Calgary reveals complex Flames arena plan involving $212.9m in subsidies, gives public a whole week to discuss it before final vote

After a three-hour meeting that was closed to the public as promised, the Calgary city council did end up releasing some details last night of its deal with Flames owners for a new arena, to be built on current Calgary Stampede parking lots, to replace the Saddledome — at just after 7 pm Calgary time. Let’s sift through the various news reports to try to piece together just exactly what the council agreed to:

  • The new arena would cost $550 million, with construction costs being split evenly between the city and the team, $275 million apiece.
  • The Flames would pay all operating and maintenance costs for the arena.
  • The city would own the arena, which often isn’t a good thing for the public because it can mean a building gets out of paying property taxes, but this is Canada so that isn’t necessarily the case. The city’s presentation, however, just mentions $158.1 million over 35 years ($74 million in present value) in incremental property taxes from new development around the arena, so it’s unclear whether the arena itself would be tax-free or not.
  • The city would collect a 2% tax on every ticket sold, amounting to a projected $155 million in revenue over 35 years, which amounts to about $72.5 million in present value.
  • The city would also get a unspecified percentage of naming rights revenue, amounting to only $2.5 million over 10 years, which is present value of a little under $2 million.
  • The city will pay $12.4 million toward demolition of the Saddledome, 90% of the cost.
  • No word on whether the Flames will pay any kind of rent of ground lease beyond the ticket tax and naming rights share, or who would cover cost overruns, or whether there would be additional infrastructure costs or who would pay for them.

That’s a little hard to put a final number on, but if we take the city’s $275 million construction cost plus $12.4 million demolition cost, then subtract out the $72.5 million from ticket tax revenues and $2 million from naming rights (property taxes are just what any development of the land would normally pay to help fund all the city services that new development requires, so they’re not really a net plus), we get: $212.9 million in public costs, plus any potential public share of cost overruns or land cost breaks. Or, to put it another way, the city and the Flames owners would be splitting construction costs down the middle, and the team would be collecting all revenues on the place except a thin trickle of ticket taxes and a sliver of naming rights money.

Compared to the last Flames arena proposal, which was projected to cost taxpayers at least $1.2 billion, this one does seem to involve lighting less public money on fire. That’s about as much positive as we can say about it, though, and $212.9 million–plus toward a $550 million arena is still an awful lot of money — pretty close in percentage terms, in fact, to the $311 million in public money toward a $676 million arena that Edmonton spent on the Oilers, to much popular consternation. “It could have been worse” is extremely faint praise for any sports venue deal, especially when the median outcome for cities in such deals is “pretty awful.”

There are still a lot of unknowns about the deal — it’s tough to analyze a proposal that is just a single page of summary numbers with some clip art thrown in — but hopefully more details will emerge before the council votes on the plan … I’m sorry, did you say next Monday?

The reason for the rush is, apparently, “momentum”:

If you’re interpreting that as “if we gave people more than a week to think about it they might stop being so excited and ask actual questions” … actually, I’m pretty sure that’s the only way to interpret it.

And now, the question I’m sure you’re all wondering, which is: What did Calgary Mayor Naheed Nenshi, he of the vow that the city would have to be made whole on any arena spending, say after the announcement of a deal that, even if you count new property taxes from ancillary development (which you shouldn’t), would leave the city stuck with at least $138.9 million in losses? Nenshi said this:

“Let’s cut to the chase. This is a good deal for Calgary,” said Calgary Mayor Naheed Nenshi. “This deal makes sense on its own merits.”

(Nenshi did add that, given the city is currently looking to cut $60 million in fire, police, and transit spending thanks to a city budget crunch, giving hundreds of millions of dollars to an oil billionaire is maybe not the best look: “The optics of this stink. It’s really terrible timing.”)

It’s really hard to see any of this as anything other than an attempt to overcome public opposition to subsidies for a Flames arena by rushing a plan to approval without public scrutiny, which is exactly what the Flames owners have been angling for. And Nenshi, who was largely cut out of the arena talks, has folded completely on his opposition to the plan, which could be tactical — in Calgary the mayor is just one vote on the city council, so if it looked like this plan was a shoo-in he may have decided it was better to retreat and declare victory — but is still a far cry from promises like this one from 2015:

“It’s not going to be a deal that gets presented to the public with a ribbon on it,” Nenshi said Monday in an interview at Bloomberg’s New York headquarters. “We will actually engage the public in discussions about what they think is right.”

Discuss really fast, people of Calgary. The ribbon gets tied on Monday.

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17 comments on “Calgary reveals complex Flames arena plan involving $212.9m in subsidies, gives public a whole week to discuss it before final vote

  1. More details are available in this document:

    1. Thanks — not a whole lot more detail there, though it does specify that the land will be a direct swap for the current Saddledome property. Without an appraisal of how much each plot of land is worth, though, there’s no way to tell how to factor this into the public costs.

      This deal is clearly complicated enough to require many weeks if not months of analysis to see exactly who’ll be benefiting from it how. Instead, we have six days.

  2. I think a big part of why Mayor Nasheed is quiet, is he is in the NDP Party and they got crushed in Alberta Elections. If this deal goes through, it will be just Arizona and Ottawa left when it comes to NHL teams wanting new buildings.

    1. Please provide some evidence that Mr. Nenshi is affiliated with the NDP (or indeed any) political party in his home province.

      While this mayor has certainly had his problems over the years, this kind of veiled attack on his views or leanings is typical of those seeking to somehow discredit him.

      To the best of my knowledge, Nenshi has never campaigned for, donated to or run as an NDP candidate at any level. If you know differently, please cite your source.

  3. >If this deal goes through, it will be just Arizona and Ottawa left when it comes to NHL teams wanting new buildings.

    I mean until next season when 3 more teams will suddenly find their 15-25 year old buildings “obselete”.

    1. I can hear it now. “We have the oldest arena in the league. We’re being left behind.” Repeat ad nauseam.

  4. Can you even build an arena for $550? Seems like the most recent Canadian arena was 100 million more than that. If not, who pays for the overage? Or maybe they anticipate rapid deflation.

    1. Part of the problem is that there is no logic to building costs, nor to the specification franchise owners are allowed to set for the publicly funded buildings they will soon control, but not pay property taxes on.

      Yes, Edmonton’s arena (which included considerably more than just an arena) cost somewhere north of $600m (last number I heard was about $640m, but I’m not sure what that included or excluded). FWIW, Wikipedia states the cost of the arena itself as C$480m (does that include the casino? What about some of the other “non arena” areas included?)

      The building completed before that one was Pittsburgh’s new arena, opened in 2010 at a cost of $321m US and the Devils new arena in Newark (2007, $375m). Vegas’ T Mobile arena was built more or less concurrently with the arena in Edmonton and cost $375m, just as the multisport arena in Newark did about ten years earlier.

      No-one has ever explained why the Oilers new arena needed to cost north of 50% more than the Penguins facility (which itself is considered a milestone in overkill, team officials once boasting that there are 750 HD screens in the building, more than half of them in areas not even accessible to the public…) – when adjusted for currency conversion.

      Yes, it costs more to build in northern climates… but Pittsburgh is a high snow load area too so….

      As the mayor notes, Calgary has actually been able to build things more or less on budget the past few years… so I would suggest they have a decent shot at building the proposed structure (assuming the Flames aren’t allowed to keep adding things through the construction process) for the $550m budgeted or perhaps less.

      At current exchange, USD$375m is roughly equivalent to C$500m, and they have tacked ten percent on to that amount as a contingency.

      Exchange rates are of course highly changeable… less than a decade ago the Canadian dollar was trading at a premium to the USD, so construction timing is very important…

      1. The Edmonton arena also included what they call the ‘Winter Garden’ which is a large common area with an indoor component. This was part of the idea to replicate Maple Leaf Square (aka Jurassic Park) in Toronto. The Edmonton Arena also has an LRT station, whereas the existing LRT station would likely be used in Calgary. The scale of the Edmonton project was greater than C$1bn by the time the entire redevelopment of this land was considered with condos and offices all part and parcel of the project. Whether or not this was a good investment for the city, I couldn’t say, but having been to downtown Edmonton before the project, this does add a lot of ‘energy’ to the city centre (for what that’s worth…)

        If land costs are considered in the Edmonton values, this land was all owned by third parties (there was a bus station, a Staples, and, well not much else there), where in comparison I can’t imagine the value of land on the Stampede site would be quite as high (further from city centre, likely zoned for specific Stampede use) with more-or-less a land swap for the existing Saddledome site

  5. Ya just gotta love unlimited democracy. Just by a simple majority, a government body can take from the many Peters and give to Paul. I prefer a constitutional, libertarian republic with limited powers. Anyone seen one lately?

  6. I think that $550 Million is very optimistic. Seattle’s new arena is $850 Million, although there are construction challenges of building a whole new structure underneath the roof of an old one.

    I hope cost overruns are spelled out very clearly in the agreement.

    1. If there’s a lowball estimate on the table (as C$550m probably is), then you can be pretty sure the public is on the hook for the overruns. “Hey, it’s only going to cost $100! Oops, we had some cost overruns…”

      We will see.

  7. Calgary council also voted last night to make $60 million in cuts to 48 different public services, including the fire department, public housing and affordable housing. More than 100 municipal jobs will be lost, but hey! Look at the new arena!

    1. Greg, maybe those losing their jobs might be able to get a job at the new arena cleaning washrooms or selling hotdogs or whatever. Always a bright side, eh?

      1. More likely they will be offered mcJobs working for the councillors who support the project on social media (IE: going on comment boards and FB sites posing as ordinary citizens saying how great the new arena will be for City X and how nobody needs libraries or police or fire departments anyway…

        In fairness, those cuts had been recommended regardless whether a new arena would be built for the Flames’ billionaire (and non-resident for tax purposes) owner, but the PR aspect of this is utterly disgraceful.

  8. Hmmmn.

    At first glance, I thought “this deal is better than the last one at least”… but perhaps not so. Perception and timing is everything I guess…

    Viewed from a distance, this one could actually be a significantly worse deal for taxpayers than the previous one (though that one, as I recall, was for much more than just a new arena…)

  9. LA Clippers reveal their proposed stadium

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