Cost overruns, tax breaks could inflate Calgary’s public cost of Flames arena to $250m or more

The city of Calgary has finally revealed some of its legal contracts with the Flames governing the team’s new arena — six months after voting on it, because that’s totally how democratic oversight is supposed to work — and the highlights include:

  • As previously reported, the city will pay $275 million toward construction, plus financing charges and the cost of demolishing the old Saddledome (previously reported at $12.4 million), while receiving $250,000 a year for 10 years in naming-rights fees, plus 2% of all ticket sales, capped at $3 million a year for the first five years. Last time I crunched the numbers on this I came up with a net total of $212.9 million in public costs; given that the ticket tax payments will be significantly backloaded toward the end of the lease, the base cost to the city is probably more like $230 million or so.
  • Not as previously reported, the city will be on the hook for any insurance premiums above what the team would pay if the arena weren’t in a flood plain, and will have to cover 50% to 67% of any construction cost overruns, depending on future negotiations.
  • The Flames owners won’t be property taxes, but instead will make payments in lieu of taxes in the amount of
    Yep, they omitted the actual payment amount, citing a section of Alberta’s Freedom of Information and Protection of Privacy Act that exempts from public disclosure laws information that would be “harmful to business interests of a third party,” though the very next section says the exemption doesn’t apply if “the information relates to a non-arm’s length transaction between a public body and another party,” so hopefully we’ll see some lawsuits to get that number revealed.

The total cost is impossible to say without knowing how much of a tax break the team is getting or how much cost overruns could be, but suffice to say we’re probably looking at more than $250 million now, which is a whole hell of a lot more than the $47 million net loss the arena’s backers touted to get the deal approved by the city council.

Calgary Mayor Naheed Nenshi says he’s not concerned about cost overruns because the Calgary Municipal Land Corp. “is the project manager on that project, they know how to build stuff on budget and on time”; all those who are reassured by this, please raise your hands. Now, all those who are wondering when Naheed Nenshi was replaced by an alien shapeshifter, please raise your hands. Keep ’em up, I’m still counting…

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6 comments on “Cost overruns, tax breaks could inflate Calgary’s public cost of Flames arena to $250m or more

  1. … and no-one is surprised at any of this.

    One of the richest men in Canada is getting a taxpayer gift running into the hundreds of millions of dollars (how many, the people who approved it won’t say…) and no-one is surprised.

    Oops, pardon me. Edwards is not one of the richest men in Canada. He became a citizen of the UK in order to avoid Canadian income tax four years ago. As a UK non-dom, he can pay a flat £30,000 to the UK gov’t in lieu of any other form of taxation.

    How many fire dept, police and general city services jobs will have to be eliminated to balance the city’s budget in 2020 again?

    1. Honestly people like this should be rounded up and their assets seized. You want to be stateless, lets see how that really goes for you.

      Put them in a work camp in Siberia.

  2. Am I just being cynical, or is that disclosed amount the Flames pay the city most likely exactly 1 dollar?

    As for Nenshi, I wonder how much the Flames bribed him and a bunch of other counsellors to change their tune.

    Neil, how do these sports owners justify getting essentially all of the naming rights money to the arena, the same one that THEY DO NOT OWN?

      1. That’s actually a huge problem with these arena deals. As soon as one owner pushes the boundary in terms of what they can get from cities, then every other one will settle for nothing less than that.

        But it really is stupid. In a rational world, it should be either

        1. The owners own the arena and pay property tax, but get all the naming rights money

        2. The city owns the arena, the owners don’t pay property tax, but the city gets all the naming rights money because they own the facility

        If there was ever an example of “having their cake and eating it too”, sports owners have this down to an art.

        1. While I completely agree that these deals are scandalous and, typically, very corrupt (think of the number of local city employees/managers or even elected officials who have pushed for arenas or stadia and then gone on to work for the sports enterprise they shilled for just a few years later after “retiring”), I would only point out that there is literally nothing stopping councillors and mayors from saying “NO”.

          In fact, Nenshi did say no… and then watched as one of the city councillors – a former decade long employee of the Flames’ principal owner – selflessly put himself forward as the point man for negotiations with his former employer over a new arena.

          And now we see how that turned out, again to no-one’s surprise.

          As sleazy and shameless as the franchise owners are in asking for these gifts, it is the politicians and local authorities who should really be blamed for agreeing to them.

          In Calgary’s case, public opinion ran heavily against additional Flames subsidies – just as it did against the winter olympics.

          It was possible for the public to vote on the olympic deal, but not on the Flames deal.

          Same Mayor. Same Council.

          Draw your own conclusions.

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