Friday, 14 October 2011

#YEGArena Tales: Santa Katz and the gift of debt

The mystery surrounding Stephen Mandel's trip to New York is over and the word is in; Daryl Katz and Stephen Mandel have a new deal for the city. For those who haven't been following Edmonton's newest attempt to catch the dangling carrot of becoming a "big city", prior to this meeting two main sticking points about the arena existed:
  1. A non-compete clause with Northlands
  2. $100million in funding outstanding
Post New York it seems they managed to "sort out" the non-compete clause. Katz has withdrawn this request and has instead replaced it with a public-private marketing campaign for the city of Edmonton (I *think* it's about the city, although it sounds more like a campaign about visiting Edmonton's new arena). Considering the ridiculousness of such a request of the city in the first place I don't exactly see this as "productive" since the $100million (arguably the most important sticking point) is still outstanding.

What else has changed? Well it appears the city will now be putting up 100% of the cost up front, with a 30-year "rent-to-own" style lease of 5.5million / year for the $100million Katz was supposed to contribute. Of course Mandel says the city would "ensure" that the $100million is paid, but with the city's *amazing* negotiation skills how confident can anyone really be on that point?

The live chat was again filled with the pro-arena Nike addicts, chanting their "Just do it" slogan. Seriously guys, you watch too much TV. Last weekend while visiting with my parents we all watched the game. I found it shocking how many Money Mart and other payday loan commercials I saw. Thinking about it though, is it really so shocking? Here you have a group of people whose argument for hastily spending a large portion of taxpayer dollars while taking on considerable risk is "Just do it", Money Mart must be getting rich.

So it would appear that Santa Katz this year brings us the gift of debt. Of course we can be completely confident this loan (give away?) will be paid. We can be confident of this because their reasoning for needing public money in the first place is that the industry would go bankrupt otherwise. As we all know, taxpayer dollars are magical and never go bankrupt. So yes, the new twist of logic is "We can't go to a bank and get a loan, we'll loose money. We can however go to the city and get a loan and pay that back 100%".

No investor could realistically take Santa Katz seriously, and that is probably why he doesn't have any.

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