a·cu·men [ak-yuh-muhn] noun: keen insight; shrewdness

Welcome to Oil Acumen. All Oilers, all the time... Occasionally other stuff.

Wednesday, 18 May 2011

05/18/11 24.0 New Arena Closer to Reality

The city of Edmonton needs a new downtown arena. Yes, the city; not just the hockey team that calls it home. The new arena district will be beneficial to more than just hockey fans in Edmonton. In fact, it will help to not only revitalize the aged and decrepit downtown core, but it will contribute to putting the city on the map. You are here because you are a hockey fan, which means that chances are you're in favor of the new arena. But this is something that every citizen should care about, and something that should excite us all. Today city council agreed on the framework of an agreement that is a major step toward the new arena district. Let's break down the particulars:

Daryl Katz will contribute 100 million dollars, the city of Edmonton will contribute $125 million and a user-fee (like a ticket tax) will pay for $125 million. That's $350 million, which still leaves $100 million to find. The city and the Katz Group agree that the cost will be $450 million, and the project will not go forward until all of the money is accounted for. The agreement today means that both the city and the Katz Group can now pursue additional sources of funding. When that funding is located, the two sides will hammer out the terms of the master agreement which will then mean that the project can get underway.

This is extremely encouraging news for the potential of an arena, because time is of the essence. The Oilers' lease of Rexall Place expires in 2014, so it's very important that a new arena be built before then. If funding and a deal can be put together and somehow ground can be broken in 2011, it will mean that the deadline could be feasible. Otherwise, the Oilers will have to extend the lease at Rexall Place for another year - a deal that is not likely to be favorable for the Oilers. City council does not believe that the city can support both Rexall Place and the new downtown arena, so if Northlands isn't part of the deal it will probably want to squeeze Katz in that lease extension.

If the arena is built, then it - and the land it's on - will be owned by the city. The Katz Group will have a lease there, which will presumably last for 35 years. That's because it's part of the conditions the city put forth that the Oilers remain in Edmonton for that period of time. That's great news for the security of the franchise. The Katz Group will operate the arena and they will get all the revenue from it and also be responsible for all the costs. Now one wonders where that leaves Northlands. Also, one wonders if the cost of beer will decrease... Chances are not good.

The Community Revitalization Levy, or CRL, is part of the way that the city intends to keep up their end of the bargain. The city did not want to increase property taxes across Edmonton, but the property taxes surrounding the arena will increase. The boundries of the CRL taxation were proposed to be from 109 street to 97 street and from 106 avenue to 102 avenue. The area is not a perfect square, but those are the basic parameters. However, the CRL will account for $45 million of the city's $125 million commitment instead of the $125 million CRL that was originally proposed, which means that the boundries of the CRL will be bigger. Because the overall cost that the CRL is covering is lower, it will mean that spreading out the cost will ease the burden and pay for it faster. Also, the increased fees from parking in the arena district and the surrounding area will help to cover the cost. Parking downtown already costs an arm and a leg, and it's only going to get worse inside that area, but it's a necessary evil.

Only new tax revenue would go to the arena, which means that the taxes already being paid in those areas would still go to infrastructure and education. As such, only tax revenue that is generated as a result of the arena development will got to the CRL. The city provides an excellent example:

"Mr. A and Mr. B own lots in the CRL zone. Both currently are parking lots and they are located directly next to each other. Today both businessmen pay $500 in taxes. The City approves a CRL in the area where the two lots are located. Mr. A builds a 20-storey condominium tower on his lot and Mr. B leaves his lot as is. Mr. B continues to pay $500 in taxes but Mr. A, who is collecting new revenue from his condominium tower, sees his taxes increase to $10,000 as a result of his new development. The increased amount – in this case $9,500 – would be used to pay for the CRL."

Originally, the Katz Group did not want to use a ticket tax to cover the cost of the arena, but the new framework agreement includes this measure, which means that Katz has agreed to it in principal. This was a major hurdle in getting the funding model approved, since without it the project would be without $125 million.

18, 500 seats is the number to expect for the new arena, but it's not set yet. This new agreement changes that. Now the two sides can come together and begin to finalize the design and components of the new arena and the district, so as to better understand the costs and logistics required to build it.

This is a major step for the development of the city. A new arena would totally change the look of the downtown, and bring it back to life. Let's face it: our downtown is a combination of skyscrapers and broken down old buildings and low-income housing. It is not exactly a place with a great deal to do. Being central, it should be the focul point of the city. If you live in the East end of Edmonton, it's further to West Edmonton Mall than downtown. If you're on the North side, you're closer to downtown than Whyte Avenue. Why not make downtown the place to be?

The Katz Group put together a website (revitalizedowntown.ca), and in it they provided some very interesting case studies of cities with shoddy downtown districts that turned them around with arenas. The case studies can be found here:


Clearly these case studies show that a new arena can transform a city. The great thing about a new arena in Edmonton is that you don't have to be a hockey fan to reap the benefits. There are enough great fans of the Oilers in this city - and all of Northern Alberta - to make an arena district viable. When you factor in a world-class location for concerts and other events in a city that is already a major destination for big acts, you have a facility that can benefit the entire community.

The money that is spent and invested in the district will help to change the face of Edmonton for the better whether you're a patron or not, and that's something that every Edmontonian should be thrilled about.

No comments:

Post a Comment