City council has approved the above design for the new downtown arena.
Photograph by: Supplied, City of Edmonton
EDMONTON - The downtown arena deal has more moving parts than a steam-driven threshing machine, but after 20 months of negotiations the city and Oilers owner Daryl Katz have finally signed a tentative agreement.
Here are some of the highlights of what the two sides worked out.
What’s it going to cost?
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
Who’s going to pay for it?
It seems like everybody, one way or another.
- 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.
Is all that funding guaranteed?
Don’t go throwing around the G word just yet. Mayor Stephen Mandel is certain the province will provide a source for the $100 million, but we’ll have to watch the March 7 budget to see whether he’s right.
While the city’s arena contribution seems secure — property taxes on future downtown development, parking fees and other sources — it must still apply for rink grants from the federal and provincial governments.
Who will take care of this giant oil drop?
The city owns the land and arena. Katz Group subsidiary Edmonton Arena Corp. will operate it and keep all the revenue over a 35-year lease, paying its share of the mortgage and interest as about $5.5 million in annual rent.
But rehabilitation and replacement of structural, mechanical, electrical and other systems, the so-called capital maintenance, will be handled by the city using $1.5 million collected annually from the ticket tax.
If that’s not enough money, they can boost the surcharge in 15 years.
And the property taxes?
The arena corporation, the Oilers and their related companies will pay the city a maximum $250,000 annually for business done during events, in addition to provincial education taxes.
That’s a fixed amount, not based on assessment. City chief financial officer Lorna Rosen says it’s reasonable considering the $60,000 in property taxes now paid at Rexall Place.
Setting the value of such special facilities is difficult and without this arrangement the city could have lost future assessment appeals, she says.
The Calgary Flames don’t pay any property tax.
All the restaurants, bars and shops in the arena that aren’t owned by Katz will pay their own taxes, but whatever they pay over $250,000 for event business will cut the Katz tax bill by the same amount until it reaches zero.
How much is the ticket tax?
Likely seven per cent, the same as most tickets at Rexall Place.
If the surcharge churns out more cash than needed for mortgage payments and the maintenance fund, the surplus goes to Katz, on the theory that he would have received all this money from ticket prices if the tax didn’t exist.
What’s to stop Katz from demanding a sweeter deal in a few years?
Company executive vice-president John Karvellas says they have no intention of coming back to the table once everything is set in place and his boss made “significant compromises” to reach an agreement.
More to the point, NHL commissioner Gary Bettman has indicated the league will support the 35-year location agreement that’s part of the proposed contract.
City council is scheduled to ratify the master agreement and other legal documents in mid-March, assuming the province offers suitable financial support.
Construction is expected to start in late summer or early fall, with work completed in 2016.
The Oilers, whose lease at Rexall Place expires June 30, 2014, are confident they can negotiate to stay until their new home is ready.
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