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 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.

      • 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.

      • 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.

  • 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.

  • 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.

  • 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.

  • 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.

  • PrairieStew

    This one is so tough. It goes against all that is sensible to subsidize the billionaire owners, yet you know that unless you do they will walk. It is at times like this you want to start a community corporation and buy them out. Do you think I could sell a million shares at $1000 each, buy the owners out for $500 million, put the other $500 in to the building and finance the rest? A 20 year mortgage for $500m at 3% is 33.6 million in payments. Surely to goodness we can turn that kind of profit on the complex and all of the teams.

  • 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

  • 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…

  • 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.

  • 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.

  • 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?

  • 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.

  • 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!

  • Big Ell

    I agree with Pizzaman, which is awesome. I think this is just the beginning and the whole project will be pulled together by an Olympic bid in 2026. Then the feds will put in cash especially if Harper gets back in. Few countries are bidding on the winter Olympics these days and it would spread the pain around. The Olympics are a different level of economic boondoggle. I am not saying I think this is a good idea, just a theory.

  • 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.