How to Think Critically About CalgaryNext

Kent Wilson
August 23 2015 09:29PM


(This is a lengthy post look at the economics and politics surrounding the Flames arena proposal. Fair warning.)

After years of whispers and innuendo, the Calgary Flames finally announced their proposed arena plans last week. The CalgaryNext project is, unfortunately, drawn from the same playbook as the Edmonton Ice District and dozens of other North American arena projects over the last decade: stick the public with most of the cost while keeping most of the profits. 

Of course, that reality isn't made explicit in any of the presentations or PR materials you will see as this debate ramps up. In order to make an informed decision here are ways you can bust through the marketing buzz words and purposeful obfuscation around the arena project moving forward.

Don't Accept the Frame

Fire_Frame_2

If a man approached you in the street and asked you to give him $100, and you sensibly said no, would you characterize the interaction as a negotiation?

Probably not. But CalgaryNext, like all modern North American stadium deals, is framed as a "negotiation" between the city and the team, even when the project as presented is little more than corporate welfare (i.e.; charity). 

The reason this frame works to the team's advantage is it locks in the idea that the two entities are merely haggling over how much each must contribute to the project, essentially guaranteeing the club a non-trivial degree of public subsidy one way or the other. 

The appropriate frame would be public as investor - meaning the Flames would approach the city as a partner and would give real value in exchange for dollars. And by value, I don't mean the nebulous "benefits" of "increased economic activity", "civic pride" and "revitalization" that are so easily bandied about in PR materials, but rather some sort of tangible ROI - dollars to be repaid in interest (a loan) or a portion of revenues/ownership (equity).  

There are other frames one need not accept either: the Flames next arena doesn't have to be a huge, multi-use facility, it doesn't have to be in the West Village area and it isn't absolutely inevitable as currently conceived - they could, for instance, refurbish the Saddledome or rebuild something on the Stampede grounds. Ken King currently says there is no "plan B" when it comes to the Flames arena plans. 

Of course, that wouldn't be keeping with the general pro sports trend of building ever bigger, more opulent sports centres every 20-30 years, of course, but that has become a habit in North America only because the public keeps footing the bill. If teams were forced to build their stadiums based on strict internal budgeting and economic principles (i.e.; what they could afford or what they could convince legitimate investors to help build), they wouldn't be recommending massive, over-the-top, $1 billion+ projects. 

Sports Mega-projects ONLY exist because franchises can count on free money from the public.  

Don't Listen to the Media

Media_Stadiums

- image from "Lets all give money to the rich man!"

With a few, rare exceptions, the local mainstream media isn't going to help you think critically on this issue. At best, the MSM will accept the frame and implicitly drive the public towards the "this is a negotiation" perspective, even when the project is clearly still merely a public subsidy for a profit seeking entity. 

At worse, they will eagerly make the Flames case for them, with no argument too transparent or too spurious. 

For example, in the last week alone we've seen articles suggesting: 

- Calgary must build the CalgaryNext project in order to attract young, creative professionals to the city and avoid becoming an economic backwater. 

- The Flames improved the life of a dying child, so their value to community goes beyond "mere money". 

- The Flames could leave town if the city doesn't give in to their vision for CalgaryNext. Not building it could also cost the city an Olympic bid.

That is, in rapid succession, economic illiteracy, brazen emotional manipulation and implicit blackmail. It's all nonsense created with the express purpose of cajoling, bullying or guilting the public into handing over their tax dollars. 

Don't listen. It's a con. The city of Calgary supports the Flames by cheering for them, attending their games, buying their merchandise and elevating the organization's status in the community. The fans don't also owe the club our infrastructure tax dollars so they can add more zeros to their bottom line.

Consider the Actual Costs to the Taxpayer

CNext_Finance

Right now, the funding model suggested by the Flames isn't merely disguised corporate welfare - it also grossly underestimates what the project would actually cost. 

On top of the $800-900M it would take to build the various structures, CalgaryNext would also need some $200M+ to clean up the creosote contamination in the area and an undetermined amount of money to redesign the traffic and other infrastructure in the West Village to service the area. 

Also not mentioned: who would cover any inevitable cost overruns that will occur? (hint: probably not the Flames). All-in, this is likely closer to a $1.3-$1.5 billion price tag. The Flames financial contribution figures to be just 13-15% of the total cost as a result.

It goes further than that. The proposed ticket tax which is said to cover some $250M of the project would have to be paid back over time after the arena is built as a kind of user fee. However, that amount would have to be provided up front in order to actually get it built in the first place. No doubt, the city would be expected to front those dollars. 

Next, the CRL (community revitalization levy), is actually a complex gamble cities make where they bet on future development to repay current infrastructure "borrowing" for the area. The bet is potentially risky because if the redevelopment doesn't result in substantially improved property values (and therefore an increased tax base) in the defined area, the investment would be more or less lost.

The other issue is that CRL's can merely "shift" tax dollars from one area of a city to another. Because the amount of demand for new property (ranging from residential to commercial) isn't infinite, the result can simply be development moving from other portions of the city into the CRL's borders. As such, there is no new "net" development or tax increase overall for the municipality.

Keep in mind that city owned properties are tax exempt. So a city technically shouldn't be peppering their CRL area with city property, because it erodes their ability to pay back the investment. Which brings us to the next issue...

The City Owning the Arena Isn't a Benefit 

home-ownership

The Flames have been very forward about the land and structures remaining city property should CalgaryNext be built. That sounds generous, but it's actually the exact opposite. 

Stadiums and arenas are huge, illiquid, depreciating assets. Like a car, they lose value each and every year of their lifespan. On top of that, you can't simply sell an arena if it has become obsolete or you need the cash. They take up massive parcels of land, must be surrounded by acres of parking lots, only have a handful of uses and are almost as expensive to demolish as they are to build. 

As a rule, arenas are terrible investments (which is why team owners don't like to pay for them). The only real reason to build them is their ability to generate revenue during their life cycle. But that benefit often doesn't accrue to the city in whole or in part in many of these deals. The Flames, of course, have been evasive when it comes to the issue of revenue ownership and CalgaryNext. 

If Calgary is to own the arena(s) and the Flames are to keep all (or a vast majority) of the revenue, then they will have passed the obligations of ownership to the public while keeping all of its attendant benefits. Assuming a 30-year lifecycle, the Flames will have sucked the asset dry of all value by the time it's time to ask for another (tax payer funded) arena. And because the public will "own" the structure, the Flames will be able to walk away from the obsolete, dried-up husk of a building without blinking.  

Imagine your friend asking you to buy him a car because he wants to be an Uber driver. He tells you you will still "own" the car, but he's going to be the only one who can use it and he will keep all the revenues he gets from driving people around. After 10 years, he'll need a new car. This would be an accurate analogy, except a car would still be much easier to sell after your buddy is done with it, in contrast to an old arena, which nobody wants. 

CalgaryNext Probably Won't Benefit the City Economically

Field_of-schemes

The biggest lie told in the marketing of these projects is that they will meaningfully "revitalize" cities and result in new, net economic outcomes. 

In fact, almost every economic study done on this subject over the last 20 years has come to the opposite conclusion. Here's a tiny sampling from a quick google search on the issue:

- The risky economics of sports stadiums 

- Why funding sports stadiums can be a losing bet

- Publicly financed stadiums are a game that taxpayers lose 

- Publicly funded sports arenas add little to local economy 

- Nine out of ten economists agree: sports stadium subsidies are dumb

- Stadium frenzy ignores economics

Etc. The literature on this topic is unambiguous: the public takes on huge risk when it comes to arena subsidies while the teams are the only entities that consistently, unanimously benefit. 

Which isn't to say a project like this won't result in some economic activity. Of course, that's a given whenever hundreds of millions of dollars are poured into anything: you could dump a billion dollars from a helicopter on the streets and "create economic activity". 

The issue is if it's a meaningfully efficient way of using the money. Almost all of the academic research says "no".

How Do the Flames Benefit?

You'll notice what is curiously absent from Ken King's public talks, the CalgaryNext website and many of the articles appearing in local papers is what the Calgary Flames organization stands to gain from the CalgaryNext project. That's odd because they are positioned to be the biggest single beneficiary if this project goes forward as conceived. 

For the currently proposed $200M, the Flames would get not one but two sports stadiums for their four teams (Flames, Stampeders, Hitment and Roughnecks). They would be the sole operators and proprietors of these buildings, from which they would likely derive ticket, concession, merchandise, advertising, concert and naming rights revenues. They'll also obviously be active in the planning and design of the structures, meaning they'll be able to define important issues like seating capacity, retail and food service rental space, luxury box totals and premium seating volume.

If the buildings are indeed city owned, the Flames will get to operate free of property tax as well. 

Let's assume, for instance, that the arena's seating capacity is equal to the Saddledome, but the Flames design the new place to have more lower bowl and luxury box tickets as a ratio of the total seats (which is a fair assumption). 

If that move raises ticket prices on average by a modest 15% (about $9 per game), the increase in ticket revenue for Flames regular season home games alone is more than $7.6M per year. Over a 20 year lifecycle, that means an additional $152M in revenue and we haven't even talked about the Stamps, Roughnecks, Hitmen or any of the ancillary revenue like concessions, advertising or naming rights - all of which will likely get an incremental bump from a mega project like this. 

Beyond the day-to-day revenue is the improved value this would give to the Flames various sports properties. Billionaires often don't get involved with sports teams simply for the yearly profit and loss statement (which, for many clubs, is either neutral or negative), but for what the teams can garner as overall assets. 

Forbes estimates the Flames alone are more than $400 million (they were bought for $16M in 1980), though the valuation is an educated guess at best. We can't really be sure what the Flames would actually be valued at since they don't tend to voluntarily share their books, but given that the NHL is now charging a $500 million expansion fee, it might actually be a lowball. A lopsided deal with the city for brand new buildings would no doubt add value to the Flames group's various sports assets. 

On top of all that, team owners also tend to get involved with the development efforts around the arena sites. By taking advantage of sweetheart deals with the city (such as new infrastructure and beneficial CRL's), team owners can strike up fresh real estate investments outside of the sports franchise - a profitable way to "double dip" on the city's subsidy. 

This is especially beneficial because it's bonus money beyond the reach of Hockey Related Revenue (HRR) - that is, the stuff that gets split 50/50 with the players. If an owner can leverage arena development to create real estate holdings, then he or she doesn't have to share that new source of profit with the players unions.

As an example, the Ice District around the new rink in Edmonton is being developed by billionaire team owner Darryl Katz

Conclusion

I have been a Flames fan since I could walk. I have written thousands of articles about the team over the last decade. I am a die hard fan. Like most fans, I'd really like to see the club in a new, state-of-the-art arena, because that would be awesome. 

But I won't let the club use my love of the team nor my excitement about a new rink to manipulate me into accepting bad deals or corporate welfare. If the team wants to approach me as a fan, they only need to put together a solid entertainment product. If they want to approach me as a taxpayer and investor, then they need to propose a solid deal. Not vague promises, buzzwords, implicit blackmail, bad economics or anecdotes designed to illicit guilt or fear. 

Fashion a deal where both entities can tangibly benefit from a new multi-purpose, mega project and then we can talk about "negotiations". As it stands, the club is looking to disperse the cost and risks to you, I and the rest of the city's taxpayers, while concentrating the profits for themselves. 

Of course, several of these issues deserve a deeper examination, including the ins-and-outs of CRL's and the economics behind arena subsidies, which we can further investigate as things roll along. 

For now, I encourage Calgarians to do their own research on the topic. Don't merely accept the word of those who stand to benefit the most from the largesse of this project. Don't let your civic pride or love for the team become a tool through which extremely wealthy people improve their bottom lines at your expense. 

Be skeptical, be engaged and don't allow the Flames group or the local media to control the frame. Given Calgary's already significant infrastructure challenges and an uncertain energy economy, this is not the time to be writing private enterprises billion dollar cheques simply because they ask.

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Former Nations Overlord. Current FN contributor and curmudgeon For questions, complaints, criticisms, etc contact Kent @ kent.wilson@gmail. Follow him on Twitter here.
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#51 Rob Huck
August 24 2015, 04:39PM
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As a former resident of Calgary and Alberta, I fully endorse the CalgaryNEXT concept.

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#52 Jake46
August 24 2015, 07:05PM
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I'm kinda regretting that I like John Oliver after watching that video. He really sensationalizes everything. While Ken King and the Owners certainly do want to get bums off their couches and into the arena and stadiums, I've gotta believe would not do some of the crazy outrageous things seen that video.

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#53 RexLibris
August 24 2015, 09:56PM
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Very well done, Kent.

What I can't figure out from the conclusion though is whether you now qualify as a 1st or 2nd tier fan. Or is that just an Edmonton thing?

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#54 Bottsy777
August 25 2015, 12:21AM
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Kent - well written article, however I believe there are a couple of other points for consideration. Prior to highlighting them - I will note that my knowledge of these items is superficial at best...

In the world of commercial real estate - it is not uncommon for landholders to offer to build a certain type of facility for a tenant - in exchange for certain rent, term, etc... We have all seen signs as such - "Will build to suit". In those scenarios the business pays their agreed upon rents - and maintains all the revenues derived from the business on the property. More on this...

Secondly - the city has chosen to acquire the lands in the West Village area in order to develop them in some manner. When they chose to acquire them - they crossed in to the realm of commercial landowner, and as such assumed the risks they may need to "play by the rules of the game". I am not a proponent of government getting in to business - they generally fail miserably.

What the CSEG has done is played off of the city's hand when they bought the land and indicated they want to develop it. They have said - we would love to help you develop it - build us the building we need for our business - and here is how you can fund it - and it will help grow the area. The city "did business poorly" - and the CSEG has leveraged it and put a viable plan in the public eye. Great and smart move by them... Especially since there is no other plan in place that anyone is talking about. The CSEG has provided the quickest path to cleanup and development for the city - and has effectively backed them in to a corner with very little wiggle room. Any other plan will take numerous more years (see East Village history) to accomplish anything. The CSEG will throw in more... But the city set this table by poor planning - and now are negotiating from a place of weakness.

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#55 Bottsy777
August 25 2015, 12:41AM
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Another point I forgot to mention. The CSEG has provided the city with the option to clean up Crowchild trail problem with this proposal (indirectly). The problem at Crowchild trail is less at Bow Trail - but rather North and West at 16th avenue. The city does not have a decent viable option to fix the bottleneck issue there without incurring massive costs (either tunnels or bridges). If the stadium is built downtown - the city can negotiate with the U of C for the land with McMahon. (Land Swap? The U won't want to have a large unused stadium anymore as it is a liability) Demolish McMahon and the underutilized baseball field - expand Crowchild (remove all lights - free flow of traffic) and elimate the congestion. They can then use the remainder of the land not used for through ways - to be developed as a "mini-core" (more than likely centered around research/tech)

Opening up this option more than likely saves the city/province hundreds of millions of dollars in infrastructure costs to address that area. Bridges and tunnels are extremely expensive...

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#56 Johnny Be Gaudreau
August 25 2015, 12:42AM
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@loudogYYC

A cultural arts centre would be free or a very minimal cost to attend if I wanted to attend it. It would also provide inisight and education into the multifaceted cultural landscape of Alberta and therefore enrich an area of students and albertans lives. In other words, it would have a public benefit. You might also argue this about a library. Free to use. Books are important to education and making future scientists, ken kings, and or Murray Edwards of the world. They have an inherrent public benefit (far more proven than any stadium/arena/megacomplex for sports project ever has).

Filed of Schemes and a couple of other books/articles address the issues that you brought up. In fact, revitalizing an area even in Columbus and Houston, Simply is not true - what is actually happening? Revenue is being redirected from other parts of the city to that area during events. However, having an arena district has no net benefit on increase to overall profitibility to the city. NONE. That is the problem. And in some cases it even scares regulars away form their bars in the area of the complexes because of rowdy fans or traffic.

Yes West Village will ultimately be redeveloped at some time. Yes, the city province and whomeever else will have to pay for that cleanup. The thing about the West Village is in order to maximize the profitibility in terms of land and property taxes and corporate taxes you need to realign bowtrail and put in a minimum of I think it's 8000 residents and I don't recall the number for businesses so i won't speculate. Putting an arena/stadia complex there takes away a lot of that. Which is important considering the Flames don't pay property tax or corporate taxes. So unless the Flames somehow wanna pay a couple million in taxes it doesn't make economic sense for me. I'm sorry no argument you can make will convince me that billionaires who don't have to disclose their profits if asking for 50-75% in public contributions are not motivated by their own self interests here.

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#57 44stampede
August 25 2015, 02:04AM
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How does one do interviews like the one that squid did with Bryant Gumbel? Pretending that there is nothing to hide? "We just choose not to disclose as this is standard". It's like you can see a piece of his soul leaving his body with every answer.

I am an entrepreneur and capitalist but if/or when I become a billionaire, I hope I don't try and hold on to it so tight at the expense of many others like these ass&*^es.

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#58 EberleSnipeSauce
August 25 2015, 03:59AM
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Regardless, this project will be completed. The only quarrel I have with it is the location. It feels like they're just shoving it in to an already cramped neighbourhood. Calgary's downtown is well built. There isn't any need for "revitalization".

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#59 suba steve
August 25 2015, 07:00AM
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Jake46 wrote:

I'm kinda regretting that I like John Oliver after watching that video. He really sensationalizes everything. While Ken King and the Owners certainly do want to get bums off their couches and into the arena and stadiums, I've gotta believe would not do some of the crazy outrageous things seen that video.

If the goal is to get "bums off their couches and into the arena", why is there room for fewer "bums" in the new arena?

The end game here is MONEY, not people. If I was the guy who was responsible for writing the cheque for the project, I would make the Saddledome work for at least another 10 seasons...probable more.

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#60 Jake46
August 25 2015, 07:59AM
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suba steve wrote:

If the goal is to get "bums off their couches and into the arena", why is there room for fewer "bums" in the new arena?

The end game here is MONEY, not people. If I was the guy who was responsible for writing the cheque for the project, I would make the Saddledome work for at least another 10 seasons...probable more.

Kinger said they purposely don't want too any seats because it'll feel empty when things don't sell out. He said better to have it packed and full feeling than to have empty seats. He said the stadium could expand to accommodate 50,000 for a Geey Cup.

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#61 suba steve
August 25 2015, 08:55AM
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@Jake46

"Kinger" says a lot of things. I don't necessarily believe everything that comes out of his mouth.

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#62 Parallex
August 25 2015, 09:06AM
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@Bottsy777

... What?

This makes no sense at all. How is the city 'negotiating from a place of weakness'? The city doesn't have to do anything as there is nothing compelling them to act. If they elect to do nothing they are no more worse off tommorow then they are today.

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#63 Parallex
August 25 2015, 09:18AM
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@suba steve

Frankly, I expect that the Saddledome will have to work for close to that long. I expect this to be a rather long drawn out process just to get approval for whatever deal ends up in front of city council (to say nothing of getting the feds/prov to kick in $$ for the clean-up). Then you have the actual work of cleaning up the site before any ground gets broken on the actual buildings (which will take a long time as well). We might be talking about Monahan and Gaudreau as post-apex players when they step foot into a new arena.

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#64 nikkomsgb
August 25 2015, 09:20AM
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@Johnny Be Gaudreau

Not wanting public money in a sports complex is fair, that's each taxpayer's right to have beef with. But claiming that nothing positive economically would come of redeveloping West Village with an entertainment district is wide of the mark. Some money would certainly be reallocated from other areas, but it would also act to attract new money and people to downtown. My family is from Toronto, and while I love this city, the biggest complaint from those outside it is that the downtown has absolutely no life to it. There is no reason to be downtown after 4pm. An entertainment district, like Maple Leaf square, or LA Live, etc that is being used 150 days a year would make people want to be downtown, and also help densify the downtown, which right now is all corporate office towers.

As far as spending $200-250 million on a Library? If you think that is a good "allocation" of public funds then I don't even know. The trend is for people to use Kindles and other such e-readers and borrow books that way. Why on earth do we need to build the Mecca of all libraries, when most people won't bother visiting it, except to take pictures of it? The library system in Calgary is certainly one of the best used in North America, but I challenge anyone to tell me that the trend is to drive downtown and spend all day looking for parking to simply take out a book, that they could download from home.

Finally, the Flames do pay corporate tax, and put a ton of money back into the economy. The Flames foundation for life has raised tens of millions for charities since it's inception. Furthermore the Flames have a lease agreement with the city on the Saddledome, and would also with any new facility, the proceeds of which go back into the community and are distributed.

That doesn't mean we should throw money at them, but there's always more than one side to a story.

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#65 nikkomsgb
August 25 2015, 09:31AM
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Dougie & The Fro wrote:

Great job, Kent. Thank you.

I have a favour to ask of everyone. Can we call them CSEC and not Flames, please? When I think of the Flames, I want to continue to think of Hartley and his rag tag group of overachieving underdogs, not these billionaire thieves that are trying to rob us all and get us to thank them for it.

I also missed the above hyperbole about the Flames, or CSEC if you prefer, being owned by thieves. I think you are on an island if you think this organization's owners are thieves.

As I mentioned previously the Flames foundation has poured millions into local charities since it's inception. Have a look at their website for the initiatives they have created or support. They raised and distributed almost $2.5 million last year alone.

I also don't know of many that speak ill of the owners.

I wouldn't give them money for being good people, I would only do so if the project merits support and makes fiscal sense for everyone. However a little perspective is needed here I think.

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#66 Derzie
August 25 2015, 09:35AM
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The city (and by extension our tax money) has 4 concerns in this matter: Stampede land use, West land use, McMahon and a new fieldhouse. If you are the city, plan A is for CSEG to refurbish (or not) McMahon & the Saddledome if they wish, the province to clean up the creosote and the city build a fieldhouse at Stampede or in the West end. That is the anchor for the city negotiation. Whoever wants a new building should pay for the land, construction and infrastructure (as the city will do with a fieldhouse). Given that football season is in full swing and hockey is just around the corner, I don't see a "need". A want, a desire, a wish maybe, but not a need. Wishes are expensive and it is a wisher-pay world. And the Madonna example is grade A silliness. Are our lives really worse for missing those things? $2B worse?

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#67 Derzie
August 25 2015, 09:40AM
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nikkomsgb wrote:

I also missed the above hyperbole about the Flames, or CSEC if you prefer, being owned by thieves. I think you are on an island if you think this organization's owners are thieves.

As I mentioned previously the Flames foundation has poured millions into local charities since it's inception. Have a look at their website for the initiatives they have created or support. They raised and distributed almost $2.5 million last year alone.

I also don't know of many that speak ill of the owners.

I wouldn't give them money for being good people, I would only do so if the project merits support and makes fiscal sense for everyone. However a little perspective is needed here I think.

Perspective is needed when looking at charitable endeavors. It really benefits those in need but does not absolve the profiteers of all wrongdoing. Money comes from somewhere, namely the masses. Charity for the rich is the equivalent of tossing coins in a beggars hat. The beggar is happy but the people whose money the rich guy has are not. Charity is a very good thing but looking fondly on the corporate barons that are throwing the coins in a hat is naive. There are rare exceptions but you don't get rich being nice to everyone.

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#68 Jimmy Maxwell
August 25 2015, 10:13AM
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I'm by no means an expert in any of this, however it seems the author may have missed a point.

The construction of this stadia and all the necessary infrastructure will create thousands of skilled trade and labor jobs within Calgary, which is always a good thing.

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#69 kittensandcookies
August 25 2015, 10:14AM
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@nikkomsgb

Critical thinking indeed... Just because City Hall pours money into a bad project, doesn't mean it gets to pour yet more money into another bad project.

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#70 Bottsy777
August 25 2015, 10:46AM
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Parallex wrote:

... What?

This makes no sense at all. How is the city 'negotiating from a place of weakness'? The city doesn't have to do anything as there is nothing compelling them to act. If they elect to do nothing they are no more worse off tommorow then they are today.

I could have been clearer on this... The city has clearly indicated that they want to develop the land. But they did so without a plan. CSEC (not CSEG like I used) has put a plan in the public eye. The city is within their rights to do nothing - but it will cost them in the public eye, as there is a seemingly viable proposed project for that area (with potential traffic issues noted). People have driven past that area for years - and either seen or not seen what it is - It just is. Now with a fancy plan, and nice pictures, peoples perception of the area will change - and like it or not in the public eye there will be some sort of expectation to develop it sooner rather than later. People will now drive (or ride the train) past that area and now see what it could become versus what it is (which isn't attractive at all). Also the city spent actual dollars to acquire the land, and are currently receiving nothing in return for it. The longer they wait to develop the land, the harder it "may" be on the books - and in the public eye.... The city is not a business - they have responsibility to the tax payer, and as such any investment should have as fast a payback as possible to the city's coffers. (in my opinion) So when I said they are dealing from a position of weakness, what I meant was that in the public eye there can (and will be) pressure to develop that land to begin benefitting the city.

One of the other considerations to be factored in to this - is the development that the Calgary Stampede Board wants to do on the outskirts of "their" land. How willing will some developers be to build there now with the potential loss of the main anchor draw to the area for the majority of the year leaving in several years... I don't think it will stop development in the area, but I think it may cool it down. And considering the City also owns that land...

I think that what the CSEC wanted to do was to put a proposal out there first - and put them selves in the drivers seat with the City. The city is now reactive... they need to manage the needs and investment they have already made in the current Stampede location and the risk associated with losing a major draw to that area, while also being pushed to look at the West End development. While the CSEC has proposed the West End development - I think they would be happy to stay at their current location (with new buildings to be built) just as easily... Because of this I believe it has the city dealing from a position of weakness.

Some may disagree with me though.... And that is the beauty of these forums - we can all (well most of us) get along, voice differing opinions - and at the end of the day respect where each other comes from.

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#71 loudogYYC
August 25 2015, 10:54AM
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Johnny Be Gaudreau wrote:

A cultural arts centre would be free or a very minimal cost to attend if I wanted to attend it. It would also provide inisight and education into the multifaceted cultural landscape of Alberta and therefore enrich an area of students and albertans lives. In other words, it would have a public benefit. You might also argue this about a library. Free to use. Books are important to education and making future scientists, ken kings, and or Murray Edwards of the world. They have an inherrent public benefit (far more proven than any stadium/arena/megacomplex for sports project ever has).

Filed of Schemes and a couple of other books/articles address the issues that you brought up. In fact, revitalizing an area even in Columbus and Houston, Simply is not true - what is actually happening? Revenue is being redirected from other parts of the city to that area during events. However, having an arena district has no net benefit on increase to overall profitibility to the city. NONE. That is the problem. And in some cases it even scares regulars away form their bars in the area of the complexes because of rowdy fans or traffic.

Yes West Village will ultimately be redeveloped at some time. Yes, the city province and whomeever else will have to pay for that cleanup. The thing about the West Village is in order to maximize the profitibility in terms of land and property taxes and corporate taxes you need to realign bowtrail and put in a minimum of I think it's 8000 residents and I don't recall the number for businesses so i won't speculate. Putting an arena/stadia complex there takes away a lot of that. Which is important considering the Flames don't pay property tax or corporate taxes. So unless the Flames somehow wanna pay a couple million in taxes it doesn't make economic sense for me. I'm sorry no argument you can make will convince me that billionaires who don't have to disclose their profits if asking for 50-75% in public contributions are not motivated by their own self interests here.

Yes, a cultural arts centre and public library would be free for the public, but building it and running it wouldn't be. My point is that building a sports district is more related to building a cultural arts and library than it is to your previous example, a Cineplex movie theatre. Even more so if it ends up being a facility amateur athletes use. This too will will have public benefit, albeit not in the same realm as educating yourself or looking at art.

I've also read books and theory about Arena Districts and as I said in my previous post, Arenas & Stadiums don't just magically revitalize an area, specially if they come with 10,000 parking spots, they're simply anchors in the pursuit of future development. The true redevelopment of the West Village will be in the form of future business' and condos and as you said, 8,000+ future residents of the area.

If it's built properly (less parking lots), bars and restaurants will thrive because of the constant flow of BOTH dwellers and visitors to the area. It would be a different story than the bar owner example given on a show which although hilarious, uses gross exaggeration to make a point (the Miami baseball stadium btw, is built in a residential neighbourhood, equivalent to building a new arena in Forest Lawn).

I'd research a little more before saying the Flames or CSEC don't pay tax, and I would 100% agree that they are motivated by their own self interests. Just like the owners of the restaurants, bars, shops, hotels and the builders who develop all of them will be.

Cities suck at commerce so ultimately increasing its profitability will always come from tax. To create new a tax base they will need private business to come do what they do best, make money; to start redeveloping a core district they will need to first find a way to clean up the mess left behind by others; and to find a way to clean it up they'll need a great catalyst/anchor/excuse. Even better if the catalyst happens to be loved by the city don't you think?

I'm certain CSEC and the city will find a way to meet in the middle. This will be good for us and I don't love saying this, but it's also necessary for a city who wants to be taken seriously outside of 10 days in July.

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#72 Balthazar
August 25 2015, 12:10PM
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Jimmy Maxwell wrote:

I'm by no means an expert in any of this, however it seems the author may have missed a point.

The construction of this stadia and all the necessary infrastructure will create thousands of skilled trade and labor jobs within Calgary, which is always a good thing.

Interesting thought.

There are a number of large scale infrastructure projects in and around Calgary that will take place over the same time that will employ a large number of skilled trades. Consideration of short to mid term employment of hundreds (probably not thousands) should not be a key evaluation criteria, though it will have some positive impact.

Likewise, the important secondary infrastructure investment that will follow this project (Bow&Crow) needs to be well planned to not cripple access to the city centre from the west side. That required interchange (at the cost of hundreds of millions carried by the city and province) will have a huge impact on the surrounding communities.

The current downturn should not be considered in the equation as it will (hopefully!) be over (though we may be in a new one) by the time construction starts.

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#73 Bryan
August 25 2015, 12:11PM
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@Bottsy777

As a real estate developer, I can give you some quick numbers on your first comment. Let's say this site costs one billion to develop. You would carry a mortgage of 65% of this, which would cost $48 million a year. Simple math and you need to generate rent of about $70 million a year to cover this and make a 10% return. I don't know what kind of rent the Flames pay, but I doubt it is this high. However, this is also a risky investment, because if the Flames et al pull out after their lease runs out, you can't just put any old business in the building in their place.

Which is why a private developer likely wouldn't touch this with a ten foot pole unless there was massive upside somewhere else (which hasn't worked out in other cities).

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#74 Bryan
August 25 2015, 12:15PM
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@Derzie

So using your logic, if Suncor raised and distributed $2.5 mil last year in charity money, the city should build them a building and not charge them market rent for it.

BTW, if you want to see net benefit to the City as a whole, I think Suncor's (and many other companies) pour way more money into the local economy than the Flames ever could.

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#75 Bottsy777
August 25 2015, 01:29PM
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Bryan wrote:

As a real estate developer, I can give you some quick numbers on your first comment. Let's say this site costs one billion to develop. You would carry a mortgage of 65% of this, which would cost $48 million a year. Simple math and you need to generate rent of about $70 million a year to cover this and make a 10% return. I don't know what kind of rent the Flames pay, but I doubt it is this high. However, this is also a risky investment, because if the Flames et al pull out after their lease runs out, you can't just put any old business in the building in their place.

Which is why a private developer likely wouldn't touch this with a ten foot pole unless there was massive upside somewhere else (which hasn't worked out in other cities).

Thanks for those #'s Bryan - those actually make sense. And put in context of how the CSEC structured the $'s in their presentation (Approx $1B for project) that $70MM per year in Rents for a 10% return wouldn't necessarily come straight from Rent - but rather in the Ticket Tax ($250MM - over how long?), the CRL ($240MM - also over how long?) and $200MM partnership from the CSEC.

My back of the Napkin #'s on those if you average/amortize them over 10 years is that that just about equals the $70MM in rent.

Ticket Tax $25MM/yr + CRL $24MM/yr +CSEC Partnership "Amortized" $20MM/yr = $74MM/yr...

In this very simplified example - any Rent the CSEC spends is in excess and may be considered extra profit on the project. Yes this is more than likely over-simplified, and the accounting folks on this thread are probably pulling their hair out at me, but it paints this as maybe not as terrible an idea as some think it is... Just saying...

I do however agree with you that a private developer may be less inclined to pursue a project of this nature - unless they could get the #'s to work out. They wouldn't be able to levy a CRL, which leaves a potential $240MM void in there...

I also agree it is risky if the CSEC pulls out at the end of their lease. This is already a risk the city has with the Current Arrangement at the Saddledome.

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#76 Amen Brotha
August 26 2015, 08:56AM
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Change your Twitter pic Kent and people will take you more seriously

It's the most douchiest attempt to be a hipster pic I've seen in awhile

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#77 Jimmy
August 26 2015, 09:30AM
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Amen Brotha wrote:

Change your Twitter pic Kent and people will take you more seriously

It's the most douchiest attempt to be a hipster pic I've seen in awhile

I was thinking the same thing. If Kent was actually exercising critical thinking he never would have posted that embarrassing monstrosity of a Twitter picture

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#78 Johnny Be Gaudreau
August 26 2015, 08:13PM
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@nikkomsgb

And that's great if this proposal had something that made the West Village an area where people would want to hang out. The city has a great plan for that with a river front walkway and hang out, open boulevard concepts that allow for outdoor market type businesses, coffe houses, bars, and residents to essentially mill around and be part of their community in. This completely ignores that aspect. This project is entirely self motivated by the CSEC wanting to increase their bottom line.

People in Calgary don't liek hanging out downtown becasue it's a traffic nightmare and we don't have the public transit infrastructure that LA has. If we had a quarter of the transit system LA had then people probably would hang in downtown but having to take 2 trains (with 1 transfer) and 3 buses to get home at the end of your night a 1.5 hour trip if you catch everything on time is not worth it for a lot of people.

When I went to schoool at Berkley going to LA live was easy. It took 30 minutes each way using public transit.

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#79 druds
August 27 2015, 12:43PM
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Thats it people keep drinking the kool-aid and that new Arena disrict will be wonderful!!! Hey don't think about the money just imagine how nice the new rink will be but of course the part you are forgetting is that none of you will be able to afford the seats in that new rink...

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#80 CitizenC
August 27 2015, 06:22PM
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@Bottsy777

"The CSEG has provided the city with the option to clean up Crowchild trail problem with this proposal (indirectly)... Land Swap... Demolish McMahon and the underutilized baseball field - expand Crowchild... elimate the congestion"

The city could do all of that without the CalgaryNEXT project.

CalgaryNEXT is everything you just mentioned, AND building a for-profit corporation a free stadium.

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#81 deantheraven
September 06 2015, 05:15PM
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I'd just like to know if the plan for this monster development would swallow the lands currently used as the home of the Pumphouse Theatre. It would be a shame if it were.

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