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Edmonton councillors walk away from arena project, deal collapses

An artist's rendition of a proposed new arena for Edmonton is shown in a handout. THE CANADIAN PRESS/HO-City of Edmonton

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An artist's rendition of a proposed new arena for Edmonton is shown in a handout. THE CANADIAN PRESS/HO-City of Edmonton

EDMONTON - The deal to build a new arena for the Edmonton Oilers collapsed Wednesday, with city councillors pointing the finger of blame at Oilers owner Daryl Katz and his last-minute demands for millions more in taxpayers money.

Stephen Mandel said it was time to send a message.

"It's wrong to hold us up for ransom," said Mandel.

"This is not a council that said, 'Don't do a deal'—but what do we do when we have a partner that says, 'We want more money, and you pay for it?" he said.

"I'm not saying we should say no to Mr. Katz, but all the information that I've had an opportunity to see does not justify council giving him another six million dollars a year."

Mandel made the comments after councillors voted unanimously to walk away from the deal agreed to last year with Katz to build the $475-million arena, starting in 2013.

Katz was not in council chambers when the decision was reached. He has been asked twice in recent weeks to meet with council in public to resolve the negotiating logjam but has refused, saying the two sides are so far apart there's no reason to meet.

The original deal had taxpayers and ticket-buyers building the rink with the Oilers spending about $15 million a year in lease payments and operating costs and keeping almost all the profits.

It went off the rails a month ago when Katz said he'd had a second look at the numbers and needed millions more, including a $6 million a year in operating subsidies for the arena.

Mandel said he can't judge the merits of the demand because the Oilers have not made their case.

"I don't know what else we do. I'm not sure where we go," said Mandel.

"Someone has to be willing to at least put information forward to justify their case.

"We need to send a message (to Katz) that you got a fair deal and stand up to that fair deal or show us why it isn't a fair deal," said Mandel.

"And I can tell you he has not shown us."

Katz officials were not immediately available for comment.

Earlier Wednesday, councillor Kerry Diotte said it's "shameful" to debate handing over money without any information from Katz.

"How can we even consider giving any tax money to a billionaire team owner when we haven't seen detailed financials. That's just not fair," Diotte said to city manager Simon Farbrother.

Farbrother said no NHL teams divulge their financial information.

Not so, said Diotte.

"In Scottsdale (Arizona), when the Phoenix Coyotes first went there, they tried to sell (the city) on doing a deal without the financials and they told them to get lost. I suggest we do the same thing."

Farbrother said the two sides have agreed to disagree on the $6 million subsidy, and that in his analysis Katz will "clearly make sufficient revenue to cover any obligations that come with operating the arena."

But Farbrother said the two sides have dug in on the issue and there's no movement in sight.

"Will we have an agreement in the next two to four weeks?" asked Coun. Dave Loken.

"In the absence of significant movement on the ($6 million) operating subsidy (by either side) we don't think you will have an agreement," said Farbrother.

"Is there any chance there (will be) significant movement on the Katz side of the table?" Loken asked.

"I don't believe we've been given any confidence in that, no," said Farbrother.

Under the original deal, city taxpayers and ticket buyers would pay to build the arena, which, with land, borrowing costs and surrounding infrastructure factored in, is now effectively at $700 million and rising.

The Oilers would keep all profits from NHL games, trade shows, concerts and other events for 11 months out of the year. The team would also keep naming rights for the building (worth up to $3 million a year), along with $2 million a year from the city for a decade for advertising.

Concession sales alone are pegged at $20 million a year.

In return, the Oilers would pay the city $5.5 million a year for 35 years and pay to operate and run the arena, estimated at $10 million a year.

The Oilers are worth about $212 million, good for middle of the pack in the NHL, and the team regularly sells out Rexall Place.

But Katz, who bought the team in 2008, has said the franchise is losing money.

He also said the city can afford his new demands because the arena will spur retail, office, and residential buildings around it that will bring in an estimated $2 billion more in tax revenues over 20 years.

However councillors were told by Farbrother that the arena will actually bring in about a quarter of that figure, $584 million, and that almost all of that money would be needed to pay off construction of the rink.

The negotiations have turned acrimonious in recent weeks, with both Katz officials and councillors publicly accusing each other of bad-faith bargaining.

Three weeks ago, Katz threatened to move the team to Seattle if the arena did not get built. He later apologized in newspaper ads after angry fans vented outrage on social media sites.

But Katz has not publicly ruled out moving the team as a last resort.

The Oilers are playing at 38-year-old Rexall Place, one of the oldest facilities in the NHL.

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