Question to Council: Why This Deal?

I've got a question. - By Teo Sze Lee from Singapore. (Henderson Secondary School Family Day 2007.) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

I have a question I would like to ask City Council.

Now that City Council and the Katz Group have once again agreed on a deal for the Oilers new downtown home I'd like to ask our Councillors just one question: Why did you agree to this deal?

As someone who has been planted firmly on the "this is a bad deal" side of the arena debate this question might seem like sour grapes, like I'm trying to get in one last shot before the war ends. That isn't my intention though, I would genuinely like to know why Council felt that this particular deal was one that you felt needed to be made.

Allow me to step back for a minute to October 2011 to help shed some light on the why I have this question. It was then, 15 months ago, when the original funding agreement between the two sides was reached. All of the outstanding issues that still exist today existed then as well - the CRL required approval and there was a nine figure contribution required from other levels of government - but everybody seemed generally happy with the way things had progressed and the deal that had been made.

With an agreement in place, design started and shortly thereafter we found out that you simply can't build a world class arena for $450M and either more money would be needed or the design sacrificed in some way. This wasn't great news but still everyone soldiered on determined to build an arena that was good for both the City and the Katz Group, which would be by extension, good for the Oilers as well.

And then it all came apart. The Katz Group asked for an annual subsidy totalling $6M. Council wasn't too receptive to this idea and so the only card the Katz Group has, the threat of relocation, was played. Moving the Oilers out of Edmonton makes zero sense and saying otherwise is nothing more than an empty threat, one the public called Katz on. Not surprisingly an apology was issued when Katz' bluff was called but the damage had been done by that point. With things seemingly at an impasse Council decided to cease negotiations. Eventually things would get back on track when the Katz Group dropped their subsidy request and agreed to play nice.

Which pretty much brings us to today when suddenly there was again a deal between the two parties. The framwork of the deal, according to the City's press release, "closely resembles the elements Council approved in October 2011". Close indicates to me that some things have changed in the detailseven if the total construction dollars have more or less stayed the same. Paula Simons has the details of what exactly has changed in the deal:

Under the terms council approved in 2011, the Katz Group was to pay for all the arena’s operations and maintenance.

In the new deal, the city will assume the costs and responsibility for all the major building rehabilitation and structural repairs, things like the pipes, the air conditioning, the escalators. Those costs will be funded with a $1.5 million annual ticket tax, which could be hiked as needed. The money will be placed in a reserve fund — but any surplus will go directly back to the Katz Group.

The updated deal also gives the Edmonton Arena Corporation a guaranteed tax agreement. Under the old framework, the Katz Group had to pay all property taxes on the new arena. Now, EAC will pay $250,000 a year in city property taxes — for the next 35 years. Even if property values around the arena rise, or inflation soars, the tax bill will never, ever rise.

As well, the old deal gave the city the right to use the arena for 28 days a year, at its own discretion. Now, it can only use the arena on those days for community, not-for-profit functions. Hosting a commercial event like the Canadian Finals Rodeo on city time is explicitly forbidden.

It seems clear to me that everything that changed from the original agreement to today's did so to the benefit of the Katz Group. Negotiating is of course a back and forth process with give and take from both parties, the problem is that when looking at the two deals I see what the City gave but I don't see the corresponding take. The only thing the City seems to have gotten is for Katz to drop the subsidy request, a request that was rejected outright.

When negations were ceased in October of last year Mayor Mandel said that "Council went a long ways towards making a deal in October 2011, it was more than a fair deal." I was by no means a fan of the original deal Council and the Katz Group reached but if that deal was a fair one and the City still hasn't seen the Oilers books I'm left wondering what information or reasoning was behind the changes made and why all the concessions made were made by the City.

I just don't get it. Why did Council agree to this deal?

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