Two months after Edmonton city council cut off talks on the proposed downtown arena, they decided on Wednesday to resume negotiations with the Katz Group.

The motion — which was opposed by councillors Linda Sloan and Kerry Diotte — came after Katz Group executive vice-president John Karvellas told councillors he wants them to authorize administration to restart negotiations.

"We do not want the downtown arena project to die," he said.

The motion allows for both sides to agree on a mediator, who will then have a financial analyst look at the economic costs of the project.

"The issue simply is what is the problem and how do we define how we fix it?" Mayor Stephen Mandel said. "And if in the end, the Katz Group can show us that they need a subsidy [and] the administration says they do, then council has to discuss it.

"At the end, if the Katz Group cannot justify that, then I think they have to accept that responsibility and pay for everything themselves and get on with this thing."

Katz Group 'stunned' when talks cut off

John Karvellas said his employer was shocked when council unanimously passed a motion on Oct. 17 ceasing all downtown arena negotiations with Oilers' owner Daryl Katz.

The motion came one day after Katz refused to go to city hall to explain his outstanding issues with the city over the framework deal struck in October 2011.

Karvellas said the Katz Group didn't show up on Oct. 17 because they didn't think it it was appropriate to negotiate in public.

"We were stunned by the decision of city council on Oct. 17th to terminate negotiations," Karvellas told council. "That is not what we wanted and we did not think that is what the city wanted either."

During the meeting Wednesday morning, The Katz Group withdrew its late request for a $6 million annual operating subsidy, asking to restart negotiations based on the original framework.

Instead Karvellas suggested the city set up a fund from new tax money from development around the arena "which would be made available to draw on to maintain, repair improve and enhance the arena and its operations.

The Katz Group said it is also willing to open its books to a third party.

But the $470 million proposal is still short $100 million which Karvellas said The Katz Group isn't prepared to pay. He asked that April 30th be set as a new deadline for an arena deal to be completed.

Arena negotiations will come up for discussion at the city council meeting on January 23 when city manager Simon Farbrother is expected to present details on how much it would cost for the city to build the arena on its own.