Downtown arena district: framework approved
01
2011
I have received many emails and phone calls about this issue over the past few weeks. Please know that I have given each one consideration in coming to a decision.
1. The City will own the arena building and land.
2. A Guaranteed Maximum Price for the downtown arena building of $450 million, including the construction of 350 parking stalls, is required. The City will not be responsible for any cost overruns and both parties have the right to walk away if the maximum price is not achieved. The $450 million will be contributed from the following sources:
- $100 million will come from the Katz Group, paid over 35 years (covering principle and interest) at about $5.5million/year. With interest (based on October 2011 rates), these annual payments would total about $192 million at the end of the 35-year period.
- $125 million will come from facility users through a 7% ticket surcharge at the new Downtown Arena building.
- $125 million will come from the City: $45 million being directed from the planned Community Revitalization Levy (CRL). A CRL can be created to help fund a major project like an arena. The City sets a boundary that includes the new project and the area surrounding it, where growth will happen as a result of the project. The City calculates how much property tax this CRL area generated before the new project gets built, and continues to take this much tax to fund services. However, as tax revenues from the area increase over the years, the amount from new growth only is used to pay off the cost of the catalyst project (arena), without which the development would not be occurring in the first place. In other words, a CRL is not an additional tax on existing downtown residents and businesses. The City also gets to keep the education portion of these new taxes, which would typically go to the Province. Development in the Downtown Community Revitalization Levy boundary approved by Council is expected to generate $1.18 billion of new tax revenue over its 20-year term. This creative funding method is one way the City will be able to fund a new arena without increasing the property taxes Edmontonians currently pay. Because the lands around Rexall Place do not have the same potential for new growth, a CRL would not be viable if a facility were to be built or renovated there. $80 million coming partly from a redirection of a subsidy paid to the current Rexall Place.
- $100 million will be requested from other orders of government. Construction of the facility will not proceed without this funding.
3. The Edmonton Oilers Hockey Club will sign a Location Agreement to stay in Edmonton for 35 years.
4. The Katz Group will commit $100 million to associated adjacent investment, with at least $30 million coming prior to construction of the arena, and the balance invested subject to commercial viability.
5. The City’s costs to build an LRT connection to the arena will be capped at $17 million.
6. The City will pay half the cost of a pedway across 104 avenue, up to a maximum of $25 million for the City’s share.
7. The City will enter into a marketing partnership with the Edmonton Oilers at $2 million a year for 10 years. The funds will be used to promote the image of the City nationally and internationally. This marketing plan will be reviewed every two years.
8. The Katz Group is to operate the new arena and is to pay all operating expenses, capital maintenance and repair. The Katz Group will receive all revenue from the arena, including naming rights.
9. From a taxpayer’s perspective, this is a better deal for the City than most NHL franchises have negotiated. The deal most NHL teams have with their cities is that the team gets all operating revenues from events and pays for operations—but not things like building maintenance and repair, or major upgrades. Edmonton is getting a better deal: the Katz Group will be responsible for all of these costs. So once the City has contributed its portion for construction and surrounding infrastructure, we will not be liable for any further costs. Under our existing deal for Rexall Place, we are liable for major repair and renovation costs on an aging facility. In order to make the arena a revenue-generating enterprise over the long term, the Katz Group will need to market the City and arena effectively and attract major events of various kinds. These events will draw many people, hockey-lovers and others, to our downtown core, to well-located lands that are currently under-used.
10. A supplementary surcharge will be added to tickets at Rexall Place to maintain a level playing field between the two facilities. The money collected from the Northlands Facility Fee will not go towards the new arena.
11. The City has committed $30 million for design work to be completed to 60% design at which point obtaining a Guaranteed Maximum Price is feasible.
12. The City has purchased the land necessary to proceed with development of a downtown arena and infrastructure around 104 Avenue. The City’s net cost will ultimately be around $25 million. This is consistent with Council’s direction.
13. The City will have access to the arena facility for up to 4 weeks each year. The City is free to take advantage of the facility for community events during this period, and will retain all revenues and pay operating costs for these days.
14. A community benefits agreement will be made between the Katz Group and the City. This agreement has not been finalized, but could include activities such as: mini-hockey camps, tickets and events for under-privileged youth and families, and access to skating in the arena for residents.
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