The Arena, the City, and the Shortfall #yegcc

Rogers Place has at times seemed more of a rollercoaster than an arena: planning, funding, and building the downtown arena and developing its surroundings into a sustainable entertainment district has had its fair share of ups and downs.

So when the City and Katz Group (or its subsidiary Edmonton Arena Corporation) recently found themselves with a funding shortfall of $32 million dollars, there were some understandable groans. There has been a lot of frustration expressed over a deal that left a $32 million dollar hole unquestioned. However, in this case the “missing money” – 5.29% of the total development budget – represents funding that was anticipated to come from the Province, but was not approved. This was always a possibility under the contract that was agreed between the City and EAC, which states that the City is obligated to pick up the tab in this situation. So, while not ideal, this turn of events is not surprising or unanticipated.

You can’t, of course, renegotiate deals of this magnitude after the fact, and you can’t squeeze blood from a stone. The agreement caps the design and construction budget for the arena at $480-million and ensures that the deal will not result in increased property taxes or a reallocation of civic infrastructure dollars. The priority for the City is to address the financing gap, have the arena completed, and not have to shortchange other capital projects. Of the $32 million required, $7 million will be used to construct a community ice rink within the Rogers Place complex – a feature that was identified by many as a valuable recreation opportunity for Downtown residents. Using the Downtown Community Revitalization Levy offers a solution.

The CRL is essentially a system of leveraging future property tax revenue towards present development: extra revenue is generated by the increased property tax base in the development zone due to the new homes, businesses, and industries that are established in the area. In this way, one project can encourage an exponential effect. This future revenue is then deployed within the neighbourhood as a loan to itself, financing improvements to infrastructure and services.

The CRL has two contributors: the City of Edmonton, based on projected property tax revenues, and Alberta Education, which allocates a percentage of the education portion of property tax to the fund. This amount is not diverted from Education funding, but rather comes from “general coffers” and can be earmarked specifically for community revitalization.

The arena district is already living up to its potential: one of the new towers will house the headquarters for Stantec, while the adjacent office tower has reached 80% occupancy with the City of Edmonton and RBC as anchor tenants, while the rest of the site will see residential condos, a new casino complex, hotel, and restaurant, as well as a Cineplex to be constructed on the former Greyhound terminal site in 2016. With this investment committed, it is estimated that the Downtown CRL will grow to $1.4 billion over the next 20 years.

The City views the Arena District as a key catalyst for re-energizing Downtown. Without it, and the further development it will stimulate, projects like renewed infrastructure for Jasper Avenue, improved park spaces, and drainage upgrades would have to wait for other funding sources. Instead, we’ve been able to fund over $300 million dollars in projects through the Downtown CRL alone, and the City estimates that the Downtown CRL will generate sufficient revenue over its 20 year life to fund $500 million in new infrastructure downtown. Already, development is being planned for the area north of 105th Avenue, which is anticipated to spur a new wave of long-term investment in our city’s core.

As the City continues its work with the Province on the Big City Charter, we can hope that future projects will reap the benefits of consistent, predictable, on-going funding.