Today behind closed doors City Council discussed a request from the Katz Group for more public money for the downtown arena project. In a letter to City Manager Simon Farbrother, the Katz Group’s John Karvellas wrote:
“…we believe the City has significant capacity beyond its commitment of $45 million to help fund the arena, which by all accounts is the catalyst for the CRL itself and which can help to fund so many other important projects to benefit downtown and the entire city.”
Council voted simply to reaffirm its commitment to the funding arrangement that was agreed upon nearly a year ago. Though the Katz Group letter outlines rising costs, it seems as though the request was actually for new concessions. And that didn’t sit well with Council. Only Councillors Sloan and Diotte voted against the motion (they had also voted against the funding deal).
Much of the discussion about today’s news has focused on the absurdity of a last-minute request from the Katz Group. Many have been critical of Daryl Katz’s decision to remain quiet and unseen, suggesting the approach has led to distrust among Edmontonians. And of course, Mayor Mandel’s statement that “frustrated” is a better word than “optimistic” has for many turned the arena from a done deal in to a big question mark.
But I’m not so sure. What if instead of a major setback, today was actually a major setup?
There’s a few things that don’t sit well in my mind. First, the timing is highly suspect. Two weeks ago the Downtown Business Association released a report that suggests $4.8 billion of investment could take place downtown in the next five years. Last week the Chamber of Commerce warned of a “massive setback” if the arena is not built. In between all of that, the province announced its financial outlook and said that revenues will fall short of projections, so a boost from that level of government doesn’t seem any more likely now than it did a year ago. Were the DBA and Chamber announcements simply well-orchestrated PR efforts designed to try to force the City’s hand? One wonders how much influence the Katz Group exerted.
Secondly, there’s much more than just the arena riding on the CRL. Municipal projects including the arena make up half of the DBA’s forecasted $4.8 billion, and most rely on the downtown CRL being approved. If there’s no arena, there’s no CRL, and if there’s no CRL, it’s back to the drawing board on how to fund all of the other initiatives. Talk is cheap yes, but I really do think that most on Council believe in the importance of a strong downtown. The prospect of putting all of the positive momentum and recent progress at risk must not be sitting well with them.
Thirdly, I just can’t get past that suggestion in the widely-circulated Katz Group letter that the City actually has the ability to contribute more money than previously agreed to. That seems like an odd thing to bring up now, at this juncture. Whether it is true or not, the seed has been planted.
Lastly, I think the Katz Group’s statement from this afternoon is quite strange. It focuses on the amount of time and money the organization has invested into the project, but remains optimistic about getting the issues resolved:
“The Katz Group is committed to continuing to work with the City to find creative solutions that work for both sides so that we can get on with the business of ensuring the Oilers’ long-term sustainability and accelerating the revitalization of the downtown core.”
Even more interesting, the statement seems to leave open the possibility that a larger deal can still be arranged:
“We have also offered to pay a fair share of arena construction costs above $450 million as part of a comprehensive package that makes economic sense.”
All of these things have me feeling as though today was more of a setup than anything else. Definitely to position the agreed upon $450 million limit as too low, and maybe even for a white knight to swoop in and save the deal, as I tweeted this afternoon. Could Katz himself now come forward in public with an increased financial offer and make Council look like the bad guys for refusing to match the increased funding requirements? Could someone on Council, perhaps someone angling for the Mayor’s chair next October, have a trick up his or her sleeve? Or perhaps most intriguing of all, could this finally be an opening for the province to step in and look like the heroes for salvaging the deal?
I guess we’ll find out soon enough.
MasterMaq's Blog 
How ridiculous and annoying is it that the public is the last to know about what’s really going on (in relation to a public project). Yay for lack of transparency -_-
What about this mysterious casino point? The city was to secure Katz a casino license? There is already a casino on site with a license and long term lease with their landlord – now the city. Who is going to buy them out? There can’t be two casinos in the same place.
And what about the city now footing the bill for some (or all) of the operating costs? This is what Lokin is saying is an ongoing public subsidy – just like we have now.
Quite the conspiracy theory wish list. The reality is the Katz Group is only now realizing the cost and risk they agreed to in New York by getting all operating revenue and having to absorb all operating costs. They are not in the arena running business, so that represents either huge risk, or more cost in paying someone to do it for them. The operating costs plus the amount they have to pay to the City in taxes and the loss of the current subsidy represents millions of dollars a year. The City Manager actually negotiated a pretty good deal for the City from that perspective, and now the Katz Group wants to back out (or wants more money). They will want an annual subsidy, and will probably go to the wall to get it. A plebiscite might be the only way out of this at this point.
Mack, I’m a bit confused as to the Katz Group’s claims on what they’ve spent on the project to date. My understanding was that they’ve committed a great deal of money to the project however I’m unclear as to their actual expenditures. Do you have any information on that?
Sorry, I don’t have any insight on the actual expenditures. They haven’t exactly been forthcoming about their finances!