University of Alberta sports economist Brad Humphreys has chimed in (at The Sports Economist, natch) with his analysis of the Edmonton Oilers arena deal, and if anything, he’s even more pessimistic than I was yesterday. Among Humphreys’ concerns:
- The current construction cost estimate for the arena (not counting land and roads and bridges and other needed infrastructure) is $480 million, up from a $450 million estimate in March 2008. But given the actual inflation rates since then for steel, concrete, and labor costs, the actual cost in 2013 dollars is more likely to be $517.5 million.
- In her new book with the really long title, Harvard planning professor Judith Grant Long estimates that the average sports facility deal comes in at about 25% above the stated cost estimate. That would make the expected Edmonton arena cost $562.5 million.
- Filling in the gap by increasing the projections of revenue from the Community Revitalization Levy — future increased property tax revenues from the project, aka a TIF — is awfully dodgy, since “if they could have raised an additional $15 million from the CRL when it was proposed as part of the financing package years ago, why wasn’t the CRL contribution higher back then?”
In other words, the funding gap may still be pretty large — though it could be the kind of gap that doesn’t show up until you’ve already agreed to build the project and suddenly realize that there isn’t enough money to pay for it. Man, this really is the week for that, isn’t it?
A few details of the plans for the new arena (http://www.edmontonsun.com/2013/05/16/edmonton-oilers-fans-and-concert-goers-can-export-more-of-everything–except-corporate-suites–in-planned-new-arena).
In the article, the mayor is quoted “I was just in Brooklyn and saw their facility which cost over a billion dollars … It does not hold a candle to what the inside of ours is going to look like.” How exactly does he figure the facility will be better at half the cost? Labour and materials will be higher cost. Design work will be comparable. Land costs lower? That alone shouldn’t represent the savings… I think I’m now more pessimistic than the above cost estimates.
Land costs dramatically lower, far, far less needs to be knocked down to clear for the arena, less needs to be crammed in because of the lack of space, less rules to follow environmentally because there isn’t the same amount of people living all around the arena compared to Barclays in Brooklyn, and so on and so on. He probably easily could build a far better arena for half the price just because of how much expensive it is to do anything in NYC, especially building an arena (I can’t even imagine how much it would cost to build another MSG in Manhattan; it probably would be the most expensive arena or stadium in the world by a landslide) However, that obviously doesn’t mean the Edmonton arena would make money (and I think it will lose money, and lots of it, if the team pays as little as it seems it will)
The CRL funding started at 45 million. As of May 15 vote by city council, it will now apparently fund 199 million of arena costs. The number just keeps a-moving, to wherever it needs to be, apparently, to fill the funding gap. Edmontonians with any savvy, are alarmed (a mild word) at what this city council has done.
Let’s not forget that the MTA sold the entire Atlantic Yards footprint to Forest City Ratner for the paltry sum of $300 million. (That’s paltry for NYC real estate prices given the size of the footprint.)
The final agreement is out apparently. The total is $604.5 million including land.
http://www.edmonton.ca/city_government/projects_redevelopment/the-agreement.aspx
There are links for the master agreement on the right.