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April 07, 2011
Edmonton council approves framework for talks about how to fund Oilers arena, maybe
In a stunning victory for Mayor Stephen Mandel, the Edmonton city council voted 10-3 last night to approve an arena deal for the Oilers ... okay, wait, actually to approve a financing plan for an Oilers arena ... sorry, that's actually to create "a financial framework the administration must use in negotiations with Oilers owner Daryl Katz." So maybe not quite as stunning as it first appeared, given the over-the-top headlines.
As for the details of the plan, they are:
- The arena cost is capped at $450 million.
- $125 million must be raised via a ticket tax.
- The province will kick in $100 million.
- A Community Revitalization Levy kicking back taxes in the arena district will raise $20 million, down from $125 million in earlier plans
- The missing $105 million will come from a $2.5 million a year subsidy that the city currently pays to the Oilers, plus increased parking revenues.
- The city will own the arena.
- The Oilers will pay operating costs.
Needless to say, there are still plenty of holes in this plan, starting with the fact that the province of Alberta hasn't yet committed to its $100 million share. Also, Katz wrote to Mandel last week that he's opposed to a ticket tax — as you'd imagine he would be, since it would effectively limit the amount of cash he himself could pocket from ticket sales. And there's still the question of the lease, whether Katz would pay any rent, and who would get money from such items as naming-rights sales.
All in all, it's not the worst arena proposal ever — Katz would end up paying for about half the construction cost, counting that ticket tax — but most of the heavy lifting is now kicked over the the province, which must consider the precedent it would set for the Calgary Flames, who are looking for arena funding of their own. So while it's kind of nice that the Edmonton council has drawn a line somewhere in the sand, this still pretty much comes down to a magic asterisk.
I've posted this question at other chat boards and been roundly booed but I'm hoping that's not the case here.
I'm fine with some civic support for these facilities but why does this need to be a $450M arena?
When you weigh the cost of arenas the Oilers cite as benchmarks for what they want - Nationwide Arena in Columbus, the Xcel Center in St Paul, and I've heard that even the Coyotes horribly named jobbing.com Arena is a solid venue to watch a game - the cost of those arenas today based on inflation comes out at around $250M each.
Why can't we build the best possible arena for that? Where's the added value that comes out of spending the extra $200M?
Good question. I know Alberta is expensive, but I think that number was just floated without a whole lot of planning behind it. I would expect once they start to get some engineering done, the numbers will be clearer (does this include all surrounding infrastructure & the "Winter Garden").
I also wonder how they are going to protect against cost overages. Seems like those would fall to the city if they "own it".
Katz is also going to want something for his $100M. Breaks on rent, a 'fee' to operate it, etc...
-Labour. Most construction labour is either building houses for inflated rates or in Fort MacMurray. Laying pipeline in FortMac can net six figures for the average worker.
-Materials: In the last 10 years, due to increasing construction in India and China, building materials have increased significantly.
I know those two for sure, otherwise, you get expenses such as winterizing the building, intangiables like parking garages, etc.
Fair enough. I can appreciate the escalation in prices based on materials - I didn't make that connection before. Nor did I concern myself too much with winterizing the building.
As for labour - some of the buildings the Oilers use as examples were built in the States during their great real estate construction boom. I can't imagine labour was dirt cheap in the Phoenix/Glendale area while building the jobbing.com arena.
Again, I may be wrong. I know living in Alberta things like the construction trades are costing a pretty penny.
The thing I'm most concerned about is what Blair states - I really hope this isn't some number they threw against the wall to see what would stick. I would hate that we could have had a world class arena for $325M but have tied up an extra $125M for no other reason than "because the Oilers asked for it."
This better not turn into a case where the Katz group is budgeting for 100$ hammers, 10$ screws and 8500$ plasma screen TVs for the concourse.
The last thing this needs to turn into is a Ralph Englestaad fiasco (albeit, he at least paid for that arena).
Of course, you're right about the possiblity of abuse/overinflation, God knows every other Canadian megaproject invites it (e.g. "Let's put a hotel in a baseball park!" or "Let's build the world's largest inclined tower!").
Just really throwing paint at the wall about why costs go up so much in such a short period of time, it's a question I have too.
The $450M number was thrown out by HOK (now Populous) when Katz retained them to look at the present arena. Actually, he hired the to provide a whole pile of reasons why the current arena couldn't be economically renovated, which they were only too happy to do. How detailed this assessment was is unclear. In my view, however, it is always a mistake to ask a surgeon whether you need an operation.
Ty: All the factors you cited will impact cost. However, the most expensive arena built in the last decade is Pittsburgh's consol energy centre. It came in at about $320M. So, what does the other 40% get spent on? Other than snow load and a moderate increase in the heating plant requirements, what is the difference in cost going towards, if not the winter garden etc?
The city of Edmonton has simply fallen all over itself to give Katz $250M (so far) in public money. He has yet to provide any concrete information that would support the conclusions he has drawn. What luck for hockey team owners that men do not think...
JB: well said. I guess we can hope the province says take a hike and the city goes back, shows some sack and tells Katz that the arena can cost $350M max.
Then the ratio falls into the 29-71 split of costs between the city and Katz, which is close to the 25/75 ratio that lady on NPR mentioned in the interview our own Neil deMause was involved with.