Arena: Katz Group Pitch
This post follows up on three previous posts on the Arena topic: here, here and here.
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:
That Administration:
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.]
42 thoughts on “Arena: Katz Group Pitch”
Comments are closed.
Don,
I recognize that I’m probably preaching to the choir here to a certain extent. With that said, it doesn’t seem to me that the Oilers’ claims are getting probed by City Council in the way that they should be.
With respect to the Oilers’ claims of poverty, are they asked to provide data to back it up? Is there a reason that that data would not be made public? The Oilers have paid into the league’s revenue sharing scheme every year since the lockout ended, according to Bob Stauffer. Implicit in that is that they are in the top ten in the NHL in revenues – only those teams pay into the revenue sharing scheme. Before they were approaching you guys cap in hand, Pat LaForge was getting quoted in the Globe and Mail about how good business is and how well they’ve done – strange that that’s changed. If a team that’s in the top ten in revenues can’t make money, doesn’t that suggest that either the NHL’s business model is completely flawed or that the Oilers – who became the most expensive team to finish 30th in NHL history last year – are incredibly poorly run?
They, and every other NHL team, are required to file a document called a URO with the NHL pursuant to their CBA. This is, in effect, an audited summary of their revenues and, IIRC, expenses. Why does the City not request that they provide this data and make it public as a part of this process so that people can evaluate for themselves whether or not their claims are true and, if they are losing money, why?
I suspect that a big reason for the losses is that Katz is carrying huge debt on the team that he paid for $200MM. If he blew his valuation of the Oilers that badly, is he someone with whom the City wants to enter into a partnershp where they will be relying, in part, on the capacity of the Oilers to run a business?
As far as the claims with respect to other arenas go, it strikes me that there are a lot of questions there. Saying that other teams control their arena every night doesn’t really tell us anything. The Leafs, for example, built their own arena. Of course MLSE controls it every night. Other teams are paying significant amounts for control of their arenas. It’s not as cut and dry as the Oilers make it out to be.
Another question that might be asked is what options are out there for Katz or another owner that will result in more revenue than they’ll make in Edmonton. Edmonton is probably of the ten best hockey markets in North America when the dollar is near parity. The only way in which it would be sensible for the Oilers to go elsewhere, it seems to me, is in circumstances where they were getting pretty incredible public subsidies. I kind of think that it’s pretty difficult to imagine circumstances in which that would make sense.
All I will say is ask Winnipeg how life is without their NHL team. I lived through that there, they needed a new arena and no one would step up and the Jets left. The Oilers need a new arena. Have you been to a game recently? Rexall is dreadful. The City needs to step up and be a partner on this. And remember, this is not ONLY AN ARENA. It will be a district. You are all focused only on the arena and “paying” for it and not realizing Katz is putting up some big bucks. And yes he needs to remind you he sunk $200 mill. How often do you get a hometown boy investing in his own town? This district will develop an area in desperate need and while the city will pony up some dough (let’s not forget the province and feds may chip in), you will benefit from the taxes generated in the district (condos and new businesses). The council seems focused on their own individual needs such as Katz hasn’t kissed you on the lips enough or let’s talk about the major conflict of interest where some of you are on the Northlands board.
This is the time to take a leap, to be aggressive and innovative. Let’s put Edmonton on the map for a change. Are you not tired of the bashing this city takes? I sure am.
Without a chance to look into the books of the Oilers, I’d have a hard team buying the “not enough revenue” spin. Especially since, as Tyler notes, the team finished dead last while spending to (actually, above) the salary cap. That suggests to me that the losses have more to do with managerial inefficiencies leading to excessive expenses than it does with a systemic market problem.
I’m not sure why the City of Edmonton should have to subsidize the team to the point that they can make windfall profits even if they are, by far, the least efficient/financially responsible team in the league. How many teams wouldn’t be selling out the rink when the team has missed the playoffs four years in a row, including finishing dead last this past season.
Blaming the market for your losses, in this case, seems pretty unfair given the way the team has been spending and performed on ice over the past couple of seasons. How many markets would have lost much more than Edmonton, given the payroll and product, over the past two seasons?
I will echo Tyler’s points. The URO is precisely what you are after here.
A copy of the format (after Levitt’s proposed changes were implemented) is included in this document (warning, pdf).
http://www.nhl.com/nhlhq/cba/archive/levitt/levittreport.pdf
The league totals are also attached in Appendix I.
I think it would be a great idea to pass this basic information on to a good accountant from the City of Edmonton. It is impossible to massage the numbers to an extent that we can believe the Oilers were losing money in 02/03, much less now.
We do know that the Oilers purchase was debt financed, as far as I know there is no public information reagarding the structure of that financing. It could be anything.
There is always the option of early repayment. The Oilers could have claimed a much greater loss to city council had they exercised that. Likely they chose to show a ~ $4 million annual loss after much internal deliberation. It’s a meaningless number in any case.
Admittedly the purchase price of the Oilers could reflect some of Rexall Sports’ expectations for extracting money from taxpayers at a later date, that may come into play and affect the current debt faced by Rexall Sports.
If this were business dealing with business, there would be no discussion of financing, NONE, until the books were opened. It just wouldn’t happen, ever. There wouldn’t have even been a meeting yet.
I’m skeptical about whether it’s the proper role of a municipality to protect the financial sustainability of organizations, whether Katz Group, or Northlands. I’d tell Katz that if he wants the city’s money, he had better start talking more about what the city will gain by investing it, less about what Katz will lose if they don’t.
Sorry Don, I disagree and calling this risk is such an “Edmonton” thing to say. Risk? Seriously? Is that what a killer downtown revitalization investments are called now? Risk?
I think the City should be grateful Katz is even making such an offer. Many other owners probably don’t care as much about their cities as Katz does Edmonton, and probably would have moved the team, themselves, and their money by now and re-invested it elsewhere.
Great comments MLB. I’m with you 100% on this one. The spin-off revenue for the City as a direct result of the EAD would be ridiculous. We should consider ourselves lucky to have such a hometown visionary billionaire that actually gives a darn about evolving our wasteland of mediocrity into an amazing 1st class city that everyone will talk about, appreciate, and reap the rewards from for generations to come.
The spin-off revenue for the City as a direct result of the EAD would be ridiculous.
Do you have any evidence Craig? Economists would laugh in your face if you said that.
I have real concerns with funding this if all of the revenue generated is given to a private business. What is the city’s benefit, beyond the Oilers, in funding an arena? And with respect to the “small market” argument, wasn’t the salary cap put in place partly to alleviate that issue in the NHL? Aren’t the Oilers one of the NHL’s more profitable teams?
The bottom line is, the Katz group can’t get funding for this proposal. It is too risky for banks. So, instead of co-owning the facility, why not have the city borrow the funds and pass the mortgage costs plus a factor for the time value of money to the Katz Group? That way, he will, in essence, have all the risk and all the reward. He will own the building outright. But, he will have to pay for it. The city could also put a restrictive covenant in place which would ensure the Oilers cannot be moved until the mortgage is paid in full.
first: I also think we need to see the numbers before we can say that the oilers are unsustainable
second: why downtown? why not build this where rexall stands
third: can the city support two arenas…. I doubt it. what happens to rexal if it is not demolished. if it is demolished, why not build the new arena and surrounding buildings at the rexal site. should we really consider leaving that area a ghost town?
Three options:
1. accept a version of the Katz proposal and get a version of this done. Yes, Northlands will fade as a result but I’m not sure how that makes Edmonton worse off. (Do we really care if Northlands is a smaller organization?)
2. reject the proposal (basically do nothing) and take the chances that Katz will sell.
3. come up with a) a better idea and b) $400 million to match.
Why do those opposed to this idea (e.g. Northlands) never offer up an option 3?
Come on Tyler, we all know that economists don’t laugh. And if they did, I’d be happy to have obliged. We all need a good laugh now and again.
Evidence? Do you have evidence to support the opposite? Unfortunately this comes down to typical politics…sustaining the status quo in order to support entrenched and conflicted interests. Evidence will be developed to support either side but at the end of the day I’d like to think that it’s just common sense.
Unfortunately common sense isn’t so common anymore. Our addiction to left-brained, analytical thinking (“data is God”) is corporate crack. People (not economists) are emotional and heart-driven beings. While you can’t take common sense to the bank, when you look at success stories like Vancouver, L.A., Columbus, and San Diego—it’s evidence enough for me to say that the revenue for everyone (the City, local businesses, and yes of course the Katz Group) would be “ridiculous.”
Give people reasons to stay downtown and spend their money, and they will. Right now—as is clearly evident, people can’t get out of downtown fast enough. Take a stroll at 5pm down any given street on any given day and it’s a ghost town. I think that’s pretty sad. Don’t you?
If we look at the existing situation/location with Rexal Place, be it Oilers games, concerts, shows, etc.—it’s broken. Do you honestly mean to tell me that Edmontonians love to race home after work, then race to Rexal, then hoof it for 3 blocks in freezing cold temperatures through the dumpiest part of the city; all just to watch mediocre play whilst forking over way too much money for bad beer and worse food; then hoof it for 3 blocks back to their unheated cars in freezing cold temperatures again, trying to beat the rush, and finally race back home? That sounds like a pretty awful brand experience to me, but unfortunately we are forced to live it every day. It amazes me what Edmontonians will put up with just to be entertained. I wonder what it could be like if we made the entertainment experience in this city fun? Made it warm? Made it easy?
As for what to do with the existing building? Level it and develop low-income housing.
Edmonton is a business, and part of any successful business is caring about customers and creating brand experiences that we love and are proud of. Everyone knows the number one form of marketing is word of mouth. Deadmonton doesn’t get very much positive word of mouth, and usually we end up taking a beating. The EAD (in it’s proposed location) is the catalyst to creating a critically contagious pulse in this city. A pulse big enough to give us a minute shot at winning Expo2017. Given the current state of Rexal Place I’d actually go as far to say it’s a bigger risk for the City not to pull the trigger on this deal.
I just want more for my city that’s all. I’d like it so that when people think of Edmonton they don’t think of “the mall.” I’d like it so that when people ask me, “why the heck do you live in Edmonton?!” I have more reasons to give them than, “because my family lives here.”
Evidence?
Yes, evidence. There are countless cities that have been utterly bilked subsidizing new arenas, with a wake of evidence to back it up, so the onus is on arena proponents to prove the benefit of such a risky investment.
We should move away from brochure platitudes and look hard at the numbers, like any private business would.
This is Brad Humphreys, an economist at the University of Alberta, quoted on Battle of Alberta:
Attracting teams and building bigger or newer facilities was not associated with economic growth, or changes in the levels of any of these economic indicators. Professional sports are not, and have never been, engines of economic growth in North American cities. They are effective at moving consumer’s entertainment from one part of the city to another, and raising employment and wages in one specific sector of the local economy, the Recreation and Amusements sector, which contains professional sports teams.
People interested in providing government subsidies to sports teams – team owners, real estate developers, elected officials, and others who will benefit directly from these subsidies – loudly and consistently claim that large, important economic benefits flow from professional sports. Their evidence takes the form of (1) unsupported assertions (“of course these benefits exist!”) coupled with ad hominem attacks on opponents (“only an idiot, or an economist, would believe that sports aren’t great for the local economy”) or (2) Economic Impact Studies that are really promotional forecasts based on badly flawed methodology.
My research does not mean that subsidies for new hockey arenas are bad. Sports clearly produce important intangible benefits in cities, which may justify government subsidies. My research just means that we – taxpayers, elected officials, team owners, and other stakeholders – should decide on subsidies based on these intangible benefits, not on overblown claims of economic benefits (“More jobs! Higher income!”) made by a few people who will benefit immensely from the subsidies.
Humphreys stated that his comments were based on having “…gone back and looked at the economic performance of cities, in terms of income per capita, employment and wages, since 1969 looking for evidence that professional sports generate tangible economic benefits.”
That second paragraph just kills me Craig. You actually take it a step further and deride the possibility that evidence could be of any value. Truthiness, eh?
Craig: I’m not sure what you think makes Vancouver, L.A., Columbus, and San Diego success stories, but three of those four examples required zero taxpayer dollars. Why should Edmonton taxpayers shovel corporate welfare at a man who can either afford the whole cost or at least rally a business case for private investment. If neither can be done, then we don’t need a new arena. Period.
And as I say all the time: if the Oilers are definitive of Edmonton, what an indictment that is against us. People who believe that are too busy sheltering themselves in bedroom communities to realize what great things are happening in the city.
Don
I realize the idea of a completely refurbished downtown core sounds great. Absolutely love to see it! Clearly Craig believes it is a lead pipe certainty. I certainly hope he is right. I do not think so but that is based on my read of the existing business reality in Edmonton.
The surrounding area development is being sold to the City and its taxpayers on the basis of 2 new office towers, 2 new hotels, a Casino (already there) and minor ancillary development.
Office Towers
There is already ongoing occupancy in the existing Triple AAA office space downtown. A new building–Epcor Tower is currently coming on stream (the first new AAA building in 20 years) and that will add an additional 150,000 AAA sq feet of space yet to be leased in the marketplace. Epcor is also vacating almost 150,00 sq feet of mostly A and B space which will saturate that market. So the question that arise: Who will be the new tenants of the 2 office buildings be? No NEW tenants, no additional CRL and no additional taxes to the City.
Hotels
I read that Edmonton downtown hotels currently have a 60% occupancy rate. If that figure is correct what in the world would cause anyone to build 2 new hotels? Additionally if the per night stays do not go up significantly — ie we simply move rooms rented from the Sutton Place/Westin hotels, etc to the new hotels— No new rooms rented, no increased CRL and no additional revenue to the city.
Casino
We have one there now ……. and that will change –how?? when we are done we have a Casino there.
Without asking hard questions, I realize it would be easier to simply jump onside this “project” and support subsidizing the Oilers to the tune of $300-350 million dollars. But that does not make sound business sense. And if the ancillary developments do not proceed expeditiously and successfully ……. the City could be paying an awful lot of money for a very long time.
What is bad, if the project does not work, we, the taxpayers of Edmonton have financed a new arena and have no increased revenue to pay for that financing. The Oilers, on the other hand, will immediately have the increased revenue stream to allow them to profit. Much much worse, though, if the project works, ALL of the upside flows to private business for their own profit.
Put a much simpler way: we get all of the risk that the project will pay off long term, the Oilers will have paid $100 million for an immediate and unending revenue stream from an 18,000 seat arena. I also suspect (shoe to be dropped later) that the entire Katz $100 million dollar contribution to the cost of the new arena will be paid for by personal seat licenses and luxury box sales. That is, the entire $100 million will be paid by season ticket holders not Rexall Sports.
I echo Tyler and Vic’s comments about obtaining the Oilers URO, I would go further and have legal counsel and accounting experts ask tough questions of the Katz group CFO re their finances so that the City — being asked for 300-350 million dollars— understands precisely why the huge public subsidy is needed.
Mr Iveson, please get positive and supportive about this opportunity for the city. An Edmontonian is prepared to put millions into downtown developement. Your task is to find a way for this to get done, promptly. Absolutely everything that happens in this country is supported by the tax dollars – whether an auto plant in Ontario, a plane built in Quebec or a LRT extension in Edmonton. Of course the city has to build the building – that is what a city does, some rent is what you are really looking for.
Northland gets millions in tax dollars, and it is not that long ago that the city and Northland were very adversarial. Not sure what changed attitudes. Northlands should not be involved in a new facility at all.
From your picture you look to be a young man, this development is something that as you grow with the city you will be proud that you supported and proud to showoff to visitors to Edmonton.
I look at it this way, what other private individual is willing to sink $200 million of their own money into redeveloping a large portion of the downtown? I think they City should pitch in, but at the end of the day the deal has to benefit both parties equally.
@craig
“As for what to do with the existing building? Level it and develop low-income housing”
building low income housing in a region already saturated with low income housing only makes a area worse off. the region sees property values fall, crime rates increase, and job opportunity diminish. It takes all the poor and puts them in one area, then lets the situation ferment and the area fall to disrepair. that is the worst thing you could do to the area
“evidence… who needs it” (paraphrased)
without evidence the world is flat…. without evidence you might be able to spend over a billion dollars on your biased instincts and destroy two neighborhoods of the city in the process….. but you had a hunch, right? how could a hunch ever be wrong?
I have a hunch I am gonna win the lottery. it’s a sure thing
Below are the written questions I submitted today. Thank you to the commenters for providing some insightful leads:
For the Katz Group
Please explain exactly how a Location Agreement works from the Franchise perspective, including the contemplated duration of the agreement.
What assurances can the Oilers or the NHL give with regards to the NHL arena standards, and how constant they will be over time; in other words, is there any likelihood of the proposed new downtown facility becoming outdated in 20-30 years and requiring major investment or replacement?
Please explain all the competitive disadvantages the Oilers face in this market relative to other NHL franchises – including the particular revenue issues with today’s lease – and provide a monetary estimate of the impact each of these disadvantages.
What direct operating subsidy would be required to put the team in a position of sustainability, all other things held constant?
Please provide the Oilers’ Unified Report of Operations (URO) as submitted to the NHL for the last two years.
Since the argument is that the team needs additional revenues to be sustainable, what assurances can be given that costs have been reduced and that the operation is as efficient as possible, (preferably with reference to league benchmarks)?
What is the Katz Group definition of sustainability for the team – in terms of rate of return on investment for the team and the $100 million contribution for the arena?
For City Administration:
I assume that the value of an NHL franchise would be higher if it had a long-term inexpensive lease in hand which guaranteed all Hockey and Non Hockey revenues as compared to the value of the team today. Can that increase in value be estimated – if so what might it be?
Please explain exactly how a Location Agreement works from the city perspective.
Can Admin estimate the lifecycle costs for a new arena as proposed, and which revenue streams might be available to operate and renew the facility over time?
Air Canada Centre in Toronto was cited as one example of a viable private arena development – is it possible to establish whether it was in part paid for with the proceeds of surrounding development?
Don –
Will you publish their answers? Given the problems with some of the information that’s already been provided to you (the Canucks weren’t sold in bankruptcy, for example), I’m sure I’m just one of many who would be interested in being able to evaluate their answers myself.
Cheers,
Tyler
I have a few questions
1) Rexall place is a relic how can fixing up this old building bring in more revenue? ever heard of lipstick on a pig?
2) If Northlands or may as well the city is willing to put in 150 million in old why not take 100 mill from Katz and build new ?
3) Is new business not acceptable to city council as the jobs this would create in construction and future building and businesses would benefit residents yes or no?
Hello Mr. Iveson,
A local investor is prepared to infuse 200 million dollars into downtown.
There are certainly questions to be asked and details to be determined, but let us please not throw such an oppertunity out the window.
Let’s build something we can celebrate and boast to the world.
Other Canadian city’s are begging for an NHL team. Even in the absense of private funding, Quebec seems perhaps prepared to invest in a World Class arena. :
QUEBEC — Quebec City Mayor Regis Labeaume on Friday announced plans to build a $400-million NHL-sized arena in the hope of bringing back a professional hockey team to the city that was home to the Nordiques until 1995.
“The mayor is asking federal and provincial governments to invest $175 million each through infrastructure programs. The city would put in $50 million.
“No professional hockey team will move to Quebec City without a new modern arena,” Labeaume said.
http://www.canada.com/sports/Quebec+City+attract+with+400M+arena/2110649/story.html
Yikes. That was a bit of beat down. Obviously there are a few of you who are extremely passionate about this issue, but it’s unfortunate that you chose take my comments completely out of context. Where’s the “truthiness” in that?
Evidence
Never once did I say that we didn’t need evidence to make a decision. What I said was, “evidence will be developed to support either side,” which was somehow twisted into “evidence – who needs it.” (Really Brian? Come on. You’re better than that.)
Evidence is what lawyers and accountants are being paid to come up with. I’m not interested in commenting on the evidence of either side, which is why I chose not to write about it. Tyler and Brian – you obviously have way too much time on your hands to sift through all of the “evidence,” but good on you for doing it. To each their own I guess.
Instead I choose to focus on the bigger picture—the stuff that your every day Edmontonian cares about because it personally affects them.
This isn’t about the Oilers
For some reason some people keep bringing it back to the Oilers, but in my opinion this isn’t about them. If it was, I wouldn’t have bothered weighing in on this blog in the first place. I don’t care so much about what happens to the Oilers—that’s Katz’s business. What I DO care about is my city.
I think this issue is much bigger than the Oilers. John Holmes and CMD you clearly understand this. This is about the evolution of Edmonton as a first class city. It’s about rebuilding a downtown core that we all can be proud of.
In Katz’s defense, why should he have to foot the entire bill for a facility his team only plays in 11% of the year? Should the City/Province/Nation decide to make a serious push for Expo2017, this is a facility that we would have to build anyway. The only difference is now we can get it for 50% off.
Why a partnership?
Because it’s the only way this idea will work. Partnerships create accountability. Molson failed in the development of Montreal’s arena partly because there was no incentive for the city to make it work. The same goes for the cities that were 100% responsible—there was no vested interest of the owners. However, as a true 50:50 partnership, both sides will make it work because they have to.
As for my low income housing idea; sorry Brian, I didn’t say it was the best idea. It was just that—an idea. You made some great points and it’s something I obviously hadn’t given much thought to. Perhaps there are some great ideas to elevate the value of that side of town as well? Do you have any ideas? Let’s hear them. I’m more for idea generation than idea bashing. The best ideas naturally have a way of rising to the top.
Don
I would add to the list of questions for the Oilers/City management:
1) what is the existing vacancy of AAA office space in downtown Edmonton?
2) what will the total existing vacant AAA space be when the Epcor Tower is completed?
3) Are there any large new tenants looking to relocate to the Edmonton area? if so how much additional space is needed?
4) is there any reputable projection as to as to the need for an additional 750,000 sq ft of AAA office space in downtown Edmonton over the next 5- 10 – 15 years?
5)what will the introduction of 750,000 sq ft of AAA office space do to the total amount of taxes generated from existing downtown office buildings?
6) is there a perceived shortfall of hotel rooms in the downtown core?
7) is there any reputable projections as to as to the need for an additional 550 hotel rooms in the Edmonton downtown core over the next 5- 10 – 15 years?
8) is there any economic data that supports the contention that the proposed development will create new net tax dollars to the city?
9)if Northland’s profitable concert business is given to the operators of the new arena and Rexall is mothballed what will be the direct financial shortfall to Northlands be?
11) what will the additional cost be to the City of Edmonton?
12) how will that identified shortfall be funded?
I am all for a revitalized downtown! I just want to make sure that all of the promises made for City’s revenue recovery are both realistic and conservative because if they are not I wonder what would have to be cut from the City’s annual operating budget over the next 30 years to pay for the City’s $350 million contribution to this project
As a long time city of Edmonton taxpayer and Oilers hockey fan, it makes no sense to me that we take all the risk as a city and then hand over all the rights to someone else.
How is hockey different than running any other business? Mr. Katz wouldn’t think to expand his pharmacy business if only someone else would build it. He also chose to buy this team on his own.
He isn’t anyone’s fool. The Oilers aren’t going anywhere soon. Just as Mr. Bettman refuses to allow Phoenix to be moved, there is no way the Oilers are going to Manitoba or Ontario.
This is a Katz bluff. Build the arena together with the Katz group but but allow us to share the revenue the same way we share the risk as taxpayers.
A pulse big enough to give us a minute shot at winning Expo2017
Really Craig? Really? Your argument is that even if the $400 million for an arena turns out to be a white elephant, City Council should spring for it in order to secure HalfExpo 2017, which is guaranteed to be a multi-billion dollar white elephant! In which universe does this make sense?
In Katz’s defense, why should he have to foot the entire bill for a facility his team only plays in 11% of the year?
Because only Katz seems to believe we need a new arena in the downtown core, maybe? Rexall is one of the world’s…are you sitting down?…most profitable concert halls. That’s “most” with an “M”. While concert promoters are concerned about future expandability with ever-increasing stage shows, it sounds like the proposed Rexall expansion would take care of that for a fraction of the price.
Edmonton’s desire to be a first class city notwithstanding (first class cities have multiple airports, I casually note), the downtown arena proposals have been so far submitted appealing entirely to the heart rather than the head: we see how fast some of the arguments that have been bandied around can be discredited. Then when the tough questions start being asked, Katz goes ahead and declares the Oilers WON’T play in Rexall after 2014, no matter if we rebuild it into a colossus that would make Madison Square Garden blush; again trying to scare people into pushing for his proposal. Tyler has done a pretty damned good job showing how no other city on the planet would give a better ROI (minus insane subsidies) for a hockey franchise, making a movement threat basically so much hot air.
When you’re in negotiations, Craig, you have to come up with your BATNA — best alternative to negotiated agreement — and Katz is hoping that the city, like you, ignores all this “evidence” before they discover that the three best options for City Hall is one of:
a) wait for Katz to agree to build the arena himself, possibly in return for a reduction in property taxes on the site for a set number of years that the Oilers remain
b) agree to build the arena themselves, run the concessions, and charge Katz rent on those mere 11% of days that you remind us he actually uses the facility
c) let Katz move the team to Amarillo in a huff and let the NHL bring in a different billionaire salivating over a proven top-ten revenue-generating hockey-mad market.
Councillor Iveson,
I know you are a large proponent of the urbanization of our downtown and are well studied in this area. I heard you speak about this very topic during a speech at BuildEx this spring and was impressed. I also saw you try and bury your head under the table when the conversation of the new arena district came up. I do applaud you for doing your due diligence and holding the Katz groups feet to the fire, but through all your research and consultations I sincerely hope you do not pass up the opportunity at hand to make this happen. This is a once in a lifetime opportunity to create a giant leap for this city that will not come around again. This fall municipal election will be one of the most important in years and sincerely hope to be voting for you again.
Craig:
In Katz’s defense, why should he have to foot the entire bill for a facility his team only plays in 11% of the year?
Fair enough, but Katz has been adamant about needing the non hockey related revenue from a new building. If he’s only willing to pay 20% of the costs, should he get 100% of the revenues?
Honestly, there have been some very compelling arguments from both sides on both this thread and others I’ve frequented. But one thing is still stuck in my craw and I won’t be able to get it out until I get some kind of sufficient answer.
Personally, I believe Daryl Katz has honourable intentions and is working hard to realize this dream. Although I’m not naive enough to believe that turning a profit isn’t a motive, I do feel like it’s a secondary one. I get the impression from the way negotiations have gone so far, that he and his staff might be a little green in the entertainment and facility management market. I do NOT compare his comments with the threats Pocklington made a dozen years ago, nor do I think he wants’ to see the team move anymore than the most hard core Oiler fan does. In all these negotiations Katz has made one thing abundantly clear, he does NOT want Northlands involvement of any kind in a new arena deal.
So my problem is … why oh why does the topic of Northlands involvement keep coming up, continually posed BY the city?
To me, it seems as though the City is being scrupulous over evidence and proof to protect Northlands stake in Edmonton’s entertainment industry and NOT looking out for the citizens? I mean if the City was so focused on evidence and proof, would they really be taking a billion dollar gamble on bidding for Expo 2017? Would the Art Gallery have gone up so quickly and quietly?
Even if Northlands were involved in some kind of agreement with the City and Katz, wouldn’t the mayor and the two other counsellors that sit on the Northlands Board of Directors have to recuse themselves? I’m no business major, but isn’t that Business Ethics 101? How can any member of city council represent the interests of the city AND a major corporation fairly?
Now perhaps I’m way off base, and there is an explanation for this. In that case let’s just talk about Northlands for a second. Several years ago, Rexall place was the gold standard for facility and operational management in North America. Although it was still one of the smallest and oldest in the league, it was one of the most efficient. The ice quality was ranked the best in NHL by the NHL, and whenever a new entertainment sports complex was constructed around North America, staff from Northlands were flown in and consulted on EVERYTHING.
This sounds like the perfect time to bring in consultants and make sweeping cuts to your senior staff doesn’t it? That’s exactly what happened, Northlands laid off hundreds of its most senior, knowledgeable staff in key positions. Since those cuts, the quality and efficiency of Rexall Place has been declining. The roof leaks, safety features have been deemed inadequate, and even when they upgraded the score clock, EPCOR had to make major modifications to the nearest power substation because the building couldn’t keep up with the power demands of the new clock.
Again, giving myself a little credit, I don’t think 24 health violations is a good enough argument to bulldoze an arena and build a new one, but they are just another sign pointing to how Northlands has intentionally allowed Rexall place, the facility, and the staff to deteriorate. Perhaps this has been Northlands strategy all along? Allow Rexall place to deteriorate to such a state where they could convince the City that Northlands needed to build the city a new arena! … Whether or not the city would have jump at the chance and start writing blank cheques…. I guess I can’t comment on, but at the very least, consider if THIS is the company you want managing our new facility?
Having said all that, the citizens of the City of Edmonton have made it abundantly clear, we want a new arena. 85% to 95% of citizens have given their approval that they want to see a new arena built and have our downtown revitalized. Most have even agreed to tax dollars being used, or user fees. I doubt any counsellor will see that kind of approval rating on any other issue for the rest of their tenure. In light of that, I want to see city council uncross their arms and take a more active role in these negotiations. Please bury the Northlands issue and start making some proposals of your own. YOUR CITIZENS WANT IT DONE.
First, I do believe whenever an new arena is constructed, it should be downtown and not on Northlands park. That area is an impediment to community economic development. No restaurants, businesses, just a lot of concrete. Kinda reminds me of the City Centre Airport. Having just returned from Toronto, I loved that both the ACC and Roger’s Centre were very close to both the office hub of Bay street and the retail/commercial business of Yonge. Makes going to a game or concert a fuller event/night out. I also would suggest that adding a downtown arena would be a major plank in the revitalization of downtown, especially at the location Katz proposes. It is near City Hall and the Arts District, major office buildings, and a growing high-density residential areas. Seeing downtown as dead as it is at night is just sad, especially when it is where I live. We need more street facing commercial space, encourage small business (and not just more chains), more restaurants with patio space and many more little improvements. I think the Arena can leverage such change.
I also believe Rexall is at its capacity and further renovation is not a viable solution. The seats are tiny, there’s not that many of them and a more comfortable experience that more people can go to is desirable.
That said, I do believe Katz and the City are making a business relationship and not a P3 type of concept, which is what seems to be the current proposal. My hope is that the City can be reasonably be reassured that any municipal investment can be returned whether through ticket surcharges, a CRL, perhaps a cut of some non-hockey event profits or a combination thereof to make a deal semi-sensible.
Risk is a fact of life with any major investment. The best we can hope for is to mitigate them as best as possible. And risk is not just negative – the potential benefits that can be realized through this project are risks too.
Colin, good post, reasonable thinking with good points. Yes I do agree with Colin.
@Craig
the evidence is the big picture…. evidence is everything. evidence is the reality of a situation. emotional appeals on the other hand are nothing more than hyperbole. actions have ramifications. it is imperative we look at evidence to predict these ramifications before we act.
if you are hungry and you see french fries in hot oil on the stove, your desires might tell you to eat it immediately after removing them from the oil. If you bother to take the time to see how hot it is, you might not get burnt.
I am not convinced that an arena will make our downtown “world class” but I am convinced it will turn the currently location of rexal into a ghost town and cause the further degeneration of an already struggling area of the city.
downtown will be rejuvenated by the lrt. the lrt will make downtown a transportation hub for the 30% of the population that currently takes transit (a number that is growing). people will choose to live downtown for it’s transportation convenience.
If we build a new arena I would like to see it built at the rexal site. I think it is the perfect location. lrt access, close to downtown. lots of parking. lots of area to develop as katz wishes. accessible from 75ave bridge to the southside
If it is not built at the rexal site, I predict the city will need to spend huge sums of money to try to infill develop that portion of the city which is not considered desirable to most looking to buy a new condo. lowest property values in town.
low income housing being limited to select impoverished communities is already a problem for this city. we don’t need to add to this. there is talks about putting a limit on low income developments in some areas.
a partnership is fine, if the city gets to earn revenue from the arena and gets to let northlands run some of it. a partnership is no partnership if the city pays all the costs and kats gets all the revenue, from non hockey events (like he wants). that is not a symbiotic relationship. that is a parasitic one.
@kelly
where do you get your statistics? are they from an actual scientific poll, an internet poll, or just made up?
Brian, a downtown arena has all the same advantages as a Northlands location – LRT access, lots of parking – lots of it heated, or covered, and there are still lots of areas in the downtown that can be developed.
Downtown is doing pretty well right now. In terms of people and nightlife it is not as busy as 82Ave. but it is pretty good and improving. It is a great place to live, you can walk to most services, and you are never to far from the river valley.
A new arena and whatever else develops around it will simply help speed downtown development.
regardless of the advantages of a downtown location, building there will leave the current rexal site abandoned. This would create a huge burden for the city.
downtown will develop without an arena. if any part of the city needs attention, it is where rexal currently stands.
downtown will infill develop with the lrt expansion, from condos and businesses that want good transit access. rexal lands are a great opportunity for infill development of the commercial establishments that katz wants like a hotel and a casino. the low property values prevent people from wanting to move there but make it perfect for a large “entertainment complex” (the very line the katz team uses to pitch the arena. after all, isn’t northlands already an entertainment complex? instead of building a second entertainment complex, and have them compete against each other, why not expand the one we already have and infill develop the northlands area. while we are at it, we could improve the one area of the city that needs it most.
just be patient and downtown will recover with better transit access. 118 ave will not recover by moving the business activities from rexal to downtown. what katz would end up doing is destroy one part of the city to create a slightly faster build schedule in another.
it’s like taking food from the poor and giving it to the upper middle class…. not my idea of a progressive policy
p.s. downtown does not have all the benefits of the northlands site. specifically it is hard to access by vehicle during peak times, especially from the south side, with bridges getting frequent bottlenecks. rexal has quick and easy access from 75st. it sits next to a major throughway with a high speed limit.
Brian, on traffic, I have driven from the South side to Northland for over 20 years, there is no easy way to get there, game day or not. 75th St moves at a crawl, as does the Capalino on game night.
I drove downtown nearly every working day, I say getting downtown is faster, lets agree it is the same, however downtown is closer.
And lots of people who would attend Oilers games work downtown, and just may stay there on game nights – so there is no travel for them, ok going home travel.
Again downtown is just better.
getting downtown on a weekday during rush hour traffic means being stuck in the bottlenecks on the hills, then having to navigate the small central roads and red lights to get to the proposed location for a downtown arena. I can prove to you that such an act would be more difficult than going to northlands. As an example here are two google maps routes from millwoods, showing optimum driving conditions with no congestion.
to rexal
25 minutes
7 turns
to the proposed arena site
25 minutes
14 turns
http://maps.google.ca/maps?hl=en&safe=off&client=firefox-a&hs=rBn&rls=org.mozilla:en-GB:official&q=millwoods%20to%20rexall&um=1&ie=UTF-8&sa=N&tab=wl
http://maps.google.ca/maps?hl=en&safe=off&client=firefox-a&hs=rBn&rls=org.mozilla:en-GB:official&q=millwoods%20to%20rexall&um=1&ie=UTF-8&sa=N&tab=wl
with a downtown arena, forget about going downtown on an event day, by car. traffic will be a congested mess….
downtown workers make up a small percentage of the population, so I can’t see them offsetting the problems. downtown workers can easily catch a train to rexal, so they would not travel by car to either venue location
sorry bad links
http://maps.google.com/maps?f=d&source=s_d&saddr=Edmonton,+Alberta+T6L+7B5,+Canada+(Mill+Woods+Town+Centre)&daddr=rexall+place&geocode=FSOnLwMdbiE9-SEqn7FFAaDANg%3BFUxyMQMdsc88-SmvK0oJGCOgUzH463SB1jpfmQ&hl=en&mra=pe&mrcr=0&sll=53.513368,-113.455811&sspn=0.230283,0.848694&ie=UTF8&ll=53.516634,-113.444824&spn=0.230266,0.848694&z=10
millwoods to rexall
3 turns
8 steps
26 minutes
http://maps.google.ca/maps?f=d&source=s_d&saddr=2331+66+ST+NW,+Edmonton,+Alberta+T6K+4C2+(Mill+Woods+Town+Centre)&daddr=104+Ave+NW&geocode=FdCnLwMdcCI9-SFC8dF16lpdeQ%3BFQENMQMdiDQ8-Q&hl=en&mra=dme&mrcr=0&mrsp=1&sz=15&sll=53.548773,-113.492889&sspn=0.00719,0.026522&ie=UTF8&t=h&z=15
millwoods to the proposed downtown arena site
6 turns
14 steps
25 minutes
I’ve read through all of this, and there are some great comments throughout. I myself support a new arena district in the downtown core. To me it is right for the city, especially with the push to develop and rejuvenate our core.
I was recently at the NHL draft in Los Angeles, and seeing the arena district there with the restaurants, clubs, and vibrancy that it has made me happy that it is the same group responsible for their arena district that Katz is consulting with on ours.
If you take a look at the area surrounding the proposed site, all you really see is empty lots, many of which aren’t even being used for parking. Imagine the tax benefits the city would see if that area was fully developed. A large portion of the empty lots in the downtown core are currently in the planning stages of being developed. The arena district should push some of those plans forward, with the city seeing more tax benefits.
People currently don’t go downtown much due to the lack of venues, or places to go. Businesses don’t want to open there because there’s not enough traffic. A new arena district would bring more businesses downtown, and more people.
I agree there are issues to sort out, and risk, but I see nothing but good coming from the extra development. Please figure something out and get it done.
to reiterate. downtown is seeing development without a downtown arena.
the city will only see tax revenue shift from the rexal/northlands areas to downtown, for any development a new arena gives. this does not equate to an increase in tax revenue. they might see some small tax revenue by increasing taxes downtown, which I doubt will encourage development.
downtown already has the shaw conference centre for large events, which will likely see an expansion in the near future. downtown also has plenty of restaurants, shopping, a theatre, parkland, and hosts many events throughout the year.
an arena might bring hockey fans downtown, but if people are there for the hockey alone, they will soon leave. spinoff benefits are easy to claim, but hard to prove and often exaggerated.
the lrt will bring far more people downtown, as downtown will be the transportation hub for the city. 354 000 people and growing, use ets every day to get to where they need to go. how many use an arena, and how often? a few thousand people for a few hours, every few weeks vs 354 thousand over the course of a full day
which is the wiser investment in the goal of “bringing people downtown”? think about it, and answer it honestly, not with the “someone that went to a draft pick in LA” bias
I note the new picture – very nice
Question for Kelly. Please post your source for your statistics. You state that 85 to 95% of Edmonton citizens want a new arena. Please provide the source of the independent poll that supports your statistics.