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A rendering of the proposed new arena for the Edmonton Oilers, looking east from above the corner of 104th Street and 104th Avenue.
A rendering of the proposed new arena for the Edmonton Oilers, looking east from above the corner of 104th Street and 104th Avenue.

Business of hockey

Daryl Katz has the prescription for the Oilers Add to ...

The picture of Daryl Katz is fuzzy.

It was 1987 when the Edmonton Oilers won their third Stanley Cup. As the players leapt onto the ice after the Game 7 victory at home against the Philadelphia Flyers, there, in the back of a photo, is the curly-haired Katz, several rows behind the bench, his fists thrust up, jubilation on his face. The young lawyer was 26, had season tickets, and was friends with some of the Oilers.

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Several years later, as Katz turned 30, he pulled off his first big business deal, buying the Canadian rights to Medicine Shoppe pharmacies for $300,000. In the two decades since, he has built a fortune worth more than $3-billion in drugs and retail, led by his Rexall chain and real estate. He is one of the richest men in Canada, but little is known of the reclusive billionaire or his privately held business.

Now the 51-year-old owns the Oilers, and he has an arena deal to sell. In late June, he granted a rare interview, at his mansion in Edmonton, nine-metre-tall windows in the living room overlooking the North Saskatchewan River valley.

“It was amazing what that team did for this city,” Katz said, remembering the glory years. “It was a city that needed the lift. And that team gave this city such an enormous shot in the arm, and pride, and changed the whole feeling and personality of this city. There are some that would say you could see it happening again.”

Katz bought the Oilers four years ago for $200-million.

At the same time, Katz and the City of Edmonton began a push to build a new $450-million arena in the north end of the city’s downtown, where there is nothing but parking lots and a small casino on a desolate stretch of blocks.

Edmonton city council convenes on Tuesday for an important vote on the project. Costs are rising, and councillors have to decide whether to push forward as the city tries to nail down the budget at $450-million. The crucial decision will come in September or October, when councillors vote on the final funding deal with Katz.

The debate largely hinges on the significant amount of public money at stake. All the up-front construction cash is public, with Katz paying back half over more than three decades. He gets full control of the building, and an agreement to keep the team in Edmonton is part of the overall deal.

Both sides have already spent tens of millions on land, design and other investments. The total budget stands at about $600-million.

Katz painted the arena two ways.

The Oilers are losing money, he said, insisting they can’t survive in Edmonton if the club doesn’t get a new building. This is an argument from the first page of the playbook of professional sports club owners. Many hockey experts are skeptical Katz could move the team, given flailing NHL franchises elsewhere, starting in Phoenix.

Second, Katz and Edmonton Mayor Stephen Mandel believe the arena is an essential one-of-a-kind spark for the city’s downtown, a draw for people, real-estate development and a font of new property taxes. They want to replicate the downtown arena districts in places such as Los Angeles.

The demand to invest in sports is a constant pressure for North American cities. Seattle is one of the rare places that said no, and lost its NBA team to Oklahoma City. Quebec City this year approved a $400-million arena, underpinned by public funds, to lure back the NHL. The owners of the Calgary Flames have started work on how they can get a new arena built.

Critics of the Edmonton arena deal look at Katz’s on-paper wealth and wonder why he can’t just build an arena himself. This year he sold a portion of his business for almost $1-billion in cash. Others gossiped about the opposite, that Katz had to sell to raise emergency funds, that he is overextended.

Katz scoffed at both suggestions. He said he has enough money to back up his promises and dismissed arguments that he’s getting a sweetheart deal. He said he has invested more than any other local would, and more than owners elsewhere. He feels Edmontonians underappreciate the money he has spent, and has committed.

“I’m not asking anybody for anything,” he said. “If they don’t want a new arena, don’t build a new arena. It’s up to them. I’m offering to step in. To the extent that no other owner has.”

Katz lives in Edmonton only several months a year, spending winters in California, and time in Vancouver. He presented a front of emotional detachment from the city and even the hockey team as he stoked the spectre of no arena, no Oilers.

“Hockey is not philanthropy,” he said. “This is a business, capital is portable. I can invest in real estate in Vancouver, Toronto, anywhere.”

He spoke deliberately, and not quickly, punctuating sentences, punching words and phrases.

“I’m a builder,” he said. “I can’t say I really would have been interested in buying the team at all, but for the opportunity, through the team, to do such a transformational thing for the city, and also sustain the team, and sustain the NHL, and build a new arena, and revitalize the city. It was the whole kind of thing that was really attractive to me. I didn’t have a burning desire to own a hockey team.”

While there is often new development in the neighbourhood around arenas, peer-reviewed academic economics research does not find a broader boon for cities.

The findings are “strikingly consistent,” according to a 2008 paper by economists Dennis Coates of the University of Maryland and Brad Humphreys of the University of Alberta. The professors said studies have uncovered “almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy.”

But in Edmonton, whose most famous building is a sprawling suburban mall, many people share the instinct to invest in downtown.

Ian O’Donnell works for an architect and is a volunteer board member of the Downtown Edmonton Community League, a publicly funded group that represents residents in downtown development. The group was unimpressed with the first design for the arena in 2010, and Katz’s development team has made changes to better encourage street life. O’Donnell does not yet feel it is ideal, but doesn’t criticize the funding plan.

“What are we trying to do?” O’Donnell said. “Just good enough? Or a showcase of what this city is about? Nothing good comes cheap. Edmonton is perhaps trying to shake off some of that good enough. The city as a whole has realized, if you want something beautiful, it costs money.”

The Oilers’ current arena opened 15 minutes north of downtown, built with public funds, in 1974. It is one of the oldest in the NHL.

Whether any future Stanley Cup banners hang from the rafters of a new arena remains unclear. If there are enough yes votes, the building could be ready for the fall of 2015. Last time Edmonton city council voted on a stage of the arena proposal, in October of 2011, it was 10-3 in favour, stronger than an earlier 8-5 decision. But costs are climbing.

“It’s not the Oilers I’m opposed to,” said councillor Linda Sloan, who has voted against the deal so far. “I’ve spent many hours as a hockey mom. I have not been able to find another model where a municipality has so heavily subsidized a sports-franchise facility.”

Katz emphasized the “once-in-a-generation opportunity” for the heart of the city.

“You’ve seen our plans,” he said. “It’s nothing short of miraculous.”

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