What happened yesterday? Essentially, the City and the Katz Group will resume negotiations, but only after we set some new conditions for how those negotiations will take place. It’s a small, cautious step forward for everyone. I felt I could support that, but it doesn’t mean I’m on board for everything in the Oct 26, 2011 framework.
The most important thing to know about yesterday’s Council decision is that the City will continue to explore options for design alternatives that can reduce project costs, in keeping with our October 17 motion. We will still get those options at our January 23 meeting. Design restraint, and alternate operational models, could help reduce the impact on taxpayers.
The issue of the missing $100 million of public funds from another government was ‘the elephant in the room’ yesterday, a cliche I was guilty of introducing. The Katz Group’s position was that the City must find those funds. In my view, if public dollars are required to make this happen, the significance of any provincial dollars is that they would correspond to the value to the Region and Northern Alberta. Absent those dollars, any alternate funding source should also reflect the fact that this is not only about Edmonton (as the Katz Group indicated yesterday, 35% of the patrons come from more than an hour’s drive away).
As before, I’d rather any new dollars needed to make the deal work come from the user-pay side rather than the property tax side, because allocating future tax dollars always has an opportunity cost for the City. There is a way to do this by moving from a Katz Group-controlled ticket surcharge to a City-controlled ticket tax like we have today at Northlands. It could expose the City to more volatility from one year to the next, but it would share in the upside as well (right now the Katz Group has to pay the same amount whether it’s a lockout year or a cup-run year).
To give credit where its due, the Katz Group has taken a number of the more problematic demands off the table, like expecting the City to lease space in their office tower. They backed off an annual subsidy request but substituted it with a new mechanism that would see new tax revenues in the arena district above the CRL forecasts allocated back to the arena. While I’m not at all sure the idea is legal under the province’s CRL laws, that approach would give them incentive to go ahead aggressively with the surrounding development to generate the higher tax revenues. I don’t know if this will fly but it indicates movement on their part, which is valuable.
The other thing they offered to do was put their arena financial performance model numbers up against ours for scrutiny to a third party, which can’t hurt. The results of this are not likely to be shared publicly but it will help Council understand where the Katz Group’s math is steering them. We may hope the process also allows the Katz Group to understand the nuances of our take on the arena financial performance model.
The motion passed yesterday reads as follows:
1. That Administration re-open negotiations with the Katz Group based on the October 26, 2011, Framework.
2.That Administration negotiate an extension in the deadline in the Land Inventory Agreement from December 31, 2012 to April 30, 2013.
3. That Administration work with the Katz Group to identify and appoint an individual who could act as a mediator by January 23, 2013.
4. That the Mediator appoint a financial analyst to evaluate the City’s and the Katz Group’s financial assumptions and analysis for arena revenues and expenses.
5. That Administration work with the Katz Group under the support of the mediator to evaluate all other non-financial issues.