Thoughts on the new arena deal

On Wednesday, Edmonton City Council voted 10-3 in favour of an amended framework to construct a new downtown arena. Mayor Stephen Mandel said the words that many an Oilers fan with arena fatigue wanted to hear:

It’s 100 per cent. A deal is done.

With all due respect to the mayor, the deal actually isn’t done and it won’t be unless everything goes as hoped by the parties on March 7. That and some other comments about the revised agreement after the jump.

The city’s update on the revised arena deal is available from the city’s website and serves as the primary source for the points made below.

The deal is not done, because there’s still $114 million in funding that needs to be secured. The city hopes to pick up $7 million each from the federal and provincial governments to fund a related community rink and $100 million from the provincial government to pay for the arena construction. Mandel sounded optimistic that the March 7 provincial budget would make it clear that the money was coming and also exactly where it was coming from, but until it’s actually announced this isn’t a done deal.

With that said, that extra $100 million seems more likely now, given finance minister Doug Horner’s comments in the piece linked in the last paragraph:

It would be fair to say we’re looking at something all municipalities would have access to. We’re not funding directly corporations to build facilities.

Putting those comments another way: ‘We can’t be seen to be directly funding corporations, so instead of just cutting a check for Katz we might put together a new program that will sprinkle money all over the place and allow the City of Edmonton to cut that check.’

As for the complete funding breakdown, here’s the chart from the city’s report:

All told, $333 million of the $601 million total budget for the project is currently expected to come from public coffers. The ticket tax will be levied by the city both on the new arena and at Rexall; the rate for that tax will be determined by Katz’s people. Katz’s contribution will be “paid as rent over 35 years” – meaning that for the next 35 years, the money the Oilers pay to play in the new arena will be used to pay off Katz’s portion of the arena’s construction costs.

One interesting change: the ticket tax is being expanded to include an additional annual contribution of $1.5 million to pay for “major capital rehabilitation and replacement.” In other words, Katz will still pay for major repairs and renovations, but he’s now doing it out of the ticket tax, ensuring there’s money available for those costs. This is beneficial for the Katz group because it also raises the taxes on events at Rexall, heightening the difficulty for the latter facility to remain competitive.

What happens if costs rise again? Katz Group will be responsible for any increases in the price of the Winter Garden; the city’s contribution is capped at $25 million. On the arena, presumably the 50/50 rule would apply for most items, but not for all. As one example, if changes to the east wall are required because Katz Group’s plans for development around the arena change, “the City will be responsible for the cost.” The city will also pay for the community rink, including picking up that extra $14 million if the provincial and federal governments don’t contribute $7 million each.

In exchange for $333 million in public dollars, as well as taking out the loans to cover the initial construction (which will be paid off by “rent”) taxpayers get:

  • A 35-year location agreement with the Oilers
  • A guaranteed $100 million in development around the arena (the Journal article quoted above says the Katz Group currently plans $2 billion in development around the arena, but the deal only guarantees $100 million)
  • Municipal property tax payments which are capped at $250,000 annually (assuming they reach the cap every year for the next 35 years, this comes out to a little less than $9 million).
  • Access to the arena for four weeks a year, for community purposes only (i.e. the City can’t use it commercially) and with “food, beverage and other revenues” going to the Katz group for those four weeks.
  • An obligation to pay $2 million/year for advertising for the next decade

Put it all together and essentially this deal sees a huge amount of financial risk falling on the city. The only way this deal makes any kind of sense is if the development around the arena explodes; there have been all kinds of rosy projections on that front but the reality is that the future is uncertain, and that no matter what happens with that development, the city will still need to pay for the arena. It’s a dangerous gamble because of the stakes involved – if all goes as hoped, the city is a better place for it, but if things go poorly than one-third of a billion dollars will have been sunk with no hope of recouping a portion of that money.

The other benefit for the city is that the Oilers are going to be around for a long time – both because of the location agreement and because this new deal is going to make the team even more profitable than it already is.

Recently by Jonathan Willis

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  • Spurzey

    Are you not leaving out a rather big detail. The deal calls for the city to put up $219 million for the Arena portion to be raised through a community revitalization levy.

    So in a way, the ticket tax and CRL are mainly borne by consumers not the taxpayer. The CRL is a risk if the additional taxes that would be raised are insufficient.

    • While I don’t specifically mention the CRL, the summation about risk is directly concerned with it.

      I have misgivings about the way the case for the CRL has been presented. The CRL is essentially what is known elsewhere as tax-increment financing (TIF). It’s generally sold as a no-brainer – enhance future revenues by using future revenue growth to pay for tax-generating construction now.

      In reality, TIFs are far more complex than that. I’ve spent a lot of time studying up on TIFs since it became evident that the City was going to use one here, and while there are undeniable positives, there are problems as well. For example:

      TIF’s sometimes capture non-TIF generated revenue. As a simple example, property prices go up thanks to inflation anyway, and sometimes those increases get lumped in with TIF’s, meaning that money which would otherwise have gone into general revenue gets redirected into TIF subsidies. Other times, development that would have happened anyway sees it’s tax money go towards the TIF rather than to general revenue, where it otherwise would have gone.

      City services to TIF districts generally increase, and the bigger the TIF gain the bigger the increase. Those increased service costs aren’t generally paid for by the taxes in the TIF district – which they normally would be. Instead, they’re covered by tax payments from other areas of the city, meaning that non-TIF districts end footing the bill for a lot of new costs that aren’t always included in TIF calculations.

      TIF’s are almost always sold as free money, but the reality is far more complex than that. So rather than say ‘Edmonton won’t need to pay any more taxes because the money is all coming from the CRL!’ all I’m saying is that the city is betting that the sum total benefit of the revitalization downtown is going to outweigh the sum-total cost – of which the arena is the biggest, most obvious example but far from the only one.

      It’s a significant risk, and I don’t think it’s fair at this point to say that the city won’t be redirecting tax dollars to help pay for the consequences of this decision.

    • You pay a ticket tax at Rexall. When you go to a concert, the ticket tax will apply. The promoter & Oilers charges what they will charge regardless of the tax. Katz will operate the arena and charge a fee to the promoter. Katz will charge for hockey tickets what he feels the market will pay regardless of the ticket tax.

      So no … it is the event goer that pays the ticket tax.

      • The Soup Fascist

        I am with David S on this. There is a tipping point at which people will decide “I cannot justify paying that amount of money” for a commodity.

        The tax is part of the total price and cuts into the margin of the seller. For example, if people decide that at $1.25 / litre they are going to take the bus vs. driving to work, it is ESSO who stops selling the litre of gas to the consumer. The consumer does not care that 40% of the price is tax. They just stop buying the gas.

        So while the tax portion is foregone by the government, to suggest ESSO does not lose out by selling less gas (or taking less margin to keep the price down enough to maintain the customer) is at best, misleading.

        • I agree, to some degree.

          There’s a balance. These days I see the ticket tax as joint payments by three different groups – Katz, the city, and the user, with Katz picking up most of it.

          Katz makes the lion’s share of the payments because his ticket prices are increasing. On the other hand, he’s also driving up ticket prices at Rexall, a direct competitor, and they aren’t seeing any benefit from that money – whereas the ticket tax on the new arena will also pay for future renovations.

          Users pay because this will (presumably) drive ticket prices higher than they would be otherwise.

          The city pays because they’re the outfit actually borrowing the up-front money and they don’t have the ability to accrue unlimited debt.

        • Correct. A consumer doesn’t base his buying decision on anything other than the all-in price. Value is defined as “what you get for what you give up”. A ticket tax is foregone revenue the vendor could otherwise charge if the consumer is willing to pay the tax-plus price.

        • Clyde Frog

          At the point that Rexall doesn’t sell out because the ticket prices are too high is the time that the ticket tax cuts into Katz’s profits. You must remember too that the goal is to maximize profits. Katz will want to charge as much as the market will bear while keeping a full building he wants a full building to make money from concessions etc.

          I think there is too much emphasis put on the fact Katz is rich and could afford to build the arena on his own ( questionable ). To me , the first question should be do we need an a new arena ( that is an easy yes) .

          Next question is whether we build it on our own and operate the building ( Northlands) or bring in an operator who will put in cash in return for potential profits from it’s operation.

          Would Edmonton rather spend more and operate the arena as a profit centre or spend less and potentially mitigate the risk of operating the facility.

          Getting back to Northlands , if they would have come up with a plan to build and operate a new Arena uptown using our tax dollars the deal would have gone ahead and we would have a new arena today ( not as fancy mind you) . But they were short sighted and thought they could just do what they have always done – build it on the exhibition site.

          • Doesn’t matter what Northlands would have proposed. The city wanted the project downtown because of the greater economic benefits that would be realized. And the city would have had to pony up for the Northlands rebuild. No way they were going to do that.

            Fact is, the money is best spent downtown.

    • Uhh… I’m not including the ticket tax as public money. I’ve only listed the $333 million slated to come directly from government as “public” money.

      Beyond that, because the ticket tax also applies to Rexall, it raises their ticket prices, which makes it easier for Katz to compete with them, so he’s seeing some significant benefit from that money – it’s not all a write-off for him.

    • Even if you accept that FALS premise it sure isn’t at the rate of a dollar for doallr, meaning 1 dollar of ticket tax DOES NOT MEAN Katz can’t charge a dollar more for a ticket..

      Tha t saturation level has not been reached and will not be reached for some time

      so essentially this is just another form of public dollars not Katz dollars

      nice try david

  • The city /Alberta etc are proposing to spend 90 million dollars on the river valley including a 30 million dollar funicular . Do we need a funicular ? Obviously the risk for the city is that the revitalized river valley will not generate taxes. But wait, we use the river valley . Just like we will use the arena. In fact, way more people will use the arena than the art gallery or new proposed museum . The arena is not a millstone or a big risk. It is needed infrastructure. If the arena does not get built now can anyone see Rexall lasting 35 more years in it’s current state ? It is when interest rates are low that you want to build.

    The new arena’s are now built with wide concourses and steep seating and are user friendly.

    • The Soup Fascist

      Thanks Dave #3. I consider myself somewhat educated but I did not know what a “funicular” was – now thanks to you and google I do. Count it a day lost you do not learn something.

      And you are right, we do not need one. I would rather spend the money on a beer dispensing system for the new rink that ensures each seat has a beer tap within reach. A fanicular ….. Pfffft, what a waste of money.

      Now if we can just get Art Vandelay on board as chief architect …….

  • @ Willis

    You may as well change the title to “I hate this deal so I’m going to reinterpret everything in the worst possible light”.

    The general problem I have with the position taken by you and others on this is that you completely disregard any and all intangible benefits and you write off any public good based on nothing more than the fact that a rich guy will do well from it.

    I don’t have a problem, in general, with disliking the deal, but the automatic slanting and refusing to consider any benefit without a tangible dollar figure attached based on nothing more than the fact that Katz will make money takes away a lot of credibility from the good points available to be made against this deal.

    I also think the dollars involved are being overvalued when considered in the total context.

    • I actually do note that the city is getting the benefit of having the Oilers around for a long time. I suppose I could also have noted the benefit of having a shiny new facility as opposed to Rexall for other events.

      Again, though, that’s a complicated matter.

      Has the City received fair value from the Katz group for the strength of the Edmonton market? In other words, we know this is a *really* good place to put an NHL team, so Katz has significant incentive to keep the club in Edmonton anyway. How much money did the city pay versus the minimum they needed to pay to keep the Oilers in town? My read, based on the available information, is that they paid more than they needed to, but then we don’t have access to the Oilers’ books and their estimates of what they’d make in other markets – we’re all making guesses here, however educated.

      How much benefit do the Oilers add to the city? Economically, the benefits of professional sports teams as a rule tend to be overstated – but the benefits of having a team go beyond the economic as the Oilers are part of the city’s identity and have a direct impact on a lot of people simply by existing in Edmonton. This is a complex question and I haven’t seen a really clear, researched answer from anybody.

      What happens to Rexall now? Will it be able to survive in a city with a shiny new arena, all of its subsidies pulled, and a heavy new ticket tax on top of things? If it can’t, what happens then? I don’t know the answer to these questions, but I do hope that the city has thought them through.

      Basically what I’m getting at is that I’m not ignoring these issues – they’re simply too complex to get into in any detail in what is a general overview of the new deal.

      • Basically what I’m getting at is that I’m not ignoring these issues – they’re simply too complex to get into in any detail in what is a general overview of the new deal.

        Yet they are integral to the deal. You can’t present your opinion with only the information you like and then set aside potentially contradictory information because it’s complex and inconvenient.

        If you want to do a short overview – do a short overview and leave your opinion out of it, or you risk credibility.

        Of course there is financial risk. Of course there is a chance this doesn’t go how the city hopes it will go. There is no path to redeveloping downtown that doesn’t include risk, expense, or the potential for failure. You just don’t like this one because it benefits Katz too. Why does it matter? Public money benefits anyone who ever got a grant. Screw those guys too right?

        Here is the type of comment I take the most issue with:

        Putting those comments another way: ‘We can’t be seen to be directly funding corporations, so instead of just cutting a check for Katz we might put together a new program that will sprinkle money all over the place and allow the City of Edmonton to cut that check.

        This is wildly unfair and heavily slanted towards your bias. Why not say:

        Putting those comments another way: We need to make sure money indirectly funding corporations provides a benefit to the public and the city, not just the corporation.

        This is just as plausible as your interpretation.

        I just don’t see “we can’t give public money if it benefits Katz” as a reasonable argument. The only thing that matters is whether or not it provides enough benefit to the city to justify the cost and the risk. In my mind this is the only thing up for debate. It may or it may not, I haven’t honestly spent enough time to make up my mind, but this whole “subsidizing the rich” position every wants to take irks me.

        • The “Subsidizing the rich” mantra reeks of jealousy. Fact is, we should HOPE Katz makes money (a ton of it according to city council).

          Katz isn’t a non-profit. If he can’t make a fair return on his investment he’ll walk away from the project. This may be fine to some but the city would be on the hook for the entire amount and be thrust into the position of developer.

          This is a private-public partnership. Like it or not we need to structure deals so that the private entity realizes profit. Any sane person would be OK with that as long as the public partner realizes realizes some sort of return as well.

          The issue at hand is arena naysayers refuse to/can’t admit the city might realize any return in order to validate their position. In fact, it’s pretty obvious to those with any business background the city will in fact see quite a substantial return.

          • This has been studied to death by economists. The reason the “naysayers” think this is bad idea is that there is no public benefit to be had.

            This is a simple fact The city is not going to get a substantial return because these schemes never, ever, work. This is as close to a settled question as there is in academic circles. Arguing in favour of the economic benefits of publicly funded stadiums is akin to arguing in favour of creationism. It is magical thinking.

            This is a direct transfer of wealth from taxpayers to the Edmonton Oilers in order to head off the threat they will leave. There is no economic justification for the deal. Teh only justification is the worry that without the deal there will be no Oilers. It isn’t any more complicated than this.

            No one has a problem with a private business making a profit. Everyone should have a problem with a private business making its profits at public expense without providing a public good.

            And for the last time the arena is not a public good and cannot be defined as a public good so long as there is a prohibitive entry free. The public does not and will never get to enjoy the arena. Paying customers get to enjoy the arena and it is paying customers that should pay for it. That way Katz would still get his profits but they’d be commensurate to the demand for his product and no one who was not interested in the product would be coerced into paying.

        • Despite what you may think, I have no particular objection to Katz making money on this deal. I despise the tactics the group resorted to along the way – the trips to Seattle, Hamilton, Quebec City – but I don’t have a problem with the guy getting a return on his investment.

          As for omitting information I don’t like, you’ll see a whole pile of negative points in my initial answer to you – points I didn’t make in the piece. I don’t think the city is getting a fair price on the value of the Edmonton market, and I think it’s because entering the negotiations they made the viability of the Oilers a paramount concern – in effect prioritizing one of Katz’s interests in a deal where they were negotiating with Katz. It’s a bad position to be in, and one that the Katz Group (understandably) took advantage of.

          But I didn’t include that because it isn’t new and even though it’s germane it’s a point I’ve made before and which doesn’t need to be rehashed. Likewise, I didn’t feel the need to explain why the Oilers being in Edmonton is generally a good thing: most first-graders could give you a reasonable answer to that.

          You may not like my opinion, but I’m omitting information for the sake of brevity and readability, not to sway anyone’s opinion.

          As for the injection of my opinion Doug Horner’s quote was mocked not because of the arena deal but because of the reversal it would indicate by the provincial government. The Tories have indicated all down the line that the city is welcome to use provincial money already earmarked for the city – such as the MSI – for the arena but that no new funding would come through. If they’re looking at a new program that would get that money to Edmonton and they’re looking at that program because the city is lobbying to get the arena, than saying ‘we’re not directly funding corporations’ is weasel-wording things.

          • This is really late here so you’ll probably not read it but:

            You’re mistaken when you say I dislike your opinion.

            I dislike the way that many people frame it purely dollars and cents and when intangibles are brought up say “well of course but …”.

            I saw you bring up those things, it doesn’t change what your article said, which is where I had a problem.

            Obviously you don’t need to rehash every relevant piece of information regarding the arena every time you discuss the deal but your piece here very nicely fit into the “the arena is not profitable to the city and therefore automatically bad” narrative very nicely. Governmental bodies cannot always operate purely based on an examination of the bottom line.

            You call it brevity and readability, but when you include such strong sentiment there is an obvious intent to sway opinion.

    • james_dean

      i second that notion.

      all you bellyaching mouthbreathers can get over it. the rich get richer, and history repeats itself.

      as i have attended inner city schools in my adolescence, my only gripe is to have a free breakfast for underprivileged elementary childern in the area.

      wont happen tho, unfortunately

  • The Soup Fascist

    I don’t see any done deal till someone figures out the where the missing funds come from. The deal with Katz still stinks, its just still the same ugly pig re-wrapped with a new bow.

    Once the taxpayers cough up the missing 114 million plus the other 200 plus million I’m wondering what services we are we the taxpayer going to live without, or have we accepted that a raise in our taxes, or have we decided to pass this off to our children. As Alberta’s we drank the Klein Koolaid, and said Oh YEAH! to the blue bumbleberry punch and we believe in this time of economic downturn that its time to spend rather the tightening up our belts. I’m not trying to be a pessimist but a realist. No one wants the arena more then I, but this comes at a cost to our future.

    Because this generation has accepted the buy now pay later mentality our government in Alberta as well as our municipal will have choice. I’m not willing to have higher taxes, ballooning deficits, crap health care, poor snow removal because people said I want a rink more then I want the other. Katz is a master manipulator, and Mandel is his 2nd rate politician who with any sense could of made this deal work without our money. Private money built rinks in Toronto, Montreal, Vancouver, why has the people here been duped into believing we have to pay for a billionaires dream.

    Billionaires are made on the backs of others, using other people’s money. Its the key mantra to any real estate decision. Make money with someone else’s money. We’ve been played.

      • I did by my house with cash, why do you ask?

        Never said I was against debt if that is reasonable and will not effect taxpayers in the long-run, I said I’m not a fan of a deal being made with a good portion of the financing coming from the public coffers. The money comes from increased taxes or money being allocated to the the arena being taken away from something else. I hope eventually that some of this revenue is generated from a larger tax base created by the project, however I don’t know how one can determine the financial impact.

        My point is that I believe in free enterprise and the government should govern. I have to invest in a 4×4 now cause my street has not been plowed in a month and half. The missing 114 million suppose to come from the provincial government. Redford’s suppose to be on TV soon to tell us we are 3.5 billion in debt this year alone cause her governement runs their affairs like well, a government and not like a business.

        Are you telling me we should mortgage this arena, and the arena Calgary wants to build? I’ll be very happy if the Wildrose idea to come up with the shortfall through revenue generated by lottery. Where the heck was this outta the box thinking for the last 3 years. Why can’t Katz sell naming rights for 35 years. Three million times 35 years equals shortfall, and that’s not factoring in any increase in money that will happen. Heck naming rights alone could pay for 150 million dollars of the project. The taxpayers should of funded this whole thing and sold those rights to Katz or to the highest bidder. If Katz was actually forced to negotiate with taxpayers rather then Mandel we could of gotten a damn good deal, not this second rate arena project. Once Mandel and Katz contrived their scheme to weasel tax dollars there was no room for discussions on why can’t this arena be funded through private enterprise.

  • The upside to at least saying that it is a done deal is that now maybe Stauffer can stop being a Katz mouthpiece and actually talk about Oilers hockey?

    Gawd how I hate it when he goes on and on about that. Talk about NOT biting the hand that feeds you.

  • james_dean

    On the CRL – If you assume that a finite amount of entertainment dollar will be spent regardless of the new arena and that tax gains are offset by tax losses in other parts of the city then you are correct. The city is hoping that their tax boat will float higher in a rising tide. Really a question for the economist’s.

  • yawto

    If you want to argue how much impact an NHL team has on the economy of a city ask any sports bar/lounge owner how the sales have been the last few months with no hockey. I understand that they do not need a new arena to make their money off of hockey but they do need a team in Edmonton to keep the fans coming to their establishments as well.

    The reality of it is that the economic benefits will go mostly to Edmonton companies bidding on the building. Edmonton people working on the building. That 600 million is spent in the community supporting community businesses. I live in Calgary and support the Oilers. On the same note, when my taxes slightly increase to do the same for the flames new building in a few years you will hear no complaints from me. I will happily pay and happily enjoy the new facility.

    • With regard to your first point, there is a substitution effect that needs to be taken into account.

      Take this article, for example, about the most recent lockout. Two quotes:

      The report shows an overall decrease of 11.23 per cent in dollars spent at food and beverage businesses near NHL arenas in Canada. Drinking establishments close to hockey arenas saw spending plunge 34.7 per cent, according to the report. Fast-food outlets and restaurants have seen dollars spent drop by nearly seven per cent and 10.5 per cent respectively. In Edmonton alone, fast-food restaurants near the arena have suffered a 27-per-cent drop in spending.

      and…

      The Moneris report says not all merchants are suffering, especially those outside arena vicinities. Overall spending at bars outside arena areas is up nearly 19 per cent compared to a game day in 2011. Fast-food and restaurant spending away from NHL rinks is also up 11.5 per cent and 4.9 per cent, respectively.

      Needless to say, there are a lot more bars/restaraunts outside the immediate arena area than in it, so the smaller percentages don’t necessarily mean fewer dollars. Media coverage in general spent a lot of time talking about the negative effects of the lockout – understandably so, since the lockout was a bad thing – but for businesses outside the immediate area of the arena the economic impact of the lockout was probably positive.

      • Next time you’re in Edmonton Jonathan you should drop into a few bars and ask the managers how much business went through the floor with no hockey. Even those not in the immediate proximity of RX1. Alot were getting killed.

        Closer to home, you might want to ask Wanye how much advertising revenue was adversely affected during the lockout. Nation Radio was a prime victim.

  • Clyde Frog

    The danger with this sort of questioning is it takes an economics degree and a full study to understand.

    There are some misconceptions in that:

    A. To a large degree the city would spend this money regardless; so the question becomes would the cost-benefit of the secondary options outweigh the arena?

    B. what is the expected rate of return on the capital/when is it being spent? A dollar valued at today’s value yet spent in 5 years is not actually a dollar finance wise. If that dollar is invested before being spent, it earns a return during that period. Ie it may only work out to 85 cents in terms of what is actually booked today.

    I could go on but typing on my phone is annoying; although I will say this is why you have to trust the civic planners who do have the degrees and studies as without them we are making some terribly baseless assumptions.

    Even weighting the expected benefits is difficult; as the financial accounting and economic value has to be modelled and Cannot function in a one to one analysis.

  • Ducey

    So another person who doesn’t live in Edmonton or pay taxes, Willis, is whining about our arena.

    Your opinion and insight carries ZERO weight with me. You don’t live here, you have no vested interest in our city, so whether you like the risk or not means nothing.

    Why do you care? It doesn’t impact you, and your negative suggestions that the downtown won’t explode are based on what exactly?

    Edmonton has spend $9 billion dollars in other communities in Edmonton the past ten years, and the downtown has gotten very little. So now it gets some help and it will jump start lots of downtown development.

    You are so far out of your league in understanding this deal it is laughable. You can whine and moan, and throw out the inaccurate assessment that this is corporate wellfare, when in fact it is how business gets down to build cities and communities.

    No offence, but you don’t live here so why do you care. Get off your high horse. You don’t know everything.

  • Ducey

    Willis,

    I take your point regarding the CRL. There is some risk. But the alternative was the $200M they were going to have to spend to upgrade Rexall.

    Would you rather:

    1) have a 100% chance of paying $200 M to maintain an aging building, in the wrong part of town (ie in the middle of nowhere), that the major tenant does not want; or

    2)have a 85% chance of collecting your $219 M CRL back for an arena that could spur tremendous growth in downtown?

    I think that its 100% that a good portion of the CRL will in fact materialize, so the 85 %risk is really on no more than $50 to $100 million.

    I guess some will suggest that the City should have just ground Katz over every nickel, but that would result in the kind of crisis the NYI are currently experiencing. The uncertainty would do the City a lot more harm than the possible CRL shortfall.

    I am really hoping the community rink gets built. There is a tremendous shortage of indoor ice in the City, and this will be important.

    • The city is paying interest on the money so they have to make more than $219 million on the deal to break even. Moreover, you both understating the risk and overstating the contribution the arena makes to development.

      Whatever amounts the CRL ends up being you can’t give the arena 100% credit for that money for two reasons. First, as Jonathan noted there is the substitution effect. Second, over the course of 35 years development would have occurred anyway. You can’t know whether and to what extent this development is caused by the arena. Consequently even if the CRL yields $1 billion dollars over x years this isn’t necessarily new money.

      Taking these factors into account the amount of development that would have to occur for this to be a break even project is very large which only compounds the question whether the arena was necessary for the revitalization in the first place.

      Any way you look at it there is no way to turn this into a good economic deal for the city.

      • Ducey

        Ah, so we can’t calculate all the effects so it must be bad.

        If the there was a billion dollars worth of investment directly as a result of the arena and the CRL plus interest was paid, this WOULD be a good economic deal.

        You can argue about the likelihood, but the fact is that it CAN (and likely will) work out. To suggest that it will never work out is just another one of your ridiculous statements.

  • David S. wrote:

    The issue at hand is arena naysayers refuse to/can’t admit the city might realize any return in order to validate their position. In fact, it’s pretty obvious to those with any business background the city will in fact see quite a substantial return.

    This might be a general comment, but if it’s directed at me I’d argue it’s unfair. Obviously, the city might realize a return – there’s a possibility they make all their money back and then some. All I’m saying is that they’re taking on a lot of risk – $219 million of it, with another $114 million expected to be picked up by other governments – and that despite how things have been portrayed there’s no guarantee that they will get there money back. They’re going to get $9 million in taxes over the next 35 years from the arena – they need to generate 25x that in incremental gains from the arena district simply to cover the cost of building the arena, assuming that the feds and the province pitch in and before we factor in the increased services costs of the TIF district.

    It’s a risk. That’s the only sensible way to look at it, in my view.

    • Jonathan, I have no axe to grind and you seem like a pretty decent guy. But you’re focussing on the arena when in fact this is a far larger project with far greater impact.

      Yes. The arena itself might only generate $9M in taxes over the lifespan of the project. But the DISTRICT has been estimated generate in the hundreds of millions. And we’re not even talking about the ancillary development the core project will catalyze. Then think of the increased city profile that’ll help attract the sort of tax paying resident who not only wants a good job, but a lifestyle with decent ammenities. They certainly won’t consider Edmonton for the crazy good climate. Here we’re in competition with Vancouver, Toronto and (god forbid) Calgary. Been to Calgary’s downtown lately?

      If this were just about an arena neither city council nor the populace at large would have let this thing get past first base. But it’s about so much more. Why can’t you and others consider the possibility of a bigger picture?

      • Hey, I appreciate the debate, and sincerely hope that you’re right – that the downtown really does take off and that we see a best-case scenario situation where this deal is a solid win for the city.

        I expect the final eventuality is likely to be more mixed – some of the planned development around the arena won’t happen, but what does will make a big difference to the area and on balance the city will be ahead.

        • first of all thank you Jonathan for your common sense, which is seriously lacking from all these cheerleaders posting here, but not at all surprising.

          most here care little for the details, they just want their shiny toy and thier beloved hockey players to cheer for, no matter what cost.

          hopefully this model does succeed, otherwise this hurts us more than helps.

          just another example of corporate welfare

          • The Soup Fascist

            Because we purveyors of “corporate welfare” disagree with you Morgie, we lack common sense??? How narcissistic of you.

            The only time you seem to appear on this site is on this specific issue, which to me indicates you have an agenda, and a very specific one at that.

            Personally, I welcome comments based on facts and even informed opinion. However condecending comments and arrogance are not helping your case. IMHO.

          • The Soup Fascist

            Thanks for making my point. Rather than logic or facts, trot out aged euphamisms and name calling.

            At the end of the day progress is happening.

            The city will benefit with a revitalized downtown core (IMO), Mr. Katz is going to make money (gasp), and I will have two spanky new seats to sit in come 2016 and watch some exciting hockey, wonderful concerts and maybe another thrilling lecture from Oprah (I think I am busy that day).

            Perhaps that will help me “get over it”. Yes. I believe it will.

          • The Soup Fascist

            Perfect!

            And it’s great how you’ve oversimplified this (not surprising)

            I just hope my taxes don’t go up becuase of this boondoggle or my services detoriated tremendously.

            But that shouldn’t bother someone like you that can afford a pair of season tickets and the thrilling oprah (Gag)

          • The Soup Fascist

            Hopefully after she was given a giant set of cow nards for her prius, she realizes how uncivilized we are a.d never returns. That is bopefully something we can all find consensus on. I know Wayne will be disapointed.

          • The Soup Fascist

            Yes I do feel terrible about having seasons tickets and your vitriol towards me that I choose to spend my (hard earned I might add) disposable income on sports entertainment is not wasted at all. (This is sarcasm, Morgie)

            At the end of the day others on the site opposed to the arena are making their case based on what they believe are facts and informed opinion while you are mad that “someone like me” can afford to go to Oilers games.

            And in case you could not pick up on the sarcasm, I have not and will not be attending any Oprah lectures.

            Not much point in continuing with this discussion as instead of debating the economic and societal merits / downside of the arena you would rather attack me because I have the gaul to have Oiler’s tickets.

            Be well, Margie.

          • The Soup Fascist

            and I quote ….

            “But that shouldn’t bother ‘someone like you’ that can afford a pair of season tickets ….” Morgie 1/24/13 2:10 pm

            … Da Nile (denial) ain’t just a river, Baby.

            This is too much fun, Morgie but I have to head home and pick up the wife for the game. Any thoughts on how the Oilers can overcome a fired up Kings team, who have yet to win a game as defending Stanley Cup Champions?

            I know, they are all overpaid and that is the root of the problem.

          • The Soup Fascist

            I guess you have trouble reading between the lines fella, you’re missing my point entirely

            you can recite rationale after another, you said it best in you first point, whichever side your on, the argument doesn’t matter

            I think its risky, and shocked, well not really, at how few are concerned about the cities financial risks

            it frustrates me to the point, I suggest it lacks common sense

            you take offense and on we go

            so my point was i guess you don’t care about the costs, and if you can afford season tickets that’s self evident, so nothing to do about denial good for you, I’m suggesting you don’t care if this deal goes bad financially,

            and them being overpaid is not the root of the problem but it is for the price of tickets since cities subsidize these teams handing over all revenue while having the public pay for most of arena costs

          • The Soup Fascist

            And my point is to sit and do nothing while the downtown core becomes even less relevant is the irresponsible act. IMO this will stimulate investment. This is a much more prudent investment than a 100 million dollar art gallery no one goes to or a $700 million dollar overpass debacle on the south side. You certainly have the right to question the validity of the economic studies, but to insinuate that no one has common sense because they disagree with you is insulting and misinformed. So is the statement “people like you” when you don’t know me .

            I respect your right to form your own opinion and voice it. But surely it can be done without disrespecting and pigeon holing those who don’t share your views.

  • If I read in between the lines, what your saying J.W. is that the Oilers would be better off in Seattle, than have the city being involved in the development of the arena,because thats the only way it gets done. Katz is not about to throw
    $400 million into a small market city for an arena, which would benefit the city as much as Katz.If you want a nice downtown, thats the price you have to pay, even if comes from taxation. Better a new arena , than a funicular, whatever that is, or more museums etc.There is a price pay for progress. Otherwise move the team, because 10 years from now the Rexall Place will really be ugly, and will cost $1 billion dollars to build.PS I have not seen anyone else step up with an offer to buy the Oilers and build their own new arena in Edmonton.
    30 years ago, Edmontons, small minded aspiration
    made Calgary the Hub of Alberta.Check the skylines of Tor, Vanc, or Cal., there is a lot of tax revenue in those developments that the home owners do not have to cover.

  • David S. wrote:

    Next time you’re in Edmonton Jonathan you should drop into a few bars and ask the managers how much business went through the floor with no hockey. Even those not in the immediate proximity of RX1. Alot were getting killed.

    Closer to home, you might want to ask Wanye how much advertising revenue was adversely affected during the lockout. Nation Radion was a prime victim

    So what you’re saying is that I should ignore the Moneris report in favour of anecdotal evidence?

    As for closer to home, you may recall that everybody here took at least a 30% pay cut. I know I did. I’m one of these people directly impacted when there’s no hockey around. But I also know this: if I own a business and I need to advertise, I don’t predicate my advertising budget on the presence of hockey. If hockey’s around I may prefer to advertise there, but if it isn’t I still need to advertise. I fully expect that my loss was somebody else’s gain.

    • I’m sorry Jonathan but you are mistaken in this case. Advertising and marketing is the first thing to get chopped when revenues decrease. Take it from a guy who’s been in the business for decent amount of time.

  • Peter wrote:

    Why do you care? It doesn’t impact you, and your negative suggestions that the downtown won’t explode are based on what exactly?

    Please quote an example of a negative assessment where I said the downtown wouldn’t explode. Never said it.

    What I said was that it may not explode – and if you’re arguing that the downtown is absolutely, 100% certain to explode, I’d ask you to prove it. You don’t get to treat a massive downtown renaissance as a certainty, because it isn’t. I think it’s likely, personally, but it isn’t certain.

    You can whine and moan, and throw out the inaccurate assessment that this is corporate wellfare, when in fact it is how business gets down to build cities and communities.

    Please quote an example of me using the term “corporate wellfare” referencing this deal. Haven’t used it.

    With that said, there’s no question that this does represent a subsidy for the Oilers. That’s not necessarily bad in and of itself – subsidies are a fact of modern business. The question is whether the incremental benefit the city gains from this subsidy is better than what they would have received from subsidizing something else. I’m making no claims on that one way or the other.

  • yawto

    I also disagree with the moneris report JW. Here is my arguement. I work weekends at a BP’s. We are located over 20km from the saddledome in a well to do area of Cowtown. Our sales have been BRUTAL for the last three months outside of Sunday and MNF. Moneris can spew all the numbers it wants, the fact is that sales were way down the past three months at our location and have spiked the last week.

    I also argue that they say that these businesses had a 19% spike due to no hockey. I am more inclined to think they had a 19% spike due to inflation and a still strengthing economy. M-F I am in retail management and we expect year over year growth to be in the area of 6-9%. That really means only a 10% jump in sales. If they really want credibility in this area, they need to poll these same businesses over the next three months. Because by what they are saying they should have a 19% decrease in sales becuase the NHL is back. I believe you may actually find that these numbers will be more like a 3-4% increase on that 19% they already have seen.

    Again, I can not confirm this with a big company name like moneris, I can just tell you that we were getting killed on sales the last three months sans NHL. Not so much anymore.

  • The Soup Fascist

    The arguments are identical to a year ago when this started to heat up. This is sort of like a debate about abortion – people are polarized one way or another. Those who think it is a bad deal for the City are unlikely to change their mind, nor are those of us who believe this is a win-win.

    The only other argument I will add is that I cannot see how this will not lead to more spending from visitors coming into the city. I live in a suburb but also own property in the City of Edmonton which I pay property taxes on. So I think I can comment on the issue.

    A significant number of fans (wish I could find the actual %) reside outside of Edmonton city proper. 2000 new seats, presumably a lot of those would also go to non-Edmontonians. Those people ARE going to spend more money in Edmonton. This cannot be debated. Personally, if there were more choices nearby than 1) an above average pizza place that is packed to the rafters game nights, 2) an ex strip bar (that is IMO atrocious) or 3) a buffet at the arena, I would happily go for more pre-game suppers and post game snacks / drinks. This is money I simply don’t spend now, because there are no viable options. Add in those new season ticket holders from Lloydminster, Bonnyville, GP, Ft.Mac, Red Deer etc. who will utilize downtown hotels and go shopping.

    I have gone to Los Angeles, typically annually, for going on 20 years. I know what the area south of downtown L.A. used to be like and what it is like now with Staples Center and LA Live. What a world of difference. If you cannot see the before and after and the revenue now being generated (from tourists like me)you are trying not to. It turned what was for all intents and purposes (and at the risk of being P.I.) a “ghetto”, into a vibrant active area.

    I know I will not change anyone’s mind, but I just do not see how attracting more people (with disposable income) into Edmonton and specifically the downtown area, is a bad thing.

    • The Soup Fascist

      I agree with you.

      The arena/entertainment center will undoubtedly make the city a more attractive destination for relocating businesses and talented professionals. It should also help to reduce the outflow of youth seeking greener pastures. These to me are important benefits and should not be ignored.

      I too have travelled to LA, and to New York and Washington, and taken in games. I really enjoyed the full experience of dining and/or going to a bar before or after a game. A similar experience is not available conveniently in Edmonton.

      I have attended games in Rexall since it opened and have shared season tickets since 1978-79. Rexall has passed its expiry date. It is time to move on.

  • DieHard

    Captain Obvious wrote:

    “Second, over the course of 35 years development would have occurred anyway.”

    I left Edmonton over 30 years ago and the downtown looks pretty much the same. There has not been a lot of downtown development. This project could be just what is needed to draw more business to Northern Alberta.

  • The Soup Fascist

    I’m not impressed with the City’s negotiations, they could have done far better.

    Case in point, the $21 million for the ‘community rink’ in reality is a practice facility for the Oilers. The land it will occupy would serve the City and taxpayers far better if it was developed for commercial real estate purposes. Most NHL teams have built practice facilities at their own cost and they are located far from expensive downtown land. Katz once talked about building an Oilers practice facility in partnership with the University of Alberta, probably on University land and to used jointly.

    Naming rights. If the City owns the arena, it should receive revenue from the naming rights.

    As to the 35-year location agreement, this is totally unenforceable and, if it was, is for far too long. The building will be redundant within this time period and what will the NHL look like in 2048? Who knows?

    The City getting access to the arena for four weeks per year as long as the use doesn’t generate commercial value doesn’t serve anything.

    The City should get 50% of the gross revenue from events, including a split on food, beverages and other unspecified revenues, otherwise it is another loser for the City.

    And this is just the beginning of a bad deal for the City and an over generous deal for Katz.

    I believe the City needs a new arena downtown and it will lead to further and much needed development in the area, but the deal should have been much better for the taxpayers.

  • The Soup Fascist

    I live in Saskatoon so my opinion doesn’t carry as much weight as the Edmontonians who will have to live through the consequences both good and bad about the arena deal. I can tell you that there are tons of Oilers fans across Saskatchewan who go to the odd game at Rexall. Personally, I think this will motivate Oilers fans from all over to attend more home games. I love the Oilers but seeing a game at Rexall was a bit of a chore. I’ve been to a few games at the Saddledome and that stadium is far from perfect but I can tell you that the overall experience is much more pleasant. They seat many more fans yet the concourse isn’t half as packed as it in Rexall. Also, just getting to Rexall can be a bit of a chore and I look forward to attending the games at the new stadium when it is built.

    Hopefully, this will stimulate some growth downtown. I have talked to many people who may or may not have any interest in hockey and most of them have stated that they would rather visit Calgary because the downtown core is better developed. In my opinion, it’s time for Edmontonians to take pride in their city. Again, this is strictly from an outsider’s perspective and it’s not really my place to say whether or not this is a good deal. From my perspective, I am very excited about this news.

  • The Soup Fascist

    the Downtown may not ‘take off’, but we can assume that there will be an increase in economic activity and, therefore, increased taxed to the city. just in real estate value alone, the city collects more in taxes. parking on event nights. will there be an explosion? No one can not say, but we say there will be an increase. Does anyone think this facility will have zero impact? no increased tax revenue of any kind? come on. it is not a question of ‘if’, only of ‘how much, how fast’.

  • I think all Edmontonians have to agree that this city needs this arena not just for our sad state of Edmontons downtown sector but what the city has to over to people who would love to come here throughout the year to see what our city has to offer. So for all of you that are against the new arena you are not looking at the overall picture and the hundreds of millions of dollars that will be spent in our city, not only in tourism but also in our local economy. Edmonton council knows this and woke up to understanding that the city of Edmonton needed this new arena just as much as the Oilers and its owner does. Good job city council, thank goodness you all see the big picture and how we all will and have benefitted from having a NHL team here. Like seriously what would this city be like if the team failed and left. Just look at Winnepeg and you would have your answer. Rather spend my tax dollar on something that would improve our city than it going to the goverment officials big fat pensions and buyouts to even the ones who break the law and still are paid these outrageous amounts of money. So when you are downtown in the fall and see the start of what will be an amazing and prosperous downtown that has been overdue for decades, might even put a smile on your sour face lol. Now when I’m in Edmonton 2016 I will have a better selection to go out to enjoy the city other than just West Ed Mall. Good Job City of Edmonton!!