Council’s Final Arena Offer
[UPDATE – October 25, 2011: I guess the April framework wasn’t Council’s final offer. See here for the October 25 report outlining the post-New York changes to the agreement framework.]
Make no mistake, I’m not anti-arena as some have suggested, I’m just concerned about the public financial contribution that is called for to make it happen, which is why I couldn’t support yesterday’s motion at Council.
I did support the required zoning in January and have supported other parts of this process that would enable the concept to move ahead, where I felt the public interest was served. However, my preference has always been that this arena be funded privately by the Katz Group if they were to operate it.
The more we learn, the more it’s clear that they probably can’t afford to do it alone. But that doesn’t make it right.
So my message yesterday was this probably isn’t a bad deal under the circumstances, it’s just the circumstances I have a problem with.
On that point, I spoke yesterday about my concern that the NHL has a broken business model. Revenues (hockey and concert) that ought to support the arenas are gobbled up to support the costs of hockey. This is because the costs involved in running an NHL franchise have gotten out of hand and the revenues haven’t kept up in many markets. Ideally the league would better control these costs so that teams can be financially sustainable without needing public subsidies in the form of discounted or free rent in public buildings.
I realize this is unlikely, and I realize there’s no way to put effective pressure on the NHL to shift its business model to lower costs as long as other municipalities are prepared to offer subsidized public arenas and control of all revenues in those public buildings. That’s the market we’re competing in, but that doesn’t make it right.
I also believe, however, that the NHL will likely have to change its approach in the coming years to respond to these cost pressures to deal with some of the floundering franchises in the US, and I question the likelihood that mid-sized municipalities will be able to continue to build these facilities to accommodate the NHL amidst more pressing basic infrastructure demands and rising interest rates. We may be among the last round of cities to do this kind of deal before the NHL eventually cleans house, and that would be unfourtunate. Though only time will tell.
The good news is that the direct municipal funding has been whittled down a fair bit from prior rounds, and yesterday’s Council motion set a maximum of $125M — formed mainly by redirecting current city spending related to the existing arena plus some fees and savings connected to the new arena that would be used to borrow $105 million, and a smaller $20 million CRL.
The motion at Council did leave open the possibility of implementing a larger overall CRL to fund other projects envisioned in the Downtown Plan, and some of the other costs like land and off-site infrastructure, which are more properly public costs.
To clarify, the other main city role is to collect a ticket surcharge, which would be applied to service another $125 million in city debt on the project. This is the user-pay component, but the debt will be the city’s.
There’s still a $100 million gap in the funding formula, and I expect that this may yet get filled by public dollars from the province, which would take the total public contribution to the building itself to half, which will still seem high to many including myself.
The motion also sets a firm price of $450 million on the building cost, which is governing by round numbers but at least it’s a cap. However, cost overruns may yet occur and responsibility for those is still a bit up in the air, which is concerning.
My sense is that the funding parameters are more or less the final offer to the Katz Group.
We’ll see how they (and the province) respond.
The full text of the motion reads:
That Administration negotiate a financial framework for a downtown City-owned sports and entertainment facility with the Katz Group based on the following terms and conditions:
- Maximum Price – $450,000,000 to be set prior to any approval by Council of adequate price guarantees
- Confirmation of Katz Group commitment of $100M.
- User fee (Ticket Surcharge) to fund capital costs of $125M
- Evaluate options for a CRL(s): That administration revise and reframe projected CRL project(s) to support the City’s overall downtown plan with $20 million from the CRL to be directed to arena and the balance of proceeds used to support other priority downtown projects (Quarters, Jasper Avenue, Warehouse District) in conjunction with the overall downtown plan.
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- Evaluation options for further support (potentially $105 million) to be paid for by either direct tax revenues from the arena, or savings from not having to pay current subsidy and parking revenue increase to the City
- That the total of 4 and 5 in terms of the City’s direct contribution to the arena building would not exceed $125million
- City owns the arena and the land for any new facility.
- Agreement on fair market value of the arena property.
- An agreement is entered into with the Katz Group, with the Katz Group responsible for operating costs and generating necessary revenues for 30 years.
- Project cannot proceed until the balance of funds are confirmed.
- That Administration continues to work with Northlands to ensure the City understands their financial challenges and how these can be addressed.
- Location agreement whereby the necessary agreements are signed to ensure that the Edmonton Oilers operate out of the facility for 30 years.
- That the City retain the right to access to facility 4 weeks per year – uses to be determined by the City but may include allocation of uses to Northlands or other bodies, for example, the Canadian Finals Rodeo, Capital EX and other events the City deems of civic importance.
- City to negotiate options for potential revenue sharing.
- Investigate the opportunities for lottery through establishment of foundation, with proceeds directed towards community benefits in the new facility.
- That Administration provide a report on options for the naming rights.
- Amendment (LS/SM) Carried
That Administration negotiate the requirement for a Community Benefits Agreement associated with the above framework as part of any negotiated agreement. - Amendment (LS/JB) Carried
That the final negotiated agreement be brought back to Council for ratification.
I appreciate your perspective and concerns regarding the financial issues and unknowns. I support the arena motion; however, I feel the concerns you have raised are of importance and should be front-of-mind as yeg moves forward.
I think the province has been very clear. Premier Stelmach publicly announced in a CTV interview, “There will be no provincial money for an Edmonton Arena.” I can assume from that statement, there will be no provincial money for an Edmonton Arena.
As far as cost overruns are concerned; I would be surprised if they are under 15% as per most construction projects.
Personally, I hate the idea of the city giving a billionaire any money for a private project.
Personally, I hate when people tunnel vision on the fact that Katz is successful and pretend that this is a private project, almost to say there is no benefit to Edmonton and its citizens, which clearly there is.
As far as cost overruns are concerned, the quicker we put out RFQs and RFPs for this project the better. The Oilsands industry is starting to really warm up and we need to get this project out there and get building before the cost of labour and materials goes through the roof like it did 2005-2008.
I feel that most of the very valid concerns of the taxpaying public are being considered and will be addressed through the 17 items of this motion.
This arena, the recently completed AGA, Nait LRT, SELRT and WLRT and the Royal Alberta Museum moving downtown are signs that downtown Edmonton is on the tipping point of becoming a bustling urban center (again) and finally lose its dusty, drab, boring core. we will soon be seeing signs that we have critical mass downtown and this will only spur on more interest and investment in downtown edmonton and area. Perhaps we can hope for a larger shift in people in central areas, and help also revive schools in mature areas.
Don – I find it curious that one revenue stream hasn’t been discussed at length either at Council or through mainstream media – and that is potential contribution of naming rights revenue. Naming rights revenue, if offset against the City’s direct contribution of $125 million, could prove significant, and could thereby reduce the City’s overall financial commitment. Additionally, there appears to be a fixation on the up-front capital construction costs and very little attention has been paid to future capital improvement/requirements for a new facility. The arena agreement for the new Consol Energy Center in Pittsburgh provides for an ongoing annual minimum investment of $400,000 (via a new parking surcharge) from the Sports and Exhibition Authority into a capital reserve fund for future arena improvements. It would appear that this would be a prudent negotiated clause to retain in Edmonton as well.
Don, you raise some valid concerns, as well as some interesting points. While I appreciate what Katz brings to the table, and the “value” of the Oilers to Edmonton… the true bottom line in this lays clearly at the NHL’s feet. When times were good, player wages went up, and Up and UP. The bust came, and most certainly has not left yet, nor will it for some time. The NHL is still thinking in the terms that people have piles of money to just toss aside into entertainment. Anyone should be able to see this has been changing. Until the NHL turns around to the teams and says “we have to fix this”, by reducing the salary caps and reducing their costs… we… the tax payers… should not have to be responsible for their bad marketing choices.
With all of the other expenses we have with SO many other projects… look at the totals of things City Council wants to put your children into debt for. Some have value, some are nice to have. And at this point, I believe the current circumstances make THIS more of a nice to have. A “nice” nice to have, if times were different.
The second part of my comment has to deal with the terms. To say that the Oliers will stay here for 30 years sounds good on the surface. But what happens if things don’t turn around and Katz wants to sell the team. The new prospective owner would probably want to move them. The contract says “no” (under what penalty would “ok” be? Could they buy-out for $10 million? ?? ??) so Katz can’t sell the team, and walks away? Do taxpayers hold the bag?
The Province seems to have put it’s foot down, and appearances are that even with an election, who ever ends up in power will also probably say “no” to adding in funding. And what happens if all of this starts, and when the City finally applies for the CRL, the process ends up being denied? We already have two CRL’s in effect (or trying to be in effect) and funds to ‘build’ those areas have been expended… but nothing yet has happened their either. The shell game City Council is playing, has been done before. And it’s been used up. And we have a hard time believing what we are being told, is going to end up as the truth. If there is any failure in transparency … oh, what a mess we could have.
$250 million in city owed debt. 1/4 of a billion dollars. When we have an arena already, of almost the same size, in perfectly fine shape, as I can attest to when I went to watch the Calgary game a couple weeks ago.
What the hell is this all about? It isn’t about what is right for the city or it’s taxpayers. It’s about taking on debt for a redundant asset for the next 30 years, and cutting other city programs to subsidize a private business. We have a perfectly fine vehicle, but we need to buy another one because it has this year’s color of paint. And screw the kid’s university, he’ll enjoy this so much more.
It’s crap, and the only people that want it are the ones that have no interest in paying for it. This will be the Waterloo of every council member that supports it. We complain about ridiculous tax hikes now, what about when the city has this white elephant to pay for too?
I’m disgusted with council and I’m saddened by all the Katz Group social media sock puppets spouting on this blog like it’s a choice of which stupid funding program we choose, not about whether we choose it at all.
Unless things have changed most recently, it is my understanding that we elect counselors to represent the taxpayers needs and to give direction to the civic employees.
One thing that all taxpayers have in common is the desire to have good services and amenities at fair prices.
The arena proposal currently offers only a slim or marginal chance to recover the investment directly and in addition there appears to be an escape clause not covered with respect to the intentions of the NHL Franchise ongoing into the future.
Should counsel acccept this open ended, unsubstantiated, construction proposal, the taxpayers are left in the situation of having no control whatsoever over either revenues from the arena and complex or ongoing expenses to maintain same.
Hypothetically, the Katz group could develop a top ranking hockey team over the next few years and quite possibly sell the franchise to a new owner for an enormous capital gain leaving the city still maintaining and diverting taxes to paying off the building and construction costs of the arena. Doubtless the new owner would simply take over the rent free building and amenities and make such adjustments they required to recover their investment.
It’s pretty obvious that such a deal puts city taxes and city prime retail property at the disposal of private enterprise.
I am suggesting that city Council, as our emissaries, negotiate a fair and reasonable return on city i taxpayers investment.
I am also concerned as a taxpayer to see any of my taxes being used to either support or speculate on what is without question a business proposal. We are not in the business of investing in other businesses. Our tax money currently is pretty much allocated to building out our infrastructure and improving transportation and amenities for our citizens.
So in short,
1.We build it and we manage it with our own Norhtlands experts.
Katz group rents a portion of the facility for the hockey club.
2., We flesh out Rexall place to extend the life of a arena for an additional 20 years.
Katz group rents were so solely for the hockey club.
3. Katz group raises funding and proceeds to build an arena complex in direct competition with North lands.
We continue to derive taxes from the downtown property and fees from the Northlands operation.
City Council now focuses on some of the larger city problems such as waste management sewer reconstructions and light rapid transit. Snow removal and embellishing uses for the River Valley properties would also fall under their Council meetings.
I am very much against funding any of this with public funds unless we get our fair share of the profits (much as we do at rexal).
I am also against the CRL, for I fear it will hinder development of the downtown core for businesses that do not require a close proximity to the arena. It could produce a dead zone in the city.
As one of your constituents, I would first like to thank you for your representation.
I must voice my personal opinion that once we have no homeless veterans and once we have no children suffering in poverty here in Edmonton, we should proceed with all possible speed to build the arena, provided that the revenues and spin-offs will adequately pay our City back for it’s efforts. Until then, shame and embarrassment should be our primary feelings on the subject. As Canadians and as Albertans and as Edmontonians, I believe that honour must come before hockey.
Perhaps the NHL millionaires should adopt the PGA model of ownership and running the sport. The NHL should either build their own facilities or purchase existing facilities for their business. Taxpayers would then not be called on to pay for their private interests.
Hi Don
I think you have made a mistake by not being an anti Arena member on Council. I completely agree with the comments made by
Ian, Bob, Brian, Beth, and especially Andy!
I come from Vancouver, and their downtown arena is a dead zone, as are all arenas, with respect to creating economic life. I don’t see any sign of economic life around Nothlands, why would an arena downtown be any different?
I understand the proposed DT arena will also house a Casino, as the one there presently will be torn down to make way for this proposed new monument. I am even more opposed to this project because of that. Casinos are another prime example of an
industry that sucks the life out of a Community. People go directly to them, never go outside them, except to smoke, unless it’s on a Reserve, and they can ignore Municipal Bylaws, then go home.
Unless they’ve lost that too.
People going to Hockey games aren’t much different, they work before the game, and usually have to work the next day. They largely come a fair distance to get there, so it makes sense to have an arena located close to major arteries. I can’t imagine the foolishness of bringing thousands of vehicles into the DT area for any function at this proposed arena. People here will bring their cars. Don’t kid yourself!
As a final comment If Council is determined to take on debt for the Taxpayers of Edmonton, lets get the roads fixed!! Including all the back lanes!
How about a proper Storm Drain System, so you don’t have to smell Sewer Gases being vented from the drains at street corners in the City.
I live in the Oliver area, and would truly love to see a vibrant downtown core, as well as this whole City. But I’m sure a Monument that’s really only used a few times a year for Hockey games, Special events, and possibly a Basketball team? Is deffinitely not the way to do it! Especially when the city already has what proved to be a winning venue for a winning team. It has great LRT access, reasonable parking, and access to major arteries. I wonder why a downtown arena would be any different
than Northlands?
Don, please become a voice in opposition for the residents of Downtown, to this Black Hole.
Kim: Don did vote against the current arena plan.
Hi Don,
I saw you in action a while back and I think you are a great. I especially remember an old lady speaking at the city hall, having trouble making ends meet and you showed great respect for her situation and offered to help.
For the arena project:
As far as I can see — there is more to the arena project than just the building itself (and the concern of public money subsidizing a private business):
Infrastructure – roads, transportation – is everyone gonna take the lrt to and from the games? ( I am sure this has been covered, just that I have missed it).
Revitalization – Sports arenas and casinos hardly ever revitalize the area of the city they are built. See other peoples posts. This means its a long shot to think the downtown area will be revitalized with the help of a new arena (but it fits someones agenda).
But the main issue I have is — Tickets (even at the noose bleeds) are currently so expensive that the average person can go to maybe 2 or 3 games a year. I am sure the plan with the new arena is not to have more and cheaper seats but to have more skyboxes and corporate clients and less regular Joe’s. What will happen is that the people who cant afford to go to games end up paying for an arena they cant afford to enjoy.
This to me makes every other point and discussion obsolete. Its a philosophical issue when you decide to use public money.
I’m with you all the way on this arena nonsense. I may never step foot in the place but I recognize that it’s going to happen without me, so thank you for looking out of the taxpayers’ interests.
Regarding the South East LRT alignment through Chinatown (which isn’t really a Chinatown but it used to be and could be again), I hope that you were chirping in the mayor’s ear, resulting in his comments in the Journal this morning. The Transportation Planning Branch IS intransigent and habitually violates the City’s very good Public Involvement policies.
Please carry this now-exposed awareness over to the North LRT alignment. I beg you to urge Council to compel Transportation to provide a few blocks of cut-and-cover, to get the line UNDER 107 Avenue. Since City Council took its “shot in the dark” three years ago, the downtown arena has newly appeared in the North LRT criteria. Surely that’s caused some major reconsideration for what was supposed to be the MacEwan Station. While they’re in there, the planners and engineers have got to look again at where and how the trains will turn north. With construction starting soon, there will not be a third chance to get it right.
Bravo Don for taking a stand for the common man,
I too have concerns about a pubilc funded arena. What my concerns are: many of the functions that currently take place at Rexall and would take place at the new arena are “high priced” events, Oilers ticket ($40-$210) , concert ticket (around $100/ticket). This is something the “average family” can not afford. Public monies should be spent on projects in which an “average family” could participate (example: recreation complexes, libraries, playground, splash parks). If a person can afford to spend a $100 or more on a concert ticket they can afford an extra $5.00 user fee (airports have had improvement fees for the longest time).
Katz Group proposals and funding of “new arena” facilities
Mr Iveson, you wrote: “The more we learn, the more it’s clear that they probably can’t afford to do it alone. But that doesn’t make it right.”
Mr Iveson, with all due respect, Mr Katz is a multi-millionaire, and therefore I find it difficult to believe this statement. I realize that a corporation looks at all budgetary expenses and future plans vis-à-vis their costs and profits. But, this is ridiculous. In addition, what do we do with a perfectly good facility already, with other buildings and facilities having been build, transportation infrastructure already in place and ample parking already available for the present location?
” Revenues (hockey and concert) that ought to support the arenas are gobbled up to support the costs of hockey. This is because the costs involved in running an NHL franchise have gotten out of hand and the revenues haven’t kept up in many markets. Ideally the league would better control these costs so that teams can be financially sustainable without needing public subsidies in the form of discounted or free rent in public buildings.”
I have to agree, sir. I am constantly amazed, until I hear my hockey-mad brother and other men like him talk, how fans continue to accept the broken model of ice hockey in the past 15 years. Players and owner continue to ask for subsidies from governments and fans for a profit-making sport, with players making millions in one year whether their team and their playing is successful or not. The Edmonton Oilers are a very good case in point.
What is “CRL” by the way? Should we all be aware of what this means?
Again, fans are being asked to subsidize this arena not only through direct taxes to the city budget to pay for this arena AND again through an added tax!!
Then, funding such as for education, infrastructure improvements, maintenance of bridges etc will be diverted by the province to subsidize this “new arena facility”? We are being fleeced whichever direction we turn!!!
All the major events which are managed and which take place at the current facility will be moved. What happens to the current facility after the millions that have already been spent in upgrading, buildings new structures around the current hockey arena, the transportation and parking???
How will the businesses which are already in place in Edmonton Centre and other smaller businesses such as Holt Renfrew and the other shops and services that exist in that new building be affected? I believe they will all be adversely affected.
The Main Library, Stanley Milner, needs upgrading and possible expansion. Such funding will not be available for this library.
What about improvements to our roads and sidewalks, our trees, our ETS and to neighbourhoods? I truly believe that funding for these will be reduced in order to pay for this “new arena project”.
More and more in central Edmonton, we see highrise buildings, nay skyscrapers being constructed, making central Edmonton a less user-friendly area to be found in. This “new arena project” will only contribute to such a wind tunnel effect, masking the sun and making the area less people friendly to find themselves in after dark.
In general, I continue to have very serious questions about this project and would prefer that the city take the bit between the teeth and refuse this kind of hard arm-twisting and scare-mongering, like Peter Pocklington, and the Gremizian brothers with the WEB, did in the past.
This new arena is NOT needed. I truly believe the NHL would not think of seriously allow Edmonton to go without an NHL hockey franchise considering the floundering teams and all their financial problems in the US. Edmonton has been and continues to be a profit-making franchise despite the dismal playing of the team in the last 10 years.
Mr. Iveson as a younger member on city council I am absolutely astounded to your short-sightedness on this issue. Myself as well as a number of your neighbours, do in fact feel that you are anti-arena and of course anti-business. I find it quite amusing that the majority of these comments attack Mr.Katz for being a successful business person. I’m curious how many of you have created businesses and employment in this city? How many of you have risked your own money to build something great in this city? My guess is none. You all spout on about the rich, yet it is the entrepreneur’s of today that have what made this province a success!
This isn’t about a billionaire and how much he will profit form this deal. This is about making Edmonton better and trying to retain the talent we have (especially new grads/entrepreneurs), and recruiting the same.
I supported the $ we spent for the AGA, the $ to be spent on the Museum, and most certainly the Arena project. Why? Because no other single project will have the same vision or impact as this proposal does.
Mr. Iveson as resident in your ward I expect you not to sell this city short and join so many citizens here that are satisfied with mediocracy. Lets not have to take our kids to Vancouver or Calgary to show them what vision and ambition looks like.
I am TOTALLY against this – why should we be on the hook for yet another pipe dream of MANDEL’S for his buddies?? What EXACTLY is stopping katz from getting pissed off a couple of years from now and f—ing off with his team to a different city or selling it and the new owner buggering off with them – NOTHING.
Don, I fully support your stand on this. Thank you.
Don, I too fully support your (and like minded councilors) stand on this.
Recent news reports say that Mr. Katz is the 18th richest person in the world, with a net worth of some 2.8 billion. So WHY is he not funding this project entirely on his own? Because he can use OTHER people’s money (namely Edmonton Taxpayers) to make him richer.
The MAJORITY of taxpayers have REPEATEDLY said that they do NOT want tax dollars spent on supporting a billionaire’s dream arena.
So why is most of Council trying to spend OUR money to build this arena, but the Katz group is going to get ALL the revenue?
WE take all the risk and most of the costs, but HE gets the profit? Just how DUMB is council?
The proposal to expand the CRL seems to be yet another attempt to slip this project past the objections of the population. The shortfall created by the the expanded CRL will just have to be picked up by those taxpayers outside the zone. Hardly fair.
Expecting the province to cough up money is just wrong. There is only ONE taxpayer. Fortunately the new premier has reiterated that there will be NO provinical money for this ‘private’ project, so maybe the message will FINALLY get through to council.
Mr. Katz can fund his own d**n dream arena.
Mr. Iveson,
It is my hope that you support the new downtown Arena. Most of the posts I have seen on this website are against the Arena because Mr. Katz is involved and he may make a profit off his investment. Which is a very small town mentality, and not enough for me to see this as a bad deal for Edmonton. It would take Mr. Katz years before he would ever see any ROI. There are much better investments that Mr. Katz could be putting 200M towards that would provide a much higher ROI then the Arena. But in this city he’s viewed as a criminal for wanting to help improve it. It’s a fact that the city will need a new Arena within 10 years, if the city waits to build that new arena the costs will go up. The city may also lose a private investor willing to invest approx 200M towards the city to help improve its downtown core. In my mind this deal is going to make Edmonton a viable NHL market for years to come as well as improve the downtown and save the city money in the long run as there are no private investors who will fund the total costs of an Arena in Edmonton.
Also I am not sure why but it hasnt been made very public that Northlands will need 250M to renovate Rexall within the next few years and that would be coming almost entirely from the city.
I would hope that you continue to insist that Edmonton taxpayers are NOT in favour of supporting a new publicly-funded arena. We have already been told that if our property tax increases are kept to 4.5%, we will be seeing a cut in services. How many people have had a 4.5% increase in their salaries, and seen municipal services drop to boot?
It’s ludicrous to suggest that taxpayers’ money should support billionaires and millionaires! And there is no comparison with money spent on the art gallery – that building is publicly owned, not owned by an independently wealthy billionaire – and the admission fees are a fraction of what they are to attend an Oilers’ game! Maybe with the $125+ million (and much more, to pay out Northlands for the non-compete clause!), Edmonton needs to look at investing money to get rid of our “murder capital of Canada” record, and look at getting the LRT to all quadrants of the city – that has been the case in Calgary for decades, and besides, they are quite happy with their old Saddledome!!!!
This latest deal is still nonsense and leaves all taxpayers on the hook, while compromising our ability to have essential municipal services looked after. Therefore, this must go to a public vote!This deal makes as much sense as giving all taxpayers 30 years to pay their annual tax bill. Maybe not a bad idea – I’ll be long gone from this city by then too!!!!
Don, I am a constituent and support your position on the funding formula for the proposed new arena. I have difficulty with supporting taxpayer subsidization of what is essentially a private business – the business of sports entertainment. You are right when you say the business model of the NHL is broken. If a business can’t support itself from the revenue derived from selling their product then it isn’t a viable business. I think we need to consider carefully any public funding that would go toward building such a facility to be owned by the city but run for the benefit of the owner of the Oilers. I very much doubt that the city would recoup the public dollars put into this arena from the increased tax revenue that might come from the arena and surrounding businesses. The other question is what is going to happen to the current arena? Do we just tear it down so Mr. Kates doesn’t have any competition? Public funding of the AGA and the Museum are different in that these are true public facilities accessible at reasonable cost to all who wish to use them. Stick to your position – you have my support.
Thank you Don for actually representing your constituents and taxpayers in voting against the arena deal. Too bad the majority of your fellow councillors don’t share your integrity and intelligence! That will not be forgotten come the next election!