Saskatoon downtown arena partner cancels appearance at committee

The city's newly announced private partner for a planned downtown arena and convention centre was notably absent from the city's governance and priorities committee Wednesday.

Expected to be the star of the show, Oakview Group (OVG) was scheduled give a presentation and answer specific questions about a 25-year, $170 million deal announced last week, but it turns out they weren't quite ready.

In a statement released at 5 p.m. on Tuesday, the city says the group notified them over the weekend that they wouldn't be attending.

"The proponent notified the administration over the weekend that they are finalizing their internal review of the tentative agreement framework," the statement read.

"As a result, they will not attend the meeting on Wednesday but look forward to continuing discussions and will provide updates on their progress before the council meeting on Aug. 28."

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The city was left with two options: pull the item from the agenda or defer. That decision became much more difficult after city held a news conference last week touting the deal and its benefits and saying the item would be discussed Wednesday.

Ultimately, administration decided to leave the item on the agenda.

"We thought there was value in having this conversation today," city manager Jeff Jorgenson said.

When questions began, multiple councillors wanted to learn more about the profit projections and what risk the city would be taking on as part of the framework deal.

"I don't see where there's risk to OVG. I see that all of the risk is to the city," Coun. Bev Dubois said.

OVG is putting up $20 million, split it in two payments, before the building opens.

The deal is structured for OVG to recoup that money, and plenty more, over the next 25 years by taking a cut of every event at the convention centre and arena — as well as through sponsorships, naming rights, food sales, premium seating and other revenue generators.

The city estimates the agreement will net roughly $150 million on top of the $20 million payment — and Dan Willems, the director of technical services who's been leading the project, says OVG's estimates were higher.

"We need to be realistic when we're putting our projections together, because if the money's not there when we need to make a loan payment, that money's going to come from somewhere else," he said.

Without factoring in inflation or other variances that could change the original projections, revenue would need to be substantial every year of the deal.

If the city expects to meet its $150 million target, the arena would need to make an average of $6 million for 25 years, which is roughly three times as much as SaskTel Centre's estimated profit of $2 million.

Willems is confident the city will be able to consistently meet that mark because the new arena and convention centre won't have the limitations SaskTel Centre deals with.

He said many aspects of modern arenas are geared towards maximizing revenue every way possible. Lines for beer and food are more efficient with many more options, the shows are more of a spectacle and the city is expected to see more events come through Saskatoon because of the modern amenities.

Willems said there won't be a need to triple the price of beer or tickets to make up the money.

"Those things allow a lot greater revenue to be generated, no matter who the operator is," Willems said.

Councillors wondered what risk the city is opening itself up to in the event of slower months or years at the arena when the city can't meet its target profitability.

Willems said he envisioned the city creating two reserves, one for operating to cover summer months when there isn't as much activity for convention centres or concert tours, and another for capital when the buildings are underperforming.

More specifics on those questions and the overall cost are expected to be revealed at city council's regular business meeting on Aug. 28.

That's also when the private partner agreement framework is expected to be discussed with OVG in the room. Council passed a motion to receive the report as information until OVG can be present for a meeting.