believe there are any economic benefits.

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#125 Sir Wilfred Laurier Heights
July 22 2010, 02:19PM
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While I think some people are under-estimating the number of out-of-towners who attend Oilers games, I think some of the out-of-towners are also vastly OVER estimating the amount of money they pump into the Edmonton economy as a result of attending hockey games.

I was at the council meeting yesterday, and the Mayor stated, with head-nods from the Katz Group reps, that hockey in Edmonton — because of our weather, Edmonton's relative remoteness, etc — is a stay-at-home entertainment venture. That is, it's largely attended by Edmontonians trapped here for the winter.

Now could Tambellini trade Souray already?

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#126 VMR
July 22 2010, 02:20PM
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@Jason Gregor

I think the reason the salaries matter Gregor is as a response to the Katz groups claims they need the revenue from non hockey events. They say they are losing money because they arent getting that extra revenue but that's hardly the case if the reason they are losing money is because they are mispending what they have not that they arent getting enough.

Forbes called the organization the worst run in pro sports and it's hard to argue that after the 30th place season where they are paying a penalty next season for going over the cap (in a totally legal manner due to injuries). I dont think the city should be supporting poor management by giving them non hockey related revenue.

Katz claims they need that revenue and they dont want Northlands involved they want AEG helping them out. I fully support building a new arena but I dont support cutting Northlands out so AEG can make money. There are a lot of holes in this proposal that need to be straightened out even if we do all agree that a downtown arena is a good thing.

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#127 wangtaco
July 22 2010, 02:26PM
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@Deep Oil

DO, I spend a lot of time in private equity valuation; you cannot use these examples and apply them straight across without considering a LOT of factors. For example:

1)Demographics/social factors - it's not accurate to suggest that the fan base (and therefore potential revenue, cross-sell, advertising opportunities) are the same in each market.

2) You absolutely must factor in a liquidity discount when valuing private equity. This means that the actual transaction price is affected by how easy it is to liquidate a position, so often the final sale figure has what is called a liquidity discount which distorts the price paid.

Two examples of many, but suffice to say that a straight across comparison isn't appropriate.

Second, Katz didn't bid against himself. He made an offer, which was refused. He then made a second offer, which was refused, etc.

last, I did not know that the funds were borrowed, but do we know the terms of the financing? Perhaps the borrowing was short-term, as a bridge loan while cash was freed up. The possibility exists that it is a longer-term debt, though without cracking the books, it's not a sound basis to speculate on.

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#128 Wanye
July 22 2010, 02:29PM
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I think this is the most intelligent debate about the arena I have read anywhere.

As an idiot, I appreciate the banter.

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#129 Deep Oil
July 22 2010, 02:36PM
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Ogden Brother Jr. - Team Strudwick for coach wrote:

When the new barn is built what happens to rexall?

Northlands sues the city for aggravated losses for terminating the lease (land) to which Rexall sits or settles out of court for an operational stipend similar to subsidy they receive today - according to http://hockey.ballparks.com/NHL/EdmontonOilers/newindex.htm - Northlands receives $2.5 million per year in a subsidy.

Does Katz keep the naming rights or does the $2 million (on average) per year go to debt repayment ?

This $100 million for the development is a throw away, as the development would only contribute $14 million (according to Edmonton Journal) per year in property taxes.

How about Katz put up $300 million for the rink, city provide $100 million, keep the naming rights, option - charge a personal seat license, and get a tax holiday for 22 years on the development - seems this would be a socialistic approach for a capitlistic investor.

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#130 JackBauer
July 22 2010, 02:39PM
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Wanye wrote:

I think this is the most intelligent debate about the arena I have read anywhere.

As an idiot, I appreciate the banter.

I agree. And as someone who just came back from Calgary and the Stamepede and saw what a great, revitalizing, organized, healthy downtown looks like, I want it.

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#131 Ducey
July 22 2010, 02:44PM
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All this chatting is swell but for those of you that want the arena, there is something you can actaully do. Email or call your City councillors and the mayor.

There is an election coming up. They need to know that people support it because they don't hear from most of us "normal" people often. I don't think they have an idea how supportive people are of the Oilers and a new arena.

I was pleasantly surprised by the mayor's attitude and leadership yesterday.

I continue to be astonished that Northlands, a public funded entity, has no concern for the public interest. They, led by Tony "I'm in a Conflict" Caterina, just care about their own jobs. They would quite happily spend $250 million in tax dollars to renovate Rexall so it would have less seats than the arena in Winnipeg has.

And watch out for Don Iveson. He looks like a cool dude, but man, he makes Jan Reimer and Tooker Gomberg look like Republicans.

Anyway, email your councillors and the mayor! If everybody who put a comment here simply sent it on to the City, it would go a long ways.

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#132 JackBauer
July 22 2010, 02:46PM
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Hell, just email this thread to your counsillor.

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#133 Deep Oil
July 22 2010, 02:46PM
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wangtaco wrote:

DO, I spend a lot of time in private equity valuation; you cannot use these examples and apply them straight across without considering a LOT of factors. For example:

1)Demographics/social factors - it's not accurate to suggest that the fan base (and therefore potential revenue, cross-sell, advertising opportunities) are the same in each market.

2) You absolutely must factor in a liquidity discount when valuing private equity. This means that the actual transaction price is affected by how easy it is to liquidate a position, so often the final sale figure has what is called a liquidity discount which distorts the price paid.

Two examples of many, but suffice to say that a straight across comparison isn't appropriate.

Second, Katz didn't bid against himself. He made an offer, which was refused. He then made a second offer, which was refused, etc.

last, I did not know that the funds were borrowed, but do we know the terms of the financing? Perhaps the borrowing was short-term, as a bridge loan while cash was freed up. The possibility exists that it is a longer-term debt, though without cracking the books, it's not a sound basis to speculate on.

Here is the loan iformation as per the jornal....

http://www.canada.com/edmontonjournal/news/sports/oilers/story.html?id=31db402d-a5d1-4bc8-8f87-b2f855610a68

Based on the Barret Jackson mentality, you only need two people to have an auction, in this case, it appears passion and/or ego outweighed business sense.

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#134 Wanye
July 22 2010, 02:46PM
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Deep Oil wrote:

Northlands sues the city for aggravated losses for terminating the lease (land) to which Rexall sits or settles out of court for an operational stipend similar to subsidy they receive today - according to http://hockey.ballparks.com/NHL/EdmontonOilers/newindex.htm - Northlands receives $2.5 million per year in a subsidy.

Does Katz keep the naming rights or does the $2 million (on average) per year go to debt repayment ?

This $100 million for the development is a throw away, as the development would only contribute $14 million (according to Edmonton Journal) per year in property taxes.

How about Katz put up $300 million for the rink, city provide $100 million, keep the naming rights, option - charge a personal seat license, and get a tax holiday for 22 years on the development - seems this would be a socialistic approach for a capitlistic investor.

Both Tyler and Deep Oil are making complete sense to me today.

IS THERE NO END TO THE MADNESS??

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#135 Dyckster
July 22 2010, 02:49PM
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ubermiguel wrote:

@ Crash

"I don't know how to make this any clearer to you that this statement made by this economist is not entirely true...maybe in a place that stands alone and there aren't any other options close by but I'm here to tell you that if the Oilers don't exist in Edmonton that my money will NOT just simply move from one part of the city to another....and I'm also telling you that I wouldn't be alone."

I'm sorry but I have to believe a economist's opinion when talking about economic issues.

Remember there are variable costs to the city associated with hockey games such as impact on infrastructure and extra policing. They could easily negate the money coming from out-of-town.

I am all for paying for the intangible benefits of a new rink, but I don't believe there are any economic benefits.

"Remember there are variable costs to the city associated with hockey games such as impact on infrastructure and extra policing. They could easily negate the money coming from out-of-town."

Would building a new arena/entertainment complex not lead to an IMPROVED infrastructure, how would that negate any revenue it produces?

Also, if we revitalize the core downtown area we could potentially reduce the amount of policing required in that area and allow for a larger police presence in other areas of town. Upscale the area would likely lead to a more "upscale" clientele.

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#136 outoftime
July 22 2010, 02:53PM
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I have no problem with the 50/50 cost scenario for a new arena. However the civic money should come not only from Edmonton tax payers but also from citizens in the surrounding areas. St Albert, Fort Saskachewan, Sherwood Park, Leduc, Stony Plain, Spruce Grove etc should also contribute with there property taxes as well.

But my guess is the individuals who live in these communities would cry a blue streak over paying more civic taxes.

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#137 JackBauer
July 22 2010, 02:55PM
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"Also, if we revitalize the core downtown area we could potentially reduce the amount of policing required in that area and allow for a larger police presence in other areas of town."

This is 100% the most laughable statement I have ever heard in my life. The Edmonton Pig Service prides itself on planting as many of their useless corpses on as many street corners in busy areas as humanly possible. Do you honestly think these swine will pass up an opportunity to detain and harass 20,000 people coming out of a downtown arena in favor of *GASP* doing real police work?!? This is Edmonton your talking about. If anything more tax dollars will goto hiring more pigs, so they can ticket more people to make back the money they lost in lawsuits and overbudgetting.

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#138 Dyckster
July 22 2010, 03:03PM
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JackBauer wrote:

"Also, if we revitalize the core downtown area we could potentially reduce the amount of policing required in that area and allow for a larger police presence in other areas of town."

This is 100% the most laughable statement I have ever heard in my life. The Edmonton Pig Service prides itself on planting as many of their useless corpses on as many street corners in busy areas as humanly possible. Do you honestly think these swine will pass up an opportunity to detain and harass 20,000 people coming out of a downtown arena in favor of *GASP* doing real police work?!? This is Edmonton your talking about. If anything more tax dollars will goto hiring more pigs, so they can ticket more people to make back the money they lost in lawsuits and overbudgetting.

Get tazered for jaywalking or something Jack?

~You seem slightly bitter.~

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#139 DC
July 22 2010, 03:05PM
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Gregors dirty 'stash wrote:

Northlands is a community based not for profit organization owned by the city, of course they are going to be in on these discussions.

The thing that is a bit of a head scratcher is that the city would have to foot the bill for the, renovations of Rexall. (If that were to Happen.)

Apparently the current location of the arena is a better location than the one by the Casino down town, according to the AEG, as mention by sexy Linda Steele last night.

So what is Katz and the city can come to some sort of Agreement to build the new facility there, tear down RX1 and make that this new sexy district.

Please feel free to criticize me!

The current site of Rexall is only ranked higher than the Baccarat site because it is already wide open. At the Baccarat site they would need to tear down and move a bunch of different things. ex/ Greyhound and Baccarat.

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#140 washed up
July 22 2010, 03:06PM
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I don't understand why the province won't cough out some money for a new arena. I don't live in Edmonton, but as an oiler fan it's where i need to go if i want to see a game or any other event for that matter. Without a 5hr drive. I'm not saying that they sould put up something stupid like half of the cash, but even a bit would show their support, and may make it easier for the city to supprot the arena as well.

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#141 Milli
July 22 2010, 03:23PM
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Someone said earlier that us out of towners exagerate or think we bring more into the market than we actually do, maybe so, not all drink like fish I guess! I know what I spend. But, as a former season ticket holder, we never went to a game without going for a few pre-gamers and a couple of post gamers. Bars and restaraunts would be devestated without it. This should be a no brainer for anyone in govt that wants to keep Edmonton growing and prosporous. That is a downtown that needs major help.

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#142 cableguy - 2nd Tier Fan
July 22 2010, 03:55PM
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outoftime wrote:

I have no problem with the 50/50 cost scenario for a new arena. However the civic money should come not only from Edmonton tax payers but also from citizens in the surrounding areas. St Albert, Fort Saskachewan, Sherwood Park, Leduc, Stony Plain, Spruce Grove etc should also contribute with there property taxes as well.

But my guess is the individuals who live in these communities would cry a blue streak over paying more civic taxes.

not a chance you would get other municipalities to put tax money towards a building going up in edmonton...

for something like an LRT expansion absolutely.

should edmonton have kicked in some $$$$ for millenium place in sherwood park? how many edmontonians use the facility? there are lots of people that use it daily(obviously, the answer is no, just using it as a smaller scale example)

for the out of towners, you get the parking $$$, the concession $$$$, the ticket $$$ etc.

charge the $5/ticket for every event in the building. whoever uses the facility can help pay for it. tossing out a blanket "everyone around" pay for it aint gonna happen...

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#143 VMR
July 22 2010, 03:58PM
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@Milli

Just what we need a bunch of drunks swerving across lanes as they try and make it out of town to work the next day. They're gonna have to budget a couple extra mill for check stops after the games :)

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#144 Fresh Mess
July 22 2010, 04:05PM
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@Jason Gregor

So, Gregor doesn't understand how a bloated player payroll and abundance of million-dollar-per year hockey executives has anything to do with the Katz group's claims of losing several million dollars per year. There is a big difference between "paying the going rate" for your executives, and creating redundant positions with regal, ego stroking titles at absurd salaries.

In addition to the usual executive consisting of a president/ceo, a general manager, an assistant GM, and a head coach, the Oilers also have a President of hockey operations, and a senior hockey advisor each at a million bucks per year. This in addition to the cast of of dozens of VP's and senior directors.

Gross overspending and mismanagement has everything to do with the validity of a billionaires claim of a franchises' sustainability, especially when asking for the taxpayers to finance his private for-profit concern.

Also, ask around about the failure of the Oilers to submit financial reporting to the NHL on time, and the subsequent threat by the league to impose a 7 figure penalty. The organisation is poorly run, so let's be careful about handing over hundreds of millions of tax dollars to a private individual, no matter how much we all love the idea of the downtown develoment.

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#145 Woodguy
July 22 2010, 04:07PM
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Tyler,

You are correct in that the majority of sports facilities have not driven any kind of economic development.

Creating a big building and surrounding it with acres of parking do next to nothing for the neighborhoods in which they exist. Northlands Coliseum is a good example of that.

As you mentioned, such bright minds in this area such as Mark Rosentraub came to this conclusion a while ago.

However, Rosentraub wrote:

"Sports Facilities, A New Arena in Edmonton, and the Opportunities For Development and A City's Image: Lesson From Successful experience.

In this document Rosenstraub uses Indianapolis, Los Angeles, Columbus, Washington and San Diego as positives examples of how Sport Facility development can work in urban centers and spur other development.

The link to the paper is here:

http://www.edmonton.ca/city_government/documents/CityGov/RosentraubReport.pdf

The new paradigm that Rosenstraub discusses seems to work, and is much different than the approaches taken on most facilities over the last 30 years.

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#146 David S
July 22 2010, 04:11PM
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More opinions here:

http://whydowntown.ca/

GRABIA IS BACK!!!

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#147 DDP
July 22 2010, 04:13PM
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This is a really interesting debate and I really enjoyed going through and reading everyone’s comments. The only thing I would add to the debate is the fact that having a world class sports arena district in Edmonton would help with People Retention. We have a world class University at the UofA with thousands of young people graduating every year. Now that they have their degrees and are looking for jobs, we need to find ways to retain these professionals in Edmonton.

Would having a world-class sports arena district in Edmonton do that? If you’re a young professional with a fancy new degree in your hand, what types of things are going to attract you to a city? I would argue that having a Vibrant Downtown Sports Arena District with concerts, restaurants, bars, casino etc… would.

Like others have said, this does not come down to simple dollars and cents, you have to bring intangibles into the argument…

It’s not just about the OILERS. This is about what’s good for the city and what the benefits to our city would be.

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#149 outoftime
July 22 2010, 04:24PM
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@cableguy - 2nd Tier Fan

I'm not surprised by the response. But your argument is silly. The parking, concession and ticket dollars are collected by the company's who run them. The taxpayers of Edmonton recieve a pittance of this or nothing.

And the communities I mentioned all have one thing in common. People who go to events all go home at the end of the day. Unlike someone from Grand Prairie or Fort Mac who stay in hotels, shop, use restaurants etc. I would never expect those people to pay for this.

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#150 David S
July 22 2010, 04:28PM
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Interesting backgrounder on Northlands by Staples...

http://communities.canada.com/edmontonjournal/blogs/hockey/archive/2010/03/22/in-whose-interest-a-look-at-northlands-and-edmonton-s-arena-business.aspx

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