Arena Talks Cautiously Resume
What happened yesterday? Essentially, the City and the Katz Group will resume negotiations, but only after we set some new conditions for how those negotiations will take place. It’s a small, cautious step forward for everyone. I felt I could support that, but it doesn’t mean I’m on board for everything in the Oct 26, 2011 framework.
The most important thing to know about yesterday’s Council decision is that the City will continue to explore options for design alternatives that can reduce project costs, in keeping with our October 17 motion. We will still get those options at our January 23 meeting. Design restraint, and alternate operational models, could help reduce the impact on taxpayers.
The issue of the missing $100 million of public funds from another government was ‘the elephant in the room’ yesterday, a cliche I was guilty of introducing. The Katz Group’s position was that the City must find those funds. In my view, if public dollars are required to make this happen, the significance of any provincial dollars is that they would correspond to the value to the Region and Northern Alberta. Absent those dollars, any alternate funding source should also reflect the fact that this is not only about Edmonton (as the Katz Group indicated yesterday, 35% of the patrons come from more than an hour’s drive away).
As before, I’d rather any new dollars needed to make the deal work come from the user-pay side rather than the property tax side, because allocating future tax dollars always has an opportunity cost for the City. There is a way to do this by moving from a Katz Group-controlled ticket surcharge to a City-controlled ticket tax like we have today at Northlands. It could expose the City to more volatility from one year to the next, but it would share in the upside as well (right now the Katz Group has to pay the same amount whether it’s a lockout year or a cup-run year).
To give credit where its due, the Katz Group has taken a number of the more problematic demands off the table, like expecting the City to lease space in their office tower. They backed off an annual subsidy request but substituted it with a new mechanism that would see new tax revenues in the arena district above the CRL forecasts allocated back to the arena. While I’m not at all sure the idea is legal under the province’s CRL laws, that approach would give them incentive to go ahead aggressively with the surrounding development to generate the higher tax revenues. I don’t know if this will fly but it indicates movement on their part, which is valuable.
The other thing they offered to do was put their arena financial performance model numbers up against ours for scrutiny to a third party, which can’t hurt. The results of this are not likely to be shared publicly but it will help Council understand where the Katz Group’s math is steering them. We may hope the process also allows the Katz Group to understand the nuances of our take on the arena financial performance model.
The motion passed yesterday reads as follows:
1. That Administration re-open negotiations with the Katz Group based on the October 26, 2011, Framework.
2.That Administration negotiate an extension in the deadline in the Land Inventory Agreement from December 31, 2012 to April 30, 2013.
3. That Administration work with the Katz Group to identify and appoint an individual who could act as a mediator by January 23, 2013.
4. That the Mediator appoint a financial analyst to evaluate the City’s and the Katz Group’s financial assumptions and analysis for arena revenues and expenses.
5. That Administration work with the Katz Group under the support of the mediator to evaluate all other non-financial issues.
8 thoughts on “Arena Talks Cautiously Resume”
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Hola Don; appreciate the update/perspective and the nuances of your position, gracias. While I would have preferred to have Northlands involved in this matter since the beginning (4 years ago), we’re where we are, and I am confident you and your colleagues on Council will do due diligence to protect & enhance the City’s interests. Kind regards Leo Campos Aldunez
Don – Edmontonians, fellow Albertans – the largest elephant I see in the room is the need for roadway infrastructure to feed this baby. from a previous article of mine on the topic: Katz shoots…he scores!
Edmonton sports journalist Ron Trychansky wrote a thoughtful column on the whole deal, noting that in every major sports city he’s visited in North America, the key to making a downtown arena work is having the highway infrastructure to speedily get thousands of fans in and out of the core without grid lock. Consequently he proposed the municipal airport area as a better alternative as it already sits on existing major arteries.
He points out that the unintended consequence of a downtown arena will be like the ‘great idea’ of building South Common big box mall in Edmonton. This big box mall on the outskirts of the city became so popular that Edmonton had to build an unplanned for interchange that tripled in cost from the originally approved $107 million in 2005 to $261 million.
Tripled in cost. I repeat. Tripled in cost.
A fancy, expensive downtown arena with no improvement to traffic access and with higher downtown taxes will not induce retail stores or residents to move downtown. What are they thinking?
As Turchansky points out in his article, the great idea of the downtown arena does not include any consideration of having 20,000 people converging on the congested downtown core (on cratered and pot-holed roads I might add) while several thousand others are trying to get home to the ‘burbs.
Arenas are big empty spaces. Downtowns that are vital are compressed with lots of retail, high eye-value retail windows, extremely high density populations, safe lighting, attractive gathering areas. Arenas provide none of that because they need acres of parking and the arena itself is a big empty spot where a beating ‘heart of the city’ should be.
Now “Deadmonton” is planning to cut lighting to save money – oh that won’t help reduce crime, will it? And Edmonton needs to generally improve roads throughout the city. That’s what that municipal fund is for – not arenas.
Edmonton has a terrible track record of wishful thinking in this regard; Pocklington already taught this province a lesson in expensive corporate bankruptcy and shenanigans with hockey heroes. And South Common has shown that Edmonton is not capable of forecasting costs of construction or doing sufficient forward planning on ‘big’ projects. That was just an interchange!
Just imagine if the global recession collapses further and there’s a shell of a $450 million unfinished arena in downtown Edmonton. Who will pay to finish it? You and I. Or let’s say it is done and beautiful, but needs an unbudgeted “unforeseen” (like South Common?) $500 million upgrade in traffic infrastructure…that we will pay for.
Don’t let Edmonton become the “Greece” of Alberta. Mayor Mandel having a hissy fit over us taxpayers saying ‘no’ to poor forward planning and corporate coercion will be much less painful than a mortgage & infrastructure meltdown over Edmonton’s downtown arena’s poorly planned dream.
Hi Don, best wishes for the holiday season.
I have a couple of questions based on your post above.
Why doesn’t the City shares its arena performance numbers with Edmontonians so we can judge the proposed arena financing deal for ourselves? After all, we are the ones who are being required to pay for it. Why the secrecy?
What is the status of the proposed Downtown CRL? It was approved by Council in October 2011 but since then we’ve heard nothing. Why has the province still not approved it?
Maybe, when negotiating with a public entity like the city, Katz should be required to make his books public. Opening his books to a third party, but closing them to the public, leaves most of us not knowing whether or not we are being screwed…. and lets face it, with this arena none-sense… more and more of us are beginning to think the mayor and council does not have our best interests at heart. Transparency is key.
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