Archive | July, 2010

Nothing Like Finding Gold

29 Jul

Since I haven’t yet done so, I need to take a break from our regularly scheduled programming to give my thanks and gratitude to Nicole Braseth, the wonderful graphic designer who made the header for this site. I did not know Nicole until about two months ago; I merely followed her on Twitter. But one day I noticed the cool composites she was posting on her blog, and decided to ask her if she’d be willing to create one for the site. Even though she didn’t know me from a hole in the ground, she agreed, and some time later provided me with the fantastic image you see at the top of this page. The composite was created using photos under Creative Commons Licensing on Flickr, and if you scroll to the bottom of the About page, you can see a list of the photos Nicole used. I really recommend checking out all the composites on her blog, as well as following her on Twitter. She’s a very talented woman with a great sense of humour and excellent taste in music. She’s also living right here in Edmonton, yet another example of the extraordinarily creative minds we have living in our fair city. I’m really proud to have her work on this site. Thanks, Nicole!

The Haters Club

28 Jul

This whole post really speaks for itself, but I will say, as an Edmontonian, that I like information. I like evidence. I like to think. I like to take data and attempt to use logic and reason to solve problems. I also believe that being smart is a virtue. I believe that intelligence should be used to foster compassion and fuel discovery. I believe that information, once discerned and subjected to reflection and criticism, can lead to wisdom. And I believe that we are all searchers, searchers looking for answers. My mind is my blessing and my curse. It is the very essence of my humanity, what it means to be homo sapiens, and I don’t ever plan on letting it go.

So, you know, thanks but no thanks.

——–

“Some people choose to look at the information, a.k.a. the “evidence,” and good on them for doing it (someone’s got to). While evidence is important, it’s not what Edmontonians are interested in. Evidence is what lawyers and accountants are being paid to come up with on both sides to rationalize their decisions and to persuade with in their pitches. I’m not interested in commenting on the evidence of either side, which is why I choose not to write about it.

In my opinion, rationale is not enough. Why? Because Edmontonians don’t have time for information. We eat on the run, we drive our kids to soccer and dance practice, we work, we workout, we do it all. We do not have the time, nor do we really care to be convinced that what happened in X city and at X arena intellectually was the wrong decision. We don’t care because it has no relevance to us. We are emotional beings and therefore, information isn’t a competitive advantage like it used to be. I’d also like to think that both the Katz Group and Edmonton City Council are smart enough to learn from the past mistakes of others.”

Checked Against Delivery

28 Jul

For interest’s sake, the transcript of Paul Marcaccio’s (EVP & CFO of Katz Group) speech to Edmonton City Council on July 21, 1010. Transcribed by me, using video from the City of Edmonton (click on item 5.4 in the minutes to see the video).

“Thank you, Ted, and good afternoon everyone.

I will be making some brief comments, which touch on two critical issues, sustainability and funding.

Now, there’s a lot of talk, and from our perspective much concern, about the long-term sustainability of the Oilers in Rexall Place. This stems primarily from the revenue model which we are currently subject to. NHL hockey teams earn Hockey Related Revenues, and non-Hockey Related Revenues. The Oilers Hockey Related Revenues are limited, primarily because they play in the second oldest and second smallest arena in the National Hockey League, where revenue opportunities are lower than other NHL teams, and they’re effectively capped. The Oilers are located in the smallest media market in the National Hockey League. Size of market determines the pricing for broadcasts, advertising, and sponsorship revenue opportunities. Non-Hockey Related Revenues, which includes revenues from concerts, entertainment events, and other arena-based activities, which are ancillary to those generated by the anchor sports team tenant.

Not only do the Oilers earn no, non-Hockey Related Revenues, they are the only team in the NHL that does not receive the non-Hockey Revenues from the facility in which they play. For sake of a close to home comparison, in Edmonton, non-hockey revenues go to Northlands. In Calgary, they do not go to the Calgary Stampede Inc., they go to the Calgary Flames organization.

It is for these reasons that we find ourselves talking about the Oilers long-term sustainability in Rexall Place. Currently, Daryl Katz has had to subsidize the team by several million dollars in each of the past two years in order for the team to break even. Under the Oilers current operating model at Rexall Place, a model in which we do not control the non-Hockey Related Revenues, that trend will likely continue in each year between now and 2014. Sustainability can only be addressed by a new arena, and having the same operating model as the Calgary Flames and all of the other NHL teams.

Now let me make a few comments on funding. We believe a new downtown arena can be funded with a mix of public and private investment in a manner that benefits the city of Edmonton without an increase in property tax rates as a direct consequence. What we hope to do is build on what you have heard from the city administration, and to communicate our optimism that, starting with their proposed funding model, and having the opportunity to work through the various elements with the city administration, we will arrive at a workable solution.

Picking up on Daryl’s comments, the Katz Group would invest $100 million dollars directly into the construction of a new arena that would be owned by the City of Edmonton. We agree with the city administration report that an additional amount of funding can be financed by the City of Edmonton using a CRL, with all of that amount being repaid over time. We hope to have the opportunity to assess and to agree with city administration on what this amount can be, based on all of the new development in and around the proposed arena district. The prospects of success for the CRL would be greatly enhanced by Katz Group’s plans to lead the development of the district, for which we have earmarked a minimum of an additional $100 million dollars of investment over time.

We understand Mayor Mandel’s belief that there should be some element of user-pay, or a ticket-tax, in the funding model, and we are prepared to have that discussion with city administration, though for the reasons I touched on earlier, there is natural limits to what we can agree to as relates to revenue streams. The balance of funds, including funds for related infrastructure, would come from other sources, including federal and provincial governments. In summary, we are aligned with the direction set by city administration, subject to reaching agreement on the various financial estimates inherent in that structure, and the specific business terms of the arrangement. We believe this can work for everyone.

Thank you, and I’ll ask John to complete our closing remarks.”

——–

The Katz Group’s presentation text, including remarks from Paul Marcaccio, found  here. There are some differences between what was written and what was actually said, including this doozy from the written remarks:

“As a result, hockey is a business where the operator does not have much discretion over its most significant cost item.”

The whole section around that line is one that needs proper dissecting, but I’ll leave it for others to discuss. I’m a bit tired from transcribing. You wouldn’t believe how many times I had to hear the Coldplay song at the end of AEG’s “Corporate Sizzle” presentation. I may never recover.

***Update*** The Annotated Paul Marcaccio, via mc79hockey.

It’s A Trap, Pt. 3

27 Jul

There has been plenty of coverage of last week’s meeting between City Council and the Katz Group (the Edmontonian has a great roundup of all the stories), but I want  to share my notes from the meeting, as well as some additional thoughts. Parts 1 and 2 of these notes are here and here.

  • I’m going to save most of the CBA, profitability and relocation stuff for another post, but I will make a few comments here. It’s really no surprise, but what became even clearer in the meeting between the Katz Group and City Council is that this issue isn’t really about the size and age of Rexall Place, or the revitalization of the downtown core. What we finally saw in the Katz Group’s presentation and in their responses to City Council is that this whole issue is about money, specifically taking away the revenue streams from Northlands and placing it in the pockets of Daryl Katz. Why? Because Daryl Katz isn’t making enough money off of his investment. Bob Black admitted to Councillor Iveson that building stadiums is bad economics, but they still want the taxpayer to take on that risk so that Katz can get more revenue for himself out of luxury seats, concert tickets and other non-Hockey Related Revenue (non-HRR). Paul Marcaccio complained that the long-term sustainability of the Oilers is threatened because they aren’t getting enough non-HRR. This is nonsensical, as non-HRR can’t be used to run the Oilers. Only Hockey Related Revenue (HRR) is counted towards the salary cap, the signature piece of the Collective Bargaining Agreement (CBA). So while Daryl Katz may be losing money because he overpaid to buy the Oilers and isn’t getting enough non-HRR to keep him happy, the Oilers aren’t. The Oilers may be losing money because the CBA they so badly wanted isn’t providing them the “cost certainty” they thought it would, because they have been forced to share their revenues with weaker NHL franchises south of the border, or because they’ve continued to spend to the utmost limit of the salary cap while icing a horrible team that doesn’t bring in any extra revenue through playoff appearances. They may even be losing money because of some fancy accounting and the way they’ve set up their financing structure. But the idea that they can’t compete because they aren’t getting enough non-HRR is simply incorrect. Any and all of those reasons for not being able to compete are not the business of Edmonton taxpayers. They are the business of NHL owners, players and the Office of the Commissioner. If the Oilers are having a hard time making ends meet, I suggest they take it up with their fellow owners, the NHLPA, and Gary Bettman.
  • Bettman’s silence in all this has been very puzzling, actually. One of his owners had one of his henchman basically say the NHL’s current CBA sucks, and had another one imply that his team will relocate if they don’t get a publicly-funded arena and all it’s revenues, and Bettman didn’t say a word. He didn’t say a word when that same owner went to Hamilton and said he’d pay that city a million clams if it didn’t get an NHL franchise in four years, either. Does that sound like Gary Bettman to any of us? The guy who goes off anytime anyone attempts to question the viability of the NHL and its franchises? The guy who has already stopped Jim Balsillie from moving three franchises to southern Ontario? I don’t think even an implied threat to move to Hamilton is credible. Nor do I believe the Oilers when they say this is a small hockey market and that they need more non-HRR to remain competitive. But I definitely find Bettman’s silence…interesting.

It’s A Trap! Pt. 2

27 Jul

There has been plenty of coverage of last week’s meeting between City Council and the Katz Group (the Edmontonian has a great roundup of all the stories), but I want to share my notes from the meeting, as well as some additional thoughts. Part 1 of those notes can be found here.

  • Despite statements from the Katz Group that they wanted all the revenues that Northlands currently receive, that they have lost money for seven of the last ten years, that they will not sign a new lease for the current Rexall Place when it expires in 2014, that taxes raised from the CRL would offset the costs of the arena, and that the arena is good for the city because it will spur downtown revitalization, they repeatedly refused to answer any questions from Council on the involvement of Northlands in any future discussions, refused to open their books to prove that they have lost money, denied that they were threatening to relocate the franchise, and refused to be put on the hook in the case of either the CRL failing or their promised development not occurring. Basically they came in, made a bunch of claims and demands, and then stammered and stonewalled when they were challenged, all the while pontificating on the value of partnership.
  • I have no doubt that the Katz Group made City Council even angrier than they already were with their antics on Wednesday, and right now I really can’t see an arena proposal getting more than three votes in its favour, but if the goal of the Katz Group is to put out their side of the story and hope no one really follows up on it, it just might work. Watching that meeting, and seeing the coverage that followed from it, it has become pretty clear that neither Council nor the mainstream media (MSM) has a very firm grasp on the intricacies of this issue. Aside from Councillor Don Iveson, I’m not convinced any of the councillors know the difference between Hockey Related Revenue (HRR) and non-Hockey Related Revenue (non-HRR), for example. Four or five of the Councillors’ votes are dependent on swinging a good deal for Northlands, which I don’t think is any better for taxpayers than swinging a good deal for Daryl Katz. I don’t remember Councillor Batty’s questions, that’s how inane and toothless they were. All I recall is her praising Katz and his family for their commitment to the city. And Mayor Mandel is so deep into this that he was actually answering his own questions to the Katz Group during the meeting. He might as well be consulting for them at this point.
  • As for the MSM, positive strides have been made. Outlets, reporters and editorialists have done a much better job at questioning the claims made by the Katz Group and other downtown arena advocates. But they are still reporting errors and making poor, discredited arguments. For example, the Canadian Press (and Hockey News) reported that Rexall is the second-oldest arena in the NHL, when a simple Wikipedia search would tell them that it’s actually the fourth oldest (it will become the 3rd oldest once the new arena goes up in Pittsburgh this year). It’s a falsehood that’s been repeated by the Katz Group—Patrick LaForge and Paul Marraccio both said it during the meeting with City Council—and is being reported without verification (I’ve seen it in the Edmonton Journal, as well). In his article following the meeting Graham Hicks wished that the City had “a financial adviser with oodles of arena expertise to separate fact from fiction,” and then in the next breath said, “seems the city has little choice but to accept the Katz Group’s arguments based on generalities, and get on with the challenge of financing an arena.” That’s like me not being sure if my sore leg is sore from a workout or from gangrene, and chopping it off before going to a doctor. And then there’s Mark Spector, who not only repeats the “second-oldest” error, but also claims that arena districts have revitalized downtowns in “city after city across this continent.” That’s a bold claim, one even the most ardent arena advocate in Edmonton hasn’t made. I don’t buy the arguments about Columbus, Los Angeles and San Diego, but even if I did, I could name a lot more cities where these projects haven’t worked than the three where they supposedly have. Pittsburgh and Cincinnati alone have four stadiums between them that have done very little to revitalize their cities. Spector’s a hockey reporter, a special breed of journalist that rarely bites the hand that feeds them stories, so my expectations weren’t that high in terms of objectivity. In fact, I wasn’t even that surprised that his claims about the healing powers of sports arenas, brain drain from the UoA, and Edmonton getting dangerously close to becoming Winnipeg all sounded awfully familiar. But his article, along with the other examples I gave, is just another example of how poorly traditional media normally cover these stories. This is an important issue, one that has tons of implications for this city, and it would be nice to see certain members of the Fourth Estate cut out the boosterism, do a little research, and be a bit more diligent in their jobs.

It’s A Trap! Pt. 1

27 Jul

There has been plenty of coverage of last week’s meeting between City Council and the Katz Group (the Edmontonian has a great roundup of all the stories), but I want to share my notes from the meeting, as well as some additional thoughts. I’ve broken the post up into three parts, and will be posting the other two parts later today.

  • City of Edmonton (CoE) General Manager Simon Farbrother started off the meeting by presenting three options that the City can use to help finance the arena: a ticket surcharge, seat licensing, and a Community Revitalization Levy (CRL). I’ll leave it to others to explain the CRL and why it’s bad for taxpayers, but I do want to share a couple of thoughts on the seat licensing idea. As for the ticket surcharge, frankly, I’m completely in favour of it. It’s a user-pay system that I fully support. What I don’t understand is why collecting that ticket surcharge should be the City’s job. The Oilers should raise ticket prices, collect the charges, and pay off the arena themselves.

  • With the seat licensing idea, I think people in Edmonton should probably know a little bit more about what it is, and the possible change in atmosphere at Oilers hockey games that might result from its inception. Simply put, a personal seat license (PSL) means that the holder has the right to buy season tickets for the seats they have licensed. This means that rather than just paying for the season tickets, the customer also has to buy a license giving them permission to buy those season tickets. Basically it’s double-dinging the season ticket holder, and it will assuredly price some Oilers fans right out of their seats. PSLs are very popular in the NFL, where die-hard fans wait for years to get their hands on season tickets. In Green Bay, for example, where there is an estimated 40-year waiting period for season tickets, the Packers allow holders to pass on their PSL in their wills. Two NHL cities have PSLs at this time, Columbus and Toronto, and anyone wanting to know what a hockey fan with a PSL looks like should just watch the early game on Hockey Night in Canada. You don’t see many “Folks on the #8 bus” at Leafs games nowadays. It should also be noted that PSLs are often used to finance new stadiums, and that they often fail in that regard for the simple reason that they make the cost of attending games too prohibitive. More often than not, guess who is on the hook for covering the difference when that happens? Hint: the answer doesn’t rhyme with “boner.”
  • Daryl Katz began the Katz Group’s presentation, delivering a short, scripted statement outlining his vision for a new arena as well as offering a public apology to City Council for the way the Katz Group has handled this issue. Initially I thought this public mea culpa was the entire reason the Katz Group were there, as their statements seemed long on rhetoric and short on specifics. Turns out I was wrong.
  • Beginning a trend that would continue throughout the meeting, Katz declared that it was in fact former CoE General Manager Al Mauer who approached the Katz Group about the possibility of building a new downtown arena. He talked about the value of the Oilers in the community, as well as its hockey history, ignoring the fact that the legacy he spoke of happened in the arena he so desperately wants to abandon. Most importantly, Katz committed himself to the following: signing a location agreement to keep the Oilers in Edmonton (later established to be a location agreement to keep the Oilers in Edmonton if and only if they were playing in the new, publicly-funded downtown arena), a $100 million investment into the building of the new arena, as well as at least a $100 million investment into the surrounding development. Katz also tried to sell the idea that, because he had bought the team for $200 million dollars, the grand total of his investment in the city was actually $400 million dollars. Why he didn’t throw his house, his backyard hockey rink, the Capitals and all the Rexall stores in town into the equation and then tell Council they owed him an IOU is beyond me. Clearly we all owe him some arena cheddar for his charitable act of buying a private, for-profit business for himself.
  • The painfully awkward “Corporate Sizzle” presentation from Anschutz Entertainment Group (AEG) Vice-President Ted Tanner was a highlight for me. I’ve had “and this is my sister, Jerry Sizzler” in my head ever since. It was voiced by Morgan Freeman, priiicks!

Links!

24 Jul

A few more links to pass along on this wonderful Saturday afternoon.

  • Councillor Don Iveson reviews the Katz Group’s meeting with City Council
  • Tyler Dellow looks at the Katz Group’s bankruptcy claims
  • Internets Celebrities take a look at the stadium projects in New York in a documentary called “Stadium Status.” Glove-tap to Par Mehta and Garrett Green for the link

Opposites Attract

23 Jul

I don’t know who is MC Skat Kat and who is Paula Abdul in this scenario, but either way, Councillor Don Iveson and Scott Hennig of the Canadian Taxpayers Federation are in agreement about the proposed plan to use a Community Revitalization Levy (CRL) to finance a new downtown arena. In the U.S., CRL’s are called TIFs (Tax Increment Financing), and a simple search for them on Field of Schemes will tell you how often they are suggested as tools for financing stadiums in the U.S. (all the time), and how often they are a bad deal for taxpayers (all the time). This is an important piece of the arena debate, and I encourage everyone to read the pieces by Don and Scott, then watch their dance-off on the roof of what appears to be Tim Burton’s Gotham City. Just a natural fact!

Have a great weekend, everyone.

Bingo

23 Jul

My fellow blogger and friend Matt Fenwick beats me to the punch with an excellent post on the NHL Collective Bargaining Agreement (CBA), the difference between Hockey Related Revenue (HRR) and non-Hockey Related Revenue (non-HRR), and the absolute yarn spun by the Katz Group Wednesday afternoon at City Council.

*Update* A post in the same vein from fellow Oiler blogger Tyler Dellow.

The Calgary Habit

22 Jul

I’m off to the Calgary Folk Fest today. The timing sucks in terms of the site, but I’m very excited to see Library Voices, Stars and the Avett Brothers. While I’m rocking out to the soothing sounds of Americana down in the land that Lord Stanley forgot, make sure to check out Neil deMause’s  Field of Schemes, the single best source for sports stadium news on the net, as well as Let’s All Give Money to the Rich Man, a hilariously insightful comic from Reason.com on sports team owners and corporate welfare. Actually, while you’re at it, check out Episode Five of Reason Saves Cleveland, too. It might ring a few bells.