EDMONTON - Edmonton city council has approved a draft agreement with the Katz Group to build a new downtown arena.
Under the framework, announced Wednesday night at a hastily called press conference at city hall, the city said it will own the $450-million arena and the land, while the Katz Group, which owns the Oilers, will operate the building and be responsible for all maintenance, upgrades, operating and capital expense costs.
The city will contribute $125 million, the Katz Group will chip in $100 million and another $125 million will come from a user-paid facility fee.
The remaining funds, according to city officials, will come from other levels of government — although the province and feds have previously indicated that they won’t be contributing.
“We believe this framework is fair for both sides and reflects what we heard from Edmontonians,” said City Manager Simon Farbrother.
“This framework allows us to move forward with this project and ensures that we will continue to align our efforts with what the community has told us are Edmonton’s priorities for this important project.”
The scheme, if given formal approval, will keep NHL hockey in Edmonton for 35 years, support downtown revitalization and limit the city’s risk, officials said.
“From the beginning, we have approached this project with the twin objectives of creating a major engine to drive the revitalization of downtown and of creating a model for the long-term sustainability of the Oilers in Edmonton,” said Katz Group Executive Vice President Bob Black.
“City Council’s decision is a watershed moment that puts us on a path towards achieving these objectives. There remains a lot of hard work ahead to conclude a definitive agreement and we are anxious to do so as soon as possible.”
The framework is not a final and binding agreement.
The city and Katz Group will now begin to hammer out a master agreement, including securing the remaining $100 million.
The framework closely reflects the terms and conditions outlined by council in the motion passed at its Apr. 6 meeting, according to a press release.
Earlier in the day, Katz Group executives urged councillors to avoid buying into a seat-selling scheme that could help finance a new downtown arena.
“The entire (idea) is based on speculation about the market for the product,” said Katz Group chief financial officer Paul Marcaccio.
“We prefer to rely on the years of experience of the Oilers organization in understanding their customers.”
Marcaccio — alongside Black — was speaking out about a seat selling proposal recently pitched by the Stadium Capital Financing Group.
The Chicago-based group tried to convince council last April their funding model involving Equity Seat Rights was the best solution to meet arena funding shortfalls.
The group suggested selling ownership of 1,500 new seats and 500 premium club seats in the new arena at a cost of $278,000 to $417,000 each, which could raise up to $700 million.
Of that $700 million, $550 million would be dedicated to funding the new proposed arena, $100 million would go to Oilers ownership and $50 million to building the reserve/community benefits fund.
The group also proposed building a new 20,000-seat arena instead of the 17,100 seats currently at Rexall Place.
But Marcaccio said the idea could never work.
“Given our expectation that 20,000 seats is excessive for this market, we expect there would be open seats (remaining) for most events,” he said.
That would discourage people from buying season tickets, he added, since there would be an understanding that there would never be a sell-out.
A bigger stadium would mean bigger expenses, Marcaccio said.
“The ongoing capital maintenance and repair costs of a much larger building would increase proportionately.”
Coun. Kim Krushell said she also had little faith in the scheme.
“From what you’ve described, it’s not very viable, is it?” she said.
“And if it was, wouldn’t you do it?”
In March, city council approved a framework, setting out the guidelines city administration will use in arena negotiations with the Katz Group.
— With files from Michelle Thompson