SOMEBODY’S POISONED THE WATER HOLE!!

 

The last 24 hours have been interesting times for the city of Edmonton. Fans found out a good portion of the ownership group and their icon collection were apparently shopping for a new city.

As with all things, context and understanding are vitally important. I’m no expert when it comes to the arena deal, but it looks like there are several pressure points on both sides:

  • Costs are going up
  • The negotiation has been going on for a generation and the two sides appear to have a wider gap than they did at the beginning.
  • The "deal" that had been agreed to–at least that was the fan’s understanding–is now not good enough.
  • "Casino" money–part of the initial deal–may not be available.
  • The city has recently rejected the Katz group request for a subsidy.
  • Mr. Katz gave a long and meandering interview ("the White Album") in which he expressed frustration over the long and drawn out process.
  • Mayor Mandel suggested he was also frustrated and went public with the idea Katz talk to council with camera’s on.
  • Katz and his entourage made their most public appearance in a new town, in a clear and perhaps desperate attempt to put pressure on the city. 

QUIT HORSING AROUND!

A statement released by the Oilers yesterday confirmed the visit and generally acknowledged that this was a pressure drop without actually saying the words. The statement did discuss the fanbase:

  • “We are extremely grateful to Oilers’ fans for their patience and loyalty as we work through this process towards what we sincerely hope will be a long and successful future for the Oilers in Edmonton. We have no further comment on the status of our discussions with other markets at this time.”

MY TAKE

The problem Mr. Katz is having–in my opinion–is that Edmontontians were very uncomfortable but willing to live with the deal made with the City. The mayor’s reaction to the new request for dollars was a perfect mirror for the citizens, and that gap–however wide–may be the hill the mayor and the city of Edmonton choose to die on.
 
Can the casino gap be made up with user fees? What about a "community fundraiser" committee ala the 1500 Saskatchewan Roughrider groups who help the team? What about–and don’t kill me–a third partner who invests and also shares in the (obvious) profits?
 

WHAT DOES IT ALL MEAN?

 
 
This isn’t an easy negotiation for either side, and I do believe the city has stretched itself to the breaking point. The feeling I get in talking to Edmontonians is that they know the current deal is a huge win for Katz but are willing to live with it. Is there an appetite to go to ‘infinity and beyond’ for the Oilers and homey Daryl Katz?
 
I suspect we’re about to find out.
  • Woogie

    The funny thing out of all this is. Katz holds all the cards and leverage just like the NHL owners do against the NHLPA.

    The city will give in to the demands by Katz and the NHLPA will do the same to the NHL.

    The sooner we get this done the better for everyone involved. Especially for the FANS!

    • book¡e

      No, he doesn’t. The American economy is in the tank still and municipal subsidies are drying up quicker than city halls are being sold. Yes, there is Seattle, but there are other teams that should and can move their before the Oilers. This is not the mid-90’s when Oil was $20 a barrel and the economy in Alberta was bad.

  • Why does Katz want every part of this negotiation public except for the minor detail of how much I’m going to be paying for this exactly as a taxpayer?

    That’s really the only part of the negotiation I want/need details on, and it’s the part he wants to hide from the public.

  • 2004Z06

    One thing Oilers fans seem to forget. Katz is a businessman. He bought the team with money he earned from being a businessman. He runs the team as if it were a business. (which it ulitmately is). It is HIS team. Not the fans team, not the city’s team. It is his. He can run it and do with it what he wants. We may not like it as fans, but it doesn’t really matter in the grand scheme of things. Of course he wants to make money on the deal and the surrounding development. That is how he became a billionaire. He doesn’t have to cater to you or I or the city at all. I love the fans passion, but we can’t be telling the guy how to run his business.

  • 2004Z06

    Wayne Gretzky on Hockey Central noon. Zero – his answer when MacLean asked the chance they allow a move of Oilers out of Edmonton. Apparently he was in Seattle with the gang watching the NFL game. He said he “kinda likes that old building” “had a lot of fun there”. There ya have it.

  • book¡e

    I just posted on Gregors blog . Hit Mr Katz in the pocketbook . If the 100,000 + fans boycott Rexall Drugs maybe he will feel it. Maybe that also would send a message re the lockout . These owners all have other businesses across North America . The fans can do nothing about hockey but just maybe we can send a different message .

  • B S

    If people are going to have an opinion on this deal they might as well base it on some facts.

    Fact #1 Publicly funded arenas are in general bad economic investments for cities. All economists (i.e. 100% agree on this). In those rare cases where an argument for publicly funded arenas make sense in particular circumstances the break even point is somewhere around 20% public investment.

    Fact #2 Katz not only wants a 100% publicly funded arena but he wants operating subsidies on top of that funding. The technical details surrounding the deal conceal this.

    These are the facts. I was willing to support the original deal because of the intangible benefits to me personally, and because of the aesthetic appeal it would mean for downtown. However, intelligent conversation on the arena begins with recognizing that the original deal was a bad economic deal for the citizens of Edmonton.

    However, we are well past the breaking point. If saying no to the arena means Edmonton loses the Oilers I am fine with that trade.

    The city has leverage here. Edmonton doesn’t need the Oilers. If he doesn’t want a 10% return on investment here I am perfectly fine with the Oilers leaving forever. In fact, as an Oiler fans and an Edmontonian, I would rather the Oilers leave than engage in terrible public policy.

    • So paying $100M worth of the mortgage and giving up $125M in ticket tax somehow equates to “100% publicly funded arena”?

      The operations expenses were to be covered by a casino on the premises, which the city was supposed to facilitate. Either they haven’t been able to make it happen or just never got around to it. This was part of the original deal. The operation expenses were on top of the $100M, not a substitute. You’re double-dip accounting if you make that assumption.

      • B S

        He’s not paying $100 M of the mortgage though. Part of that $100M is coming from the city in terms of advertising.

        And the $125M in ticket tax isn’t his either. The city is fronting it and it gets paid over time.

        In any case, the original deal was bad, the new one he’s trying to pull is much, much worse.

        • B S

          I guess whether the deal is good/bad is determined on your point of comparison… If you look at Quebec who’s paid every penny publicly – this deal is great… If you compare to what Hansen in Seattle is looking at doing – this deal is atrocious..

          Personally, I still like the idea of investing in this project… The downtown core would be revitalized significantly and the city should be involved… Now of course, I don’t believe Katz should be getting everything he wants but a world class facility worth $450 million with an initial $225 investment doesn’t sound so bad considering the offshoot revenue the arena would bring ($1.4 to $3.0 billion)…

      • book¡e

        I would also like to see documentation on these economists you continue to refer to… The City of Edmonton themselves has projected the amount of money coming in to the downtown core (over the life of the arena) is again projected anywhere from $1.4 million to $3.0 billion… Perhaps these economists are referring to money going directly into city coffers rather than the businesses the arena would attract?? If so – fine, I get your argument… The city invests $225 million and doesn’t see the entire amount back in return?? Granted – with the projected increase in property taxes, I still don’t see that, but the council is also responsible for improving the overall business environment of the city along with promoting culture… A downtown arena accomplishes both tasks…

        What are you trying to say that I’m missing?? Why would this investment be a terrible public policy??

      • book¡e

        I would also like to see documentation (Captain Obvious refers to) on these economists he continues to refer to… The City of Edmonton themselves has projected the amount of money coming in to the downtown core (over the life of the arena) is again projected anywhere from $1.4 million to $3.0 billion… Perhaps these economists are referring to money going directly into city coffers rather than the businesses the arena would attract?? If so – fine, I get the argument… The city invests $225 million and doesn’t see the entire amount back in return?? Granted – with the projected increase in property taxes, I still don’t see that, but the council is also responsible for improving the overall business environment of the city along with promoting culture… A downtown arena accomplishes both tasks…

        What is he trying to say that I’m missing?? Why would this investment be a terrible public policy??

        • book¡e

          See the Zymbalist report, or really any of the economic literature on sports arenas. Now that report was commissioned by Northlands but it is based upon independent, peer-reviewed, research.

          The city of Edmonton is projecting 1.4 to 3.0 billion dollars of revenue because they are trying to sell the deal. However, that isn’t new revenue to the city, it is revenue that either is redirected from investments that would have occurred elsewhere or is part of the normal inflationary process of development.

          Second, sports teams do not contribute a lot to local economies. The reason is that the income they capture is discretionary, which means they take money away from other local entertainment options, while a large amount of their expenses escape the local economy.

          Third, to respond to David S’s point, the ticket tax is not money that Katz is putting up. While it is true that it is revenue that he is foregoing, if the team did not exist that money would be spent elsewhere in the economy which would in turn drive exactly the kind of investment the arena is supposed to produce. A tax is still a tax. It is not money that Katz is spending.

          Add all these things up and a new arena will not provide an economic benefit to the city. On this, all economists agree. There are no success stories.

          Now there is benefit in redirecting investment towards downtown. However this is not a net benefit, or if it is a net benefit, it is small. It does make the city better, however a publicly funded arena of this kind is a bad way to achieve this goal if the % of funding gets too high because it prevents the city from doing other things that could accomplish the same goal. Opportunity cost, and what not. Zymbalist recommends 20% public financing. There is room to quibble over the precise numbers but the chasm between a reasonable deal (say 25% financing) and what Katz wants is so large that there is no argument to be had here.

          • book¡e

            I just reviewed the Zymbalist report… First and foremost – his report was more of his opinion rather than substantiated fact (IMO) but let me recap for you a couple things that I found…

            #1) And I quote Edmonton should “consider serious proposals for a new arena of for a significant renovation to Rexall Place to bring up to NHL standards”…

            #2) an arena does not raise employment or per capita income levels…

            #3) the report uses Columbus, Indianapolis, LA and San Diego as comparisons

            First – even the economist you refer to has stated that something NEEDS to be done… Granted he recommended that the city shouldn’t fund more than about 20% – which equates to $90 million – but even he is admitting that someone whether it be Katz or the city or together needs to do something…

            Second – the argument I’m making isn’t that the arena will improve the quality of life for the people there… I’m saying it will add more money and tax revenues to the city… The economist’s again you refer to argue that the tax revenue moves from one point to another… That’s a fair point – assuming we had a mecca of economic activity anywhere else in the city… Currently, we don’t have one before, during or after an Oiler game or any concert… A new arena won’t pull revenues from other areas of the city – it will create a new one to supplement the current areas we have, which are far and few between…

            Finally – the basis of the argument are the cities of Columbus, Indianapolis, Los Angeles and San Diego… Those markets are not in comparison to Edmonton’s economy… First – only Columbus and Los Angeles are the only two cities that have hockey teams (that have different revenue streams than we see in the MLB, NFL or NBA). Those hockey teams also trail behind the NFL, MLB and NBA in popularity and market share… In Edmonton – the Oilers have no competition… Again – comparing the two are comparing apples and oranges… A better comparison for the Edmonton market would be Vancouver or Toronto where these teams to face the same competition…

            I also note the concern that funding an arena would pull funding from other vital areas… As Edmonton isn’t a corporate juggernaut like Calgary or Vancouver or Toronto – I ask you what other revenue-generating activities would you spend the $225 million on?? The downtown core isn’t vibrant and asides from another museum or art gallery, I can only see the city spending more money on road repairs, snow removal and other maintenance activities…

            And finally – not all economists agree on this…. The report refers to only two economists… I’m sure we can dig up other opinions that would support additional public financing… I’m sure the mayor of Quebec had some educated people suggesting that a downtown arena will aid his city…

      • JonW

        David S, is the S for Staples?

        If that’s the case, then I know what you’ll be arguing for, I digress

        I could careless if the Casino was part of the original deal

        It’s insane the deals pro sports requires, especially the NHL

        It’s too f-ing much, period!

        The CRL would have to be a slam dunk to do anymore, and even then nothing is guaranteed with projections in real estate building

        Enough for Katz in the original deal

        His EGO will kill this deal if we don’t get on our knees and start sucking

  • book¡e

    Haha oh man I get a real good kick out of Edmontonians standing up right now saying “IF THEY WANT TO LEAVE… LET THEM.”

    Are you kidding me? The Oilers are a huge part of Edmonton and the city just wouldn’t be the same without them.

    I don’t agree with the Katz funding model either, however, he is the only one who has actally come up with a plan to build a new arena. No owner would ever pay for the majority of the building in a market like Edmonton. It’s just not viable.

    Unfortunately, this is business – and it kind of sucks. I definitely feel like Katz is taking advantage of the Citizens which is really odd. It’s like this greedy bastard came out of no where… but now we are stuck with him for now.

    Many we should put up a bunch of Calgary Flames stuff all over his home…

  • book¡e

    ”We are extremely grateful to Oilers fans for their patience and loyalty as we work trough the process towards what we sincerely will be a long and successful future for the Oilers in Edmonton. We have no further comment on the status with other markets at this time.” Excerpt from team press release.

    Seen in another context. ”I would like to thank my wife and children for their patience and loyalty and sincerely hope we will enjoy a successful future together. I have no comment to make at this time but the other women I have been boning in Seattle, Quebec City and Hamilton while I consider my options.
    Love
    Daddy.

  • I have three thoughts to comments on this blog:

    1. If the casino was originally apart of the arena deal, I don’t understand why Mr. Katz left it up to the city to lobby the province. You cannot convince me that a man worth $2 billion doesn’t have connections within the provincial government to help move along the casino for the entertainment complex he wants to build.

    2. I have heard others on 1260 or 630 say this and I agree, if Gretzky can leave Edmonton right after winning a cup, then anything can happen, including the Oilers leaving our city.

    3. I don’t understand if there is an impasse on the price of the facility, then why doesn’t one of the two side create at IPO for weather it be an ownership stake in the Oilers or the Arena, I know either one I would pay into myself.

  • JonW

    I am still trying to understand why people think museum = arena. The big difference is no other levels of government are funding the Arena. The RAM is being built with a combo of Fed and Provincial funding. Two are not even close to similar.

    Katz group taking credit for paying for half of the arena better look at their numbers again. 125 million coming from the ticket buying public in the form of a ticket tax is not his money. Unless he is planning on charging fans the equivalent amount less in ticket prices (we know how that works)this is propaganda plain and simple.

    This move by the Katz group yesterday really angered me. I was a supporter of public money for the arena. I believe the deal is not great but it should work over the long term as long as the surrounding area can fund the CRL. But the idea that somehow the Oilers are subsidizing anything is ridiculous. Far from it the CRL will be only dedicated to funding the arena until it is paid off so no tax money goes anywhere else during that period.

    This means a significant drain on possible funding. Now we can argue that this funding would not exist without the arena but lets not make it out as some kind of free found money.

    And it is not equal to funding older neighbourhoods or newer ones because the total cost of the arena may do little to entice people to flock downtown. Or create multiple jobs past construction. If anything it is a nice to have which MIGHT trigger a small amount of development.

    The concept that somehow the Oilers are the white knights in all this I would have hoped is passed. Pocklington at least gave the city Five Stanley Cups before his business collapse created the horror scenes in the early nineties. Katz so far has offered up a poor product a premium prices with threats to move to places in no position to accept the team.

    Great move, man I am so negative compared to a year ago on this.

    • B S

      A little out of date. The Tories said they don’t want to fund the museum anymore, and I’m doubting the feds will fund it either given their outright hatred of anything scientific or informative at the moment.

      And yes, for a Billionaire, Katz seems to think he has more leverage than he does, not exactly good business acumen. Threatening to move a team in a profitable market to a 4th string arena, still not owned by him, during a lockout, is possible the stupidest thing I’ve heard in a while.

      “If you don’t pay me to keep the Oilers in a publicly funded, but privately owned arena where they aren’t going to play given the constant string of lockouts, I’m moving this non-team to some selfish union friendly hell-hole like Quebec City.”

    • JonW

      Jonathan,

      Brilliant again, you really make far too much sense and logic, god bless you! Truly!

      People don’t grasp the ticket tax at all and suggest Katz is losing/contributing at that same equivalent amount, which is simply not true.

      Even if someone believed that premise, it’s not dollar for dollar, that is, if ticket tax is $1 dollar per ticket, that doesn’t mean Katz can’t sell tickets for $1 dollar more of course, but if the ticket tax was $25 dollars per ticket on average, then perhaps.

      so if my math is correct, if it was dollar for dollar a $125 Mill ticket tax would mean Katz loses the opportunity to charge $125 Mill more so 125/125 = 1, dollar for dollar

      at 25/125 = .2 or twenty %, or Twenty cents on each dollar of ticket tax.

      So .2 x 125 Mill = 25 mill Katz loses by Ticket tax potentially or much much less, since people will pay anything it seems for tickets