7/31/2019 Daryl Katz Letter to Edmonton's Mayor and Council

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DarylA.Katz

Chairman

October16,2012

MayorStephenMandel

MayoroftheCityofEdmonton

2ndFloor,CityHall

1SirWinstonChurchillSquare

Edmonton,ABT5J2R7

DearMr.Mayor:

IwasextremelydisappointedbytherecentcommunicationsfromtheCityofEdmontontotheKatzGroupregarding

thedowntownarenaproject.Wehadthoughtweweremakingconsiderableprogress,butitseemsfromyourrecent

communicationsthat,infact,wehavegonebackwards.Asidefromthemanyissuesstilltoberesolved,weandthe

Citycannotevenagreeonbasicassumptionsrelatingtothefinancialaspectsofoperatinganewarena.

Inthewordsoftheleadershipcommitteeyouappointednearlyfiveyearsago,thisprojectwastobeEdmontons

greatestopportunity.

Iboughtintothatvisionwholeheartedlyandhavecommittedanextraordinaryamountoftimeandmoneytomakeit

areality.Fromdayone,mygoalshavebeensimpleandclear:(1)toensuretheEdmontonOilerscouldbesustainable

inEdmontonforthelong-term,and(2)toacceleratethelongoverdueandmuch-neededrevitalizationofour

downtowncore.

Toachievethesegoals,Ihavebeenpreparedtoinvestupwardsof$250milliontohelpbuildanarenathattheCityof

Edmontonwouldown,andtosigna35-yearcommitmenttokeeptheOilersinEdmonton,wheretheybelong.Byany

objectivemeasure,thisfarexceedswhatNHLownersincomparablecitieshavedone.

Ihavealsobeenpreparedtoinvestover$1billioninaprivatesectordevelopmentthatwouldtransformourcityand

generatenewtaxrevenuesthatyourAdministrationhasveryconservativelyestimatedat$1.2billion,withonlythe

arenaasacatalyst--and$1.6billionifweproceedwithjustthefirstphaseofourplanneddevelopment.Muchof

thesenewtaxrevenues,whichwouldbenefitEdmontonandEdmontoniansforgenerationstocome,willnot

otherwiseberealized,atleastnotinthenextmanyyearsandnotwithoutanewarenaasthecatalystproject.

Lestanyonequestionmycommitmenttothearenaortothisdevelopment,Ihavealreadyinvested$70million

towardsrealizationoftheprivatesectordevelopmentthroughlandpurchasesandextensivedesignandotherwork.

ThisismorethandoubleCityCouncilsunilateralrequirementthatweinvestatleast$30millionintheprivatesector

developmentbeforeitwouldauthorizeproceedingwiththearenaonanybasis.

IfeartheCityhasapproachedthisnegotiationbasedonnarrowpoliticalconsiderationsratherthanagenuinedesire

tostrikeadealthatisfairandmakeseconomicsenseforbothsides.Ibasethis,inpart,onyourrepeatedinsistence

tothepressthatwesomehowhaveadealbasedontheNewYorkframework.Asyouknow,itwasnotadeal,buta

frameworkthatweeachthoughtwecouldsupport,subjecttoactuallyprovingitoutandensuringitwouldachieve

ourmutuallyrecognizedgoalofensuringthelong-termsustainabilityfortheOilers.Inplainterms,weallunderstood

thedevilwouldbeinthedetails,andindeeditwas.

7/31/2019 Daryl Katz Letter to Edmonton's Mayor and Council

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SinceNewYork,wehavebeenabletomodelanticipatedoperatingcostsandrevenuesbasedonthearenasactual

designandwithinputfromAEG,ICONandBigelow,oneofNorthAmericasleadingvenuefood&beverage

consultants.Thesimpleandunfortunatefactisthatthecostscameinhigherthanexpected,andrevenueslower.This,

aswellasourneedforoperatingsupport,hasbeenasubjectofongoingdiscussionwithyouandyourAdministration

goingbacktotheSpring.ItmaybetruethatCityCouncilwasunawareofthesediscussions,whichisunfortunate,but

IdonotthinktheKatzGroupshouldbeblamedforthat.

Thebottomlineisthis:Beforewecansigna35-yearlocationagreementandinvestmorethanaquarter-billion

dollarsintoanewarenathatthecitywillown--letaloneinvestmorethan$1billionintootherprivatedevelopment

aroundit--weneedasolutionthatmakeseconomicsenseforbothpartiesandcreatesasoundbasisforthelong-

termsustainabilityoftheOilersinEdmonton.

Wesimplycannottakethekindofriskthecurrentframeworkentailsover35yearswiththepotentialforonly

nominallypositivereturnsonourcapitalwhentimesaregood,andthepotentialforsignificantongoinglosseswhen

conditionsaredifficultforsmallmarketteamsinCanada--astheyhavebeenformostofthelast35years.

Thisisonlyfairandreasonable,andweareseekingfarlesstoachieveadealthanotherteamshavereceivedinother

cities.WecontinuetobelievethereisnoreasonEdmontoncannotdowhatPittsburgh,Columbus,Winnipeg,Quebec

Cityandothercitieshavedonetobuildnewarenasand/orsustaintheirNHLfranchises.(Detailsontheseandother

pointsareincludedintheattachedletterpublishedintodaysEdmontonJournal.)

Perhapswithmoretimeandpoliticalleadership,thisprojectcanstillbesaved.Butasitstands,weremainfarapart

bothonsubstanceandprocess.Onsubstance,asyouknow,thereare15openissuesinournegotiations.Onprocess,

aswepreviouslyadvised,wewillnotmakeaproposaltoCityCouncilthatdoesnothaveAdministrationssupport.

Accordingly,andrespectfully,wewillnotappearattomorrowsmeetingofCityCouncil.

Igotintothisprojectthinkingitwouldbeagoodthing,andthatmywillingnesstoinvesthundredsofmillionsof

dollarsinourcitywouldhaveyourpublicsupport.MayorMandel,thisisanopportunityforEdmontontobeboldand

forward-lookinganditwarrantsyoursupportandleadership.

MydoorisopenifCityAdministrationwishestocontinueourdiscussions.

IalsowanttoremindyouofCommissionerBettmansoffertocometoEdmontontohelpforgeadealthatwillenable

ustomoveforwardandthatwecanallbeproudof.Ihopeyouwillconsidertakinghimuponhisoffer.

Sincerely,

DarylA.Katz

Chairman

cc: MembersofEdmontonCityCouncil

SimonFarbrother,CityManager

GaryBettman,NHLCommissioner

JohnKarvellas,ExecutiveVicePresidentandGeneralCounsel,KatzGroup