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Tomorrow night, the Edmonton Oilers will end their 31st season in the National Hockey League in dismal fashion: not just out of the playoffs but dead last. With luck, they'll avoid matching their franchise-record lowest season total of 60 points.

But for a Cinderella run to the Stanley Cup final four years ago, the team's golden days are long gone. It has been 20 years since the Oilers last won the cup, their fifth in seven years and the only one since Wayne Gretzky's infamous trade to California.

The team will begin rebuilding with a top draft pick in June, but the construction plans don't stop there. There is also a campaign to erect a $400-million arena.

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The Oilers and their billionaire owner say they need it to stay competitive in a small market. They also say the new home must be in the heart of the city - and taxpayers should pick up the tab.

In a community already on the hook for billions in infrastructure backlog, the proposal has proved incredibly divisive. Some residents feel it will spark a rejuvenation of the sputtering downtown core and some consider it blackmail, a veiled threat to move if the public says no. Others, however, fear the decision is a forgone conclusion.

"A new arena will be built, and it will be subsidized," University of Alberta economist Brad Humphreys predicts. "It's not just Edmonton - that's the way it happens across North America."

The Promised Land

Unzipping a makeshift tarp door, Bob Black walks into an unfinished corner office on the 17th floor of the Bell Tower, one of the few skyscrapers in Edmonton's downtown.

He strides past construction material to a window where he can look down on a casino and bus station separated by a sea of parking stalls.

"This is the site," he says proudly, spreading his arms out to the 16 nearly empty acres. "The arena would basically be in the centre."

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A lifelong local resident, Mr. Black was poached from a law practice late last year to lead the pitch for a new arena by Oilers owner Daryl Katz. A reclusive self-made pharmacy mogul, Mr. Katz boasts a net worth, according to Forbes Magazine, of $1.4-billion, and bought the team two years ago - five years after buying the right to name its current home Rexall Place after one of his drugstore chains. To complete the deal, he leaned heavily on his local roots and pledged $100-million toward a new home for the team.

Edmonton Mayor Stephen Mandel supports the idea. In 2007, the same year his re-election campaign received a $15,000 donation from Mr. Katz's company, he commissioned a city report on a plan that would "accelerate urban redevelopment," "meet current and future NHL standards and the needs of the Edmonton Oilers," and "meet community expectations."

Rexall Place is owned by the city and located a 10-minute drive from downtown. Originally known as Northlands Coliseum, it opened in 1974, six years after Madison Square Garden, the NHL's oldest arena, and can hold 16,839 people, just 600 more than the league's smallest (the New York Islanders' Nassau Veterans Memorial Coliseum).

The report pegged the cost of renovating Rexall Place at $250-million, said the city would probably be on the hook for that sum, and outlined a long list of cases where arenas have played a role in downtown revitalization.

"If we don't do something else, we're going to have to pay to fix that building," Mr. Mandel explains. "We're caught between a rock and a hard place, so we've got to come up with some solutions."

So the report recommended a new arena that "has to be downtown," and the team says it is essential to its long-term viability because Rexall Place has too few seats, luxury suites and amenities to make a decent profit. (Last year, according to Forbes, the Oilers ranked 20th among the league's 30 teams in revenue.)

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Some have interpreted that as a threat to move the team - a sore subject since the Oilers nearly left for Houston in the 1990s, saved by a last-ditch effort by 38 business leaders, the group that sold to Mr. Katz.

"It's not a threat to move the team," Mr. Black counters. "It's simply a reflection of the need to put the Edmonton Oilers on a solid foundation financially."

And his boss is proposing much more than a hockey rink. Mr. Katz envisions a $1.5-billion "arena district" with new hotels, an office tower, student housing, a casino and other retail developments, all breathing life into a downtown area currently crawling along in second gear.

But local columnists have questioned the "raw gall" of the proposal, detecting a whiff of "bait-and-switch" because the team now says the $100-million was never meant to be for the actual arena. Mr. Katz is proposing to leverage that money and his reputation to raise the $1-billion for the rest of the development. In exchange for the potential tax revenue, he wants a free rink and a sweetheart deal to use it.

"We have a really marvellous opportunity here in Edmonton," Mr. Black says. "Standing still is really taking a step back. And we can't afford to take a step backward."



"If we don't do something else, we're going to have to pay to fix that building...We're caught between a rock and a hard place, so we've got to come up with some solutions. Edmonton Mayor Stephen Mandel


Moving ahead would cost $400-million to $450-million, although the mayor says these estimates were made at the height of a building boom and may have fallen significantly.

The league's newest arena, the New Jersey Devils' Prudential Center, cost $309-million and was two-thirds financed publicly. But critics note that Rexall Place cost just $17-million (about $78-million today), and say that, with cash-strapped Ottawa and the province unwilling to chip in, Edmonton just can't go it alone.

"We are not prepared to do that at this point," says Councillor Tony Caterina, who sits on the board of directors for Northlands, an arm's-length city agency that runs Rexall Place as well as other city buildings, including its new $150-million trade centre.

Deputy Mayor Don Iveson wonders if a new arena is even needed, adding, "I am not at all keen on using the city's borrowing power … If there is a downtown arena development, it should occur and survive … on its own merits."

Toronto, Montreal and Vancouver all have modern arenas built on downtown sites without public money, but they are hockey's biggest Canadian markets. Ottawa's venue, now called Scotiabank Place, was privately financed as well, but foundered at its location in suburban Kanata and was sold for a small fraction of its cost less than a decade later.

Mayor Mandel insists that the Oilers will pay for some of a new rink. "Absolutely," he says. "Why not? … I think fundamentally the citizens of Edmonton would expect the Katz Group" to put in some money.

Talks Have Begun

Despite the skeptical councillors and the fact that, even though Edmonton is in the midst of developing a broader strategy to jump-start its downtown, no formal plan has been proposed, Mr. Black says the city and Oilers are already in "facilitated discussions."

Mr. Katz has launched a website, RevitalizeDowntown.ca, to promote his vision. It includes video testimonials from Oilers greats, such as Mark Messier and Kevin Lowe.

The city has hired as consultants University of Alberta business professor Dan Mason and U.S. academic Mark Rosentraub, both experts in sports economics and building arenas, while Mr. Katz has retained AEG, one of the world's top arena development and management firms.

Even the team's current landlord is trying to elbow its way in. Northlands fears having the Oilers move downtown, leaving it with an aging and empty rink. "I think we're going to be an integral partner in the pivotal next steps," Northlands board chairman Andy Huntley says. "There has to be a proper steward for the [public]investment."

Through all this, public discussion has largely been limited to call-in shows, Twitter and the letters pages of local newspapers.

Mr. Black first revealed the request for public money to a business conference rather than city council, yet the mayor says, "We should try to make it work. Here's a guy who wants to spend a billion dollars in our downtown … That's not bad to have."

Mr. Mandel rules out a tax hike to pay for the city's contribution, but is open to taking out a loan that would be repaid with tax revenue from the development and perhaps a surcharge on tickets. He contrasts the Katz proposal with one to use the site for a grocery store: "What kind of taxes is that going to generate?"

But does a new arena really revitalize a city? Mr. Black and others point to Ohio, where a massive, privately financed arena district revived a desolate stretch of downtown Columbus. Other oft-cited success stories include Conseco Fieldhouse in Indianapolis, San Diego's PETCO Park and the Staples Center in Los Angeles. In each case, Mr. Katz contends in a YouTube promo, "the difference has been undeniably positive," although only the Columbus arena was built just for hockey, and the Blue Jackets have struggled financially even if surrounding businesses have not.

Councillor Caterina, however, points out that a $1.1-billion development would generate $14-million a year in taxes, while paying off a $400-million loan would cost $30-million. "Right there," he says, "the numbers don't work."

Some people say the numbers will never work - because arenas rarely provide tangible economic benefits.

"They don't create jobs. They don't create new tax revenues. So, if you're looking at those kind of things as justification for using public money for a new arena, forget it," says Bruce Johnson, a specialist in urban and sports economics at Centre College in Danville, Ky.

"You go back 20, 30 years, team owners have always argued in favour of more public financing rather than less. ... What's different now is they're not limiting the argument to just an arena or stadium. They're putting all sorts of other things in there as well."

But Prof. Rosentraub, the city consultant, argues that public money also represents an investment in such "intangible" things as civic pride that, by extension, would help Edmonton compete in a province that has been booming. "It is tied to the attraction and retention of human capital," he explains. "And I think that everyone understands that, for Edmonton, the retention of human capital is a day-in, day-out challenge."

Logic like this resonates in a place with something of an inferiority complex. As the mayor says: "If you're going to be a big-league city, which I think we try to be - I think we are - I think you have to have the kind of facilities that allow big-league cities to be big league."

Mr. Black insists that "our project, by reason of its sheer magnitude, will create a very obvious ripple effect." But Prof. Johnson, the sports economist, says "nobody knows" what the impact will be.

"One question I'd have is: Why wouldn't the private developers be willing to take on that risk, if the rewards are so great?"

Behind Closed Doors

Complicating the arena campaign is the perception that too much is going on behind closed doors, with too much potential conflict of interest.

For example, the city committee that recommended a new arena included the Oilers' chief executive officer and one of the owners at the time. Also, Mr. Katz is a director of the mortgage company that employs Mr. Huntley, chairman of the board of Northlands, the team's current landlord. And the husband of popular Edmonton City Councillor Karen Leibovici is an executive at a Katz-owned company. (Ms. Leibovici did not respond to an interview request, but the mayor says it's up to her whether she votes when the issue reaches council.)

Finally, the taxing scheme proposed for the plan, by both Mr. Katz and the city report, is called a "community revitalization levy," effectively money borrowed against future tax revenue. It's not common in Canada, so the city is releasing an explanatory primer that, according to one source, the Katz Group paid for (Mr. Black declined to comment).

Some councillors oppose borrowing because the city is expanding its light-rail transit system and will already be stretching its credit. After decades of suburban sprawl, Edmonton has an infrastructure deficit that Councillor Caterina estimates at $30-billion.

It's an issue Mr. Katz addressed last month in a newspaper article: "Some will say we should just fix the potholes and call it a day," Mr. Katz wrote. "Well, I drive here too, and I'm all for fixing potholes. But we need to aim higher than that if we want to keep Edmonton moving forward."

Prof. Humphreys, the U of A economist, says that ultimately, the decision "boils down to civic pride: What do the Oilers mean to us? And do they mean $400-million for a new arena to us? And if they do, then we should go ahead."

But "we should have the conversation, and we should have it out in the open."

Mr. Black says the Katz Group welcomes a public debate: "By no means is it a done deal." And he may be right - some councillors say nearly all their constituents oppose public financing. "I haven't talked to anyone who's okay with that," Mr. Caterina says.

The mayor jokes that "there's been more speculation about this than Obama's health-care bill," and the lack of open minds perplexes Lyle Best, the entrepreneur and philanthropist who chaired the city's arena committee.



He says that "everybody has to come to the table," and Mr. Black confirms that talks are pressing ahead. Yet city councillors claim to have been told virtually nothing about the plan, including the hiring of the two consultants.

"I think we need a much longer discussion …," Councillor Ben Henderson says. "We certainly haven't said, 'Great, bring it on, we'll pay for whatever you want.'"

If no avenue for public input appears sooner, this fall's municipal election offers residents a chance to weigh in. Even the all-private project in Columbus failed several plebiscites before going ahead.

But the mayor says, "we're not Columbus, we're not Toronto, we're not Montreal. We're Edmonton. So we have to have a made-in-Edmonton model." And that model leads many observers to suspect that the outcome is in no doubt.

"My prediction is this thing'll get done, and I've been saying that since I've been here," insists Prof. Humphreys, who arrived three years ago. "I'm not a long-time Edmontonian, but I guess this is kind of how things get done here."

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About the Author
Parliamentary reporter

Josh is a parliamentary reporter in Ottawa. Before moving to the nation's capital in 2013, he covered provincial affairs in Edmonton and throughout Alberta. He joined the Globe in 2008 in Toronto before returning to his home province in 2010. More

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