Thoughts on the new arena deal

Jonathan Willis
January 24 2013 10:28AM

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.

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Jonathan Willis is Managing Editor of the Nation Network. He also currently writes for the Edmonton Journal's Cult of Hockey, Grantland, and Hockey Prospectus. His work has appeared at theScore, ESPN and Puck Daddy. He was previously founder and managing editor of Copper & Blue. Contact him at jonathan (dot) willis (at) live (dot) ca.
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#52 morgie
January 24 2013, 01:21PM
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Jonathan Willis wrote:

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

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#53 The Soup Fascist
January 24 2013, 01:38PM
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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.

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#54 The Soup Fascist
January 24 2013, 01:47PM
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morgie wrote:

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

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.

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#55 DieHard
January 24 2013, 01:49PM
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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.

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#56 Morgie
January 24 2013, 01:53PM
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The Soup Fascist wrote:

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.

i suppose the truth hurts?

if the shoe fits...

you are a blatant cheerleader and have much company, accept it and get over it!

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#57 The Soup Fascist
January 24 2013, 02:01PM
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Morgie wrote:

i suppose the truth hurts?

if the shoe fits...

you are a blatant cheerleader and have much company, accept it and get over it!

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.

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#58 morgie
January 24 2013, 02:10PM
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The Soup Fascist wrote:

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.

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)

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#59 Smokey
January 24 2013, 02:57PM
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morgie wrote:

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)

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.

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#60 EHH Team
January 24 2013, 03:05PM
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@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.

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#61 DonDon
January 24 2013, 03:18PM
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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.

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#62 The Soup Fascist
January 24 2013, 03:26PM
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morgie wrote:

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)

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.

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#63 morgie
January 24 2013, 04:17PM
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The Soup Fascist wrote:

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.

ya that's it, I'm attacking you becuase you have oiler tickets LMAO

and you call me narcissistic :)

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#64 The Soup Fascist
January 24 2013, 04:48PM
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morgie wrote:

ya that's it, I'm attacking you becuase you have oiler tickets LMAO

and you call me narcissistic :)

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.

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#65 Dog Train
January 24 2013, 04:55PM
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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.

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#66 morgie
January 24 2013, 05:54PM
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The Soup Fascist wrote:

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.

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

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#67 The Soup Fascist
January 24 2013, 06:55PM
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morgie wrote:

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

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.

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#68 Fresh Mess
January 24 2013, 10:03PM
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A warning bell that we are living in a sick society.

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#69 seanjohn
January 24 2013, 11:51PM
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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'.

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#70 TigerUnderGlass
January 26 2013, 12:15AM
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@Jonathan Willis

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.

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#71 Paul
January 30 2013, 02:10PM
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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!!

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