SBD/December 13, 2012/Facilities

City Of Edmonton Re-Starts Negotiations With Katz Group Over Arena Deal

Construction costs were originally projected at C$450M but have risen to C$478M
The city of Edmonton yesterday "restarted downtown arena negotiations with contrite Katz Group executives," but while they "withdrew some key demands, councillors are leery of new proposals the company put forward," according to Gordon Kent of the EDMONTON JOURNAL. Talks were "cut off in October after Oilers owner Daryl Katz asked for a [C]$6-million annual subsidy and other changes to a 2011 agreement, then refused to attend city council and explain why he needed the extra money."  But seven weeks later, "virtually every senior company executive was in council chambers, asking to resume talks, jettisoning the subsidy idea and eating a little crow." Katz Group Exec VP & General Counsel John Karvellas said, "What we're trying to do is be as open as possible with our projections so you understand we're not trying to put anything over on you; we're not trying to be sneaky." Karvellas said that although the Katz Group last year agreed to "keep all revenues from the facility and cover all the operating and maintenance costs, further analysis showed that isn't economically viable." He "proposed that part of the taxes on the company's developments in the sports and entertainment district that exceed city projections be put in an arena fund, although what the money will cover hasn't been determined." Karvellas said that in another move, the Katz Group is "willing to pay a 'reasonable share' of cost overruns on the project." Arena construction, originally slated to cost up to C$450M, now is pegged at C$478M, "while the price of the Winter Garden pedestrian bridge over 104th Avenue" is now C$60M, C$10M "more than the budget." Karvellas said that Katz Group also is "dropping its push for the arena deal to include the city renting space in the office tower" (EDMONTONJOURNAL.com, 12/13).

FINDING THE FRAMEWORK: In Edmonton, John MacKinnon writes the two sides "will keep on talking, using the framework of agreement worked out in New York City in October 2011 as the basis for discussion." Councillors also "agreed with the Katz Group suggestion to include an independent mediator and a financial analyst to facilitate agreement, or so they hope." However, once the "talking is done, support for a reserve fund may well hinge on whether both sides can agree on the numbers, on what it costs to operate the proposed new facility versus how healthy the revenue streams are." Unlike the Oilers' current deal with Rexall Place, a move to a larger, more modern downtown arena would give the club "access to the revenue from all events staged there." However, the Oilers "calculate things much differently" so there is a "major disconnect on the financial projections in the new arena" (EDMONTON JOURNAL, 12/13).
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