Oilers owner Katz drops arena non-compete clause
Council agrees to land purchase, will vote on deal Oct. 26
Oilers' owner Daryl Katz has waived a requirement that Rexall Place operator Northlands sign a non-compete clause before he agrees to a deal with the city on the new $450 million downtown arena.
This concession is part of a proposed deal announced Friday following a closed-door meeting of Edmonton city council.
"The Katz Group has withdrawn the requirement for a non-compete [clause] which would allow Rexall Place to operate, for example, in the concert business," City Manager Simon Farbrother said.
"Now recognizing that this does contemplate that there would be a level playing field. So if there is a ticket surcharge on the new arena, then a ticket surcharge would continue to be levied on the old arena."
Farbrother said the city would no longer subsidize Rexall Place once the new building opens.
"That would be consistent with the current lease. If the Oilers aren't playing in the building, the city's requirement to subsidize ends anyway," he said.
Coun. Kim Krushell asked Farbrother how much of a concession the Katz Group made by abandoning the non-compete clause.
"I believe, certainly from our discussions with the Katz Group, they do see this as a very, very significant concession," Farbrother said. "But also I think it's really important that we don't just focus in on that. This is about all the elements within the agreement, working as one agreement."
"So are you satisfied, Mr. Farbrother, with the agreement that's in front of us, as city manager?" Krushell asked.
"Yes, I am," he replied.
Council approves land purchase
The proposed agreement is still subject to approval by city council. But councillors did vote Friday in favour of buying the arena lands.
"Don't mind making a deal on this land because whatever happens [with the] arena now, later or never, this land is going to continue to have value," Coun. Don Iveson said. "I would feel concern if we were making some of the other decisions today based on new information today, but the land has been a recurring conversation."
No one from Northlands was commenting Friday on the proposed agreement. The organization's president Richard Andersen had suggested earlier that Northlands would need $250 million before agreeing to leave the concert business.
The Katz Group issued a brief written statement late Friday afternoon.
"We respect the city's process and appreciate the time council and administration devoted to the arena project in today's special meeting," said executive vice-president John Karvellas.
"We have the basis of an agreement that will enable us to move this project forward, subject to the approval of City Council on October 26th. We continue to believe, as we have from day one, that this project represents a great opportunity to help revitalize our downtown and ensure the Oilers' long-term sustainability in Edmonton."
Katz money paid back over 30 years
According to the proposed agreement, the pedway over 104th Avenue will cost the city a maximum of $25 million or half the cost.
The Katz Group has pledged to put $100 million towards the project. What's new is that the cost will be spread out over 30 years. The city will have to borrow $350 million dollars to allow the arena to go ahead.
The city will put in $125 million into the project; $45 million will come from a downtown Community Revitalization Levy or CRL. Farbrother said the $5.5 million that the city currently gives to Rexall Place could be transferred to the new arena.
Another $125 million will come from a ticket tax. The source of the remaining $100 million in funding is still unknown.
The city will own the facility and the land. The Katz Group will earn all revenue from the facility but also be responsible for all operating costs and capital maintenance, Farbrother said.
The city may also consider entering a 10-year marketing agreement with the Oilers at a cost of $2 million a year.
Council will hold a non-statutory public hearing on the proposed agreement on Oct. 25th.
Scott Hennig, the Alberta director of the Canadian Taxpayers Federation, expressed concerns that the city would have to borrow $350 million to move the project ahead.
"That's going to be expensive and it's going to eat into their cap of what they can actually borrow for other projects like LRT," he said. "And what happens if Katz goes belly-up or what happens if something goes wrong? We're going to be on the hook.
"I think we'd be much better if we asked for this money upfront from Katz Group, then letting them, over the long term, pay it back."
Meetings this week in New York
The proposed agreement came after Mayor Stephen Mandel met behind closed doors this week at NHL headquarters with Katz and NHL Commissioner Gary Bettman.
Neither Katz nor Mandel would reveal what was discussed after Wednesday's meeting, saying it would be inappropriate to do so before Edmonton city councillors received an update on Friday.
At a news conference late Friday afternoon, Mandel said Katz wanted to find a way to make a deal.
"They bent, we bent," he said. "We came up with what I think is a fairly good balance."
Karvellas said last month that the arena deal was at risk if an agreement was not reached by Oct. 31st. The company said it would have exhausted its rights to extend the closing date on the arena lands by that date.
Katz officials had wanted the city to firm up a source for the outstanding $100 million in funding as well as compel Northlands to sign an non-compete clause before they signed an agreement.
Mandel said the city couldn't solve those two issues by the end of the month.