The Arena Deal Is Far From Done

I don't know if the Oilers should be packing there bags for a new home quite yet. - By Stefan Baumann (Stefan Baumann) [Public domain], via Wikimedia Commons

In a process where almost nothing has been quite as it seemed it's not surprising that a done deal is anything but done.

Item 6.2 on today's City Council meeting agenda is an update on the negotiations between the City and the Katz Group on the proposed new downtown arena. That update will include an announcement that a deal with the Katz Group has been reached, provided of course that Council approves another few million dollars more for the project to cover the cost increases. Council will no doubt approve the increase because if you're fronting the entire cost of the building what's a couple million dollars more, right?

But will the deal really be done? No. In fact it won't even be close to done which is par for the course in a process where nothing has been quite as it seems. Let's recap.

The CRL is nothing more than a shell game shifting tax dollars from pile A to pile B and as a result your taxes (assuming you live in Edmonton) will increase. Anyone who tells you otherwise is full of it. The ticket tax which the Katz Group like to put under their name when it comes to contributions is really a user tax and has nothing to do with the Katz Group unless you assume the market in Edmonton won't bear higher ticket prices but as evidenced by increased prices every year and a never ending string of sellouts I don't believe that to be true. The $100M which Katz himself is contributing to the project isn't what it seems either. That $100M comes from a City loan, so yes while one day Katz' contribution might be $100M his contribution on opening day is zero dollars on opening day and because the City can borrow at a lower rate than Katz the Edmonton taxpayer is handing him yet another subsidy in the process. Even the proposed lottery is too good to be true.

And this "done deal" is more of the same.

There is a still $100M in missing funding that is expected to come from the Province Government despite the fact that they've made it very clear on multiple occasions that they will not be directly funding the project. Of course there is the possibility that the missing funds could come through the back door in the form of increased Municipal Sustainability Initiative (MSI) funding but with a growing deficit the Government is going to have to make tough choices. If tax increases are off the table I'm left wondering what will need to be cut to provide in order to provide that funding, or if it comes at all.

The missing $100M isn't even the whole story though. The CRL is proposed to cover $45M of the construction costs. and even if you ignore the fact that the CRL won't work as advertised there is still the pesky little fact that the CRL requires the approval of the Provincial Government which, again, may not be a slam dunk. As part of the CRL the education portion of the new (really shifted) municipal tax revenues are contributed by the Province. Personally, I think approval of the CRL is probably more likely than the missing $100M showing up in a bag on Mayor Mandel's doorstep tomorrow but it isn't guaranteed either.

All told the project is still missing or hasn't confirmed almost 33% of the original building cost. So yeah, the deal is definitely done as long as you define the word done in a very broad sense.

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