Oilers refuse to meet with city for crucial arena debate

The Canadian Press

10/16/2012 6:06:06 PM

EDMONTON -- City councillors set to decide the fate of a new arena for the Edmonton Oilers on Wednesday will do so without the help of the NHL team.

Oilers owner Daryl Katz said he will not meet with councillors in public to explain why they need millions of dollars more in public funding for the rink, and called on Mayor Stephen Mandel to show leadership.

"We have gone backwards," said Katz in a letter delivered late Tuesday to city council and the media.

"We and the city can't even agree on basic assumptions relating to the financial aspects of operating a new arena.

"Perhaps with more time and political leadership this deal can still be saved. But as it stands we remain far apart both on substance and process.

"Mayor Mandel, this is an opportunity for Edmonton to be bold and forward-looking, and it warrants your support and leadership."

Katz, in the letter, also accused the politicians of trying to corner his NHL team into accepting a lopsided deal.

"The city has approached this negotiation based on narrow political considerations rather than a general desire to strike a deal that is fair and makes economic sense for both sides," wrote Katz.

"We all understood the devil would be in the details, and indeed it was."

Mandel could not immediately be reached for comment.

Wednesday was the day Mandel set as the deadline to resolve once and for all the financial wrangling that has plagued the project for four years.

A cost-shared deal to build the rink was actually struck a year ago by the Oilers and the city.

But it came off the rails last month, when Katz said he had looked at the numbers again and needed more public money, including an extra $6 million a year from taxpayers, to offset the cost of running the building.

Councillors rejected the new demands and the two sides have been sniping at one another through the media ever since, prompting Mandel to set the Wednesday deadline.

Construction had been slated to start in the spring with the 18,400-seat arena completed in the fall of 2015.

Katz has said he's a passionate Edmontonian who wants to keep the NHL team in the Alberta capital, but needs more money to compete in what he terms a "small market."

"The Oilers need Edmonton and Edmonton needs the Oilers. Each is an integral part of the fabric and the identity of the other," Katz told fans in full-page newspaper ads published two weeks ago to apologize for threatening to move the team to Seattle.

University of Alberta sports economist Brad Humphreys urged fans to strip away the rhetoric.

"It's the way the game is played," said Humphreys, who has authored numerous reports on sports economics and has advised the U.S. Congress on the issue.

"In the bargaining procedure you try to get it however you can get it, and part of that is coming back and making requests like, 'Oh, by the way, I'm going to need $6 million (a year) in operating expenses."'

Under the original deal, city taxpayers and ticket buyers would pay to build the arena, which was initially pegged at $450 million. But with land, borrowing and surrounding infrastructure factored in the price is now at $700 million and rising.

The Oilers would keep all profits from NHL games, trade shows, concerts and other events for 11 months out of the year. The team would also keep naming rights for the building (worth up to $3 million a year), along with $2 million a year from the city for a decade for advertising.

Concession sales alone are pegged at $20 million a year.

In return, the Oilers would pay the city $5.5 million a year for 35 years and pay to operate and run the arena, pegged at $10 million a year.

The Oilers are worth an estimated $212 million, good for middle of the pack in the NHL, and the team regularly sells out Rexall Place in a hockey mad city.

Katz, however, said the franchise is bleeding money.

Along with the $6 million, the Oilers are also reportedly seeking tax breaks and a casino licence.

The Oilers say the city can afford its new demands because the estimated $1.2 billion in extra money that will fill city coffers due to rising property values around the arena will actually be closer to $2 billion.

That money would come in under a specially designated community revitalization levy, or CRL.

"The CRL is going to be double in value relative to what it was supposed to be," Katz told The Edmonton Journal in an interview Sept. 17.

Humphreys said it's a phantom argument.

"The CRL has become this giant pinata of economic benefits that everybody should get a crack at when a shovel hasn't been put in the ground and we don't know what kind of property increases there might be," he said.

Humphreys and Scott Hennig of the Canadian Taxpayers Federation also said while arena districts can produce more cash, it's not new money. Rather it's money redirected from somewhere else. In other words, more new bars downtown doesn't mean more drinkers. It just means the existing number of drinkers stop drinking at one place and drink somewhere else.

"It creates economic activity, but that economic activity has just been moved around from some other place in the city," said Humphreys.

"It's not new economic activity. What an arena does is it concentrates economic activity at a specific place at a specific time."

Hennig agreed.

"The CRL is a shell game at best," he said.

"Daryl Katz should know better, and he probably does. He's playing on the council's fear of losing a hockey team here, which is completely unfounded."

Humphreys said fans and politicians who don't like what is happening need to look in the mirror.

"I can't blame the Katz Group for trying to do this because these are the ground rules we've sort of laid out as a matter of public policy in North America," he said.

"We're going to let these guys operate as monopolists, and they're going to do what they can to exercise that monopoly power."