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July 19, 2010
Oilers arena financing plan includes ticket tax, some Katz bucks
The Edmonton city council is scheduled to discuss Daryl Katz' proposal for a new Oilers arena again on Wednesday, and Katz kicked things off by saying he'll contribute $100 million after all, after initially promising to and then changing his mind and saying the money would go towards surrounding commercial development. In a letter to the council dated June 29 but only made public last week, Katz now says the $100 million will go toward the arena, which should make Mayor Stephen Mandel happy, if nothing else.
Of course, $100 million is still only a quarter the estimated cost of a new $400 million (or so) arena, and the rest of the cash will need to come from somewhere. Mandel's office released a report last Thursday calling for a "balanced funding model" — by which they mean, according to the Edmonton Journal, a mix of "ticket surcharge revenues, a community revitalization levy, contribution from team owner Daryl Katz, funding from other levels of government, and transferring current operating grants to cover debt servicing costs." In particular, a $5 ticket surcharge could pay for $110 million to $135 million in arena costs, the report projected.
Edmonton city councillors were mixed in their comments to the CBC on a ticket tax:
"It's not any different than some of the user fees that we, as a city, use on some of our facilities," Coun. Jane Batty said.
But Coun. Kim Krushell wondered if people would be willing to pay extra for their Oilers tickets.
"I'm not sure whether the market will bear that or not," she said. "But I'm certainly willing to look at anything, although $5 does seem a bit on the high side."
Actually, any economist will tell you that ticket taxes mostly don't raise ticket prices, for exactly the reason Krushell mentions: If teams and concert promoters are already charging as much as the market will bear, they'll have to lower prices to account for the new tax if they want to keep selling tickets. So in the end, ticket taxes mostly come out of the pockets of team owners and other event promoters. (Before anyone writes in about price elasticity: No, not 100% out of the owner's pockets. But close enough, given that the marginal cost of selling an extra ticket is darn near zero.)
That still leaves about $200 million to be paid for by various forms of public money, though, which should make for an interesting council hearing on Wednesday. Also interesting to watch for: Will the council kick the can down the road again to avoid the issue until after the November elections? And how will Katz' Hamilton gambit play to the councillors? Stay tuned.
Glad ta an owner is actually chipping in, though it's really a loan. He'll find a way to get it back, whether it's refusing to pay rent, arena maintenance costs, or getting a subsidy to keep the team around. He sees what other owners are doing! Hard to ignore that precedent.
If you had to look past the scheming, the Oilers are in dire need of a new facility. I went to the Coliseum in 2000, and was shocked how awful a place it is. Given the choice, I'd rather watch the game at home on TV instead of a free ticket to Katz's box suite.
Posted by Dave on July 19, 2010 01:17 PM
*"Glad to see an..."
I guess the shock caused me to forget how to type correctly.
Posted by Dave on July 19, 2010 01:19 PM
What exactly is wrong with that place (not rhetorical, I'm curious)?
Posted by Brian on July 19, 2010 01:22 PM
The first thing I noticed was the concourse, which is as wide as a High School hallway...so packed and problematic to navigate. Food or washrooms? Only if you really need to.
Then there is the bowl seating area. Looking up at the ceiling structure you'd think it would cave in...looks like they never finished it (of course the TV cameras only go as high as the banners).
The place is poorly lit, the seats are terrible. A sound system from the 70's. It just looks to be in general disrepair all over.
I grew up going to the Saddledome in Calgary, which seems like the New Cowboy Stadium in comparison to the Coliseum. And the Dome is 27 years old!
If I hadn't known, I would have never guessed the Coliseum was once the home of a dynasty.
Posted by Dave on July 19, 2010 03:19 PM
Brian:
"what's wrong with the place?"
Well, that depends on your perspective.
Financially, not much. The Oilers have been in the top 8 of arena revenue (gate and concessions) around the league for the past several years. The capacity is modest by 2010 standards at just under 17,000. However, Katz' present plan is only to build an 18,000 seat arena, so it's hard to justify a new barn with the capacity argument.
As for the concessions argument, well, perhaps they aren't at the elite level some would like, but you wouldn't be disappointed in comparison to several other NHL/NBA buildings, and particularly not in comparison with most other sports at or near the NHL's level (or in Edmonton/Calgary). The "club level" seats have their own lounge in which the high end ticket buyers can while away the intermissions.
Lights, concourses and seating can all be upgraded within the present building. Pocklington upgraded two of the three in the late 1990s (using public money, of course).
I haven't been to either Edm or Cal arenas in 4 years, but unless there have been significant upgrades in Calgary, I wouldn't say there is a huge difference. Calgary's rink is nicer, but not by a staggering amount. BTW, the Saddledome was built less than a decade after Northlands Coliseum.
All that said, from Mr. Katz' POV, if he can get a new building and get someone else to pay for most of it, hey, why not? The argument that it is "the oldest" building in the league is not relevant. One of the thirty teams will always have the oldest building - as in baseball, where the 20yr old Skydome and Tropicana field cannot be described without including the phrase "Amongst the oldest facilities in baseball".
The Coliseum underwent a publicly funded makeover in the mid-late 1990s. Perhaps it does need a $20-30M refit today. An upgrade in that financial ballpark would cost less than the annual debt service on a proposed new rink (including infrastructure), and would allow the city to continue using it's rail and road transit systems to service the rink - something that's going to be difficult in the "new" proposed location, particularly for road access.
Funding to come from other "levels of government"? What other levels of government? The provincial and federal levels have already made it abundantly clear there will be no funding for a new arena in Edmonton. Is there some other secret level of government I don't know about?
Posted by Chris on July 20, 2010 07:50 PM