February 10, 2010

Oilers owner: Elfen magic will pay for our new arena

Edmonton Oilers owner Daryl Katz provided new details about his proposed "world-class entertainment and sports district in downtown Edmonton" yesterday, which would cost $1.4 billion and include not just a new Oilers arena but two hotels, a community arena, office towers, a casino, and new student residences. It would also be paid for by not-him: Katz would put up $100 million toward the development, but the rest of the non-arena development would be funded by unspecified private partners, while the $400 million arena itself would be bonded out by the city, which would pay itself back via taxes from the new development.

Katz Group VP Bob Black insisted that "The people of Edmonton should feel comfortable that their taxes will not go up to pay for a new arena," but that's hard to guarantee: This is, as discussed here previously, a tax-increment financing plan, and TIFs are notorious for siphoning off money in indirect ways from city treasuries. Among the problems: While development-related taxes may be "new," if they're going to pay for an arena they can't be used to pay for all the new services that a new development requires; and new development in one part of town can cannibalize demand for development elsewhere that might have paid its own way.

In any case, it looks like the stage is set for the Oilers arena battle to come. One potential stumbling block: Edmonton Mayor Stephen Mandel, who'd previously backed the Katz arena plan, seemed puzzled that Katz is now talking about putting his $100 million into the surrounding development and leaving the city on the hook for the entire $400 million arena. Hint to sports team owners: It's usually a good idea to tell your elected official allies what your plan is before you announce it to the press.