Let’s Talk About Community Revitalization Levies

The centerpiece of the proposed funding package for the CalgaryNEXT project is a $240 million Community Revitalization Levy, aimed at transforming the West Village from a bunch of under-used land beside the river into a full-fledged community.

Of course, nobody really knows much about Community Revitalization Levies other than they’ve been used in the East Village. So I did a bit of digging, and here’s what I figured out.

THE CONCEPT

Here’s the gist: a Community Revitalization Levy arbitrarily draws a box around an area. Everything within that area is subject to the levy. Via the Calgary Municipal Land Corporation, here’s the basic concept:

Similar to the Tax Increment Financing (TIF) used widely in the United
States, the CRL provides a means to segregate property tax revenue
increases that result from redevelopment in the Rivers District into a
fund for infrastructure improvements. The City of Calgary levies and
collects the CRL through the property tax system and then allocates the
funds to CMLC to implement the Rivers District Community Revitalization
Plan.

So basically, you get a loan against the value of future tax revenues in order to develop the infastructure necessary for future development. In other words, you build the literal groundwork – roads and sewers and other such things – to facilitate future development.

THE EAST VILLAGE

Now, remember how I mentioned how you can arbitrarily draw a box? The construction of The Bow downtown technically fell within the confines of the East Village, so its tax revenues fell within the East Village and helped out with the levy.

From the Calgary Herald:

Coun. Druh Farrell said the Bow building was the “insurance” in the
East Village and almost eliminated any risk of the community
revitalization levy failing to pay down the debt.

“It would still be successful without the Bow,” Farrell said. “(But)
the Bow enabled us to go to the province and make a business case, show
that we’ve looked at every scenario to mitigate risk.

“Most people see East Village and see it developing, but they don’t realize the rigour that went into mitigating risk.”

Even if the redevelopment of the East Village took forever, the tax revenues from The Bow at least ensured that there wouldn’t be zero dollars coming in against the value of the loan. So you can have things like the National Music Centre and the new public library going up in the East Village and not drawing in a ton of money in tax revenue because you have The Bow operating as a big shiny tax generator for the whole area. It was built first, and it allowed the developers to have a bit of confidence in the financial side of the process.

And that’s the rub.

THE WEST VILLAGE

Let’s just say that the idea for the West Village is that the CalgaryNEXT development, owned by the city, would be the big anchor project for the revitalization zone. The big, obvious problem with that is that as a city-owned project, the city wouldn’t be able to collect tax revenue on itself. So you wouldn’t have the big, shiny tax generating anchor project that would allow them to have a safety net with which to fund everything else, or on which to make a business case to the province for the levy in the first place.

A Community Revitalization Levy for the West Village makes a great amount of sense as a concept. As a mechanism to fund infrastructure, they can work really well – as long as there’s a tax-paying anchor tenant in a particular revitalization zone to provide some back-stop tax revenue in case development is slow at the beginning. CalgaryNEXT doesn’t fit the bill, and actually feels like a second piece of the puzzle – akin to the National Music Centre or the new central library – a big cultural piece that can’t be relied upon as a tax haven.

For now, with all the expensive work that needs to be done in the West Village – even ignoring the creosote issues – using a revitalization levy to fund the CalgaryNEXT project itself doesn’t seem to make much sense. But if somehow they lure in a big, expensive, tax-paying anchor tenant to pair with CalgaryNEXT in the first bit of development in the area, then all bets are off.

  • Parallex

    yeah, that’s the biggie with the CRL. where does the city get the $$ to build the utilities for the rest of the district if they use 2/3 of it on just the complex. The roads, sewers, power grid aren’t going to build themselves.

  • Reidja

    One question that I haven’t heard addressed is how a field house can impact development potential relative to a sports arena. We have all heard that arenas don’t encourage development, but does this other use provide more potential?

  • piscera.infada

    It’s a wonder that there is anyone left at all who supports this project in any way in it’s current design.

    The article along with dozens of others have shown the CRL to be a highly inefficient way to pay for the building due the city owning the building while probably waiting years for other buildings/tenants to pop up who will actually be paying into the CRL all while that 250 million has been spent.

    The ticket tax only works if people are going to the games/events. If the teams fold or the teams are terrible and people are not attending like they did, what then?

    The 200 million in funding from the Flames is probably a giant smoke screen. If it’s the same funding scheme that Katz has in Edmonton the Flames could contribute as little 30-40 million up front while ‘contributing’ the rest of the amount as rent over a 30-35 year lease (which is what Kats did, only put up 17.2 million of the initial construction costs and the rest of the 160 million he is suppose to contribute will be paid back over 35 year lease).

    And then there’s the 200 million for the field house. I’d like to see what the city of Calgary’s vision of a field house is versus what the Flames vision of their stadium is with a field house added on is. There’s also the question of who will run the field house or if the Stamps/Flames will have control of that building as well and will run the field house as a separate business on behalf of the city.

    All of this as well fails to take into account the creosote and infrastructure upgrades. But if I heard Ken King correctly on the radio, those are upgrades and things that need to happen anyways so they are not factored into his building costs. But King of course fails to present is that those things would be paid off by future taxes generated by future development there, so it wouldn’t be a big issue. But the issue is, if his development isn’t paying taxes it doesn’t make sense.

  • Reidja

    The more and more I read about this proposal the more I am against the location and the way the proposal seems to be favouring the owners. If the largest square footage user is an entity that does not pay taxes how will the tax payer ever be off the hook. The sports ownership will get their money back via their userfee and the other revenue generated by the complex. The city will likely be responsible for insurance, repairs and any other additional costs. Meanwhile the owners want the revenue for all the events, naming rights, concessions etc. Sorry but as much as I see the need for new facilities and my love of sports this is a poor use tax payers dollars. Find a better location come up a fair proposal and then lets talk about it.

    • Karachi Vice

      Fair comments…but a negotiation never starts until someone makes a proposal….good on the Flames sports group for getting this off the ground….they are in need of facilities for their respective sports franchises….they merged their needs with those of the City….if we wait for the City to get things rolling then it will never happen….the much needed amateur field house would remain in the back burner as it has for the last 10 years, the remediation issue would remain to be a hidden issue without any public awareness (for the most part) and potential west end expansion being ignored, the Crowchild traffic snarl and subsequent need of interchanges will remain to be ignored despite a city engaged consultants report that recommended major needed upgrades….good on Murray Edwards and team for stepping up and proposing a collective approach to the many private and public projects that are required….negotiations remain open and yes I eventually see the Flames group absorbing more of the costs but don’t expect private sports owners to cough up dollars for municipal projects…and vice versa……

  • CMG30

    I’m new here. Well, to be entirely honest, first time long time caller. I’ve enjoyed reading you hooligans for awhile now, and figured I’d take this opportunity to talk about my self.
    I love the plan. I love it because I can bike to it in 5 minutes instead of drive/bus/per stinking ctrain to it. I love not having to pay 20$!?!? to a meth head for parking. I love that it can be a future place of convenient employment for my kids.
    I know, like really know, that it makes no real sense beyond the fact that the Dome suuuuucks for anything but tv angles (honestly, games look great from there).
    And then I drove through Marda Loop last night, and I realized that the biggest reason that this plan exists is to cater to its lower bowl affording residents who mostly (I’m not being a snob, just driving along 33rd ave sw) live within 3 minutes of the 4 overpasses that go over Crowchild between 50th ave and 17th ave.
    Westside Money Yo!

    • prendrefeu

      Yep.
      Money talks.
      https://www.youtube.com/watch?v=2lqdErI9uss

      I hope there is some kind of intelligent compromise that makes this thing actually happen. Perhaps the ownership would take on more of the costs… like much more… like 70-80%. That whole creosote thing is another issue, but it needs to be addressed regardless for the city’s health and progress for decades/centuries to come.

      I’ll speak about what happened here in Los Angeles with the Staples Center / Nokia Theatre and all the buildings that came with it… I think it’s called “LA Live!” ? I’m not sure. Anyway, yeah it cost a lot of money. We, the residents of the City, ended up footing the majority of the bill. AEG profited. Ticket prices also went up…. but on the note of what actually happened with the area beyond the stadium itself, I have to say it’s been a massive success. Downtown LA has had a swell of changes over the past 10 years. Once a place that you would avoid at night it’s now *the* destination to be at, and it doesn’t matter if you’re thinking about the areas in the East, South, or Western parts – which each grew and developed separately – the complex of buildings that came along with the Staples Center development has been a focal point of growth for the area. It’s bustling virtually every day of the week, even when the teams out here are not playing or there isn’t a concert/show/awards ceremony/whatever. Bars and restaurants are active, hotels are filled, lofts rented… kinda ridiculous to think about it after knowing the area too well for decades.

      Yes, I totally agree with the likes of John Oliver and others that the owners should foot the bill and not ‘abuse’ their place in the city’s entertainment environment. That said, the arguments that the developments do nothing is a bit of a blanket statement. They work in some cities, they might not work in others, but they have the real, actual potential to be successful and not only improve that one section of a city but reach into the surrounding areas as well with growth.

      Trash away on this comment.

      • MonsterPod

        A fellow LA-living Flames fan here

        LA Live is rockin’. Granted, they have three tenants — Lakers, Clippers, and Kings — as well as non stop concerts and events, but if Calgary can take a page while having an attached practice facility (Kings practice out by LAX), they could really create a cool and useful hub.

        My dad is a long-time Flames season ticket holder. He loves to see LA Live when he visits me, and understands that the Dome is beloved, but behind the times.

        CGY has over a million people now. It’s time for a big boy project. Looking forward to seeing what they eventually put together.

        Sidenote: Living here, I know what a hellhole Stockton has become. I’m actually worried for the safety of our AHL players. Gonna be a real culture shock, especially for some of our Scandinavian prospects who have likely never seen such social deterioration. Wishing them the best…

        GFG

        • MonsterPod

          Comparing the Lakers, Clippers and Kings to the Flames, Stampeders, Hitmen and the NLL(sorry lacross fans but the team name has slipped by me)is sort of silly. That’s 3 high professional teams vs 1. @41 pro games Calgary vs @123 LA is not exactly similiar. @1m Calagrians vs how many in LA? Weather in the winter in Calgary vs LA one of these things is not like the other.

  • Reidja

    Nice work Pike. I have also found that these CRL’s are under review by the province, who the loan comes from, so they may not be available. Also the biggest thing that I learnt and you pointed out here is that the city wouldn’t be collecting very much revenue (tax, etc.), making this CLR proposal a very bad idea.

    I have to say that I would fire Ken King for his incompetence in developing this project. After several years he has come up with very little.

  • prendrefeu

    In my opinion the best location for this project, is and always has been, the area from 12ave SE to the CP rail tracks, and from Olympic Way to the Elbow River.

    Plenty of space, lots of parking.

    Future green line LRT station right there, not much further to walk to Stampede or City Hall stations then you have to walk now to/from Stampede station.

    Yes, yes you are worried about flooding. First, so what, I mean really if insurers are ok then why would I care. Second, there are and will be billions invested in the east village area, and no one seems to upset. I don’t think this is as big of a deal that it is made out to be. Think creative, hire some good engineers, and get er done.

    Also pony up owners, this is your business. We fans, tax payers are not shareholders in YOUR business.

  • Section205

    Since everybody seems to be city planners now…

    I’m thinking about “revitalization”, and I realize that a lot of the economic activity (condos, offices, shops restaurants etc) is going to draw from other neighborhoods in the city. BUT…

    Some issues that Calgary has:

    1. Massive population growth last 15 years. we build a lot of everything. The question is… where?

    2. Extreme urban sprawl. Commercial developments in outskirts/outside of town. Suburbs growing without any “incentives”. HOWEVER… suburban growth is expensive for the city (services, transit, etc) to maintain.

    The city needs to revitalize downtown (west and east). So much sunk dollars invested in transit/infrastructure downtown. Better to maximize those resources before spending too much on adding more suburbs.

    This project will obviously lead to new development around the site. Could easily support a new office tower for an anchor tennant. This will take away from or slow down suburban development. More businesses, jobs and residences downtown instead of in the burbs. This should be very good for the city.

    • prendrefeu

      Your right in that the city needs to develop a strong and more dense inner-city. That has been happening for decades now and will continue. The thing is the city doesn’t “need” this arena the Flames et al do. So if they want to have their cake they need to pay to eat it.

    • CMG30

      Will it lead to new development? I doubt it. At least Edmonton had the excuse that their arena wasn’t downtown, it was in the middle of nowhere. Calgary already has an arena downtown, so what sort of new development do you imagine is going to be stimulated by moving the arena from one side of downtown to the other? At best it’s going to pull from the east side to the west.

      Further more, the only reason that the West Village hasn’t already been developed is because of the contamination. That’s the reason there was a CRL for the East side, to clean up the site. After it was conditioned development took off. There is no reason to believe that a city like Calgary with a dynamic core needs an arena to ‘stimulate’ anything. For these reasons a CRL to build the complex would be a foolish waste of tax dollars.

      I do agree with your assertion that it’s better to grow within rather than continue the sprawl. Still, a new arena is not the way to accomplish this for Calgary. The city already has a plan similar to the East village project lined up for the West. They are waiting for full build-out of the East first though since they don’t want to essentially compete with themselves for development dollars. Plunking a giant sport complex in the middle of the land actually takes up valuable space and lowers the density of both living spaces and potential jobs for the area. Again, we have an arena downtown and it’s nowhere near the end of it’s useful life, nor are the Flames hurting for profit playing there.

  • Karachi Vice

    @Scarface

    Ha! I wish I were that clever…

    Next time I have anything personal to add (cuz I’m neither that clever nor that analytical) I won’t type it out on my phone.

    No more blocky letters!

  • The Last Big Bear

    Why are we assuming that property taxes are the only possible revenue the city could get from this project?

    Will the Flames and Stampeders be staying there rent-free in perpetuity? Will the U of C Dinos also get to use the facility for free? Will conventions and conferences be able to use the facilities without paying any fees? The Rolling Stones won’t have to pay when they use the place for their 2025 tour?

    It’s just weird that you’re assuming the city will have zero revenue flow from a billion dollar multi-use complex in the downtown core.

    • piscera.infada

      It’s just because that’s usually how the deal ends up. Generally, the ownership group keep all profits of the shows, conferences, naming rights, and extraneous sporting events. “Nominal leasing of the building” is usually assumed as well.

      I mean, sure, perhaps CSE are better citizens than that, but I wouldn’t place any bets on that considering that any question even close has been avoided like the plague.

      The part that would hurt with CRL isn’t just lost property tax from the stadiums, but the entire development as a whole.

      • The Last Big Bear

        But the City is the ownership group in this case.

        And nominal leasing may be fair in this case, because the Flames are kicking in a couple of hundred million dollars to get the place built.

        But with that undecided, and with revenue splitting undecided, it’s completely premature to be saying the Flames will get all the revenues, and the city will get none.

        I think it’s unlikely that the Flames are honestly proposing for the city to spend $400m+ to build a facility from which the city will see zero revenue and zero taxes.

        I’m sure they would like to keep the naming rights, and keep all the revenue from concerts and stuff, and pay no rent, but they probably know that they’re unlikely to get hundreds of millions of dollars in funding without throwing the city a single bone.

        • The Last Big Bear

          What one can assume(and I know what assume can be turned into) is that the Sports organization group wants the same deal as all other sports organizations get and that will be their starting point if it wasn’t then I suspect it would have been hilighted at the outset as a selling point to the taxpayers. At this point the sports organization is likely to want as much revenue as possible and as little outlay as possible(that’s how all big businesses work). They have a plan(ticket userfee) to recoup their expenses and have suggested the levy as the way for the city to recoup it’s expenses however if the biggest footprint is the west village is city owned then it is mostly tax exempt reducing the revenue from taxes in the area. However if the sports management group owns the building they would have to pay taxes, pay for the insurance and pay for repairs and updates instead the taxpayer will be on the hook for these.

          Until a fair revenue sharing system is finalized then we as tax payers need to be very concerned about the costs. There will likely be serious overruns, likely unexpected costs, the cost of the clean up, and then the additional infrastructure around the area. These things need to be done but on whose agenda; the cities or the sports management group? Then of course there is the concern of building on a flood plain which is at least something that must be discussed.

        • piscera.infada

          All we really have to go by is past experience in this case though, and majority of past experiences (yes, they were different municipalities, I concede that) show that your “unlikely” scenario is exactly what happens the vast majority of the time.

          As I said above, CSE may, in fact, be better citizens than all those previous ones. I have a hard time believing it though until they have something in the way of a concrete answer about it. That is, of course, something over an above “the city deserves ownership of the [depreciating] asset [that will never be profitable again, after we decide we need a new one in 20 years]”.

    • Karachi Vice

      Well,if I’m just not mistaken, didnt someone mention a possible ticket tax?

      I love the Stones, a lot, but I ain’t paying $250 future paperless bucks (I will call them CanaCreds when I am Optimus Priminister of the Future) to see Mick fall out of his hovering wheelchair.

  • piscera.infada

    Who determined that we need a new stadium?-Ken and Murray? Where is the proof that we need a new stadium? We already have one of the largest arenas in the NHL. Why don’t they spend their paltry $200M in upgrading the roof and concourse?