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Oilers, city councillors agree to resume talks on new arena

The Canadian Press

12/12/2012 6:43:10 PM

EDMONTON -- The deal to build a new arena for the NHL's Edmonton Oilers rose from the dead Wednesday, but remains a long way from getting back on its feet.

City councillors voted to resume talks with Oilers billionaire owner Daryl Katz after Katz officials promised to abandon demands for an extra $210 million in direct subsidies from taxpayers.

Both sides are still hoping to get a deal in place to put shovels in the ground by April on the $478-million downtown rink.

Mayor Stephen Mandel said the two sides still need to resolve the core issue: the Oilers say they need more taxpayer dollars to make a profit on the deal while the city says they don't.

"This is all about money," said Mandel. "I think there's a great vision to build a wonderful downtown and create a bunch of new buildings and all kinds of marvellous things.

"But let's face it, at the end of the day if they (the Oilers) don't have enough money to pay their bills, it's not good for them and it's sure not good for the city."

The decision was made after John Karvellas, a vice-president and lead negotiator for the Katz Group, and other Katz Group officials made a pitch to council that talks resume.

Council had pulled the plug on negotiations on Oct. 17 after Katz refused to budge on his demands for the extra money. He also twice refused council's entreaties to meet with them to make his case on why the extra millions were so critical.

Katz was not at council Wednesday.

Katz officials also pulled off the table their demand that city hall break its own tendering rules by directing city staffers move into a proposed new Katz office building beside the arena as an anchor tenant.

However, they said the Oilers still need extra public money somehow, perhaps some of the extra property tax revenues expected to be generated by the arena.

Along with reopening talks, councillors also voted to bring in a mediator.

The mediator will in turn appoint a financial analyst to examine the numbers and see if Katz really does need millions of dollars more to make the deal profitable.

Karvellas later told reporters that the work is just beginning and that the Katz Group must rebuild trust with councillors and Edmonton hockey fans.

During the stalemated talks two months ago, Katz threatened to pull the team out of Edmonton and move it to Seattle.

"Trust to me is a little bit like getting your reputation back when you lose it," said Karvellas.

"It's not something you do immediately. It's something you earn through a period of time of consistent conduct, and that would be my objective going forward."

Karvellas said the Katz Group refused to attend the two earlier meetings at council's request because, with negotiations crumbling, it felt less like an information session and more like "an invitation to a public hanging -- our own."

When asked if their appearance Wednesday could be construed as an apology, Karvellas mulled the question for a few seconds, then said: "That's not an inappropriate characterization."

While talks with the Oilers will resume, city council will also proceed with an in-house proposal to build and run the rink itself and keep the profits. A report on that is coming on Jan. 23.

Wednesday's decision was another turn in a long and tortured path of negotiations, accusations, and recriminations since the Katz Group and the city struck a deal in October 2011 to build the rink.

Under the original deal, city taxpayers and ticket buyers would pay to build the arena, which, with land, borrowing costs and surrounding infrastructure factored in, is now effectively 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, estimated at $10 million a year. It went off the rails last fall when Katz said he'd had a second look at the numbers and needed millions more, including $6 million a year in operating subsidies.

Coun. Kerry Diotte voted against reopening talks Wednesday. He said councillors voted on Oct. 17 to end the deal on the grounds there was nothing left to negotiate because the city had given all it was going to give.

"What's the point of reopening negotiations now?" Diotte asked his fellow councillors.

"They (the Oilers) are still making demands above and beyond that (October) 2011 deal, and we at the time said, "Forget it, you can't have anything above and beyond that.'"

Coun. Linda Sloan made a motion, which was defeated, that talks shouldn't restart until the Oilers put new promises in writing.

"There's nothing presented here today (by the Oilers) other than public optics," she said.

The Oilers are worth about $212 million, good for middle of the pack in the NHL, and the team regularly sells out Rexall Place.

But Katz, who bought the team in 2008, has said the franchise is losing money.

He has not publicly ruled out moving the team as a last resort.

The Oilers are playing at 38-year-old Rexall Place, one of the oldest facilities in the NHL.