Staples: ‘I’m focused on making this deal work,’ Katz says
Oilers owner lays out his side in ongoing arena negotiations with city
EDMONTON - At long last, Edmonton Oilers owner Daryl Katz spoke out on the arena issue on Monday. What he said won’t please everybody. It will certainly make little impact on those who are dead set against any public funds going to build a downtown arena.
But Katz is finally talking because he needs to explain to arena supporters, both on city council and in the public, why they should continue to support the deal, something that is now in doubt after reports came out that Katz is asking for a $6-million annual subsidy to operate the Oilers in a new downtown arena.
In an hour-long interview with me and my colleague John MacKinnon, a sometimes frustrated, sometimes rueful and undoubtedly passionate Katz did his best to address the various controversies around the arena.
Katz says he has always made it clear to city negotiators that there should be a subsidy for him to operate the arena, and that he had in mind a gaming subsidy similar to what the Winnipeg Jets and Pittsburgh Penguins receive in their new deals. In Winnipeg, the team gets $12 million a year in operating subsidies, Katz said, a portion coming from gaming.
About a year ago, the city agreed to take this request for a gaming subsidy to the province, Katz says, but nothing has materialized. Yet he still needs that subsidy.
“If it didn’t work out, it didn’t work out,” Katz says of the gaming idea. “But when two parties are trying to make a deal, it’s just not sufficient for one to say, ‘Too bad, so sad, you guys eat it.’ That’s not how two sides make a reasonable deal.”
Katz says he was surprised that city councillors never knew about the request for an operating subsidy. “But to have my integrity and commitment questioned, and to suggest this is new and came out of nowhere, is not true and not fair.”
At city hall, I’ve been hearing whispers about this ask from Katz in regards to the casino funding for the arena for more than a year now. My understanding was that the city would write a letter to the province on Katz’s behalf.
So Katz is correct that the city agreed to pursue this, though there was no promise from the city that any funds would come through.
I asked Katz why any public subsidy of the arena is needed, with Toronto, Montreal, Ottawa and Vancouver all building arenas in recent decades with largely or fully private financing. But Katz pointed out that various owners, Rod Bryden in Ottawa, the Molsons in Montreal and the Griffiths in Vancouver, all suffered huge losses and lost control of their arenas and teams.
“Let’s be frank, the only privately funded NHL arena (in Canada) that hasn’t been a financial disaster is ACC (Air Canada Centre) in Toronto, where they have the Leafs and an NBA franchise. Everyone else lost their shirts ... They lost their buildings and their teams. So this has to be a private-public partnership (in Edmonton).
“Edmonton is a great hockey town, not necessarily a great hockey market. We have the best and the most knowledgeable and, to be honest, the most loyal fans in the NHL. That’s what we believe. But Edmonton is tied for the smallest media market by far. And we have the lowest percentage of corporate season ticket holders.”
Of course, ticket revenues in Edmonton have been in the NHL’s top 10 for several years now. Yet Katz is correct that Edmonton is not Toronto, and that the team owners who built privately in Montreal, Toronto and Ottawa got knocked out of business.
If no deal is done, might Katz move the Oilers out of Edmonton after his lease ends in 2014?
“I’m focused on making this deal work,” he says. “God knows I’ve spent enough money. You know, my wife thinks I’m nuts, OK?”
MacKinnon and I both chuckled at that.
“Guys, don’t laugh!” Katz said. “I’m telling you. She thinks I’m nuts.
“If this doesn’t work, what can I say?” he added, returning to the prospect of the deal failing. “Obviously all bets are off and we’ll have to figure out what comes next. And I don’t know what that will be. That’s truthful.”
Katz scoffed at those who would suggest he’s asking for too much now to scuttle the deal so he can take a sweeter offer in another city. You just have to look at his track record to see commitment, he asserts.
“I bought the Oilers (in 2008) because the EIG (Edmonton Investors Group) was fractured and Edmonton’s ability to keep the team was at risk. OK? Nobody can doubt that. That was only four years ago. EIG knew and the Katz Group knew that the key to Oilers’ sustainability was a new model and a new arena. I stepped up. Nobody else would. I stepped up with two goals. To ensure the Oilers long-term sustainability in Edmonton and to turn Edmonton’s need for a new arena into something unbelievable for the city. Now I’ve been at this five years. I spent $200 million on the team. I’ve funded operating losses since. I put $70 million into acquiring land. Nobody can question my good faith or my commitment.”
Katz – quite rightly – sees one solution in the Community Revitalization Levy. It’s a 20-year fund that will gather up new property taxes in the downtown to pay for downtown infrastructure. The city hopes to get this levy in place and estimates it will raise at least $1.2 billion, with $45 million of that going to pay for the arena.
Katz suggested the CRL will earn several billion and argues more of it should pay for the city-owned arena. Without the Oilers and the arena, downtown won’t boom nearly so much. “The CRL is a gold mine for the city. The Oilers are the anchor for the arena and the arena is the catalyst for the CRL. Some would argue it should pay for the whole arena. We’re not asking for that. We’re willing to partner with the city to meet the needs of everyone and capitalize on the opportunity. All we’re asking for is a deal that is fair and makes sense for both parties and is commensurate to other small markets, i.e. Pittsburgh and Winnipeg.”
The way Katz sees it, every major city needs a major arena. Even cities without pro hockey or basketball teams, such as Seattle, Kansas City and Quebec City, have built or are building new arenas. Edmonton needs a new one because, as Katz puts it, “our arena was built in 1972 and it’s falling apart.”
Edmonton can use the Oilers to help pay off its new arena, Katz says, but the deal must be right for both sides.
“Every deal has to look at risk/reward. The city has little risk. But it has enormous reward. Because it needs a new arena that it would otherwise have to pay for by itself without us. So what do they get? They get a 35-year deal for the NHL in Edmonton. They get a subsidized arena because the NHL team is there to play in one of the league’s smallest markets. They get a revitalized downtown. That new downtown will drive a $2-plus billion CRL annuity. Katz Group, for our part, we make a 35-year commitment to what some would say is the NHL’s smallest market and we get a cost sharing in some elements, but nothing yet that is commensurate with Winnipeg, even Pittsburgh, which is three times the size of the Edmonton market. And neither Winnipeg nor Pittsburgh has the upside of the CRL to offset the investment they are making to keep their pro sports franchise in the city.”
Of course, Winnipeg and Pittsburgh did benefit from whatever property taxes and other taxes were created by their new arenas, CRL or no CRL. But it’s also fair that if Edmonton’s CRL does take off, if it raises a billion, or several billion, that far more than $45 million should be directed to pay off the arena. Numerous interested parties on all sides of the deal agree the arena will indeed be a catalyst for Edmonton’s downtown boom.
This is where a solution to Edmonton’s arena funding question might reasonably be found.
Katz says the deal can still happen. That’s what he tells those who think he’s crazy to stick with it.
“Everything that is worth doing is worth making sacrifices for. There’s no deal or no transaction that is easy to get done. This has been maybe more trying, but I think we’re close to realizing our vision with the city, and I think if we work together and are reasonable, we could do so.”
Still, with all he’s invested in the Oilers, his frustration comes through with the public bashing he’s taken over the subsidy issue. “What happened the last couple of weeks just isn’t fair,” he says. “Some guys just wouldn’t put up with it.”
I don’t doubt Katz’s commitment. He’s not trying to scuttle any agreement. Instead, he’s groping for a solution. He’s been held back, in part, by his own reticence to make his case in public. So it’s crucial to this debate that he’s finally making his own arguments in public. More of the same is needed, such as a full news conference.
He clearly has no trouble expressing himself and making strong arguments, even if some of them are self-serving.
But this project can serve us all, not just Katz. His arguments are worth a listen, worth solid consideration, so it’s good he’s finally made them for all of us to read, for all of us to judge.
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