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Clarifying the proposed arena debate

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  • Clarifying the proposed arena debate

    Originally posted by Lorna Rosen

    ****UPDATE****

    Update –April 28

    Discussion around the proposed downtown arena has quieted following the April 6 motion passed by Council. That motion provided clear direction on the terms and conditions that Council wants to see included in an agreement on the proposed facility.

    Currently administration is looking at the legal and financial impacts of the motion. One key condition is that any negotiated agreement will have to be finalized by Council.

    The April 6 motion touches on several aspects of a possible agreement including financial arrangements, a 30-year location agreement for the Oilers and community benefits. Council’s motion also clearly sets a maximum price for the project at $450 million, and the City’s contribution to construction of the building is capped at $125 million.

    The City’s contribution of $125 million is to be generated through a combination of no more than $20 million through a CRL and another $105 million through other options such as direct tax revenues from the arena, parking revenue increases or savings.

    The motion from Council also identifies a user fee (ticket surcharge) to fund $125 million of the capital costs.

    The Katz Group has publicly committed $100 million to construction and sources for the remaining $100 million are being explored.

    As well, the motion instructs administration to continue to work with Northlands to clearly understand their financial challenges and how these can best be addressed if a new arena is built downtown. An independent review of the sustainability of Northlands is currently underway.

    There has been much chatter in recent days and weeks about the proposed downtown arena, just what it will cost and whether or not it is already a done deal.

    First let me say that Council has not made a decision on the proposal. Both Council and City administration are giving the proposal its due diligence. Administration continues to gather and analyze information for Council so that they can assess the risks and benefits before deciding if the proposed arena and entertainment district is the right decision fro Edmonton.
    Cost will be a major factor in that decision. Based on similar projects in other cities the City estimates the cost to design and build a new arena in downtown Edmonton at $450 million.

    Of that, the City would contribute $125 million towards construction. This money would be generated through a Community Revitalization Levy (CRL), a measure that allows municipalities to dedicate the property tax revenue from new development in an area to cost of new infrastructure, in this case the proposed arena.

    This $125 million would be the extent of the City’s contribution to construction of a new arena. We believe the CRL is a good approach for this project and could contribute to ongoing efforts to revitalize the downtown core. So why do we think this will work?

    Right now the proposed site for the arena generates about $180,000 in tax revenue annually for the City. We believe that the arena and entertainment district, backed by the $100 million pledged by the Katz Group for development around the proposed site, will spark new development in that area resulting in increased property tax revenue coming into the City. It is that increased tax revenue that will be used to pay for the CRL. Taxes will not increase and Council passed a motion in 2010 saying that taxes couldn’t increase to support the proposed arena project.

    It is also important to note that without the proposed arena we don’t think that this development will occur. As well, if Council approves the project and the use of a CRL then the province must also approve the CRL. Part of that approval process will be looking to see how the CRL will be paid off if development doesn’t occur at the rate anticipated.

    The City has also proposed that a second $125 million could be raised through a ticket surcharge, a common method of raising funds for projects such as new facilities or facility improvements. This estimate is based on the current level of ticket tax that is already in place, paid by individuals attending events.

    In addition to the $100 million they have publicly committed to kick start development in the area around the arena the Katz Group has also committed $100 million for design and construction of a new arena. This brings the total to $350 million, leaving a shortfall of $100 million. Work is underway to identify other potential revenue sources to address this shortfall.

    We continue to negotiate with the Katz Group on a downtown arena framework and will bring more information to Council at the April 6 meeting.

    I encourage Edmontonians to be informed on this issue. More information on this proposed project is available at www.edmonton.ca/downtownarena.

    -- Lorna Rosen
    Last edited by Deus ex Machina; 28-04-2011, 10:30 PM. Reason: UPDATE from Lorna Rosen
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