What Calgarians Need To Know About the Oilers Arena Mess

 

 

(No, this is not an entrant into the contributor contest. Duncan already has enough jobs)

By: Duncan Kinney**

As a Calgarian who has lived and worked in Edmonton for the past two years let me give you the skinny on the mess that’s going on up here in Edmonchuk and the awkward stylings of their quirky Mr. Burns-esque billionaire pharmaceutical emperor and hockey team owner.

First a quick primer.

Daryl Katz has invested in downtown real estate in order to build an arena in downtown Edmonton. He is currently in negotiations with the city. The numbers break down roughly like this. The arena will cost roughly $450 million, the city will thrown in $250 million, Katz has promised to pay $100 million. I was never good at math (it’s why I’m a journalist) but I do believe that leaves us still $100 million short.

Attempts to bridge this $100 million gap have, shall we say, fallen short. With two recent examples of hilarious flailing about. For even more detail, head to another blog post I wrote on the subject.

The Katz Group let it be known to the media though “highly placed sources in the negotiations” (or some such malarkey) that they were looking into the possibility of putting the arena on the land of the Enoch Cree reserve northwest of Edmonton. It would presumably locate the arena nearby the large casino development out there. The other stumble? In what may bethe clumsiest piece of advocacy I’ve ever seen, the Katz group called up five different Edmonton MLA offices offering “communications assistance” to their offices.

It’s been quite weird actually. Edmonton has essentially grabbed its ankles in negotiations with the Katz Group. The city and the public purse is taking the most risk here, kicking in $250 million on a planned $450 million development. Despite this significant public investment the Katz Group and the Oilers are getting all operational revenue. This deal essentially makes the current owner of their current arena – Northlands – disappear. The Katz group gets a bigger arena with more luxury boxes that will bring in far more revenue yet Daryl Katz seems fundamentally unwilling kick in more than a $100 million on this project. Instead preferring to try and get his way through any number of corporate hostage-taking strategies.

Let’s look at the first move.

While Katz owns the land on which the site is being built the only real, serious gambit he has is to MOVE THE OILERS. That is the precarious Damoclean sword hanging over top of these negotiations. This latest “leaked” plan falls short of that threat however it shows the limited range of negotiating options the Katz group has. They’ve committed to a downtown arena. They’ve sung the praises of downtown arenas for the past two years. Now they don’t want to build a downtown arena?

In order to get out of their current barn into their new one for the 2015 season (Katz has made it quite clear that he won’t be renewing the lease with Northlands) construction needs to begin post-haste. He already has a significant amount of promised public money as well as designs, drawings and general planning for a downtown site. Moving it to the Enoch Cree site would mean the beginning of even trickier negotiations. He won’t own the land (the reserve will) and he will be dealing with entirely different public funding mechanisms (since he’s made it clear he doesn’t want to pay for the whole thing). This whole Enoch Cree mess is an idle threat of the highest order.

And the second tactic, offering PR services to individual MLA offices? Ridiculous. Akin to calling up the Oilers and saying that you’ll help with their goaltending problem. The province isn’t going to kick in any straight-up cash for this project and it’s easy to see why:

• Ed Stelmach is a lame duck

• The Progressive Conservatives are in the middle of a leadership race

• It’s a politically tumultuous time and the biggest threat to the PCs, the Wildrose, are fiscal hawks

• Any money given for this project essentially has to be doubled for the eventual Calgary arena

Yeah, and I believe the problem is fairly simple. He’s either really bad at this or the people he’s hired to do this are really bad at this. I mean, real estate development/getting a bunch of public money can be a difficult gig, sure, but do you think we’d have such a gongshow down in Calgary? No.

Look, the Flames might have a mediocre hockey team with dim prospects in the short, medium and, well, long term but at least our owners are stable, old dudes who wouldn’t be heading to meetings in Quebec City and Hamilton. I don’t think you’d see this need to extract every last ounce of value from the city.

Don’t think that the management team with the Flames (Ken King) isn’t paying attention to this whole deal. When the time comes for the Flames to have a new arena it would behoove them to avoid the style of negotiations and demands that have taken place up here.

It’s gotten weird and a little bit ugly – kind of like Edmonton.

**This article was also posted at duncankinney.com. Duncan Kinney is an angry urbanist, professional writer and hockey nerd who likes to talk about advanced stats but not actually understand them

  • ChinookArchYYC

    At the risk of sounding like a Homer (pun intended), Darryl Katz sounds like a billionaire cheapskate. Yes, I’m aware of the 100M he has offered to put up for a new arena, but his demands are those of a guy putting up the majority of the cash. By my math 100M is 2.5x less than 250M the city of Edmonton is offering and 4.5x less than the 450M needed for the entire job. By the way, does anyone really believe the project will come in under budget? My point is that he will pay less than 1/3 of the costs, at best, but wants all the revenue. What a jerk . . . and how do I get a piece of that action? I’ve been wondering about the Oilers lately, mostly because I’m tired of hearing Flames fans trying to sell Oiler Kool Aide. For the record, I don’t buy the argument that the only way to win a cup, is to suck bad for X years, and draft in the top 5 until you have a great team. Back to Katz, the Oiler Kool Aide is a pretty convenient way for a cheapskate owner to be near the NHL floor in spending. When you consider that the Oilers have the worst defense in the league, and they need to shore up the back end with more than an old drunk, even the most delusional fan has to admit they need to put some more dollars into the team. I’m not sure how palatable the Flames deal for an arena will look when all is said and done, but I believe the owners in Calgary will handle themselves with a good deal more class, not because I am a ‘homer’, but because these owners have always handled themselves well in the public eye.

    • SmellOfVictory

      I agree with you on Katz being a serious rectal orifice, but I feel I must correct you: 100M is 0.6x less than 250M, and 0.78x less than 450M.

      Although being a capital city has its advantages, I think the whole “political city” aspect of the place makes people feel as though they deserve to get government handouts everywhere they look. Calgary has never had that issue; the majority of Calgary was built by corporations, it is a massively corporate town, and I suspect our new arena will be built primarily on the finances of corporate interests. Different cultures, really. That, and Katz is a jerk.

      Side note: I did those calculations in my head, and I’m really proud of them.

  • I’m not sure Katz is so much a jerk as a typical dude with money trying to leverage his power and political sway to expand his bottom-line.

    What he’s doing in Edmonton, although somewhat clumsy, comes from a well worn playbook that has worked many other times in many other NA cities over the last 2 or 3 decades. Countless public purses have been raided for the sake of building private stadiums (*cough* Phoenix *cough), so it’s no surprise something similar is happening up North. Nor is it an example of a particular form of jerkiness from Katz himself.

    I’m not defending anything here of course. Just saying it’s all too common.

    • ChinookArchYYC

      Yes, he is using a well worn playbook and yes it’s worked (mostly in the US), but it’s no excuse for his behavior. If he acts like a jerk, then he is a jerk. His willingness to use the strategy alone gives you all you need to know about his character.

  • #1 Katz does NOT own the land. Get your fatcts straight before portraying them as such. The city would own both the land as well as the facility. They would also get usage of this for 4 weeks per year for events such as CFR or Capital X. However they would like to. Its rent free, they simply cover cost of utilities and other typical expenses during this time of “rent-free” space

    #2 Katz has said that he will not play in a RENOVATED northlands so please dont portray that as he will not play past 2014 either. That is far from the truth. If construction is not ready for 2014, they seem willing to extend the lease but just not to renovate it.

    Its this spirit of false information that has stalled this process and will continue to until people like yourself continue to spew false information on the actual deal. Please inform yourself prior to making such comments that completely neglect the actual framework of this deal.

    #3 – the Katz group is putting up $225M, not $200M. Might seem insignificant but judging by your misrepresentation of the deal, i figure its another good point to discredit your argument. $100M of Cash (80-90M Cash, the rest later. This is to cover costs as they are allocated for construction) also another $125M from the ticket tax which is to be borrowed by the Katz group at no cost to the city for interest costs. He fronts, he gets charged interest.

    #4 Northlands will not cease to exist, it seems they will simply operate a 8000-10000 seat venue until 2034 when their agreement runs out. This is good for Edmonton as more venues equals more opportunity.

    Im glad to talk about this as I am fairly well informed than most. I do sincerely despise false interpretations of what this deal is, so if you could please refrain from comment unless you know , that would be greatly appreciated. Edmonton is fighting this battle for Calgary right now, so youre welcome CGY.

    • ChinookArchYYC

      Keep selling.

      Sports arena’s haven’t got a reputation for generating enough money to offset the cost of construction. The only people they financial benefit are billionaire owners and his millionaire players. Your right about Katz doing the heavy lifting for Calgary’s new arena. That’s of course, if he doesn’t blow it, in the court of public opinion.

      • OH, REALY yet another Flames fan speaking before even googling a smarter reply. Look up the winnipeg arena and sport’s complex built by billionaire owners for there city and fans jack ass! Get you facts together. I’m not getting into hard fact’s you can research the rest.

        The building the Jets will play in is one of the most profitable arenas in North America!!!!!!!!
        Thats without a game of hockey being played in it…..Go ahead look it up.
        I think the rink is even paid off.

        • I may be wrong but from what Ive read on WPG, there are a couple of interesting notes to take.

          #1 – they received Provincial AND Federal money in addition to city funds

          #2 – I REALLY dont like how they are subsidizing loan pmts for true north thru VLT money (There are a couple articles somewhat recent about this increase in payments)

          The main reason I like the deal in Edmonton is its a one time deal. The cost is capped for construction. This is fantastic to be able to secure that cost and get exactly what you want out of it.

          Thats where I agree with WesMantooth. This deal is fair when you know everything about it and you think about life-cycle cost. The city exchanged a share in reveues to not have to pony up cash when renos/upgrades come up. Yes, they’ll be awhile before they need them but the building will nit sit as is for 35 years. The city getting out of the arena business is a good thing, the city getting free usage of the facility is a good thing, and the building going DT is the BEST thing for this city, not the team, this city.

    • Please get your facts straight before you accuse others of ignorance. Katz is only fronting $100 mil. The “ticket tax” is being fronted by the City of Edmonton’s borrowing of $250 mil, of which $125 will be paid back via the collection of the ticket surcharge. Item 5, page 10, at http://sirepub.edmonton.ca/sirepub/cache/2/a2lmfi24sffe5v55y2cliz2u/1074960809201101032495.PDF .

      Notes 3.d and 8 of the same document shows Edmonton taxpayers will also have to cough up $20 million or so to buy the land from the Katz Group. So once again, you’re completely wrong. Not that I’m surprised – most pro-arena types are content to disregard facts and/or present misinformation.

      • #1 I already said that the city has to buy the land for $20M (see above). They also have to cover $32M in LRT improvements to the site, pedestrian bridges etc that are over and above the $450M deal

        #2 In the Master agreement that I read, it states specifically that the $125M for the ticket tax is going to be a loan taken out by the Katz group and all interest costs will be covered by the Katz group aswell. Im on the golf course right now but I will send you think link later

        Also, Im not giving you an opinion, so please dont label me as a “supporter” (even though I am) to try and prove a point. Im simply trying to give you facts that ive read so you can make your own assumption.

        I enjoy debating this and I also like to hear ideas like the lottery but I questioned Danielle Smith about her lottery and she has not thought it out at all, just said “lets do it”.

  • As another note: the katz group contacted MLA offices to talk to people like yourself who are completely out of the loop on the deal to inform then as to what the city tends to gain from such a deal.

    If the arena goes to Enoch, i support $0 going into this infrastructure as it benefits nobody but the oilers. BUT, if it goes DT, it will enhance our DT greatly and thus the city should have the burden of having to share the cost. Its as simple as that

    I can be reached at @edmontoncritic or possibly on here for comment but Im not trying to start an issue but seriously, before people comment on “mega-sites” like flamesnation. I feel that they have real facts and not what one deems to be factual when its not at all what is actually the case

  • Matty Franchise Jr

    Ah, I see you have a second post up. It’s funny, even the most die-hard of supporters, like you, seem to see the Enoch cree gambit as execrable.

    Thanks for offering up your assistance to clear up any misconceptions though, super helpful!

    Also, you’re simply incorrect. Katz does own the land. In the details of the proposed deal (which seems to be unravelling) he would sell it to the city. However, that hasn’t actually happened yet. Don’t come on here and try and pretend like you’ve got some kind of monopoly on the facts.

  • I have no doubt that the Flames ownership group is very quietly watching and waiting to see what kind of deal the Oilers get so that they can replicate it.

    While I am generally against these kinds of public money deals, if they are going to happen I have one question.

    Aside from the dubious spin off benefits, the only benefit of keeping these sports teams in a particular is the nebulous good will effect. However, the current economics of pro sports means only the pretty well off get to enjoy these benefits, with the concomitant revenues going to the team. Why don’t’ cities negotiate ticket blocks or lotteries or something to spread a few more tickets to those who would not otherwise enjoy the supposed goodwill? It only seems a fair way to distribute a benefit to the public (if you accept that is the point of the exercise).

  • Matty Franchise Jr

    Since I’m not willing to put the effort in to research any of this myself, I have to arbitrarily choose between edmontoncritic and Duncan Kinney.
    I’m going to assume that the one with terrible grammar and spelling is wrong, therefore Duncan Kinney is right and edmontoncritic is probably DKatz.

  • I need more facts.

    What does this mean: ‘Daryl Katz has invested in downtown real estate in order to build an arena in downtown Edmonton.’?

    Is that the 100 million he is willing to pay, or has he already invested in the downtown area (im assuming areas that will be located around the new stadium) and if he has, do you know how much he has invested there?

  • Matty Franchise Jr

    Domebeers. He owns the site on which the putative arena is supposed to be built. He also owns some surface parking around the area as well.

    The way the deal is currently structured he would sell the land to the city who would then turn around and rent it to him (for nothing if I remember correctly).

  • Im not trying to sell anybody on it. Personally I dont care if you support it or not. I think its right to give the facts though. The city would have to buy the land for $20M, that doesnt matter who owns it. It could have been a bunch of houses like when they extended the LRT. What matters is that after construction, the city would own the Land as well as the building.

    Please point me to where I say I have a monopoly on facts? Im saying, you arent giving someone reading about this for the first time, the structure of actual deal. I ask that people search for “Downtown Arena Master Agreement City of Edmonton” and inform themself if they care.

  • The facts are correct. I stand by them. The city is kicking in $250 million of a planned $450 million development. $125 million in straight up cash, the other $125 million in a loan to the Katz Group which is supposed to be repaid via a ticket tax or “user-paid facility fee” (that one’s straight from “Downtown Arena Master Agreement City of Edmonton” edmontoncritic.

    http://www.edmonton.ca/city_government/news/city-and-katz-group-agree-on-agreement-framework-to-build-arena.aspx

  • DieHard

    Hey Kent;

    I used to enjoy your articles but you let your emotions get the better of you. Words like “hostage-taking strategies” and “gotten weird and a little bit ugly – kind of like Edmonton” have pretty much killed any desire to read you. Hockey talk and team bashing are fine but you stepped over the line.

    • RexLibris

      For the record it was Duncan Kinney who wrote the article/smear piece. But I agree, the drive-by comments on Edmonton and Katz that were in the article and subsequent postings are pretty low. I read FN steadily for 2 years before posting anything because I wanted to get news about other NHL cities in Canada and in the last 6 months I’ve seen more and more pieces about the Oilers and Edmonton (there used to be none at all) with very few of them being worthy of what the site used to put out. FN used to be about cheering (and critiquing) the Flames but over the last few months it seems there have been many attempts to take a swing at Edmonton, specifically. Not sure why, but I could guess.

      I like Kent’s pieces as he focuses on the team and performances and I enjoy listening to his comments on Naton Radio every Sat (Keep it up Kent, some great work there).

      I will say this on behalf of most Oiler fans: if some of us are running our mouths off about the team, sorry. I hate those guys no matter what colour their blood runs. But to call Katz a jerk because he’s a businessman trying to get the best deal for his company at the expense of the taxpayer? You live in Calgary, a city that is dominated with the head offices of oil companies that have unbelievably sweet deals on taxes and royalty rates with both the provincial and federal government and you’re bashing Katz? Pot = Kettle. And since when has an owner’s likeability matter at all in the interests of a team. Steinbrenner was a jerk, Bruce MacNall was a charmer, who cares! Thank goodness we don’t work in job where people can post anonymous slanders about our character.

      Finally, if anyone wants to read a relatively unbiased report on the arena process try David Staples’ Cult of Hockey articles here: In regards to the Tory leadership candidates and the arena http://blogs.edmontonjournal.com/2011/07/24/tory-leadership-candidates-open-the-door-to-edmontons-downtown-arena/
      Stelmach on the arena http://blogs.edmontonjournal.com/2011/07/26/stelmach-on-edmontons-downtown-arena-it-is-an-important-project/
      And the role of Northlands in running an arena http://blogs.edmontonjournal.com/2011/07/29/who-is-northlands-what-role-do-they-play-in-the-arena-business/

      In closing , Kinney sounds like all the arena-opposition groups we have here in Edmonton, casting aspersions about Katz’s real intentions and financial health with no basis for those comments. The sense that I got reading the article is that Kinney, as a Flames fan, is scared about the direction that Edmonton is taking in building an arena/entertainment complex because it’s something that Calgary doesn’t have. I welcome the idea of the article, but the motivation seems insincere and the execution is amateurish and demeaning to this site.

  • DieHard

    Kent – I apologize. I will continue to read you. But yes, my fault I didn’t realize he was posting your dribble. Most times NATION contributors will provide a link to someone else’s article. Nor sure if Kent agrees with your style or not but I sure sure don’t. You can make a point without being a asshole.

  • DieHard

    RexLibris, I live in Edmonton and like it here. I was just having a little fun and appealing to the natural rivalry. No need to get all butt hurt.

    If you want to call anything from David Staples in regard to the arena a “relatively unbiased report” well I have no other words for you. The man has been an unabashed cheerleader for this effort from the very start, excusing the worst of the Katz Group’s tactics.

    Your reading of the situation is comically wrong. If you read my other blog post on this issue

    http://www.duncankinney.com/daryl-katz-loses-the-plot

    You’ll see that I approach the issue purely from a business/urbanist point of view. I couldn’t give a whit about the rivalry or whether Edmonton has a nice arena than Calgary. I’m a journalist, we’re poor. We don’t go to hockey games.

    In closing you sound like all of those arena-justifiers who cast aside any criticism of how this deal has rolled out and instead can’t see badly this thing has been handled

  • DieHard

    edmontoncritic – Do you have access I don’t know about? I’ve never seen these numbers in such detail.

    “#1 I already said that the city has to buy the land for $20M (see above). They also have to cover $32M in LRT improvements to the site, pedestrian bridges etc that are over and above the $450M deal”

    Also in regards to your second point.

    #2 In the Master agreement that I read, it states specifically that the $125M for the ticket tax is going to be a loan taken out by the Katz group and all interest costs will be covered by the Katz group aswell. Im on the golf course right now but I will send you think link later

    You’re right. The loan is being provided by the City of Edmonton. The risk comes at the expense of the public purse.

    • Hey Duncan. I just re-read my prior comments. I didnt mean to come off as such a D.elta B.ravo. I apologize. I wrote those comments quickly on my phone, not great for editing. I wont write a book explaining my viewpoint for why I think its a good idea but I will point you in the direction of the most informative piece that Ive read. I printed it all off, dont have a link handy but the title of the document is “Downtown Arena Master Agreement” it is written by A.Giesbrecht on July 20, 2011 – City Managers office2011CM004. Its 17 pages long. Hopefully googling that gets you there somehow. If you cant find it, let me know and Ill scan it and email it to you (Of course there will be alot of white out on it though to make sure the deal looks better than it is 😛 lol)

      Its basically a meeting minutes and actually put my mind a little at ease with the ability of our city council. They actually asked some good questions that I wanted to know about, like the extra costs (LRT/Bridge etc). I get that its their job to do that but until I see it for myself, I just didnt know what they were doing!

    • You forget one simple fact-If YOU were Katz would YOU pay for it all?

      Business is business, what is going on here, it isn’t about who is putting what to the table, it’s what is best for both Edmonton, the Oilers and D.Katz. If you look at other models this is the best fit for the city and the future downtown re-vitalization. If you look at it from the Oilers it’s about damn time they got a new building and if you look at it from Katz point he wants a return. I’m thinking thats all pretty fair.

  • This story has more holes in it then Al Gores documentary of fear mongering! Holy Crap Kent!! I had way more respect of you then this. This is outright irresponsible journalism.

    It’s bush league at best!

    Here’s a great writer and pro! John MacKinnion of the Edmonton journal, facts are there, proper inside information. try looking it up before you base your story. You and your boy there are creating a story just like the other irresponsible journalists did when Katz and Co. went to Quebec City.

    The fact is If you can build something you don’t pay for it all your self, although kicking in 400 mil to date is not to bad with another 100 coming.

    Also the city does not in anyway, want Katz owing the whole thing, nor Katz.
    Also do you have any clue what this will generate outside of hockey to mention the core of downtown Edmonton.

    Your bias and you come off stupid, you lost a ton of respect in both journalism and host for other sites.

    I’ve been to two sessions at city hall in Edmonton and a open house for the new rink.

    This is a win, win that wont be shared by tax payers. read competent writers and not some Flames fan wishing they were in tough talks about getting a new rink.

    P.S I’ve never dragged the Flames bloggers or there web site down, but you all have red glasses on, the flames suck! the flames will not make the playoffs this year or next, then you done for the next 5 years after that!should have rebuilt last year! have fun moving noboday out. 12 NMC smarrrrrt!