Edmonton’s Upcoming Fiscal Black Hole
Edmonton needs a new hockey arena about as much as an elephant needs that desperately sexy pair of high heels. Before breaking metaphorical language any further, lets look at the price tag for this boondoggle in waiting. Thanks to the Edmonton Journal for the numbers.
All in, $601 million. That breaks down as:
– Arena construction, $480 million
– Winter Garden pedestrian bridge across 104th Avenue, $53 million
– Arena land, $25 million
– Community rink attached to arena, $21 million
– Pedestrian corridor through the arena, $15 million
– Link to MacEwan LRT station, $7 million
$601 million so we can have rubber disk chasing in our downtown core. I know I am terribly excited over the entire notion. What is even more exciting is who gets to pay for these shiny new elephantine high-heels.
– The city: $219 million ($140 million for the arena, $25 million for the Winter Garden, $25 million for the land, $15 million for the pedestrian corridor, $7 million for the LRT and $7 million for the community rink).
– Katz Group: $143 million ($115 million for the arena, $28 million for Winter Garden).
– Ticket buyers, through a surcharge: $125 million.
– The province: $107 million ($100 million for arena, $7 million for community rink).
– The feds: $7 million for rink.
What is interesting to me, and by “interesting” I mean peeved, is that I fall into three categories that are donating to the Rubber Disk Arena construction fund. I reside in Edmonton and thus pay municipal taxes, Edmonton also happens to be in Alberta thus I pay provincial tax aaaaaand Alberta happens to be in Canada and ‘Lo I also pay federal taxes.
Therefore, I get to pay $335 million while the dude that owns the team chips in $143 million to build a house for his team and he will get to keep all the revenue generated once the Rubber Disk Arena is built. I need to get on the same plan as the Edmonton Oilers Owner; you know the one where you get to use public money to take the majority of risk and build stuff that will make me money once its built.
As the person indirectly responsible for funding this bedazzling misadventure, it would be sensical to point out that if private industry wants to build a new Rubber Disk Chasing Emporium, they should damn well pay for it themselves and not expect the public to fund their private ventures.
(ed. Very proud not to have used the words “fucking insane waste of public money” in this article.)
bleatmop
Mystro
Dead Wild Roses 
11 comments
February 18, 2013 at 11:42 am
Heinrich
I hope I’m the fist to say “fucking insane waste of public money” in the comments.
When the next NHL lock-out happens, the tax-paying public will pay to keep the heat on, literally, while we hang breathlessly ton every word concerning the ‘heighten sense of optimism’ at the contract negotiations.
And once the millionaires have inked a deal with the billionaires, 1,000s of people will willingly stand in line to give up even more of their money to put their asses in the seats and scream for ‘their’ team.
Gladiators on ice.
Oh well, it’s not as though the public could use their own money for other important things like, say, schools or MRI machines…
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February 18, 2013 at 11:50 am
The Arbourist
@Heinrich
Well said. :)
I guess bread and circuses have historical precedent, one would have hoped we learned our lessons from the past…
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February 18, 2013 at 12:54 pm
john zande
Brilliant “appraisal” of this Rubber Disk Arena. This had me laughing from beginning to end :)
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February 18, 2013 at 1:40 pm
Rob F
We already give too many subsidies to professional sports teams. Its no surprise that the vast majority of economists agree we should stop doing that.
Teams don’t make much money from the likes of ordinary ticket buyers; the real moneymakers are luxury boxes and club seats. That, and also TV/merchandise/games, etc.
Perhaps this is why everyone should switch to women’s hockey:
Your ticket and television revenue substantially goes towards development of young players, both here and worldwide.
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February 19, 2013 at 12:54 am
bleatmop
Fucking insanity. You forgot to mention the austerity measure incoming for the rest of us. Welcome to Alan Greenspan’s world. Socialism for the rich, austerity for everyone else.
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April 18, 2013 at 2:05 pm
Rob F
The blog Field of Schemes has lots of coverage of this and other ridiculous subsidies for professional sports franchises.
And wait till you see what Forbes say about the team under discussion here,
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April 19, 2013 at 3:35 pm
The Arbourist
@ Rob F
Wow, that does make me mad. Good Call. :)
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April 20, 2013 at 8:46 am
VR Kaine
Not a big fan of Katz (I’m an Oiler fan at heart and don’t like when owners threaten moving my beloved team), however I should include a token business guy’s defense here re: Katz using just some simple straight-line numbers for perspective:
Katz apparently bought the Oilers for $170m(Forbes)-200m(Wikipedia) in 2008.
Operating Revenue is $12m for 2011-2012.
$12m/$200m is only a 6%-7% annual return profit-wise if Katz is bearing full operating costs. Return is of course potentially greater if there are capital gains to be realized if the team sold, but either way, that’s not a great return percentage-wise for all the risk and overhead the franchise is incurring as a business. This is especially true when you consider that simply putting your money in the Canadian Stock Exchange (TSX) would have produced far better average returns with far less headache.
Annual TSX Returns since 2008:
2009 – 30.7%
2010 – .14.4%
2011 – -11.1%
2012 – 4.0%
Average: 17%
(Source TSX Composite Index Returns)
http://www.forbes.com/teams/edmonton-oilers/
http://www.forbes.com/sites/mikeozanian/2012/11/28/nhl-team-values-2012-maple-leafs-first-hockey-team-worth-1-billion/
I’m seeing numbers of around $450m-$600m for the new arena complex? Devil’s advocate – why should Katz front the entire cost of an arena which would effectively reduce his return to ($12m/$600m = ) 2% or less while increasing tax revenue for both the city and the province free-of-charge? Not just in the construction of the arena, but in the ongoing jobs from the complex as well? They get their reward for free on the back of his risk? Surely Katz would and already has a number of tax concessions, but that doesn’t reduce his front-end risk or truly recognize the opportunity cost on his money. On that basis alone (and only on that basis) do I um, “respect” his right to expect that the city and province chip in their “fair share”.
I’m making this case because i see many “fair share” liberals simply look at the large figures and go, “Phhhht – he’s a billionaire, he can afford it!” without really taking a look at the realistic math from a business perspective.
OK, Daryl, there’s my token support on the math for ya. Can I move to the other side of the courtroom now?
1) I think Katz is asking for far too much in concessions.
2) I think “screw him” for threatening to move the team (not just sell the team) if he didn’t/doesn’t get them.
3) I still think Rexall Place is fine where it is, and we’re still selling out, so why ask for or need or demand government help? Telling a stakeholder in the negotiation “pay what I want or I will cut off your fingers” isn’t a partnership or a negotiation, it’s extortion. At least put a better spin on it.
4) I don’t think he considers what the fans have invested – millions of dollars in jacked up prices – to continue to see a team NEVER make the playoffs. Does he have to? No, but still…
Yes, here’s my little bit of “fair share” Liberalism back at Katz. I think as fans, we are owed because if I recall, we were given a “whatever it takes” promise back in 2008 that we’d have a Stanley Cup team again if we kept our sales and merchandise numbers up for him as fans. We kept our end of the bargain, and for the first time in a long time, finances were no longer an issue for the team acquiring the best coaches and players and yet here we are, years later, still $hitting the bed every season and not making the playoffs. Worse, now we’re back to “cronyism/nepotism at its best” with MacT at the helm.
Arguments either way on this one because there’s not just math but emotion and tradition involved. Just my two cents. :)
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April 21, 2013 at 9:10 am
The Arbourist
@ Vern
Many of my objections stem from the idea that somehow we need a new arena. Northlands is doing OK and with renovations, would again be considered on par for what the league expectations are.
But that seems to be off the table and thus we get the standoffish foot the bill for a new place or we will move rhetoric. That is just greed speaking and I’m not one that likes subsidizing avarice with my tax dollars.
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April 21, 2013 at 12:43 pm
Rob F
@Vern:
According to various surveys of economists, 85% of them believe that “Local and state governments should eliminate subsidies to professional sports franchises.” I assume “subsidy” means more than just outright cash transfers, but also things like below FMV rates on loans or rent, etc. It is a reasonable shortcut to defer to the experts on this matter.
And if Katz builds the arena on his dime, he won’t get just the same sorts of revenue he gets now. Since he owns the arena, he’ll also have access to other sorts of revenue. These include parking, concession, concerts or other events, etc. I don’t know what the lease agreement is, but unless the status quo and potential future have exactly the same revenues going to Katz, they can’t really be compared easily.
Also, in terms of gate revenue, the real moneymakers are luxury boxes and club seating, not the average person’s receipts at the gate. Since more money is made from luxury boxes and club seats, there is always an incentive to build a facility with more luxury boxes, even if in the status quo the owner is making money.
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April 24, 2013 at 11:08 am
Rob F
Here’s a post from LGM discussing more about public funding for stadiums/arenas and related topics.
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