Welcome

21 Jul

“That thing’s operational!”–Lando Calrissian

We’re up like the Death Star, baby. Hello, my name is Andy Grabia, and I’ll be your host for the evening. Welcome to Why Downtown?, a pro-Edmonton, pro-downtown website that opposes the downtown arena project, as currently proposed, for one or more of the following reasons.

  1. The owner of the Edmonton Oilers, Daryl Katz, is one of the richest men in the world, and can afford to pay for an arena himself;
  2. Academic research consistently shows that there is little to no economic benefit to taxpayers when cities subsidize sporting facilities;
  3. The downtown arena project will not “revitalize” downtown Edmonton, as it does not truly solve the “problem” of the downtown core, which is a problem of low population density;
  4. The current Rexall Place is a storied, historic, and fully functional and operational hockey arena. It is a built heritage that should be protected, so that it can be enjoyed by Edmontonians and hockey fans from around the world for many years to come.

Over the next little while (God, I hope it’s just the next little while), this site is going to examine the downtown arena project from a variety of angles–economics, politics, sports, media coverage, urban planning–in the hopes of better informing Edmontonians on the issue.

For now, I will be the sole contributor to the site. It is something I care passionately about, and have written about for almost four years. But the plan, and the hope, is to bring in other contributors who also care very much about this issue. Some will write under their own name, and some will write under a nom de guerre. But they’ll all be smart people, and they’ll all know a lot about this issue. Most of them will be opposed to the arena project in one way or another, but they won’t necessarily share my point of view on every single matter. To be clear, this will not be an equal-opportunity site in terms of posted content. I can’t see the space being offered up to the Katz Group, as they already have their own space, as well as mainstream media outlets willing to let them share their side of the story. But I do encourage people to leave comments and engage in the debate, whichever side they may be on. All I ask is that everyone keep it civil. That might be too much to ask from a blog, but I’m going to ask it anyway.

I will be delivering more content as soon as possible, but it will take time. The public meeting between the Katz Group and Edmonton City Council was this afternoon, and there is lots to dissect. I’m also off to Calgary Folk Fest tomorrow, so that will prevent me from getting to everything as quickly as I want to. But my hope is to get some new content up by end of this weekend at the latest. In the meantime, take a look around the site, as well as the arena primer from my old site, The Battle of Alberta. You can also start following the page on Twitter, at twitter.com/whydowntown.

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15 Responses to “Welcome”

  1. Woodguy July 23, 2010 at 5:30 pm #

    Hi Andy,

    Look forward to a good discussion on your site.

    I see where you are coming from, and using the old model of sport facility development, you are mostly correct in your assertions. Building a facility in a field and surrounding it with acres of parking spurs nothing and benefits no one but the team.

    However, Dr. Mark Rosentraub (whose work is often sited when discussing why sport facility’s do not add to the local economy, or spur development) has written a paper regarding the development in Edmonton and uses Indianapolis, San Diego, LA, and Columbus as examples on how facility development can spur development, if the model is correct.

    Here is the link to the report:

    http://www.edmonton.ca/city_government/documents/CityGov/RosentraubReport.pdf

    In light of the new information and models that work, I think a response to your 4 assertions could be:

    1) In the models that work, there is public participation. They provide some of the funding with the expectation of being re-paid, so essentially they act as a bank more than anything else.
    The tangible benefits to the cities in the models that work was significant development and increase in population density in downtown areas that were targeted. This resulted in an increased tax base as well which was enough to cover the mortgage.
    Rosentraub also discusses the harder to quantify benefits of the cities becoming more attractive to the “creative class/idea generators” that are the engine of the 21 Century economy.

    2) Overwhelmingly the history of sport facility development has shown no gain to the local economy. Rosentraub is often sited in this regard as his research is some of the best in this area research. Rosentraub is now convinced that done properly, these facilities can have the positive effect desired.

    3) The examples that Rosentraub uses (San Diego, Columbus, LA etc) all had significant muli-family developments near the new facility increasing population density in the desired area.

    4) There is an argument for this. As a season ticket holder I have a lot of emotional investment in that building. That being said, having watched games in Washington, Phoneix, and Vancouver you see why a new facility would be welcomed. Lots of space on the concourse, larger seats, lots of food and drink options. Rexall compares to these facilities like a 1974 Vega to 2010 Mercedes E-class.

    There is no question that the Katz group dropped the ball on presenting this to the city and city council.

    Their ham-handed ways have gotten a lot of people’s back up, and they just expect everyone to fall in line.

    Its sad because properly presented, with plenty of evidence, a proposal like this could have been a slam dunk (discounting the omni-present Northlands of course)

    It is interesting to note the the project most like the Katz proposal is the San Diego Petco Field. With that development the owner of the Padres guaranteed payment on the mortgage if the tax revenues were not sufficient.

    Katz should do the same.

    • Scott Hennig July 23, 2010 at 11:46 pm #

      Woodguy,

      1. Columbus, which is a great model for all others to follow (minus the eminent domain), was 100% privately financed. The arena is owned by Nationwide Insurance and the local newspaper.

      Columbus got a new arena, a revitalized area of town (that used to be old jail grounds) and taxpayers didn’t have be the “bank” for the project. In fact, taxpayers rejected that idea five times in referendums.

      Careful not to put words into Dr. Rosentraub’s mouth. He repeatedly says that these developments can be used to change the location of economic activity, not to generate new activity. Here’s one passage from that report: “If used as an anchor for an overall strategy these facilities could change the location of economic activity, support development, and change the image of an entire city or an under developed part of a metropolitan area.”

      Those may be desired impacts (ie. revitalizing a brownfield), but there’s still no “new” money.

      So, no, that doesn’t mean there’s an increased tax base, just a tax base that is located in a different place than it was before. And any guarantee that development occurs should be taken at face value.

      Taxpayers are paying for a change in the location of development. The “new” taxes aren’t there, so, they can’t be guaranteed.

      • Woodguy July 24, 2010 at 1:05 pm #

        Scott,

        You are correct that the Nationwide arena itself was 100% private financed.

        The cost of the arena is just one part of the overall cost of the district and you left of the fact that Nationwide was (and continues to be) subsidized substantially by the city and state in the other areas of development.

        You already mentioned the use of eminent domain for Nationwide to acquire the adjacent lands for development, that ability was crucial to getting the project going and I think qualifies as a subsidy.

        Nationwide also does not pay any tax on any of the arena district lands, that is a pure subsidy that will accrues yearly. (ticket tax goes to the schools, but that is it)

        The city paid for all infrastructure improvements in the area, and with the state paid for all environmental remediation. That is a pure subsidy.

        I am unsure of what the total cost of environmental remediation was, but knowing that sites as small as a gas station can cost over $1,000,000, I suspect it was not inexpensive. I will try to find the actual cost and report it here.

        As a taxpayer I dislike the Columbus model compared to others as it involves many different types of subsidies to a private corporation. In the Rexall model, if it works, the only subsidy is the lack of tax on the arena itself, and if the city is going to own the arena you can argue that its not really a subsidy. (although I’d count it as a subsidy)

        All taxpayer monies have a plan to be paid back with the Rexall plan.

        Katz should guarantee the payback, like the Petco model.

        Also,

        If the plan is increase population density in an area then it is beneficial to “move” development from one area to another. If the condo development around the arena district move units that would have been built in the suburbs you can argue that it is a huge win for the city.

      • Woodguy July 24, 2010 at 1:09 pm #

        Scott,

        You said

        “So, no, that doesn’t mean there’s an increased tax base, just a tax base that is located in a different place than it was before. And any guarantee that development occurs should be taken at face value.”

        I think its more of directing where a “new” tax base will be rather than re-directing a current one.

        If there is never any “new” tax base, then Edmonton should have had the same tax base since it was created.

        As the population expands, those people need a place to live, development happens and the tax base expands.

        Directing that expansion downtown to increase the population density rather than having another set of condos south of 23rd ave is a good thing for the city.

      • Scott Hennig July 25, 2010 at 10:29 am #

        Eminent domain, while morally wrong, doesn’t really cost taxpayers money, so not a subsidy.

        Public infrastructure is also not a subsidy. If it was, then every single road or bus stop or fire station would be considered a subsidy to some business or another. Public infrastructure, especially roads and transit are built to transport people where they want to go.

        Agreed on the environmental remediation, although it’s unlikely on a cost per acre it would cost the same as a gas station. Gas stations have gasoline leaking into the earth. The Columbus district was largely old jail grounds and parking lots, or so I believe.

        As for the Rexall model, it’s a shell game, as I explain here: http://www.edmontonjournal.com/opinion/Revitalization+levy+sleight+hand/3311476/story.html

        There is no “new” money that gets paid back. And it’s not just no taxes on the arena, it’s taking all the additional tax dollars from a sizable “district” that get siphoned off to “pay” for the arena.

        Again, the only guarantee they could make is the development, not the “payback.”

        As for directing “current” versus “new,” it’s actually both. But it’s easier for people to understand current, so I tend to use it for example purposes. But yes, if there is need for a new hotel in Edmonton, it will get built. The CRL will help direct its location. But the only way that you can have “new” development is if incomes or population of the city increase. (Although with hotels, tourism is also a factor).

        Various peer reviewed academic studies have shown that sports teams and new arenas do not increase overall incomes. I’ve not seen a study that shows that new arenas increase the population (professional sports teams might, but that’s not the question, the arena is the quesiton). Same with tourism.

        However, I think you have hit on one of three legitimate arguments for taxpayers subsidizing a development. 1. To move development to a 16 acre parcel of land in downtown Edmonton. 2. To increase density in the city centre. 3. To maintain or increase Edmontonians view of themself.

        So, when you are considering whether you want to subsidize the building of the arena, you need to decide how much each of these three are worth to you, because the arguments of it paying for itself, or being “free” or of it increasing jobs, or tax revenue, or economic development are all bogus.

      • Woodguy July 25, 2010 at 6:15 pm #

        Hi Scott,

        Good post.

        There doesn’t seem to be a reply button on your last comment, so I’ll just drop my comment down here.

        1) “Eminent domain, while morally wrong, doesn’t really cost taxpayers money, so not a subsidy. ”

        – I would argue that anything that lowers the cost to a developer is a subsidy. Certainly the developer received access to the land at a substantial discount due to the use of eminent domain. We may be splitting hairs here though.

        2) “Public infrastructure is also not a subsidy. If it was, then every single road or bus stop or fire station would be considered a subsidy to some business or another. Public infrastructure, especially roads and transit are built to transport people where they want to go”

        -When developing any area the creation and installation of the roads, sidewalks, gas line, sewer, power etc is all done and paid for by the developer not the city, so this is a significant subsidy.

        Developers also pay for costs to change existing infrastructure such as access from roadways. The developer of South Edmonton Common not having to pay for even a small portion of the 23 ave interchange is criminal.

        When I talk about “guarantee”, I mean if the taxes from the development do not pay the mortgage, then Katz will.

        “Various peer reviewed academic studies have shown that sports teams and new arenas do not increase overall incomes. I’ve not seen a study that shows that new arenas increase the population (professional sports teams might, but that’s not the question, the arena is the quesiton). Same with tourism.”

        I’m not arguing that point, not sure why you included this part.

        Thank you again for addressing my points.

        I respect your position, and agree with parts of it.

  2. Craig July 23, 2010 at 3:45 am #

    Hi Andy,

    A special interest group that needs to be taken to task on their comments is the Canadian Tax Payers Federation, a misnomer since any federation consisting of Canadians would be taxpayers themselves.

    I find it quite humorous that Mr. Hennig himself, under the auspices of vanguarding citizen taxpayers dollars, seems to be positioning himself against the infusion of private investment in the arena district ($200 million) and by default in favor of an alternative (renovating Northlands) that promises to be a much heavier burden on taxpayers.

    His argument is riddled with logical fallacies. First, he claims that an arena district will be merely a “tax shift”, moving bar patrons from one venue to another and in essence shifting tax dollars from “successful” entertainment/hospitality businesses around Northlands (??) to a downtown district. Northlands has few if any ancillary venues where visitors to shows spend their time and money.

    Second, at present, the vacant parking lots next to Baccarat bring in very little tax revenue. A Katz-City owned arena coupled with significant private investment ($200 million in addition to other private businesses) that will be partially financed by a revitalization levy surely must be better than the Northlands tax grab naysayers are clamoring for.

    Third, he presents to the public a rather unsophisticated portrayal of how Edmontonians spend their entertainment dollars. They are not confined to one particular venue, location of the city or type of entertainment. The amount that any particular patron also depends on the value of entertainment offered.

    An arena/entertainment district that provides massive value for all ages also has the possibility of attracting tourist dollars, new knowledge workers and confidence among citizens. Blind skepticism, a “can’t do” attitude and the possibility of plunging the city again into another infrastructure deficit (in the name of “fiscal austerity” has little if no transformative potential.

    • Andy Grabia July 23, 2010 at 8:58 am #

      Craig,

      Thanks for coming by. I’d suggest taking a look at the “Resources” section of the website, and reading some of the academic papers on the issues on the economics of sports. You won’t find a single serious economist who has a different viewpoint than Scott on this matter. It’s the basis of his opinion. New stadiums do no stimulate economic growth. They simply move the dollars you and I spend from one place to another. Here’s a quote from an interview I did with Professor Brad Humphreys a couple years ago, for example.

      “Professional sports are not, and have never been, engines of economic growth in North American cities. They are effective at moving consumer’s entertainment from one part of the city to another, and raising employment and wages in one specific sector of the local economy, the Recreation and Amusements sector, which contains professional sports teams.”

      Bold is mine.

      Cheers,

      Andy

    • Scott Hennig July 23, 2010 at 1:09 pm #

      Hi Craig,

      Andy addressed a few of my points, but I’d like to try to clear up a few others.

      For starters, our organization doesn’t want to see the $200 million renovation of Rexall place either. However, we think if taxpayers are going to be forced to foot the bill, a real figure on a renovation should be put on the table. To date the only renovation suggested of Rexall is a silly doughnut proposal that removes seats.

      No one has released a figure on simply keeping the current building in tact. Is that going to cost $2 million per year? Is that going to cost $30 million in one time costs? Nobody has put that figure on the table.

      Also you put the word “successful” in quotation marks as to imply that this is a quote from me. I’ve (for good reason) never said that the current area around Rexall Place is successful.

      My point about a business moving from another part of town to the new downtown “Community Revitalization Zone” was to show that in fact the tax revenue that would be collected in that zone, would not be new money. I just chose as an example a business that currently relies on customers from Rexall Place, as a prime candidate for moving.

      And, yes the vacant parking lot next to the Baccarat would pay more in property taxes if a new Earl’s was sitting on it, but the location where that Earl’s would have gone anyway would pay less, meaning the money is the same, it’s just shifted. But because of the CRL, if in that zone the money goes to the arena loan, but if it were built in Millwoods, their taxes would go to pay for fire, police, etc.

      As for me presenting a rather unsophisticated portrayal of how Edmontonians use their entertainment budgets, you are correct, I did. I did so to try and make the point very clear, because, as you proved, it’s a complicated point that can get easily mis-understood.

      The more complex point is that entertainment budgets are fixed. Various peer reviewed academic studies have shown that years where there are strikes in professional sports, the cities that have teams in those leagues do not suffer from a loss of income, spending, etc. on an aggregate basis.

      Obviously some businesses do better than others (hence the shift). But, because overall, people’s entertainment budgets are fixed, they spend the same amount each year. So, the year the NHL went on strike, Edmontonians who otherwise would have spent their money on Oilers tickets would have spent their money on thousands of other things (some on Eskimo’s tickets, some on concerts, some at the Citadel, some at Folk Fest, some at the Fringe, some on a bowling league, etc.).

      Your point about a new arena creating confidence among citizens is likely correct. So, let’s have a debate about how many tax dollars that is worth, rather than try to suggest that this is all free and without cost to taxpayers.

  3. Duncan Purvis July 22, 2010 at 7:06 pm #

    Doesn’t this whole site gloss over the fact that it is not feasible to renovate Rexall Place? It’s old and getting older. I have not read the HOK report, but my understanding is that the $250m to renovate would widen the concourses at the expense of seats, which would mean actually less ticket sales. This cant happen. Simply put, once the renovation of Rexall is eliminated as an option, most of these points don’t have much importance IMO.

  4. lesoteric July 22, 2010 at 2:12 pm #

    I have to agree with Doug that:

    While an arena project such as this one will not revitalize downtown alone it will draw in some off the necessary business and support for growing population density in the core.

    I also have to agree that while Rexall is currently functional it is also on the cusp of becoming a white elephant. The building is ~30 years old and can only be brought up to a certain standard even with major renovations.

    There is always a public component of funding these facilities whether it is in cash outlay, tax assistance, sprawl, environmental impact, supporting infrastructure (roads, water, power) and pride in one’s surroundings. I am embarrassed taking friends from out of town to Rexall Place at present – it is a horrible looking building in some of the worst surroundings in a questionable area for that type of development.

    There is an opportunity right now to leverage a lot of private money to get a better building in a better location (near hotels, transit, restaurants and bars) and the city may not see this opportunity again, ever.

    Right now the anti-Katz crusaders (that’s essentially what it boils down to) are setting up a staring contest which they can’t win. Either Edmonton plays ball with Katz and helps him spend some money on an arena or he builds one himself where and how he wants with no municipal input (i.e.: if it goes up next to some houses, tough titty for them, no transit service, tough titty for the city, etc…) or he doesn’t build one at all, Northlands continues to run Rexall and Katz runs the Oilers like the EIG did (less money in, less money out) or he abandons the venture altogether and the Oilers follow the Phoenix Model (because I can’t see another investor willing to buy an NHL franchise in Edmonton in the near future). Katz doesn’t need Edmonton, but if Edmonton wants an NHL hockey team it might very well need Katz.

    • FACLC July 27, 2010 at 11:43 pm #

      Oh no, a thirty year old building? This of course brings up a point many people have noted: will THIS arena be a disgusting eyesore that your children insult as outdated, insisting that your tax dollars pay for a replacement?

      Do any of the clever arena financing plans have an amortization period significantly less than this? If not, this plan is equivalent to signing a 15 year payment plan on a Ford Focus whose value will be zero long before the last payment is made.

      What is wrong with Rexall? Is there a design flaw that meant its lifetime was a third of Yankee Stadium or the Montreal Forum? Am I really risking my life the next time I set foot in it?

      And seriously you can’t see anybody interested in having an NHL team in Edmonton in 2012? Nobody thinks its a better place to have a team than, say, Tampa Bay, who managed to have their team purchased in February?

  5. Art Vandelay July 22, 2010 at 4:23 am #

    Bookmarked.

  6. Doug July 22, 2010 at 2:53 am #

    Hi Andy,

    Though I don’t agree with your stance, I’ll say up front that I completely respect the differing views so I come in peace! I think on your 4 points, I’d disagree with #2, 3 and 4. On #2, even Mark Rosentraub has now talked about how it’s important to look beyond economic impact only. Impact of having these facilities on the well being of a city, which can’t easily be tracked by dollars but has an impact on them, is important.

    I agree that the arena on its own will not revitalize downtown. I’m sure you have but the overall downtown plan works to address this issue so bring more people to various parts of the core. This is a piece of the puzzle but I agree not the only element.

    As for #4, it is functional. But will that be the case in 10 years, 20 years etc. Buildings have dramatically changed in the last 10 years and though that in and of itself isn’t a reason for a new one, it’s about being proactive so we’re not stuck with a building that’s falling apart in the next decade which is a distinct possibility. All that renovation money would be tax-payer funded so is that better to invest that on an old building? I’d argue no. Like you I grew up in the 80’s and have been a season ticket holder for 16 years now. I’ll miss Rexall for sure but it’s time to make the switch.

    Anyway, sorry this is longer than intended but just wanted to throw out some thoughts.

    Doug

    • Andy Grabia July 22, 2010 at 3:05 am #

      Hi Doug,

      Thanks a lot for the feedback. I’ll address some of your points in future posts, but I’ll start now with just one little note. As it stands, both the current Rexall and the new building will be built/renovated with taxpayer dollars. Despite what the mayor and the Katz Group say, a CRL is a tax. Personally, I don’t want tax dollars being used on either. But at the meeting today, it became very clear that the Katz Group’s problem isn’t with the operational state of the facility. It is with Northlands, and non-hockey related revenues. They want all of the revenues.

      Thanks again for coming by. Looking forward to discussing this stuff with you. I love talking about it, even with those with which I disagree. 🙂

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