Markham city council dumped controversial arena promoter Graeme Roustan as a financial partner Wednesday night but declared it still wants to be the home of an NHL-ready arena.
In an 11-2 vote, with Mayor Frank Scarpitti one of the dissenters, council declared all the financing for any planned arena must be done with private investors. Council also voted unanimously, 13-0, to withdraw from a proposed financial framework with Roustan's company GTA Sports and Entertainment. That agreement called for GTA Sports to build a 20,000-seat arena for $325-million, with Roustan's company providing half the construction costs of $162.5-million and the city covering the other $162.5-million.
Roustan refused to admit defeat, calling the vote a "housekeeping" move because the original financial framework changed recently. However, Scarpitti, who has supported Roustan from the time he introduced his arena plan two years ago, felt otherwise. "I'm worried we may have skipped a wonderful opportunity away for our city," the mayor said.
Last week, Roustan provided a new proposal in a memorandum of understanding (MOU), offering to put up more than half the construction cost among other changes, bringing GTA Sports' investment to nearly $200-million. He and Scarpitti also said they had a second MOU with an unnamed group of developers promising to eventually provide $130-million to cover the rest of the cost of the arena. But few details were given and it appeared the city would still have to borrow the money to build the arena.
Along with killing Roustan's financial framework, council voted to send both memorandums to city staff for study. Roustan is pinning his hopes on that. He said he is hopeful the proposals will proceed once staff studies the details.
The meeting, which went to nearly 1 a.m. Thursday, fell into confusion after the votes to end the partnership with Roustan when some clauses added to an original motion by deputy mayor Jack Heath contradicted the one calling for all arena financing to be private. After much discussion, council amended one clause which left the door open a crack for Roustan.
Council voted 12-1 that if the current arena plan is to continue, Roustan or any other private arena developer has six months to come to the city with proof of $325-million in private financing to cover the full cost of the arena.
Roustan can still pursue an arena deal, but without any financial guarantees from the city, his proposed GTA Centre is on life support. However, he said he can still come up with $162.5-million and hopes the anonymous developers who were part of the second MOU or other private investors can provide the rest.
But, he admitted, if no other investors surface in six months "yeah, it's over. It's always been that way."
All of the 13 members of council said they like the idea of an NHL-ready arena for Markham. But the majority of them said they did not want to use public money for it. This echoed an opinion they said they received from the voters.
"What we've heard over and over again is residents do want an arena," said councillor Carolina Moretti. "But they don't want to pay for it."
Councillor Jim Jones criticized the haste with which Scarpitti and Roustan wanted to proceed. He said it did not make sense given that NHL commissioner Gary Bettman has made it clear there are no plans to put a second franchise in the Greater Toronto Area despite the insistence of arena supporters that one would follow an arena.
"What is the rush?" Jones said. "We're not going to get an NHL franchise any time soon, so let's take our time and get it right."
Some councillors indicated they learned enough through the process to believe cities enter dangerous economic waters if they pay for large arenas, especially ones without a major tenant like an NHL team.
"Publicly funded arenas have an abysmal financial record," Councillor Valerie Burke said. "Nothing in this proposal or the amendment convinces me otherwise."
Scarpitti argued once again that the city could continue its financial arrangement with Roustan's company and still not be at risk of losing any money. He noted GTA Sports and Entertainment claims it will cover any construction cost overruns, with its contractor agreeing to a fixed-price contract to build the arena and the management company, Global Spectrum, saying it will offer a guarantee on the operating expenses.
But most of all, the mayor said, the onus is on Roustan to find most of the money for the $325-million arena. If he cannot find investors, he said, then the city is still not tied to the deal.
"No financing means we do not put a shovel in the ground," Scarpitti said. "I said from day one I would never approve an arrangement that puts us at risk."
Leading up to the council vote was a third night of speakers from the general public, most of whom said they had nothing against someone building an NHL-ready arena as long as the Markham taxpayers do not have to pay for it in any fashion. Many said if the project is as bound for success as its proponents say, then there should be more than enough investors to get it built without the city borrowing money to do so.
"If it is worth the gamble," said local resident King-Hai Chow, "entities with deep pockets will build it."
But Chow said if council continues the partnership with GTA Sports it will be taking taxpayers on a high-speed train that "will explode with debt and burn a lot of taxpayers."
Several speakers reminded council that Roustan and other supporters of the arena insist the arena will be profitable with or without an NHL team yet there is no sign they plan to personally invest in the project.
"Mr. Roustan does not seem to be investing any of his own money in this deal. Does that not tell you something?" said Norm Pemberton, a representative of a Markham ratepayers association.
Roustan was also taken to task by several people for having a lawyer send letters to some local residents, including members of ratepayers groups. The lawyer said this week's council meetings and the web sites of the taxpayer organizations would be monitored. The residents were warned them they could face legal action depending on what they said about Roustan, who has a history of failed business deals, unhappy ex-partners and lawsuits in the United States.
This prompted a sharp rebuttal by one speaker, who thanked a cable provider for carrying the meetings live on television.
"It's also a way for Mr. Roustan's lawyers to monitor the proceedings in a cost-effective manner," Markham resident Bil Trainor said.
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