What about Rexall?

Daryl Katz, owner of the Edmonton Oilers, wants a new downtown arena. This is hardly news. Certainly Mr. Katz has a bold vision for a new arena district and has spoken about his desire to help revitalize Edmonton’s downtown core. I share this goal and can see the potential for an arena to make a positive contribution; however, the discussion around the new arena is still lacking, and I’m not yet sold on the funding plan.

Most troubling is the absolute lack of discussion about what would become of the existing Rexall Place, which is not only situated in Ward 7, but is also only a stone’s throw from my own neighbourhood. With a new arena, it’s likely Rexall would close, or would at least become much less active. Rexall Place (along with its parking lots) sits on 20 acres of land with an existing LRT station and is, for better or worse, the main anchor for 118 Avenue. While it’s certainly possible to imagine a better use for the site, a vacant arena is not it.

It’s possible that the land could be redeveloped to bring new residents to the area, for example. More eyes on the streets and shoppers in local businesses could be a boost for Alberta Avenue. An empty shell, however, would undo much of what has been achieved in recent years, and a discussion of what to do with the closed Rexall Place would need to start immediately to avoid damaging the revitalization efforts along 118 Avenue.

The relative merit of the Katz site also hasn’t been fully discussed. While it would likely liven up four relatively desolate blocks of downtown, an HOK study listed it fifth – behind the existing Northlands site as well as other downtown locations. Katz is monopolizing the visioning while expecting council to provide the funding and push Northlands out.

Funding is one area where significant discussion has taken place, and Katz has constantly revised his position on just how much of his $2.43 billion in net-worth would go to the project. An original offer for $100 million toward the arena was “clarified” to mean for surrounding development, then to go toward the arena itself, and was finally increased to $100 million for the arena and $100 million for the surrounding development.

What hasn’t changed is that the rest of the arena funding (construction is often pegged at $400 million) is to fall to the city. I have major reservations putting public funds toward a private project, just as I am not convinced that the amount of new taxes generated by the surrounding project is likely to come anywhere near covering the arena’s costs.

A downtown arena would increase property tax revenues in its vicinity, but much of the development would have been built anyway – in this area, elsewhere downtown (i.e. the Quarters), or elsewhere in the city. It’s impossible to know how much new investment the arena would actually bring to the city, but it’s unlikely to be anywhere near the billion dollars needed to pay the debt off – over several decades, no less, by which time the new arena would presumably be obsolete. I find it very hard to believe that building this project wouldn’t increase taxes.

The Katz Group pitch for hundreds of millions in subsidies asserts the Oilers are “not sustainable,” since Rexall Place is not meeting their needs (not enough seats or luxury boxes, translating to lower ticket revenues) and they do not receive funds from non-hockey-related events at Rexall. In Katz’ own words “the team is also a business. And like any business, it needs a sound financial base in order to be sustainable, which today it is not.”

As a business, they are refusing to reveal financial information to City Council, denying reports such as Forbes’ showing the Oilers generating the seventh highest profit in the league. At the same time, they have also stated that Oilers will not play in Rexall – renovated or otherwise – beyond 2014 and are pursuing the rights to operate Copps Coliseum in Hamilton. Deny as they might any intention of moving the team, it’s hard not to read between the lines and not take all this as a threat.

The upshot is that Katz is treating the project as a business deal, and council should do the same. As representatives of the future landlord (i.e. you, the citizens of Edmonton), council must ensure that it gets the best deal possible – both financially and for the city as a whole. It’s up to Katz to convince council to dedicate public funds, and while I’m prepared to continue listening, I’m not yet ready to sign on.

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