‘All bets are off’ if arena deal doesn’t work: Katz
‘Nobody can question my good faith or my commitment,’ Katz says
Listen to the interview on your mobile device - http://snd.sc/OWkoLA
EDMONTON - Saying he fears delays and rising costs could price the proposed $450-million downtown arena project “out of this market,” Oilers owner Daryl Katz made an impassioned pitch Monday to close this deal with Edmonton city council — and soon.
In an hour-long telephone interview with the Journal arranged at his request, Katz termed the project “far too important to fail,” a spectre that arose last week as a result of a report to city council that pegged the new cost of the arena at $475 million and revealed other requests from the Katz Group, including a $6-million annual operating subsidy to run the facility.
“I’m focused on making this deal work — God knows, I’ve spent enough money,” Katz said. “My wife thinks I’m nuts, OK?
“If this deal doesn’t work, what can I say, obviously all bets are off and we’ll have to figure out what comes next. And I don’t know what that will be.”
Katz said he chose to speak up about stalled negotiations because, “there’s a lot at stake and people in Edmonton need to understand the full picture.”
The picture became more cloudy last week, when the subsidy issue, in particular, rankled and blindsided members of city council.
In October 2011, the Katz Group agreed to make mortgage payments of $5.5 million a year for 35 years to cover Katz’s $100-million share of the arena’s construction cost.
Katz also agreed to pay roughly $10 million a year in operating and maintenance costs. To many, that $6-million ‘offset’ resembles a clawback of the $100 million he originally promised.
“I’d like to clear the air on this issue of an operating subsidy,” Katz said. “Because what has come out of the city over the last several days, to be frank, is unfair, untrue and totally counterproductive if what we’re trying to do is secure the Oilers future in Edmonton and have us participate in the development of a new arena and sports entertainment district.”
Katz said a “mechanism to offset capital and operating costs of the new arena” had been contemplated from the beginning of the four-and-a-half-year negotiations, and should not have been a surprise to city council.
“I feel badly if members of council were caught off guard, but I guess that is politics and that’s not actually our responsibility,” Katz said.
In discussions among Katz, the city and NHL commissioner Gary Bettman in New York City in October 2011, one mechanism identified to achieve such a subsidy was casino and gambling revenue, which the city agreed to facilitate with the provincial government.
“We don’t care if it’s a casino and gaming initiative, or something else,” Katz explained. “We need a mechanism to offset operating and maintenance costs, just like Pittsburgh and Winnipeg.
“Casino and gaming is just one way and it happens to be used in other markets all over North America.”
Katz reinforced the need for a public-private collaboration to build a new arena, one Edmonton badly needs, one the city would have to fund entirely itself if he and the Oilers were not prepared to invest in the project.
Without the Oilers, Katz said, the city “would have to pay all the capital and operating costs, just like Quebec City will, just like Kansas City, just like Phoenix, just like Seattle, just like Hamilton, and just like other cities that would all like an NHL or an NBA team to subsidize their arenas.
“So, you see, in our view it is the team that acts as a subsidy for a city’s arena, which is effectively infrastructure, not the other way around.”
In Katz’s view, the Oilers franchise, for which he paid $200 million, makes possible a major-league arena which, in turn, will drive downtown revitalization, expressed in “billions of new investment downtown,” to be harvested by the proposed community revitalization levy.
Conservative estimates suggest this tax on new development could generate between $1.2 billion and $1.6 billion for the city. Terming the CRL a “gold mine for the city,” Katz said it might produce more than $2 billion in revenue, and could be used as a source for the operating subsidy.
The current funding model for the arena earmarks $45 million from the CRL to help cover the $125 million the city has pledged as its contribution to arena construction costs.
Katz also said a proposal to centralize city employees in an office tower to be built adjacent to the arena, along with a hotel and other parts of the surrounding development, would “supercharge the CRL and drive it forward faster for the city to realize their billions of dollars in tax revenue.”
Katz dismissed suggestions he is changing the deal in midstream, making new demands to try to sabotage his own negotiations as a pretext to move the team.
“That worry has been expressed,” Coun. Don Iveson told the Journal last week. “That’s been the leverage behind this all the way along. If that’s their intent, it would be handy if they could come out and say it.”
Stressing that he stepped up four years ago when the Edmonton Investors Group was fracturing, purchased the Oilers and pledged to contribute to a new downtown arena, Katz flatly rejected the notion he is scuttling his own deal.
“Oh, so he’s questioning my track record and good faith?” Katz said of Iveson’s comments. “If you want to judge the quality of my commitment, look at what we said we’d do with the hockey team four years ago and what we’ve done since ... and we’re just getting started.”
Katz underscored he had spent $200 million on the franchise, “funded operating losses since (and) put $70 million into acquiring land.
“Nobody can question my good faith or my commitment.”
Like most, if not all parties involved in the project, Katz is deeply frustrated the process has dragged on so long.
“Quebec City is in the ground (on their arena project) and they started three years after us.”
Given cost increases owing to the economic boom in Alberta, Katz noted, “If we don’t move quickly, this deal is done.
“We’d like to be able to agree on a deal in the next month or two. We’d like to be able to break ground on the project in the spring and get hard pricing by late fall.”
Despite the apparent disconnect between the Katz Group and city council, Katz said: “I think we are close to realizing our vision with the city and I think if we work together and are reasonable, we can do so.
“We have to move quickly, time is our enemy. The longer it takes, the more it will cost, and cost (increases) will make the project prohibitive for all of us.
“It’s crunch time.”
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