Roundup: Reaction to the latest downtown arena vote

By Mack D. Male · October 29, 2011 at 8:42pm

On Wednesday afternoon, City Council approved a financial framework for the new downtown arena. The vote passed 10-3, with Diotte, Iveson, and Sloan voting against. Council also agreed to spend $30 million to complete the design of the arena to 60%, to enable contractors to bid on the construction project with a Guaranteed Maximum Price of $450 million. From the news release:

“A new downtown arena is a catalyst for revitalizing downtown. This is a fair agreement and will help sustain NHL hockey in Edmonton while increasing economic activity in the city,” says City Manager Simon Farbrother. “It will also improve land values and the livability and sustainability of Edmonton for all citizens.”

John Karvellas from the Katz Group also issued a statement:

“We very much appreciate City Council’s strong vote of support for the downtown arena, as well as the considerable time and effort Mayor Mandel and City Administration, in particular, have put into this project. We will work with the City administration to understand the implications of the new elements of the deal introduced in today’s motion in the context of the agreements that need to be completed by month-end.”

NHL Commissioner Gary Bettman also shared some comments:

“I am thrilled for the City of Edmonton and I want to congratulate and thank Mayor Mandel and Daryl Katz for their hard work and commitment. The future of the Oilers couldn’t be brighter.”

I was paying attention to the meeting on Wednesday, and as the vote approached I tweeted much of Council’s final remarks. Here are some of the highlights:

Mayor Mandel: “I have not had one, not one call since SLRT opened about what it cost us to build.”
Mayor Mandel: “Today is about making a decision to change our downtown.”
Mayor Mandel: “This is a project about Northern Alberta, it’s not just about Edmonton. The province should come to the table.”
Councillor Anderson: “Thank goodness he lives here.” (referring to Daryl Katz)
Councillor Anderson: “I believe that the casino and the gravel project would sit for another several decades if this does not go forward.”
Councillor Anderson: “We all have to remember however, that no matter how we vote on this, it is still subject to $100 million appearing from somewhere.”
Councillor Batty: “I applaud Daryl Katz for his perseverance.”
Councillor Gibbons: “Hopefully we can work toward keeping Edmonton on the map.”
Councillor Gibbons: “We’ve done such a good job of growing out, maybe we can grow back inside.”
Councillor Gibbons: “I’ve travelled all over the world, and a great city has to have a great downtown.”
Councillor Leibovici: “We do have a downtown that needs a bit of a lift.”
Councillor Leibovici: “Do we need an arena? Yes. Do we need to change what we have? Yes.”
Councillor Leibovici: “A lot of this reminds me of the airport debate.”
Councillor Sohi: “I know it’s not a perfect deal, but it’s a reasonable deal that I can defend to the people I represent.”
Councillor Krushell: “It’s time to tell the Prongers of this world that Edmonton is not just a city with great people.”
Councillor Krushell: “The project will play a key part in revitalizing our downtown, and that is why I am supporting this.”
Councillor Loken: “This is a game-changer in my mind.”
Councillor Loken: “This is about Edmonton, this is about vision, this is about the future.”
Councillor Diotte: “There’s no reason to agree to a bad deal.”
Councillor Diotte: “I think we can all agree that the majority of Edmontonians want to see a new downtown arena.”
Councillor Sloan: “I maintain grave reservations about the costs and associated risks that the City is undertaking.”
Councillor Sloan: “I am further concerned that a lack of clarity has resulted in both Council and Admin losing face in the public.”
Councillor Caterina: “I’m comfortable that this is a much fairer deal than what was brought back from New York.”
Councillor Henderson: “I’m prepared to continue moving forward because I think at this point that our interests are being served.”
Councillor Henderson: “I don’t think the arena by itself is the magic wand.”
Councillor Iveson: “Nothing would anger me more in my old age than to see this debate play out again in my lifetime.”
Councillor Iveson: “I’m sold on what a new arena can do for our downtown, but I believe a better deal can be found.”

Slowly but surely, our Councillors are becoming more familiar with the tools and technologies available to them. Three Councillors blogged their final remarks, something I’d like to see the norm rather than the exception.

Councillor Iveson: Arena Decision Logic
Councillor Sloan: Arena Debate Closing Remarks
Councillor Diotte: Why I voted against the downtown arena deal

Many people tweeted about the news on Wednesday, and as I showed in my brief analysis, the response seemed to be mostly positive. There was also a fairly active thread on Connect2Edmonton about the deal.

Here’s what Paula Simons wrote about the deal:

“On Wednesday, Mayor Stephen Mandel described the arena as something to benefit all of northern Alberta. Sohi called on Edmontonians to petition Premier Alison Redford for financial support. Indeed, the province may be more willing to come up with the necessary cash, perhaps by some sleight of hand with casino money, now that the city and the Katz Group have come to terms. But this story, dear readers, isn’t over. We’ve just taken a whole new plot twist.”

Here’s what John MacKinnon wrote:

“Now that Oilers owner Daryl Katz’s downtown arena project is a qualified ‘go,’ maybe people can focus on what should have been the main issue all along: how this facility will help transform Edmonton’s downtown.”

Here’s what Gary Lamphier had to say:

“As I’ve said repeatedly over the past couple of years, I’d love to see a new downtown arena. But not at any price. I don’t think this deal represents anything close to an equitable sharing of risks and rewards between Katz Group and city taxpayers.”

In that same article, U of A sports economist Brad Humphreys shared his thoughts:

“It’s a terrible deal. They’re still short $100 million and I don’t see it going very far until they come up with the remainder of the funding.”

Here is what David Staples wrote:

“So did we get fleeced? Not even close. This is a good deal, far better than the existing Oilers deal at Rexall, and certainly right in line with what we see in terms of public/private funding models for new arenas in other NHL cities.”

Here is what Terry Jones wrote:

“The late great city of Edmonton has dared to be great again.”

Northlands CEO Richard Andersen hasn’t made many statements since the vote, but the Sun quoted him yesterday:

“We want to move on and get busy doing the other things we do. This is a huge distraction.”

Oilers star Taylor Hall tweeted his reaction to the news:

“Excited news on the new arena for Edmonton. In other news @ebs_14 and I got iPhones and they put BlackBerrys to shame.”

Here is what Yukon Jack wrote in his column:

“Finally! Finally another step in the downtown arena project. To say this thing is moving at a glacier’s pace is an insult to climate change.”

Bruce Urban, owner of the Edmonton Rush, is a fan of the project:

“It’s very exciting. Let’s picture Downtown Edmonton with this beautiful arena, the businesses that will follow, the restaurants and entrepreneurs who will follow. It’s very exciting for the city.”

The Calgary Herald asked Flames CEO Ken King to comment and received this statement:

“The news coming out of Edmonton regarding their new building is wonderful. A state of the art new facility will be a great boon to their community and create a viable future for their team.”

Writing for the National Post, here is what Jesse Kline had to say:

“This is nothing more than corporate welfare, and by threatening to relocate the Oilers, Mr. Katz was essentially threatening to make business decisions based on how much money he can extract from local governments, rather than what city is the best market to do business in.”

The Edmonton Sun said that with the deal done, it is time to move on:

“City council has decided to proceed with a package that will see a major chunk of downtown Edmonton revitalized. It has been an acrimonious two-year debate, and the sensible move at this point is for the city to move forward together.”

The Edmonton Journal said the decision was the right call for our city:

“In this corner, the belief is that all Edmontonians will benefit – from economic spinoffs boosting the tax base, from the proliferation of non-hockey entertainment options that they will use, from the greater future attractiveness of Edmonton as a place to live, and from the fact that NHL hockey will now be guaranteed to remain a key part of community pride for at least the next 35 years.”

I’m sure I have missed some reaction, but I think the quotes I have highlighted are fairly representative.

With a positive vote on the arena, Council can get back into the driver’s seat

By Mack D. Male · October 24, 2011 at 2:45pm

City Council probably could have done a better job of handling the arena issue this year. I asked Councillor Sohi about this a couple weeks ago, and he agreed. “In hindsight we should have been in the driver’s seat rather than letting the Katz Group drive the process,” he told me.

How much have things skewed in the Katz Group’s favor? Some would say a lot. Here’s what Paula Simons wrote about Council’s vote to purchase the land for the arena:

I am honestly awestruck at Katz’s audacity — and his brilliance. The city takes two large parcels straight off his hands, at his cost, allowing him to assemble and flip the land, with no expense or debt. The city pays all the upfront costs of the arena but still agrees to let the Katz Group choose and hire the architect, come up with the design, and keep all the revenues. We actually pay the team to promote the city. And, at Katz’s behest, we slap a tax on his business rival. It’s the most stunning power play in Oilers history.

The entire article is worth a read. It may have been a brilliant move on the part of the Katz Group, but I think it also opened the door for Council to gain some leverage. There are two key things to consider here – the land, and the design.

Purchasing the land that Katz assembled is a good deal for the City. Underutilized, valuable land is now owned by the City rather than speculative developers. The latest report on the proposed Downtown CRL pegs the cost of the land at around $30 million, a very reasonable amount. “The big piece of land for the arena proper is below market value so that was a no-brainier,” Councillor Iveson told me. Importantly, the City owns that land now regardless of what happens with the arena. “If the deal falls through, it’s a good asset,” Councillor Iveson said. I don’t know about you, but I’d much rather have the City own that land than a private interest. You might argue that the City could just as easily fail to do anything with the land, but at least we can put pressure on the City to make something happen. A private developer could just sit on the land forever. Getting rid of the parking lots is one of the most appealing aspects of this project.

Moving forward with the design process is an important next step. Conceptual stuff has been done by the Katz Group of course, but a vote in favor of the arena deal this week would really get the ball rolling. As I understand it, the City and the Katz Group would sit down and figure out the necessary retentions. They’d select the design architect, the local architect, and any consultants. An RFP would go out for the construction manager, and once the retentions were in place, the design process would start. According to the latest City report, “the City will fund the cost of design to a 60% level on which the tender documents will be based in order to get the best possible Guaranteed Maximum Price for the arena.” Keeping in mind the $450 million ceiling, the goal would be to produce a design that could be taken to market for that price, and the design itself is an element of that total amount. Importantly though, the City owns this design work (the Katz Group would retain ownership over the conceptual work they completed). “If either party elects not to complete the deal, the City will have ownership rights to the design work undertaken by the City.” You can read more about the budget request to start the process here.

The City needs the Katz Group’s help on this, so I think the collaborative approach makes sense. The Katz Group understands the market and they know what will sell. They’ve done the research and they know what has worked elsewhere around the league. Of course we want the design to be attractive, to comply with the Capital City Downtown Plan, and to support Edmonton’s other priorities, such as The Way We Green. But it has to be functional, too. With the proposed agreement, the City would get all of that design for less than all of the cost.

The design process also presents an important opportunity for Council to re-engage the public. The public consultation that will take place as part of getting to the final design must be taken seriously. It really should be seen as a rare chance to dramatically improve the way the City solicits input and feedback from citizens. We must do better.

Armed with both the land and a ready-to-build design for an arena, Council (and thus the City) will be in a much better negotiating position. Let’s assume for a minute that the deal falls through, perhaps because the province refuses to come to the table, and that Katz or a subsequent owner wanted to move the team. The City could justifiably go to the NHL and say “look, we have land and the design for a building ready to go” which would put the brakes on any move pretty quickly. The league is very unlikely to approve any move if the municipality is ready to play ball, especially in an important market like Edmonton. It gives Council leverage they lack at the moment, and it should put any relocation fears to rest, unfounded as they may be.

Not everyone agrees with this perspective. Councillor Caterina, for instance: “We could be spending taxpayers’ money…before we even know if an arena is a go or not.” But I don’t think there’s much harm in this limited amount of strategic spending. Everything appears to rest upon another level of government stepping up to the plate with $100 million or more. If that doesn’t happen, at least Council will be in a stronger position to move forward.

Maybe it’s not too late. Maybe with this week’s vote on the arena deal, Council can get back into the driver’s seat.

City Council approves downtown arena land purchase, postpones final decision on the project

By Mack D. Male · October 14, 2011 at 10:44pm

The downtown arena project took a big step forward today as City Council voted to purchase the land proposed as the site for the project and the Katz Group made some concessions in order to further the negotiations. With options on the land expiring at the end of the month and a decision required by October 21, Council had to move quickly. They decided to postpone a final decision on the arena project until October 26, however.

City Manager Simon Farbrother provided an update on this week’s meetings in New York and the ongoing negotiations between the City and the Katz Group. You can view his presentation in PDF here. The highlights include:

There was no change in the maximum price approach (still $450 million), nor in the user fee (ticket tax) of $125 million, nor in the City’s contribution of $125 million ($45 million to come from the CRL).
There was no change in the location agreement of 35 years.
While the Katz Group reconfirmed its commitment of $100 million to the arena, the funding has been restructured as a $5.5 million lease for 30 years.
The LRT connection now has an estimated cost of $17 million.
The cost for the pedway over 104 Avenue (also known as the winter garden) will be split evenly between the City and the Katz Group, with the City contributing a maximum of $25 million.
The City will now operate the community rink.
The design process will now potentially commence before the province has confirmed any contribution.
The City will spend $20 million over 10 years to market itself through advertising at Oilers games (this is over and above the $450 million and will be introduced in a future City budget).
And the biggest change, the Katz Group agreed to waive the requirement for a non-compete clause with Northlands.

With Council agreeing to purchase the land and the Katz Group agreeing to waive the non-compete requirement, the project certainly feels like it is back on track. Terry Jones called Mandel the MVP and Katz the first star in the arena project. There is still the outstanding $100 million, however, and both parties will continue to pursue provincial funding for that.

For more on today’s meeting, check out David Staples’ column and Paula Simons’ blog post. And don’t miss The Charrette’s look at 311 call statistics.

Today’s Council meeting was the talk of Twitter, as expected. This graph shows the frequency of tweets posted over the four hour meeting:

Here’s a word cloud of all the tweets posted in Edmonton during the meeting:

The non-compete clause was definitely a big topic of discussion. For its part, the Katz Group issued a simple statement from Executive Vice President John Karvellas after today’s meeting:

We respect the City’s process and appreciate the time Council and Administration devoted to the arena project in today’s special meeting. We have the basis of an agreement that will enable us to move this project forward, subject to the approval of City Council on October 26, 2011. We continue to believe, as we have from day one, that this project represents a great opportunity to help revitalize our downtown and ensure the Oilers’ long-term sustainability in Edmonton.

The next step will be a non-statutory public hearing on October 24/25, with Council set to make its final decision on the arena project on October 26. As I mentioned earlier, if you want to voice your opinion on the deal one way or the other, the number one thing you can do is email your City Councillor.

Edmonton’s Downtown Arena on the precipice

By Mack D. Male · October 14, 2011 at 11:45am

Today is another big day for Edmonton’s downtown arena project. City Council will be meeting this afternoon to once again discuss the project, with a particular focus on the outcome of this week’s meetings in New York with Gary Bettman.

My sense is that the project is in danger. And I’m still trying to understand how we got here.

I used to think the arena was basically a done deal. It seemed like all of the right pieces were in place. The arena was listed as one of the catalyst projects in the Capital City Downtown Plan and that document was successfully approved. Edmontonians got engaged at public meetings and open houses. The City embarked on a high profile public consultation process. The Katz Group met with anyone who would listen (and they continue to). Council had questions and they got answers. Surveys showed significant support for the project, up from previous surveys. Organizations started becoming more vocal about their support, with letters from the Downtown Vibrancy Task Force and Yes 4 Edmonton. In May, the “agreement framework” was approved. In August, the Downtown CRL concept came forward and seemed to be well-received. The latest stats on calls to 311 suggest that more people support the project than oppose it.

Certainly there have been challenges along the way, but it seemed to me that most of those challenges were related to the details. For a while now it has felt like the arena was going to be built, it was just a matter of how and when.

But now? Well, it doesn’t look so good anymore.

The meetings in New York were taken by many to be a sign that negotiations between the City and the Katz Group were about to go off the rails. Mayor Mandel hasn’t been his usual optimistic self lately either. Two new websites launched this week to try to push the project forward, Heart of the Capital and Build the Arena. And my preliminary analysis of tweets about the arena shows that lately, the majority of tweets are about supporting the arena rather than opposing it. Edmontonians seem worried. The October 31 deadline is inching ever closer, but it feels like we’re getting further and further away from the goal line for this project.

Tweets about the arena in Edmonton for the first twelve days of October

I share the Katz Group’s growing impatience, even if I don’t agree with the way they have gone about things. I don’t envy Council’s position, but I’m confident they’ll make a decision that is in the best interests of the city (though likely not today). At this point, I just want some certainty. If we’re going to build the arena, great, let’s do everything we can to ensure it is a success. If we’re not going to move ahead with the project, fine, let’s refocus and get back to work.

For a decent overview of where we’re at, check out the Journal’s summary. You can follow this afternoon’s discussion on Twitter, or you can connect to City Council’s streaming audio and video. If you want to voice your opinion on the deal one way or the other, the number one thing you can do is email your City Councillor.

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

By Mack D. Male · August 24, 2011 at 8:47pm

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 Katz Group won’t build an Edmonton arena outside of downtown

By Mack D. Male · August 6, 2011 at 6:21pm

The Charrette has a good discussion of the recent arena news. You’ve probably heard by now that the Katz Group is now on record saying they would consider alternate locations if the downtown arena doesn’t move ahead:

“We continue to believe that the best solution for the city and the Oilers is a downtown development and we remain committed to those negotiations. However, to the extent that we cannot be certain of the result of those negotiations, we are open to alternatives to find another long-term home for the Oilers in the Edmonton region.”

At this point a statement like that is nothing but political maneuvering. The Katz Group has never indicated they would look to build elsewhere prior to that statement, so I find it hard to believe it’s true. Here’s a look back at what I mean.

The Katz Group issued a press release on March 25, 2008 voicing its support for a new downtown arena complex. John Karvellas, Rexall Sports President, said:

“Rexall Sports shares the Committee’s view that a downtown arena complex can help revitalize Edmonton’s core and become the centrepiece for a number of major developments in the adjoining area, as similar projects have done for other cities.”

On August 31, 2009 the Katz Group appointed Patrick LaForge as its principal point of contact. He said:

“At the end of the day, we envision a vibrant downtown with new housing, retail, office and public space, hotels, residential housing and other amenities, all anchored by a world-class entertainment and sports venue. We envision a neighbourhood that is well-integrated with public transit, livable, walkable, environmentally responsible and a benefit to downtown, surrounding communities and all of Northern Alberta.”

On September 29, 2009 the revitalizedowntown.ca domain name was registered. The website didn’t launch until February 24, 2010. Here’s what I said at the time:

Annoyed with the domain http://www.revitalizedowntown.ca. Katz is certainly not the only person working to revitalize downtown #yeg.

Here’s what Bob Black said in a speech on February 9, 2010:

“In all of the public opinion research we have done, the opportunity to revitalize downtown is what has people most excited about this project. It is also the reason why the mayor and the city have made revitalizing downtown one of their top priorities.”

In a speech to City Council on July 21, 2010, here’s what Daryl Katz had to say:

“I believe we have a once in a generation opportunity — through the Oilers, and through the need for a new arena — to do something transformative for downtown and for our city.”

In December 2010, the answers to questions from Council were released. Councillor Thiele asked the Katz Group: If no new downtown arena district is built in Edmonton and the Oilers will not play in a renovated Rexall Place, where will they play? The response:

“Our singular focus is upon negotiating a mutually satisfactory agreement with the City of Edmonton that will facilitate the construction of a new downtown arena. We are confident that this can be achieved.”

And here’s what Bob Black said on May 18, 2011 when the Katz Group and the City agreed on an agreement framework:

“From the beginning we have approached this project with the twin objectives of creating a major engine to drive the revitalization of downtown and of creating a model for the long term sustainability of the Oilers in Edmonton.”

So, after all that, they release a simple statement saying they’re exploring alternatives? I call bullshit.

But perhaps, as The Charrette pointed out, the damage is done. Either they’re lying about looking elsewhere, or they’ve been lying to us for three years about how important downtown is.

Edmonton’s Downtown Arena moves ahead with agreement framework

By Mack D. Male · May 18, 2011 at 11:36pm

The Katz Group scored a major victory tonight as City Council voted in private to approve an “agreement framework” for the proposed downtown arena. The framework is the basis for the two sides to negotiate a formal Master Agreement, which will require final approval by City Council. While not a final binding agreement, tonight’s deal nevertheless allows the project to move forward.

Here is the full motion and amendments as voted on back on April 6 (tonight’s was largely the same – see here):

Edmonton Downtown Arena Motion

The vote tonight succeeded 8-5. Who voted in favor of the framework? Who voted against?

For: Mandel, Krushell, Loken, Leibovici, Batty, Henderson, Anderson, Sohi
Against: Sloan, Gibbons, Caterina, Iveson, Diotte

The document outlines $350 million in funding for a $450 million arena. Where does the other $100 million come from?

Answering questions from the media tonight, Mayor Mandel would only say “other orders of government.” There is no confirmation on where the remaining amount will come from, but it is hoped that the Province will support the project.

How much of the total cost will be funded by a CRL?

The motion only states that $20 million be directed at the arena from a CRL. The remaining $105 million (the City’s maximum contribution will be $125 million) could come from direct tax revenues. However, the agreement framework page states that $45 million would come from a CRL. The final mix is likely to change.

What happens to Rexall Place and Northlands?

The motion specifies that City administration will continue “to work with Northlands to ensure the City understands their financial challenges and how these can be addressed.” Answering questions this evening, City Manager Simon Farbrother said that Edmonton cannot sustain two arenas. It would appear that Northlands has lost its seat at the table.

Will the City own the arena? Will it receive the revenue?

Under the agreement, the City would own the building and land. The Katz Group would be responsible for all maintenance, upgrades, operating and capital expense costs. The City also retains the right to access the facility four weeks a year. As for revenue, the motion only states that the City “negotiate options for potential revenue sharing.”

What will the arena look like?

The City stated tonight that the arena will contain 18,500 seats and 350 parking stalls. The design process will still need to happen once the project moves ahead.

What are the next steps?

The City and the Katz Group will now work to complete the Master Agreement. They’ll also be working to secure the remaining $100 million, likely from the Province.

Twitter was buzzing with the news tonight. Here are a few of the tweets that caught my eye:

#yegcc just came back in public – voted on a motion to approve a framework for #yegarena deal – details to be kept in private. Passes 8-5.Don Iveson
May 18 via Twitter for iPhone

News conference upcoming at City Hall for major #yegarena announcement.NHL Oilers
May 18 via Twitter for BlackBerry®

City announces framework to build arena!Steve Hogle
May 18 via Twitter for BlackBerry®

City and Katz Group agree on agreement framework to build arena http://bit.ly/ipraRy #yegarena #yegCity of Edmonton
May 18 via TweetDeck

The City of Edmonton and Katz Group agree to framework that “sustains NHL hockey in #yeg for 35 years.” #yegarena #OilersCTV Edmonton
May 18 via Twitter for BlackBerry®

Mandel stresses optimism, forward momentum, believes holes in plan will come together now that framework of deal in place. #yegarenaJohn MacKinnon
May 18 via Twitter for BlackBerry®

This arena will built just when the construction labour and materials market explodes. I’m guessing it comes in at $700 million. #yegarenaDavid MacLean
May 18 via HootSuite

This arena situation is just like the airport situation; everyone knew it was going to happen, it was just a matter of when. #yegarena #yegAlana Willerton
May 18 via Twitter for Mac

NOTE: #yegarena dissenters. A friendly reminder; you have until JULY 17th to file your plebiscite application. Just saying.Chris LaBossiere
May 18 via web

It’ll be interesting to see what happens next! Much more to come, stay tuned.

Alberta’s Community Revitalization Levy: Proposed Downtown Edmonton Arena District

By Mack D. Male · December 17, 2010 at 9:00pm

This is the third part in a three-part series on Alberta’s CRL.

In the first part of the series, we looked at Alberta’s CRL legislation, identifying how it works and what the process is for creating a new CRL. In the second part of the series, we looked at Alberta’s three existing CRL projects, to get an understanding of how the funding mechanism has been used in the province thus far. Now we’ll look at the proposed downtown Edmonton Arena District, to see how a CRL might be used for that project.

Introduction

I am by no means the first to write about a CRL in relation to the proposed arena. Last month, Andy Grabia of Why Downtown? wrote a popular post on the proposed CRL. The use of a CRL has been a frequently cited potential source of funding since at least August 2009, but it was mentioned long before that actually. Notably, in the City Shaping: Summary Report of the Leadership Committee for a New Sports/Entertainment Facility for Edmonton (PDF) from March 2008, there’s this statement:

There is precedent in Alberta for the use of a community revitalization levy (CRL) for enabling projects such as this.

At the time that statement was made, the Rivers District CRL (the first in Alberta) was less than a year old. The three current CRLs are being used to revitalize large areas, and they are not centered around any specific development like an arena. Only one of them has received full approval and moved on to full implementation. I don’t think it’s fair to say there’s precedent for the use of a CRL to enable the arena project now, and it certainly wasn’t an accurate statement three years ago.

I point this out, because it seems as though that report has formed the basis of many other related decisions in the intervening years. It treats the CRL as if it is a well-known, well-established funding mechanism, which I don’t believe is true. Certainly TIFs have been used elsewhere in North America, but our context here is different.

What’s the potential?

As we saw in part one, there can be significant upside to a CRL, assuming development does occur and property values do rise. We also learned that there are a variety of factors that can affect this.

That same City Shaping report offered some financial estimates on the proposed arena CRL:

We have estimated the potential for $2.5 billion in additional assessment growth representing $20 million in incremental municipal and provincial property tax revenue annually. This estimate was reviewed for reasonableness by the City Assessor.

Back in February, Gary Klassen, GM of Planning & Development at the City of Edmonton, estimated that $1 billion in investment would generate $14 million a year in taxes.

Given that we don’t have another Alberta-based example of a CRL like the one being proposed for the arena, I asked the Katz Group to help me out. Can we really get the economic lift that proponents of the arena suggest? They pointed me in the direction of Columbus, which is the focus of a case study on their website. Nationwide Arena, home of the Columbus Blue Jackets, opened adjacent to the city’s downtown in 2000, in an area that once housed a state prison. A report published in July 2008 by the John Glenn School of Public Affairs found that the Arena District was responsible for stimulating more than $1 billion in investment:

"This is really a model of ways to use an arena to help revitalize downtowns," said Glenn School professor Robert Greenbaum.

The report suggests that the Arena District had a significant impact on jobs in the area:

An increase of more than 50 percent in the number of businesses in the Arena District since 2000. In addition to the Blue Jackets, the district’s 172 businesses include coffee shops, a movie theater and professional service firms. These businesses employed more than 5,000 full- and part-time workers in 2006, and between 2000 and 2006 they generated $1.46 billion in payroll and $6.13 billion in revenue.

And on property values:

Appraised property values in the Arena District increased by 267 percent between 1999 and 2008, compared to a 22 percent increase in property values for the entire downtown area.

I encourage you to read through the report. Of course, the findings are not without dispute. You can read another perspective on Columbus here.

Hypothetical CRL Boundary

Though the City of Edmonton has been working with a conceptual model for the arena CRL, they haven’t shared it publicly. In response to Council’s questions, they did offer some insight, however. The model includes:

300,000 square feet or retail built over 20 years
370,000 square feet of hotel built over 6 years
95,000 square feet of casino built in the first year
1,500,000 square feet of office built over 20 years
1,800,000 square feet of residential built over 10 years

The model assumes natural assessment appreciation of 3% per year, and a 3% increase in municipal and educational taxes per year.

The model suggests that $160 million in incremental taxes could be garnered, $125 million of which could be dedicated to the arena while the remaining $35 million would go to other public infrastructure.

You can download the relevant spreadsheets in PDF here.

As for the conceptual boundary, which also remains private, the following information was shared:

The boundary includes the Aurora project, which they estimate could generate $4.1 million in tax revenue
The boundary includes a redeveloped casino, which they estimate could generate $0.8 million in tax revenue
The boundary includes the EPCOR Tower, which they estimate could generate $5.0 million to $6.8 million in tax revenue

That shows how much more lucrative commercial development like an office tower can be. There’s a risk, however, in that it is quite likely the EPCOR Tower will be completed before a CRL is approved, which means it would generate very little or no lift in property taxes. Remember the baseline assessment is set to December 31 of the year in which the CRL is approved.

I have absolutely no inside information on what the CRL boundary for the proposed arena district might look like, but here’s a hypothetical example:

View Larger Map

You can see the proposed Edmonton Arena District in the middle (the dark part), and the red is the hypothetical CRL boundary. Why did I choose that boundary? A few reasons:

The hypothetical boundary covers an area of 1.4 square kilometers, which is right in the middle of the three existing CRL boundaries.
The hypothetical boundary includes the Aurora project, as well as the EPCOR tower.
It highlights a risk, that the CRL might be located adjacent or very close to the Quarters CRL, potentially affecting the success of both projects.

We should learn more about the City’s model and boundary when City Council meets on January 17, 2011.

Is the timeline realistic?

The Oilers’ lease at Rexall Place expires on June 30, 2014, and the Katz Group has said it has no intention of renewing that agreement. That gives the project a deadline of less than four years. As we learned in part one, the ideal process for obtaining a CRL takes roughly two years, and in part two, we found out that only the Rivers District CRL happened that quickly. Mayor Mandel recently suggested a decision could be made by April 2011, which makes the window of time to obtain funding and complete construction more like three years. It just doesn’t seem likely to happen. Here’s the response from Administration when asked about the timeline:

The Katz group has identified that if an arena project goes ahead it will happen concurrently with development of an office tower in the district. The expected construction window for both the office tower and arena is 18 – 24 months. This schedule for concurrent development is aggressive. For comparison, the current EPCOR office tower project is scheduled to be constructed over 36 months.

It’s certainly possible that a CRL could be approved in the given timeframe, but rezoning, building permits, design, and all the other elements of construction would likely take more time than is available (given the Katz Group’s deadline).

What are the risks?

In Administration’s answers to Council’s questions, they addressed one of the bigger risks of using a CRL to fund the project – the current economy. The answer notes rising office vacancies downtown and declining lease rates, and goes on to say:

A significant component of the Katz Group proposal is the construction of new office and commercial space. This type of space would contribute considerably to the front ending of a CRL area, however, the current market conditions suggest that there is considerable risk if anchor tenants are not committed to the space before construction. The Katz group intent is to attract new business to the City that currently does not have a place in the market. If this is not possible it may result in existing businesses moving from other parts of Edmonton to the new development.

Another answer gave similar information:

A faster assessment lift would occur if the Katz Group was to construct certain developments (i.e. in advance of natural demand) that could increase incremental taxes within the boundary. Unless new tenants are coming from outside Edmonton that otherwise would not locate here, then these incremental taxes (in advance of natural development) may only reflect a shift in tenants from one area of downtown to the other.

Those answers highlight an issue that Scott Hennig of the Canadian Taxpayers Federation has frequently pointed out – the potential that the resulting development isn’t actually new, and is just a shift from other areas of the city. That would have the side effect of taking taxes that would have been in general revenue and locking them into the CRL. Scott told me:

The only way a new hotel (or bar) will get built next to the arena and not just shift demand is if all of a sudden people’s incomes go up (in aggregate, not just say, construction workers) as a result of the new arena and development and therefore they want to use that money to purchase additional products, or if it can be shown that Edmonton’s population will grow faster as a result of the new development, or if you can increase tourism.

It’s an issue that is certainly worth thinking about. How can you prove that a business located in the area specifically because of the arena? How can you prove it wouldn’t have been built elsewhere in the city were it not for the arena? How can you show that tourism increased as a result? How can you show that the arena caused population to grow faster than it would have normally? All of these things are hypothetical benefits that are difficult to prove in practice.

Scott also made a good comment on demand, in response to a question about the arena potentially inducing a housing development that would not have occurred in Edmonton otherwise:

You can be sure that if there was a demand for additional housing to be built, it would get built. The city didn’t use a CRL in anywhere else in the city and houses, condos, apartment buildings, townhouses and other housing still got built over the past 100 years.

Another risk, of course, is that not enough development takes place over the 20 year timeframe of the CRL, leaving the City burdened with the remaining debt.

Sharing The Risk

Both Mayor Mandel and the Katz Group have repeatedly said they want to negotiate a deal that is fair to all parties involved. More specifically, the Katz Group has said:

We seek a functional partnership with the City and a fair balancing of risk between the parties. Neither the City nor the Katz Group should bear risk disproportionately.

Could that sharing of risk apply to a CRL? We know that an important part of the plan for a CRL is to outline how any potential shortfall would be covered. By default, the City would have to cover the debt out of general revenues, taking on all the risk and potentially impacting the services it provides to citizens. Perhaps the Katz Group and the City could agree to share that responsibility, something that Administration has confirmed is an option:

An agreement can be attempted to be negotiated between the parties with respect to the issue of a guarantee to cover debt servicing if projected development does not occur in the CRL area.

Paula Simons has noted in the past that a similar deal in San Diego took place, but at the time the Katz Group wasn’t interested in such an arrangement. More recently they have indicated that such an arrangement could be a part of any negotiations with the City.

Sharing the risk could also refer to the resulting ownership of the project. It is important to recognize that a CRL is public money. Mayor Mandel has stated that if public funding was used to build the arena, there would be “big time say by the city and citizens.”

Transparency

I think both the City of Edmonton and the Katz Group have done a poor job of informing constituents about the CRL thus far, and I’d like to see them both address that shortcoming.

On the Katz Group’s Answers page, there’s a question about public investment that states:

The Community Revitalization Levy (CRL) is drawn from the enhanced tax revenue from the developments in and around the district. The CRL would pay down the city’s loan and then create a revenue stream in perpetuity.

No introduction or link to more information on the CRL. It’s as if “public investment” and “community revitalization levy” are one and the same, whereas the CRL is just one of a variety of public funding options. The City of Edmonton is guilty of jumping the gun as well. The questionnaire that was made available last month included a question about the CRL, without explaining what it is. Handouts were made available at the open houses that took place, but just 300 people attended those – compared to nearly 29,000 responses for the questionnaire. The City has since added a page on the funding model.

The City’s findings from that public consultation reinforce the idea that more education needs to be done. Participants noted that more study on the CRL is required, and that the “concept is very hard to understand.”

I asked Scott Hennig a bunch of questions about the CRL, and one of his comments in response stood out for me:

Unquestionably, the city can spend tax dollars to make certain locations more attractive, or using zoning laws or their land ownership to make certain types of buildings mandatory, but they don’t need a CRL to do that.

I think it’s really important that both the Katz Group and the City of Edmonton are transparent about what the CRL is, what the CRL is not, and how it might be used.

If Council decides a CRL is appropriate, the process of obtaining it needs to be much more open as well – when did you first hear about the Belvedere or Quarters CRL? My guess is not until the discussion about using a CRL for the arena started. That’s unacceptable, given that public consultation is a key component of obtaining a CRL.

Transparency on this issue moving forward is key.

Two Basic Assumptions

Let’s revisit the “two basic assumptions” we identified in part one. Is the arena project worth the risks associated with using a CRL to fund it? Public opinion on this seems mixed. Some people feel that a new arena is unnecessary and will do little to revitalize downtown. Others think the arena is a game-changer, an important catalyst project (as identified by the Capital City Downtown Plan). The truth likely lies somewhere in-between. As for the second assumption – is there a sound expectation that development will occur as a result of the arena? The fear is that we end up with another City Centre debacle, where additional development was promised but never built. The Katz group did not provide specifics, but did try to reassure Council that additional development will take place:

Our dialogue with our consultants and prospective tenants and partners leaves us with a high level of confidence that we will be able to develop a vibrant entertainment district around the arena. We have had substantive discussions with 6 major hoteliers and the level of interest in placing two hotels in the Arena District is very high. We have nine written Letters of Interest from a variety of international, national and local hospitality and entertainment providers and have had numerous other verbal expressions of interest. We have also had promising discussions with potential anchor tenants for the proposed office towers. We are confident that there will be a market within the District for both student residences and condominiums.

Final Thoughts

In this three-part series, we’ve looked at how Alberta’s community revitalization levy legislation came into existence, we’ve examined the impact it can have, and we’ve identified the process that must take place for a CRL to be approved. We also explored the three current CRL projects in the province. Finally, we’ve taken all of that information and applied it to help us understand how a CRL might be used for the proposed downtown Edmonton Arena District. There are opportunities and challenges associated with a CRL for the proposed project, and I think it is clear that there’s a need for more specific information.

The arena project is a moving target of course. We’ll learn much more about the City’s business model framework as well as their thoughts on the use of a CRL at the January 17, 2011 City Council meeting.

Alberta’s Community Revitalization Levy:

Proposed Downtown Arena: Response to Council’s Questions

By Mack D. Male · December 3, 2010 at 10:56am

Back in July, City Council asked questions of Administration, the Katz Group, and Northlands regarding the proposed downtown arena district. A lot of questions. Today, the responses to those questions are being made available in preparation for the December 10 meeting (read them here). Here are a few questions and answers that I have extracted.

Mayor Mandel asked Administration: How many parking stalls are in downtown Edmonton that are within 8-10 blocks of the new proposed arena site?

Data from a parking study prepared as a background report for the Capital City Downtown Plan (Capital City Downtown Plan) in 2008 and recent calculations indicate approximately 46,100 total parking stalls exist within a 10 block radius from the proposed arena site. Of these, approximately 2,700 are on-street metered parking, 17,300 are off-street surface parking, and 26,100 are located within a parkade (i.e. structured parking).

Councillor Caterina asked Administration: Why was the 5th best location chosen rather than #1 – Jasper Avenue, #2 – Northlands, etc.?

The confidential HOK Study does not prioritize the proposed locations. Rather, it identifies the essential components required to attract major sporting and entertainment events and identifies location issues and the criteria necessary for a successful facility development. The proposed location for the district is a viable choice when factoring in the various criteria identified in the HOK Study, particularly related to the challenges/opportunities of land assembly.

Councillor Leibovici asked Administration: Can a condition of a CRL be a guaranteed revenue stream? In other words if projected development does not occur as anticipated can the City require that the Katz Group provide a guarantee to cover debt servicing costs?

A risk assessment is part of the requirement for the CRL. The CRL plan must identify expected and alternative funding sources in the event the development does not occur. Alternative revenues to make up any shortfall in expected revenues from a CRL would be discussed as part of a negotiation with the Katz group.

Councillor Leibovici asked Administration: What are the projections for the Edmonton Convention Market? Part of the answer:

From Mike Fitzpatrick, VP & General Manager of the Shaw Convention Centre: The Shaw Conference Centre is routinely turning away convention business due to a lack of downtown convention space; when that happens these events are almost always forced to select another city. In the nine months from January to September 2010 we have already turned away 13 future convention bookings.

Councillor Sohi asked Administration: Have discussions taken place with the Province regarding the CRL model?

Administration has had preliminary discussions with the province on the use of a CRL for arena development.

Councillor Anderson asked the Katz Group: Is the $100 m Katz dollars cash or land?

There are a number of ways to deliver $100m in value, but we recognize that this will have to be done in a fashion that is acceptable to the City.

Councillor Iveson asked the Katz Group: Please explain exactly how a Location Agreement works from the Franchise perspective, including the contemplated duration of the agreement.

A location agreement would be a term of the lease pursuant to which the Oilers would play in the new building. It would bind the Oilers to playing only in that building for the full term of the lease. We are prepared to sign a long term lease in a new downtown arena that would bind the team to Edmonton for the term of that lease. We expect a term of 25 years or more.

Councillor Sloan asked the Katz Group: Forbes has shown consistently over the past 3 years that the Oiler net operating income is better than the Calgary Flames anywhere from $3 million to $10 million per year?

That is not accurate based on our information.

Councillor Sohi asked the Katz Group: Are two arenas viable in Edmonton?

No.

Councillor Thiele asked the Katz Group: If no new downtown arena district is built in Edmonton and the Oilers will not play in a renovated Rexall Place, where will they play?

Our singular focus is upon negotiating a mutually satisfactory agreement with the City of Edmonton that will facilitate the construction of a new downtown arena. We are confident that this can be achieved.

The complete list of questions and answers is available here. At the December 10 meeting, Northlands will be giving a presentation, the questions and answers will be discussed, and Administration will be talking about the public consultation that took place.

The issue will come before Council again on January 17. You can see more information here.

Recap: Downtown Arena Public Consultation Session

By Mack D. Male · November 10, 2010 at 10:00am

Last night was the first of four City-hosted public consultation sessions on the proposed downtown arena. The sessions aim to gather input that will be provided to City Council. Roughly 150 people visited the Robbins Health Learning Centre throughout the evening, though only about a third of those stayed for the facilitated part of the session.

The first two hours of the session followed an open house format, with information displays, handouts such as a backgrounder (PDF), City officials available to answer questions, and opportunities for individuals to write questions or comments on sticky notes or in drop boxes. Promptly at 7pm, Margaret Bateman made a brief presentation (PDF) on the consultation process. The next two hours were facilitated discussion groups, where everyone had the opportunity to provide specific feedback on five key questions. Here are the questions as they were presented this evening:

What’s your position on building a downtown arena?
- If supportive, why?
- If not, why not?
- If conditional, why?
If a new downtown arena project were to proceed, what do you think is important to consider in terms of:
- Design?
- Downtown connection and impact?
- Impact on surrounding communities?
- Community benefits/engagement?
- Impact on the future of Rexall Place?
- Any other issues?
What about using a mix of private and public funding to fund a downtown arena?
- Are you open to this? Why?
- Not open to this? Why not?
- Open under certain circumstances or conditions? If so, what are they?
What do you think about other possible funding sources to cover arena costs? (some or all of these are options)
- A ticket tax
- A personal seat license or luxury box license
- A community revitalization levy (which would require the facility be publicly owned)
- Funding for non-arena infrastructure from other levels of government
- Additional private investment
- Any other sources?
Do you have any final thoughts or views for Council?

I attended a “stakeholder” consultation last Thursday that followed a similar format, but asked slightly different questions. The first question in that session was: “Do you support building an arena to revitalize Edmonton’s downtown? If yes, why? If no, why not?” Talk about a leading question with a big assumption! Needless to say I was very pleased to see that the City (along with consultation partner Calder Bateman) had tweaked the questions this time around.

My discussion group started off fine, but quickly descended into disagreement as a few very vocal members wanted to skip to the funding question right away. The City officials on hand handled the situation very well, and before long our group was back on track generating some useful discussion (the other groups didn’t seem to have any issues). Here are some of the comments from the group that I wrote down:

Unclear that the arena would actually bring people downtown
The arena will not generate tourism
Skepticism about an influx of commercial development surrounding the arena
Transit would need to be greatly improved, concern about the lack of an LRT stop right at the arena
What would happen to Rexall Place?
General feeling we would lose Canadian Finals Rodeo and maybe other events
Lots of concern over traffic congestion, some concern over parking
Feeling that the current ticket prices are already too high
Quite a bit of skepticism about the effectiveness of a CRL
Thought that spending the money on existing recreation centres would result in higher benefit to the community

As far as I could tell, my group was the most negative about the arena. The others seemed cautiously optimistic, and when everyone came together at the end of the evening for Margaret Bateman’s recap, that seemed to be the consensus. There was concern over treating the arena as the key to revitalizing downtown, and there was obviously lots of concern over the funding model, but there also seemed to be some optimism that the project could be a very good thing.