How to Think Critically About CalgaryNext


(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.

  • beloch

    Some facts about the Saddledome:

    1. It’s capacity (19,289 seats) is fifth largest in the NHL.
    2. Average Flames ticket prices are fifth highest in the league.
    3. It was built entirely using public funds. The Flames did not invest a dime in its construction.
    4. After the ’88 Olympics, the Stampede was tapped to be a joint operator of the ‘dome with the Flames. Despite the Stampede having a minority share in revenues, the Flames felt it was worth buying the stampede out in 1994 for $20M to become the facility’s sole operator and recipient of revenue.
    5. As the responsible owners of the facility, the city renovated the Saddledome (the Flames paid nothing) in 1994-1995 to add luxury boxes to increase revenue for the Flames. However, it was agreed that the Flames would be responsible for future renovations. Besides flood repairs, LCD panels, and the jumbotron, no renovations have been performed since. Once the new arena is built, it can be presumed the Flames will be entirely off the hook.

    Thanks to its high capacity, high ticket prices, and continual sellout status, the Saddledome is almost certainly one of the NHL’s best earning arenas, from a hockey standpoint at least. The Flames certainly have much to be thankful for because, until the flood, they had a free ride. All the costs were paid and they kept all the profits.

    Where the Saddledome falls behind is as a concert venue, because the ‘dome’s roof cannot support the gear a lot of performers want to hang from it. The new arena really isn’t about keeping the Flames competitive with the rest of the league. It’s about capturing concert revenue that is currently going to other cities. It’s also probably about avoiding more renovations to the Saddledome because, this time, the Flames are responsible for the costs.

    So, here’s the conundrum that King is facing:

    How much investment is capturing additional concert revenue really worth?

    My guess is that it’s not anywhere near worth $1.5B. That’s why the hat is being extended. Private investors would, naturally, demand revenue sharing. If King lets anyone take a share of his revenues, the new arena might actually reduce his take. A smaller portion of an only slightly bigger pie may be a step backwards for him. So, the only hope for increasing his take is a huge public handout.

    It’s a conundrum for us fans too. We want to see a new arena built, but it may simply not make economic sense. We’d love to see something done with the West village even if, despite what King says, it is in a flood plain. However, the creosote contamination makes it so prohibitively expensive to develop there that some sensible green-space is just not enough to motivate the clean-up.

    In my opinion, the Flames need to come up with a Plan B for their arena and the city needs to develop a Plan B for the West village. The city should also consider the Saddledome’s future, and look for ways to make King share some of the responsibility for it.

  • everton fc

    Another conundrum to consider is job loss. We must think “critically” about this, as the article points out in it’s title.

    With oil at $38.99/barrel as I type…

  • everton fc

    Great piece. I’ll just ad that Ken King’s background is President of the Calgary Herald and Calgary Sun.

    And, as mentioned above, the G&M did have a nice article talking about absurd the ask was.

  • loudogYYC


    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?

    If giving the man $100 somehow positively addresses my agenda, I’d have to take a look at it, wouldn’t I? Focusing on extremes is one way of getting to the middle, but I prefer a more practical approach.

    I think @The Last Big Bear nailed it in comment #7, this district will be a challenge for the city no matter how they move forward. CSEC knows this and like any land developer or large corporation, their offer is built around that fact.

    We’re still far from consensus being reached, so for now all I know is that compared to the Oilers f*ck you approach to their city, CSEC has taken an overall positive step one. Nothing is final yet.

    • Matty Franchise Jr

      What $1B agenda does the city and its tax payers have that this CSEC proposal addresses in a financially sensible way?

      $50M – $300M clean up? The CSEC is not offering to do anything about it, just giving a reason to start.

      $??M redevelopment of the West Village? Stadiums have proven to not revitalize an area, or create new businesses or tax revenue. They have proven to provide revenue for the owners of the team.

      $200M field house? See the clean up note above.

      Imagine this was Cineplex instead of CSEC and they were asking that the city (you and me etc…) clean up the land, reroute some major roads, then pay for 75% of a new multiplex, plus 100% of a new field house for (imagine they also bought the Stamps) so that they could take an unknown (but assumed 100%) cut of all movie profits. You in?

      • loudogYYC

        I’m sorry but your examples aren’t even comparable to the subject.

        – The city needs a champion excuse to push the higher levels of government to help fund the clean up BEFORE they can even start thinking of an area redevelopment. There’s your agenda.

        – The area was polluted by Canada Creosote, a corporation who actually did bend the city over decades ago and is now off the hook. CSEC did not contaminate the area, and neither did any other future participants in this redevelopment for that matter. It’s unclear who exactly will pay for this regardless of the existence of CalgaryNEXT.

        – Please check the arena/stadium districts in Columbus & Houston. It’s not about a stadium magically revitalizing a blighted district, it’s about creating a mass gathering space which would promote future planned densification. Like the Anderson Station TOD (Transit Oriented Development) Nenshi promoted when he took office. This is the biggest reason for the projects lack of parking in my opinion, parking lots don’t promote pedestrian-friendly areas.

        – Honestly the Cineplex example is just terrible. Name me one movie theatre in the world which is anywhere near in the same scope as this project? If anything, a movie theatre would probably be part of the future of the West Village as an added attraction for dwellers and visitors. This type of project compares more to a large public library or a giant cultural/arts centre, both which would cost the city way more than they would ever generate, but worth it for the civic pride and because they help put a city on the map.

        Don’t get me wrong, I don’t think Nenshi should be signing the dotted line quite yet, but lets not pretend Calgary Sports and Entertainment Corp is a Phillip Morris or Anheuser-Busch trying to place a well decorated, pretty looking factory in the West Village.

        • 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.

          • nikkomsgb

            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.

          • 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.

          • loudogYYC

            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.

  • Section205

    I think this article and many citizens are going overboard. This is nowhere near as bad as other situations. Most of these costs have nothing to do with NHL arena.

    I think maybe the owners should throw in another $80 million and reduce the city contribution by the same amount. Then we have a pretty fair balance.

    NHL Arena – should be paid by NHL owners. $450 million ($200 cash and $250 ticket tax) is more than enough to cover it.

    CFL stadium – $200 to $280 million should be paid for mostly by the public. The CFL is not the NFL, NHL or MLB. I don’t particularly buy into this “CRL” concept, but at any rate this city/province should budget every 35+ years to build a decent facility for the public.

    Contamination cleanup – this is long overdue and should be paid by the public

    Crowchild roadwork – this is long overdue and should be paid by the public

    Fieldhouse – If this fieldhouse satisfies the city’s objective to build a $200 million fieldhouse then most of it should be funded by the public.

    Like I said, an additional $80 million from owners pockets would go a long way.

  • Matty Franchise Jr

    Well written Kent, good job. But it’s your way of thinking critically about CSEG’s proposal as I find I like it a lot more than you do.

    I agree we the taxpaying nation shouldn’t get hosed on the deal. So I would like to see the Owners front the cash for the ticket tax and for the CRL. That will show they believe in the potential for development in the WV too.

    I was at Ken King’s original presentation last week and I felt: 1. Where is all the parking go to be? There are no parking lots of structures in the drawing and connectivity for cars is not a priority. Which lead me to: 2. this is going to create a bit of a nightmare on Bow Trail and other routes that connect to Bow Trail around the West Village. Ken King kind of neglected to talk about that all, simply saying we can build it within or between the existing roads. That left me thinking the City is going to have a costly road construction bill in the future to accomodate all this.

  • Reidja

    It’s reasonable for any business to maximize its return on investment. Let’s all just remain cognisant that we don’t own the team. A very successful business man does for all intents and purposes. It’s not unreasonable for the city to demand some ROI but the owner expects it. Remember the early 90s. The polarized opinions are as helpful as the pocket media.

  • 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.

    • supra steve

      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.

      • Parallex

        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.

  • RexLibris

    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?

  • supra steve

    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.

    • Parallex

      … 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.

      • loudogYYC

        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.

    • supra steve

      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).

      • loudogYYC

        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.

  • supra steve

    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…

    • “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.

  • 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.

  • 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”.

  • Derzie

    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?

  • nikkomsgb

    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.

    • Derzie

      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.

    • Derzie

      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

  • loudogYYC

    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…

  • supra steve

    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.