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Edmonton Oilers New Arena

Revitalization Levy sleight of hand


By —— Bio and Archives--July 23, 2010

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Editor’s Note: This op-ed appeared in the July 23, 2010 edition of the Edmonton Journal.

“Lose weight while you sleep.” “Congratulations UK Lottery Winner!” “Enlarge your…” well, you get the picture. Every day e-mail inboxes are bombarded with outrageous claims from spammers around the world looking to bilk Canadians out of their life savings. However, closer to home it’s too often governments working hand-in-hand with legitimate businesses to pilfer money from the public with similarly outrageous promises. In Edmonton’s case, if the current downtown arena request was sent via e-mail, the subject line would probably read something like this: “Free tax dollars from Revitalization Levy pays for new arena!”

As the City of Edmonton considers a proposal from billionaire Oilers owner Daryl Katz to build his team a new downtown arena, one of the less-understood suggestions on how the city can finance it is known as a “Community Revitalization Levy” (CRL).

The five-second description by those who either don’t understand how the CRL works, or who are trying to sell a false bill of goods, suggests that taxes from all new buildings surrounding the new arena would pay off the city’s loan to build the arena. It would be wonderful if this were true, just like it would be wonderful if deposed Nigerian royalty were actually willing to pay you millions to cash a few cheques.

A more accurate description of the CRL process goes something like this: the city draws an imaginary line around a zone that is called the “Community Revitalization Levy Zone.” This zone can be large or it can be small, it’s completely up to the city. They then figure out what the property within the zone currently pay in property taxes (say for the sake of this example, $10 million). Next they imagine all of the new buildings that could be built if the zone were to be “revitalized.” Then they calculate how much in property taxes (both local and provincial education) the property in this zone would pay after the “revitalization” (say, $25 million). If the province approves the CRL, the city uses the difference ($15 million) as an annual payment on a 20 year mortgage (say, $175 million).

The claim is that the incremental property taxes that the city collects are essentially “free” because they never would have been there without the “revitalization.” Further, proponents claim because they are “free,” it’s fine to spend them to induce the revitalization (eg. build an arena), all without costing taxpayers a penny.

Even setting aside the assumption that new development actually takes place as a result of the arena, the logic of the larger argument is faulty.

For starters, the CRL makes an incorrect assumption that you can artificially manufacture extra demand for a product. It assumes that because a new restaurant opens that the total number of dollars spent across the entire city on food and entertainment will go up. If that were true, no restaurant would ever go out of business and new ones would open up every 15 minutes.

If, for example, the Fireside restaurant that is currently located next to Rexall Place were to shut down and re-open inside the CRL zone, their property taxes would be considered “new” and would go to fund the arena loan instead of fire, police, roads, libraries, education, etc. as they were before.

Alternatively, if a hot new bar were to open up next to an arena, the CRL argument implies those patrons of the new bar were not previously going to bars on Whyte or Jasper Avenue. In truth, it’s merely a shift of where the money gets spent, or as Edmonton City Councillor Don Iveson calls it, the “zero sum problem.”

Thanks to the CRL, this shift causes a loss in revenue for the city that means property taxes across the city would have to go up to cover the shortfall for core services. It also means that the CRL doesn’t produce “free money” at all. It’s just a complicated bit of accounting trickery to get taxpayers to unknowingly buy a for-profit company a new building.

The bottom line is that every single new NHL arena built in the past two decades in Canada has been virtually 100 per cent privately financed. If Daryl Katz wants a new arena for his hockey team, he should pay for it himself rather than trying to sell taxpayers on engaging in the phony shell game that is the CRL.

Scott Hennig
Alberta Director



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