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Edmonton Oilers brass refuses to meet with city for crucial debate on new arena

Tuesday, 10.16.2012 / 5:05 PM / News

The Canadian Press

EDMONTON - Fading hopes for a new arena for the Edmonton Oilers grew fainter Tuesday after team owner Daryl Katz refused for a second time to meet city councillors in public to explain why he wants millions of dollars more in taxpayers' money.

"I'm not sure where we go from here," Edmonton Mayor Stephen Mandel told reporters after receiving the refusal in a letter from Katz. "It's frustrating that for whatever reason he still doesn't want to come to city council to talk about what his issues are.

"That's an important part of how we move forward."

Mandel had set a Wednesday deadline to hash out all remaining issues on the arena, which has been negotiated on and off for four years.

Katz said the two sides are so far apart, a public meeting is not useful.

"We have gone backwards," said Katz in the letter. "We and the city can't even agree on basic assumptions relating to the financial aspects of operating a new arena."

Katz also accused Mandel and the councillors of putting parochial interests ahead of the city's and by doing so risk missing out on a golden opportunity to revitalize the downtown.

"The city has approached this negotiation based on narrow political considerations rather than a general desire to strike a deal that is fair and makes economic sense for both sides," wrote Katz. "We all understood the devil would be in the details, and indeed it was.

"Mayor Mandel, this is an opportunity for Edmonton to be bold and forward-looking, and it warrants your support and leadership."

Asked to respond, Mandel told reporters: "Many of the things Mr. Katz states in (the letter) I wouldn't necessarily agree with, but we're not going to get into that today."

Mandel has said the city wants to stick with the original funding deal agreed to by Katz a year ago.

That deal came apart last month when Katz officials informed the city privately that they had reviewed the numbers and needed millions more public dollars to make it work.

Councillors refused to budge, prompting both sides to publicly accuse each other of bargaining in bad faith.

Mandel urged Katz to come to city council and explain himself. Katz refused and instead threatened to move the team to Seattle. When angry Edmonton fans reacted on social media, Katz took out full-page newspaper ads on Sept. 29 to apologize.

With both sides resuming talks in private, Mandel then set the drop-dead date of the Sept. 17 city council meeting, and said he expected Katz or his officials to show up.

Construction had been slated to start in the spring with the 18,400-seat arena completed in the fall of 2015.

Katz has said he's a passionate Edmontonian who wants to keep the NHL team in Alberta's capital, but needs more money to compete in what he terms a "small market."

"The Oilers need Edmonton and Edmonton needs the Oilers. Each is an integral part of the fabric and the identity of the other," Katz told fans in the full-page apology ads.

University of Alberta sports economist Brad Humphreys urged fans to strip away the rhetoric.

"It's the way the game is played," said Humphreys, who has authored numerous reports on sports economics and has advised U.S. Congress on the issue.

"In the bargaining procedure you try to get it however you can get it, and part of that is coming back and making requests like, 'Oh, by the way, I'm going to need $6 million (a year) in operating expenses.'"

Under the original deal, city taxpayers and ticket buyers would pay to build the arena, which was initially pegged at $450 million. But with land, borrowing and surrounding infrastructure factored in the price is now at $700 million and rising.

The Oilers would keep all profits from NHL games, trade shows, concerts and other events for 11 months out of the year. The team would also keep naming rights for the building (worth up to $3 million a year), along with $2 million a year from the city for a decade for advertising.

Concession sales alone are pegged at $20 million a year.

In return, the Oilers would pay the city $5.5 million a year for 35 years and pay to operate and run the arena, pegged at $10 million a year.

The Oilers are worth an estimated $212 million, good for middle of the pack in the NHL, and the team regularly sells out Rexall Place.

Katz, however, said the franchise is bleeding money and last month told council he wants to change the deal to deliver to him an extra $6 million a year in public subsidies to offset costs of running the rink.

He is also reportedly seeking tax breaks and a casino license.

Katz says the city can afford to meet those demands because the estimated $1.2 billion in extra money that will fill city coffers due to rising property values around the arena will actually be closer to $2 billion.

That money would come in under a specially designated community revitalization levy, or CRL.

But Humphreys said it's a phantom argument.

"The CRL has become this giant pinata of economic benefits that everybody should get a crack at when a shovel hasn't been put in the ground and we don't know what kind of property increases there might be," he said.

Humphreys and Scott Hennig of the Canadian Taxpayers Federation also said while arena districts can produce more cash, it's not new money. Rather it's money redirected from somewhere else. In other words, more new bars downtown doesn't mean more drinkers. It just means the existing number of drinkers stop drinking at one place and drink somewhere else.

"It creates economic activity, but that economic activity has just been moved around from some other place in the city," said Humphreys.

"It's not new economic activity. What an arena does is it concentrates economic activity at a specific place at a specific time."

Hennig agreed.

"The CRL is a shell game at best," he said.

"Daryl Katz should know better, and he probably does. He's playing on the council's fear of losing a hockey team here, which is completely unfounded."

Humphreys said fans and politicians who don't like what is happening need to look in the mirror.

"I can't blame the Katz Group for trying to do this because these are the ground rules we've sort of laid out as a matter of public policy in North America," he said.

"We're going to let these guys operate as monopolists, and they're going to do what they can to exercise that monopoly power."

For me, it's a great win for our hockey team and for a lot of people back in Columbus, especially our fans in particular … people who have been devoted to this organization, it's big.

— Columbus Blue Jackets coach Todd Richards said after their 4-3 OT win vs. Pittsburgh in Game 2, the franchise's first ever Stanley Cup Playoff victory