Tuesday, July 17, 2012

Wading back into the #yegarena debate

It just won't go away will it? Here I was pretty well set to stop discussing it and wait for the inevitable "told-ya-so" moment years down the road and instead the debate has already heated back up. I haven't written about the #yegarena on this blog and I hadn't intended to pollute important issues with further debate of this lavish expense. However, the situation is so ridiculous that I simply can't resist.

Over the past few days I have again seen the same tired arguments rehashed back and forth over twitter and other platforms that I was seeing during the initial phases of debate. For those not familiar with my arena stance, here it is:

Of course I would love Edmonton to have this new development. Of course. This is an obvious statement sort of like saying to someone, "do you want this Porsche?" "Well yea, I want that Porsche." - No questions asked. The real question being asked to Edmontonians though of course is "Would you like this Porsche for $250,000? Oh and by the way until you pay it off I'll be the one driving but you can put your name on the door in the meantime." The conditions could really just be a run-on sentence unto themselves but you should already be aware of this conditions and you should already be aware of the horrible deal the city has agreed to. You should be aware that besides the $35 million the design has gone over budget, that there is still $100 million in what I can only guess will be the most epic tooth fairy delivery ever. This blog post isn't about any of that, this post is going to focus on several common arguments and on my take of the current viability for such a project for any deal can't be a good deal with out a good return and this comes from long term viability.

First of all, I want to address those concerned that Katz might pull the Oilers from Edmonton if he doesn't get his new facility. I'm not sure if you noticed this, but Winnipeg just got their team back - so which broke U.S. city are you worried the Oilers are going to end up in? Edmonton is one of the top markets and there are plenty of teams in underwater cities that quite frankly just don't appreciate hockey the way most Edmontonians do. It isn't going to happen and the broke U.S. cities are just going to become more broke as time goes on. The NHL needs Edmonton's market plain and simple, so stop freaking out about a business decision about as likely as Donald Trump investing in Ali G's Ice Cream Glove.

Those broke U.S. cities are going broke because of a collapsing global ponzi scheme which masquerades as a sound banking system. The first time I wrote a post about the arena I made the same argument I'm going to make now (albeit now after a year of blogging about this problem I'll hopefully do it better). Since that first post we've had several mini-oil shocks. The U.S. has lost it's triple A credit rating along with many other nations. Occupy occurred. There has been unrest, riots, and police brutality in response to the global situation in almost every developed nation. There have been bank runs in Spain, Greece, etc. I could go on and on about the cumulative problems brewing to make 2008/2009 look like a party and I do on this blog (go read some other posts) but for the purpose of this particular post I will sum it up like so: Shit hasn't gotten better, there is no recovery, and desperation is already beginning to settle in many places.

When we talk about the viability of the new #yegarena, most of this is expected to come in the form of a "revitalized downtown". A "revitalized downtown" is one where people go, presumably to shop. We're looking for more stores in the downtown core, and they better be damn good ones too as they'll have to be rolling in cash to meet the additional arena-debt paying property taxes. We want growth! Lots of it! Of course the reason interest rates globally are at all time lows is because they can't get growth to restart despite trillions in stimulus spending and free credit galore. The only thing the credit free-for-all has done is pile up consumer debt, still no growth.

The no-growth global economy is important because Canada's (and Alberta's) primary source of revenue is from these countries which are having difficulties maintaining growth and as a result I anticipate hard times are indeed coming here to Canada too. These are not the sort of hard times that call for revitalization, they call for strategic and careful planning, an arena isn't going to stimulate what trillions in global stimulus spending hasn't.

This arena will put the city into a long term debt obligation, one which assumes long term consumer growth. Under normal economic conditions this might be alright, but if this recent LIBOR scandal proves anything - it's that the global banking system hasn't even begun to clean out the corruption and there are more Lehman's waiting in the wind. The city should not take on this obligation should the future required tax revenue be questionable on top of standard civic obligations. World economic growth right now is incredibly uncertain and Canada's is partially based on our own consumer debt load. This consumer debt fueling economy is temporary at best and highly volatile.

Canada, Alberta, and Edmonton are not immune to the global economic climate, and for round two Canada is out of credit fumes.

What's in an investment?

Above and beyond the viability of the obligations the arena will place on Edmonton, I have a few sticking points about the deal itself. Katz will be paying Edmonton "back" 5.5million / year over 35 years (if this is incorrect please correct me). Now, 35 years for a huge "state-of-the-art" facility seems reasonable but then I have to wonder what we'll think of it in 35 years should it never deliver the magic revitalization bullet everyone is hoping for.

Northlands opened in 1974 and granted that it may be the third oldest stadium in the NHL, but our team is also old as well. It has history, and it has character. This is the stadium Gretzky delivered Edmonton's Stanley Cups in. Are we, Edmontonians, saying that this historic stadium has a life of 38 years? If so, how exactly did Katz land a deal that lasts for almost the entire duration of our current stadium's lifespan? So if we're not happy with this one in 35 years will we just build another? I imagine most people back in 1974 thought this stadium was "state-of-the-art", "amazing", something that might make Edmonton "world-class". But I disgress..

You know which other area could really use some revitalization? 118 avenue.

That's really all I have to say that isn't already in every arena debate already out there. Thanks for reading.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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