How to Think Critically About CalgaryNext


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(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.

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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).  

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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

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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

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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.


  • The GREAT Walter White

    This project is a poor design and in a poor location (not to mention ridiculous financially).

    Now before you all say: “a lot smarter people than WW have come up with this project”; consider the “smart” people who designed the Saddledome (with a low roof) in a poor location (flood zone with traffic problems).

    “Yes men” and people with conflicting interests make poor decisions all the time…

    WW

    • tbh. I actually am not even sure a lot of smarter people than walter white came up with those designs. I’m very confident the renderings were done as part of a class project for an urban design class as part of the civil eng program at u of c. I have friends who were asked to submit concepts for West Village including an arena/stadia/filed house concept. They were all asked to sign confidentially agreements.

      Great Article @ Kent. Really great article. Thanks. Really too bad you’ll never see anything like this in the sun, hearld or globe.

      Here’s some other things to consider as well.. King will continue to frame this as this is good for the city. As “we’re not going to sneak in here and steal money from the city.” (Kiss radio interview back in March). How this anchoring of the arena-stadia will spark redevelopment to the area.

      Well what if redevelopment of WV fails? What if people don’t want to buy in the area? DO the Flames care? My guess is no and it’s a fairly good educated guess here’s why:

      KK in his season ticket holders address said: Bow Trail doesn’t need to move because it would cost 400m million more. This just stood out for me as exactly the kind of selfish enterprise this whole project is. It was a good statement because it in addition to the lack of road access and egress included in these initial plans shows just how little the Flames care about the development side of this. They don’t care if the city can’t pay back the CRL in 20 years. If they did they would have produced plans that realign bowtrail and address traffic issues of that area. At the end of the day if this goes ahead. We’re basically going to have a nightmare of having to fix the traffic around the area left as the legacy of this project. never mind any future Olympic bids, MLS teams, Fifa or track events we might miss out on. The legacy will be the nightmare of infrastructure in the area around a pretty stadium that the city will later be on the hook to fix so that people actually will wanna live, work and play in this area so that they can collect the property tax and economic benefits of such an area. The lack of plan for this shows how little the flames are invested in redeveloping the area and more invested in their bottom line and arena/stadia corporate welfare.

    • The Last Big Bear

      I agree, wholeheartedly.

      This is like the Simpsons’ “Marge vs. the Monorail”, except now a lot closer to home for Calgarians.

      This same story has been played out time and time again across the Globe, with the same requisite results.

      – see Senators, Ottawa (Kanata, ON)
      – see Coyotes, Arizona (Glendale, AZ)

      The Calgary ownership group can trot out niceties and buzz words and tug at the old heartstrings, but be clear, the only real beneficiaries of this type of deal (PPP) are the Calgary ownership group.

      “Look at this fantastic fieldhouse!” (though you can only use it when the Stamps aren’t training there, and you can bet we will get revenue from any events hosted there)

      “look at this practice rink that you as members of the public get to use!” (when the Flames, Hitmen et al) aren’t using the facility … and lets be frank, there are a glut of city-owned rinks and outdoor surfaces within 5 kms of the site).

      I don’t disagree that the current facilities are dated, relative to CFL and NHL peers, however, I believe that if the Calgary Ownership group wants to make this happen, then they have to foot more (if not all) of the bill.

  • The Last Big Bear

    I generally agree with this message of not handing out corporate wellfare, or building free arenas, but I think Kent is strongly overselling the negative side of this.

    1) The Flames kick in $200m cash up front. That’s not all the money, but it’s there.

    2) The $250m from the ticket tax also comes out of the Flames’ pockets. This is the Flames borrowing money from somewhere (possibly the city, possibly somewhere else, doesn’t much matter), and then repaying it by giving the lender a cut from each ticket sale. This is money that comes directly out of Flames ticket revenues.

    3) The city has already said it wants to pay $200m for a fieldhouse, on public lands, owned by the city, and with the city paying to operate it. They just haven’t yet decided when or where they want to build it. This proposal would see the city spend that $200m, and instead get a world class multi-sport mega facility, CFL stadium, NHL arena, conference centre, etc, with a rich and profitable corporate tenant to pay the bulk of the expenses.

    4) The CRL is not going to cost the city $240m. They’re getting basically nothing in taxes from the area now, and if this project sees the west village generate (inflation adjusted) $240m in taxes EVER, then the city has come out ahead. Any tax revenues that ever come from this area will go against that $240m, meaning that even if it never breaks even, the city will still not be anything near $240m out of pocket. The real cost of CRL is opportunity cost, namely other potential proposals that would see them spend $240m but then get the money back faster.

    5) If the city wants to develop the west village, the roads will be an issue. Whether it’s for an arena, or a mall or condos or whatever. No project developer is going to offer to throw in an extra couple hundred million dollars to fix the roads out of generosity. The Flames are even willing to make do and work around what’s in place.

    6) Somebody’s gotta pay to clean that contaminated land up, and it’s going to be the government. Probably the province. This is also money that is going to be spent sooner or later.

    The way the proposal was delivered leaves plenty of room for this to be a windfall or a boondoggle. The devil will be in the details.

    It certainly has the POTENTIAL to be a corporate welfare disaster.

    But it also has the POTENTIAL to see the city take $200m for a fieldhouse and end up with one of the world’s top athletic venues, and get big fat steady rent cheques from several professional sports teams. To see the city spend $240m on a CRL that will spur the development of what is currently dead space into an active and tax-paying downtown neighborhood in the city’s core, that pays for itself in tax revenues. And to also be better than Edmonton in yet one more way.

    It will probably end up somewhere in the middle, but I won’t go poo-poo’ing this proposal until more details come out.

    • If the city is going to pour money into a CRL for the area or for brownfield remediation, they don’t need the Flames in the middle of it, soaking up space, money and creating huge infrastructure demands with a giant arena.

      The West Village could be cleaned up and sold to developers at a pace that makes sense for the city. No Flames involvement required.

      • nikkomsgb

        Problem is the clean-up is an all or nothing proposition. So once they start it, they need to have a plan for how to justify the cost.

        it appears as though the only way CRLs are passed is when there is an anchor tenant. I don’t think it is possible without one, and I don’t know of another project big enough to justify the clean-up and guarantee the surrounding development.

        The argument you made about essentially supply and demand and a shift from elsewhere to the West end is interesting. But there are still surface lots in Eau Clair and area that need developing that would make it crazy to clean up the West Village without a project to attract new development.

      • The Last Big Bear

        I agree with all of this.

        As I said, the real cost to the city is the opportunity cost, of using the CRL money for this project when it could potentially be used on another project that might generate a better return on that investment.

        If the city gets $300m in revenues from the West Village over the next 30 years with CalgaryNEXT, when they could have gotten $400m if they’d gone with BigBearsBowlingBonanza, then the grossly oversimplified cost to the city is $100m.

        And the city might decide that coming out ahead revenue-wise on this arena, just not as far ahead as they would have otherwise, is a perfectly reasonable cost to get this stadium built.

        But THAT is the discussion that should make or break this proposal. Not how much money each party is paying up front.

        • BurningSensation

          I’ve enjoyed the back and forth so far between you and Ken, but the ‘opportunity ity cost’ cuts both ways.

          By having the West End languish as it waits for the city/province to determine site cleanup, there is a ‘cost’ in not pursuing a deal in terms of lost tax base revenues, and the ongoing blight of that area remaining polluted.

          Also, if we assume that:

          A. Flames kick in $200M, and
          B. Another $250M from the ticket tax (essentially a user-fee)

          That leaves;

          C. $200M for a fieldhouse (a promised, but as yet unbudgeted project)
          D. $2-300M $ in provincial cleanup $ for the site (likely unbudgeted at the proovincial level)

          E. ?in local tax increases to cover remaining shortfall

          Out of all that my only objections are;

          – No revenue/ risk sharing
          – Using the targeted tax increase
          – Lack of foresight. In 10 years went they want another new building, or massive and expensive repairs, who pays?

          I still don’t love the deal

          • The Last Big Bear

            Well, we just don’t know enough detail to decide whether this is a good deal or not.

            If the city owns the facility, how much rent do they charge the Flames, Stamps, Roughnecks, Hitmen, et al?

            if the city owns tha facility, and are charging their main tenants a couple of million bucks per year in rent, that would go an awful long way towards the missing property taxes that Kent is lamenting.

            On the other hand, they may pay a notional 1 dollar per year, on the justification that they’ve already paid about half a billion dollars to get the place built.

            That one issue right there has enough scope to turn this project decisively in either direction.

  • The GREAT Walter White

    Thanks for some sober second thought, Kent. I had similar thoughts when I heard the proposal.

    The Flames most likely have alternate plans, but we have yet to hear of them. They’ll float this one until it dies.

  • Interesting read, Kent.

    Is it just me or does anyone else feel like this is the con before the actual ask?

    This Calgary Next just seems so structured like the Edmonton deal (that has universally been understood to be massive heist by Katz at the public expense) to be for real.

    Ken King has always been a sales guy. I don’t think I can name a single guy who can talk for so long and actually say so little. And, as a sales guy, you NEVER come out with a first offer that is actually what you want.

    You lead with an offer that is so obviously a money grab, (insist that it is the only option) lobby hard, and see what happens.

    If you can actually get people to support the outlandish deal, then you thank the Lord above for pervasive stupidity and laugh all the way to the bank.

    But, more likely, the proposal looks and smells bad to just about everyone,and we move to phase 2.

    Now we get the almost standard hints about ownership having to maybe move the club if the city and province won’t deal. Then, when the media is hyping the crisis, and the public starts putting the screws to the politicians,
    only then do you propose the ACTUAL deal that you are after…

    In this one, you (the owners) pay a much more reasonable portion of the actual cost, get to look like heroes in the community, and then sit back and watch the city and province throw much more money at the new proposal than they would have ever done if you started with it.

    That is what sales guys do, and Ken King and the millionaire/billionaire owners of this club are nothing if not smart businessmen.

    I really hoped that, when this thing was released, that this ownership group(which I have always greatly respected) would not play this game and just cut straight to the chase.

    I guess, however, when the guys up north got everything they wanted and more, they just couldn’t resist the temptation to go for the home run…

    I hope that I’m wrong, but this whole thing just seems like the long con to me.

    • Yes. This very well may be an anchoring offer – the kind of offer that makes the next ask seem altogether reasonable, ensuring public buy-in through relative comparison. That’s why I note in the opening paragraph about not accepting the frame that this is a “negotiation”.

      • The Last Big Bear

        This is one thing I definitely agree with.

        It’s important to see this proposal for what it is. It is not a negotiation, it’s an unsolicited sales pitch by a profitable corporation attempting to get the city to pitch in a couple of hundred million dollars so the corporation can get even more profitable.

        As such, the default position of the city shouldn’t be “how much will be contributed by each partner”. The default position should be “NOPE”, unless the Flames can make a very convincing case otherwise.

        I think there is definitely scope within this proposal for the Flames to actually make that case.

        But I 100% agree that this shouldn’t be framed as a “give and take” negotiation. This is a sales pitch, and if the city doesn’t come out ahead, they should turn it down.

  • Great summary Kent.

    Quick addition on MSM reaction to be fair. The Globe&Mail immediately put out an editorial that said the city should NOT play along with the ask.

    I too am a great fan of the Flames and want better facilities for Flames and Stamps (et al). As a citizen, I’m not interested in paying for it except in buying tickets, jerseys, over-priced beer and other swag.

    I want a project to happen for a new home for the Flames. Maybe it’s this project, maybe it’s Option B (there’s always an Option B). But not on the city’s dime.

    I hate this argument but let’s state it again: Other businesses as critical or more so to Calgary’s economy are investing and aren’t as blatant as this in their ask:

    Imperial Oil is completing a new campus in Quarry Park that’s a major development of its Canadian HQ that I’m sure will be very expensive. If they’ve asked the city to pay upto 75% of it, they’ve done it quietly. Now, they may well pressure the city to accelerate the CTrain line to service the area (in 2018 instead of 2023)but that’s a different story.

  • Burnward

    When Canada’s leading experts on flooding and water question the location then we should at least listen. When economist around the world agree that this is a bad idea then we need to listen to them. I agree with most of what Kent has to say and until there is some significant movement on revenue sharing I just don’t see this happening.

  • 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?

  • 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.

  • Parallex

    This is the way I see it…

    What the public should pay: Environmental Clean-up, percentage of what they would otherwise spend on the Fieldhouse (percentage because the stadium, into which they are incorporating the capacity to also be a fieldhouse, won’t be open for public use 100% of the time) I have no issue with simply incorporating the fieldhouse into their plans in theory.

    What CS&E should pay: Everything else.

    Ken King is frankly trying to bamboozle the public by seperating out the ticket tax and CRL. Those are simply funding schemes, in reality he expects the city to pony them up for the project… he’s just seperating them out so that it look at a casual glance like someone other then the city is doling out the dollars. Likewise asserting that the city owning the land and buildings is a positive is also simply a way for them to sell what is actually a negative to the public as a positive to whom the idea of “ownership” is less nuanced then it actually is..

    If the Flames/CS&E want the city to invest any further in new facilities for their organization that is exactly what it should be… an investment with a reasonable rate of return on that investment. In my mind that means that the public get’s back every cent of it’s investment directly from the revenue taken from the project. Any CRL money should not be directed towards the athletic facilities… CRL’s get recouped by future revenue (AKA property tax) derived from the revitilization if the public owns the property then it’s not being restored. I have no issue with using a CRL to spur development of the rest of the non-publically owned WV but using it on property that will not return property tax is against the intent of CRL’s as a funding scheme.

  • Mr. King was on SN960 explaining how ‘people drive to the Saddledome and traffic is not an issue…’ (Paraphrase) Well the Saddledome is not next to 2 major traffic arteries…argh!
    Why don’t they build something they can afford.
    Great article, thanks for the insight.

  • 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

    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…

  • Burnward

    I think everyone in this city wants to see a win/win/win deal where the city, public and the owners benefit from new facilities. So if everyone agreed that the design and the site were the right answer then the financial discussions could go to hardball right away, again with win win win in mind.
    The problem here is the site! Enviro problems and infrastructure requirements that have to factor into the cost to the public and the city. On the other hand Nenshi cant say “just say no” either. Giving where Calgary’s economy is headed over the next few years the concept of some “public works” will sell to the taxpayers. We will have to bid on the 2026 Winter Olympics to justify all of this!

  • 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.

  • The only way I’d ever support this is if the Flames got more creative with their financing scheme. For example:

    Flames owners put up – $200 million private equity
    Take out a private loan – covers the $250m ticket tax.
    City – takes out loan to cover $240m of CRL portion, however, the FLAMES owners pay back this loan without interest out of the events profits over 20 years.
    City – cover $200m for the field house portion, however, city gets back 100% of any concession/parking profits obtained from amateur/public events held there.

    Flames CSEC pay the city a modest building lease to the city.
    The city/province/feds assume the costs to clean up the area and invest more money to realign the roads properly.

  • Matty Franchise Jr

    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.

    • Matty Franchise Jr

      Billionaire thieves? Seriously?

      You may not agree with the proposal but this is a bit much no? All the money they’ve donated to the community, and they are thieves?

      Disagree with putting tax payer money towards this project, fine – but I think they deserve a bit more respect than that.

    • nikkomsgb

      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.

      • Derzie

        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.

        • supra steve

          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.

  • nikkomsgb

    Great effort here Kent, and I agree that the MME are not going to present a balanced opinion, but you’re glossing over issues too generally here.

    1) The Saddledome will never be refurbished. it was a poor design that we have only seen with the benefit of hindsight. trying to fix it would be a huge waste.

    2) The ticket tax does not have to come out of taxpayer pockets, to imply that it will is somewhat presumptuous. The Flames said themselves that they WILL ask the city to front it, but could also look to conventional finance for it. I doubt this is a hill for them to die on.

    3) Building the arena outside of downtown is proven to be a disaster in virtually all instances. See Ottawa and Sunrise Florida as examples.

    4)Building on Stampede would be very difficult for two reasons:

    i) The Stampede put out plans a few years ago for redeveloping the grounds. Part of that plan is to build up Olympic way, next to the dome, with mixed use retail/commercial. That, to my knowledge would be the only place large enough to build.

    ii) The CRL that was used to develop East Village was drawn up to include Stampede Grounds. Therefore even if the Flames could get a deal for the land, they would be paying a significant premium in property tax, because of the CRL, without any of the benefits of it coming to them. No wonder they aren’t fond of the idea.

    For my money this is the Flames trying to exploit council’s long standing interest to clean up and develop the West Village. Council know the only way that is going to happen is with a CRL, which requires a catalyst….and this was the first crack at an offer. It’s a pitch and catch, so of course this is negotiating.

    All in all there really isn’t much to stress over. It will be years before anything is decided and this is a really complicated process with a lot of variables. No doubt councillors will be too scared to make a decision and put it to a plebiscite, so we’ll all get our say.