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Friday, April 18, 2008

New Study States That New Oilers Arena May Cost Albertans Untold Millions

A new report out of Edmonton contends that a new downtown arena will end up costing Alberta taxpayers untold millions. Former University of Illionois professor, and current University of Alberta professor Brad Humphreys told members of the Economics Society of Alberta the folly of trusting early building estimates, as building cost usually overrun by at least 30%. In Edmonton's case it would be even higher, as not only do they need to fund the building, but they need to look at acquiring downtown land, and a potential new LRT station (light rail transit for people who aren't familiar, it's similar to a subway).

Humphrey's research also indicates no economic gains from a new facility, however, it can shift where development takes place. So, instead of Edmonton continuing to develop on the outskirts of city borders with new houses, stores, hotels etc, that development could shift to downtown with the help of a new arena. However, he warned that this always doesn't happen. Busch Stadium in St. Louis was supposed to drive development in the surrounding area, but has failed to so far.

He also conceded, that a new arena will be a huge money maker for the new owner, allowing him to charge premium prices for luxury boxes, and a big concourse full of vendors. He also confronted the belief that the Oilers provides intangible benefits to the city like increased profile. He said that though that is absolutely the case, it is overstated. The benefits are usually in the $60 to $80 million range (if you were to put a dollar value on them), not half a billion, like many believe.

One point that he made that I thought was excellent, was that it is a mistaken belief to think that the new arena will "ensure Edmonton's place as a world class city." It may give the city some profile across North America among hockey fans, but those fans really don't get to see the city during broadcasts in Edmonton. It just gives some name recognition, people still have to look Edmonton up, to see if they want to go there (ie for vacation, or maybe move).

People who maybe wondering just who is Brad Humphreys to be telling us all this, and whether we should trust him. They should know that he was commissioned by the Cato Institute (one of the leading economic think-tanks in America) to see if there were economic benefits to bringing the Montreal Expos to Washington. He has also testified before U.S. Congress on the issue of publicly financing arenas. You can see an article on his work published by the University of Illinois News Bureau here:

(RSS and Newsletter Readers: I have two polls below, I'm not sure you can see them, I'll make sure to see into fixing that problem. The questions are: Should the Edmonton Oilers New Arena Receive Public Funding? and If so how much?)

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