Two months ago, it was announced that the city of Calgary and the Calgary Flames, their NHL team, had come to an agreement to build a new arena for just the low, low price of $1.22 billion. This comes after last year’s failed arena deal where the Flames decided to pull out of the deal when the city told them that they would need to help pay for additional infrastructure costs.
There are three groups who are putting money into this project:
- The City of Calgary will pay $537.3 million in total
- Calgary Sports and Entertainment Corporation (the Flames) will pay $356 million, though only $40 million is to be paid upfront, followed by annual payments starting at $17 million and increasing by 1% each year over 35 years
- The Alberta government will pay $330 million in total
Here are the basics of the deal. The Arena will cost $800 million, a practice facility arena will cost $52.8 million, a parking area will cost $35.4 million, an enclosed plaza will cost $35.4 million, an “on-site public realm” will cost $28.7 million, infrastructure improvements will cost $238.4 million, “Unspecified Costs” will add another $58.5 million.
A normal business person would think the group who receives virtually all the profits and revenues from this deal would be the one paying the most for this project. But you would be wrong. On a $1.2 billion dollar deal, the Flames are putting in just 30% of the costs.
CBC.ca wrote an article a week after this deal was announced and brought up a good point. Why is it that the public knows less about this agreement than the 2019 failed deal at the same point of time after it was announced? In 2019, the city went on a PR blitz about how this 50/50 deal would bring in money and tourism. One of their biggest talking points was how every ticket sold was a source of revenue for the city.
Today, a Calgary resident is still unable to tell whether they can get a return on this deal. So much of the agreement still isn’t known. They won’t get any answers in the short term either as the city continues to answer arena questions with “this matter remains under negotiation”:
- Will the Flames be paying rent? “Officials say this remains under negotiation”.
- When will construction start? “Officials say this remains under negotiation”.
- When is the expected opening date? “Officials say this remains under negotiation”.
- When the arena sells its naming rights, who gets the money? “Officials say this remains under negotiation”. Wait, just this week the city added language stating that “All revenues streams, which include ticket surcharge and naming rights … are consolidated into one … lease payment to the city … at $17 million per year for 35 years”.
- The city has said it will need to spend millions of its own money on infrastructure improvements. Where? How much? “Officials say this remains under negotiation”.
- Who pays for cost-overruns? “Officials say this remains under negotiation”. Wait, the Flames leaked some parts of the agreement and so the city added some language on their site stating that they will split over-runs by 50/50.
- The Flames pulled out last time due to costs. Are there any maximum acceptable additional costs? “Officials say this remains under negotiation”.
Not only is there little information available, but the city initially told the public that they won’t be doing any public consultation since the “public consultation was done previously for the last event (Arena) deal”. After immense public pressure, they caved and the city is supposed to be hosting a session today to give much needed details about the deal.
Furthermore, the Calgary Herald wrote a story this week that detailed how a local economist ran what little numbers he could on this deal and found that the city was, in fact, going to end paying substantially more than what has been talked about.
For example, the city has stated that they will pay for just 56% of the deal. But when you factor in that the Flames are only putting in $40 million upfront, that means that the city will be putting in a significant amount more upfront and therefore interest payments will push its own upfront costs to 89.7%. Better yet, this economist found that even if you factor in concerts, etc…at the new arena, it is likely to produce “zero revenue” for the city at any future point.
But as one city leader who leads the city’s event centre committee told the CTVNews, that the public is getting something in return for all its money being included. Something that Calgary can treasure for years to come. It isn’t money.
“The community benefits associated with having this amenity in the culture and entertainment district is the return to the community” – Coun. Sonya Sharp, CTVNews.ca, 06/05/23
This deal will end up costing Calgary a lot of money.