Edmonton considers raising missing Oilers arena funds by wishing it into existence

The Edmonton city council thinks they’ve come up with a new way to fill the Oilers arena funding gap, and this time it’s not beating their head against the provincial government’s door. Or just spending the money and hoping they can pay for it later. Well, okay, yes, it is just spending the money and hoping they can pay for it later, but pay for it later in a different way:

City council could look to the community revitalization levy to cover the missing $55 million needed for the proposed downtown arena project if the province doesn’t come through, some councillors say.

The levy is up for debate Wednesday as administration presents a list of revitalization projects that could be funded with the projected increase in taxes from development in the levy area. Administration earlier suggested development around the downtown arena project will raise $612 million to $1.1 billion over the 20-year life of the levy.

The CRL is essentially a Canadian version of a TIF, wherein future growth in tax revenue gets kicked back to pay for the project that (allegedly) helped sput its growth. The Oilers arena is already being funded by CRL money, but now it sounds like Edmonton is considering just increasing the amount of pretend money that it projects the arena will generate in the future, magically creating more cash to pay off the arena debt. And if the money doesn’t turn up, well, hey, they were just going to blow it on parks and roads anyway.

Edmonton to Alberta: Oilers arena money all gone, send more

So the Edmonton city council indeed met last week, and indeed decided to throw a few million dollars a year extra at a new Oilers arena. It did not, however, actually figure out how to pay for all of the shortfall in arena funding, instead — wait for it — asking yet again for the province of Alberta to fill in the rest of the gap:

In the recent budget, the province increased the amount it grants Edmonton annually through the Municipal Sustainability Initiative, which helps pay for municipal infrastructure projects, by $3 million.

City administrators recommended the city put the increase toward the arena over the next 20 years, which would raise $45 million of the $100 million arena shortfall.

Councillors approved the plan in an 8-5 vote, while making the deal contingent upon receiving clarification from the province with respect to the remaining $55 million…

Coun. Kim Krushell said the vote can be seen as a challenge to the province.

“Where are you in this equation? We’ve met you again halfway because we stepped up on the $45 million with the MSI and we’re waiting for the balance,” she said. “That’s the message that’s been sent out.”

Okay, to recap: Alberta premier Alison Redford said when she was elected in 2011 that she wasn’t going to give Edmonton any arena money. Then she said it again. And again. And again. And again. She did, however, point out that Edmonton was welcome to use its MSI money if it didn’t have anything better to do with it.

The Edmonton council has said, okay, fine, we’ll spend our latest allocation of MSI money, which should raise enough to pay for $45 million worth of arena debt. But we still have another $55 million of arena debt unpaid for. (This on top of the $294 million in arena debt and land costs it’s already agreed to, but we don’t talk about that anymore.) Where’s our money for that, huh, Premier Redford?

The Alberta government’s answer was prompt in coming. Care to guess what it was?

Municipal Affairs Minister Doug Griffiths repeated the government’s long-standing position that Edmonton can use its Municipal Sustainability Initiative (MSI) funding for the project, but there will be no additional money.

“We are going to continue to support municipalities through MSI, and that is the perfect place that allows municipalities to make the decisions they need to make,” he said Thursday.

So all Edmonton needs is $55 million in blood from a stone, and this Oilers arena thing is totally happening. Except that it really needs $69 million in blood from a stone, since the funding gap was last reported at $114 million, not $100 million. But I guess we don’t talk about that anymore, either.

Latest Edmonton plan to fill $100m Oilers arena gap: Just wing it, hope money turns up somewhere

The Edmonton city council is meeting today to discuss the Oilers‘ $601 million arena plan, which has had a $100 million budget hole for almost as long as there’s been an Oilers. And this time, the council appears to be ready to acknowledge that the province of Alberta isn’t going to bail them out with a surprise $100 million check, and instead is looking to “Plan Bs.” Such as, Edmonton Journal columnist David Staples?

To keep moving the project, [Edmonton Mayor Stephen] Mandel will resort to Plan B, pulling together some combination of infrastructure money, new taxes from the arena district development, and possibly an additional contribution from Katz.

Coun. Bryan Anderson says the city doesn’t need $100 million right now, it just needs to cobble together funds from various sources that will cover a $5.75 million annual loan payment. “There will be a plan proposed to produce the capital dollars that are missing.”

I can’t tell if Anderson actually means that the city isn’t going to worry about how to pay off $100 million, but will just worry about how to pay off $5.75 million this year, then figure things out all over again next year, or whether this is just awkward wording by Staples. But if that is what they’re considering, it’s really not likely to end well.

Alberta to Oilers: What part of “no money” didn’t you understand?

Alberta premier Alison Redford has followed up her report of two weeks ago that there’s no money in the provincial budget for $100 million toward an Edmonton Oilers arena by saying that no, seriously, there no money, you’re not going to be getting any money, you got that yet?

“On the issue of tax dollars for the pro sports arena in Edmonton, my answer is no,” Redford told a crowd of municipal politicians in Edmonton. “When every one in this room from every municipality are facing the same difficult budget decisions that we are, I can’t think of a worse time to have this discussion.”

So, um, why are we having this discussion? Apparently “sources” told  iNews880 radio that the province was about to allow the city to borrow against a new revenue stream of some kind to get arena money. So of course iNews880 had to ask Redford if it was true. And surely those sources couldn’t have been just starting a rumor in order to get the media to pester the premier, in hopes that she’ll get sick of it and relent, right?

Alberta to Oilers: No, really, we’re not going to fill your $100m arena budget hole

In case you weren’t tipped off to the idea that Edmonton Oilers owner Daryl Katz wasn’t going to get his requested $100 million in provincial funds for a new arena when Alberta officials said there was no money in the budget, now it’s official: The budget is out, and there’s no money in it. The province indicated, as it has before, that Edmonton can use money from its state provincial-funded Municipal Sustainability Initiative budget if it wants, but Edmonton pointed out, as it has before, that it already has dedicated that money to other projects.

So, we’re back in the same stalemate we’ve been in for years: Despite Edmonton being willing to give Katz a ton of money, there’s still a $100 million hole that nobody is offering to fill. Downtown Business Association Jim Taylor said yesterday that “the arena is a done deal and this doesn’t change it,” but there are done deals, and then there are done deals.

Oilers arena numbers sort of add up, if you squint

A FoS reader finally directed me to the updated Edmonton Oilers agreement on the city of Edmonton website, and it clarifies some of the confusion around who’ll be paying for what. Team owner Daryl Katz’s $5.5 million in annual rent payments, it turns out, are meant only to pay off his original $100 million commitment (at about 3% interest, taking advantage of cheap government loans); this will be increased proportionally to cover an extra $15 million in new costs, so Katz will actually be on the hook for more like $6.5 million a year. As for the $28 million he’d be paying towards a new $53 million pedestrian bridge, the new agreement specifies that he’d indeed be paying that, “amortized over the 35 year term of the lease with interest costs included” — though it doesn’t say whether those would be additional rent payments or what, and whether low-interest provincial loans would be used for those as well. Add it all up, though, and Katz could end up paying about $8 million a year toward the cost of a new arena, which should be just about covered by whatever he gets for naming rights plus the $2 million a year in advertising at the arena that the city has committed to buy.

Though speaking of naming rights, one Edmonton city councillor now wants to reclaim those and use them to fill in the remaining $100 million budget hole that the province of Alberta keeps insisting it won’t be filling:

Councillor Kerry Diotte tells iNews880 the province has said all along that the extra money won’t be provided.

“That has been their stand and I think the only thing to do now is find a plan “b” and it is alarming that we don’t have a plan “b.” explains Diotte. “I would suggest in this case if it is to go ahead it would have to be money from the Katz group.”…

“I’ve been saying for quite some time now with the naming rights it is something that this city should retain,” explains Diotte. “The city is building the arena and we should have a right to name it and make the money from that name. In other markets that could be worth $100-million, indeed in this market it is probably worth about $100-million over 35 years.”

That’s not a bad guesstimate, though of course $100 million over 35 years isn’t going to be nearly enough to pay for $100 million in construction costs right now. But more to the point, Katz is presumably counting on that naming rights money to cover his rent payments (because who wants to have to pay for things out of your own pocket, amirite fellow rich guys?), so it’s going to take another pitched battle if Diotte expects to use it to cover arena costs instead.

Alberta Premier Alison Redford reiterated last week that the province won’t be coming up with any lottery money or anything else to help with the Oilers arena, though she did say that Edmonton could use provincial Municipal Sustainability Initiative dollars if it wants. Except that Edmonton has already used up its MSI money, and no additional funds are expected so long as the Alberta economy continues to be in the tank. (Apparently low oil prices are the problem, so this could always change if the U.S. starts sucking up gasoline like there’s no tomorrow again.) Which means Redford is effectively saying: We gave you all the money we have, if you want to spend it on an arena rather than something else you already planned, that’s your business. Everybody in Edmonton doesn’t really need a sewer, do they?

Oilers arena funding numbers don’t quite add up

I did a quick rundown of the new Edmonton Oilers arena deal yesterday, and included the publicly reported figure of $143 million to be provided by Oilers owner Daryl Katz. That prompted some questions in comments about whether Katz is really putting in that much money in today’s dollars, or just over time.

The Edmonton Journal provides a bit more detail today, but the new information only makes this whole thing more confusing. It reiterates the $143 million contribution from Katz ($115 million toward the arena, $28 million toward a new pedestrian bridge), but then adds:

Katz Group subsidiary Edmonton Arena Corp. will operate it and keep all the revenue over a 35-year lease, paying its share of the mortgage and interest as about $5.5 million in annual rent.

Let’s reverse-engineer this: Katz will borrow $143 million, and pay it off over 35 years in $5.5 million increments. That’d be an interest rate of just about exactly 1%, which isn’t too damn likely even in these crazy economic times. If we assume the $5.5 million a year would only pay off the $115 million for the arena, that’s marginally better — a 1.9% interest rate — but still pretty ridiculous.

So either 1) the Journal’s numbers are wrong, 2) Katz has access to an essentially interest-free line of credit, or 3) that $143 million contribution isn’t really worth $143 million. Except if 3 is the case, then there’s a hole in the budget, because that $143 million is needed to get to the $601 million in cost, which is in today’s dollars.

So, curiouser and curiouser. If anybody has access to the actual language of the Oilers arena deal and not just a press release describing it, maybe we can get to the bottom of this. But right now it appears that the numbers do not mean what the Edmonton media think they mean.

Edmonton council votes to approve Oilers arena, now just needs $114m from “other”

The Edmonton city council voted yesterday to approve the revised Oilers arena proposal, and Mayor Stephen Mandel says this means the now-$601-million project is a done deal:

“It’s 100 per cent. A deal is done. Council has approved it. All the other stuff is just going through some steps,” Mandel told reporters after the 10-3 decision by councillors.

Just going through some steps, like finding another $114 million in funding that’s currently slated to come from “other levels of government,” in the words of the CBC. That almost certainly means the province of Alberta, which never liked the idea in the first place, and which is now warning that the next fiscal year “is not going to be a fun budget.” Yes, it’s a step, but it’s a doozy.

Anyway, here’s the breakdown of the revised deal, as reported by various news outlets:

  • Oilers owner Daryl Katz puts up $143 million toward the arena project, which is now estimated to cost $601 million including infrastructure. Katz is no longer demanding a $6 million a year operating subsidy, a property tax exemption, a casino license, or a pony.
  • $125 million would come from a tax on tickets at the new arena, for hockey and non-hockey events alike.
  • The city would put up $219 million. It’s also already agreed to buy $74.9 million worth of land for the arena.
  • $114 million from “other.”
  • Katz would pay $6 million a year in rent on the city-owned arena, keep all revenues from events there plus from the sale of naming rights, and get a commitment from the city to buy $20 million worth of advertising there over 10 years.

That’s a lot better than when Katz was asking for all his additional goodies, but still a bit worse than the fairly crappy deal being proposed 14 months ago, since in the interim the estimated price has risen by $30 million, and Katz has gotten the council to agree to pay for half that. (Speaking of which, there’s apparently no provision for cost overruns in the current plan. But no worries, because that never happens, right?) Which means that by inserting a bunch of last-minute demands, pissing off the council, and then agreeing to kiss and make up, Katz has only managed to increase the level of enthusiasm for the same deal he wanted in the first place — plus come out of it with an extra $15 million to boot. What would that be called, a reverse bait and switch? There’s probably a term for it in the world of used car sales, or maybe a slightly different field.

Oilers arena plan could rise from dead as soon as today

NHL commissioner Gary Bettman was in Edmonton on Friday for talks between Oilers owner Daryl Katz and Mayor Stephen Mandel, and apparently he knocked some heads together, because there are now reports that a new arena deal could be announced as soon as today.

According to councillor Ed Gibbons, who spoke with Mandel, Katz has agreed to drop demands for a $6 million a year operating subsidy that he added last fall, though he’ll now be asking for $15-25 million in additional cash from the city to pay for half the price of additional costs that have been identified since then.

Gibbons says he thinks the council will be able to swallow that much extra expense, though he would say that, since he’s a backer of the plan. We’ll know more after the actual deal is announced, maybe.

Edmonton mayor, Katz to present new Oilers arena plan Wednesday

Barely a month after the Edmonton city council agreed to reopen talks with Oilers owner Daryl Katz about a publicly subsidized $475 million arena, Mayor Stephen Mandel reportedly reached agreement on a general framework of a deal in a Friday meeting with Katz and NHL owner commissioner Gary Bettman. No details are available yet; specifics are set to be released on Wednesday.

Of course, it was the Edmonton council that called a halt to the deal last time, while Mandel has been the project’s biggest booster. And there’s still the problem that presumably any arena funding plan will include that $100 million from the province that the province doesn’t want to provide.

Still, given that the main council objections to Katz’s plan last fall were less that he was asking for bucketloads of money than that he wouldn’t settle on a number for how many bucketloads he wanted, it’s fair to say that the Oilers arena plan is back from the dead, if still not out of the woods entirely. Which just goes to show that time heals all wounds even faster than I thought.