Edmonton denied new arena by city

[Ravin]

http://www.tsn.ca/nhl/story/?id=407598

It is a long article, but to basically sum up the details, the Oilers want the city of Edmonton to basically foot the bill for the new arena, and then the team will take all the profits from the arena and pay some operating fees.

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.

Just have to laugh at the ownership here in thinking this is a fair deal.

 

[killgod]

Seattle Oilers you say?

 

[Senser81]

I don't really understand how the deal is set up. If I am reading it correctly, the Oilers pay the city $5.5 million/year for 35 years to "use" the arena, and on top of that they are paying an estimated $10 million/year to "operate" the arena for 35 years. So the Oilers are essentially signing a 35-year lease with the City of Edmonton to use an arena for a total cost of $542.5 million?? Sounds great. I remember paying $150,000 to lease a Chevy Impala for 3 years.

 

[Ravin]

I don't really understand how the deal is set up. If I am reading it correctly, the Oilers pay the city $5.5 million/year for 35 years to "use" the arena, and on top of that they are paying an estimated $10 million/year to "operate" the arena for 35 years. So the Oilers are essentially signing a 35-year lease with the City of Edmonton to use an arena for a total cost of $542.5 million?? Sounds great. I remember paying $150,000 to lease a Chevy Impala for 3 years.

The arena costs $700million to build, and the Oilers keep all profits from hockey games, concerts, trade shows, any event that happens at the arena basically, concession stands, etc. So basically the Oilers in the 35 years will never repay the city for the Arena,and the Oilers have said the city will get like $2billion in revenue from taxes once the area around the arena gets bigger and more developed.

Basically Oilers just don't want to foot any of the bill.

 

[killgod]

I get the impression that Katz threw this bad deal at the city to get out of ownership. He's stated publicly he doesn't desire to own an NHL team, it's a business venture and nothing more. Bought a trashed team, stocked them for the future, time to sell.

 

[Ravin]

I'm sure it wouldn't be hard to find a new owner for the Oilers.

 

[NAHSTE]

So it's not just an American sports problem? The whole "taxpayers build new arena which enables rich business man to print free money" thing?

 

[killgod]

I'm sure it wouldn't be hard to find a new owner for the Oilers.

Not as easy when they need an arena. The buyer has to have the funds/plan/desire for that.

 

[Senser81]

The arena costs $700million to build, and the Oilers keep all profits from hockey games, concerts, trade shows, any event that happens at the arena basically, concession stands, etc. So basically the Oilers in the 35 years will never repay the city for the Arena,and the Oilers have said the city will get like $2billion in revenue from taxes once the area around the arena gets bigger and more developed.

Basically Oilers just don't want to foot any of the bill.

But looking at the most basic element of it...the arena costs $700 million, the Oilers pay $542.5 million to lease the stadium. Thats a terrible deal for the Oilers. One, they don't actually own the stadium, so at the end of the 35 years, they will be looking to lease/build another stadium. Two, since they don't own the stadium and are leasing it from the city, they would be contractually obligated to remain in Edmonton for the next 35 years. If you are already sinking in $542.5 million, just pay the remaining $157.5 million so that you actually own the stadium and property, and can move from Edmonton whenever you want.

 

[Ravin]

But looking at the most basic element of it...the arena costs $700 million, the Oilers pay $542.5 million to lease the stadium. Thats a terrible deal for the Oilers. One, they don't actually own the stadium, so at the end of the 35 years, they will be looking to lease/build another stadium. Two, since they don't own the stadium and are leasing it from the city, they would be contractually obligated to remain in Edmonton for the next 35 years. If you are already sinking in $542.5 million, just pay the remaining $157.5 million so that you actually own the stadium and property, and can move from Edmonton whenever you want.

A few issues with this.

1. Edmonton never wants to leave Edmonton. The history, the team, the city, it just will never happen. Edmonton is one of those teams that can sell out just because they are the Oilers. The Oilers would have no issue being obligated to stay in the Edmonton for 35 years, and the league would be more then happy about it.

2. I see where you are going with the money thing, but after 35 years, they would probably want to build a new arena anyway. Or close to it. The Oilers are sinking 542million, but they will probably make 20x that in all the revenue from the Arena. Remember that they get everything the arena does. Sports, tradeshows, concerts, etc. From the cities point of view, they are paying $700m for a rink, and will only see $542M of that back in 35 years. And they have no other option but to take the loss and hope the taxes in the area help.

The Oilers should be required to build a new rink, or at least pay half of it. If you look at the $700m as being a low, the Oilers are not even paying it back over the course of 35 years. Wish we could all buy million dollar homes, and only pay the bank back about 80% of the cost.

 

[Senser81]

A few issues with this.

1. Edmonton never wants to leave Edmonton. The history, the team, the city, it just will never happen. Edmonton is one of those teams that can sell out just because they are the Oilers. The Oilers would have no issue being obligated to stay in the Edmonton for 35 years, and the league would be more then happy about it.

So you are basically saying you can see 35 years into the future. Got it.

 

[Maynard]

1. Edmonton never wants to leave Edmonton. The history, the team, the city, it just will never happen. Edmonton is one of those teams that can sell out just because they are the Oilers. The Oilers would have no issue being obligated to stay in the Edmonton for 35 years, and the league would be more then happy about it.

you just described the browns prior to 1995

 

[wr50l]

So you are basically saying you can see 35 years into the future. Got it.

This isn't the NFL where owners are worried their fans might buy a season ticket to McDonalds next year - this is hockey in Canada and yes, in 35 years the Edmonton Oilers will be happily situated in Edmonton.

 

[NAHSTE]

This isn't the NFL where owners are worried their fans might buy a season ticket to McDonalds next year - this is hockey in Canada and yes, in 35 years the Edmonton Oilers will be happily situated in Edmonton.

This was hockey in Canada too, amirite?

 

[Ravin]

This was hockey in Canada too, amirite?

:facepalm: Time for a little history lesson.

Both the Jets and the Nordiques came from the old World Hockey Association, and at the time of the teams leaving, neither team was in a huge market place, as both Winnipeg and Quebec City were the smallest markets of any the NHL teams. Interesting to note, Edmonton is also from the WHA, and all three teams were brought into the NHL. With a lack of support in Quebec for another hockey team, as fans were driving to Montreal for their beloved Canadians, and the Jets being in the middle of no where with no major corporate centres, the teams were both in money trouble. Edmonton on the other hand was not, and turned into one of the best and stories franchise in NHL history.

They are considered to be part of the last age of the dynasty teams in the NHL, and have such a storied history that any attempt to move them from Edmonton would be met by more backlash and death threats then the day the great one was traded to the Kings. In this day in age, there is not a chance any Canadian team gets moved, and the NHL would block the sale or relocation of the Oilers. The Seattle visit was a backfire for the ownership, and as wr50l pointed out, this is hockey in Canada. Taking a team like the Oilers out of Edmonton would be like moving the Cowboys out of Dallas.

 

[killgod]

Actually, what you neglect to note (and the largest contributor) was that the Canadian dollar was worth 60 cents American in the time those teams moved away. Basically, their teams were costing a shit ton more because the conversion rate was so extreme. A 40M US cost to run a club was like 60M CDN. Not feasible.

Teams are coming back because we're at par and if we weren't, Winnipeg would not have happened again.

 

[wr50l]

Ok, you got me.

'Anything's possible' but I couldn't possibly forecast Edmonton losing its team. Even as one of the worst teams in the league and with an admittedly decrepit arena they still have middle of the road revenue and and are one of the few profitable teams in the league.

 

[wr50l]

Little bit of maths on this stadium proposal.

From the Oilers perspective ...

Payment to the city -$192.5m (-$192.5m)
Operating costs -$350m (-$542.5m) *
Naming rights +$30m (-$512.5m) *
Additional Payment from city for advertising +$20m (-$492.5m)
Oilers ticket sales +$1.951bn ($1.459bn) *
Concession sales +$700m ($2.159bn) *
Additional income from other events which Oilers will collect (?)

* Inflation not included

And the city never sees a profit on this proposal. Gee I wonder why the Oilers don't mind a long-term commitment.

 

[killgod]

moving is not going to happen. it won't. Katz is just preparing to sell. He's now got all the numbers and stance for Edmonton and likely Seattle, which he can use in sale negotiations.

 

[Senser81]

:facepalm: Time for a little history lesson.

Both the Jets and the Nordiques came from the old World Hockey Association, Edmonton is also from the WHA...blah blah blah...Taking a team like the Oilers out of Edmonton would be like moving the Browns out of Cleveland.

Fixed