Sympathy for the Devils?

RexLibris
October 20 2012 09:33AM

Photo: y2kcrazyjoker4/Wikimedia/CC BY-3.0

The Edmonton arena deal isn't dead. I know it looks bleak right now, and frankly the negotiations surrounding this whole thing are starting to make the NHL and NHLPA look good, and that's bad, but this isn't the first time similar groups have butted heads over massive building projects.

Here is an example of another team's arena negotiations that may give heart to Oilers fans - the New Jersey Devils and the construction of the Prudential Center in Newark, New Jersey.

Most of us don't really follow the Devils. They're an Eastern Conference team associated with stultifying defence and a GM that we love to loathe because he is so damned much smarter than the rest of us. I think many fans are vaguely aware of the team being close to bankruptcy. As for the building of the Prudential Center from 2002 to 2007, it kind of got lost in the shuffle of news of two Alberta teams' deep playoff runs, the hype surrounding Sidney Crosby's first few seasons in the NHL as well as the Pittsburgh arena deal, and countless other distractions.

Here's the thing, the river of antagonism that is currently flowing between the Edmonton City Council and the Katz Group hasn't yet reached the level that existed between the City of Newark and Vanderbeek beginning with their arena negotiations and extending all the way up to the present day.

Photo: Bbsrock/Wikimedia/CC BY-SA 3.0

First, our two principal dramatis personae: Jeff Vanderbeek, owner of the Devils who purchased a majority control in 2004 and Cory Booker (pictured above), mayor of Newark, NJ, elected in 2006.

The differences are significant between the relationship of Katz and Mandel to that of Vanderbeek and Booker. In Edmonton, both groups want the same thing, a downtown arena, but disagree as to the level of risk to which each party must be exposed in any deal.

However, let's look at Booker and Vanderbeek, and all the other details surrounding the Prudential Center to see if things in Edmonton are really that bad by comparison.

The Continental Center in East Rutherford was in need of replacement. It had been built in 1981 and was well behind the NHL standard for venues. Newark, at the time, was also desperate to kickstart a downtown revitalization program that would attract people from the suburb communities. The crime rates and stigma attached to Newark don't compare to Edmonton's, but the underlying desire to provide a catalyst to economic development does.

First, here is some of the language floated by Vanderbeek shortly after purchasing the Devils, regarding the building of a new arena in Newark: “The Devils need a new arena that can provide a game-day experience that is certainly equal to the best team in the National Hockey League and certainly equal to the product that is put on the ice” and that this project “would take downtown Newark to a whole new level”. Sound familiar? After only a few months in office, Booker announced that he would re-evaluate the deal, even as the arena was being built, with the option of withdrawing the city's participation. A few months later Booker relented saying that Newark would get “a first-class arena built...whether we like it or not” (citation here), going on to say that not proceeding would likely result in “a tremendous amount of litigation”. Doesn't that sound like a vote of confidence?

*As a side note, the Prudential Center took about three years to build at an estimated cost of $375 million, during a time of high construction costs, and includes only a few of the entertainment amenities that the Downtown Arena plans currently envision.

Vanderbeek was a vocal proponent of a new arena dating back to his time as a minority owner of the team. Prior to construction there were legal battles to determine eminent domain and the extent of the city's financial participation in construction. While the municipal government had originally committed to aid in the arena project in 2002, the city and the Devils finally came to a deal in 2004 after lawyers had settled most of their disputes. Groundbreaking took place about a year later in 2005. Booker's predecessor (and now convicted felon) Sharpe James, had a sketchy history of ties to developers and there remained discomfort in some quarters over the city's relationship with the Devils' as it pertained to this deal.

Despite the intervention of the lawyers, the Devils and the city still fought over the amount of money that would be contributed to the project. It eventually got to the point that, while the groundbreaking had already taken place in October of 2005 and a workforce of thousands had been retained to start building, it wasn't until one day before the financial deadline in January of 2006 that the Devils' ownership submitted their letter of intent to help finance the project to the tune of $100 million. Failure to do so would have halted the entire project mid-construction.

Enter Cory Booker, elected mayor of Newark on July 1st.

Stop Me if You've Heard This One Before...

Photo: mastermaq/Wikimedia/CC BY-SA 2.0

For Oilers and Flames fans who have been following the Edmonton arena dispute, specifically the contest of wills between Daryl Katz and Stephen Mandel, we haven't yet seen anything like the schoolyard antics between Vanderbeek and Booker over, of course, money. This was an arena deal that had gone way past sour.

Even the national political partisan divide seems to enter the fray. Booker, a Democrat, has gotten embroiled in a dispute over the Devils with New Jersey governor Chris Christie, a Republican and avowed Rangers fan (link is here). Booker is defending the city's case in money's payable to the government while Governor Christie has said that the city owes money to the Devils.

Rent hasn’t been paid to the city since 2007 because of a dispute over parking fees payable to the Devils. This lead to an increasing acrimony between the two sides.

Recently an arbitrator was needed to rule on the financial state of the two entities relative to contracts signed and payments owed. The city, according to the findings, owes the Devils approximately $15 million, roughly $600,000 more than the Devils owe to the city for their contracts and services rendered. When two sides need to go to arbitration for what is, relatively, small potatoes in the world of financial governance, you know that the relationship is strained, if not broken.

This ruling has led to stories swirling that the city is infuriated at the outcome to the extent that the police presence at games has been reduced.

Mercifully, we haven't seen anything of that magnitude here in Edmonton.

My point is that while Katz and Mandel appear to be playing a game of chicken with this arena development plan, in the end the city will get a new arena. They almost always do. The team is going to stay – prior to the Prudential Center being built there were constant rumours of the Devils moving, even as far back as 1995 when they won the Stanley Cup – and the Katz group will get a deal that they can live with. Will the taxpayers pay for it? Of course they will. Just as we pay for roads, sewers, police, parks, and so on. It is a part of the cultural infrastructure of a city. The extent to which it will come out of the city's tax revenues remains to be seen, and it is best left to far keener minds than I to work out those details. But rather than wringing our hands (or gloating if you're a Flames fans) over this ongoing melodrama, we ought to remember that other local goverments have negotiated, or are currently negotiating, deals to build massive new “entertainment complexes” to house alleged economic engines and sources of civic pride all over North America. Edmonton is neither alone in this, nor particularly outstanding in their experience thus far.

That being said, it isn't easy to see more progress happen between Bettman and Fehr than Katz and the city of Edmonton. Until this gets sorted out, or the NHL season starts, let's just watch some Eberle and Yakupov highlights and try to forget about the “business of hockey”!

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#1 BlacqueJacque
October 20 2012, 09:44AM
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It's not a part of our infrastructure. It's a luxury.

Taxpayers can share the burden but they shouldn't subsidize the profits of a billionaire.

And before any moron jumps in asking "what's wrong with private profit", it's because it isn't private profit - it's publicly subsidized profit.

We - the great mass of middle class and lower class Edmontonians - pay taxes (either directly through property tax or indirectly through fees and rent which then pays property tax) in order to build and maintain this city and benefit its citizens at large. This is money we give up to spend on ourselves in projects necessary to the city's well-being that none of us could afford alone.

Subsidizing a private entertainment district and guaranteeing profits for someone who doesn't need the money is a complete waste.

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#2 Boourns99
October 20 2012, 09:46AM
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Good article. I'd be interested to know what tangible benefits downtown Newark has realized as a result. That probably is the biggest detriment and source of angst from the anti-arena crowd (as in the above comment).

We do need to get this back on the rails. And BlaqueJaque, this IS a part of the infrastructure and long term viability of the city of Edmonton whether you want to believe that's true or not. Being a world class city means having world class facilities - for arts, education, and entertainment. To keep Edmonton thriving requires a new arena - how it is built is what is being hotly debated now. Would you rather that all of the dollars came from taxes?

Thanks Rex

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#3 Ales Hallsky
October 20 2012, 09:57AM
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BlacqueJacque wrote:

It's not a part of our infrastructure. It's a luxury.

Taxpayers can share the burden but they shouldn't subsidize the profits of a billionaire.

And before any moron jumps in asking "what's wrong with private profit", it's because it isn't private profit - it's publicly subsidized profit.

We - the great mass of middle class and lower class Edmontonians - pay taxes (either directly through property tax or indirectly through fees and rent which then pays property tax) in order to build and maintain this city and benefit its citizens at large. This is money we give up to spend on ourselves in projects necessary to the city's well-being that none of us could afford alone.

Subsidizing a private entertainment district and guaranteeing profits for someone who doesn't need the money is a complete waste.

I disagree. It is a part of infrastructure. The city shouldnt get fleeced, the investors should make a profit. More action, less pants.

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#4 They're $hittie
October 20 2012, 10:10AM
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Uh Yakupov and Eberle Hilights? I wanna see Schultz hilights.

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#5 oilers2k10
October 20 2012, 10:59AM
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I'm following the oilers wherever they go next..obviously they aint goin to seattle and if they do good..I will cheer for the Seattle Oilers then.. Enough of this BS

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#6 HardBoiledOil
October 20 2012, 11:01AM
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i'm not concerned about IF we get a new arena, but i am concerned about how long we may have to wait to get a new one! i'm starting to really dislike seeing games at Rexall. to me it's an old dump and i would like to get to the new arena as quickly as i can, but the dilly dallying continues!!

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#7 ubermiguel
October 20 2012, 11:09AM
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They're $hittie wrote:

Uh Yakupov and Eberle Hilights? I wanna see Schultz hilights.

http://youtu.be/CMfw1fXGeks

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#8 Quicksilver ballet
October 20 2012, 11:14AM
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Kinda funny to see how the worm has turned on this new arena issue. A year ago, one in 40 comments was opposed to this idea and were branded a lunatic by many here. Now, close to 50% of the comments posted here see the light of this situation.

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#9 EHH Team
October 20 2012, 11:27AM
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HardBoiledOil wrote:

i'm not concerned about IF we get a new arena, but i am concerned about how long we may have to wait to get a new one! i'm starting to really dislike seeing games at Rexall. to me it's an old dump and i would like to get to the new arena as quickly as i can, but the dilly dallying continues!!

I agree. I have held season tickets since the WHA days and I would like to be able to enjoy games in a modern facility. Rexall is cramped, the ice seems to get worse every year, and soon it will be seen as a joke around the league. First we thought the arean would be up for 2014, then 2015, now it looks like 2016 unless Katz, the City & the Province get their acts together.

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#10 Dutchscooter
October 20 2012, 11:43AM
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Before the gloating by Flames fans about the Edmonton situation gets disgustingly ugly, remember that after we get our new barn it's YOUR turn to replace the Saddledome. It'll be one of the oldest arenas in the league.

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#11 Czar
October 20 2012, 11:57AM
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@Dutchscooter

Reports have been swirling around for some time now that the Flames brain trust,and I use that term loosely, have been waiting to see how this plays out before they proceed forward.The ugly sisters to the south can't attract some of the bigger entertainment acts these days and it looks good on them!

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#12 David S
October 20 2012, 11:57AM
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BlacqueJacque wrote:

It's not a part of our infrastructure. It's a luxury.

Taxpayers can share the burden but they shouldn't subsidize the profits of a billionaire.

And before any moron jumps in asking "what's wrong with private profit", it's because it isn't private profit - it's publicly subsidized profit.

We - the great mass of middle class and lower class Edmontonians - pay taxes (either directly through property tax or indirectly through fees and rent which then pays property tax) in order to build and maintain this city and benefit its citizens at large. This is money we give up to spend on ourselves in projects necessary to the city's well-being that none of us could afford alone.

Subsidizing a private entertainment district and guaranteeing profits for someone who doesn't need the money is a complete waste.

Every large Private-Public-Partnership is going to "subsidize the profits". I assume you're dead-set against the Millwoods LRT expansion because a private company might be involved? Oooooooo Scary!

Remove the fact Katz is more financially successful than all of us and half the (faux) angst out there has no substance.

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#13 Fresh Mess
October 20 2012, 12:09PM
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I guess the taxpayers of Edmonton should start subsidizing cineplex odeon too. They provide about as much 'cultural infrastructure' as Katz does.

Where does it end.

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#14 yawto
October 20 2012, 12:13PM
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Dutchscooter wrote:

Before the gloating by Flames fans about the Edmonton situation gets disgustingly ugly, remember that after we get our new barn it's YOUR turn to replace the Saddledome. It'll be one of the oldest arenas in the league.

Ya it will be easier for the Flames cause Edmonton has done all the heavy lifting. Flames fans will make fun and laugh it up but in reality Calgary is just a follower of Edmonton and only makes fun cause they live in its Shadow. Just like kids, the baby always gets an easier ride by the older stronger one breaking the trail.

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#15 Butters
October 20 2012, 12:25PM
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I will defend Flames fans, this time only. I have not met one Flames fan who wants the Oilers to leave, not one. And these are Flames fans that HATE the Oilers.

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#16 David S
October 20 2012, 12:41PM
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It's interesting to note that negotiations are usually close to concluding when one of the parties indicates a clear willingness to leave.

This deal will get done. Book it.

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#17 Butters
October 20 2012, 12:47PM
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@David S.

Bingo!

The city stood up to Katz, they got their political capital. I am not certain they are actually that far apart. They can't seem to agree on how much scratch Katz is going to make; X as the KG maintiains or 5X as the city claims. I think they need to find that number somehow and agree to it. The Count probably has an idea.

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#18 John
October 20 2012, 04:37PM
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I live in SK and make the trip to Edmonton 3 or 4 times a year and rarely miss a game on tv (DVR is the greatest invention of all time). I do believe that I would go more often if the stadium was built. I look at my riders and think what if they left? Our province would be heartbroken, not everybody, but a lot of people. As in Edmonton we are building a new stadium, and its not easy. But it has to be said that the burden is on the taxpayers and it always will be. I have taken two sports economics classes that have proven time and time again that the taxpayer will never see that money again. Yes it generates business and a few more people will come a few more times but in the end it will be on the tax payers to pay for it. But to me its worth it, and it seems that way in Edmonton as well. Just don't go into thinking its a money making venture, as proven in many other cities that build stadiums, the money just changes venues but it doesn't grow. Another thing they taught in that class is that salary caps don't work. The rich teams in big markets will always find a way to be at the top. Parity will never be achieved and if you look at the winning percentage of large markets to small across all sports its quite apparent, even under salary caps. They find a way (17 year contracts?). Also interesting fact was that stadiums make more money overall if they are at 90% capacity as opposed to being completely sold out. The congestion slows concessions sales and liquor sales and creates lineups everywhere which causes a bigger loss than if they sold 10% more tickets, to me thats incredible. That's why its always important that teams always get concession sales included in their contracts now (they didn't always). Also, this is by far the best site for oilers fans, I read every article and find myself agreeing with most opinions of the writers, very Bob Mckenzie like.

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#19 BeeKayDub
October 20 2012, 04:44PM
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Too many people are blaming Katz for the cruddy negotiations. I wonder if it was the old ownership group of 20 local rich guys, instead of the single billionaire, would we be more angry/impatient with Mandel and city council instead? It's too easy to blame the uber rich guy. Gee, why doesn't he just spend a whole bunch of money and not worry about any return on his half billion dollar investment? After reading the Katz letter to city council, I have a bit of a different perspective (not that I'm totally pro Katz in this now but it did let me see how much the Katz group has offered to get this deal done).

To suggest that "luxuries" like an arena will not have a significant impact on things other than the owner's bank account suggests a lack of understanding and vision. City council knows that a new arena is a good deal for the city, which is why they've been negotiating in earnest for so long. For this reason, some investment of public money is appropriate.

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#21 Smokey
October 20 2012, 06:08PM
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Quicksilver ballet wrote:

Kinda funny to see how the worm has turned on this new arena issue. A year ago, one in 40 comments was opposed to this idea and were branded a lunatic by many here. Now, close to 50% of the comments posted here see the light of this situation.

Oilers fans as a whole want an arena, and there are many who have always been against publicly subsidizing Katz. I`ve never seen a scientific poll on Edmontonians views on whether money should go towards an arena, but I believe it would be close with a slight edge to the no`s.

I`ve kept my mouth shut on the forum in the past as I did not want a public flogging at the expence of the Katz arena lovers led by the media propogandists who praised the deal religiously. I want an arena, just not this deal. If the city is going to spend the money, then they should build it period the way they want. I`d rather see the arena be built by the private sector, cause it can and it should have. I`ll admit I`m not one for corporate welfare.

Please flog me gently...

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#22 Butters
October 20 2012, 06:52PM
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@Smokey The deal is supposed to be quid pro quo. Katz gets a healthy margin as the operator of the arena. The city benefits becuase the surrounding development will increase the tax base. I don't think it is a good idea if either side goes at this alone. But the City wants the arena bad enough, if push came to shove, they will build it alone. Everybody will get there share, they just haven't agreed to what Katz's will be.

Also, nobody loves Katz right now. We just want the Oilers and the arena.

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#23 Butters
October 20 2012, 07:06PM
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Rex, great article, and it is somewhat of a relief to learn that NJs arena debate was far more acrimonious than ours. My faith has been restored.

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#24 Walter Sobchak
October 20 2012, 09:12PM
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I do find the Brooklyn arena and the Atlantic Yards almost mirror's the downtown situation best.

As for the Arena in NJ and the NETS the governor farewell speech was great!

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#26 D
October 21 2012, 12:23AM
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Anytime sums amounting to 1/4 to 1/2 a billion dollars are at stake, there is going to be serious heavy financial lifting involved, and lots of disagreements and fights. But the equation should remain the same (for both sides): can the money my side invests into the project result in a future stream of revenue that, discounted to present value, is greater than the initial investment? If yes, proceed. If no, pull the plug.

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