Hardball leverage key to arena deal
If Katz, City Hall can’t agree to terms, the Oilers are likely gone
Now that Edmonton Oilers owner Daryl Katz and Edmonton Mayor Stephen Mandel have cleared their throats, but not the air, on the downtown arena, the mind’s eye is haunted by the image of Edvard Munch’s painting, The Scream, isn’t it?
For some Edmontonians, the current disconnect is the realization of the nightmare scenario they feared all along: the billionaire operator endlessly demanding concessions from a beleaguered City Hall and, by extension, the taxpayer.
If it’s not a $6-million annual operating subsidy, it’s agreeing to install city employees in an office tower, or it’s building in a financial cushion to soften the effects of the Canadian dollar possibly taking a tumble in 10 or 15 years.
What’s next, provision for the possible negative effects of global warming?
On and on and on. And this is coming just at the onset of an NHL lockout yet?
The reality is that after more than four years of this taffy pull, after Katz and the city have rattled their respective cages to focus each other’s attention, this is coming down to one thing and one thing only and that’s this: leverage.
For the two sides to conclude a deal over the next two or three weeks, or even months, this is going to be about leverage and how it’s used.
The deal-making process won’t be for those with tender stomachs or faint hearts. But a deal can and should be made. Enough is enough.
Time is a component of this, of course. That’s merely because it’s crucial to make a deal before rising construction costs increase the price tag beyond the $25 million all the dithering has so far cost the city, lifting the price tag to $475 million from $450 million.
More important, as time passes, another deadline approaches, the June 2014 expiration of the Oilers lease to play at Rexall Place.
On that score and its meaning, former Edmonton Investors Group member Bruce Saville was heard from on Friday in a radio interview, saying, in his typically blunt fashion: “If this arena doesn’t get built, the team is gone.”
Some citizens, and perhaps some city councillors, take comfort in the belief that no matter how out there Katz’s demands may be, the NHL would not permit their cherished Oilers, who sell out their building game-in, game-out, to up and move to, say, Seattle or Quebec City or Markham, Ont. The very idea!
Don’t delude yourselves. In fact, the NHL has communicated to city council that, absent a lease, and with no state-of-the-art arena either being constructed or about to be, the Oilers would be a candidate for relocation.
That would require a majority vote of the NHL board of governors. But that gang, one of the most exclusive boys’ clubs extant, wouldn’t stop Katz from moving.
Still, moving the Oilers is not and never has been Katz’s end game in all this. He did not invest a reported $70 million in land acquisition and design costs so that he could uproot the Oilers. He loves the Oilers as much as anyone and really does want to contribute to something grand and lasting in downtown Edmonton.
He also has to know that the beloved Oilers brand, a powerful thing, loses a great deal in the translation if the team decamps to Kansas City or Seattle. At least, it would in theory, although the Dodgers and Giants, to name just two transplanted franchises, seem to have become closely identified with Los Angeles and San Francisco, respectively.
Were the Oilers to up and leave, those believing that another franchise — say one of the ones struggling in the Sun Belt — would swiftly trundle on up here to replace it are also dreaming. My sense is NHL commissioner Gary Bettman feels he has given at the office two or three times over to keep the Oilers in Edmonton, including that famous meeting among the city, Katz and the NHL in New York in October 2011.
If, in the end, the city failed to negotiate an arena deal with Katz, why would Bettman send in another owner to face the same problems? At a bare minimum, until a new, majorleague arena were built, the NHL wouldn’t consider relocating a team to Edmonton.
Katz’s major worries have to do with the annual tab he’ll ring up in the new arena: about $10 million in operating expenses; $5.75 million toward the mortgage; $4.5 million in ticket tax money.
True, he’ll also collect $2 million from the city for the first 10 years in that marketing partnership, and if he gets that $6-million operating subsidy he claims was always contemplated, that has to provide some comfort. Especially when you consider Katz would collect the revenue from all non-hockey events, as well.
In the end, what Katz is seeking is not a deal that seems fair and reasonable to the average citizen, but one he believes puts the Oilers on a level playing field with the other 29 NHL franchises, notably Pittsburgh, where the Penguins do have an operating subsidy in their new arena deal.
Katz will use whatever leverage is available to achieve that, among other things.
City council may determine that a deal can be found by being more optimistic and creative with the revenue they hope to generate from the community revitalization levy, pegged at about $1.2 billion over 20 years.
Or they may conclude it would be irresponsible to accede to Katz’s demands, a perfectly defensible position.
Along with that haunting image of The Scream, it seems, comes a growing queasiness that the outcome of all this comes down to hardball leverage and a choice between the more bearable of two nightmare scenarios.