Will Edmonton be a second-class city without the new arena?

Last week City Council was again discussing the proposed downtown arena. Though Administration provided an update at the Wednesday meeting, it certainly didn’t feel like much new information was brought forward. Details on the proposed Community Revitalization Levy (CRL) were delayed yet again, this time until the first week of April. The meeting did not go well.

Mayor Mandel seemed to be upset that progress had stalled. He wants Council to make a decision in the next month or so:

“It’s enough already. I think we’re going around too many circles and let’s make a decision.”

But there was another comment he made that stood out:

“Either we build a new arena or we become a second-class city, which in my mind we don’t want to be.”

I’ll admit that comment even surprised me. Does Mandel really think we can’t be a first-class city without building the new arena? Is the project really a make-or-break one for Edmonton? Boosterism has long been a part of this debate, something Dave covered back in January. And as our Mayor I think Mandel needs to be Edmonton’s greatest champion, a role he has definitely not shied away from while in office. But is there no hope for Edmonton if the arena project doesn’t go ahead?

“My choice of words probably wasn’t right,” Mandel admitted when I asked him about it. “It’s just that when opportunities come up, you have to make a decision. Edmonton in the past hasn’t made an effort to seize opportunities that have come up.” It’s a good point, I think. You can’t simply wait for things to come along, you have to go out and get them. If we want to take Edmonton forward, we need to make a concerted effort to do so. “You’ve got to fight for things,” Mandel said.

Mandel stressed the need to improve our downtown. “Cities are evaluated by their downtowns, not their suburbs. Edmonton’s downtown has a long way to go.” I asked if that meant we had to have the arena. “There’s millions of ingredients that go into it,” he said. The arts community and our IT sector were just a few of the examples he cited. He of course thinks the arena is one of those ingredients, however. “The arena with a good financial deal will make Edmonton better.”

Stephen Mandel at Candi{date} Sept 29, 2010

When discussions get intense, people say things without fully thinking them through. I think that’s what happened to Mandel last week with the second-class comment, but he’s certainly not the only one who has made regrettable comments. Is it true that “the anti-arena faction is out in full force” as David Staples suggested (archive) a couple of weeks ago? I think it is, and there have certainly been some puzzling comments from them as well. The debate needs people on both sides, to help us tease out the details and ultimately arrive at the best decision for Edmonton. Mandel has decided to support the arena. Others have decided to fight it. A good debate is healthy for Edmonton.

On Saturday, Gary Lamphier writing in the Edmonton Journal reminded us that there are many key questions about the project that have yet to be answered (archive):

Although Mayor Stephen Mandel seems determined to wrap up the Seinfeldian arena "debate" — such as it is — in early April and push the project ahead at Mach speed, it’s hard to see why with so many key questions unresolved.

With weeks to go before a pivotal report on the project is presented to city council — following which councillors may have little time to reflect on it before they vote — it’s puzzling that so many key questions remain unanswered.

Today, Danny Hooper writing in the Edmonton Sun offered some compelling reasons to move ahead with the project (archive):

We are not the arctic outpost some think of us. This is a vibrant, energetic, resourceful, caring, and fun community, yet I don’t think our downtown best makes that statement. And I think it should.

Where some see a downtown that feels dull, disjointed, and at times lifeless, I see a blank canvas. The Katz group have at least brought out the paint and offered their vision of what our city centre could be. Of what it should be. And we’re all welcome to pick up a brush.

Maybe it comes down to perspective, as is so often the case with difficult questions such as this one. Do you choose to see the arena as Mayor Mandel does, as an opportunity to enhance our downtown that we should at least make an effort to capitalize on? Or do you choose to see the arena as those against the project do, as an expensive pet project that will do little to help Edmonton’s core?

There are no guarantees in this debate. Edmonton will not be relegated to “second-class” status if the project dies, nor will Edmonton automatically be world-renowned if it goes ahead. There’s obviously no secret recipe either, or we’d have already turned downtown around. Whether you support the arena or not, it’s important to recognize that revitalizing our downtown and becoming the city we want to be will take much more than any single project.

6 thoughts on “Will Edmonton be a second-class city without the new arena?

  1. Rush to Decision

    I am quite alarmed to hear the escalating rush to make a decision on moving forward with a new downtown arena. This is a complex challenge, but I have attempted to distil the discussion down to its essence. I applaud those members of City Council who are not buckling to pressures and are in fact pressing for details, which in the absence of, they will vote NO to moving forward in April 2011. Where has the debate occurred about the principles of City Government being in the business of business? Most governments are evolving with the times and getting out of the business of business, not into it.

    First the need for City Council to make a decision, implies City Council thinks there is a bigger role to be played by the City in what should be a business decision to build an arena or not. In the discussion that follows, I would suggest there is not a role, beyond the traditional zoning, by-law and licensing, and shared infrastructure e.g. LRT. Second, the mere fact City Council is debating the financing model, implies the City believes that beyond collecting tax revenue there will be a role for City Government to invest in the project. Forgetting about the fundamental decision of City Government getting into the business of business (where the private sector is capable of delivering a service), but if this is the case, then 78% of the revenues should be attributed back to the investors taking the lions share of the risk, which is not the Katz Group.

    Financing of New Downtown Arena

    Source
    Amount
    Type of Financing
    Percentage

    Katz Group
    $100 M
    Occupant Financing
    22%, one time investment

    Ticket Surcharge
    $125 M
    User Financing – to cover portion of construction and future operating and maintenance costs. Another form of GST.
    28%, initial investment, with ongoing revenue stream of $5-$6 per ticket

    CRL
    $125 M
    A form of property tax from those benefiting from Arena development/traffic drawn to area
    28% initial investment, and once recouped, ongoing revenues to City’s general tax levy.

    To Be Determined
    $100 M
    Provincial and Federal Governments have confirmed they will not be investing in project.
    22%

    Total
    $450 M

    My understanding is that the minority investor, Katz Group, would like 100% of the revenues generated, including not only NHL games, but all other events held. Further, they want to control/operate the venue.

    What is the Role of City Government and Tax Payer?

    Is the initiative a high priority need for Edmonton citizens?
    Can the private sector meet the need?
    Is the private sector willing to meet the need? Typically a business case would look at feasibility and profitability and returns to share holders.
    If business is unwilling to fill the need is it essential for Edmonton citizens? Essential services typically include transportation services, including snow removal, fire and police services, etc.

    How does this apply to the new Edmonton Downtown Arena?

    Is the initiative a high priority need for Edmonton citizens?

    Edmonton already has an arena operated by Northlands. There are ongoing operating and maintenance costs, but an arena exists. What is driving the need to replace the arena? If it is a desire by a tenant, Edmonton Oilers, to generate more revenue for the club, they could raise ticket prices. I would mention as a season ticket holder for many years, I had to let my tickets go as the prices are totally out of reach for most Edmontonians. Who can afford a $750 to $1,000 for a family night out at an Oilers game? The notion that more box seats could be added only puts it further out of reach. Who can afford box seats ($20,000+/game) to start with – typically businesses, not individuals, unless they are wealthy.

    Can the private sector meet the need?

    I do not believe the city has introduced any barriers to entry by the private sector, should business wish to build an arena. The City is prepared to rezone the downtown area for redevelopment. The Katz Group seems to be suggesting they could build and operate a facility and is prepared to look outside Edmonton to bring in expertise to run the facility. This implies existing Edmonton businesses in partnership with Northlands might well be displaced, having a negative impact on some existing businesses and jobs.

    Is the private sector willing to meet the need? Typically a business case would look at feasibility and profitability and returns to share holders.

    Again the Katz Group is interested, but, only as a 22% partner, who demands 100% of the revenue. It certainly would not be attractive to other private sector investors who basically would be investing 78% for NO return until the $450 million cost is recouped, and only a limited return on investment there after. I find it hard to believe if this is such a great business opportunity that we are not in a position where we are trying to address how to reduce an overwhelming abundance of interested business investors down to a manageable investment group. One might think this is because the details do not support this as a profitable business venture. It has risk, and The Katz Group has assessed the acceptable level of risk/return to be a 22% investment. Why would City Council feel compelled to accept the balance of risk, or backstop the deal, particularly when you consider the next series of questions around filling an essential need.

    If business is unwilling to fill the need is it essential for Edmonton citizens? Essential services typically include transportation services, including snow removal, fire and police services, etc.

    Is an arena an essential service for Edmontonians? Without the arena, would Edmontonian’s basic needs for food, shelter, transportation and health suffer? It is doubtful they would. However, the nice-to-have desires of some Edmontonians would. Assuming they could afford the cost to attend the events, the inability to attend a hockey game might result, if the current arena was not maintained and the NHL Oilers relocated. Why are the hospitality industries and other industries benefiting from an NHL team in Edmonton not more vested and interested in investing?

    Without even considering the bigger implications of who assumes the financial risk in the event ticket taxes and a CRL do not recover the initial investment, it seems to me this is a business decision not a City Council discussion and decision that requires the financial involvement of City Government, and ultimately it’s tax payers. Instead of a debate on how much the city should invest, the debate should be about how to protect and sustain our tax revenue stream. There has been no debate about whether City Government should get into the business of business. In fact past debates, including Ed Tel, have the city getting out of direct delivery business where the private sector can fill the need while preserving a revenue stream.

  2. This is such crap! How are we a 2nd rate city cos of that? Listen Mandel and all you other yodels how love to spend the tax payer bucks here…PAY IT YOURSELF and STOP riding off the backs of hard earning and hard paying Edmontonians!

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