Alberta Politics

why would the government of alberta help fund the proposed Katz group arena?

This week Edmonton’s City Council is holding hearings and holding a vote to purchase the lands underneath the proposed Katz Group Arena on 104th Avenue north of downtown Edmonton. This vote will take place despite the $100 million which is still missing from the funding formula that has been negotiated by Mayor Stephen Mandel, the City Administration, and billionaire Daryl Katz‘s Katz Group. The current funding formula would have the City of Edmonton fund an approximate $450 million towards the mega-project.

Some advocates of the proposed Katz Group Arena will tell you not to pay too much attention to the details, because the proposed Katz Group Arena will cure all of Edmonton’s civic ills, but reasonable voices are pointing out the raw deal that the City of Edmonton has negotiated. Paula Simons wrote an excellent column about this last week, and Edmonton Journal business reporter Gary Lamphier waded in to the discussion today, highlighting the point that Mr. Katz is no longer willing to pay the $100 million he has previously committed towards the project:

“It’s a terrible deal,” says U of A sports economist Brad Humphreys. “They’re still short $100 million and I don’t see it going very far until they come up with the remainder of the funding.”

What’s more, by allowing Katz to forgo the $100 million upfront funding commitment in return for a 30-year lease at $5.5 million per annum, Humphreys says the city has further softened the financial burden on the Oilers owner.

“I notice in the reporting to date, people are saying Katz is paying $165 million, which is $5.5 million over 30 years. But that’s not right. That calculation ignores the time value of money, which believe me, is coming out of the taxpayers’ pockets.”

The federal government has given no indication that it is interested in entering this kind of financial venture, which has led some arena advocates to look to the provincial government to fill the gap. It is a risky venture for the provincial government to become involved with.

During the Progressive Conservative leadership campaign, now Premier Alison Redford said in a media release that she opposed any government funding for the Edmonton arena, direct or through a dedicated tax.

It has been speculated that provincial funding already allocated through the Municipal Sustainability Initiative could be allocated to the Katz Group Arena, but such a move could come at the cost of much needed public transit and community infrastructure.

Provincial involvement in the proposed Katz Group Arena could also create expectations by other municipalities that the provincial government should fund other professional arena mega-projects. This could be the case especially in the City of Calgary where the aging Scotiabank Saddledome could need be replaced or undergo major renovations in coming years.

Premier Redford has said that she wants the provincial government to deliver a balanced budget by 2013-2014. Diverting $100 million toward the proposed Katz Group Arena to fill a funding gap that was a result of poor negotiations on the part of the City of Edmonton does not exactly send a clear message of fiscal responsibility to Albertans. This would open the Progressive Conservatives to increased attacks by the NDP and Wildrose, who have already taken hardline positions against public dollars supporting the proposed Katz Group Arena.

In a September 29 media release, NDP leader Brian Mason (who was elected to City Council during the Peter Pockington-era of Edmonton Oilers ownership) said:

“I’d rather see that $100 million used to reverse this year’s education cuts, or used for publicly accessible infrastructure like LRT. I’ll put kids before a billionaire team owner any day.”

There is also the possibility that provincial funding for an expensive mega-project like the proposed Katz Group Arena could hurt Edmonton’s chances of securing future funding from the province for legitimate public works projects, such as future LRT expansions. The provincial government is already funding the construction of the Anthony Henday ringroad and is currently undertaking the restoration of the Federal Building, the creation of a new Centennial Plaza at 99 Avenue and 108 Street, and providing funding to expand the LRT.

With the provincial government already pouring funds into these large infrastructure projects in Edmonton, there is the very real possibility that the province will have no interest in becoming financially involved in a mega-project like the proposed Katz Group Arena. 

That no other level of government wants to become involved in funding the proposed Katz Group Arena should be a hint to Edmontonians and their City Councillors that they should take a closer look at the “deal” that their Mayor and Administration have negotiated.