EDMONTON – Edmonton city council has passed a motion to cease negotiations on the proposed downtown arena project “as a result of Mr. Katz’s letter and unwillingness to have an open discussion with Council.”
City councillors voted unanimously to walk away from the deal agreed to last year with team owner Daryl Katz, pointing the finger of blame at him and his last-minute demands for millions more in taxpayers’ money.
Mayor Stephen Mandel said it was time to send a message.
“It’s wrong to hold us up for ransom,” he said.
“This is not a council that said, ‘Don’t do a deal’ – but what do we do when we have a partner that says, ‘We want more money, and you pay for it?” Mandel added.
This does not necessarily mean the deal is dead, though.
The City Administration is being asked to provide a report to City Council as soon as possible on the “completion of the cessation of negotiations and the status of the City’s current transferable investments in a potential downtown arena project.”
A report outlining a framework for Council “to explore potential avenues to achieve the long-term goals of sustainable NHL hockey in Edmonton” has been requested of Administration as well, which essentially means that the City still wants to continue looking for a way to make a new arena in Edmonton a reality.
Amidst all the frustration, some councillors have floated a rather controversial solution of building the arena without the Katz group – an option that would mean spending more money and would involve more risk. but the rewards might also be there.
If the Katz Group wants to come before City Council to discuss a deal, though, the door will still remain open.
Neither Katz nor any of his officials attended Wednesday’s meeting, despite entreaties by Mayor Stephen Mandel to do so.
In a letter to Mandel Tuesday, Katz said given that the two sides are so far apart in negotiations, he would not show up to answer questions. It’s expected that his team will also not be commenting on Council’s vote.
It’s the second time in recent weeks the reclusive pharmacy billionaire has refused to appear in person to resolve the impasse, which began a month ago when Katz said he’d had a second look at the numbers and needed millions more, including a $6 million a year in operating subsidies for the arena.
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Mandel said he can’t judge the merits of the demand because the Oilers have not made their case.
However, the Mayor said council cannot even begin considering giving Katz the extra $6 million a year he wants if he won’t show them the financial details to prove he needs it.
“I’m not saying we should say no to Mr. Katz, but all the information that I’ve had an opportunity to see does not justify council giving him another six million dollars a year.”
Councillor Kerry Diotte said it was “shameful” to debate handing over millions more taxpayer dollars to Edmonton Oilers owner Daryl Katz for a new arena given they are not even allowed to see his team’s books.
“How can we even consider giving any tax money to a billionaire team owner when we haven’t seen detailed financials. That’s just not fair,” Coun. Diotte said to city manager Simon Farbrother at a meeting Wednesday to decide the fate of the stalled arena project.
“And we’re proceeding anyway to do a partnership with somebody and we don’t know how much money they make or lose? It’s ridiculous,” said Diotte.
Farbrother, tasked with negotiating the deal with Katz, told Diotte his officials are only doing what was asked of them.
“What council supported in terms of going forward is to support the investment of a new arena in the downtown core under a set of very defined conditions.”
He said other NHL teams wouldn’t divulge their financial information either.
Not so, said Diotte.
“In Scottsdale (Arizona), when the Phoenix Coyotes first went there, they tried to sell (the city) on doing a deal without the financials and they told them to get lost. I suggest we do the same thing.”
In regards to the issue of the $6 million, Farbrother said the two sides have dug in on the issue and there’s no movement in sight.
“Will we have an agreement in the next two to four weeks?” asked Coun. Dave Loken.
“In the absence of significant movement on the ($6 million) operating subsidy (by either side) we don’t think you will have an agreement,” said Farbrother.
“Is there any chance there (will be) significant movement on the Katz side of the table?” Loken asked.
“I don’t believe we’ve been given any confidence in that, no,” said Farbrother.
Coun. Tony Caterina asked Farbrother that given the Seattle threat and Katz’s renewed demands, “What assurance can you give me right now that whatever agreement we come to … that there will be nobody coming back in a year, in five, wanting to renegotiate?
“I cannot give you any categorical assurance, just like I can’t give you for any other agreement,” said Farbrother.
After the vote, Mandel said he doesn’t know what else Council should do.
“I’m not sure where we go,” he said.
“Someone has to be willing to at least put information forward to justify their case.
“We need to send a message (to Katz) that you got a fair deal and stand up to that fair deal or show us why it isn’t a fair deal,” said Mandel.
“And I can tell you he has not shown us.”
Katz officials have not made themselves available for comment.
More on the details of the original deal:
The two sides struck a cost-sharing deal a year ago, with construction set to begin in the spring of 2013.
City taxpayers and ticket buyers would pay to build the arena, which, with land, borrowing costs and surrounding infrastructure factored in, is now effectively at $700 million and rising.
The Oilers would keep all profits from NHL games, trade shows, concerts and other events for 11 months out of the year. The team would also keep naming rights for the building (worth up to $3 million a year), along with $2 million a year from the city for a decade for advertising.
Concession sales alone are pegged at $20 million a year.
In return, the Oilers would pay the city $5.5 million a year for 35 years and pay to operate and run the arena, estimated at $10 million a year.
The Oilers are worth about $212 million, good for middle of the pack in the NHL, and the team regularly sells out Rexall Place.
But Katz has said the franchise is losing money.
He also said the city can afford his new demands because the arena will spur retail, office, and residential buildings around it that will bring in an estimated $2 billion more in tax revenues for the city over 20 years.
However councillors were told by Farbrother that the arena will actually bring in about a quarter of that figure, $584 million, and that almost all of that money would be needed to pay off construction of the rink.
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