Edmonton’s downtown revitalization: now linked to the arena more than ever?

Back in May, the City of Edmonton and the Katz Group agreed on an agreement framework. A month later, City Council asked a number of questions about that agreement, which Administration answered in a report (PDF) that went back to Council on July 20, just before the summer break. Unsurprisingly, a few of those questions were related to the Community Revitalization Levy (CRL). The answer was that Administration would return to Council with more information, including the new CRL boundary, with a target date of August 31.

Today, that date became official, not to mention a whole lot more complicated. Here’s what a media advisory titled “Proposed Downtown CRL could fund revitalization” said:

A vibrant downtown is a key ingredient of a great city. Gary Klassen, General Manager for Sustainable Development, will be available to speak about a report on an option for a boundary for a downtown Community Revitalization Levy which could fund revitalization.

That media conference will take place tomorrow at noon (right in the middle of the I (heart) yegdt BBQ taking place right outside City Hall in Churchill Square). The report itself will be made available at 11am.

The gist of it is this: the City is proposing a larger, downtown-wide CRL to fund not only the arena but also a number of other “catalyst” projects in the downtown (as outlined in the Capital City Downtown Plan). I can’t confirm this just yet, but my understanding is that the proposed CRL is big – as in $320 million big. It’s a smart piece of political maneuvering, when you think about it. How do you get councillors who are opposed to or on the fence about a CRL for the arena to support one? Add in a whole bunch of other stuff they would likely support. It’ll be especially interesting because with the summer break a number of the councillors have no idea this is coming.

I think there are two ways to look at this proposal.

One perspective is that the proposed CRL is a good thing because the catalyst projects will finally receive funding. Projects like the Jasper Avenue New Vision, At-Grade LRT, the High Profile Bikeway System, and the Warehouse Campus Central Park all sound great, but don’t have any funding attached to them. The proposed CRL could be used to fund all of these in addition to the arena. Some projects would certainly benefit as they’d sort of “catch a ride with the arena” and would get their funding without too much added trouble. And since they are all part of the plan to revitalize downtown, the CRL is a good fit. That’s what it was intended for, after all.

The other perspective is that the proposed CRL is a bad thing because it basically holds downtown revitalization hostage. You could see the proposed CRL as a message that either Council agrees to fund the arena, or the other projects don’t receive funding. The 2012-2014 Capital Budget is coming up for discussion later this year, and some of these projects (or elements of them) would have been part of the budget discussions. Now it seems they would just come along with the arena, or….what? It’s not clear what the alternative might be. Additionally, projects funded through the CRL might not actually receive any money for years (a CRL takes time to approve), whereas if they were funded through the budget process they could receive funding as early as January.

Take the Alley of Light project, for instance. It was slated to be up for discussion as part of the Capital Budget, with a line item of $500,000. Now it would fall under the Green & Walkable Downtown catalyst project. In a way this is a good thing – the Alley of Light might receive the funding under the CRL without too much debate. On the other hand, don’t we want Council to be clear about what they’re funding? I want Council to stand up for the Alley of Light, to say that it is absolutely worth the $500,000, and that it will have a positive impact on our downtown. I don’t want it to get funded “under the radar” just because the arena did. Likewise I don’t want the arena to get funded just because we want the other projects.

Not to mention that the proposed CRL is especially risky given that The Quarters CRL is immediately to the east. How likely is it that the required development will take place in both areas to generate enough tax “lift” for the CRL to work?

Ever since the beginning, the Katz Group has made it clear that this project is about downtown revitalization. To them, downtown revitalization doesn’t really happen unless the arena happens. Now with the proposal of a downtown-wide CRL, it seems that the City has bought into that idea wholeheartedly. Next Wednesday, we’ll find out if City Council has as well.

UPDATE: The report is now available. Details: “over the 20 year term of the levy is expected to generate an additional $1.18 billion in new tax dollars (net present value of $600 million) of which $788 million is based on appreciation of the existing assessment base (net present value of $385 million).”

  • The Cat

    The (Community Revitalization Levy) CRL will consist of the tax lift from improved properties, and I can understand the city’s motive for wanting a revised zone.  So far, the arena will be funded with $45 million of CRL revenue ($80 million will consist of equivalent revenues that Northlands earns), so it may be the case that much of this revenue would go to other improvements.  With the CRL, both municipal and provincial education tax component revenue raised within the boundaries, which could be allocated to downtown projects.

    • Yes, currently “Administration is projecting CRL revenue in excess of $45 million.” But that would all go to the arena. I don’t think the new CRL necessarily means 320-45 goes to other projects, however. Remember there is still $100 million missing from the whole arena equation.

  • The Cat

    Let’s hope that provincial funding comes through.

  • Paula Simons

      Hi Mac – Hmm….why am I typing in such large “shouty” letters? Clearly, bad internet etiquette. But here’s the column I wrote back in April, when Mandel first came up with this expanded CRL vision. This should give some useful background to how this all came about. Again, sorry for my techno-illiteracy. (I know more about the CRL, it seems, than I do about how to use a computer keyboard.)Mandel magically crafts arena deal with support of city councilEdmonton Journal 
    Thu Apr 7 2011 
    Page: A3 
    Section: News 
    Byline: Paula Simons 
    Column: Paula Simons 
    Source: Edmonton Journal Perhaps Stephen Mandel and Harry Houdini were long lost cousins.
    Or perhaps Mandel has been taking conjuring lessons in his spare time. However you want to account for it, at 9: 30 Wednesday night, 12 hours after a contentious city council meeting started, Edmonton’s mayor pulled off a political magic trick, convincing a majority of his skeptical council colleagues to support a motion authorizing city administrators to negotiate a deal on a downtown arena with the Katz Group.
    At 8: 30 Wednesday evening, after council had spent four hours in a closed-door, in-camera meeting, Mandel returned to the council chamber with a motion that had enough safety features and escape hatches to put councillors’ minds at ease.
    By the terms of Mandel’s motion, the arena can’t cost the city more than $450 million. There must be a user fee/ticket tax, enough to raise at least $125 million.
    There must be a 30-year commitment from the Oilers not to move the team, and firm commitment from the Katz Group to put $100 million into the project. There must be a community-benefits agreement, a deal made with the city, Oilers, and the communities and social agencies of the inner-city to ensure some tangible benefits to the surrounding neighbourhoods.
    The motion also requires city administration to negotiate some kind of revenue-sharing agreement with the Katz Group.
    There’s one other important change, one that Mandel first explained to the Edmonton Journal editorial board earlier this week. Under the original plan, the community revitalization levy, orCRL, the tax money raised on new development spurred by the arena, was supposed to contribute at least $160 million to the cost of the project. Under the mayor’s new model, the CRLwill only be expected to contribute $20 million toward the cost of the arena. The rest of the anticipated CRL revenues will be earmarked, instead, for infrastructure improvements in other parts of the downtown, including 108th Street, the Warehouse District and Jasper Avenue. The rest of the money? It would come from sources such as the money that used to go to Northlands, from parking, from other internal-revenue streams. The maximum amount would be $125 million in direct contributions from the city to the arena.
    That clarity, that simplicity, I suspect, is what clinched the vote.
    The CRL was always a tough sell, to the public and to council, because it was always a gamble. If the revitalization zone was too small, there was a significant risk that the money wouldn’t be forthcoming, that taxpayers could be left on the hook.
    If the CRL boundaries were too wide there was a significant risk that the city could lose the benefits of rising property taxes in the downtown, that if we had any kind of downtown renaissance, fuelled by rising oil prices or redevelopment in the legislature area, we’d sacrifice all that tax growth on the altar of the new arena.
    It’s far more transparent, far simpler and far more accountable for the city to simply say that it will invest $125 million in public dollars to the capital project, without all the jiggery-pokery of the CRL. And as Coun. Ben Henderson put it Wednesday night, by putting the CRL money into the rest of the downtown, the whole city centre stands to benefit.
    Of course, Wednesday night’s vote doesn’t mean the arena is a done deal. All council really did was to give city manager Simon Farbrother and his team a mandate to negotiate a firm agreement with the Katz Group. It also gives Farbrother more juice at the bargaining table because it’s now clear to the Katz negotiators that the city isn’t willing to compromise on many central points.
    Whether Katz and the Oilers want to sign a deal on these terms is quite a different question.
    Are there still some serious questions for council and for Edmontonians to debate? Oh yes. The province must still approve the terms of the CRL and there must still be a statutory public hearing on the issue. There are still very important issues around the architecture and design of the arena. Voters still need firm assurances that the building and the entertainment zone will be examples of outstanding urban design, that the finished project will be properly integrated into a vibrant, pedestrianfriendly downtown, that it won’t be a blank-walled fortress that actually drains life from the city core.
    There’s nothing in this deal that requires Daryl Katz to live up to his earlier pledge to invest another $100 million in the area around the arena.
    But there’s no doubt that Wednesday’s meeting was a remarkable example of Mandel’s prodigious talents as a deal-maker and negotiator.
    He has wanted this arena badly and he has spent years politicking to get it done.
    Few mayors have his capacity to broker compromise within council.
    On Wednesday, he sold his council colleagues on his vision of a downtown arena.
    For his next trick? He’ll need to convince Edmontonians that he’s bolstered his vision with enough supports and safety features to make it work for us all.

    • Thanks Paula, I appreciate it. It’s too bad EJ links aren’t permanent, that would have been simpler!

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  • Mack – I’ve asked this question elsewhere and haven’t really gotten an answer, but maybe you have a take. Isn’t there a fatal flaw in building a CRL around an entertainment district and calling it incremental revenue, in that the vast majority of business growth downtown will have to come at the expense of business in other parts of the city? I don’t imagine that there are very many Edmontonians holding back their entertainment dollars, waiting for a revitalized downtown before they start spending, so won’t any growth downtown be from dollars that used to be spent in other neighborhoods?  I seriously feel like I’m missing something here.

    • Hi Jesse, thanks for the comment. My take is that the CRL is just another way for Council to direct funds. Let’s say Council had $366 million to spend (the amount of the proposed CRL) on stuff. They could vote to spread it around the City, or they could vote to concentrate it in a specific area. Going with a CRL is basically just the second option, voting to concentrate it in a specific area.

      Maybe businesses that would have built outside the CRL now decide to build inside the CRL, because they think it’ll offer them greater success. Or maybe instead of going to that restaurant on the edge of the city you go to the restaurant inside the CRL. If we think as a city that we’d like to improve downtown by attracting more business, then the CRL would be having the desired effect. It’s helping to direct investment into the core.

      There’s also an argument to be made that perhaps the CRL will help to attract business that wouldn’t otherwise have been here, so it’s not competing with existing businesses elsewhere in the city.

      • If a CRL is basically just a vote to concentrate funds into a specific area, then why have it at all? It is being sold as new revenue for the city, not as a decision to spend money in one area over another. As Ben Henderson put it in his recent open letter: ” The money we borrow to cover this $125 million will be paid back using a number of sources, none of which would exist if there was no new arena built.” That includes $40 million from the CRL.

        The only way for that statement to be true, as far as I can see it, is if the new businesses downtown get people to spend money that they wouldn’t have otherwise spent within the city limits. And there is very little chance of that happening with the types of businesses people are talking about attracting with an entertainment district (retail, restaurants/bars, casino, etc.). It’s much more likely that we would just be shifting spending from one area to another, and over time the higher tax revenue downtown will be offset by lower tax revenues elsewhere. Suggesting that it will be a new source of revenue is just dishonest, no?

  • The Cat

    One thing about the CRL is that all funds raised in the respective zone will be earmarked for projects within that zone.  First, the Government of Alberta has to approve the Community Revitalization Zone.

    One of the new projects is $12 million for 1,000 new housing units ($12,000 per unit), meaning about 1,500 more residents would be living downtown.  That’s probably the equivalent of four 25-storey high-rises, and based on your calculations here:

    http://blog.mastermaq.ca/2010/12/14/albertas-community-revitalization-levy-introduction/

    the expected CRL revenue would be about $1.6 million per year, or $32 million based on these new units.

  • Paula Simons

    Hi Mack,
    Boy, I wish our links lasted longer, too. When they make me queen of the world, I’ll fix that. As it is, I’m afraid I’m left to cut-and-paste via Infomart. Let’s not forget another benefit of the CRL: it allows the city to claw back dollars that would otherwise flow to the province, doubling the city’s downtown property tax take. That, of course, is why the province has to approve any CRL. Now, we can argue about the morality of that, since the tax dollars in question are nominally dedicated to the provincial education budget. But in post-Klein Alberta, that’s a polite fiction. There’s no longer any direct connection between the education dollars collected locally and local education budgets. When I’m feeling grumpy about the arena, I can argue that we’re stealing dollars from school children to subsidize an arena. But you can just as accurately spin it the other way, and say that since the city collects the property taxes anyway, all the province is doing is vacating tax room. Either way, Edmonton school children won’t see a drop in local budgets as a result.

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