Oilers arena cost to taxpayers nears $500m

As approved by the city council last month, the city of Edmonton has moved ahead with its $20 million purchase of land for a proposed new Oilers arena:

Monday afternoon, the City of Edmonton concluded a deal with the Katz Group to purchase three parcels of land for a proposed new downtown arena and entertainment district for a total cost of $74.9 million.

Wait, what the? $74.9 million? Where’d that come from?

The answer, explains the Edmonton Journal’s Paula Simons, is that the original land buy for the arena will now cost $25.9 million, but the city picked up two other adjacent parcels as well for an additional $49 million. These will be used for development around the arena, and Oilers owner Daryl Katz has already promised to buy back one of the site for $33.6 million.

The catch, explains Simons:

Daryl Katz had long pledged to invest $100 million in commercial developments in the arena district.

At last Wednesday’s city council meeting, Coun. Tony Caterina, a staunch opponent of the arena deal, changed his position and voted in favour of the proposal — but only after he successfully amended the city’s agreement with the Katz Group to include a clause that would require the company to invest a minimum of $30 million in those ancillary commercial developments before construction of the arena is to begin. I had rather assumed — perhaps naively — that such a $30-million commitment would involve some kind of visible development, like a hotel or an office block.

Not quite. Moyles said the Katz Groups’s repurchase of the 3.7-acre south parcel would be considered as representing that $30-million investment. … Katz is a tough negotiator — and with this land swap he’s just reduced his capital commitment in the ancillary developments to $70 million. In effect, Caterina’s amendment didn’t make this a better deal for the city — it made it a better deal for Katz.

In any event, the remaining $41.3 million land cost is on top of the $450 million price tag of the arena itself, meaning Edmonton taxpayers are looking at a close to half a billion dollar expense, with the only money supplied by Katz coming in the form of $3.5 million a year in rent (rising to $5.5 million after ten years), parking revenues, user fees and ticket taxes.

It’s still not the worst arena deal in the world — that’d be this one — but it’s definitely getting worse and worse.


11 comments on “Oilers arena cost to taxpayers nears $500m

  1. If I had some way to place a bet on this, I’d bet that there is absolutely no chance they’ll build an NHL/NBA-ready arena in Edmonton (or anywhere else in Canada, for that matter) for just $450M. That’s a deliberate underestimate of this arena’s costs.

    I hope they have some nice, strong cost overrun clauses built into this agreement.

  2. Mike:

    Well, excluding the Staples & Prudential centres (which are more than just hockey rinks), the most expensive arena built is Pittsburgh’s Consol energy centre. As I recall, it opened in 2010 and cost $321m… and was generally considered to be a shocking example of overkill (Multiple HD screens in unoccupied hallways etc). So I think they do have a chance to build for that price… but getting materials in and out of the site (or touring acts after it’s built) won’t be easy as, unlike the present arena location, there is no acceptable access to the city’s main HGV routes from this parcel. Stay tuned for more public expense to benefit Katz on that count…

    The city has claimed that Katz will pay for all “cost overruns”. Then again, they also claimed he’d put $100m into the rink and $100m into the surrounding development, which he hasn’t and won’t. My understanding is that the city will ‘build’ the building, not Katz. So they will have a better handle on what it is actually going to cost than in some other deals (where the team builds whatever they want and hands the bills – often with a markup – to the paying public).

    Nonetheless, the one thing we’ve learned (many of us knew it all along) is that Katz rarely speaks the truth and the City council is full of complete morons who have no understanding of business or math. Par for the course, in other words.

  3. Arena: Price in 2011 $ / Year Opened

    :::No NHL/NBA Tenants (6):
    Barclays Center: 800** / 2012
    Sprint Center: 292 / 2007
    Century Link Cen. Omaha: 291ÔøΩ / 2006
    KFC Yum! Center: 238 / 2010
    BOK Center: 200 / 2008
    Wells Fargo Arena: 111 / 2005

    :::Dual-Tenant Arenas (10):
    American Airlines Center: 521 / 2001
    Staples Center: 494 / 1999
    Prudential Center: 397 / 2007
    Verizon Center: 356 / 1997
    Air Canada Centre: 331 / 1999
    Wells Fargo Center: 294 / 1996
    United Center: 259 / 1994
    TD Garden: 231 / 1995
    Rogers Arena: 212 / 1995
    Pepsi Center: 211 / 1999
    –Avg.: 330.6

    :::NHL-Only Arenas (15):
    Bell Centre: 352 / 1996
    Consol Energy Center: 328 / 2010
    BankAtlantic Center: 249 / 1998
    HP Pavilion: 247 / 1993
    Nationwide Arena: 223 / 2000
    Jobing.com Arena: 215 / 2003
    RBC Center: 208 / 1999
    Bridgestone Arena: 202 / 1996
    Scottrade Center: 200 / 1994
    St. Pete Times Forum: 195 / 1996
    Scotiabank Place: 195 / 1996
    Honda Center: 187 / 1993
    HSBC Arena: 178 / 1996
    Xcel Energy Center: 166 / 2000
    MTS Centre: 148 / 2004
    –Avg.: 219.5

    :::NBA-Only Arenas (15):
    Amway Center: 480 / 2010
    Rose Garden: 378 / 1995
    Time Warner Cable Arena: 292 / 1995
    FedEx Form: 291 / 2004
    American Airlines Arena: 281 / 1999
    Philips Arena: 281 / 1999
    US Airways Center: 279* / 1992
    Toyota Center: 241 / 2003
    Conseco Fieldhouse: 241 / 1999
    AT&T Center: 227 / 2002
    Target Center: 175 / 1990
    New Orleans Arena: 150 / 1999
    Energy Solutions Arena: 150 / 1991
    Quicken Loans Arena: 148 / 1994
    Chesapeake Energy Arena: 109 / 2002
    –Avg.: 248.2

    40-Arena Average (Dual-Use/NHL/NBA):
    $258 million

    30-Arena Single-Major-Tenant Average:
    $233.86 million

  4. What is it with your “Field of Schemes” agenda? Are you against every stadium in every city, U.S. and otherwise or are you just against publicy funded ones? What’s the matter, did your no-talent kid get cut from a team and you hold a grudge or were YOU just never good enough for said team?

    I laugh at all the stadiums that get build despite your pestulance. Are you also boycotting all these venues or are you hypocrites that attend so as long as your tax dollars are not at work? Are you just anti-jocks?

  5. Let’s take these one at a time:

    1) No, I’m not against stadiums. I have had many of the best times of my life in stadiums.

    2) I’m not against all publicly funded stadiums, either. I do think, though, that it needs to be pointed out that in the vast majority of cases, taxpayers don’t get anywhere near the amount of value back that they put out in subsidies – and that’s even if you count the value of keeping a team from moving (something that’s threatened way more than it actually occurs) and the value of getting to attend games in a new building (where the cupholders and new nacho stands are invariably offset by higher prices and crappier sightlines).

    3) My son plays both soccer and baseball, and has never been cut from anything. (Well, he didn’t make the travel baseball team this summer, but it’s hard to blame that for a book and website that started five years before he was born.)

    4) I go to lots of sporting events, at both new stadiums and old, though I know plenty of other people who refuse to attend games of, say, the Detroit Tigers or New York Yankees because of what they did to get their new stadiums. It’s a personal choice, and a tough one when you’re a sports fan and the only game in town is the one run by the current powers that be.

    Finally, there’s no such word as “pestulance” – is that like a cross between petulance and pestilence? If so, can I use it? I can think of a bunch of pro sports team owners who it applies to…

  6. LOL:

    Without wishing to speak for anyone else, “we” are against massive transfers of wealth from the poor and middle classes to the elite for no good reason.

    Clearly, you are in favour of same.

  7. @ Neil:

    There was a posting on another board where someone said that no team has ever stated they’d leave without a new arena and didn’t.

    Now, I know this is false (Red Wings are playing without a lease, Rays are forever begging for something) but is there any team that sticks out as an example where they had all the leverage to leave a market (ie. lease expired; escape clause) if they didn’t get a new arena/stadium yet stayed despite not getting that requested arena/stadium?

    Thanks

  8. “LOL” is obviously one of those pestulant Obama-loving elites who is never at a loss when it comes to finding new ways of wasting other people’s money.

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