EDMONTON – Edmonton Oilers owner Daryl Katz told city councillors Wednesday his NHL team is running millions of dollars in the red and that he needs taxpayer dollars to help him build a franchise-saving 18,000-seat downtown rink.
“Some might say the Oilers are just a hockey team, but I think we all know they’re much more than that,” Katz told councillors. “But this team is also a business, and like any business it needs a sound financial base in order to be sustainable, which today it is not.”
Paul Marcaccio, Katz’s chief financial officer, told councillors that the Oilers are severely disadvantaged by being in the league’s smallest market, which limits how much they can charge for ads and broadcast rights. He said, more importantly, the Oilers are also the only NHL team that doesn’t get revenue from non-hockey events held at their home rink.
“Daryl Katz has had to subsidize the team by several million dollars in each of the past two years in order for the team to break even,” said Marcaccio. “Under the Oilers’ current operating model at Rexall Place … that trend will likely continue.”
Katz asked councillors to direct city bureaucrats to strike a deal with his team, subject to council approval, to pay for the new facility, expected to cost $450 million.
Katz also promised to sign a deal to keep the Oilers in Edmonton.
He also renewed a pledge to put up $100 million for the rink, and offered Wednesday to spend another $100 million or more to spur development of businesses around the new facility. That, he said, is on top of the $200 million he spent to buy the team.
“Taken together, I expect I will invest no less than $400 million,” he said.
“I’m prepared to do my part.”
For two years, Katz has been lobbying to have taxpayers fund the lion’s share of a rink for the Oilers as part of a larger downtown $1-billion revitalization project that would include shops, businesses, restaurants and a casino.
Katz is proposing that the city own the rink, but the Oilers pay minimal rent and keep the revenues from the NHL games and other events in the new facility, which he wants built on a 6.4-hectare parcel of land he owns.
A new report by city officials last week states that the rink is feasible if the Oilers add a $5 tax to all game tickets and if the city diverts a portion of the money from the increase in property taxes that would result from the new buildings in that area.
The deal would also give rise to other questions: who runs the rink, how much profit do the Oilers take, who’s on the hook for any losses, who gets the money from rink naming rights, and so on.
Katz, a curly-haired 48-year-old pharmacy billionaire, has been beating the drum for a new rink to replace aging Rexall Place since he bought the Oilers two years ago.
He wants construction to start sometime next year so that the rink is built when the Oilers’ current lease at Rexall Place expires in 2014.
Previous efforts by the noted philanthropist to rally city councillors and the public to his side have been criticized as secretive and ham-handed at best, and Machiavellian string-pulling at worst.
Prior to Wednesday, Katz’s public comments had been through his executives, letters to the editor, or in staged interviews with employees from the Oilers’ in-house radio network.
Councillors have objected as much to the secrecy as the tactics. Mayor Stephen Mandel, for example, learned through the media earlier this year that Katz had gone back on his pledge to put up $100 million for the rink. Instead, Katz planned to spend the $100 million on surrounding property instead. He has since changed his mind again, and returned to the original promise.
Councillors also said they were kept in the dark on a plan by the Katz Group, announced earlier this month, to strike a deal with Hamilton city council to run the Copps Coliseum. That renewed concerns the Oilers were using Hamilton’s desperate longing for an NHL franchise as a bargaining chip in Edmonton negotiations. The Oilers have denied this.
A hearing to rezone the downtown arena land, the first step in the project, was cancelled by the Katz Group last month after councillors grumbled they had not been brought in on funding or design plans.
Katz admitted to councillors Wednesday that his group has made mistakes.
“I know we haven’t always made it easy, and I’ll be the first to apologize for that, but I assure you our hearts are in the right place,” said Katz.
Katz’s team has also antagonized Edmonton Northlands, the non-profit board that runs the team’s home in Rexall Place.
Northlands is supporting a new downtown rink, but says it should have a role in running it. Katz, however, has signalled his goal is to marginalize Northlands by hiring the Los Angeles-based entertainment conglomerate AEG to run the new rink with him.
Katz’s team told councillors they haven’t decided yet how Northlands fits into their vision for the new rink.
Northlands has let it be known it plans to fight back. The board recently hired as its new president Richard Andersen, the man who helped develop Petco Park, a Major League Baseball stadium that has anchored downtown revitalization in the California city.
Northlands also says council should not reject renovating Rexall Place instead of building a new rink. It announced earlier this month that sagging construction prices mean it could be done for as little as $175 million. The Katz team said the real cost would be $250 million.
Rexall Place, built in 1974, is the second-oldest rink in the NHL—only the New York Islanders play in an older facility. It is about half the size of the new rinks that have sprung up in the last 15 years.
Little is expected to develop on the issue until after the October civic elections, as councillors have said quietly that public money for a private enterprise would be an explosive issue at voters’ doorsteps.
Premier Ed Stelmach’s provincial government has said it doesn’t plan to give direct subsidies, but may help with related transportation infrastructure.