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Hey Hey Hey Goodbye…

Katz Group puts pressure on potential Edmonton Northlands contractor

Downtown arena may be dead if Oilers owner Katz doesn’t step up

An election is approaching – an unpopular arena funding model seems to become more so by the day – A provincial budget came and went without $100 million in arena funding, leaving the Mayor’s “the money is coming, the money is coming” reality distortion field, bleeding on the side of the potholed road – And a couple more City Councillors have toyed with the idea of possibly, maybe, sort of, voting against the Arena framework as it heads back to Council without the Provincial funding we knew it wasn’t going to get.

Did I mention an election is coming?

Anyway, as it all heads to either a tear-filled finale or a ramming through from throat to rectum, I’d like to offer Council and Council hopefuls a solution, free of charge.

Cut Katz loose.

Aside from a 30+ year lease for the use of the facility for 41 days per year + the playoffs (if any), let’s do it without him. Let’s do it without the Katz drama, the Katz ego, the $20 million marketing deal and the forfeiture of facility revenues. Let’s do it without his meagre investment to be spread out over decades.

I don’t begrudge Daryl Katz for making fantastically one-sided business deals, I just wish my city could do the same. Here’s Edmonton’s chance – cut Daryl out. If we’re going to build it, if we’re going to own it, if the city is going to stretch its borrowing capacity by a half-billion dollars to do this; then let’s run our rink, fill its seats, and profit fully from it.

If we need partners going forward, who have the expertise and the ability to bring shows through the door; Then starting with a trip to LiveNation, City Council can send Simon Farbrother on the road with instructions to fill the barn, not give away the farm.

And that’s that..for today anyways.

It’s important, vital, for a municipal council to have a vision for the future of the municipality under their care. It’s also equally important that they don’t take a header off the financial cliff chasing it. Today City Council was the adult in a room, absent Daryl Katz, as it sensibly voted to cease negotiations with the Katz Group.

About this time last year, Council expended a significant amount of political capital agreeing to a generous financial framework which included a Community Revitalization Levy + $80 million from other sources, an ask to the Provincial Gov for $100 million, up to $25 million for a pedway across 104 ave, an estimated $7 million for a community rink, $20 million for a marketing agreement, $20+ million for land purchases, with the City borrowing to construct the arena with the Katz Group making their contribution at $5.5 million per year over 35 years.

Council and the Mayor agreed to this without verifying the financial claims of the Katz Group. Without analysing, or as Seattle is doing, auditing the books of their prospective business partner. Without verifying, themselves or through City Admin, their partner’s financial claims.

A process conducted largely in camera and with private verbal reports, without due diligence providing all the facts and figures to city negotiators and civic decision makers, it’s well open for abuse or manipulation. Which indeed happened with the Katz Group playing down the importance of the tentative financial framework, the agreement reached in New York, while advancing claims of a struggling business model which not only required the naming rights but the entire revenue stream of the facility to be sustainable, while continually refusing to reveal it’s finances to the City; The majority investor in the project. And of course there may have a childish trip to Seattle somewhere in between.

The front door was open, the public, the media, and a Council which has been more than generous in moving this forward was there today waiting. Instead, rather than appear and move the agreement forward, the Katz Group offered a rhetoric filled letter offering no specifics or concessions as it’s response.

 

Motion approved by Council this afternoon.

1. As a result of Mr. Katz letter and unwillingness to have an open discussion with Council and the frustration of the Interim Design Agreement, all negotiations, and ongoing City work related to the October 26, 2011, framework be ceased immediately.

2. That administration provide a report, as soon as possible, to City Council to report on the completion of the cessation of negotiations, and the status of the City’s current, transferable investments in a potential downtown arena project.

3. That Administration provide a report outlining a framework for Council to explore potential avenues to achieve the long term goals of sustainable NHL Hockey in Edmonton.

 

Last year’s financial framework, or for that matter, any further negotiations, and spending on the arena design and process, should never have occurred without verifying the Katz Group’ finances and financial claims. Whether the Oilers are a profitable venture, or a failing business model in need of external and public subsidy to carry on, civic decision makers absolutely should have been provided the information to know one way or the other.

Today’s decision, ceasing further negotiations is the responsible course. Yes, it might well have been avoided with a dose of sunlight and due diligence some time ago and along the way, but Council can’t roll back the clock. It’s something for future Councillors and candidates to learn from. The next step, it’s Katz’, and it starts with transparency on the front steps of City Hall. Anything less is probably just a letter to the editor that’s bad for the blood pressure and Katz’ remaining support on Council.

Dizzy

The City of Edmonton says it can’t ‘affirm’ his economic claims, Councillors say they don’t know what he wants, and to date we’ve been threatened with relocation to Hamilton, Houston, Quebec and Seattle by two different owners of a team that’s been rebuilding for 20 years. If anyone wants the ride stopped so they can get off, I don’t think you can be blamed. The Mayor has set an October 17th deadline for Mr. Katz or representatives to appear before Council, although what would happen if they’re no-shows as the deadline comes and goes is..undefined. I’ve written on the arena a few times before, so until something actually moves other than politicking and posturing, I think I’ve said my piece.

The comments from the Mayor about the two sides being ‘far apart’ despite the existence of an approved financial framework are interesting. To that end, I went looking for old news articles from the time of it’s approval for comments from the Katz Group. Just to try and glimpse their level of support for the framework at the time. Anyway, in the process I compiled a number of articles from the past several years. Time clouds details, and it’s interesting too see the specifics that have been washed out from memory. If you’re interested in some arena-saga nostalgia, check out the collection below.

More confusion over Katz plan

Skepticism, tough questions must stick to arena debate like glue

NHL commissioner adds his say about downtown arena

Research on downtown arena has cost Edmonton $450K

Oilers bid makes arena plan more feasible: councillor

Mandel sets Oct. 17 deadline for Katz Group to spell out arena demands

Concern grows over the future of Rexall Place

NHL’s Bettman asks mayor for meeting on arena – Edmonton – CBC News

Angry taxpayers protest arena

Ex-NHL owner disputes arena economics

Mayor, Katz Group to meet with NHL commissioner in New York

Arena funding model mulled

Edmonton arena deal within reach, mayor suggests – Edmonton – CBC News

Alberta looking at funding Edmonton arena – Edmonton – CBC News

Stelmach, Mandel meet to discuss proposed downtown arena

Oilers owner Katz drops arena non-compete clause

Arena funding hot topic at public hearing – Edmonton – CBC News

Katz sets the record straight in a letter to Edmontonians

Edmonton, Katz Group agree to $450M arena deal | Hockey | Sports | The London Free Press

Oilers talking about move to Quebec City?

Downtown arena framework approved – but not all convinced

Arena decision reaction

Katz Group postpones public hearing

No federal money for downtown arena

Edmonton mayor wants vote on downtown arena

 

 

 

For Immediate Release – Please, sir, I want some more.

The Katz Group is back to City Council (not in front of City Council though, once again City Admin has to play middle-man), with financial concerns with the proposed arena’s contentious financial framework.

Major stumbling blocks threaten Edmonton’s downtown arena project

“The Katz Group’s concerns have grown as it’s become clear, to them at least, that to building a proper arena is going to make more than the $450 million for the arena and $50 million for the Wintergarden pedway.”

I think we all know $450 was unrealistic, a number produced and clung to mostly for political reasons. The missing millions have always been the elephant in the room, somewhat covered up by a room divider with “Province of Alberta” and a happy face scrawled on it with a sharpie. The province was never going to do more than leave some MSI money on the table for the city to re-purpose towards the arena.

So to get to $450, on the city’s end, it channels $100 million from the province, $45 from a CRL, $80 from *other sources*. As well, outside of that, it spends, an estimated, $25 million on land purchases, up to $25 million on a pedway, and up to $17 million on LRT connections. In addition, if other levels of government are willing to help out, the city will spend *an estimated* $7 million on a community rink. Above this, the City of Edmonton will spend $20 million over ten years, entering into ‘marketing/branding partnership’ with the Oilers. It also surrenders operating revenue from the facility, as well as its naming rights.

I certainly don’t see a lack of will here by Council to have a deal done. In reality it very much appears to be the Katz Group, through strategically placed third-party opinion, and requests behind the veil through city admin and ‘in camera’ discussion that’s the stumbling block, as it attempts to nickel & dime a better deal for itself, or for some other reason we haven’t yet stumbled upon.

And, as per the letter in the article, Councillors are once again denied the opportunity to speak directly with the Katz Group. Why City Councillors, the directors of the corporation of the City of Edmonton, don’t have the business partner with which they’re choosing to enter into a multi hundred-million dollar project, at the table with them in their choosen forum is beyond frustrating for this Edmontonian and politico.  Just as I’m sure it is to some Councillors, having to watch the City Manager and staff shuffle messages back and forth.
I’d like to see a downtown arena and surrounding district develop…in the “nice to have” as the coliseum ages and we focus on downtown development sense. Not in the ‘we absolutely need this to grow and create a vibrant city’ one, a turn onto a road which can leave a city with a bad financial deal and debt for a long time.  To quote from a book I’d highly recommend to any urbanite “The folly of building-centric urban renewal reminds us that cities aren’t structures; cities are people.”  These things are amenities, they play a role in local economies and civic pride, but the life, rise and growth of a city extends well beyond it’s rink, and place on the pro-sports map.  The same is true for our downtown, which comprises obviously more than just an ‘arena district’ and will grow and under-go revitalization and reinvestment regardless.

The onus is on Council to create the best arrangement for the city. They’ve clearly made a commitment and offered up/sacrificed significant political capital to put a financial framework in place.  Expecting other orders of government to step in a make-up the difference was politically expedient but a structural failure point to which no alternatives were put in place. The Edmonton Chamber of Commerce, with somewhat convienient timing, has leaned on government to make-up the difference. As has our city’s partner in this arrangement, today. It’s time the Katz Group put it’s financials on the table, and itself at microphones in front of Council so our civic decision makers can finally see if our partner here has the cash or even the will to fill in the blanks in financing and make this thing happen. At that point, we can begin to plan what happens next. As per today’s motion, Council may be ‘committed’ to the existing funding model. But that doesn’t mean it’s not….insufficient to the point, that without a partner willing to answer the cash call, we should perhaps move on to alternate visions for the area, rather than wittling the project down just to make it happen in any form.

28 Days Later?

Last week, the Journal’s John MacKinnon did a write-up on potential uses for our soon-to-be downtown arena by the city during the 28 days per year City Council was “savy” enough to secure it’s use for, in the arena agreement.

28 days a year, in an arena we own….A couple Edmontonians react to the news.

Ok, I’m done being sarcastic now, at least until the next blog post.  So what do you do with the biggest rink in town for 28 days a year?

The article delves into some specific options, however with some time to go obviously before city staffers start booking bands or whatever, I think we’d do well to first decide on some guiding principles for it’s use during these days.  Namely, I hope, this one; that for 28 days a year, this facility and the district around it should be open and interactive, with events, activities and what have you that are easily affordable if not completely open to the public.   That are setup to keep people around, interested and active all day, rather than sending them off home after a few hours.  Surely in a full ‘arena district’ this is do-able, and at a policy level, this is an amenity which could well be tied into the developing WinterCity strategy, with the creation of new winter festivals and events.  We’ve got it for four weeks, I’d say that’s a few too few, but the deal’s done, the onus here should be, to make them full, active days, and even throw in the opportunity for the kids, little to middle-aged, to take a skate on NHL ice.  The arena can go back to being expensive the other 337 days per year.

All Wings Report In

City Manager Simon Farbrother fights through traffic en route to report to City Council on arena negotiations between the CoE and the Empir….Katz Group

On September 23rd, Edmonton’s City Council will be holding a special meeting to hear an update on arena negotiations.  Don’t bother going, its one agenda item is ‘private’.

Proposed Arena Project Update – Verbal Report

Sections 16, 21, 23, 24, 25, 27 of the Freedom of Information and Protection of Privacy Act

It’s definitely not the first time Simon Farbrother has updated Council in private:

September 14th,

8.3

City Manager Update – Arena Project – Verbal Report

Item 8.3 – Addendum

Sections 16, 21, 23, 24, 25 and 27 of the Freedom of Information and Protection of Privacy Act

April 6th,

Verbal Report – Potential Downtown Arena – Update on Negotiated Outcomes Passed

Sections 16, 23, 24 and 27 of the Freedom of Information and Protection of Privacy Act

 

March 2nd,

9.1

Update on Arena Negotiations – Verbal Report K. Leibovici

Sections 16, 23, 24 and 27 of the Freedom of Information and Protection of Privacy Act

 

If you spend enough time looking through Council agendas, you’ll find that a ‘verbal report’ for a private item isn’t the most uncommon thing to happen in Council chambers.  A several hundred million dollar public investment into a proposed city-owned, privately run facility, with the majority of proposed revenue going to the minority investor is on the other hand, not so common.  While publicly releasing a report may indeed compromise the city’s bargaining position with the Katz group at this time, a deal this large, this controversial, and with so many on-going issues regarding process and transparency, at the very least deserves a paper trail for future decision makers, public servants, and members of the public who may wish to use the Freedom of Information Act to peer into this issue in the future.  Even if it ends up sitting on the shelf, unread by everyone but a city manager, 12 councillors and a mayor for the next several years, there’s no FOIPing the City Manager’s brain.  Having a written report prepared for Council leaves open the opportunity to peer into the arena deal in the future, even if it is post-mortem.

 

*Update, Sept 23

So a public component was added to the meeting 😉

In-Private Discussions
It is the City Manager’s intent to discuss
in public those things that can be
discussed in public.
You can checkout some of the meeting's Twitter coverage at the Edmonton Journal

Arena District & City Council (Round 2)

On Friday, December 10th, the downtown arena will be back on Council’s agenda.  The meeting package is available, and includes answers to written questions submitted by Councillors following the Katz Group’ first trip to city hall late last spring.

One the more interesting reports included is background information on all the NHL arena’s currently in use.  The currently proposed funding model, a city-funded, city-owned arena with 100% of revenue going to the primary tenant, with the city left to collect revenue in the form of property taxes from new developments surrounding the site would seem to be a fairly unique situation in the NHL.  That said, the report does include a few similar scenario’s which currently exist in the league:

Anaheim Ducks
The team plays in the Honda Center owned by the City of Anaheim and operated by
Anaheim Arena Management, LLC. The facility opened in 1993 and was built by Huber,
Hunt & Nichols for $123 million. The facility was 100% publicly financed and Ogden
Entertainment is assuming the debt for the bonds issued by the city through a 30-year
agreement. On December 13, 2003, the City of Anaheim reached a 30-year Facility
Management Agreement with Anaheim Arena Management, LLC, which gave AAM the
right to manage, maintain, and operate the Honda Center. In the nine years leading up
to the new agreement in 2003, the City had to expend a total of $40.2 million more than
it received in revenues for arena operations. The new agreement was crafted to reduce
the public sector’s responsibilities. Maintenance is now the responsibility of the
franchise through its management company.

Phoenix Coyotes
The team plays at Jobing.com Arena owned and operated by the City of Glendale. The
facility opened in 2003 and was built for $220 million. The arena was funded by a $180
million contribution from the City of Glendale ($30 million in general obligation bonds
and $150 in excise tax funding). The city planned to repay its debt from revenues
generated from activities surrounding the facility. The Coyotes’ owner agreed to pay for
any cost overruns and to repay the city for its investment if the commercial property
surrounding the arena did not generate enough money to offset the city’s investments.
The entire financial plan has collapsed and the team filed for bankruptcy protection.
The City of Glendale is responsible for all maintenance and the costs for the facility’s
construction and new potential owners have each submitted bids that would require
Glendale to assume responsibilities for all construction related expenses and
maintenance. No new ownership group has yet been designated and that team and the
matter remain under the oversight of the bankruptcy judge and the NHL that is operating
the team.

A Downtown Arena and The Hockey News

From the October 25th edition of the Hockey News….

Early reports had the Katz camp seeking 100 percent control and 100 percent of the revenue (hockey and otherwise) of a 100 percent taxpayer-funded arena.

Once the laughing stopped in Edmonton, the Katz Group agreed that further discussion might be necessary.

“of a 75% percent taxpayer-funded arena” would have been more accurate, but it shouldn’t stop us from filing this under the funny ’cause it’s true category.