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Money For Nothing

15 Jan

I was happy to have a chance to talk about the downtown arena, and in particular some of the questions asked in the City of Edmonton’s recent poll of Edmontontians, on the Rob Breakenridge show tonight. Audio is here.

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It Depends On What The Meaning Of The Word “Is” Is

25 Oct

Mayor Stephen Mandel dances on “taxes”:

“If we do (build a new structure), we need to be creative and not burden the taxpayers.” –Dec. 22, 2006

“…we’re not going to burden our taxpayers with a $400-million or $300-million debt to have a new facility. That just won’t happen.” –Feb. 22, 2007

As for who is paying for this new arena, Best, Bouma and Mandel all indicated that taxpayers will have to chip in for at least part of the cost. “But I don’t want it digging into taxpayers’ pockets all the time,” Mandel said. –April 24, 2007

“I have said from the beginning the citizens of Edmonton can’t fund this arena on their own nickel,” said Mandel. “I have got some ideas how it can be financed that wouldn’t require any city money, and I think it can be done creatively, with limited amounts of public dollars, but to say no tax dollars — that would be irresponsible.” –April 25, 2007

Mayor Stephen Mandel isn’t ruling out using taxpayer dollars to make his dream of a new downtown arena a reality.  –April 25, 2007

Rightly, the mayor insists no city tax dollars will be involved…  –Oct. 10, 2007

“As I’ve said hundreds and hundreds of times before, we just can’t afford to take our municipal tax dollars and put it into an arena.” –Dec. 15, 2007

“I’ve said it a hundred times and I’ll say it another hundred times, we’re not going to raise taxes to pay for this.” –March, 26, 2008

Mayor Stephen Mandel, a booster of the downtown location, has said that there would be no property tax hikes to finance the arena, but the committee is discussing a community revitalization levy to help finance it. –March 29, 2008

“…it has to be funded some way, and we think we have a reasonably creative way of doing it that is not going to involve any current property taxes or grants from other orders of government.” –July 20, 2008

Mandel has ruled out property tax hikes to pay for the arena. But he said recently he has not ruled out improvement levy options, such as allowing the city to essentially borrow against the future value of the developed site to fund the construction. –Aug. 31, 2009

Mayor Stephen Mandel said last week he would be open to using a community revitalization levy in the area surrounding the new building to help pay for some of the facility.

It would work by seeing a portion of taxes paid by new neighbourhood developments set aside for the arena. –Sept. 1, 2009

Edmonton Mayor Stephen Mandel has said arena funding won’t come out of general revenues. A city committee that looked at Edmonton’s arena situation recommended that there be a 70/30 public-private split on building a $450-million (Cdn) downtown arena.  –Dec. 13, 2009

He repeated his desire to have the city own the arena and help fund construction costs–estimated at $450 million last year–with a community revitalization levy. It would use property taxes generated by development in the area.

“We would not use grant money from the federal government (provided) for other projects. We would not use current city taxes to build the arena.”  –Feb. 11, 2010

…the only acceptable deal is only one that does not divert existing tax or capital dollars. –Feb. 18, 2010

However, Mandel made it clear that he would only support a deal that doesn’t divert existing tax or capital dollars, and can prove that the CRL as a funding model actually works. “I would stress that a CRL is only possible when it goes hand in hand with proof that the revenue streams assumed into a CRL calculation are achievable,” he said, adding he would only consider a city-owned deal if city dollars are to be used to fund the arena. –Feb. 18, 2010

“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.” –July 30, 2010

Mandel’s recipe is the Community Revitalization Levy, a ticket tax, Katz putting in money, and small amounts of support from other orders of government. “Boom! You got an arena.”

I ask Mandel about all those who say they don’t want one penny of taxpayer’s money to go for an arena for millionaire players and a billionaire owner. “I agree with them. I don’t want my money going to them either. All I’m saying is what will go to them is what they can develop within their own complex. And without the arena downtown that wouldn’t happen. So I absolutely agree with those people. I don’t want my money going to a millionaire hockey player. I got to fix roads.” –Oct. 12, 2010

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.

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!

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.