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Can Edmonton afford the Oilers?

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10-17-2012, 08:28 AM
  #76
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I'm so tired of Katz jerking around this fan base. How many winters does the uncertainty need to drag on? At this point ill never forgive the rotten SOB

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10-17-2012, 08:29 AM
  #77
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Originally Posted by I am the Liquor View Post
So you are saying that the Oilers are no longer sustainable in Edmonton.

Youve convinced me.

Now why in the world should we build a half billion dollar building for a business that the city cannot possibly sustain or afford?
That's exactly the point.

Likely, someone is going to lose a great deal of money on this deal over the next 35 years. I think the city manager has crunched the numbers. I think the Katz group has crunched the numbers.

By the sounds of it, the team will need to be subsidized for at least a period of time during the next 35 years. The city of Edmonton doesn't want to do it. Other cities appear to be willing to. Perhaps moving the team, prior to building a $400-500m building, would be preferable to building a building without an anchor tennant?

David Staples article was on building the building, and charging rent. Anyone here think that would work?

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10-17-2012, 09:03 AM
  #78
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So you are saying that the Oilers are no longer sustainable in Edmonton.

Youve convinced me.

Now why in the world should we build a half billion dollar building for a business that the city cannot possibly sustain or afford?
Find me one place where I have ever said that.

I have repeatedly said that the Oilers can be viable long term in Edmonton with an arena that is a private public partnership. The degree of that partnership is the issue at hand.

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10-17-2012, 09:20 AM
  #79
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Given what the league is offering I wouldn't be thinking 10 years down the road, if the CBA is 6 years that's all I'll worry about. No point in worrying about something any further than that.

I also wouldn't be shocked to see tickets at $100 average a lot sooner than that chart.

Does the chart also allow the revenue sharing that we'd get if we dropped to a lower earning team?

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10-17-2012, 09:24 AM
  #80
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Revenues for the new building will be similar to the current building, but concessions/parking/ticket taxes/ancillary revenues will go to Edmonton

???
Come again?

How does a larger arena with not only more seats, but more luxury boxes have the same revenue of Rexall?

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10-17-2012, 10:32 AM
  #81
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Find me one place where I have ever said that.

I have repeatedly said that the Oilers can be viable long term in Edmonton with an arena that is a private public partnership. The degree of that partnership is the issue at hand.
But the non-hockey revenues are outstripped by operating expenses of the building and the player salaries are on par with gate revenues.

You have said both of the above.

So how is it viable?

Your argument seems to portray that it isnt really.

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10-17-2012, 10:41 AM
  #82
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You know of any independently run, multi-billion dollar pension investment firms in the Edmonton region? Quite a bit of a difference between a corporate entity like that(largest in canada), and the City of Edmonton buying the team.



Debatable considering the NHL has the worst revenue sharing system of the major sports in North America, and the franchise in question is already claiming they are losing money(something a guess from Forbes does not clarify one way or another). If city council and Katz salt their relationship enough that there is no arena for the forseeable future(10 - 15 years, probably the amount of time it would take the city to getting around to "building it themselves"), the BoG absolutely would vote for relocation of an untethered franchise with desirable markets opening up(Ontario/Quebec).

Saying the BoG will bend over backwards to keep the NHL in Edmonton because they make money(which Katz/Bettman dispute), or the city is entitled to the team, or that anyone is going to split revenue in a 35+ year old venue with little hope of a new arena being built anytime soon(if the deal falls through) - is denying reality.

Are you serious ,how much money the team make IS important.This is getting ridiculous.The team is not going to move

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10-17-2012, 10:59 AM
  #83
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Originally Posted by I am the Liquor View Post
But the non-hockey revenues are outstripped by operating expenses of the building and the player salaries are on par with gate revenues.

You have said both of the above.

So how is it viable?

Your argument seems to portray that it isnt really.
The non-hockey revenues are not outstripped by the operating expenses of the building.

The thing the NHL needs help with are capital costs for ludicrously expensive buildings that the general public will make heavy use of. Much like Walmart needs help with capital costs for ludicrously expensive interchanges that the general public will make heavy use of.

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10-17-2012, 12:21 PM
  #84
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Originally Posted by victor View Post
There is a significant local demand - even with Pocklington, there were 10k plus out for poor teams. Pocklington didn't pay top dollar for players, however.

Would Edmontonians pay a premium for hockey tickets if the economy went south? Probably. Would it be enough to support the team? Depends on the expenses.



QE3 is intentionally devaluing the US dollar (Side note: I didn't like it in Japan in 1991-1992, and can't see it really working in the US right now.) The US economy is in shambles, and hopefully will recover faster than Japan's has.

Canada clearly is a petrocurrency, though. The rise has occurred against other currencies as well, and is in line with expected projections.

I'm questioning the assumption that the Canadian dollar stays high, and that Edmonton's economy stays strong - historically, this isn't the case over 35 years.
yes, The American Fed has taken more action to drive down the dollar. So the rise of the Canadian dollar has less to do with any real appreciation. Bottom line poeple make way to big of a deal over the Canadain American exchange rate. If things go as they have, the Canadian dollar will continue to outpace the American dollar in the future. I highly doubt it will ever dtop by much.

If the economy tanks, huge, yes, we can't support the oilers, if it goes down 10-15% I think Edmonton is still a very viable NHL market. So you are making a lot of assumptions. For all we know the Economy of Edmonton will continue to grow for 100s of years. Predicting oil's imminant demise is about as fruitful as predicting that something even more valueable to Alberta will replace it.

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10-17-2012, 12:42 PM
  #85
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This is a very interesting thread that brings up a lot of good points.

For one, I believe the city should go it alone and construct a new facility, let Northlands operate it - for profit. Let Katz have say 75 nights a year for $1 dollar.

Northlands, for profit, can use the naming rights and other nights to generate sufficient funds to pay for ongoing operating costs, and hopefully a return to the city on their investment.

Two other important points:

1) I don't believe Katz has the money people think. I don't even believe he is a billionaire. This is why getting him to agree to what he has allready agreed to is such an issue ... he doesn't have the money. Remind you of anyone?

2) Oil -- in the short term Oil could very well spike to new highs, which would futher fuel the local economy. There are many factors that could contribute to this: Isreal-Iran confrontation, Turkey-Syria, US Fiscal cliff, devaluing of currencies (US, Euro, etc.) due to debt loads, etc.

Oil - in the long term will trade below where it is today, based on simple supply demand fundamentals. World economies are going to stagnate over the next several years as they deal with austerity measures to pay off debt, with growth only marginally increasing demand. However, supply is going through the roof, with new technology unlocking 'tight oil' shales (fracking etc.). In recent years the US has added 2 million barrels per day of production from oil shales in the midwest US, with total potential exceeding 50 Billion Barrels (one quarter of all of Saudi's reserves). Russia has 10 times that potential, and other countries around the world are making similar discoveries.

Simple supply - demand.

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10-17-2012, 01:08 PM
  #86
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Originally Posted by Gone View Post
This is a very interesting thread that brings up a lot of good points.

For one, I believe the city should go it alone and construct a new facility, let Northlands operate it - for profit. Let Katz have say 75 nights a year for $1 dollar.

Northlands, for profit, can use the naming rights and other nights to generate sufficient funds to pay for ongoing operating costs, and hopefully a return to the city on their investment.

Two other important points:

1) I don't believe Katz has the money people think. I don't even believe he is a billionaire. This is why getting him to agree to what he has allready agreed to is such an issue ... he doesn't have the money. Remind you of anyone?

2) Oil -- in the short term Oil could very well spike to new highs, which would futher fuel the local economy. There are many factors that could contribute to this: Isreal-Iran confrontation, Turkey-Syria, US Fiscal cliff, devaluing of currencies (US, Euro, etc.) due to debt loads, etc.

Oil - in the long term will trade below where it is today, based on simple supply demand fundamentals. World economies are going to stagnate over the next several years as they deal with austerity measures to pay off debt, with growth only marginally increasing demand. However, supply is going through the roof, with new technology unlocking 'tight oil' shales (fracking etc.). In recent years the US has added 2 million barrels per day of production from oil shales in the midwest US, with total potential exceeding 50 Billion Barrels (one quarter of all of Saudi's reserves). Russia has 10 times that potential, and other countries around the world are making similar discoveries.

Simple supply - demand.
Solid post. I think you are bang on about Katz.

However, I will say, and it is some what politicaly sensative to say, the world will not suffer from austerity. THe world is suffering more from uncertiantly surrounding government debt. If the US and EU can impose strict criterion for reducing debt, the investors of the world will see a favourable and much less risky future. Austerity is what the developmed world needs, though many don't want to admit that.

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10-17-2012, 01:26 PM
  #87
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yes, The American Fed has taken more action to drive down the dollar. So the rise of the Canadian dollar has less to do with any real appreciation. Bottom line poeple make way to big of a deal over the Canadain American exchange rate. If things go as they have, the Canadian dollar will continue to outpace the American dollar in the future. I highly doubt it will ever dtop by much.

If the economy tanks, huge, yes, we can't support the oilers, if it goes down 10-15% I think Edmonton is still a very viable NHL market. So you are making a lot of assumptions. For all we know the Economy of Edmonton will continue to grow for 100s of years. Predicting oil's imminant demise is about as fruitful as predicting that something even more valueable to Alberta will replace it.
The point I'm trying to make is the challenge with projecting a business deal over 35 years, which is the length of the proposed deal.

Edmonton is currently booming. Over the next 35 years, it's unlikely that the boom will continue, and that there will be financial impacts.

As to the idea of renting it to KG for 75 days for $1 - that works out to about 140,000 seats (say 19000 seats times 75, with 25000 seats unsold for contingency. Assuming all of the seats are sold at $50 plus taxes, that brings in about $70m. Give all of the concessions for those dates, and $5 margin per seat, and you get another $7m.

$77m likely won't cover payroll in a few years, and that assumes that the difference between NHL dates and the 33 non-NHL dates are full house, $50avg seats, and that the dates have no other costs, like performer fees or salaries. Be difficult to do, to say the least.

How about 182 days a year?

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10-17-2012, 01:34 PM
  #88
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Solid post. I think you are bang on about Katz.

However, I will say, and it is some what politicaly sensative to say, the world will not suffer from austerity. THe world is suffering more from uncertiantly surrounding government debt. If the US and EU can impose strict criterion for reducing debt, the investors of the world will see a favourable and much less risky future. Austerity is what the developmed world needs, though many don't want to admit that.
Other than pushing these issues down the road, I only see two paths to solve the debt issues:

1) Austerity - which would stagnate world economies for years to come. What is the result to Canada in this circumstance? On a relative basis, we should come out OK, primarily because of resource revenues (Oil and Gas, Food, minerals etc.).

2) Inflation - if the Euro's and US use inflation as the tool to pay down debt, the Canadian economoy will absolutely boom, the dollar will sky rocket and our resouces will be in even greater demand than today.

Either way the future for Canada is either OK or very OK. We are luckily in one of those jurisdictions that will neither be too hot, nor too cold.

My guess.

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10-17-2012, 01:37 PM
  #89
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Originally Posted by victor View Post
The point I'm trying to make is the challenge with projecting a business deal over 35 years, which is the length of the proposed deal.

Edmonton is currently booming. Over the next 35 years, it's unlikely that the boom will continue, and that there will be financial impacts.

As to the idea of renting it to KG for 75 days for $1 - that works out to about 140,000 seats (say 19000 seats times 75, with 25000 seats unsold for contingency. Assuming all of the seats are sold at $50 plus taxes, that brings in about $70m. Give all of the concessions for those dates, and $5 margin per seat, and you get another $7m.

$77m likely won't cover payroll in a few years, and that assumes that the difference between NHL dates and the 33 non-NHL dates are full house, $50avg seats, and that the dates have no other costs, like performer fees or salaries. Be difficult to do, to say the least.

How about 182 days a year?
I'm sure there is a fair number that works for both sides. Keep in mind, ticket prices always go up ... not down.

I suppose the city could still impose an entertainment ticket tax to recoup some of the funds used to pay off the facility.

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10-17-2012, 01:47 PM
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Originally Posted by Gone View Post
Other than pushing these issues down the road, I only see two paths to solve the debt issues:

1) Austerity - which would stagnate world economies for years to come. What is the result to Canada in this circumstance? On a relative basis, we should come out OK, primarily because of resource revenues (Oil and Gas, Food, minerals etc.).

2) Inflation - if the Euro's and US use inflation as the tool to pay down debt, the Canadian economoy will absolutely boom, the dollar will sky rocket and our resouces will be in even greater demand than today.

Either way the future for Canada is either OK or very OK. We are luckily in one of those jurisdictions that will neither be too hot, nor too cold.

My guess.
I am in the minority, but, my view is pretty straight forward. The political system has incorporated many, (well lets say Keynesian ideas) that the gov needs to stimulate the economy. This may at different times work, but when the business world sees a indebted government spending money it doesn't really have. The business world gets worried. I really think Austerity will lead to immediate growth. However, it is politically sensitive. IF the US and EU could push for Austerity measures we would be fine. It is battling through the political process.

I could be wrong, but I don't even see government cut backs as slowing the economy even in the short term. Of course it will hurt many. I am not ignorant of that reality.
Also, I think you make good points, but point two will never happen. The US fed will not repay debt with inflation. I could go on for a long time about this point. Lets just say it never has and it never will. That being said its inflation rate will be higher than Canada's no doubt for some time to come, but by like half a percent or something.


Any way, back to Hockey. I think as you say, Canada will be ok to very ok.

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10-17-2012, 01:49 PM
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Originally Posted by victor View Post
The point I'm trying to make is the challenge with projecting a business deal over 35 years, which is the length of the proposed deal.

Edmonton is currently booming. Over the next 35 years, it's unlikely that the boom will continue, and that there will be financial impacts.

As to the idea of renting it to KG for 75 days for $1 - that works out to about 140,000 seats (say 19000 seats times 75, with 25000 seats unsold for contingency. Assuming all of the seats are sold at $50 plus taxes, that brings in about $70m. Give all of the concessions for those dates, and $5 margin per seat, and you get another $7m.

$77m likely won't cover payroll in a few years, and that assumes that the difference between NHL dates and the 33 non-NHL dates are full house, $50avg seats, and that the dates have no other costs, like performer fees or salaries. Be difficult to do, to say the least.

How about 182 days a year?
I don't disagree with you about much. However, you also need to assume some chance that the Edmonton Economy will actually get better. It is very possible as well. We have plently of resources and a very well educated work force. There are plently of reason to be opttimistic about Edmonton as well.

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10-17-2012, 02:19 PM
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Originally Posted by I am the Liquor View Post
But the non-hockey revenues are outstripped by operating expenses of the building and the player salaries are on par with gate revenues.

You have said both of the above.

So how is it viable?

Your argument seems to portray that it isnt really.
You asked me specifically if concessions and parking would cover the operating expenses of the building. I said they would not and gave you evidence from actual data why I felt that way. At this point, your evidence seems to be simply that you fell they would. If you can detail for me why I am wrong I would be happy to listen.

These are far from the only non-hockey revenues. It is also true that the new building will increase gate revenues as well as significantly increase revenues from luxury boxes, something that is typically excluded from gate revenues.

The question of viability is complex. As it currently stands my sense is that the Oilers make a relatively small operating profit with salaries near the cap midpoint and no playoff revenues. This is in part a conseqeunce of a $CDN above par. At $.90US the Oilers costs rise about $7M with no off set in revenue. At that point they may be at the break even level or in position for a small loss. If they end up near the ceiling then likely at par they may make a little but at $.90 Us they most likely lose money.

The new revenue streams from the arena should allow them to insure that the team is profitable under normal circumstances which I personally have no probem with. In the best case secenario, Kat may indeed do very well. But I doubt that the new arena is the license to print money that many feel it is. If it was we would almost certainly not be in this debate.


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10-17-2012, 03:26 PM
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This is a very interesting thread that brings up a lot of good points.

For one, I believe the city should go it alone and construct a new facility, let Northlands operate it - for profit. Let Katz have say 75 nights a year for $1 dollar.

Northlands, for profit, can use the naming rights and other nights to generate sufficient funds to pay for ongoing operating costs, and hopefully a return to the city on their investment.

Two other important points:

1) I don't believe Katz has the money people think. I don't even believe he is a billionaire. This is why getting him to agree to what he has allready agreed to is such an issue ... he doesn't have the money. Remind you of anyone?

2) Oil -- in the short term Oil could very well spike to new highs, which would futher fuel the local economy. There are many factors that could contribute to this: Isreal-Iran confrontation, Turkey-Syria, US Fiscal cliff, devaluing of currencies (US, Euro, etc.) due to debt loads, etc.

Oil - in the long term will trade below where it is today, based on simple supply demand fundamentals. World economies are going to stagnate over the next several years as they deal with austerity measures to pay off debt, with growth only marginally increasing demand. However, supply is going through the roof, with new technology unlocking 'tight oil' shales (fracking etc.). In recent years the US has added 2 million barrels per day of production from oil shales in the midwest US, with total potential exceeding 50 Billion Barrels (one quarter of all of Saudi's reserves). Russia has 10 times that potential, and other countries around the world are making similar discoveries.

Simple supply - demand.
You forgot to include the double digit millions northlands gets as a subsidy. Its fine for them to get tax payer money to screw up everything they touch

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10-17-2012, 03:45 PM
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You asked me specifically if concessions and parking would cover the operating expenses of the building. I said they would not and gave you evidence from actual data why I felt that way. At this point, your evidence seems to be simply that you fell they would. If you can detail for me why I am wrong I would be happy to listen.
Ive already given you financial statements from Northlands showing they had more revenues than expenses in operating the building, but you dismissed it.

Quote:
These are far from the only non-hockey revenues. It is also true that the new building will increase gate revenues as well as significantly increase revenues from luxury boxes, something that is typically excluded from gate revenues.
You said earlier that the gate is approximate to player salaries. Now you are saying there will be more money. Which is it?

Quote:
The question of viability is complex. As it currently stands my sense is that the Oilers make a relatively small operating profit with salaries near the cap midpoint and no playoff revenues. This is in part a conseqeunce of a $CDN above par. At $.90US the Oilers costs rise about $7M with no off set in revenue. At that point they may be at the break even level or in position for a small loss. If they end up near the ceiling then likely at par they may make a little but at $.90 Us they most likely lose money.
Then we would be crazy to finance a new building AND provide ongoing subsidy for such a tenuous entity.

Quote:
The new revenue streams from the arena should allow them to insure that the team is profitable under normal circumstances which I personally have no probem with. In the best case secenario, Kat may indeed do very well. But I doubt that the new arena is the license to print money that many feel it is. If it was we would almost certainly not be in this debate.
Nobody knows because he wont be open about the numbers. If he were, and even just to council and not the public, then they could see for themselves what is or is not required to make it viable and make a decision from there. As it stands, all we have are demands made behind closed doors and no transparency whatsoever. Not sure if Katz were born yesterday, but if he thinks he can extort the city for even more money than was agreed upon last Oct, then he probably was.

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10-17-2012, 03:47 PM
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You forgot to include the double digit millions northlands gets as a subsidy. Its fine for them to get tax payer money to screw up everything they touch
Ya, how dare they help provide and run the arena from which the legacy of the Oilers was born by winning all those cups.

Go Horcoff!

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10-17-2012, 04:56 PM
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Originally Posted by I am the Liquor View Post
Ive already given you financial statements from Northlands showing they had more revenues than expenses in operating the building, but you dismissed it.
No offense but what you quoted is the Northlands annual report that I posted. This showed that in 2011 that all revenues Northlands collects for Rexall exceeded their expenses by $4M. The year before it had been $2M. This includes a lot more than just concessions and parking.

In fact this actually supports my point that with access to broader revenue streams the Oilers can make a profit that will keep them viable long term.

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Originally Posted by I am the Liquor View Post
You said earlier that the gate is approximate to player salaries. Now you are saying there will be more money. Which is it?
The current gate is approximately what player salaries are today. You mentioned the 80's. I pointed out that back then gate revenues were far more than player salaries.

None of this is at all inconsistent with my claim that in the new building gate revenues will go up. In fact, so will all other types of revenues. This is the whole point in the team wanting the new arena. My numbers refer to the current situation with the Oilers playing in Rexall. And yes, if they stay in Rexall much longer I do think things get dicey.


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Originally Posted by I am the Liquor View Post
Then we would be crazy to finance a new building AND provide ongoing subsidy for such a tenuous entity.
Where did I say that the Oilers would be a tenuous entity under the proposed fnding formula. My whole point is that I do not believe they will with the new revenue streams that come from the new arena.

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Originally Posted by I am the Liquor View Post
Nobody knows because he wont be open about the numbers. If he were, and even just to council and not the public, then they could see for themselves what is or is not required to make it viable and make a decision from there. As it stands, all we have are demands made behind closed doors and no transparency whatsoever. Not sure if Katz were born yesterday, but if he thinks he can extort the city for even more money than was agreed upon last Oct, then he probably was.
You know I am not a fan of how he has conducted this deal. And I have no issue with the City wanting to see some proof that the money they are investing is needed. This might include opening his current books, which I'd be all for, though it would likely be in camera. But this will only tell part of the story. The much more complex part in this negotiation is trying to model the return on this investment going forward 35 years if the new arena is built. This is the data the City needs to see and this is the data they need to analyse. Perhaps the best solution is a claus in the deal similar to what Nashville has making the amount of any ongoing subsidies contingent on a periodic independent audit of the Oilers revenues and costs.

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10-17-2012, 06:29 PM
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No offense but what you quoted is the Northlands annual report that I posted. This showed that in 2011 that all revenues Northlands collects for Rexall exceeded their expenses by $4M. The year before it had been $2M. This includes a lot more than just concessions and parking.
You used the report to bolster your claim on the amount of expenses that are incurred operating the building. I pointed out that the revenues were greater than the expenses, which you claimed would likely not be the case even in the new building, which is why you seemed to be ok with the request for subsidy.

Quote:
In fact this actually supports my point that with access to broader revenue streams the Oilers can make a profit that will keep them viable long term.
That really isnt how I remember the argument which was specifically about the numbers in regards to non-hockey revenues vs operational expenses, which you claimed would be negative due to the expenses being higher than the revenues.

Quote:
The current gate is approximately what player salaries are today. You mentioned the 80's. I pointed out that back then gate revenues were far more than player salaries.
Sure, and back then the average family could afford to go to a game without blowing grocery money for the month.

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None of this is at all inconsistent with my claim that in the new building gate revenues will go up. In fact, so will all other types of revenues. This is the whole point in the team wanting the new arena. My numbers refer to the current situation with the Oilers playing in Rexall. And yes, if they stay in Rexall much longer I do think things get dicey.
I remember you saying the expenses could possibly go down as well, which is likely in a new building vs an old one. So revenues go up, expenses go down, and they are already in the black right now. So why the need for a yearly subsidy?

Quote:
Where did I say that the Oilers would be a tenuous entity under the proposed fnding formula. My whole point is that I do not believe they will with the new revenue streams that come from the new arena.
Then why the need for subsidy? That was the crux of the whole argument. You claimed originally that there would be a deficit in regards to revenue vs expenses. I dont think there will be.

Quote:
You know I am not a fan of how he has conducted this deal. And I have no issue with the City wanting to see some proof that the money they are investing is needed. This might include opening his current books, which I'd be all for, though it would likely be in camera. But this will only tell part of the story. The much more complex part in this negotiation is trying to model the return on this investment going forward 35 years if the new arena is built. This is the data the City needs to see and this is the data they need to analyse. Perhaps the best solution is a claus in the deal similar to what Nashville has making the amount of any ongoing subsidies contingent on a periodic independent audit of the Oilers revenues and costs.
I think he would first need to demonstrate the need for a subsidy in the first place, and if needed, then a periodic review should be considered. In the end we both want a new building and the Oilers to stay, and not only be viable, but to profit so that we can field a proper competitive team year after year.

I can only assume Katz is getting cold feet and is looking for extra security.

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10-17-2012, 10:07 PM
  #98
Jamin
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Originally Posted by I am the Liquor View Post
Ya, how dare they help provide and run the arena from which the legacy of the Oilers was born by winning all those cups.

Go Horcoff!
So Katz wanting a subsidy (smaller then Northlands gets) he is a pure evil billionaire out to screw the city.

Northlands is jesus reincarnated, its the resurrection, how godly of them for operating an arena and all for millions of public money. Its almost like slave labour, northlands gets no benefits at all from subsidies and the city

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10-17-2012, 11:55 PM
  #99
t0psh3lfclu7ch
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the mts center in winnipeg cost under 200m$ it gets the job done. your arena idea is too grandoise, thats why its not working.

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10-18-2012, 12:38 AM
  #100
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Perhaps Katz should be using the Coyotes model for city support...

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