WITH REGARDS TO THE ARENA

Wanye
September 13 2012 11:37AM

Big ups to our main man @21bam21 for sending us the classic video above.

Bad news just seems to be raining down on the OilersNation doesn't it? First the lockout dominates our every waking thought as our beloved sport is put in jeopardy by the very same rich people who make their living from us enjoying our beloved sport. Then news that Randy Jackson isn't leaving American Idol after all. Then news yesterday of an alarming exchange between Daryl Katz and City Council.

Good times.

MYTHS

Let's all take a deep breath and calm down. 99% of what we are witnessing is theatre designed to create fear among us average folk and force the government's hand into publicly funding a greater share of a private-public partnership.

Read that again if you need to have it sink in: people who are experienced at this sort of thing are playing out drama designed to freak you out and make demands of government. There is no risk of the arena not being built and the Oilers leaving town.

Zero.

Everyone involved knows that this arena is going to get built. Make no mistake. They just want someone else to pay for it and are willing to stir us all up to sway public opinion. This is a play that was designed a long time ago and has been very effective time and time again. 

The City wants other governments to pay for this thing. Katz wants anyone but Katz Co to pay for it. The Feds don't want to pay for anything for fear it will lead to multiple demands for federal money for arenas in other cities. Fans just want to line up to pay $200 for a ticket to watch Dubnyk and Khabibulin battle it out for King Shit of the Worst Goaltending tandem in the league.

Good times.

MYTH: IF GOV'T AND KATZ DON'T HAVE THE $ ITS OVER

This is just utter nonsense. Companies and individuals with large amounts of capital would be all over putting in $100 million into funding the current gap. Think that a billionaire can't raise 100 million at the drop of a hat? Please. We guarantee that the Katz Group is appoached on the regular by companies looking to participate in the project.

Hell we saw representatives from the AEG at the Art Gallery for the launch of the arena designs at many months ago. They make millions of dollars every year by funding arenas that can't come up with the money from any other source. And they charge a boatload to do it. They have been hanging around since day one and aren't the only company that would jump at the chance to fund a project of this size in an economy as hot as Alberta.

If you are interested in an arena at a reasonable price you will want to avoid private funds which will want a much higher percentage return on their money thus jacking up the cost considerably. You might not believe it - but it is absolute truth.

No entity can borrow money at a lower rate of interest than a government. A government owned arena or some sort of partnership is the cheapest if a government body borrows the money at government rates and makes a return on the money they borrow.

MYTH: THE OILERS COULD LEAVE TOWN

The US is going through a generational recession at the moment in case anyone cares to look. Cities in the US are experiencing double digit unemployment, social unrest and bleak prospects for the immediate future. If you want to line up the teams that need to be relocated the Oil are like 25th out of 30th. 

One of the main reasons that the NHL is going to war over expenses (though they lack the PR sense to discuss it) is that the US economy is in dire trouble and there are several teams on life support. North American cities are splitting into haves and have nots and Professional Sports are exposed to a tremendous amount of risk as a result.

A strong market like Edmonton is not going to be disrupted no matter what nonsense is being thrown around in the media.

Read that again if you need to have it sink in: there is ZERO risk the Oilers are leaving town if they don't get a new arena. Zero.

EXPERT ANALYSIS

What we are witnessing here folks is theatre, pure and simple by people who are used to putting on this sort of play. Katz has more than the ability to put in the $100 million himself, or raise the capital with a couple well timed phone calls. Governments routinely split costs of publicly owned facilities like this and at the same time private money bangs these things out all over the world.

And the quickest way to get the deal done is turn up public pressure to 1000 until someone cracks and the thing gets built.

Don't let politicians, rich people or the media scare you. It is all a show designed to get a rise out of us all and everyone freaking out and blogging, tweeting and screaming their heads off is playing right into their practiced plans. Whether it's through a per ticket surcharge, $9 beers or tax increases you are paying your portion of the arena whether you like it or not. And odds are you won't even notice.

It's a similar situation over in the NHL-NHLPA war too. It's a shame that the average joe is the only one put out by any of these battles and picks up the tab for the entire thing anyways.

But that's a different conversation.

Mark this down: the arena will be funded and the first shovel will be in the ground in the Spring. This is all BS.

BELIEVE THAT

09049f03ecb006ab29372206f2a88f75
Blog so hard motherf**ckers try and find me. Email me at wanyegretz@gmail.com or tweet me @wanyegretz provided it is about Jordan Eberle or babes.
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#51 David S
September 13 2012, 09:50PM
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ubermiguel wrote:

Nothing against you either. I appreciate you're keeping it measured and not getting personal.

100% agree with you, no doubt Katz can get private financing (as opposed to building partnerships which was more where I was going with that). I know he wants to use gov't money because it's cheaper. But you saying "this deal may only be feasible for him by using those rates" is kind of what I'm getting at: rink = bad business. If I can only afford to buy a house with a 0.0001% mortgage, I can't really afford that house.

No doubt Wanye's a sharp guy. I love his businesses and will continue to support them. But I tend to trust what I read for myself and it's stuff like the links below that have me convinced rink = bad business:

http://www.uwlax.edu/faculty/anderson/micro-principles/stadiums.pdf

"independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development. These results stand in distinct contrast to the promotional studies that are typically done by consulting firms under the hire of teams or local chambers of commerce supporting facility development."

http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2257.1990.tb00513.x/pdf

"The evidence presented here is that the presence of a new or renovated stadium has an uncertain impact on the levels of personal income and possibly a negative impact on local development relative to the region"

I wish more Oilers fans would just admit, "I want a new rink because it's frickin' cool!" The business arguments are endlessly debated because they're endlessly debatable.

Every case is different. In Edmonton there's a severely underdeveloped downtown ripe for development with the right sort of stimulus. I've seen those studies you cited and more like 'em. I've also seen conservative estimates by city planners pegging development potential at $2 Billion probable and almost $5 Billion possible with the arena entertainment district being one of the prime accelerators.

What's not up for debate is the need for a new arena. Whether we like it or not the city will either dump $250 Million (more like $300M now) into RX1 for a major reno or downtown. There's also not much debate on which location has a greater opportunity for urban redevelopment. I had a meeting at RX1 the other day and was reminded how crappy an area it sits around when I drove down there (it's far more depressing when you drive in during the day let me tell you!).

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#52 David S
September 13 2012, 10:06PM
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I'd also add that the interest rate difference between private (banks/VC houses) and public (municipal/govt) financing on deals of this magnitude can easily be the difference between an unacceptable profit margin/no go and a favorable venture.

Of course this is all secondary since David Staples just released the real reason why things went so bad yesterday. Katz Group says that they need an annual subsidy of $6 million to make it work. Seems to me that could be made up with additional ticket taxes or some sort of annual lottery, but hey, what do I know?

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#54 Chris
September 13 2012, 10:41PM
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David,

It brings me no end of amusement that you feel that somehow your journalism degree gives you some special insight into the field of economics. Every major paper published in the field of economics finds that arenas are a shell game. You move some money from the suburbs into the downtown as people go to the game buy a steak and some beer while they're there. That and they buy hockey tickets rather than tickets to the latest Tom Cruise movie at the Cineplex.

The question is why should the taxpayers of Edmonton give a damn if people are spending their money in Hawkstone, Terwilliger, Belle Rive, Castledowns or downtown? I personally could not care less where people spend their money it has no real impact upon me personally so why should my tax dollars be devoted towards desperately trying to channel it in the direction of the down town area?

The idea that we need to redevelop the downtown area seems to assume that this is necessary. Why? If the market dictates that condos should be built south along the Hendey in Windermere or up in Schonesee great, let people live where they want and people will build where its profitable. If there was this great demand for downtown condos the land would be bought and they'd be built. Some have been over the last half a dozen years and amazingly it all happened while the hockey team played off in a gulley in Highlands.

Every independent study shows that arenas have essentially no economic impact. They do not create anything new. New people and businesses do not come to Edmonton on the basis of how nice one's arena is. Things like economic growth, educational and employment opporunities are what draw in new people and businesses. Shiny new arenas do not do this.

Estimates of revenues provided by the City don't factor in the fact growth would occur on its own whether its downtown or elsewhere in the city. And when you've your heart set setting a half a billion dollars on fire from an economic perspective you can draft any manner of optomistic estimates about how everything is going to be sunshine, lolly pops, mom and apple pie. It doesn't make anything said valid, independent or realistic.

The arena is essentially opperating in a closed system. That system is the entertainment market in the greater Edmonton metropolitan area. Outside of that area it is irrelevant. People are not going to flock to Edmonton's downtown from Outer Mongolia, the furtherest depths of the Congo or the sunny beaches of Australia just because we built a half a billion dollar gleaming zinc monstrosity in the middle of our city. You get the same people from Edmonton, St. Albert, Sherwood Park, Spruce Grove, Leduc etc that would come in to an Oilers game now, coming to an Oilers game in a new stadium but you have two or three thousand more seats. That's it.

I'd say its irrational to spend half a billion to ensure a couple thousand more people can get Oilers tickets but gosh I only have degrees in economics and law not journalism so what would I know?

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#55 J-Dogg
September 13 2012, 10:42PM
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I sent you that video weeks ago, didn't even get a reply, much less any credit.

I'm gonna grab a beer to soothe my wounded ego.

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#56 Wanyes bastard child
September 13 2012, 10:49PM
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@Chris

Thanks for the laugh Chris :) Your well thought out post is a rebuttal to the wrong David :P

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#57 The Soup Fascist
September 14 2012, 07:19AM
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Just as Daryl Katz is not actually Batman - David S is not actually David Staples .... Or is it David Staples is not really David S?

No matter.

..... However David S COULD be Batman.

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#58 Czar
September 14 2012, 09:01AM
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I wish more Oilers fans would just admit, "I want a new rink because it's frickin' cool!"

ubermiguel, The old barn sure isn't so YES,I would like the coolest rink in the league to go with the coolest team and the coolest fans. Can they get the beer a little cooler too?

Wanye, the video was cool too! Now I know why the kids are all over it and dudes been everywhere on the tube lately.

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#59 Ibbk
September 14 2012, 09:07AM
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Chris, your perspective is limited to residential only. I also care less where residential growth tale place. The FAR GREATER impact is in corporate growth which Edmonton was leading the nation for growth circa 1980, and has fallen every year since.

Every other city has invested in its business sector core, Edmonton has not.

By ANY worthy economics study the result is simply millions "saved" through neglect has cost 100's of millions if not a billion dollars in growth.

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#60 Rick
September 14 2012, 09:48AM
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@Chris

Taxpayers should have a very real interest in if money is being spent in downtown vs the burbs.

A sprawling city like Edmonton has become is the most inefficient city to operate. If you an funnel people back into the existing core instead of letting them to continue expanding outward then the city can better focus it's spending more efficiently.

An arena district is not a magic bullet it doing that but it can be a big piece of the puzzle. Both from an infill perspective and an attraction for people to gravitate to.

Further, all the economic reports that talk about a simple shifting of where the money is being spent tend to ignore that a portion of that money can be shifted right out of the city. It is not the boom it sometimes gets presented as but it is a luxury that can benefit a city and area if done right.

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#61 Jason Gregor
September 14 2012, 11:53AM
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ubermiguel wrote:

Wanye, why would Katz be wasting his time with the City if there is private capital available? Face it, an arena is a bad business venture, no smart business man (that didn't own a hockey team) would build one. It's a great thing for Edmonton's city core and general image, but it's not going to turn a profit.

Ask MLSE if their new arena turns a profit. In a major market with diehard fans, you can easily turn a profit.

It would be harder in Edmonton, but there is still a profit to be made. Both sides need each other to make it work. Make no mistake money can be made, but neither side wants to invest too much. Eventually they will figure it out, however, when they do the cost will be much higher than it is now.

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