New Edmonton Arena Construction will begin in March 2014

[Azure]

What a horrid deal. Katz as owner of the team will be the only one directly benefiting from the new arena. The city sure as hell won't, so why would they even WANT to pay for it?

Numerous studies have shown that economically it isn't such a big benefit to have a brand new arena or a sports team in your 'city.'

Just a stupid deal. I don't blame the city for saying no.

[browna]

All this being said, from the moment he bought the Oilers, lost in some of the "drive for 5" predictions that Edmontonians heard he was going to spend money, was the fact that he said, at some point in the near future (and that was 5 years ago), there had to be a new arena, and had to have just-as-engaged public and public levels of government as him to keep the Oilers in Edmonton...or at least to keep him as an owner and make it a worthwhile business venture for all involved.

Everyone assumed at the time it was just lipservice, that a local guy as big a fan as him with the money he had, wouldn't actually ever think about doing anything but holding onto the team no matter if a new arena became reality or not.

Each step of the way though he was making that clear...following through with his original plan, pushing to gain that equality with the city and province to get a new arena approved. He got the city reluctantly on board, but over the course of 4 months its gone from a grandiose drawing of a new rink, to suddenly scaled back, to a bunch or eraser marks and not far from thrown in the trash. With that project now looking to be in limbo, as promised, he's just following through again on the caveat's he made in the press conference announcing his purchase, about not being the owner in a market that isn't showing the same level of interest as him in keeping hockey as a viable business in Edmonton.

This isn't out of the blue and everyone expects because me makes millions of dollars in his other buisness', that it should just flow that through to the Oilers and subsidize the other partners. He made it clear from the start that it wasn't his plan, for better or worse, so no one should be surprised now that push is coming to shove, that he's just stating what he said at the original presser.

[MoneyGuy]

Originally Posted by SebC

I'm not sure who you're referring to as "they", but from Katz's perspective, why get a loan if you think you can get a grant? From Edmonton's perspective, borrowing money as a muncipality is basically forbidden by the province.

No it's not. I'm a city councillor. We borrow money for projects all the time. All municipalities do.

[Robbob]

I think it is pretty funny when they say hockey in Edmonton in Rexal isn't a worthwhile venture when it is pulling in 10-15 million. It would be a more convincing argument if they were breaking even. At this rate the team will probably pull in almost 50 million (probably more once the new cba is signed) by time the arena gets built. Kind of hard to be crying wolf under these circumstances.

[Tinordi]

Want to know why Katz is lobbying so hard for someone else to pay for his arena?

Several forces propel the trend toward public provision of facilities for use by privately owned professional sports franchises. During the 1990s, 48 new sports facilities were constructed (or refurbished for over $100 million) while only 16 expansion teams opened for business in the four major professional leagues. Two-thirds of the new facilities and all of the refurbishments are to replace the existing facilities of established teams. The first step toward a new facility usually is a team’s claim that its existing facilities are “inadequate.” The inadequacy commonly pertains not to seating capacity, structural integrity, or sightlines to the action, but rather to the fact that the stadiums built more than a decade ago do not include the luxury boxes, club seats, catering facilities, and advertising opportunities that generate substantial cash flow from high income fans. In other words, although the existing facilities are not physically obsolete, they are economically obsolete.

Private investors and team owners have rarely found a new stadium to be an attractive investment. Since revenues from the existing facility are largely spoken for (for player salaries, organizational expenses, and so on), new stadiums would have to generate incremental revenues over and above those of the facilities they replace to attract private investors, so as to cover their entire construction cost plus a suitable return. While new facilities invariably contain amenities that offer additional revenue sources, and ticket prices usually increase with the opening of a new stadium or arena, new facilities also cause other costs to rise. Because players’ salaries depend on their estimated marginal revenue products and are roughly proportional to team revenues, much of the additional revenue from a new stadium goes toward payroll. The result is that seldom does enough incremental revenue survive to cover facility construction costs. If the financial responsibility for new facilities were left to team owners alone, or to other private investors, surely fewer and more modest facilities would be constructed.

The financial attractiveness of a new playing facility is largely irrelevant, however, if a team can persuade someone else to pay for the facility. Most professional sports franchises find themselves in precisely such an enviable position today. They have lured state and local government officials into a frantic competition to build stadiums and arenas with tax or lottery revenues, requiring the teams to pay virtually no rent, while retaining all or nearly all of the revenues the facility generates. Why do local governments agree to do this?

This nugget is great too:

Few fields of empirical economic research offer virtual unanimity of findings. Yet, independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development (Baade and Dye, 1990; Baim, 1992; Rosentraub, 1994; Baade, 1996; Noll and Zimbalist, 1997; Waldon, 1997; Coates and Humphreys, 1999).

http://www.uwlax.edu/faculty/anderso...s/stadiums.pdf

[Plett25]

New stadiums/arenas don't create economic development.

New stadiums/arenas can influence where economic development takes place. Edmonton city council is trying to move economic development from the suburbs to downtown. It is a good way to leverage the existing transportation infrastructure downtown.

I'm pretty sure it will work and there will be new developments downtown that wouldn't happen without the arena. But there will not be a net increase in economic activity.

[Stranger]

Originally Posted by Plett25

The arena deal changed from the original $100 Katz + $125 city + $125 ticket tax + mystery $100

The latest version was Katz not putting in anything, but paying $5.5 million a year. So essentially the city would end up paying the whole shot and would get ticket tax and $5.5 million every year from Katz to service the debt. So Katz would get the arena for no upfront cost, but would pay for maintenance, etc.

Then Katz demanded a $6 million to subsidize the maintenance because there wasn't a casino attached to the arena.

Or something like that.

And then Katz said that the city should be subsidizing the Oilers because without the Oilers, the city would have to pay for a brand new arena all by itself.

Wasn't there also something in his new proposal about the city having to rent a certain amount of office space in a proposed new building he intends to build next to the arena?

[Vulcan]

The thing is governments often give away vast sums of money that we never hear of to their corporate buddies, so the province throwing in $100M for a new arena in each city would at least give the citizens something tangible.

[Sidney Crosby's Hat]

Originally Posted by Enoch Root

Originally Posted by Sidney Crosby's Hat
How does Edmonton have the 5th highest operating income if they have the 16th highest revenue? How do they make $17 million and Calgary makes $1.1 million even though the Flames make $10 million more per year in revenue?
_______

What year is being referenced?

I assumed 10-11 because I doubt all of the data is out for 11-12 yet.

Salaries are the single largest expense, and according to capgeek the salary cost for the two teams that year was:

Edmonton: $45,359,812
Calgary: $62,791,271

a $17M difference - pretty straight-forward.

(if we are talking about 11-12, the difference is only $4m however)

If this is the case then it's not like the Oilers are making gobs of money. Especially with a $70 million cap on the horizon (maybe). If that was the cap and they spent to it, they'd be losing $8 million a year.

Fact is, right now with a dollar at par they're a mid-range revenue team (16th?). If the dollar dropped they could be in peril at some point, particularly in a 40, 50, 60 year old arena.

[SebC]

Originally Posted by MoneyGuy

No it's not. I'm a city councillor. We borrow money for projects all the time. All municipalities do.

Are you allowed to run deficits?

[BlackRedGold25]

Originally Posted by Sidney Crosby's Hat

If this is the case then it's not like the Oilers are making gobs of money. Especially with a $70 million cap on the horizon (maybe). If that was the cap and they spent to it, they'd be losing $8 million a year.

If that was the cap and they spent to it they'd deserve to lose money. In what world should the worst team be expected to make money if they're also the most expensive team?

Fact is, right now with a dollar at par they're a mid-range revenue team (16th?). If the dollar dropped they could be in peril at some point, particularly in a 40, 50, 60 year old arena.

Fact is, right now with the worst team in the league they're a mid-range revenue team. If the team won they could be a high revenue team at some point, even in a 40, 50, 60 year old arena.

[Erick Estrada]

Originally Posted by BlackRedGold25

Fact is, right now with the worst team in the league they're a mid-range revenue team. If the team won they could be a high revenue team at some point, even in a 40, 50, 60 year old arena.

They sell out as it is so I'm not clear on how they could turn into a high revenue team unless they jacked up ticket prices. The current arena is in the small size as far as seating capacity goes so an 18000 seat building could bring in extra revenue from another 1200 seats.

I'm past getting involved in this debate because we all know that the guy will get his building one way or another so it seems pointless to argue about why it's right or wrong that taxpayers will be paying a large portion. It will get done and like the Peace Bridge a large portion of people will oppose but in the end it doesn't matter.

[Poe969]

ya, but if the made the playoffs for once then they'd have a bunch of extra money they aren't really used to!

[belsarius]

Originally Posted by BlackRedGold25

If that was the cap and they spent to it they'd deserve to lose money. In what world should the worst team be expected to make money if they're also the most expensive team?



Fact is, right now with the worst team in the league they're a mid-range revenue team. If the team won they could be a high revenue team at some point, even in a 40, 50, 60 year old arena.

I am not usually one to defend Katz in this but I think the point he is trying to make is that the arena is at capacity, they are getting all possible revenue from it now with a losing team. Becoming a winning team will increase revenues only if they make the playoffs, or get a bigger, better building which can support an increase in luxuries that will increase revenue.

For a losing team this city is still rabid about their Oilers, I don't get it, these first round picks haven't proved anything yet but still the building sells out and memorobilia flys off the shelf. There will be a small increase in that as winning will bring some more fair weather fans back but the arena is full and winning more won't drive up ticket sales in Rexall as they are already maxxed out.

There is no doubt a new arena is required to increase revenues, the doubt is who should pay the cost to increase them. They city can pay for the arena the day it gets a suitable proprtion of all arena based revenues or if Katz will accept a rent agreement that doesn't take half a century to repay the taxpayer.

[JayP]

Originally Posted by Vulcan

The thing is governments often give away vast sums of money that we never hear of to their corporate buddies, so the province throwing in $100M for a new arena in each city would at least give the citizens something tangible.

Two wrongs don't make a right.

[JayP]

Originally Posted by Erick Estrada

They sell out as it is so I'm not clear on how they could turn into a high revenue team unless they jacked up ticket prices. The current arena is in the small size as far as seating capacity goes so an 18000 seat building could bring in extra revenue from another 1200 seats.

I'm past getting involved in this debate because we all know that the guy will get his building one way or another so it seems pointless to argue about why it's right or wrong that taxpayers will be paying a large portion. It will get done and like the Peace Bridge a large portion of people will oppose but in the end it doesn't matter.

While I agree that this argument is pretty futile in the case of the Oilers (Katz will get his rink and the lion's share will come from the city) it does bring awareness to the issue to Calgarians. The Flames are going to try to squeeze out every public dollar they can to build their new rink - it's just in their best interest to do so. Having a healthy debate that addresses the many issues of using public dollars to build a private rink that most people are simply unaware of is pretty valuable. Most people simply buy into the logical (but incorrect) argument that arenas stimulate the economy and the only "research" they'll ever see is the propaganda put out by the owners. This is a pretty big forum so if some people can be more informed and in turn spread this info to other Calgarians (when it becomes relevant) it could make a difference down the road when the Flames are looking for tax dollars.

[Erick Estrada]

Originally Posted by JayP

While I agree that this argument is pretty futile in the case of the Oilers (Katz will get his rink and the lion's share will come from the city) it does bring awareness to the issue to Calgarians. The Flames are going to try to squeeze out every public dollar they can to build their new rink - it's just in their best interest to do so. Having a healthy debate that addresses the many issues of using public dollars to build a private rink that most people are simply unaware of is pretty valuable. Most people simply buy into the logical (but incorrect) argument that arenas stimulate the economy and the only "research" they'll ever see is the propaganda put out by the owners. This is a pretty big forum so if some people can be more informed and in turn spread this info to other Calgarians (when it becomes relevant) it could make a difference down the road when the Flames are looking for tax dollars.

I think there will be a lot of Cagarians that will oppose a new arena using taxpayer money. We will hear the typical anti-sports fluff such as needing libraries they will never use or new roadways that may decrease their commutes by 5 minutes, etc, etc. It's all so predictable and boring. The only thing we really can't predict is just how much taxpayer money the Flames will need as things have been really tight-lipped.

[Tinordi]

I'm not opposing a publicly funded arena because I'm anti sports. I love sports, love the Flames. It is just completely and utterly inappropriate to use taxpayer dollars to subsidize a profitable private business. Full stop.

[calgaryrocks]

Originally Posted by Erick Estrada

I think there will be a lot of Cagarians that will oppose a new arena using taxpayer money. We will hear the typical anti-sports fluff such as needing libraries they will never use or new roadways that may decrease their commutes by 5 minutes, etc, etc. It's all so predictable and boring. The only thing we really can't predict is just how much taxpayer money the Flames will need as things have been really tight-lipped.

I would rather pay less in taxes. the Flames are a private entity and can build thier own arena

[Cleveland Steam Whistle]

Originally Posted by Tinordi

I'm not opposing a publicly funded arena because I'm anti sports. I love sports, love the Flames. It is just completely and utterly inappropriate to use taxpayer dollars to subsidize a profitable private business. Full stop.

You realize that Alberta provides businesses, private ones, tax incentives to set up their head offices or production facilities her all the time. They actually call it the "Alberta Advantage".

Whether you use tax payer dollars to create something like a rink, or whether you simply give a huge coporation a tax break to set up shop here, it's all the same pile, just different wrapping.

Government gives hand outs to big private business all the time to make Alberta an appealing place to be, and to create jobs in our area. Government incentives are pretty key to keeping the economy of this province running. This really isn't much different. Like my original comment said, I'm not sure what the correct hand out in this particular situation is, but I'd wager it's at least something when you compare it to all the other hand outs big business gets to keep Alberta competitve and operations from an economic standpoint.