Downtown arena project over budget

EDMONTON - What some are calling another roadblock for the proposed downtown arena project came up Thursday morning at city hall.

A news conference revealed that the cost estimates for the project are sitting at $485 million, which is $35 million over the maximum price of $450 million set by the city.

"It's not good," said Councillor Kerry Diotte. "It is basically at this stage, yeah you can be 20% over or under, but it's going to shake the public's confidence further in this financial arrangement."

Mayor Stephen Mandel, however, sees the update differently.

"I think it just shows though that, with a reasonable balance, we can reach the number and still have a substantial contingency. So, I think it's a pretty good news story personally," said Mayor Mandel.

“Now, during the next 6 months, discussions will have to take place as to what you want to have in and what you don’t want to have in, what you’re going to have to give and what you’re going to have to take.”

The numbers will be on the city council meeting agenda next Tuesday. Council will then have to decide whether or not to proceed with the project.

"I believe that we need a new arena, but I've never been a fan of the funding formula," said Diotte, "and I think we should get a better deal."

The city is now looking for cost savings, and have so far found about $8.5 million by removing certain items from the design proposal.

The Oilers Team store, removing certain food kiosks and making a change from zinc to stainless steel for the exterior are some of the options currently being considered to bring the cost down.

"You have to keep in mind," said Rick Daviss, the City's executive director for the Arena District, "as we're not yet at the guaranteed maximum price stage yet, we still have a lot of design work to go through, and generally, when you're at schematic design, there's still a plus or minus 20% when you're dealing with cost estimates, so it is still a pretty preliminary number."

However, unless an additional $30 million in savings can be found, it's unclear if the project can move forward, and the city is reportedly hesitant to remove too many elements from the design for fear of impacting the potential revenue stream.

"We do want to get that down to $450 [million], and we've identified a path to get there," added Daviss. "The Oiler Team store has been removed from the program, we changed the exterior treatment from zinc to stainless steel, we removed some of the food and beverage provisions that were provided, we still have an amount equal to the program, but we did remove some of the bistros and the bars and the like, and we've changed the terrazzo flooring on the second concourse level to polished concrete."

"What we took out to the public, and the perception and what people see, is in essence, what we're proceeding with," said Daviss.

While Diotte supports a new arena, he's skeptical of what the trimming and cutting will mean for the overall product.

"We want to know what we're getting," he said. "It's one thing to draw a picture of something, but when you start taking out components, then I want to see what I'm getting, and I think the public does as well."

The Katz Group issued a statement regarding the Downtown Arena update:

"The City's report on the CRL is very encouraging and supports our long-held view that this project can deliver significant benefits to the entire City for many years to come. Last October, City Council passed a resolution requiring the Katz Group to invest $30 million in the private sector development before construction could begin on the arena. We have already far exceeded that amount and have developed detailed plans for a very exciting mixed-used development in the heart of the city. In order to proceed, however, we need to secure an anchor tenant for an office tower and reach agreement on an arena design and budget, among other things, that will support the level of investment we hope to make in downtown Edmonton.

With respect to the arena itself, we are very pleased by the public's strong continuing support for the design and master plan, and remain optimistic that we can achieve further reductions to the current estimated cost of construction. The obvious challenge is to find a way to do that without sacrificing the integrity of the arena design, or the revenue streams we need to sustain our investment.

We have told Administration that while some of the ideas it has proposed have merit, others do not. This is not an easy problem, and is further complicated by the fact that the community rink, Winter Garden over 104th Avenue, and related commercial areas are integral to the arena’s structure and design. We are also concerned about rising construction costs if the project is delayed.

We remain committed to working with City Administration, PCL, ICON and 360 to achieve a great result for Edmonton. However, a number of significant issues remain unresolved. This initiative can only proceed if the project as a whole makes sense and is fair and acceptable to all parties."

-- Bob Black, Executive Vice President, Edmonton Arena Corp/Katz Group

The full report can be viewed below:
Downtown Arena Update