ARENA DEAL IN LIMBO

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.

  • DSF

    As one of the many that was ecstatic when Katz bought the team I am seriously disappointed in the latest news. To me Katz is either an incredibly arrogant rich jerk or he is running a house of cards like Peter Pocklington and needs hockey to support his lagging businesses. The man will go visit the city of Seattle but won’t lower himself to talk with the city of Edmonton, his supposed partners. The man who is “willing” to put 5.5 million dollars yearly towards building the arena if the city pays him 6 million dollars to offset it. Turns out he is not the saviour he led us to believe but just the latest owner with a napoleonic complex to try to blackmail our city because of our love of hockey. Well there is bad news Katz. Our love of hockey is being ruined by the other Napoleon, Bettman, and the incredibly shortsighted and greedy NHLPA. Eventually, and quickly, there will be a tipping point where many of us just won’t care. That point may have already been reached in many regions of the U.S. and it is folly to think it can’t happen here.

    Props to many on the city council who put their careers on the line and got their feet kicked out by the latest greedy “gnome”.

  • DSF

    Lets see what city contingency plan is before all is said and done . It might be far superior than conceeding too much to Oilers as current deal suggests financially and otherwise . Katz could go buy another team , but i doubt Bettman and the Nhl would allow him to move team if we build a new arena without first putting them up for sale , perhaps even to city .

  • Numbers! Numbers! Math, Integer, Ledgers! Cashflows, Equity, Risk.

    I wanted to add to the conversation so I thought I’d adopt the language. Except I think when you translate what I said to english it says, “Where can I Milk the Hamburger?” and all I really wanted to say was, “Where can I find the Washroom?”.

    I think I should cancel my extended vacation to the Island of Accounting.

  • DSF

    Gregor brings up the best point in the discussion when he says the city cannot grant casino licenses. It is a provincial matter through the ALGC. Katz would have to go and apply for a licence through them. The only way the city can help Katz on this matter is perhaps lobby a bit on his behalf to the ALGC. That said though, Katz is the one who actually has to apply for it. For people to say that the casino is a no go and that is why Katz needs the $6 million per year is ridiculous. He has not even applied for a license yet.

  • DSF

    I wonder if Katz may make overtures to Sherwood Park or even Red Deer/Saskatoon to cut the city out of it completely.

    Would have to be to a completely different physical and financial scale in those cases.

    To me the whole “get Bettman in” part of his letter seems to me that Katz is intimating that Bettman has his back if it comes to relocation.

    • DSF

      Bettman has already been very clear that Edmonton needs a new arena to keep its hockey team.

      If Katz was to look at an alternate location, I would think Enoch would be near the top of that list.

      You can bet the feds would be chipping in there.

      • DSF

        There is no disagreement between Katz and the City when it comes to the question of Edmonton needing a new arena.

        As for Enoch being an option, only a fool would see it as legit.

          • book¡e

            Enoch would be fine if Katz wants to build and pay for a Rink. He could build a great rink at Enoch for about $250 million.

            The feds would never put money into a rink at Enoch. What would make you think that they would? They have no history of such investments and would have no reason to get involved at all. I would think that it is more likely that the government of China would invest in a rink at Enoch than the Canadian federal government.

            Why would Katz build a rink at Enoch when he could have a much better rink for far less in downtown Edmonton?

            Enoch was an option when Katz was actually discussing building an arena, now that he sees the ‘team as subsidizing public infrastructure’, that is not going to happen.

          • For starters you’ve been banging away on where the risks lie in the deal, why would Katz willingly partner up with an entity that has an extensive track record of mismanaging it’s business ventures?

            Let me stress – PARTNER UP.

            In addition, people have cited the Henday as reasonable access when infact it does not actually get you to Enoch. Who is gonan pay for any needed infrastructure extension?

            LRT? No chance.

            Spin off development? Good luck with that.

            Servicing the complex, as in water, sewer, power and so on…the City of Edmonton holds teh hammer on that one and Enoch isn’t exactly in the City’s good graces when it comes to that type of agreement.

            You have a 2 year old phantom threat by Katz backing the suggetsion and the notion that the Feds would be eager to pony up the cash…care to wager they actually would?

          • DSF

            1) No need for a partnership. Enoch builds the arena. The Oilers play in it.

            2) Enoch is about a 60 second drive off Henday. I would imagine the arena would be built near the casino.

            3) The West LRT is being built to Lewis Estates. The route will be along Whitemud Drive which is about a stones throw from River Cree Casino.

            4) Spin off development? Who cares.

            5) Water, sewer and power already run to Enoch. Ridiculous argument.

            6) Enoch already owns the land.

            7) The Federal Government has a long history of funding projects to increase employment on reserves.

          • DSF

            1) Fine

            2) Ok, but an assumption, and as the old saying goes…

            3) Define a stone’s throw and a cold January night. It isn’t coming onto Enoch lands, I know that much.

            4) Who cares? Anyone interested in business development does. Everyone should.

            5)Sufficient water/power to serve an arena? I dunno, and neither do you. More importantly, road access to/from the site where the City ends and Enoch begins. Major, major issue.

            6)Ok

            7)Ok

          • DSF

            3) Oh good grief…take a look at a map. Enoch is literally across the street from Lewis Estates. It’s no farther than the far end of the parking lot is from Rexall Place.

            4) If it makes business sense to build more, it will happen. But it doesn’t require any Katz investment unless he chooses to do so.

            5) The city ends to the west of Henday. Building an access road off Henday would be simple and relatively inexpensive compared to downtown construction.

          • DSF

            I know you’re exasperated with how simple we all are, but I am simply raising points that I’m confident would come up. “Good grief” them all that you want, but you can’t ignore the objections that inevitably arise.

            Plus, you are assuming the the arena is built near to the River Cree or closer to the Edmonton/Enoch division, the same way you are assuming that building an access road of the Henday is simple and relatively inexpensive (relative to what, exactly?) – again, you are making these assumptions without knowing about potential 3rd party development in the areas, municpal lines/rights of way, etc.

            By the way, it never hurts to acknowledge someone else’s points wherein they have either a) proven you wrong or b) raised a point you hadn’t previously considered. Try it sometime. You might like it!

          • DSF

            Are you seriously secure in assuming that the most logical choice (at least by your perception) is always what ultimately ends up happening? Surely you know that isn’t necessarily the case.

            Plus, as I explained in the post, there’s a number of unknowns that might make it impossible to build there. I’ll give you a good example – suppose that one of the conditions for the Costco moving into the building nearby included agreements with the City and/or Enoch that no venues that would require parking (that may overflow into their customer parking lot) be built within, say 2.5 km of their site. Enoch and the City, wanting Costco as an anchor tenant in the area, agree…uh oh, now we’ve got a problem!

            Unlikely example, of course. My point, again, is that what presents itself as the logical solution is often not as simple as we would like to think.

            “Good grief” right?

          • Are you seriously secure in assuming that the most logical choice (at least by your perception) is always what ultimately ends up happening? Surely you know that isn’t necessarily the case.

            I am when there are no other plausible locations. Perception has nothing to do with it.

            Plus, as I explained in the post, there’s a number of unknowns that might make it impossible to build there. I’ll give you a good example – suppose that one of the conditions for the Costco moving into the building nearby included agreements with the City and/or Enoch that no venues that would require parking (that may overflow into their customer parking lot) be built within, say 2.5 km of their site. Enoch and the City, wanting Costco as an anchor tenant in the area, agree…uh oh, now we’ve got a problem!

            All any of this tells me is that you have no idea how the development process works. It also indicates that you are probably a bit lost as to how the Edmonton/Enoch dynamic functions.

            I agree that an arena happening out there is somewhat unlikely but the reasoning you present is broken.

          • It is a simplistic hypothetical that I used, but your comments indicate that you’ve never been involved in negotiating real estate deals. I have. Such restrictive covenants exist.

            Please, educate me how I’m so clueless then.

            Or ignore it. You seem to be better at being aggressive moreso than actual presenting a fact-based argument. You were plenty good at telling me I’m clueless, but at no point did you explain why or how I’m wrong. Try harder!

          • your comments indicate that you’ve never been involved in negotiating real estate deals. I have.

            FFS. I’m going to give you a pass on this and assume you just don’t know, even though a few people on here do.

            Please, educate me how I’m so clueless then.

            Here then, prove your vast commercial real estate knowledge:

            How would a Restrictive Covenant limiting parking in a 2.5 KM radius be imposed or even registered? You’re using terms you don’t even understand.

          • DSF

            1) They can’t afford it. The best they can offer is a place to build it.

            2) Put 10,000 cars on the two lane access road that starts at the property line of the reserve the 60 seconds stretches out alot longer.

            And that’s completely ignoring that the White Mud is only 2 lanes from the Henday to the reserve.

            3) And from there it will only be a 45 minute walk from the arena…in the winter…assuming it’s adjacent to the casino.

            4) Katz does, he clearly based his previous business plan around it.

            5) Not a ridiculous argument, it’s an issue that has real history, a lot of bad feelings and an outstanding debt to the CoE behind it.

            6) Repeat of #1

            7) As I said, care to wager? Out of curiosity, what was the Federal involvement with the Casino?

            Look I get you have a contrarian schtick going on around here, I even find it amusing sometimes but you are out of touch on this one.

          • DSF

            The types of employment projects funded by Aboriginal and Northern Development Canada on reserve are much more modest in scope. I cannot imagine AANDC getting involved in a project of this nature as it would appear to fall outside their program authorities and decimate their capital budget. Approval would likely require Cabinet approval, which would create all kinds of problems across the country.

            Given that Enoch has problems with the casino, it would also appear problematic for them to raise private capital to fund construction. If Katz is willing to cover the construction cost on Reserve, then he may as well do it in Edmonton.

            All in all, I think Enoch is as bad a bluff as Seattle.

  • Enoch is an interesting alternative. I personally hate it, but would prefer it to, say, Kansas City!

    The problem, as identified by Rick, is that the Enoch Band doesn’t have a fantastic track record. I’ve heard rumblings that the Marriot is very unhappy with the hotel operations and have considered pulling their flag. Combo of lack of activity on the access/utility developments, as well as generally poor management of the facility.

    If the Marriot is having trouble, I imagine the smaller Katz Group would too.

  • book¡e

    Why don’t they just build the arena without Katz’s money and get this Arena built. Look at the money we are spending on the new museum, art gallery etc. If Edmonton wants to be a world class city then build the Arena. Katz is spending money to sign players like Hall, Eberly and soon Hopkins. If Edmonton wants to compete with the New York’s and Chicago’s its time to step up and spend some money. In the big scheme of things the province and city waste hundreds of millions of dollars on less important things. I like our mayor but I don’t believe some of the councellors have the capacity to make a decision on this issue. Some are in it for publicity. Ask Winnipeg how they felt when they lost the Jets? Our downtown is brutal spend some money on fixing it up!

    • DSF

      Katz should just move the team to Fort Mac., *&^%$ Nortlands and there sheep in city council. I bet they could get a building and crazy support in about 3 years. Ask Chris Philips of the Ottawa Senators how much support hockey gets in his home town. Move Oilers Now! Move Oilers NOW! Edmonton can just go back to being known for……What is Edmonton known for?

  • OilClog

    Having gone around the world, and now living on the west coast.

    This is embarrasing as a former Edmontonian.. I really thought reason would previal and this thing would get done.

    Edmonton needs the rink and the Oilers.. Traveling with my Oilers backpack through my journeys in other countries.. Edmonton is known for two things.. One The Oilers, not that everyone knows what they are, but it’s recognizable. The other is the mall.. and that’s barely a whimper..

    If the Oilers leave town, it will really be known as Deadmonton.

    But hey if they move to Seattle excellent! I’ll wear my vintage jerseys, and cheer em on.

    Katz is a putz, but the municipal and provincial governments need to recognize the importance of what they could be losing. Or you know.. build more homeless shelters instead, cause supporting the unmotivated and pathetic is clearly more important, creating healthy economic situations.(Sorry that was part of my hate of Victoria) but still.. the shoe fits.

  • Quicksilver ballet

    Sorry Mr.Katz but I think you screwed up again . The way I see it is you convinced our mayor to go to NY to meet Bettman . He did and you came to a working agreement but then you thought your risks where to high and wanted more . To me that means you screwed up in the begining so the onus is on you to open up new lines of conversation . Maybe the 35 years should be 20? Maybe you shouldn’t commit to investing in the new surrounding area being developed ?? and on and on but if you don’t explore new ideas this will just keep dragging and if you loose an NHL season there will be more backlash from the citizens .

  • DSF

    I always thought building the arena out at Enoch made a lot of sence. Much cheaper to begin with, room to have plenty of parking, so lets drive there, get in and out thanks to the excellent access of the whitemud and henday. I,ll have my dinner and drink in my community, don’t need to be downtown when its 20 below. The amount of empty grey concrete surrounding the downtown arena on non event days will not revitalise downtown, just create some wind tunnels.

  • DSF

    Harper gets invovled and transfer Oilers to Marois in Quebec City to appease the separatists(tongue in cheek ).Then they set up for Quebec City to be World Capital of one World Gov’t. – tongue in cheek . Would you believe that is no Red Bull Crashed Ice ? City then gets failing U.S. franchise to fill their new, or old arena ,owning the team and building . Reasoning , less costly than dealing with Katz ?

  • DSF

    From the Oilers website:

    Daryl Katz statement following the City Council meeting

    Thursday, 18.10.2012 / 2:30 PM /

    We are concerned about the implications of the motion passed yesterday by City Council. We do not yet have a view on what comes next, but we remain hopeful that there is a solution that achieves the mutual goal of securing the Oilers’ long-term sustainability in Edmonton.

    xhttp://oilers.nhl.com/club/news.htm?id=643759&navid=DL|EDM|home

  • DSF

    Ominous reply . If arena is such an economic boon to city and Katz , then Katz should build it and ask for lease(on land i believe) like as given to Dell when they were here . Something like $1.00 a year . That way he retains all the profits as well . Seems to me both would profit . Current deal seems like only Katz profits while most everyone else subsidizes his bills to a tune where city stands unmaintainable losses over 35 years or so .

  • DSF

    The way I see it, Katz has no leverage.

    1) NHL wouldn’t let Oilers move (#7 in revenue with sold out building?)
    2) Owner either takes the deal as is, renegotiates with the city in good faith or sell the team.
    3) If team sold, start at step 1 with new owner