Edmonton declares Oilers arena deal “100%” done, still not actually 100% done

The NBA owners’ vote to reject the relocation of the Sacramento Kings wasn’t the only big arena-related decision yesterday: The Edmonton city council also voted to approve a new funding plan for the long-in-the-works Oilers arena. The council voted 10-3 to commit a series of different public funding sources to a now-$604-million arena, with Mayor Stephen Mandel declaring triumphantly, “This is actually 100 per cent.”

Of course, Mandel has said that before, but this time he apparently means it. So, how did the city finally fill that pesky $100 million arena funding hole? Let’s refresh ourselves on where the arena plan stood back in January:

That’s $676 million, but the old arena cost estimate was $601 million, not counting the $75 million in land costs, so it all adds up. Except for the part where $114 million was unaccounted for.

And the new plan:

  • $279 million from the CRL, parking fees, and the like.
  • $125 million from the ticket surcharge.
  • $184.4 million from Katz, including an extra $15 million that the owner agreed to kick in yesterday.
  • $25 million from the provincial Regional Collaboration Program.
  • $7 million from the province of Alberta.
  • $7 million from the federal government.

That adds up to … $627.4 million. So it’s actually still $50 million short of where things were in January. Maybe the city is no longer counting its land costs as part of the deal? It’s hard to tell from the documents released by the city, and press coverage that includes offenses to math like “$23.69 million in third party funding ($25 million from the provincial Regional Collaboration Program, and $7 million each from the province and the federal government)” isn’t likely to help much either.

Basically what appears to have happened yesterday: Katz agreed to kick in some extra cash; the city gave up on raiding its Municipality Sustainability Initiative fund and is instead just assuming the CRL will raise more money; and the remaining gaps were filled in by flat-out assuming the cash will come from the provincial and federal governments.

That’s a whole lot of assumptions, and pretty much still amounts to “we’ll borrow the money and figure out how to pay for it later” — in particular, just flat-out upping the projected revenues from the CRL increases the odds that new revenues will fall short, and end up eating the lunch of the general fund, as Greg LeRoy of Good Jobs First memorably put it. Plus the RCP money still isn’t approved, and lord knows where those $7 million contributions from the province and feds are supposed to come from.

Still, Mandel and the council say it’s a done deal, so it looks pretty likely that this is a done deal, and any shortfalls will be worked out later. (Because that always works out.) Which means that Edmonton taxpayers are now going to be on the hook for more than half of the cost of a new arena for the 7th-most-profitable team in the NHL, owned by Canada’s 11th richest man. It’s still not the worst arena deal in history, but that doesn’t make it a good one.

Louisville arena TIF windfall fails to materialize for third straight year

And finally in today’s onslaught of holiday reporting, we have the news item that isn’t really news:

It was supposed to be a reliable way to help cover the cost of a new downtown arena: The building’s events would bring throngs of people downtown who would eat, drink and shop nearby. Their sales taxes would be captured to help pay for the KFC Yum! Center.

But the arena hasn’t added as much to tax revenues as expected during its first three years — producing less than one-third of the amount originally projected.

Yep, the KFC Yum! Center TIF district isn’t generating as much incremental tax revenue as expected — just as was the case 11 months ago, and a year and change before that. At least tax receipts are finally up from before the arena was built, but only slightly: a total of $6.4 million over the past three years, a drop in the bucket compared to the city’s $19 million in annual arena debt payments, let alone the $30 million a year that that will rise to in coming years.

The city is now expected to be asked to bail out the arena district as early as next spring. (The Louisville Courier-Journal also speculates that this could increase the pressure to lure an NBA franchise in order to add arena events, which would be a great idea if NBA franchises actually paid significant rent.) Meanwhile, arena authority financial adviser Alexander Rorke told the Courier-Journal that nobody should be hung up on the fact that the TIF was expected to bring in a ton of money and now needs a bailout: “With the feasibility study — that was all great for that time period for what people knew. But I think it’s important that we just realize that was then.” Yeah, that’s what they all say.

Louisville TIF generating next to no arena money

Back in 2000, economic-subsidy expert Greg LeRoy of Good Jobs First said this to me about tax-increment financing, in which new tax money from a development is earmarked to pay off the development’s bond costs:

“TIFs are among the most problematic kinds of subsidies in America today. Right now we’re in the middle of this giant real estate boom, but real estate markets are cyclical. During the crash in real estate values in the early ’90s, some places got caught in the downdraft, and the increment evaporated. And you’ve got a situation where a liability that was supposed to be taken care of by the TIF is now eating the lunch of the general fund.”

From Wednesday’s Louisville Courier-Journal:

Paying for the KFC Yum! Center depends on more people spending money downtown, but the plan to use rising sales tax revenues to cover part of the arena debt failed to produce a single penny last year….

And if sales tax projections continue to lag, Metro Government could have to come up with an extra $3.3 million to cover arena costs as early as 2012….

Without any of the $4.5 million in projected sales tax revenues, the project received just $678,000 worth of tax rebates last year — nearly all of it from property taxes.

Now, the KFC Yum! Center — yes, that really is its name — doesn’t even open until next month, so it’s possible things will look better in coming years. Still, you can’t say Louisville wasn’t warned.