Oilers owner asks for operating subsidies, surprised to find Edmonton council knows the word “no”

If you’ve been wondering how many times the city of Edmonton was going to agree to pump more money into an Oilers arena before it became too rich for their blood, we have our answer: Or, rather, we don’t have an answer in dollar figures, but we know that they’ve reached it:

The Katz Group asked city council for more public dollars for the arena project Wednesday, arguing the “iconic” structure can’t now be built for $450 million.

But city council turned down the request, which may put the future of the project in jeopardy.

Mayor Stephen Mandel wouldn’t say how much more money the Oilers’ owner was asking for.

Mandel has been the main cheerleader for the Oilers project, but it sounds like even he’s finally getting peeved at owner Daryl Katz’ continued price hikes. Asked after the council vote if he was still optimistic about the arena getting built, he replied: “Optimistic might not be the best word. Frustrated might be a better word.”

The Edmonton council held its meeting behind closed doors, so it’s impossible to know exactly what Katz asked for this time, but apparently it involved an annual operating subsidy on top of the $491 million in cash he’d demanded previously. Referencing a Katz Group letter that under the existing agreement it would be impossible to ensure “revenue streams from the arena will be sufficient to ensure the Oilers’ long-term sustainability,” Councillor Don Iveson told the Edmonton Journal, “That’s a roundabout way of saying they would like additional cash annually from the taxpayers of the City of Edmonton in order to close the deal. That’s the problem. Annual ongoing subsidy. … [The request for] cash money to offset operating costs for the Oilers directly is new.”

Given all the talk about new arenas in Seattle and Quebec and Markham and Virginia Beach and whatnot, you have to wonder if Katz decided this would be a good time to up his demands, since he has some viable alternatives if an Edmonton deal falls through. Admittedly, not alternatives that are already willing to give him $491 million, but he couldn’t know the Edmonton council would realize that. After all, plenty of elected officials elsewhere still haven’t.

4 comments on “Oilers owner asks for operating subsidies, surprised to find Edmonton council knows the word “no”

  1. I’m not sure it’s great timing by Katz, Neil. With an announcement current on what Hansen has agreed to do in Seattle, Katz’ timing kind of sucks. He looks like even more of a carpet bagger than he has previously done.

    Mandel essentially genuflected with great humility to Katz, offering up on a platter everything the dwarvish owner had asked for (if not more… remember that $100m investment Katz was promising to make in the arena, and another in surrounding development? Ah… well, um….)

    Now he wants more.

    BTW, the city has not directly paid operating subsidies to the Oilers before. However, under an agreement reached in 1998, Northlands (the present arena’s manager) pays about $10m of the $11.6m in annual operating costs attributable to Oiler games. So it’s not like “operating subsidy” is unheard around here. They just do a bit better job of hiding it than some other markets…

    This would be the perfect time for the city to issue a take it or leave it (or better yet, withdraw from the present agreement unilaterally if Katz Group won’t accept it), no doubt to be immediately followed by KG’s announcement that they are seeking relocation options.

    I’d be fine with that. There’s no shortage of other team owners in the league that would gnaw off their own arms to move into the kind of market Katz feels the need to abandon. The league would object absent a new building, no doubt. But I remain convinced a completely viable NHL building can be built for under $300m. The Oilers don’t want that, of course. They want something that costs 50% more than Pittsburgh’s overkill arena did less than five years ago.

    Funny, the hometown boy who “just bought the team to protect the city’s interest” seems to have changed. Maybe it happened when he moved his family to Vancouver last year.

  2. JB,

    Love the post, but I have to disagree on one thing:

    While there are many NHL teams struggling in their respective markets (see: Sun Belt teams) it makes sense for the NHL to hold Edmonton’s feet to the fire if the Oilers do depart. If the Oilers pack up and leave on a Friday and Sunday afternoon the mayor is welcoming the Panthers the NHL misses out on two things:

    One, a hefty expansion fee seeing how this market is one of the prime ticket markets in the league.

    Two, the League loses the leverage in other prime markets (see: Canadian teams) to put the pressure on City Councils to pay for these arenas if it becomes clear that being a hockey market exempts you from having to fork over cash to support these projects. It would set a dangerous precedent for at least a dozen or more markets.

    I really wish you were right though.

    I find it quite humorous that the same owners who are looking to remove players leverage in the next CBA via a lockout are the same owners who have used and abused this power in this and other industries to fuel their greed.

    But we don’t understand because it’s just business.

  3. Andrew:

    I agree with you, the league would heavily resist attempts to relocate another team to Edmonton to replace the Oilers, should they depart.

    The problem that the league would have is that it won’t be a “Balsillie” type attempt, where an outsider tries to gain control of a franchise and forcibly relocate it.

    When an existing member of the group applies for relocation, there are some basic criteria needed to gain approval for a move (and to demonstrate why a move from the present market is necessary). Once those are met (and all would be in Edmonton vs Florida, to use your example), the BoG would be in violation of their own constitution if they refused move without grounds (which was a major factor in their refusal to sell a franchise to Balsillie… once in the group, they knew he could easily demonstrate both the non-viability of the “present” markets, and the viability of the market he wanted to move to).

    In effect, then, they would be opening themselves up to the possibility of action from their present franchisee – not least because that owner has essentially been forced to remain in an unprofitable location when a profitable one is available. As we saw with the Coyotes, if the league refused such a move, their next step would pretty much have to be buying out the present owner. That might work once, but no league can own 5 of it’s teams, for example.

    In the end, I assume Edmonton’s city council will surrender to Katz Group – in much the same way they capitulated utterly on the present deal. My view remains that they do not have to do so, nor should they. They are elected by Edmonton residents to represent their interests, not to cater to the interests of non-resident billionaires.

  4. Interesting.

    I guess the only city we have as evidence of the NHL blocking is the Hamilton/Southern Ontario relocation that was blocked. We’ll need a bigger sample size to verify how much collusion occurs with franchise relocations.

    In theory, there should be 3-5 teams seriously kicking tires once buildings are complete in Seattle and QC. If not, then it stands to reason that the league wants to hold those cities as potential threats for other teams to relocate to or use them as expansion franchises.

    I really hope the city has the cojones to remind Katz that his team plays in a market that can charge more for a throw-away game between two teams battling for last place during a January blizzard than most sun-belt teams can get for Game 7 of the Western Conference Finals.