The Edmonton Arena, Corporate Welfare & You, The Taxpayer


To be perfectly honest, I’ve been quite hesitant to put worth a post on the debacle that is the debate on the Edmonton Arena. (Yes, get those jokes about how I’ve hesitant to post about anything lately out of your system.) It’s a topic that’s been beaten to death, both in the MSM, blogs, and social media. However, leading up to the City Council meeting today, the pro-arena PR machine was kicked into overdrive, and lo’ and behold, the twitter-verse was filled with false dichotomies and flawed reasoning.

Before I wade in any further to this issue, I’ll make my own position on the Edmonton arena clear; I would like to see a new arena, Rexall, while still completely functional, is outdated and cramped. Would it be nice to have a brand new facility in a better location? I don’t think anyone disputes this. What I don’t want is for the City to assume the majority of financial risk, while a private entity reaps the benefits. Simply, I’m for a new arena, but not on taxpayer money. We support the team through expensive tickets and overpriced merchandise already. Which is completely voluntary, unlike say, paying increased property taxes.

Now, let’s move on to some of the logical fallacies and reasons the pro-arena crowd has been putting forth, shall we?

“This is how arenas are normally funded in North America.” I’m not going to deny the accuracy of this statement, as this is sadly how business is done these days. Sports owners have seen that cities will open the public purse to them, and now everyone wants a piece of the action, and it’s real hard to blame them for doing so. Why pay for something when you can get it subsidized, at no private financial risk? My issue with this argument is that it boils down to “everyone else is doing it” and well, you know the whole thing about jumping off of cliffs. Just because it’s popular doesn’t mean it’s the correct option.

“The arena will create an influx of spending and boost the economy.” Go and take a moment to google the term “consumer discretionary spending”. There isn’t going to be some magical influx of cash into the economy. Those spending money to go and watch the Oilers at Rexall are simply going to go and spend money watching the Oilers downtown. Instead of eating at a restaurant at South Common, or on the West End before a game, they might eat downtown. It’s transferring consumer spending downtown, not creating it. This arena only creates wealth if it attracts tourists, which is something arenas don’t tend to do. Discretionary spending also leads me to my next point…

“If the arena isn’t built, the Oilers will move and Edmonton will never recover financially.” Except that the money that people would normally spend on the Oilers, will just get spent somewhere else. Edmonton is more than just the Oilers, and people need to realize this. Those more interested sports will divert will excess cash to the Esks, the Oil Kings, the Rush, FC Edmonton, etc etc. Then there’s all the festivals, the Indy, shopping, I could go on and on. And we all know how much Winnipeg, Minnesota-St. Paul, Quebec City, Colorado, Atlanta have all become desolate ghost towns because they lost a sports franchise, right? Will there be financial harm to the city if it were to happen? Yes. However the level of which is completely overstated.

There’s also the fact that threat to move the Oilers is most likely a bluff. Daryl Katz is a billionaire, and one does not become a billionaire without being a shrewd businessman. He knows the panic that Edmonton went over when we nearly lost our team in the 1990′s, and like any shrewd businessman would, he uses any leverage he can get. In addition, I’d doubt the NHL would let it happen. Look at it this way, the NHL is fighting  hard to keep a failed market that is haemorrhaging  money; if they then turned around, and allowed an owner to move a team from a stable, profitable market, simply because he didn’t get shiny new arena, there’d be tremendous backlash from the optics of that.

With all that said, I do have to tip my hat to the pro-arena spokespeople for turning this into a black and white argument of you’re either for a new arena, downtown revitalization, and keeping the Oilers in town, or you’re against it, after all, I’m for all of these things, just not in a deal that where all financial risk runs on the taxpayer dime. That’s where the true debate should lie; public vs. private financing for this deal. This deal, as it stands right now, has Edmonton fronting all of the cash up front. Even the 100 mil that the Katz group will put forward, is not in the form of a lump sum, it’s paid out over 35 years, it is essentially a rent with interest included. And 35 years is a long time, a lot can happen in three and a half decades that would affect the viability of a facility, and you can bet that a shrewd businessman is going to weasel their company out of paying for a facility that no longer suits their needs.

Ultimately, this comes down to Edmonton’s problem with self-conciousness. We, as a city, need to worry less about our image, and worry more about doing the right thing for the health of the city and it’s economy. “Socialize the risk, privatize the profits” is a saying closely related to the term corporate welfare. The public coffer is fronting all the cash up front for this arena, while Daryl Katz stands to receive all the profits. (While paying no property taxes, as the building is owned by the city.) That to me, sounds like the very definition of corporate welfare, and in my opinion, the wrong way to go about building a new arena and revitalizing the downtown core.

After all, in the grand scheme of things, wouldn’t downtown revitalization be better suited by having the Katz group front most of the money for the arena, and then allocating what the city is going to spend on the arena, on the actual downtown infrastructure itself?

Tags: Downtown Edmonton Arena Edmonton City Council

  • jonrmcleod

    As a non-Albertan, I say just get it over with and build it. 

  • Numenius

    Winnipeg built the MTS Centre with 70% private funding. I don’t see why the Katz group so tight, especially given how much they benefit. The MTS Centre has helped revitalize the downtown core, though, so I’d say the same would happen in Edmonton.

  • wrosychuk

    I think it’s responsible for taxpayers to be weary of spending public funds on private projects, but the City of Edmonton has a few problems with attracting private funds in the current climate:
     
    First, the city forked out $88 million for an art museum;
    Second, the city has allocated many more millions on the city centre airport redevelopment; and,
    Third, the city is desperate to keep the Oilers.
     
    Love it or hate it, but the Oilers organization is the face of Edmonton, and it’s what people recognize globally about the city. While you can say that Edmonton would survive without hockey, it certainly wouldn’t make those -40 degree winters any more attractive.
     
    Though, considering the environment, I wouldn’t hesitate to give $100 million as a private investor for naming rights if I could – guaranteed payback, and you’d be perceived to be the “savior” of the arena project.

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