Archive | August, 2010

Good Design, Bad Design: Library vs. Arena showdown [Winnipeg Edition]

29 Aug

Editor’s Note: This post originally appeared on Urbane Adventurer, a blog written by Zoe Todd. Many thanks to Zoe for allowing me to post it here.

One of the things that immediately caught my attention when I first visited Winnipeg this summer was the downtown Winnipeg arena (the MTS Centre); with all of the debate going on in Edmonton about the Downtown Arena, I was keen to dig a little into the history and narrative of the MTS Centre, which is sometimes pointed to as an example of a successful catalyst for downtown revitalization. As an Edmontonian eager to see our own downtown managed in a way that most benefits the city, I was curious to deconstruct the powerful discourse around this Canadian arena.

Now, this post will begin with a caveat: I am not an architect, nor am I a city planner. I don’t have all of the technical language or training to assess the success of the building as a revitalizer of the Winnipeg downtown core from a professional perspective. However, I do feel that I have the tools to assess how the building affects people on the street like me, and my experience living in a city so similar to Winnipeg gives me some insight into how this could translate to an arena project in Edmonton. So, in my last few weeks in Winnipeg I decided to document how the MTS Centre interacts with the people and buildings around it.

You can find some background on the building here.

This article by Nick Ternette in the ‘Uniter’ highlights the tension between the claims of the pro-arena stakeholders and the reality of how the arena has impacted downtown Winnipeg. As the author notes: “The real reason that downtown revitalization has failed is urban sprawl, the lack of people living downtown (13,000 as compared to 45,000 just 15 years ago) and the closing of businesses after 6 p.m. Just look at how empty the area is after business hours.”.

I think these are words for Edmonton to weigh heavily. The lesson is that no one amenity can revitalize a city’s core–to claim that an arena in our downtown core will deliver all of the things that are being promised is wishful thinking at best. What is really impacting our ability to attract people to the city centre is the overall structure of our city, and decisions we’ve made over the last few decades regarding where and how people will live. While my preference would be to reuse the existing arena, I am also somewhat resigned to the fact that even if overwhelming evidence suggests that the downtown arena is not a good return on investment, it will still be built. Therefore, my hope is that if our city is going to invest such a large sum of money into the building (money that could easily have huge and immediate impacts in a plethora of other city areas and initiatives) that we can find a way to build an arena that is thoughtfully designed, conscious of the negative impacts it can have and does not divert money that would be better spent elsewhere to achieve revitalization and urban renewal aims.  However, with the power balance between the proponent, the legislators (city council), and tax-payers being what it is, I fear that we will cave to the demands of a group co-opting the trendy notions of urban revitalization to their advantage to get their hands on prime real-estate in a city core in rapid transition.

I think that we need to separate the two threads of the pro-arena argument, because ultimately two major ideas are at play in the arena debate. One aim is to keep the Oilers in Edmonton. The other aim is to revitalize downtown. These two things may have commonalities, but at the end of the day they are two separate ideas:

a) the arena itself is a sports facility. The main aim of the facility is to house an NHL team, one that the city is emotionally and mythically invested in (and one whose main aim is to make money, period).  The ultimate claim that propels this project is that the Oilers group feels that they need more seats. That is a fair concern–however, is it really worth spending $400 million for 2,000 more seats?  Surely there are more economical ways to address capacity concerns in the existing facility.

b) Trying to roll a whole bunch of other facilities into the plan in order to ‘sell’ the project is risky–once a project tries to be all things to all people there is a huge chance that it will only achieve many things at a mediocre level. Furthermore, urban revitalization needs to be separated from the discourse around the arena. True urban revitalization needs to focus more holistically on the deep-down culture of city planning  and development in this city–and we need to tackle sprawl in meaningful and effective ways. We need to ask ourselves why the downtown core is seen as unsafe or unappealing to so many Edmontonians–and also to question how disparity plays into our narratives about what parts of the city are valuable and which are not.  Why is it that downtown is seen as a place that can be continuously torn apart and built again? Would we ever consider marching into Wolf Willow or Terwillegar Towne or Glenora and telling the people who live there that what they really need is a huge, culturally homogeneous multi-million dollar project to improve their lives?  And why is our downtown–one of the city’s assets in terms of how dense it already is compared to our suburbs–always acted upon and problematized while the suburbs that are contributing so much to the environmental and economic unsustainability of the city are allowed to continue so haphazardly?  I think we need to be bold and courageous in building and creating things that define our city as the vibrant place that it already is. And we need to deconstruct ideas that tell us that the downtown is a place that needs to be invaded by these types of large-scale projects that ultimately benefit a powerful few but don’t necessarily nurture the small-scale and diverse interactions that make a city resilient and strong.

So, with that in mind, let me take you on a tour of the MTS Centre, as seen through the eyes of one young twenty-something with a passion for urban issues.

The building itself is fairly conventional: it resides on Portage Street (which is a lot like Jasper Ave).  It takes up an entire block, and offers a handful of restaurants (a Moxie’s, a Tim Hortons, an Arby’s). There are some vendors that were closed at lunch hour when I visited, but appear to be open during events in the centre.

There is also parking in the back of the building, and a second building to the West of the arena houses a bar and the CTV offices. The arena is surrounded by a number of office buildings and stores, including a Mountain Equipment Co-op, a Dollar store, the Aboriginal People’s Television Network headquarters, ‘The Bargain Store’, a church, the Radisson Hotel, the Millennium Library, the City Place Mall, and is connected to a number of buildings that surround it via pedways elevated above the street. There are three major malls in the Winnipeg downtown core: these include Portage Place, City Place (directly connected to the arena via a pedway), and Winnipeg Square (located beneath the street and accessible via the infamous intersection of Portage and Main).

One thing that I noticed immediately were the number of empty buildings that surround the arena, six years after its construction.  To be fair there are a number of vacant buildings throughout the entire downtown core:

The black and white building picture in the left of this image used to house A&B sound.  It is directly across the street on the northeast corner of the arena. It is being leased by the company that owns the MTS Centre to house the Body Worlds Exhibit this year, and is slated for demolition after the exhibit ends in order to make way for a hotel.

The beige building in the centre of this image, which is directly across from the northwest corner of the MTS Centre, used to house an RBC bank, but the bank moved to the new Manitoba Hydro building a block west of the arena. The building is now empty.

The method:

I visited the building between 11 AM and 12:15 PM on a Sunny Monday (August 16).  The weather was a touch cool (+15) that day, compared to the week of blazing temperatures that preceded it. I wandered throughout the building with my camera, observing how people were moving through the space, and also trying to document what facilities exist in the building and how the facility interacts with the streets around it.

As I moved through the building (or at least the parts that I had access to) I was struck by how few people were in the space.

There are some nods to the fact that the building is on the site of the historic Eaton’s building:

It was also interesting to see how little activity there was in the restaurants in the arena. I saw about 20 people dining in the Tim Hortons and Arby’s area:

There are a number of restaurants that appear to be open during events, but were closed during lunch hour when I visited:

When I stepped outside, I noted how little interaction there is between the building and the sidewalk: on all sidewalks that ring the building there was very little pedestrian activity, especially the south, east and west sides of the building.  The portion of the building facing Portage avenue offers more activity, but the building is not designed to encourage people to enter or explore the space from this main drag, other than to attend specific ticketed events or to squirrel yourself away into one of the food establishments buried inside the complex. It is possible that the cooler weather influenced the lack of pedestrian activity around the building. However, the form of the building does not really engage pedestrians or encourage them to interact with the building, either. The one restaurant structure (a patio) that does emerge onto Portage avenue is lined by a tall, partially frosted glass wall that stops patrons from seeing or engaging in street life (and, probably very intentionally, prevents people on the street from interacting with diners).  The perimeter of the building is marked by blank walls, doors designated for ‘staff only’, and parking infrastructure.

By contrast, I stepped across the street and entered the Millennium Library to see how that space was being used at lunch hour:

The library was recently renovated by Patkau Architects and LM Architectural Group; I used the space as a place to work on my thesis this summer and I was really impressed by the number of people who used the library throughout the day, and how the well-designed space invited people into it.

One nit-picky note: the entrance to the library allows enough space for people to move freely and safely into and out of the building. Unlike our downtown library, the main transit stops are located across the street (westbound buses) and across from the MTS Centre (eastbound buses).  I never felt unsafe or crowded when trying to access the library. This was a welcome change from the inadequate space in front of our library for patrons and transit-riders to access the building and transit.

One other thing I love about the Millennium Library is that the Children’s section has a whole ‘Aboriginal reading-in-the round’ section full of Aboriginal books. This is pretty great for a city with such a large Aboriginal population (and benefits both Aboriginal and non-Aboriginal people).

It is not clear from the photos, but the library was PACKED. There were people all over the place, including the cafe near the entrance.  It is also exciting to note that the library is renovating the plaza behind the building and creating a Millennium Garden that promises to be a really great addition to downtown life.

In my opinion, the library serves as a much more powerful and effective magnet for daytime downtown life than the arena. The arena does indeed draw people into the core sporadically: on nights when there were concerts (such as the Black Eyed Peas show two weeks ago) it was clear that thousands of people were coming downtown, but they also fled really quickly after the events.  In terms of sustainable and manageable downtown street-life, I think there’s something to be said for a ‘sustained burn’ encouraged by a building (and public service) like the Millennium Library instead of a rapid and sporadic influx from a building like the MTS Centre.

Based on my observations I’m not convinced that the Winnipeg arena, as executed, is actually very impressive as an urban renewal tool.  The library fares much better: the stunning architecture, the thoughtful layout of the outside and inside space and the future Millennium garden to further encourage people to interact with the building does a much better of drawing people into the area.

Edmonton should consider this when deciding how to proceed with the arena proposal. Some questions to bear in mind:

  • Will the structure add to day-time street-life?
  • How will rapid influxes of fans and concert-goers be managed?
  • Will it bring people to the city core in a sustained way?
  • Will the arena complex nurture our amazing local restaurant industry or will it further marginalize local entrepreneurs (ie: do we need another Moxie’s in the arena when businesses like Bistro Praha are struggling to find a suitable space?).
  • How will it contribute to community and human interactions (the lifeblood of a resilient and livable city)?
  • Will it be physically arresting or a re-hash of mediocre architecture (something we can do without)?
  • Furthermore, how will an arena district impact socio-economically disadvantaged residents of the downtown core? Will people who rely on services located close to the proposed arena location be displaced? How would this affect non-profits that serve this population–will they be compensated if they need to move to better serve their clients?
  • Are there more effective ways to spend several hundred million dollars to foster a functional and inviting and thriving downtown core?

In any case, I am not convinced that arenas deliver on the hype.  Let’s call a spade a spade: arenas are for sports teams. They serve a very specific market, and are homes for private businesses.  There are ways to encourage public benefits in sports complexes, but ultimately arenas are a pretty expensive way to deliver those benefits.  Investing our money in good public infrastructure and smart investment in local talent and business would be a more diversified (and thus resilient) way to foster a vibrant urban core.  I also think that doing things to curb sprawl (ie: creative downtown infill development, firmer controls on suburban sprawl, doing  a really good job with the airport redevelopment) should take precedent over flashy one-off facilities.  As a citizen I am very concerned about how much public money would be spent on an arena complex, and I hope my observations contribute to this debate in a constructive manner.

——————————–

*A note on rigour: I wish I could have observed the space over many days throughout the summer to measure activity and movement in a more rigorous way. Although I was informally observing the space throughout the summer, my schoolwork prevented me from setting up camp and studying the MTS Centre scientifically.  I also didn’t visit the Moxie’s or the bar in the arena complex at lunch, so I can’t determine how busy they were at noon. However, given my overall impressions of the building I think there are some things about it that should be considered very critically by those concerned about how a downtown arena will affect Edmonton.

**One thing I do like about the MTS Centre is the front entrance:

Oops!

26 Aug

“I also don’t understand why you’d say you have a $120MM business while you’re simultaneously pleading poverty. Usually even the really poorly run teams know how to present a certain image when they’re asking for a handout.”

Tyler Dellow looks at the recent statement by Oilers Vice-President Allan Watt that the Oilers are a $120 million dollar business.

***Update*** Jonathan Willis also takes a look at this issue.

***Bonus*** Here’s a story from today’s Edmonton Journal, noting that only 46% of downtown residents surveyed by Downtown Business Association are in favour of a downtown arena. And Mayor Mandel is in complete denial.

Miami Vice

25 Aug

“[Owners] simply don’t tell the truth about the finances,” deMause said. “Or if they do, it’s in such a narrow way.”

I tweeted this article by Jeff Passan yesterday, but it’s worth sharing here again.  Then there’s this follow-up today from the Miami Herald (glove tap to Brian Gould for the story):

Before the team was awarded the favorable deal — the Marlins basically secured every dollar of revenue made at the stadium — several commissioners argued the city and county had the right to know the team’s financial position, given that taxpayer dollars would foot almost $500 million of the stadium’s cost.

But the Marlins refused, pointing to their protected status as a private entity.

The club even played political hardball on the issue, threatening to leave town if it didn’t get its way. The Marlins took meetings with officials from San Antonio and Las Vegas before securing the deal they wanted in South Florida.

 

Coincidentally, there’s a NHL hockey club that claims to be losing money right here in Edmonton. It also refused requests from city councillors to open up its books, pointing to their status as a private company. It hasn’t explicitly stated it will leave town if it doesn’t get all the revenues from a newly-built, mostly publicly financed downtown arena, but it’s stated that it won’t play in the only other arena in Edmonton it can play in past 2014. Interestingly, it’s also met with officials from another city, all the while denying it has any plans to relocate. That’s eery. It’s almost like there’s a playbook when it comes to these matters.

In all seriousness, the lesson here for Edmonton’s City Council is pretty clear: don’t just accept the word of the Katz Group on their finances. Demand that they open their books.  If Mr. Katz really wants to make Council’s “job easier by articulating why this project is necessary… important and can benefit all Edmontonians,” he can start by being open and transparent about his hockey team’s financial situation.

***Bonus*** I chose “Miami Vice” as the title of this post just so I could include the classic “In The Air Tonight” scene from “Brother’s Keeper,” the series’ pilot episode. This recording isn’t that great, but still. Crockett. Tubbs. Michael Mann. Phil Collins. Epic.

Newark, Newark

23 Aug

“Our city is the complete opposite of Newark, NJ and, as such, there can be no doubt that a downtown arena district in our city will be anything other than an unmitigated success.”

yegarena

Uh, okay.

Since the proprietor of that website won’t allow comments, thereby preventing people from challenging the merits of his arguments, I thought I’d open up a thread and encourage people to leave their comments here. We’ll call it a group post. I’ll even get the ball rolling by pointing out a few things:

1) The Devils haven’t paid rent since 2008, and are now going to court with the city of Newark. So that’s $5.7 million owed to the city by the team the city spent  $358 million to build an arena for.

2) The arena doesn’t pay taxes or water fees. Those taxes and fees might be useful for an impoverished city to have.

3) I don’t know the mathematical system where $15 million in economic activity is a proper offset for the cost of $350 million dollars, but even so, that article was written in April, and probably doesn’t hold up when the city of Newark is now looking at laying off 350 policeman and firefighters, cutting back trash pickup, and closing city pools.

Calling a public expenditure of that amount an “unquestionable success” in light of the stark reality facing Newark is bewildering. Saying “if Newark decides to sell its interest in the downtown arena, it won’t be be [sic] because the project failed to achieve its goal; it’ll be because Newark needs money fast” is…I don’t even know. Crazy piled on crazy? If Newark decides to sell its interest in the Prudential Center, if Newark is able to sell its interest in the Prudential Center, it will only be correcting a mistake it never should have made in the first place. Newark made the very poor decision of investing a very large amount of public money into an arena, and now can neither offer basic public services nor gather taxes as a consequence. It can’t even get its major tenant to pay the rent. Newark isn’t a lesson in economic success. It’s a lesson in irresponsible governance.

Arena Economics, 101

16 Aug

Last September,  I received an email from Darcy Norman, an Honours Economics graduate from the University of Alberta. Darcy was in his last year at the UofA at the time, and had completed his honours thesis, under the supervision of Professor Brad Humphreys, on the issue of public subsidies and sports stadiums. More specifically, he wrote a literature survey on the public subsidy of sports stadiums in an Edmonton context. The scope and thrust of his essay, Do Citizens Gain from a Publicly Subsidized Stadium?, is as follows:

“Academics have expended much brainpower on the question of the benefits of publicly funded stadia. This essay will reveal that it is generally a bad idea for the public to finance such ventures. This thesis will be examined from the viewpoint of three different citizen groups: taxpayers concerned with the economic costs of the arena, taxpayers concerned with the aura, prestige and vitality of the city and taxpayers concerned with their enjoyment of the sports team.”

Darcy suggested that his paper “might make for a good introduction to the less academically inclined as to what is pretty much a consensus in academia: subsidizing sports arenas is a bad idea.” I could not agree more. Darcy’s essay is a fantastic primer on the issue of arena economics. It is highly accessible and very easy to read. It took me about 30 minutes, and at no time was I confused or slapped silly with formulas and tables. Yet the logical clarity, the evidence and the links to further studies are all there. Most importantly, it is written with knowledge of the debate in Edmonton, and addresses some of the claims that have been made by pro-arena advocates in the city. With Darcy’s permission, I’m going to post the essay in the “Resources” section of the site. I really encourage anyone who is interested in this issue to have a look at Darcy’s paper.

…And The Puns For Free

10 Aug

“Rogers Sportsnet today announced an unprecedented 10-year partnership with Alberta’s two National Hockey League teams, under which Rogers Sportsnet will be the clubs’ Official Television Broadcaster and provider of digital media content until 2020.”

Press Release, August 10, 2010

“And because the Oilers operate in the smallest media market in the NHL, we face significant limits on the amount of broadcast, advertising and sponsorship revenues we can generate.”

Paul Marcaccio, speaking notes from presentation to City Council, July 21, 2010

“Working together with Rogers Sportsnet, the Calgary Flames and the NHL, I believe we have created the most dynamic and dominant broadcast vehicle for our fans.  It is equal to any television partnership anywhere in the NHL.”

Patrick LaForge, August 10, 2010

——–

It could be nothing, but if I was a reporter or member of City Council, I’d want to ask the Oilers or Sportsnet about the financial terms of this agreement. Despite the claim of doing the fans a solid, I find it unlikely that the Flames and Oilers gave up on pay-per-view without being amply compensated. The question, in light of the Oilers’ recent cries of poverty, is how amply.

***Update*** Here’s a story from the Globe & Mail from March. There are some big numbers in there.

On Columbus, Pt. 2

5 Aug

Now Give Me Money (That’s What I Want)

There are two other things to keep in mind in all of this discussion about Columbus. The first is that the arena district that Staples writes about, and that the Katz Group frequently uses as a model for an arena district in Edmonton, was paid for through private investment. It was not publicly funded. Through referendums, voters in Columbus repeatedly rejected the use of taxpayer dollars, so the Nationwide Mutual Insurance Company built the district mostly by itself, and Blue Jackets owner John H. McConnell agreed to lease the arena from Nationwide.  The man who was to be a co-owner of the franchise with McConnell, Lamar Hunt, backed out when voters refused to finance an arena using taxpayer dollars.

Secondly, despite voter rejection of major public investment in the district ten years ago, the Blue Jackets are now asking the City of Columbus and Franklin County for a handout. Why? Because they claim to be losing $12 million dollars a year. Nationwide owns the arena and is charging the Blue Jackets rent, keeping some revenues for themselves, and of course the team is perennially bad and has only made the playoffs once in its ten years in the league. They also aren’t making enough money with the concerts they hold at Nationwide, losing $4 million a year in non-hockey related revenue. The Blue Jackets have asked for public money in a variety of forms, including having the city take over the arena and cutting them a deal on rent. The Columbus Chamber has even warned that the Blue Jackets might be forced into relocating their franchise if they can’t get financial help from taxpayers. Sound familiar?

Some might jump all over this news as proof that the Katz Group and the Oilers really do need the city to foot the bill and give them all the revenue from a new downtown arena. But to do that one has to admit two other realties: that things in Columbus aren’t as rosy and ideal as they are made out to be, and that the economics simply don’t work. And that last one, to use a sports metaphor, is the ballgame. The National Hockey League’s current business model is so bad one of its teams can’t even afford to pay the rent (and that isn’t even counting problems in Phoenix, Nashville, Tampa Bay, and Long Island). That team, the Columbus Blue Jackets, are the Columbus Arena District’s major tenant, and they say their hockey business is losing millions of dollars a year. Furthermore, even if they got a free pass on revenues recognized as hockey-related revenues (Nationwide has actually given them a break the last two years), they say they’d still be losing $4 million on the non-hockey revenue side. Yet their owners have expressed no interest in taking financial control of the arena, nor has Nationwide offered to buy the Blue Jackets (they have offered up the arena to the Blue Jackets for the low, low price of $55 million dollars). Two private businesses, then, are refusing to invest any more of their own money into the district, the arena and the hockey team. Why? Because they know the math doesn’t work, and rather than be accountable for the bad business decision they made 10 years ago, they want the taxpayers to bail out the Blue Jackets. But why should government take on the financial risk when two private business are proving that it’s a losing venture? Why should taxpayers be responsible for cleaning up the NHL’s mess? And what kind of precedent does it set for future handouts when government eats the costs for a private business gone bad? Columbus is often identified as the ideal case, the exemplar of arena redevelopment, and yet the real lesson of Columbus, just like everywhere else, is that sports arenas are financial sinkholes. Governments should therefore treat the idea of funding them like they’re being asked to join the Mob. Think really, really hard about it, because once you’re in, you’re never getting out.

On Columbus, Pt. 1

4 Aug

Stay Puff

In November of ’09, David Staples of the Edmonton Journal wrote a four-part series on the downtown arena, with a specific focus on the “success” of arena projects in Columbus and Los Angeles. The pieces were mostly puff, full of anecdotal evidence from two of the only cities in North America where downtown redevelopment centered around sports facilities have been deemed even a moderate economic success (when asked on Twitter why he hadn’t visited any other cities besides these two, Staples said that he went to the two places mentioned in the Arena Feasibility Committee Report. If only the Katz Group’s PR work was always that easy). But in the first article in the series, Staples also referenced a paper about Nationwide Arena in Columbus, written by Brad Humphreys and Xia Feng. Humphreys is a professor of economics at the University of Alberta, and is renowned for his work in sports economics, particularly the economic effects of new stadiums and arenas. Many of his papers are in the resources section on this site. The Columbus paper was the type of hard analysis that isn’t present in most media stories about the economics of sports arenas, and because it did an increase in residential property values around Nationwide Arena, Staples went back to the well with it repeatedly throughout his series. Unfortunately, he overstated the results in Humphreys’ paper, and glossed over some important facts. These include:

1) The paper was neither new nor revelatory. It had been publicly available since 2008. In fact, Humphreys referred to the paper in an interview I did with him back in February of 2008, and it was debated in the comments then whether the higher property value argument had any merit (more on this later).

2) The paper was a working paper. It had not been subject to the peer review process, an essential step in the validation of any academic work. Professor Humphreys’ methodology and conclusions have not been screened and looked over by the people who understand these issues best: his colleagues.

3) The paper did conclude that residential property values were higher in proximity to Nationwide Arena, but it also included a great big, giant caveat that they could not determine how much of that was due to the arena and how much was due to the fact that the arena was downtown.

4) The paper did not take into account the 75-100% property tax abatement provided by the City of Columbus to encourage people to live downtown (Nationwide Arena received a 99% tax abatement).

5) A similar study Humphreys cites in his paper found no effect on property values from the new football stadium in Dallas.

6) A simple calculation shows that even if the increase in property values was a result of the new arena, it was not enough to offset the cost of the facilities.

Staples also referenced a study by the John Glenn School of Public Affairs at (The) Ohio State University, which reported that property values in the Columbus arena district had shot up by 267% in ten years. Scott Hennig at the Canadian Taxpayers Federation has already scrutinized the findings, but I’ll add that Staples failed to mention that the study was paid for by the Columbus Blue Jackets and the owners of the arena district, Nationwide Realty Investors. Not really a surprise, then, that the result of the study saw the arena district as having a positive economic effect on the region.

It Doesn’t Really Matter

In one of the accompanying pieces, Staples wrote a line that immediately stood out to me and some fellow arena news watchers:

“The increased property values in Columbus can be translated into increased taxes for the city, Humphreys says.”

The reason it stood out for us was that it was an issue that had come up in the interview I did with Professor Humphreys in February of 2008. In the comments, there was a question raised about whether or not it was the case in Alberta that an increase in property values would mean more tax revenue for a city. The general consensus was that an increase in property values doesn’t lead to more tax revenue for the City of Edmonton. It just means that the distribution of taxes between properties will change. I asked Scott Hennig of the Canadian Taxpayers Federation to explain why an increase in property values doesn’t lead to any extra money for the City of Edmonton. This is his response:

1) If a certain area magically becomes more desirable and property values go up, it should have an equal reduction in another area, based solely on the fact that unless the incomes of the people change, the ability to purchase property stays the same. If this wasn’t the case, every house in Edmonton would be the size and price of Katz’s. I get this might not be immediately clear, but there’s a reason why not every house in Edmonton is a mansion or a little shack. The distribution of income across the population is not even, and therefore their desire and ability to purchase homes isn’t the same. There is only a certain percentage of the population that will want and be able to purchase housing at say the $700,000 level. If the supply of $700,000 houses go up, while the demand stays the same, those houses will either sit empty or be decreased in price. Or if everyone who lives in Riverbend moves to an arena district, it’s likely that the houses in Riverbend will have to be decreased in price to find buyers. Therefore, there should be no change in overall property value in the city.

2) Even if I’m incorrect about #1 and there is an overall increase in the market value of property in the City of Edmonton (more rich people move in than any other income level), the way that property taxes are set and collected would prevent an increase in revenue. Unlike the federal and provincial governments, who set their tax rate first and then just collect whatever money comes in (and if incomes do increase, or employment goes up they collect more money than expected) the city decides first how much money they want to collect, check what the assessment is, and then they set the tax rate. So, if they decide they are going to collect an extra $40 million, they just divide that by the total assessment and set the mill rate. That combination of the rate and the assessment will dictate your portion of that $40 million. So, those people with a higher assessment will pay more than those with a lower assessment. In the end, the city doesn’t collect any more money, just some people pay more than they did before, and some people pay less.  Or in reality, some people see an even larger tax hike than they expected, while others see a slightly lower tax hike than they expected.

This really doesn’t change much for businesses.  I just use houses as an example that most people can wrap their head around.  But the same goes for businesses.

You can’t, therefore, make an argument that the City should invest tax dollars into an arena because it will get more money back from an increase in property taxes. It won’t, because an increase in property values in one part of the city leads to a decrease in property values in another party of the city, and because the City of Edmonton doesn’t collect property taxes in the same way as Columbus, Los Angeles, or any other American city.

Doubleplusungood

2 Aug

The public sector isn’t paying for it. The fact of the matter is it’s a $400-million arena. [Oilers owner Daryl] Katz is putting in $100-million. That leaves $300-million. We’ll come up with some sort of a package for a ticket tax, which is probably another $120- to $125-million. That’s generated from people who use the facility — a user fee, which is not, I don’t think, unreasonable.”

Mayor Stephen Mandel

Bold is mine.

Call it dumb, delusional or intentionally deceptive, but the one thing you definitely can’t call Mayor Stephen Mandel’s recent statement to the National Post is accurate (I’m going with a dab of the delusional spread across a big misdirect sandwich). Even the math in his own quote leaves around $175-180 million to be covered by someone not named Daryl Katz. We could give Mayor Mandel the benefit of the doubt and expect the Tooth Fairy to cover the remainder of the bill, or we could look at the following tidbits and draw a more logical conclusion:

  • The Katz Group sat in Council chambers a mere eleven days ago and said that a 100% private financing model was not a viable economic option, and that they wanted to arrange a deal with the City, one where the City would help finance the arena, own the arena, and then let the Katz Group collect all the revenues from the arena
  • City Council has since come up with 140 questions for city administration, the Katz Group and Northlands, and they all seem pretty clear on the idea that the Katz Group is looking for public investment
  • City administration, the Katz Group and the Mayor himself have all advocated using a tax known as a Community Revitalization Levy to help pay for the arena
  • Substantial public subsidy, including the CRL, was also recommended in City Shaping, the report that was commissioned by the Mayor and City Council
  • At this point, the City looks to be in charge of collecting revenue from both the ticket surcharge and the personal seat licensing, with no explanation as to who will make up for any revenue shortcomings if those two plans don’t work. Considering the Katz Group is unwilling to cover the shortfall if either the CRL or downtown development don’t go as intended, I think it’s unlikely that they’ll agree to be on the hook if the user-pay ideas don’t pan out
  • The Katz Group requested that the City join them in asking both the Federal and Provincial government for infrastructure funding
  • The City has already spent “less than $100,000″ of taxpayer dollars on the City Shaping document
  • The City already subsidizes the Oilers to the tune of several million dollars a year, providing them cheap rent ($1 a year), concession revenues, parking revenues, ticket surcharge revenue, ownership of the naming rights for the building, and a free ride on property taxes.

So to summarize: existing subsidies and opportunity costs associated with the current Rexall Place, public expenditures to build the new facility and surrounding infrastructure, public ownership of the new facility, public risk and exposure on the CRL and user-pay ideas, opportunity costs from the turning over of revenues from a city-owned and paid-for facility, opportunity costs from the CRL and the direction of taxes towards the arena, and new taxes to cover the mandatory redirection of taxes from the CRL to the arena. If that isn’t public sector involvement and financing, I don’t know what is.

Mayor Mandel has done this type of…let’s call it meandering with language…before, not only on the question of spending tax dollars to finance the arena, but also on the question of whether or not he wanted it located downtown. So it’s clear that the best way to get him to say something different from what he’s said before is to ask him the exact same question. But I don’t get why he’s continuing with this particular line of spin, since about 200 people sat in Council chambers two Wednesdays ago and heard the Katz Group say the only way they could finance a new building was by using public dollars, and the only reason there was a meeting in the first place is that the use of public dollars and public sector involvement are on the table. It does, however, reinforce the fact that, despite the public opinion and independent economic research that point in the other direction, the Mayor is still stubbornly in favour of a publicly-funded downtown arena. I’d also argue that it reinforces how disingenuous he has been throughout this entire process, and that he should be held to account for it in October, but that’s a whole other post and a whole other story.