Arena Funding FAQ
- How much will the downtown arena cost?
- What does this include?
- Will taxes increase if a new arena is approved?
- Will the City of Edmonton pay the entire costs of building an arena?
- Haven’t the federal and provincial governments already said they won’t support facilities for professional sports teams?
- How will the ticket surcharge work?
- Who will pay the cost of financing construction while the arena is being built?
- Who will pay for any extra infrastructure costs to support the arena and entertainment district?
- Is the Katz Group providing cash for its $161.5-million contribution?
- Is it right that the Katz Group will receive all revenues from events held in the new arena?
- Who will own the land?
- How will the land be paid for?
- The early design proposed by the Katz Group included a community arena and winter garden. Are they still part of the deal?
- Could naming rights help pay some of the costs of the arena?
- Is a location agreement for the Oilers part of the deal with the Katz Group?
- The City won’t start collecting the ticket tax and see an tax uplift as part of the Community Revitalization Levy until well after the arena opens so how will the City pay for the development that is occurring until that time?
- 1. How much will the downtown arena cost?
Council has set a cap of $480-million for the construction of the arena building. Research done estimated that an arena could be built for that price, based on similar projects in other cities.
- 2. What does this include?
This includes design and construction of the actual facility. Other aspects such as the purchase of land, construction of a practice/community arena and other local infrastructure development are not included.
The total cost of the project, including the associated infrastructure, will be $604.5-million. This includes the arena, Winter Garden, community rink, LRT connection, pedestrian corridor and the land. The City will contribute $279-million to the total project, none of which will be generated by increasing taxes.
- 3. Will taxes increase if a new arena is approved?
Council passed a motion in July 2010 authorizing administration to enter into discussions with The Katz Group and Northlands on a framework for financing for the proposed arena project that did not include an increase in property taxes.
The City will contribute $200-million to the arena, of which a portion will be funded through a Community Revitalization Levy (CRL) and other means, including parking revenue, arena property taxes, and the redirection of support currently provided to Rexall Place.
- 4. Will the City of Edmonton pay the entire costs of building an arena?
No. The master agreement approved by Council limits the City’s contribution to $200-million. Another $125-million will be raised through a user-pay Facility Improvement Fee ticket surcharge and the Katz Group will contribute $130-million..
Members of the Capital Region Board representing 95% of the region’s population supported Edmonton in applying for its allocation under the provincial program.
The City will submit the application as soon as the program’s guidelines are defined.
- 5. Haven’t the federal and provincial governments already said they won’t support facilities for professional sports teams?
The City has identified funding sources for the project, and is seeking Provincial and Federal support for the remaining $14-million needed for the community rink, which will be owned and operated by the City.
- 6. How will the ticket surcharge work?
The $125-million to be generated from a ticket surcharge would be borrowed by the City to start design and construction of the arena. The cost of interest on that borrowing would be covered by the fee. The City would also implement a ticket surcharge on events at Rexall Place equivalent to the one at the new arena, ensuring a level playing field for both facilities.
As part of the approved master agreement, Council agreed that revenue collected from tickets sold for events at Rexall Place would not be used to pay for the new arena.
- 7. Who will pay the cost of financing construction while the arena is being built?
The framework agreement caps design and construction of the arena at $480-million. The City has factored the cost of borrowing for construction into all its cost and revenue projections.
- 8. Who will pay for any extra infrastructure costs to support the arena and entertainment district?
The City routinely pays infrastructure costs associated with new public buildings such as LRT connections to the University Hospital or Southgate Mall. The City will cover the costs to provide a LRT connection to the arena, a pedestrian corridor, part of the community rink, and a maximum of $25-million towards the Winter Garden, a pedway over 104 Avenue.
- 9. Is the Katz Group providing cash for its $161.5-million contribution?
The Katz Group is contributing a total of $161.5-million, which includes $130-million for the arena and $31.5-million for the Winter Garden. Of that, $140 million, plus interest, will be paid as a lease over 35 years. The remaining $21.5 million for the Winter Garden will be paid in cash.
- 10. Is it right that the Katz Group will receive all revenues from events held in the new arena?
The Katz Group will be responsible for all arena operating expenses and maintenance costs. In return they will receive the operating revenues, including naming rights and parking revenue.
- 11. Who will own the land?
The City would own the land and arena.
- 12. How will the land be paid for?
The land costs are not part of the $480-million, and they will be funded through the CRL.
- 13. The early design proposed by the Katz Group included a community arena and winter garden. Are they still part of the deal?
The City has agreed to pay half of the cost, to a maximum of $25-million of a pedway bridge across 104 Avenue that would lead to a new arena.
A community rink is not part of the $480-million cost of an arena building. The City estimates the cost for a community rink at $21-million. The city is approaching the provincial and federal governments to each contribute $7-million to the community rink.
- 14. Could naming rights help pay some of the costs of the arena?
The framework agreement gives naming rights to the Katz Group as part of them assuming all operating expenses and maintenance costs.
- 15. Is a location agreement for the Oilers part of the deal with the Katz Group?
84% of Edmontonians told the City during its public consultations that they wanted a long-term agreement that keeps the Oilers in Edmonton as part of negotiations on the proposed new arena. The City has heard that and made that a priority of negotiations. The agreement includes a clause that keeps the Oilers in Edmonton for at least 35 years.
- 16. The City won’t start collecting the ticket tax and see an tax uplift as part of the Community Revitalization Levy until well after the arena opens so how will the City pay for the development that is occurring until that time?
With any large capital project, the City manages cash flows in order to optimize the timing of the borrowing of funds. The City's Working Capital (as noted in the 2011 Investment Committee Annual Report) is managed as an investment through the Short Term Bond Fund and the Money Market Fund. The City's significant revenue streams are cyclical; the Money Market Fund value peaks each July at approximately $500-million. The balance of the Short Term Bond Fund at December 31, 2011 was $222-million. The Investment Committee Annual Report for 2012 will be available in the 2nd quarter of 2013.
The City has done detailed financial analysis to model the cash flows associated with the arena project. All opportunity costs (for the use of internal funds) and carrying costs will be charged back to the funding sources for the project when the revenue streams associated with the project start. There will be no tax increase associated with the funding of the Arena project. There will be a portion of the project funded through a Community Revitalization Levy (CRL) that captures the assessment uplift and corresponding taxes within the Downtown CRL boundary.
For more information:
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