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Edmonton Oilers' owner Daryl Katz speaks to the media and employees during a news conference in Edmonton July 2, 2008.Reuters

A new downtown arena for the Edmonton Oilers hit the ditch Wednesday as city councillors rejected a bid by the NHL team for more money from taxpayers.

Mayor Stephen Mandel would not say how much was asked for, or what is was for, but said the ball is now in the court of the team's owner, pharmacy billionaire Daryl Katz.

Reporters asked Mandel if he was still optimistic the rink would proceed as planned.

"Optimistic might not be the best word," Mandel said.

"Frustrated might be a better word. But I'm optimistic in the sense (we can) get back together and see how we can make this work."

Construction on the $450-million arena is slated to begin early next year.

Mandel said the request from the Katz Group did not come with an ultimatum, although Katz has said the Oilers won't play indefinitely at their current home of Rexall Place in Edmonton's north end.

The Katz Group, responding to council's decision through a prepared statement, said it has become clear during the design and engineering process that the $450-million cap won't be enough to build the "iconic" structure that both the city and the Oilers want.

John Karvellas, executive vice-president of the Katz Group, didn't say what the revised cost would be, but said the Oilers would pay their fair share for any costs over the $450 million.

Karvellas said they have already gone above and beyond expectations by spending $70 million to date.

"We have made these investments of time and money in good faith and without regret and continue to believe this project can and must succeed," he said in the statement.

Mandel and the councillors rejected the Katz request Wednesday morning after debating it behind closed doors.

Their decision comes almost a year after the Katz Group and the city agreed in principle on a cost-shared deal for the rink, which included a maximum cost of $450 million.

Mandel said council voted to keep that original agreement in place.

"In my opinion (it's) a very good deal for all parties to keep sustainable, strong, great NHL hockey here," said Mandel.

Councillor Kim Krushell, a longtime supporter of the project, was asked if council was "blindsided" by the Katz Group request for extra funds.

"I would characterize it that I was surprised. That's about all I will say," Krushell said.

The deal for the new rink has led to sharp and heated debate in the Alberta capital.

Proponents say public money for this private venture will lead to economic spinoff benefits, a revitalized downtown core, and a higher international profile.

Critics say no public money should go toward a private venture.

A third group says it can see a role for public money, but says the deal struck is too lopsided in favour of the Oilers.

Under the agreed terms, city taxpayers will put up $125 million to go with $100 million by the Katz Group. A ticket tax ($5-$6 a ticket) would pay for another $125 million.

Another $100 million is being sought from the province, although Premier Alison Redford's government is adamant no tax dollars will go to private ventures.

Mandel said that they're getting closer to solving that problem.

"We've been working with the province on various programs and we believe they're getting close to coming up with a solution that would deal with the realities of every town and village and city ... coming up with funds for facilities like the arena project," he said.

Council has already been told that the city's ultimate contribution will far exceed $125 million.

Officials estimate that when borrowing and land purchase costs are factored in, the number becomes $305 million. Another $57 million will be spent for a light-rail transit extension to the rink, a pedestrian corridor and an above-ground walkway over the main avenue in front of the building.

A proposed community rink would add another $21 million. The city would also pay Katz $20 million over 10 years to advertise through his team. It's not clear what form that advertising would take.

The base number itself is already rising.

In July, councillors were told revised estimates have boosted the original $450-million figure to $485 million, prompting designers to look at ways to cut back on some of the amenities, like some of the concession stands and the Oilers retail store.

The Oilers would pay their $100 million in instalments: $5.5 million in annual rent for 35 years, plus interest, for a total of $186 million.

The team would pay to operate the building and keep the profits for 11 months out of the year.

Katz would retain the naming rights for the building. Comparable estimates put that at $1 million a year.

The deal would bind the team to staying in Edmonton for the next 35 years.

The proposed rink is a futuristic structure of wavy lines and curves done over in zinc, masonry and glass in the broad shape of an oil drop.

There would by 18,400 seats along with clubs and bistros, even a space to hold beach volleyball tournaments, along with underground parking.

The city is banking that the arena will be a catalyst for more retail and housing.

The rink would replace the aging Rexall Place, which has been the home of the Oilers since their World Hockey Association days of the 1970s.

Built in 1974, it's the second-oldest rink in the NHL. The oldest is the arena where the New York Islanders play.

The Oilers are the only NHL team that doesn't get non-hockey-related revenue from its building.