ARENA DEAL IN LIMBO

Jason Gregor
October 17 2012 06:57PM

Yesterday Daryl Katz informed Edmonton Mayor Stephen Mandel that he wouldn't accept the mayor's invitation to come talk to city council. Today city council voted unanimously to cease negotiations with the Katz group and empowered city administration to look at other options.

This doesn't mean the deal is dead. The city is still very much open to negotiating with the Katz Group, but they will cease spending any more money on the design at this point.

Call it part of the negotiations, but for Edmontonians it was just another bad day in a four year negotiation.

This doesn't put the city any closer to a new arena, and make no mistake Edmonton needs a new arena, mostly because we need to start upgrading our downtown. The arena will be the catalyst, and now we to wait until January 13th to find out what the next step is.

There was also a motion tabled that would see the city agree to the original deal from last October. The reality is the longer this deal takes to make the more it will cost. For all those who are celebrating today as a defeat of Katz, keep in mind the city is no closer to a new arena, and you might be on the hook for the entire thing.

The most sobering and disappointing comment came from Mandel, "I don’t believe we are much further ahead today than we were four years ago except for a greater ask of money.”

Four years and no progress. Ouch.

Simon Farbrother, who has been negotiating on behalf of city administration, told council he didn't get the sense the Katz Group wanted to back off of their new demands of another $6 million/year in operating subsidy and so city council voted to cease negoitations.

WHAT NOW

  • I honestly don't believe that negotiating publicly would have helped Katz, but by not showing up he lost the trust of many Edmontonians. Why couldn't he have shown up and stated he was willing to continue to negotiate, but didn't feel doing it publicly would help. At least he would have shown he was willing to talk, and maybe answer a few simple questions.
     
  • Many have suggested the Katz Group should have to show his financials to city council. This could turn out to be a legal nightmare for the city. Can anyone guarantee some of the info wouldn't be leaked publicly? Rather than worry about that, city councillors should at least get to see the Master agreement. To date they've never seen that, and that is a tad perplexing. I'm not in favour of the Katz Group needing to show their finances. I think we can all see the Oilers have made a profit in the past.
     
  • The city can look at funding the arena on their own, but there will be some hurdles. They'd have to negotiate rent with Katz and they'd have to give him some non-game night revenue. Also then they'd be in the business of operating the arena, and that is something the city should be a part of. Maybe Katz operates it, who knows, but I don't think Katz will completely walk away.
     

I applaud the city for taking a stand. I feel this was a tough decision that needed to be done. I still believe both sides will meet again though. 

Today was not a win for anyone. We aren't any closer to a new arena, and in fact we are farther away than we were last October.

I hope that before January 13th the Katz Group contacts city administration and continues to negotiate. If they don't then city administration has to do some serious research and find out the major hurdles of building on their own and ensure they come to city council with plan that ensures we reach an arena deal sometime in 2013.

Unfortunately there is no resolution in sight. You know it is bad when the NHL and NHLPA might reach an agreement before the Katz Group and the city does.

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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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#1 Suntory Hanzo
October 17 2012, 07:00PM
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yar

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#2 Toro
October 17 2012, 07:06PM
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Man this is becoming a joke, Katz is so greedy it's unbelievable , I welcomed him as an owner 4 years ago and now , I wish he would sell the team too someone else in Edmonton.

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#3 Captain Obvious
October 17 2012, 07:10PM
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Why does the city need an arena? If an arena costs more to build than the revenue it generates, and that appears to be the case, what does the arena do other than syphon off resources from projects that provide a return on investment.

What evidence is there that an arena provides a catalyst to downtown development? Every time I hear this it sounds like pseudo-magical thinking. And if it does provide a catalyst, how do you measure the difference between an arena and no arena? If you can't answer these questions then building an arena is just throwing money at a problem and hoping. Public policy on a wish and a prayer is not a plan we should be following.

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#4 seelymac
October 17 2012, 07:29PM
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Katz wants $6 mill a year subsidy times the 35 year lease for a grand total of $210 mill.LOL how much did he say he would put in.

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#5 Captain Obvious
October 17 2012, 07:34PM
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Toro wrote:

Man this is becoming a joke, Katz is so greedy it's unbelievable , I welcomed him as an owner 4 years ago and now , I wish he would sell the team too someone else in Edmonton.

It doesn't have to be greed. He could be telling the truth that he can't make money under the current arrangement because operating expenses would be too high. However, if that is the case then that is even more reason not to build the arena. If an arena doesn't make sense even if you are having it built for free and you are getting all the revenue then it surely doesn't make sense for the city to pay for it and not get all the revenue.

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#6 Puritania
October 17 2012, 07:35PM
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Great year to be a fan. Nothing like putting up with years of torture, then finally getting a big fat bag of hope, only to get kicked right in the dick.

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#7 Walter Sobchak
October 17 2012, 07:35PM
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This is terrific! A museum that cost 350 million dollars a 100 % built with our taxes for a minority of the population will ever even use, we get to look forward to a council that took four years to broker a broken deal, flip flop on the 23rd ave interchange, let all the corporate offices leave to Calgary and take a decade to make the Henday, we the citizens get to fund a whole new arena project with immediate out of pocket taxes. B-e-a-utiful deal!

On a brighter note we get to watch Katz take the Oilers out of Edmonton, after watching them suck for a better part of a decade and just when they get good Katz will yank the Oilers out of Edmonton.

Meanwhile city council decides on what Communist looking concrete construction the lowest bidder will provide the greater Edmonton area with, while Northlands conveniently steps in and rapes the city anyways while the city still looks to attract another NHL club that should take another 5-8 years.

Welcome Edmonton Coyotes 2019!

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#8 15w40
October 17 2012, 07:44PM
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If the Oilers are losing $$ like Daryl says they are then shut the whole thing down. They are in the top 1/4 of the league in ticket prices and have a fairly lucrative regional TV deal and I would think their merchandise sales are also among the leaders in the league as well. If they cannot make money, I can't even fathom what the red ink would look like for the Florida teams, Nashville with the giant Weber contract, St. Louis, Dallas, or any team in California. Hell, I think you could pick just about any team outside of the original six franchises and they would be in worse fiscal shape than the Oilers. Make an argument for more money fine, but at least make it believable.........

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#9 @NateInVegas
October 17 2012, 07:45PM
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It's pathetic that the biggest Oiler supporters have had it with Katz. He comes across as being extremely disingenuous.

How did his original sales pitch of a facility for the UofA and $100M upfront turn into $0 upfront, a casino, a $6M/year subsidy, an office tower occupided by the city, and a weak attempt to relocate the team?

I think Katz 'vision' for Edmonton, is of himself in the mirror. (With as much of our money as possible)

If he doesn't like the 'framework' he agreed to last year, it's time to look for another owner. Or a private investor to offset the potential risk he's concerned about taking on himself.

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#10 Rexall Place no more
October 17 2012, 07:45PM
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Captain Obvious wrote:

Why does the city need an arena? If an arena costs more to build than the revenue it generates, and that appears to be the case, what does the arena do other than syphon off resources from projects that provide a return on investment.

What evidence is there that an arena provides a catalyst to downtown development? Every time I hear this it sounds like pseudo-magical thinking. And if it does provide a catalyst, how do you measure the difference between an arena and no arena? If you can't answer these questions then building an arena is just throwing money at a problem and hoping. Public policy on a wish and a prayer is not a plan we should be following.

That is just stupid talk ... did we need a new museum , Winspear, art gallery, hospitals , airport additions , city hall, rec centres, etc etc.

Rexall Place has to be one of the worst public arena's in Canada. It is a symbol of everything that is backwards thinking and wrong in Edmonton.

If there is money for culture and the Arts, new LRT lines amd rec centres galore there is money for a new Arena.

Northlands should be talking about replacing Rexall with a new arena uptown. Give Katz a great rental deal and if he can get a better deal elsewhere too bad for us BUT we need a new arena.

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#11 Rexall Place no more
October 17 2012, 07:48PM
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Some other blogger on another site implied that all was not so great in the Katz business empire ... could that be the reason for his flip flop ?

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#12 Walter Sobchak
October 17 2012, 07:53PM
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15w40 wrote:

If the Oilers are losing $$ like Daryl says they are then shut the whole thing down. They are in the top 1/4 of the league in ticket prices and have a fairly lucrative regional TV deal and I would think their merchandise sales are also among the leaders in the league as well. If they cannot make money, I can't even fathom what the red ink would look like for the Florida teams, Nashville with the giant Weber contract, St. Louis, Dallas, or any team in California. Hell, I think you could pick just about any team outside of the original six franchises and they would be in worse fiscal shape than the Oilers. Make an argument for more money fine, but at least make it believable.........

The Edmonton Oilers get ZERO non-hockey related revenue from RX1.

The Only NHL team that has this arrangement, hence the extra ticket prices ect, to make up revenue!

FLA and NASH don’t even have to sell a ticket to make money! There rinks make more money NOT playing hockey!

How is that a level playing field? The Oilers need a new rink period.

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#13 Puritania
October 17 2012, 07:55PM
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Walter Sobchak wrote:

This is terrific! A museum that cost 350 million dollars a 100 % built with our taxes for a minority of the population will ever even use, we get to look forward to a council that took four years to broker a broken deal, flip flop on the 23rd ave interchange, let all the corporate offices leave to Calgary and take a decade to make the Henday, we the citizens get to fund a whole new arena project with immediate out of pocket taxes. B-e-a-utiful deal!

On a brighter note we get to watch Katz take the Oilers out of Edmonton, after watching them suck for a better part of a decade and just when they get good Katz will yank the Oilers out of Edmonton.

Meanwhile city council decides on what Communist looking concrete construction the lowest bidder will provide the greater Edmonton area with, while Northlands conveniently steps in and rapes the city anyways while the city still looks to attract another NHL club that should take another 5-8 years.

Welcome Edmonton Coyotes 2019!

Don't think I've ever seen a post on the entire internet that I agree with more.

Infinite props to you.

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#14 dmac
October 17 2012, 07:59PM
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This is a real question. How many people a year grace the 350 Million dollar art gallery? I suspect the number is quite low. But these are the movers and shakers of the city and city councel I suspect. Yet those of us blue collar workers and middle income people who actually pay our taxes because we don't get tax shelters galore can't have a new rink. Don't get me wrong Katz needs to man up and start communicating with the people he wants the money from.

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#15 They're $hittie
October 17 2012, 07:59PM
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We need a new arena period. One of the many reasons is to keep northlands out of it. Look how bad they helped screw up champ car. I am glad they said screw you to Katz. Time to sell the team and go jump of a cliff. I would gladly own the oilers play in rexall and make 17M dollars a year also knowing that I am employing hundreds of people who most likely love their jobs.

IF YOU WANT TO MAKE YOUR POINT TO KATZ, NOW IS THE TIME. BOYCOTT REXALL AND BOYCOTT THE OILERS.

You can make your point to the NHL and NHLPA at the same time.

**a very simple start is to not click on their websites, get your updates from an independant site**

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#16 Gilmore Tuttle
October 17 2012, 08:04PM
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Walter Sobchak wrote:

The Edmonton Oilers get ZERO non-hockey related revenue from RX1.

The Only NHL team that has this arrangement, hence the extra ticket prices ect, to make up revenue!

FLA and NASH don’t even have to sell a ticket to make money! There rinks make more money NOT playing hockey!

How is that a level playing field? The Oilers need a new rink period.

Not quite true. The Oilers manage the arena suites and get all the ticket and concession revenues from them for every event in the Coliseum. Their deal also gets them a pouring rights fee when Northlands (who have a different brewery sponsorship agreement) runs an event like the CFR. The Oilers get all the advertising revenues in the building.

Rexall Pharmacies pays Rexall Sports and Entertainment for the naming rights. Northlands supplies all the staff for hockey games, which is a savings for Katz. The city gives Northlands the non-hockey ticket tax and $2.5 million to help pay for costs the Oilers don't have to pay, saving him money too.

He has a better deal than some teams that get all the revenues but have to pay all or a majority of the costs.

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#17 Captain Obvious
October 17 2012, 08:11PM
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@Rexall Place no more

If you don't understand the difference between public and private goods then you don't get to be a part of the conversation.

These things you list are not analogous.

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#18 Sanaa Montana
October 17 2012, 08:16PM
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Walter Sobchak wrote:

This is terrific! A museum that cost 350 million dollars a 100 % built with our taxes for a minority of the population will ever even use, we get to look forward to a council that took four years to broker a broken deal, flip flop on the 23rd ave interchange, let all the corporate offices leave to Calgary and take a decade to make the Henday, we the citizens get to fund a whole new arena project with immediate out of pocket taxes. B-e-a-utiful deal!

On a brighter note we get to watch Katz take the Oilers out of Edmonton, after watching them suck for a better part of a decade and just when they get good Katz will yank the Oilers out of Edmonton.

Meanwhile city council decides on what Communist looking concrete construction the lowest bidder will provide the greater Edmonton area with, while Northlands conveniently steps in and rapes the city anyways while the city still looks to attract another NHL club that should take another 5-8 years.

Welcome Edmonton Coyotes 2019!

Amen.

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#19 Reg Dunlop
October 17 2012, 08:36PM
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As a young man I learned to intentionally screw up any job I was forced to do, such as breaking dishes that needed washing or adding bleach to the colored clothes during laundry. Without actually refusing the work, without even complaining about the work,I got out of my responsibilities. Is it possible Katz has had a change of heart about being in the arena- operating busness? Without admitting it, he gets out of the situation by his douchery, knowing that the city will build an arena without his input. Is he really the puppet master? Or is he Pocklington version 2?

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#20 Fresh Mess
October 17 2012, 08:38PM
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Rexall Place no more wrote:

That is just stupid talk ... did we need a new museum , Winspear, art gallery, hospitals , airport additions , city hall, rec centres, etc etc.

Rexall Place has to be one of the worst public arena's in Canada. It is a symbol of everything that is backwards thinking and wrong in Edmonton.

If there is money for culture and the Arts, new LRT lines amd rec centres galore there is money for a new Arena.

Northlands should be talking about replacing Rexall with a new arena uptown. Give Katz a great rental deal and if he can get a better deal elsewhere too bad for us BUT we need a new arena.

The museum , Winspear, art gallery, hospitals , airport additions , city hall, rec centres, etc etc... are not privately owned by billionaire individuals with a personal profit motive.

You need to think this through a bit more.

Also, there are still some in society who hold education and enlightenment as priorities over professional sports.

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#21 Reg Dunlop
October 17 2012, 08:40PM
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Also,Cap'n Obvious, your input here is becomming DSFish in it's ability to irritate. Congrats.

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#22 VK63
October 17 2012, 08:46PM
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It occurs to me that Katz hired Bob Black (specifically) to handle this entire arena thingy on behalf of the Katz group.

So.

Given the assumed importance of this particular sitting of council to the City in regards to the arena deal. I would view this as a unique opportunity for Mr. Black to state the delinquencies of the proposal as viewed by the Katz group.

Instead.

A rather gutless letter from Katz (supposedly) stating that they wouldnt be attending.

ergo.

I want Bob Blacks job..... u get paid large and do sweeet f all. Winner winner chicken dinner.... Sign me up!!!!!!!!

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#23 Zamboni Driver
October 17 2012, 08:51PM
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@Walter Sobchak

With all due respect (and yes, that does mean what you think) - you and all the 'if it's Oilers it must be fantastic' nutbars deserve each other.

First of all, it WASN'T $350 mil (it's called "google" check into it) - second, the museum isn't owned by some dude named "Muse". The hockey rink would be operated, and net benefits to ONE PERSON.

The museum analogy is nonsense.

I'm going to say it slowly again. For the mouthbreathers and Horcoff fans.

THE CITY ALREADY SAID YES

Is that clear to you?

Your hero...who, btw didn't actually play for the Oilers in the 80s, he's a rich smurf...can't take YES for an answer.

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#24 Morgie99
October 17 2012, 08:57PM
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Toro wrote:

Man this is becoming a joke, Katz is so greedy it's unbelievable , I welcomed him as an owner 4 years ago and now , I wish he would sell the team too someone else in Edmonton.

Amen but that wont happen

Maybe he'll wake up

I applaud the city council and Mayor they called this clowns bluff the past 30 days, now where is he

unless he has a better eye on a deal, but masterful for city to look at doing themselves.

We build an arena, there's no way the NHL ignores us, but too handover 100% revenues would be ridiculous and wont happen obviously

This deal has always been 100 mill short to begin the despite Mandel reassurances which are so far empty

Katz has been played!

He will have to come back, at worst, the city will build a scaled down version, still more than adequate, and Katz can't leave , NHL won't let him, city has the leverage, perfect and about time

And best of all DSF can shut up about taking the Ferry to Seattle LMAO

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#25 Crooked
October 17 2012, 09:03PM
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This hasn't been a negotiation as much it's been a PR battle. Instead of bickering, posturing and bullying, they need to sit down and work out a fair deal.

The city deserves to get a return on it's investment, and Katz deserves to turn a profit. As long as the city clears the debt incurred from the construction and turns a profit before the end of the lease, does it really matter how much the team profits?

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#26 DSF
October 17 2012, 09:11PM
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Morgie99 wrote:

Amen but that wont happen

Maybe he'll wake up

I applaud the city council and Mayor they called this clowns bluff the past 30 days, now where is he

unless he has a better eye on a deal, but masterful for city to look at doing themselves.

We build an arena, there's no way the NHL ignores us, but too handover 100% revenues would be ridiculous and wont happen obviously

This deal has always been 100 mill short to begin the despite Mandel reassurances which are so far empty

Katz has been played!

He will have to come back, at worst, the city will build a scaled down version, still more than adequate, and Katz can't leave , NHL won't let him, city has the leverage, perfect and about time

And best of all DSF can shut up about taking the Ferry to Seattle LMAO

I'll always be more than willing to talk about the breathtaking ferry ride to Seattle.

It just has so much more cache than a drive from Edmonton to Calgary in a snowstorm to watch an NHL game.

But enough about me....

At this point, I think it's likely Katz will quietly put the team up for sale and we'll see if there is anyone in Edmonton with the stones and the rubles to buy the team for $225 million.

I expect there isn't.

Once Bettmann becomes aware that the the team has a reluctant owner and a shabby arena to play in, he won't be adverse to a relocation.

The City can ramble on about the possibility of building the arena on its own but it must be remembered that, without Katz, $125 million in ticket surcharge revenues will vanish as will Katz' $5.5million annual payment.

One would assume Katz will also pull back on his commitment to invest in the surrounding arena district so the value gleaned from the CRL will be much delayed and/or much reduced.

If the City can come up with $450 +++ million of its own (very doubtful) it will then have to go about wooing a major tenant to make its investment worthwhile.

Since we know how long it takes Edmonton council to make a decision on anything of import, it's highly like that, even if the city finances the whole thing, it will be many year before it is finished meaning construction costs will soar even further.

Would the last one out please turn off the lights.

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#27 Dave
October 17 2012, 09:27PM
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I disagree on the four years of negotiations, it's closer to twenty. This is the third owner(ship) trying to get a new building, city councils come and go, but one common denominator is Northlands has far to much influence in this city in all matters. The media is scared to shine a light on Northlands, but their not scared of a multi-billionair. What it tells me is Nortlands drives policy behind the scenes, how many councilars have a past or present relationship with Northlands. Anybody can support a new building in front of the cameras, and then undermine it behind the scenes.

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#28 David S
October 17 2012, 09:50PM
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Dave wrote:

I disagree on the four years of negotiations, it's closer to twenty. This is the third owner(ship) trying to get a new building, city councils come and go, but one common denominator is Northlands has far to much influence in this city in all matters. The media is scared to shine a light on Northlands, but their not scared of a multi-billionair. What it tells me is Nortlands drives policy behind the scenes, how many councilars have a past or present relationship with Northlands. Anybody can support a new building in front of the cameras, and then undermine it behind the scenes.

This deal would have been done at least two years ago if the city had issued a non-compete to Northlands. The reason Katz has to take such a conservative stance in his revenue projections (and thus now thinks he needs an operating subsidy) is that he must assume Northlands will compete for every piece of concert/event business up for grabs. Being a paid-in-full (100% by the city) property, they'll easily undercut every RX2 bid, thus take a substantial amount of business.

Northlands has enough political clout to make sure that non-compete will never happen. RX1 is their primary revenue generator so they'll do everything in their power to keep it operating when the truth is, this city cannot sustain two arenas.

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#29 Walter Sobchak
October 17 2012, 09:51PM
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@Zamboni Driver

You got Museum out of that? That's it? It was meant to be tongue and cheek.

As for "one person" go find another "person" to put up the cost/risk to develop not only the arena but the area around it.

Ya he does deserve a little something, unless you can tell me what the market in 2020 will be like?

You Sound like a hippy pot smoking liberal with little man syndrome, I'll take mouth-breather you can keep Horcoff though.

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#30 David S
October 17 2012, 09:56PM
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DSF wrote:

I'll always be more than willing to talk about the breathtaking ferry ride to Seattle.

It just has so much more cache than a drive from Edmonton to Calgary in a snowstorm to watch an NHL game.

But enough about me....

At this point, I think it's likely Katz will quietly put the team up for sale and we'll see if there is anyone in Edmonton with the stones and the rubles to buy the team for $225 million.

I expect there isn't.

Once Bettmann becomes aware that the the team has a reluctant owner and a shabby arena to play in, he won't be adverse to a relocation.

The City can ramble on about the possibility of building the arena on its own but it must be remembered that, without Katz, $125 million in ticket surcharge revenues will vanish as will Katz' $5.5million annual payment.

One would assume Katz will also pull back on his commitment to invest in the surrounding arena district so the value gleaned from the CRL will be much delayed and/or much reduced.

If the City can come up with $450 +++ million of its own (very doubtful) it will then have to go about wooing a major tenant to make its investment worthwhile.

Since we know how long it takes Edmonton council to make a decision on anything of import, it's highly like that, even if the city finances the whole thing, it will be many year before it is finished meaning construction costs will soar even further.

Would the last one out please turn off the lights.

Problem is, Katz most likely overpaid for the team with the assumption he'd make the premium he paid back with the new arena deal. He bought the team as an actual business proposition, rather than a hobby as many would believe. IMO, this is the root of the problem.

http://www.mc79hockey.com/?p=4927

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#31 DSF
October 17 2012, 10:00PM
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David S wrote:

Problem is, Katz most likely overpaid for the team with the assumption he'd make the premium he paid back with the new arena deal. He bought the team as an actual business proposition, rather than a hobby as many would believe. IMO, this is the root of the problem.

http://www.mc79hockey.com/?p=4927

Yeah, I think he had to pay a premium to get the team from EIG but Forbes now values the franchise at $210 million and I expect that will shoot up a bit as soon as the new CBA is in place.

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#32 book¡e
October 17 2012, 10:10PM
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dmac wrote:

This is a real question. How many people a year grace the 350 Million dollar art gallery? I suspect the number is quite low. But these are the movers and shakers of the city and city councel I suspect. Yet those of us blue collar workers and middle income people who actually pay our taxes because we don't get tax shelters galore can't have a new rink. Don't get me wrong Katz needs to man up and start communicating with the people he wants the money from.

What $350 million Art Gallery, the Art Gallery of Alberta was $88 million?

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#33 DSF
October 17 2012, 10:13PM
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In other news...word all over Twitter tonight that the Leafs and Canucks have all but completed a trade to send Luongo to Toronto as soon as the new CBA is in place.

I expect Mason Raymond will also be part of that deal and James Reimer has been skating with Canuck players at UBC this week.

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#34 book¡e
October 17 2012, 10:13PM
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@DSF

Ok - I'll respond, I don't want you to get lonely and actually interact with people in real life.

What $5.5 million payment? When you pay $5.5 million and then ask for $8 million a year in subsidy, that's a -$2.5 million payment.

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#35 DSF
October 17 2012, 10:15PM
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book¡e wrote:

What $350 million Art Gallery, the Art Gallery of Alberta was $88 million?

I think he means the new Alberta Museum which is estimated to cost $340 million.

http://www.infrastructure.alberta.ca/3654.htm

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#36 Graham James
October 17 2012, 10:26PM
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I just wanna dance!!

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#37 DSF
October 17 2012, 10:26PM
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book¡e wrote:

Ok - I'll respond, I don't want you to get lonely and actually interact with people in real life.

What $5.5 million payment? When you pay $5.5 million and then ask for $8 million a year in subsidy, that's a -$2.5 million payment.

They are two separate issues.

Katz committed to pay $5.5 million over 35 years ($192 million) to pay for his initial $100 million investment (plus interest) in the arena.

I have no problem with that since it only makes good business sense to access the very low interest rates the city can access as opposed to raising the funds on the capital markets.

As far as I can tell, Katz then asked the city for $6 million annually to offset maintenance and capital projects for the life of the agreement.

The optics of that are horrible as many, like you can't differentiate between the two issues.

Katz claims those funds were always part of the discussion and were supposed to have come from casino revenue but that has not occurred.

The city disavows this and that's where things started to go off the rails.

Then Katz wanted the city to commit to leasing space in his new office tower and things just ground to a halt.

It will be interesting to see how the city now plans to go it alone without a commitment from a major tenant.

Other things I think are worth watching for is how long it takes Northlands to stick its nose in and how the city would deal with its own new arena competing with Northlands old pig.

Northlands and its old boys network have controlled things in Edmonton for close to 100 years and you can bet we haven't heard the last of them.

BTW, I spend all day interacting with people in real life.

I just come here for the comedy.

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#38 cableguy - 2nd Tier Fan
October 17 2012, 10:35PM
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@Captain Obvious

What evidence is there that an arena provides a catalyst to downtown development? Every time I hear this it sounds like pseudo-magical thinking. And if it does provide a catalyst, how do you measure the difference between an arena and no arena? If you can't answer these questions then building an arena is just throwing money at a problem and hoping. Public policy on a wish and a prayer is not a plan we should be following.

have you actually went looking for evidence? or do you just say "well, i havent seen any evidence so there must be none."???

edit: i should clarify, i am in no way saying the city should bend over and give katz whatever he wants. no chance. however, the numbers are there to indicate everyone could do well long term. the deal has to be right, and i will give the city credit for standing their ground..

yes, katz has a f-ton of money. he made his money by not being a (complete) idiot. the district would help generate money for both katz and the city. both can pay. work it out, get it built...

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#39 book¡e
October 17 2012, 10:49PM
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@DSF

I don't have any trouble differentiating the intended goals of the money, but the reality is that if the payment in one direction is $5,000,000 and the payment in the other direction is $6,000,000, then regardless of how you frame it, it works out to -$1,000,000 per year.

Once you take into a account a few other things, its pretty easy to see that it's more than that.

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#41 Gazmort
October 17 2012, 11:00PM
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@DSF

Right DSF, you've correctly identified that the two cashflows are separate issues. What you haven't done is explain your position that we shouldn't be offsetting these two cashflows to arrive at a net result.

I'm really interested to hear it, especially given that I work in corporate finance and get to negotiate deals every day. What am I missing in your point?

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#42 Jason Ross
October 17 2012, 11:02PM
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@dmac

I want the new rink as much as and possibly more than the next guy, but can we leave the art gallery and museum out of the argument. The city needs those buildings as much as, if not more than they need the new rink. If you are choosing to not go to either, that's fine and your choice, but I can afford to take my family to both, several times over before I could dream of being able to take my family to an Oilers game. And both buildings and the great exhibits they put are well worth the money. You should really try to go sometime...

The problem with this is Katz is playing some game where he's the only one who knows what's going on. He's pissed off the city, and his biggest supporters on the council, he's pissed off most of the city with his ignorance and inability to speak up in public about why we should fund more of the arena operating costs. If he wants the money then someone from the Katz group needs to step up and say what they want and why. Without that they aren't going to get anywhere fast.

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#43 David S
October 17 2012, 11:06PM
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DSF wrote:

Yeah, I think he had to pay a premium to get the team from EIG but Forbes now values the franchise at $210 million and I expect that will shoot up a bit as soon as the new CBA is in place.

It's not the value of the team, rather the carrying costs. He probably financed the vast majority of the purchase. Servicing the debt with private financing is probably eating into his profit.

If he wants to leverage the team to finance the arena development (i.e. the office building), he'd have to show an EBIT of around 10%, which by all accounts is about what he's making right now (I've seen reports of around $20M).

His interest carrying costs bring that EBIT down dramatically, which I guess is part of his claim he's "losing money" with the present deal. Losing money in this case meaning "not making as much as he should".

A fine distinction, I agree.

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#44 TigerUnderGlass
October 17 2012, 11:11PM
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@ Captain Obvious

If you don't understand the difference between public and private goods then you don't get to be a part of the conversation.

This is getting stupid. You repeat this everywhere you post but you have yet to demonstrate the difference. An arena is a public good in every sense of the word. You just don't like that a private business may profit from it. That's fine, that's your right, but denying the arena as a public good is doing your own position a disservice.

@Jason Gregor

But when it is built I hope you honour your word and never enjoy any of the events there, because clearly you think it is a drain to the city.

This is equally asinine. You don't give up your right to use a facility simply because you think it's a bad idea.

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#45 Gazmort
October 17 2012, 11:12PM
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@David S

Confusion: EBIT = Earnings Before Interest & Taxes....right?

Interest carrying costs would not "bring down EBIT dramatically" because by definition EBIT is a measure of earnings before interest is deducted.

Further, I'm unclear on your EBIT of 10% that is required to finance construction of an office tower. This varies wildly based on amortization, interest rate, lease income, etc.

Lot of questions here.

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#46 TigerUnderGlass
October 17 2012, 11:15PM
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Jason Ross wrote:

I want the new rink as much as and possibly more than the next guy, but can we leave the art gallery and museum out of the argument. The city needs those buildings as much as, if not more than they need the new rink. If you are choosing to not go to either, that's fine and your choice, but I can afford to take my family to both, several times over before I could dream of being able to take my family to an Oilers game. And both buildings and the great exhibits they put are well worth the money. You should really try to go sometime...

The problem with this is Katz is playing some game where he's the only one who knows what's going on. He's pissed off the city, and his biggest supporters on the council, he's pissed off most of the city with his ignorance and inability to speak up in public about why we should fund more of the arena operating costs. If he wants the money then someone from the Katz group needs to step up and say what they want and why. Without that they aren't going to get anywhere fast.

The fact that you enjoy and can afford a museum is irrelevant. They are bult with public money, they service a relatively small portion of the population, and they do not provide good return on investment.

The only reason people see a difference is because a wealthy man might profit from one. This is not a good reason to refuse to build an arena. There are plenty of other reasons, but this is pure idealistic nonsense.

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#47 David S
October 17 2012, 11:19PM
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book¡e wrote:

I don't have any trouble differentiating the intended goals of the money, but the reality is that if the payment in one direction is $5,000,000 and the payment in the other direction is $6,000,000, then regardless of how you frame it, it works out to -$1,000,000 per year.

Once you take into a account a few other things, its pretty easy to see that it's more than that.

Because there's TWO payments. The repayment of the $100M and the operating costs (rough estimate of $6M/yr.). They are not substitutable as many think. That's called a double-dip error.

If I understand Katz latest latter correctly, his team ran the numbers and came up with the conservative estimates (including the high probability of Northlands outbidding them for a substantial number of event nights - currently in excess of 220 days a year) leading them to believe they wouldn't be able to cover the operating costs and expect a reasonable return.

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#48 Gilmore Tuttle
October 17 2012, 11:19PM
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@David S

The non-compete was illegal. The City can't really force Northlands to do anything. They have another 30 some year contract with the City to operate the Coliseum - forced on them by Reimer in a past effort to keep the Oilers around.

The building title belongs to Northlands. Like their other buildings, it was 1/2 paid for by provincial and federal grants and 1/2 paid through a 30 year mortgage by Northlands. The only city money that goes into it would be the yearly subsidy that they had to pay to Northlands to help cover team costs.

If the city actually owned the Coliseum as most Katz boosters claim, why would they need to force a non-compete on anybody? If it was their building, they could close it down tomorrow. It isn't so they can't.

If Katz was willing to buy it and the related event business that goes with it at a fair market price, I am sure they would sell and be done with a tenant that costs them a lot in direct and indirect costs.

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#49 Kypreos
October 17 2012, 11:20PM
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A crazy owner looks good on Edmonton. A couple of years ago you were ready to give him the key to the city. What a joke! How do feel about supporting a guy like this.

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#50 RJSOILER69
October 17 2012, 11:30PM
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Guys, Mayor Mandel set a "Drop Dead" date (Please don't quote me on this) but he drew a line in the sand!

Do you really think the katz group would show up at this "DEMAND" from the mayor? No Way in Hell! This negotiation is now trying to find the balance of power. IMHO, they will posture for a while longer and sort it out and I believe they will come to a mutually agreed upon arrangement. But there are 2 scenarios at play here:

1. Split the costs with the Katz group and everyone wins. We can start being proud of our downtown, Katz is footing "some" of the bill. We need to work towards a sustainable model. and they (katz group)might also make some money along the way.

2. The City builds the rink and "our" oilers move before the rink is secured in a fashion conducive to this environment. Yes we will certainly have many new suitors for our city built rink, but we are now negotiating from a position of weakness and suddenly the team plays here rent free, retains all the HRR and other related compensation out of desparation to have a team here!

I don't think that the city should hold its ankles while dealing with the Katz group, I just think all parties are missing the bigger point!

But then again I drink beer and read oilersnation as my number one hobby with this god foresaken lockout in effect!

Cheers... My 2 Cents

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