understanding the katz arena district debate: community revitalization levy, opportunity costs, and the arena poll.

Edmonton City Council voted yesterday to enter formal negotiations with the Katz Group to develop a downtown arena though framework documents developed by the City Administration. These documents are problematic for many reasons, but mostly significantly because they present a $100 million gap in the funding framework.

Mayor Stephen Mandel remains a steadfast supporter of this mega-project and a few Councillors expressed their discomfort at entering this stage of the process with a surprising lack of important information available to them. Councillors passed a 12-part motion requesting reports on the community benefits, the potential to raise money from licensing or selling seats, the impact on businesses near the area, and the status of negotiations with Northlands. The lack of important information still unavailable makes yesterday’s motion very much a tentative move towards negotiations between City Council and the Katz Group.

After a heated day of questions and debate, Councillors Don Iveson and Linda Sloan were the only two Council members to vote against the motion to enter negotiations, which was voted upon separately from the rest of the 12-point motion. Councillor Iveson wrote a blog post last night expanding on why he did not support the motion and raised the important point that perhaps: “we should just call this a subsidy and be transparent about it.” This point raises another important question that I asked in a previous post: should municipal governments be responsible for subsidizing professional sports in Canada?

Public hearing on the Katz Group’s zoning proposal are scheduled for today and more public hearings are expected to be held in mid-March.

As City Council awaits a response to its motions, it is important that all Edmontonians understand the wider issues surrounding this development, so that they can fully participate in the debate and ensure that our elected officials are making the most responsible decisions for the future of our City. Here are three of those wider issues:

Understanding the Community Revitalization Levy
An important thing to remember when trying to understand the Community Revitalization Levy (CRL) is that despite its name, it is essentially a tax (in other jurisdictions it is known as Tax Increment Financing).

There is a good explanation of CRL on the WhyDowntown? blog. Mack Male has also written a helpful three part series explaining some of the basics about CRLs, how they are already being used in Calgary’s Rivers District, in Edmonton’s Fort Road, and is in the process of being implemented in Edmonton’s The Quarters District, and how a CRL could work in a Katz Arena District.

Understanding Opportunity Costs
The Charette’s Scott Lilwall has taken a look at some of the opportunity costs facing the City of Edmonton if public funds are used to subsidize the Katz Group Arena. Are the opportunity costs of subsidizing a new downtown arena good for Edmontonians?

Given that it’s never a sure thing, we need to ask ourselves – what is the opportunity cost? If downtown revitalization is our goal, is a new arena the best thing we could spend $250 million on? It seems to be a high price to pay for bringing people to the downtown for a few hours at time. Even if the new arena was booked every night, most people are going to be in and out: come downtown for the event and then go home. Some of them will stick around for a few hours beforehand. Do some shopping. Do some eating. Spend some time downtown.

That’s good. But it can’t be all that we aim for. What we need is to get more people living around downtown, people who will be eating and shopping and walking and doing what people int he neighborhoods they live in. And they’ll be doing it at all hours of the day. That should be our goal, and the arena is only one way of getting closer to it. But are there better things that we can do with that big pile of money?

Understanding the Arena District Poll
Last week’s news stories in the Edmonton Journal and Edmonton Sun were filled with praise for a poll showing that a majority of Edmontonians not only supported the construction of a downtown arena and public funding of the project.

Luckily for Edmontonians, the Journal’s Paula Simons took a more critical look at the poll results and the questions asked in the poll. Ms. Simons’ closer look confirms the old adage that you can always formulate polls to give you the results you are looking for.

In her column today, Ms. Simons reminds Edmontonians that many questions still need to be answered before this arena deal spins out of control. Hit the books and get learning, Edmontonians. The future of your City deserves a good debate.

8 thoughts on “understanding the katz arena district debate: community revitalization levy, opportunity costs, and the arena poll.

  1. Colin

    While I have now become opposed to the current framework for public involvement in the arena, I think your question is specious on whether muni’ should be responsible for subsidizing professional sports.

    Muni’s should be as free to choose whether or not to engage in such deals as is the feds or the prov. In this case, both the feds and prov have indicated they do not want to. So if the muni wants it – then they can choose to do so. It is not a question of responsibilities.

    Reply
  2. daveberta Post author

    Thanks for the comment, Colin. I believe that we should have a discussion about whether the level of government with the smallest tax base should be responsible for subsidizing professional sports in Canada. It is only one of the many questions in relation to the Katz Arena debate, but it is an important one.

    It also raises the question about why do they need the subsidy? As a private business, if their current business model is not viable enough to survive without this kind of capital project subsidy, should they change their business model?

    I personally don’t believe that it is a municipal responsibility, but regardless of the results I’d like this question to be part of the larger debate.

    Reply
  3. James

    Dave you raise some good points. I wonder about the costs of the arena, is $450 million an accurate estimate? Why is it that in Regina the government is talking about building a new football stadium (with a retractable roof no less) for $380 million and yet an arena in Edmonton which will be half the size will cost us $450 million? Something isn’t right here.

    Let’s say the bidding is fierce and the winning bid is $390 million, who saves the $60 million? the City? Katz?

    Personally, i’d like less talk about downtown revitalization and more talk about an actual arena with actual cost estimates.

    If Katz is in for $200 million, then why not have the specs drawn up and let’s get an actual price estimate.

    Reply
  4. Call it like it is

    @James,

    OMG! You are asking for truth and accountability, sorry you are in the wrong province.

    Trying to get anybody here to nail down an estimate is like nailing jelly to the wall…you just won’t get an estimate.

    The mayor is about to force this one down our throats, so much for serving the public’s interest mandate. I personally would like to see the city get a share in ownership of everything, the team, the arena, the district and its proportional share of the profit as well, fair is fair. We are the only province that claims we don’t like giving welfare, but we give it to corporations, like its nothing.

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  5. Andre

    No offense Dave, but you basically summarized what Edmonton Journal articles has posted on the arena debate. I am sure you read my blog post on the arena debate. My post is a balanced view of what should happen given the risks involved, politically, economically and socially. For our city to grow and to be proud of, this arena and surrounding development must be built but must fully understand the risks involved. This I believe is what Councillor Henderson made a motion for.

    Reply
  6. Alain Saffel

    Excellent post Dave. You’ve done a good job of bringing together a lot of resources and points of view on the problems with the arena development.

    There are some really fundamental questions that are not being answered in this rush to get the arena started downtown.

    Sorry Andre, but it’s more than simply understanding the risks involved in this development. City council’s job is to understand the risks to the taxpayers of Edmonton and to mitigate those risks. There are a variety of ways to do so.

    I am certainly not the only one that is worried about whether Edmonton’s city council is looking after the interests of taxpayers or a billionaire sports team owner.

    Reply
  7. Pingback: Edmonton Notes for 1/23/2011 at MasterMaq's Blog

  8. rod rauscher

    So the truth is slowly coming out there will be added taxes to business and people in the proposed arena area.You can bet on this anyone supporting the arena will not reveal the real cost because there isn’t a definite figure, there will be cost over runs and people will be on the hook for the shortfall. My answer is simple if you are a new arena supporter go to the bank borrow some money and become an investor and leave the majority of non supporters out of it.Our tax money is needed on
    important issues like roadways, infrastructure, snow removal, etc. The city has no business getting into bed with private enterprise and i wonder if maybe some have personal interests in the cause.

    Reply

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