Round One of Arena Talks Over; Round Two Begins
The idea of a new arena downtown is not dead, but round one of negotiations is now over. Round two can now begin in earnest and from my study of American arena deals in mid-size cities it takes at least two rounds to find a deal everyone can live with.
I think this is actually a good step in the process. We were too far apart on some key money issues. As a City we were not understanding the Katz Group’s position with respect to the economics of the building and team and the request for additional public subsidy. And I don’t think the Katz Group had an understanding of the difficulty we would have persuading our public to put additional funding into the deal.
So what does Round Two look like? It starts with the motion Council approved last week to look at other options.
The October 17 motion adopted unanimously (yup, unanimously) by Council.
One of those options could be to update the numbers for renovating Rexall Place to see if that’s improved, however there are some fundamental structural limitations and logistical challenges to that renovation, which is why I now believe a new building would be preferable. If the choice is to build a new building, I have always been open to the idea of doing so downtown.
My issue with the previous deal was the allocation of cost, risk and benefit, which you can trace here.
The real question is whether we can still partner with the Katz Group to build jointly or whether the building should instead be built by the City with the Oilers as a tenant. This carries some more risk in the long term as far as keeping the team in Edmonton, but it also allows some opportunity to shift some of the design objectives toward better value and better integration downtown: that is, a better arena for less.
On the matter of waiting for the Katz Group to build it privately, I do think there is probably a case to be made (though they have not made it to my satisfaction) that our market is not rich enough to make a private arena pay for itself.
Come what may, I believe Council genuinely wants to ensure we have an NHL franchise here for the long haul. Just not at any cost.
8 thoughts on “Round One of Arena Talks Over; Round Two Begins”
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Hello Don,
My first choice is a good deal with the Katz Group. A good deal is where the risk/reward ratio is not unbalanced for taxpayers. I want a deal that has the moral support of most Edmontonians, not just a few. To achieve that, we’ll need to know details.
Second choice is city ownership of the arena, but not if we hand over the keys and the revenues entirely to Katz. That would be unacceptable.
How great would Commonwealth Stadium be if it was covered – an all year facility in a winter city? We don’t want to move forward with regrets.
In negotiations, the passage of time always makes one party suffer; one side learns more things to ask for and bitterness develops. Trust is lost or set back. Timely progress needs to happen with clear agreements along the way. And full disclosure by both parties to each other. Finally, one needs a bottom line that when approached, the other side is told the deal is over. We don’t need a legacy project, we need a good deal.
The legacy will come from the agreement, fully understood and appreciated by the people who pay. Remember the Montreal Olympics, the building was in disrepair by the time it was paid for and no one cares. No Montrealer would do that again – guaranteed. That’s not the legacy [debt and blame] anyone wants in hockey city.
Great summation Don. I do believe that a fair effort needs to be given to the idea of a KG / City partnership. It is proven they can work. The other scenarios all have significant downsides. A City owned facility with say NL as operator is not bringing best in class to the table especially from a marketing and business development perspective to drive revenue.
I am very skeptical you will get a better arena for much less (excluding the Wintergarden idea) as certail key costly elements are crucial to drive enough renvenue to make the facility sustainable financially.
Do you want to be in a position of negotiating with KG as your prime tenant? I stand to be corrected but did Columbus go down that road then had to eventually subsidize the team?
These are fasinating times and the direction we take will impact our great city for decades to come. This is a rare opportunity to make a positive impact on our DT and the city and region as a whole by keeping a visionary mindset. Good luck!
Don
Thank-you and the rest of our City Council for the stand you took on the new arena deal. Again, I thank-you for the continued responsibility you show in the expenditure of our City’s tax dollars.
In case you didn’t see the article discussing government subsidy of professional sports I have included the following link.
http://www.freakonomics.com/2012/03/13/how-the-nba-takes-money-from-people-who-don%E2%80%99t-like-basketball/
I found it interesting that 85% of economists surveyed suggested that governments should not be subsidizing professional sports.
As I see it a new downtown arena will cost our City close to a billion dollars when all the ancillary costs are included. Can we really afford that?
Well written summation. Thanks. The one nagging question I have is by what date does a businessman like Katz who knows his current lease is expiring begins to ensure his business has an operating base after 2014?
As a businessman, that looming decision must be worrisome to Katz. So why the drama on the part of Katz, and why does Katz think taxpayers have to come to his financial support.
I worry, too, the City may be having too many expensive projects on the books to take on building an arena on its own. I would like to see City Council seek a separate (special) mandate from all voters first (special survey or town hall in each Ward) before any decision by Council is made to build an arena on its own at taxpayers expense.
Even visionaries must, at some point, realize there are voter limitations to their expectations, and to their spending. Otherwise, the future taxpayers/property owners of this City might inherit one heavy tax burden.
Don, Council ought to take a serious look at Northlands. The tendency in this city is to chase the new. The City may not be large enough to make two venues of the type viable. If Northlands falls into disuse, it will be costly to either maintain it or to make it disappear. Moreover there is no earthly reason a building should have a lifespan of less than 40 years. Let us think a bit about the deep history of our home, and whether we want to be shuffling our major institutions around the city once every generation. I am positive that if you take a large fraction of what is proposed for the downtown building – say $300 million – and apply it to Northlands and area revitalization, you would (a) save the taxpayer some bitterness; (b) profit the Northlands district; (c) create an impressively refinished venue.
The idea of an entirely city driven downtown arena is a singularly bad idea. I can read the headlines screaming boondoggle, and no private party in sight to share the blame with. You will want to avoid that legacy as mayor.
Thank you, by the way, for helping us get out of a bad-faith negotiation conducted in a distasteful way. It is a good thing we are out of it before contracts had legally bound the two parties. But now that we have seen the sh!t, let us not step in it please.
In my opinion we don’t need a new Arena
Our city is build around culture and Art instead of investing in this Arena, let’s upgrade Northlands and make it the landmark of Edmonton. I’m glad this deal did not gone thru, Katz don’t care about our city he cares about profit.
Let’s move forward and think what is best for Edmonton.