The thorniest issue amongst Edmontonians with regards to the new arena remains how it will be funded.
We seem to fall into four groups on the matter:
- People who want a new arena and would personally pay via taxes towards it.
- People who want a new arena but don’t want to personally pay via taxes.
- People who don’t want a new arena and don’t want to personally pay via taxes.
- People who want the Mayor personally fixing the pot holes in front of their house at 4 PM on a Tuesday.
We can totally understand the reluctance of some Edmontonians to want to see their hard earned dollars go towards a new arena, particularly if they don’t attend Oilers games, Justin Bieber concerts or anything else at the facility.
But paying the City "paying for a free arena" should not be confused with using the City’s borrowing power to fund the arena at a much lower cost, nor should it be confused with a concept like a community revitilzation levy – or a CRL.
Gary Lamphier of the Edmonton Journal wrote an interesting article in the Journal the pointing out holes in the arena development project and nothing the value of a CRL as a means of financing the arena district.
“Although Mayor Stephen Mandel seems determined to wrap up the Seinfeldian arena "debate" — such as it is — in early April and push the project ahead at Mach speed, it’s hard to see why with so many key questions unresolved.
Although the Katz Group has committed $100 million to the arena and a ticket tax might raise another $125 million, the rest of the funding model looks shaky at best. So far, there are no federal dollars, no provincial dollars, and no other private dollars committed to the arena.
That leaves a proposed CRL (Community Revitalization Levy) as the only other potential source of funds. And while the CRL sounds good in theory — i.e., any new taxes generated from new hotel, condo, casino, office or retail projects on the 6.4-hectare redevelopment site would be used to help pay for the arena it’s all just hot air until real projects with real budgets and timelines backed by credible developers come forward."
Firstly, Katz has committed $100 million to the arena and an additional $100 million to the arena district. This is often overlooked in the debate. Keeping the basic facts straight has been one of the many issues that have been needlessly complicated during this entire process.
Secondly. the idea of a CRL is a good way to fund the arena. It prevents the average Edmontonian from having to dig into their jeans to fund the arena through higher taxes.
This would placate the folks who scream “not a penny for this arena shall come from my wallet good Sir!” while at the same time allowing the City to levy a tax on all of the developments in the arena district as a means to generate revenue to service the construction debt.
The other good thing about a CRL? Once the debt to the City has been paid back – with interest like any debt – they are free to use the revenues as they see fit for ever and ever amen. With the amount of development that would go on in the arena district, this sum of money would be considerably more than the vacant lots and parking facilities currently contribute to City coffers.
The City estimates the CRL could cover a $125M investment in the arena. Katz has vowed to invest $100M in the district – aside from the $100M into the arena – which would bring the development to $325M. That would represent a sizeable chunk of the total budget that has been thrown around and doesn’t represent a dollar of new taxes paid by Edmontonians.
One thing we should keep in mind during the final push towards a decision on the arena. No one can borrow money as cheaply as a Government. You think you can roll in to the local money mart and demand a $400 million dollar loan? Think again son.
But Cities have access to money at much lower interest rates than anyone else, which would in turn lower the price of the payments of the arena district significantly. There may be private money floating around out there willing to fit the bill – ol’ Phil Anschutz springs to mind – but we need to consider all of the costs involved in taking that money at higher rates.
You borrow $400 million at 5% interest vs 10% and you have a much cheaper arena when all is said and done that is paid off much faster.
Ever wonder how much RX1 cost to build back in the 1970s? How about $17.3 million dollars – roughly $77 million dollars in 2011. Looking back 40 odd years you would be hard pressed to find a reason that this wasn’t a slam dunk of an investment that has generated that money back for Edmontonians many, many times over.
The cost of the entire arena in 1970s dollars doesn’t even buy you five consecutive games of Shawn Horcoff hockey in 2011 – if our math is correct.*
Everyone in the know seems to think that a decision on this baby is imminent and can be expected in the next several weeks. Here’s to hoping that creative ways can be found to minimize the impact on tax payers and get the thing built as cheaply as possible.