FRACTURE

I’ve been trying to figure out the last 24 hours  and something doesn’t add up. I’ve been googling things like “provincial government says it won’t get involved in arena discussions unless there’s a fracture in negotiations” but can’t find it.

On the face of it, this makes little sense.  Daryl Katz had an exceptional deal–one that went too far by most estimates–and clearly didn’t want to proceed. Mayor Mandel burned a lot of political capital to get the deal as far as it went, and there’s no guarantee he’ll have all of council on board next time. In fact, there’s genuine bad blood in the water now based on what we heard yesterday from city hall.

What is the fracture? Where is the disconnect? I can think of only a couple:

  1. The increasing cost projections meant both sides had to find a way to back out, and instead of admitting it the Katz group decided to dump it all on Mandel.
  2. The two sides privately decided that they needed a third chair at the table, and feel this might pressure another level of government into the conversation (beyond the current level).
  3. There are money problems on one side or another at a more basic level.
  4. Daryl Katz is working off a completely original script.

Beyond that, I offer the following post from last night’s thread:

  • SLIDERULE: I was talking to a friend about what Katz is up to on the arena with all these new demands.My friend who has built up and sold several large businesses over his lifetime immediately said that he has cold feet and wants out.
    We agreed the main problem is the building is too damn expensive.Making a world class statement by swooping lines and zinc coating has run the cost up by at least 100 million.The jobbing.com arena in Glendale was built at a cost of 280million in 2012 dollars.It is considered to have one of the best interior designs in the NHL but the exterior is plain.Katz or Mandel wanted a world class building without a clue as to what that would do to the costs.
    Katz at this point doesn’t think there is enough other revenue to make it work financially .
    As the city has already put in almost 100 million for the land and design he figures the city may forge ahead on it’s own and then he can cut a real sweetheart of a deal after it’s built.
    That’s our take on this fiasco.

So there’s another possibility. I’m no expert, and the oilogosphere will be jam packed with posts about this today, but this blog is, as they say, nonplussed about the Katz group behaviour.

An interesting overview–and a fine site–is here.

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59 Responses to "FRACTURE"

  1. regwald says:

    Interesting about the cost overruns. I think there is some legitimacy to that view.

    My other view is this … Katz is either greedy like Peter Puck and/or he is cash strapped due to the expansion costs at Rexall and competition in pharmacy. He may be heavily leveraged and just does not have the available cash to support this deal.

  2. till_horcoff_is_coach says:

    As per the cold feet.

    It’s hard to see how the arena deal isn’t a good one for him, so it leads me to think that the rest of the project isn’t as hot as he had sold the city on.

    The arena was supposed to kickstart the so-called 1.5B in other downtown investments around it. Most of Katz’s commitments were to that part of development and if it succeeded would be a real coup for him. If it isn’t going well, he also can’t state that to the city as they have built their entire justification around downtown rejuvenation and the taxes it would generate.

    This is all just conjecture, but it would explain the rather odd moves made by the Katz group lately.

  3. Clay says:

    It’s interesting to be in Calgary and watch this all from afar. The local sports media take great interest in these shenanigans, and the general feeling is that Calgary is just going to watch Katz and Mandel bash each others brains out, and however the deal shakes out, that will be the template for a new arena in Cowtown.

    The “cold feet” scenario does seem to make sense, if it’s true.

  4. jzed says:

    The Katz Empire is built entirely on leveraged cash. However, having billions of leveraged dollars in his name entitles him to whatever public money we are stupid enough to give him. Mandel and company did good. As for Mr. Katz, Rexall: An empty pharmacy first. Better be careful with all that leveraged cash.

  5. Chris Hext---formerly EasyOil--- says:

    This whole thing stinks.

    My PoV is somewhat different probably to most of the other guys around the Oilogosphere, given that I’ve never even stepped foot on Canadian/American soil. The way pro sports work in North America is just totally different than it is here in the UK.

    For starters, whilst we have local councils, they don’t have nearly as much power as they do over where you are. In most cities here, a mayor is more of a symbolic figurehead rather than anyone with actual political clout, with the exception of London. That said, we have had clashes between private business and the councils. Where I live, in Bath, billionaire James Dyson – inventor of the Dyson vacuum cleaner, among other things – wanted to open an engineering & design school. It would have been state of the art, and would have brought a tonne of people and money to the city. But the local council were being funny about it because it would have been built on a flood plain (despite that being accounted for in the design and the funding) and the government rejected his funding bid (it was to be a joint venture between him and the government). Most people in Bath wanted it, and were outraged when the deal collapsed back in 2008.

    Where I’m going with this, is that whilst we have similar clashes between private business and city councils, it can never ever result in a sports team moving to another location. Sports teams here are all set-up by local people, for local people, and aren’t anybody else’s to move – no matter the owner. Obviously a lot of other things come into play – we don’t really have such things as local TV markets, due to being a much smaller country; if something is televised, everyone in the country can watch it (or if it’s on satellite TV, everyone who can afford it can watch it), which is the way it should be in my opinion. No daft TV blackouts and such. So there’s no real benefit for an owner to move a team, even if they could. And our country is so small, people are able to travel relatively easily to watch “their” team play even if they live miles away.

    So this whole threat of relocation thing just baffles me, I wouldn’t even know it could happen if I hadn’t been a diehard NHL fan for the last several years.

    Hence, I tend to take the view that anyone saying “let the Oilers leave, we’ll get another team” is being more than a little naive and lacking somewhat in loyalty. Not loyalty in the sense of “you should support this deal blindly because it means the Oilers will stay”, but more “why would you even suggest that this team leaves the city when another one coming back is NOT guaranteed, and even if it was – it wouldn’t be the same team?”

    Any replacement team would not be the same. WInnipeg may have called it’s team the Jets, but it is NOT the same franchise as before. It doesn’t have the same history, it doesn’t share the same past-players. It’s different, and at least at the moment, sub-par.

    From my point of view, I want THESE Oilers, and THESE players, and THIS history. Any replacement team is not likely to be a good team. Even if the Oilers continue sucking, they’re MY sucky Oilers, not someone else’s sucky team from down South.

    Maybe I’m over-sentimental about it, but trust me I think it’ll be a damn sight harder to get excited about another team than this one. Do you want the ex-girlfriend, who you had such great history with and so many amazing times, or the one you pick up a few years down the line, who, sure, does many of the same things, but there just isn’t that history between you going back, and she doesn’t make you feel the same way? Crappy metaphor, but I know which I’d choose.

    A little lesson in life for some Edmontonians: the only person I’ve ever met in my entire life who has even heard of Edmonton who isn’t a hockey fan, happened to have spent a year at the U of A there over 20 years ago. Other than that, the ONLY people I’ve met who have heard of Edmonton, are hockey fans, and those are few and far between here in Britain. Most of those don’t even know exactly where in North America it is. Whilst it’s not a grand survey of people, I think that says something.

    The Oilers put Edmonton on the map. It may not matter to most of you whether people around the world know about your city, but I know I’m proud that my city (Bath) is a World Heritage City and renowned all around the globe, drawing in millions every year in tourism. If we were to lose our Roman Baths, our primary attraction, we would lose almost all of that. Lose the Oilers, and I’m not sure anyone outside Canada will know about your city either.

    Sorry LT, I know that was a long post and you didn’t really mention relocation, but from where I stand it looks like a very real – and ridiculous – possibility. And yet many don’t seem fussed.

  6. Ducey says:

    It seems to me that there may be two under rated factors at work:

    1)Katz is surrounded by a bunch of law school buddies who are totally out of their league. Bob Black litigates like a thug; why would he conduct the arena negotiations any differently? They don’t know government relations or public relations; they have never done anything like this;

    2) Katz has thin skin. I think members of the council that were against this, some media, and even some members of the public have upset him. He doesn’t like the limelight for a reason.

    The bottom line is that if Katz ever tries to move the franchise, the BOG is going to say no. He must know that. He must also know that his Rexalls are going to become subject to some backlash – I will go out of my way to go to a competitor now. He must know that if he tries to move the team or keeps this up much longer that everything about him will become the subject of scorn.

    He has to know all of this, right?

    His behaviour makes no sense.

  7. hardcore says:

    Loooong time reader, first time poster.

    I thought I’d weigh in with a factor that people may not be aware of that MIGHT in some way be influencing this whole debacle.

    As of July 1st of this year the Alberta government changed the funding model for Pharmacists so that reimbursements for purchasing generic drugs was reduced by upwards of 85 million dollars a year. As a result, owners of pharmacies lost a huge portion of the money they were receiving to fund the pharmacists payrolls they employ. Supposedly, the government was to redirect these funds to a new pay for service model where pharmacists could be reimbursed for performing new services like prescribing, providing immunizations, developing care plans with patients, etc. I guess it hasn’t happened to nearly the extent that was originally planned.

    Anyways, all of this is to say that the Alberta Government recently put a huge dent in Mr. Katz’s revenue stream from his Rexall and Medicine Shoppe pharmacy operations here in Alberta. I can’t help but think this might be one reason why he’s become such a douche.

    Here’s a link to a pretty one sided view of what I just described.

    http://www.staffordpharmacy.com/changes-to-the-alberta-pharmacy-compensation-model-what-you-need-to-know/

    And just to set the record straight, I’m not a pharmacist so I don’t have an agenda. It just seems like the entire tenor of the negotiation shifted pretty recently and this could help explain why. Thoughts?

  8. Kris11 says:

    Hi Chris,

    Maybe I’m over-sentimental about it, but trust me I think it’ll be a damn sight harder to get excited about another team than this one. Do you want the ex-girlfriend, who you had such great history with and so many amazing times, or the one you pick up a few years down the line, who, sure, does many of the same things, but there just isn’t that history between you going back, and she doesn’t make you feel the same way.

    I’ve heard this exact same argument from people in abusive relationships. Exactly. “We have history. No one will eve love me the same way.” There comes a time when you have to have dignity and stand up for yourself. When your girlfriend hasn’t made the playoffs in 20 years, and you make so much revenue than other guys that tons of girls would love to have you. Sure, maybe you’re a little cold, but you have to be confident.

    Wait I’ve lost what I was saying.

    A little lesson in life for some Edmontonians: the only person I’ve ever met in my entire life who has even heard of Edmonton who isn’t a hockey fan, happened to have spent a year at the U of A there over 20 years ago. Other than that, the ONLY people I’ve met who have heard of Edmonton, are hockey fans, and those are few and far between here in Britain. Most of those don’t even know exactly where in North America it is. Whilst it’s not a grand survey of people, I think that says something.

    1. I ask Americans “What is the capital of Canada?” and none of them know. Not my 18-22 year old students and not my 50-75 year old PhD professsors. The kids don’t even know Ottawa is a place. Many think of Ontario as a city.

    2. I had never heard of “Guangzhou” until recently, or at least I didn’t know it. But at least 13 million people live there. The surrounding Pearl River Delta has 40 million people. And the region is a massively important area for manufacturing. But I doubt Guangzhou cares about whether I know about it or it matters whether I know about it. Same goes for Edmonton,

    The league won’t allow the Oilers to move. Plain and simple.

    IMO, a cheaper arena will be built.

  9. Kris11 says:

    If cost overruns were the problem, why wouldn’t Katz have a rep go the meeting and say “Cost overruns are the problem. If you want ta worldclass rink, you need to pay X dollars.”

    ??

    That way the city can build him a shirty looking cheaper rink (still a big revenue draw to Katz) ir a nice looking expensive rink.

    Billionaires sometimes get awful dumb when they get outside of the area they made their fortune in.

    Katz is acting wild and dumb.

  10. steveb12344 says:

    To those who say the NHL BOG won’t approve relocation. I would remind you that it wasn’t long ago the Bettman himself stated that Edmonton would need a new arena if they wanted to stay viable as an NHL city.

    If the city plans on going it alone without Katz and building the arena anyways, then yes relocation would not be approved. If they think they can scrap it all together and continue on in RX1 for the forseeable future. Then i’m sorry to tell you but all bets will be off.

  11. russ99 says:

    The BOG are a bunch of common-thinking businessmen and the group smacks of old boy club thinking. They also like to do favors for each other when it comes to votes.

    Nobody can say for sure that a relocation vote would go Edmonton’s way, especially if the destination were Seattle, which would save tons on travel costs for franchises who often think about themselves before the league.

    It’s a much better idea to get a different deal done than to depend on that. And dammit, I want to see these kids grow up and win the cup as Oilers, not Seattle Metropolitans/Thunderbirds.

  12. BlacqueJacque says:

    I find the tidbit about Katz wanting out to be plausible, but why the Seattle dog and pony show? Seattle makes no sense in a “Katz wants out” context. It makes perfect sense in a “Katz is being greedy” way.

  13. rickithebear says:

    Kris11: If cost overruns were the problem, why wouldn’t Katz have a rep go the meeting and say “Cost overruns are the problem. If you want ta worldclass rink, you need to pay X dollars.”

    Architecs Bad!
    Round Construction Real bad! EGO!
    Linear Construction Better!
    Linear way Cheaper!
    Katz Big EGO!

  14. DSF says:

    russ99:
    The BOG are a bunch of common-thinking businessmen and the group smacks of old boy club thinking. They also like to do favors for each other when it comes to votes.

    Nobody can say for sure that a relocation vote would go Edmonton’s way, especially if the destination were Seattle, which would save tons on travel costs for franchises who often think about themselves before the league.

    It’s a much better idea to get a different deal done than to depend on that. And dammit, I want to see these kids grow up and win the cup as Oilers, not Seattle Metropolitans/Thunderbirds.

    Totems.

  15. striatic says:

    BlacqueJacque:
    I find the tidbit about Katz wanting out to be plausible, but why the Seattle dog and pony show?Seattle makes no sense in a “Katz wants out” context.It makes perfect sense in a “Katz is being greedy” way.

    it also makes sense in a “Katz is being DESPERATE” way.

    i think that some combination of the Rexall revenue stream sputtering and downtown development projections being off is at the root of this.

    this would also explain the demand that the City of Edmonton be the anchor tenant in Katz’s downtown tower. if the surrounding development is over built and needs a crutch, that’s just the sort of crutch Katz would ask for.

    so they go to a football game in Seattle and try to throw a Hail Mary in order to get a totally subsidized, risk free deal.

    i think this is more about desperation than greed.

  16. Cactus says:

    Kris11,

    The reason Katz wouldn’t publicize these problems is that if he’s involved with other investors, signs of weakness could cause them to pull out/place additional conditions on a deal. Even in the case of Edmonton, if the city council was worried about Katz liquidity (or even solvency) they might seek further collateral. It’s in Katz’s interest to keep this all as secretive as possible.

  17. regwald says:

    hardcore:
    Loooong time reader, first time poster.

    I thought I’d weigh in with a factor that people may not be aware of that MIGHT in some way be influencing this whole debacle.

    As of July 1st of this year the Alberta government changed the funding model for Pharmacists so that reimbursements for purchasing generic drugs was reduced by upwards of 85 million dollars a year.As a result, owners of pharmacies lost a huge portion of the money they were receiving to fund the pharmacists payrolls they employ.Supposedly, the government was to redirect these funds to a new pay for service model where pharmacists could be reimbursed for performing new services like prescribing, providing immunizations, developing care plans with patients, etc.I guess it hasn’t happened to nearly the extent that was originally planned.

    Anyways, all of this is to say that the Alberta Government recently put a huge dent in Mr. Katz’s revenue stream from his Rexall and Medicine Shoppe pharmacy operations here in Alberta.I can’t help but think this might be one reason why he’s become such a douche.

    Here’s a link to a pretty one sided view of what I just described.

    http://www.staffordpharmacy.com/changes-to-the-alberta-pharmacy-compensation-model-what-you-need-to-know/

    And just to set the record straight, I’m not a pharmacist so I don’t have an agenda.It just seems like the entire tenor of the negotiation shifted pretty recently and this could help explain why.Thoughts?

    Just one small correction. Medicine Shops was sold off earlier this year, but point taken about cash flow.

  18. Traktor says:

    We’re building an arena for Quebec instead.

  19. mustang says:

    The league won’t allow the Oilers to move. Plain and simple.

    I’m not so sure about that comment, I know alot of people believe this, but I don’t think it’s true.
    What Bettman said a few years ago to Mayor Mandel was, and I’m paraphrasing here, In order for the NHL to be viable in the city of Edmonton, the city must build a new arena.

    As of this moment( actually 2 years time) we are in the same situation as Winnipeg and Quebec City found themselves in the mid 1990′s. They needed to build a arena to keep their Jets and Nord, we all know what happened there.

    I believe, we the city of Edmonton better have a shovel in the ground and building a new arena one way or another, with or without Katz, in less than 2 years time or there is a good chance they will be gone. The city needs to give the NHL board of governors and Bettman a reason to say, there is no way in hell that team is moving, if we build it they won’t go.

  20. godot10 says:

    Katz sold a big chunk of his pharmacy business earlier this year for nearly a billion in cash. So I doubt that he is over-leveraged at the moment.

  21. mustang says:

    steveb12344:
    To those who say the NHL BOG won’t approve relocation. I would remind you that it wasn’t long ago the Bettman himself stated that Edmonton would need a new arena if they wanted to stay viable as an NHL city.

    If the city plans on going it alone without Katz and building the arena anyways, then yes relocation would not be approved. If they think they can scrap it all together and continue on in RX1 for the forseeable future. Then i’m sorry to tell you but all bets will be off.

    Sorry Steve never seen your post, I totally agree with you.

  22. Kris11 says:

    steveb12344:
    To those who say the NHL BOG won’t approve relocation. I would remind you that it wasn’t long ago the Bettman himself stated that Edmonton would need a new arena if they wanted to stay viable as an NHL city.

    If the city plans on going it alone without Katz and building the arena anyways, then yes relocation would not be approved. If they think they can scrap it all together and continue on in RX1 for the forseeable future. Then i’m sorry to tell you but all bets will be off.

    Bettman was lying. Or bluffing. Lawyers and business people do this sometimes to get more money for their clients.

  23. Kris11 says:

    “wouldn’t publicize these problems is that if he’s involved with other investors, signs of weakness could cause them to pull out”

    Didn’t he bring this all about anyway by not going to the meeting. I mean, if I’m a local investor, I might still believe a deal will happen, but I’m losing confidence.

    And would the downtown investors care if a less pretty rink is built? They just want the rink and the concessions and the anxhor for big condo projects, etc.

    Maybe you’re right. I don’t get any of this stuff. But at best, it seems to me, there are two good explanations: Katz is acting wild and dumb. And Katz is acting verly cleverly to a cost overrun in construction.

  24. cabbiesmacker says:

    I liken the last year or so of arena negotiations and news of the tentative deal with “Johnny Cash” as one would an odd colored mole on ones back. It isn’t on yur mind 24/7 but when you stop to really think about it the potentials could be ugly.

    I’ll freely admit I didn’t analyze the deal in great detail outside of what I’d pick up during the drive home. I recall Katz = $100M contribution amortized, design overlord, and reaping profits 11 months of 12 and well beyond what was just hockey generated. How is this a bad deal?

    Now I think “Johnny” might just have the city right where he wants them. I expect to hear news of the thinly veiled “we won’t be playing in the current arena come 2014? 15? 17? any day now. His trump card is the average Edmonton sports fans fear of losing their beloved 5 time champs to another locale. Oh the sacrilege.

    I foresee much public mumbling and grumbling until the city capitualtes and ges with the “we’ll build it and they will come” plan. At which point Johnny will proceed again to bend city council over the kitchen table and forcibly resize an orifice to his liking.

    What I’d love to see happen is a currently unseen investor, lets pretend it’s Donald Trump for 5 seconds, step up to the plate ala Mel Gibson in The Road Warrior and say “I’ll build that arena”, and watch Katz shit his pants. Yeppers…a lock stock and barrel agreement with a private investor to build the joint entirely on his/her own whereby the only thing the city realizes is tax revenue and a little lipstick on one of it’s many pigsty areas. Hell it doesn’t even have to resemble a melting frisbee to get the job done here.

    Now Mr Katz? Here’s your “15″ year lease agreement You get all popcorn and beer and half the parking…..sign on the dotted line or I get one of Phoenix, Columbus, Nashville (my personal fave), etc etc ad nauseum, to take your place. Say buh bye to 100% sold out seats…EVERY FN NIGHT, asshole! Dare to dream of what your Hall’s, Eberle’s, Noogies, and Yaks could have raked in for you making the playoffs and winning Stanley Cups for the next 10 years. Go learn French ya fuck. They like it up the ass anyways so what the hell.

    All because you wanted a $450M stylized pill bottle that suited YOUR personal outlandish tastes to unfurl your bottom lip in, 95% of all revenues generated, and your company name regaled in lights for the next couple of years. For free basically.

    adios

  25. HeavySig says:

    This issue reminds me of the Edmonton City Hall debate of the 80′s. The original proposal was for a much bigger City Hall topped with cones to resemble First Nation’s teepees. The price tag was estimated at $134 million, and the reaction to the price and design was heated. So the architect was sent back to the drawing board and came out with a scaled down design for what is now City Hall, built for $49 million.

    It was a win for the taxpayers and the architect undoubtedly didn’t mind recieving fees to design the building a second time.

    Looks like history may be repeating itself for Gene Dub, eh?
    .

  26. art vandelay says:

    Of Steve and Mustang, I ask, “so what?”
    So what if the Oilers leave town?
    That won’t change Edmonton one bit.
    It’ll still be an honest, working-class city with horrible winter weather but good people.
    Most of us will have plenty else to occupy our time.
    Some of you will suffer from self-esteem issues. I suggest you watch latenight TV for your next chance to buy a box of Extenz. Cheaper than an 8% hike in property taxes to pay for an arena we don’t need.

  27. art vandelay says:

    Also, love the epic takedown by Cabbiesmacker.
    We need to harness some of that energy and make sure city council doesn’t go weak in the knees.

  28. spoiler says:

    Katz press release from about an hour ago:

    “We are concerned about the implications of the motion passed yesterday by City Council,” Katz said in a brief press release Thursday.

    “We do not yet have a view on what comes next, but we remain hopeful that there is a solution that achieves the mutual goal of securing the Oilers¹ long-term sustainability in Edmonton.”

    The release ends there saying, “There will be no further comment from the Katz Group.”

    Katz apparently doesn’t remember Council offering to continue negotiations and it was the Katz Group that refused.

    So what we have now, in the midst of this slow motion bank robbery, is posturing and a game of chicken.

  29. godot10 says:

    Katz is making more money in Edmonton than he can make in any other available market (excepting Markham) even in Rexall, and I’m pretty sure Markham ownership is already accounted for. Quebec City might be close, but Quebecor already has that franchise lined up, and I doubt Quebecor and Quebecers would hand over the new arena to a non-Quebecer and an “Anglo”. And moving to these markets mean all the other owners lose their share of the expansion fee. Like the other owners are going to let Katz take away and expansion market and millions out of their pockets.

    The “losing money” argument is bogus. One has to look at EBITDA, because Katz obviously has loaded the Oilers up with debt to make sure they don’t show an official profit.

    Katz loses leverage if he is just a renter in a new arena and not a partner.

    Edmonton offered a good fair and generous deal. Don’t blink. Katz threw away the best deal he was ever going to get.

    If the NHL leaves Edmonton after the deal the city offered, shame on the NHL.

  30. "Steve Smith" says:

    art vandelay:
    It’ll still be an honest, working-class city with horrible winter weather but good people.

    This is the nicest thing you’ve ever said about Edmonton, I think. Also, an entirely fair assessment.

    I’m not going to pretend that I don’t care if the Oilers leave town (which I don’t think they will). I will care a lot – not because I think it diminishes Edmonton’s prestige among the British or anyone else, but because I like being able to go to my one or two games per year, and I like the playoff atmosphere the odd time we get it, and because I’m not sure the community of fans will survive a relocation (most of us get our Oilers stuff from TV and the internet, so there’s no reason our fandom couldn’t survive; I’m just not sure that it would). But Jesus, I’d survive. Might even become a better CFL fan, like I was years ago.

    I’ve been asked by more than one outsider why I so strongly prefer Edmonton to Calgary, given that the cities are so damned similar by any objective measure. And they are pretty similar,* except that Calgary thinks it’s New York while Edmonton thinks it’s Grande Prairie. I don’t want to turn into Calgary. Like Paul Simon said, Daryl, “leave if you want; if you want to, leave”.

    * My girlfriend, who is from nowhere near Alberta and has no dog in the race, also says that Edmontonians are appreciably friendlier than Calgarians. I’ll take her at her word.

  31. Wolfpack says:

    I didn’t follow last night’s thread but I did practice a bit of self auditory mutilation by listening to Tencer’s show. I know it is a sports show but it still surprised me that 4 out of every 5 callers (not dentists) were all for tearing down city hall and signing absolutely anything slid across the desk by the Katz Group.

    I can’t recall the councilor who put forward the motion, but he said something that stuck with me. He said that the Katz letter was citical of the city leadership and the “politics”… clearly Katz has not listened to his PR people at all, because he is in fact dealing with politicians who are not spending their own money, but the money of the citizens of Edmonton. Maybe in Katz’s business world these kinds of deals are finalized with a back-room handshake and a bottle of single-malt scotch, but I don’t think the city council is out of line in asking for an explanation as to why Katz needs further money and guarantees on an already sweet deal.

    I hope they stand their ground andI wish there was some way the city could build the arena on its own.

  32. Moosemess says:

    “Steve Smith”

    * My girlfriend, who is from nowhere near Alberta and has no dog in the race, also says that Edmontonians are appreciably friendlier than Calgarians.I’ll take her at her word.

    And Calgary’s sports teams CHOKE – like a lot – so much so that it never stops being funny when it happens.

    Seriously, Edmonton won 5 Grey Cups in a row with Moon/Wilkie and Cowtown won 1 with Flutie! And they lost to the Baltimore Stallions. The only Canadian team to lose a Grey Cup. lol

    And who was consistently the second best team in the league when the Oilers won 5 in 7? Yep. The Flamers. Imaginative name btw. Way to keep alive the irreplaceable legacy of Willie Plett and Eric Vail.

    Being a Calgary sports fan is probably a lot like being Wynonna Judd’s husband. You’re constantly being reminded that you ended up with the fat sister.

  33. Anon E Mouse says:

    The email below from City Manager Simon Farbrother was sent out to all City of Edmonton staff minutes ago.

    Feel free to tear in – the spin machine is working hard here.

    By now you have probably heard in the news that Council voted late yesterday to cease work on the proposed downtown arena and directed Administration to explore other options. This work has already begun.

    The City remains committed to the revitalization of our downtown and keeping hockey in Edmonton. As per Council’s direction we will now explore options to develop a world-class sports and entertainment facility in the heart of our city.

    At this time I would like to acknowledge the outstanding efforts of staff from across the City who have worked on this project in the past several years. This has truly been an example of staff from virtually every department in the City coming together with a common vision and goal of moving our city ahead. I will be sure to keep you updated on future developments regarding this project.

    Thank you.

    Simon

  34. spoiler says:

    “Steve Smith”* My girlfriend, who is from nowhere near Alberta and has no dog in the race, also says that Edmontonians are appreciably friendlier than Calgarians. I’ll take her at her word.

    Steve… Have you been friendly with your girlfriend? (And that “appreciably” is a fine compliment too!)

  35. "Steve Smith" says:

    spoiler: Steve… Have you been friendly with your girlfriend?

    No, we don’t believe in being friendly before marriage.

    (Sex is fine, but no friendliness.)

  36. Bar_Qu says:

    "Steve Smith",

    There’s an appreciable lack of friendliness after marriage too. Metaphorically speaking.

  37. hunter1909 says:

    Interesting how little the Flames get mentioned around here – as in hardly ever.

    My first outstanding Flames memory – listening to the post game show in Dad’s car headed north on Highway 2 after a 10-1(or something) thrashing in Calgary at the hands of the good guys in 1983, right before they won their first cup.

    Those Calgary fans were sick to their stomachs. One of them had asked a Flame in a bar how long to expect before the Flames could realistically compete with the Oilers, and he was told “ten years’ by the drunken Flame.

    Just hammer the 5-1 cups and no Calgarian can stand it. They can say anything they like about Edmonton(like it’s in a different time and space dimension than Calgary instead of near-identical), but when they’re reminded of their NHL absolute inferiority, they have no defence whatsoever.

  38. steveb12344 says:

    So a reasonable statement about the city’s need for a new arena is now met with insults and racial slurs!

    Cabbiesmacker: That was absolutely uncalled for. Northern Alberta is full of French canadians, and i’m sure that many of them are oiler fans and probably read these sites.I don’t think they appreciate being told they take it up the ass!

    Vandalay: I could write a whole page about why that’s one of the most idiotic things i’ve read here,and even you can’t believe that. No need though because it pretty much speaks for itsself. I was in no way suggesting that Katz should get everything he wants, but merely pointing out the fact the Edm. needs a new arena or there are no guarantees of keeping NHL there. If you want to insult peoples dick sizes, i suggest you keep that between you and your boyfriend! This is a hockey board, not some place to share your penis-envy with the world.

  39. Marc says:

    If you’ll allow me to indulge in some lateral thinking here…

    One element of the NHL’s latest CBA offer is enhanced revenue sharing – $200M (US in this comment, unless specified otherwise) per year with at least half of that payable by the top ten teams in gross revenue (http://www.theglobeandmail.com/sports/hockey/some-owners-will-find-a-few-gems-when-dust-on-new-offer-settles/article4620090/). It stands to reason that whatever the CBA ends up looking like, it will contain at least that much revenue sharing, with a heavier burden on the top ten gross revenue producing teams.

    According to Forbes, the Oilers were tied for 15th in revenue last season at $96M (http://www.forbes.com/nhl-valuations/list/#p_1_s_d5_), playing in one of the smallest, second crappiest (I’ve been to Nassua Collesium) arena in the league.

    The new arena will add approximately 2000 seats to Rexall’s capacity. The average price of an Oilers ticket is $70CAD, so just the ticket revenue from those new seats would bring in another $6M per year or so in gross revenue, which would have tied LA for 11th in gross revenue last season. When you add in the other revenue streams from the new arena, naming rights, plus the merchandise revenue from a bunch of marketable young stars, and (god willing) playoff revenue, the new building Oilers are comfortably in the top ten in revenue, probably somewhere in between PIttsburgh ($110M – 9th) and Chicago ($118M – 7th). And that would mean potentially $10M or more in annual revenue sharing payments under the new CBA.

    Keep in mind that revenue sharing would be based on gross revenue rather than net, so any annual debt repayment and the $5.5M CAD per year promised to the city in rent probably aren’t going to be deducted for the purpose of calculating revenue sharing. If Katz has to stump up the cash already promised toward the arena, plus projected cost overuns, he could be looking at $10M-15M per year in debt repayments, plus $5.5M CAD per year in rent, plus $10M or more in revenue sharing. Which would mean that the new arena would have to bring in $25M a year new revenue just to break even, which seems a bit risky.

    That’s not to say that Katz won’t make a mint from the new arena, or can’t afford to make up the difference, or that Edmonton taxpayers should make up the difference. But it would explain why Katz says the numbers won’t work.

    Just a thought.

  40. commonfan14 says:

    steveb12344: If you want to insult peoples dick sizes, i suggest you keep that between you and your boyfriend!

    Attaboy – always fight racial slurs with gay slurs.

  41. steveb12344 says:

    I’m sorry i didn’t realize the word boyfriend was a gay slur now. It’s getting tougher to keep up with the times.

    My sincerest apologies to boyfriends everywhere!

  42. Jon K says:

    Ducey:
    It seems to me that there may be two under rated factors at work:

    1)Katz is surrounded by a bunch of law school buddies who are totally out of their league.Bob Black litigates like a thug; why would he conduct the arena negotiations any differently?They don’t know government relations or public relations;they have never done anything like this;

    Kris11: Bettman was lying. Or bluffing. Lawyers and business people do this sometimes to get more money for their clients.

    It’s funny, because Katz’ choice in counsel probably has a lot to do with how things have gone to date. Bob Black, a cordial enough guy, was the lawyer on the negotiations previously. There was progress made, but Black arguably may have been out of his league.

    John Karvellas is now counsel and Katz’ primary negotiator. He is an excellent lawyer with a good reputation, however his reputation also suggests that we are seeing negotiations proceed exactly how he would like. He is known to push things to the absolute edge of the abyss in order to get his client the best result, regardless of how that is perceived by others.

    I am very frustrated with how things have gone in terms of the arena negotiations. However, with all of the above in mind, the negotiations are still underway, even if city hall doesn’t realize it. If the city researches and analyzes the costs associated with building and operating the arena themselves they may find themselves reconsidering negotiations with Katz. Should that happen, I sincerely hope that Mayor Mandel and his colleagues continue to make good decisions on behalf of the public as things further unfold.

    With respect to the CBA negotiations, I fail to see how anyone can rationally side with the players at this point. Fehr has done a very good job of starting negotiations from the premise that the players’ association “lost” the last CBA negotiation and made massive concessions. Meanwhile, the players have prospered under the previous CBA by nearly all metrics. Yes, the method of calculating league growth under the previous CBA was faulty, and the continuous increase of the salary cap was largely driven by the revenues of a handful of teams. Yes, Fehr is correct that a new system of revenue sharing is required. However, I think that it is absurd for the players’ association to come around this time and suggest that they need to make no concessions because of the previous CBA’s negotiations. I think it is also absurd that they should claim anything more than 50% of league revenues, but that is more along the lines of personal opinion. Both sides need to make concessions for the NHL to continue to operate. Quite frankly, the concessions made by the league regarding UFA and RFA eligibility last time were massive, and many of the issues we are seeing now with mega-contracts and unsustainable spending by teams directly result from those changes.

    Things can only look up from here, right?

  43. Mr DeBakey says:

    I think it is also absurd that they should claim anything more than 50% of league revenues

    They don’t.
    Its revenue “As defined”, not total revenue.

  44. cabbiesmacker says:

    steveb12344:

    Cabbiesmacker: That was absolutely uncalled for. Northern Alberta is full of French canadians, and i’m sure that many of them are oiler fans and probably read these sites.

    I wasn’t referring to the Northern Alberta versions. Just the ones in Quebec.

    I bet if you checked you’d find out that many of those living in Northern Alberta like it up the ass though.

    Hell. i bet theres even a few Northern Albertans who AREN’T French that do too..

    In the meantime I’d respectfully suggest that you pull the fire-hydrant out of yours.

  45. commonfan14 says:

    Jon K: I fail to see how anyone can rationally side with the players at this point

    I don’t really see how any fans can ever side with the players. Everything they win to drive up their salaries ends up driving up ticket prices.

    If fans had a chair at this negotiation, wouldn’t our offer look something like: no guaranteed contracts, no unrestricted free agency, a $20 million salary cap, a 70% salary rollback and a 70% rollback in ticket prices?

  46. Dalton says:

    At times like this, I’m reminded of the Dallas Stars’ American Airlines Centre.

    It’s a big rectangular building. Probably cost a buck ninety-five to build, or less.

    Let’s just build one of those.

  47. BlacqueJacque says:

    commonfan14: I don’t really see how any fans can ever side with the players.Everything they win to drive up their salaries ends up driving up ticket prices.

    If fans had a chair at this negotiation, wouldn’t our offer look something like: no guaranteed contracts, no unrestricted free agency, a $20 million salary cap, a 70% salary rollback and a 70% rollback in ticket prices?

    You’ve got it backwards.

    When revenues rise, player salaries rise.

    Players only earn more because owners are making more.

    Do you honestly think ticket prices will go down if players earn less? Then why is below-the-cap Montreal charging more for tickets than at-the-cap San Jose?

  48. alice13 says:

    I’m amazed how much traction 50% has as an idea. With well-educated people, too, as in “I’d never give my employees over Half of my Business!!”.

    If I hire ten engineers at $90k each and rent them out at 100, they’re getting paid 90% of my revenue. I don’t care. What I care about is what my 100k looks like against my investment in the business – if I bought into this arrangement for 200k then my investment is returning me 50%. If I paid a million, then I’m getting 10% in return.

    The players salaries are part of COGS, doesn’t make a bloody bit of difference. If I booked the Stones to play – another entertainment example – I expect they would be getting 90% of the gross proceeds too. It’s irrelevant. What matters is what’s left over as compared with what had to be put in. The transaction volumes in the middle of all that do not matter.

    It’s irritating hearing about the fairness or not of 50% coming from professionals, doctors etc. – where the talent always gets the huge majority of the revenue – who think they are contemplating 50% to their receptionists, instead of realizing that they are in fact the highly-paid players.

    <<Rant :-)

  49. spoiler says:

    Congratulations to the Detroit Tigers. And any World Series without the Yanks is a good World Series.

  50. Lowetide says:

    Amen.

  51. russ99 says:

    If the NHL’s offer was 50-50 with the remaining rules from last season including the cap, we’d be talking about the upcoming season now.

    But no, the had to get cutesy with pushing entry level and FA, the beyond dumb player payback scheme- attention Gary: they hate escrow now! And you want to push it to multiple years???

    But the worst is this idiotic notion that teams are responsible for a player’s cap hit after they’re traded. That would hold down salaries a large percentage, I’d guess as much as 30-50%, to reward the owners for giving out such stupid contracts the last few offseasons.

    Seems this was a PR smokescreen to turn the public against the players, and not a real attempt at bargaining. Seems some posters took the bait…

  52. BlacqueJacque says:

    This always worried me about him. He’s not really that rich. He’s paper rich and this wealth is built on debt.

    It’d be one thing if he had no debt and his stocks were worth $1b. But when you’re leveraged, you have $100m, $900m in debt, and $2b in stocks, which is all fine and dandy and bllionairey until the stock drops 60% in price and now you’re worth -$100m.

    I don’t know what his leverage ratio is, but if it’s described as “high”, that could be in the range of major hedgefunds – about 10:1 or so.

    jzed:
    The Katz Empire is built entirely on leveraged cash. However, having billions of leveraged dollars in his name entitles him to whatever public money we are stupid enough to give him. Mandel and company did good. As for Mr. Katz, Rexall: An empty pharmacy first. Better be careful with all that leveraged cash.

  53. spoiler says:

    BlacqueJacque:
    This always worried me about him.He’s not really that rich.He’s paper rich and this wealth is built on debt.

    It’d be one thing if he had no debt and his stocks were worth $1b.But when you’re leveraged, you have $100m, $900m in debt, and $2b in stocks, which is all fine and dandy and bllionairey until the stock drops 60% in price and now you’re worth -$100m.

    I don’t know what his leverage ratio is, but if it’s described as “high”, that could be in the range of major hedgefunds – about 10:1 or so.

    Keep in mind that corporate leverage and investment leverage are two different animals.

  54. hunter1909 says:

    Jon K:
    It’s funny, because Katz’ choice in counsel probably has a lot to do with how things have gone to date. Bob Black, a cordial enough guy, was the lawyer on the negotiations previously. There was progress made, but Black arguably may have been out of his league.

    John Karvellas is now counsel and Katz’ primary negotiator. He is an excellent lawyer with a good reputation, however his reputation also suggests that we are seeing negotiations proceed exactly how he would like. He is known to push things to the absolute edge of the abyss in order to get his client the best result, regardless of how that is perceived by others.

    I am very frustrated with how things have gone in terms of the arena negotiations. However, with all of the above in mind, the negotiations are still underway, even if city hall doesn’t realize it. If the city researches and analyzes the costs associated with building and operating the arena themselves they may find themselves reconsidering negotiations with Katz. Should that happen, I sincerely hope that Mayor Mandel and his colleagues continue to make good decisions on behalf of the public as things further unfold.

    With respect to the CBA negotiations, I fail to see how anyone can rationally side with the players at this point. Fehr has done a very good job of starting negotiations from the premise that the players’ association “lost” the last CBA negotiation and made massive concessions. Meanwhile, the players have prospered under the previous CBA by nearly all metrics. Yes, the method of calculating league growth under the previous CBA was faulty, and the continuous increase of the salary cap was largely driven by the revenues of a handful of teams. Yes, Fehr is correct that a new system of revenue sharing is required. However, I think that it is absurd for the players’ association to come around this time and suggest that they need to make no concessions because of the previous CBA’s negotiations. I think it is also absurd that they should claim anything more than 50% of league revenues, but that is more along the lines of personal opinion. Both sides need to make concessions for the NHL to continue to operate. Quite frankly, the concessions made by the league regarding UFA and RFA eligibility last time were massive, and many of the issues we are seeing now with mega-contracts and unsustainable spending by teams directly result from those changes.

    Things can only look up from here, right?

    Fans discussing the merits of owner’s lawyers. I’ve now seen everything.

    Quantum Theory Hockey at it’s finest.

  55. Bruce McCurdy says:

    hunter1909: My first outstanding Flames memory – listening to the post game show in Dad’s car headed north on Highway 2 after a 10-1(or something) thrashing in Calgary at the hands of the good guys in 1983, right before they won their first cup.

    Quit exaggerating, Hunter, it was “only” 10-2.

    That was the game Calgary had 3 powerplays and the Oilers scored shorthanded on all three of them. The first one was a 5 minute job after the requisite first period brawl (the Flames had played like churchmice in games 1 and 2 in Edmonton) and Semenko got tossed out for some unscrupulous act or other. The Oil killed the penalty and Coffey scored shorthanded just before the end of the 5 minutes to open the scoring and the air went out of the balloon. Gretzky lit them up after that with 7 points on the night, 3 of them shorthanded.

    Oilers never had a PP all night and never needed one.

    One of my favourite games of all time. I didn’t even need to look up the game summary to recite all that stuff, but you might enjoy it!

  56. spoiler says:

    $80 oil is a distinct possibility in this Global Slowdown. Shipping has been cratering and drives demand. I don’t know if it will happen while the Fed is doing its QEternity, but it is a risk. I don’t like the markets right now but there’s some election buoyancy. Still, there’s a lot of complacency, short positions are nearly non-existent and bad things tend to happen when markets are like that. Then today Google blows its earnings, trading gets halted and before the end of the day CME is lowering margins for E-minis because a whole shitload of Hedge Funds (165 IIRC) just became over-leveraged.

    And in this environment of a global slowdown, we have Katz asking city taxpayers to take on the lleverage and risk for his for profit enterprise. And he’s asking for city subsidy to add non-market driven office space to Edmonton’s downtown. Council somehow thinks this equals revitalization when in fact it represents malinvestment and will distort the downtown real estate market for years. Not to mention the impact of increased taxes by special levy on core property owners. Some will re-locate to economize. The ones that stay will have higher costs. This restrains property prices and thus tax base. But it is a classic feature of Socialist Planning to think that investment drives demand and not the other way around.

    We also have a provincial government with a big defecit (it should be spelled that way) based on frickin $99 WTI which hasn’t been seen for awhile despite Wall Street being flush with speculative liquidity. That is a government that will be leery to contribute real money. They’ll probably throw in a couple of VLTs though, which of course will hurt all other local VLT owners(I love it when governments pick and choose who should make money).

    The longer this arena delay lasts the better I think for Council and taxpayers. It’s likely we’re going to get a glimpse of where things are headed for the economy before a deal gets done and hopefully that will have a sobering impact on all parties involved.

  57. spoiler says:

    My fears last night were confirmed by the markets today. Absolute bloodbath on the anniversary of the big one. Oil sells off $2, and gold $20 as the Hedgies scrambled to raise cash and make their margin calls. Oil teetering at $90 now, dangerous territory for the province.

    And, maybe most importantly to the Oilers and the arena deal, CAD is down about 3% over the past two months against USD, losing an astounding full cent this week.

    The PPT will attempt a late day ramp to make this bloodbath look better on the Evening News. Remains to be seen if they can pull it off.

  58. hunter1909 says:

    Bruce McCurdy,

    That was the game that opened my proverbial eyes to the Battle of Alberta. Flames fans phone in show comments let’s just say were desperate.

    They were fucked. And they knew it.

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