Mr. Katz came to City Hall this week in response to Council’s invitation to come and publicly present his vision for the Arena District. He clarified his position on funding: $100 million toward the arena itself, a new $100 million toward the nearby development, and reminded us that he spent roughly $200 million buying the team in the first place.
The Katz Group asserted that the Oilers will not play in Rexall Place, renovated or otherwise, past 2014. They would not clarify what happens after that, which leaves us all to speculate. But it does present a deadline and, more or less an ultimatum to deliver a new arena.
It would seem that Council may be prepared to go ahead and partner with him to build a new arena publicly. Council directed that this not involve raising taxes, and asked for Northlands to be brought back to the table (all the motions are below).
I’m still not sold.
My questions of the Katz delegation (here on video at the Edmonton Journal website) and city staff focused on two main points: exploring why a private funding option appears to have been ruled out, and what risks and opportunity costs the city might experience by being involved in building and financing the arena. My motions at council, which passed, probe these issues further:
Downtown Arena – Private Development
1. That Administration develop a benchmark scenario for private development of the facility and report back on the proforma for this. If it is Administration’s conclusion that it is not feasible for an arena to be built privately, then detail and quantify the financial gaps that stand in the way.
Community Revitalization Levy – (Downtown) Risk Leakage
2. That Administration report to Council on the risks of leakage of development potential from the pending Quarters Community Revitalization Levy to the proposed Arena District Community Revitalization Levy. [I wrote about some of the issues with levy financing in a previous post.]
The key message in the Katz Group pitch for a new arena is the assertion that the Oilers are ‘not sustainable’ as they operate today. They argued that this is because:
Rexall place does not meet their needs – not enough seats and luxury boxes, which translate to lower ticket revenues than might be realized in a new arena.
They don’t get all revenues realized from the arena – apparently other NHL teams get the non-hockey related revenues from their buildings, whether they own them or not; in other words, they want the business Northlands is doing on the other nights between hockey games. They also want a larger building with more concession opportunities.
The team has lost money over the last ten years, including each of the last two – it was said that Mr. Katz has subsidized the team with several million dollars in both seasons he’s owned it.
After speaking to the community benefits of the team Mr. Katz put it plainly: “But the team is also a business. And like any business, it needs a sound financial base in order to be sustainable, which today it is not.” This remark comes about five minutes into a video of his remarks on the Edmonton Journal website.
The Katz Group essentially argued that the Oilers play in a small building in a small market and that because of insufficient revenues they can’t afford to build their own rink – even if they had control of non-hockey revenue and could sell more seats.
They also argued that three of the last four Canadian NHL arenas failed – all of which were built privately – and that they are not prepared to take that risk (they supplied me this document on this point).
There may in fact not be enough money in the hockey business in Edmonton for them to afford to build a rink. If that’s true, and if they won’t play at Rexall, and if we want to have a hockey team, their logic flows that it has to be built by the city.
And so the real question Council was led to was: what’s it worth for Edmonton to keep the team? I don’t think there’s all that much risk of Mr. Katz moving the team. I think the issue is what happens if he felt forced to sell the team – and then who knows what the next owner might do?
The main motion, moved by Cllr. Batty was:
1. Enter into discussions with the Katz Group of Companies and Northlands on a framework for the financing, not including an increase in current property taxes, and operations of a potential downtown arena and entertainment project.
2. Develop a community consultation program, in line with City Policy C513, on a downtown arena and entertainment district project on a city-wide basis.
Anticipated Impacts on Northlands
3. Prepare a report for Council on Edmonton Northlands’ anticipated impacts and opportunities relating to any potential downtown arena and entertainment district project.
Invitation to Edmonton Northlands
4. Invite Edmonton Northlands to make a formal presentation to Council on the impacts of a new sports and entertainment facility and the future of Rexall Place and the overall financial health of Northlands.
Cllr. Sloan’s motion:
Downtown Arena – Potential Impacts
That Administration prepare a report on potential impacts on City operations, infrastructure and investments of a potential downtown arena and include an update on any commitments of Federal and Provincial funding for this project.
[Update, 2pm July 26: my written questions to Katz Group and City Administration posted to the comments area below.]