Examining Ken King’s CalgaryNEXT Update

It’s been a while since the Flames released anything new on CalgaryNEXT. After the initial concept and website reveal, Ken King has been engaged in a media and PR junket to try to sell the project. 

It hasn’t gone well. 

Gary Bettman’s ill-advised attempt to give the project a shot on the arm backfired on the club. With the commissioner’s visit increasing, rather then assuaging, scepticism, it’s fair to say the organization has lost the initial battle to capture hearts and minds. Even the ardent fans at Calgarypuck give CalgaryNEXT an overwhelming thumbs down. 

Ken King’s PR update video above is the Flames’ latest salvo in the PR war. It’s therefore worth examining the claims and statements he makes in detail. 

“CalgaryNEXT will be a catalyst for downtown’s west end. Across North America stadiums and arena projects have shown to have a transformative effect on communities…”

This isn’t a good start. The claims of arenas being effective development catalysts are always made by the teams and developers who stand to profit from those ventures, but are rarely backed up by evidence.

Economic studies have shown overwhelmingly that arena development project subsidies are a bad bet for the public. If you search through scholarly articles on this topic, you will find this sentence (or variants of it) over and over again:

The primary beneficiaries of subsidies are the owners and players, not the taxpaying public.

It seems counterintuitive that such a massive project can fail to deliver on economic promise, but there’s a couple of points to consider that the teams don’t talk about. First, that the stadiums are rarely the most efficient use of public money: 

Economic growth takes place when a community’s resources—people, capital investments, and natural resources like land—become more productive. Increased productivity can arise in two ways: from economically beneficial specialization by the community for the purpose of trading with other regions or from local value added that is higher than other uses of local workers, land, and investments. Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers.

A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment. 

And second, that the economic activity the arenas do generate tends to be small and concentrated relative to other ventures: 

“If every sports team in Chicago were to suddenly disappear, the impact on the Chicago economy would be a fraction of 1 percent,” Leeds says. “A baseball team has about the same impact on a community as a midsize department store.”

“CalgaryNext is also going to fulfil the top unfunded recreational priority for the city: a fieldhouse.”

I don’t know what “fulfil” means in this context, but all the CalgaryNEXT project does is move the fieldhouse – and its proposed $200M budget – next to the arena in West Village and ask that the Stampeders get a free place to play out of it. The Flames aren’t helping the city to fund the fieldhouse – they are trying to free ride on the project once the city finds the money to build it. That’s it.

All the ballyhoo about the city not having a fieldhouse in the video can be safely ignored because it really isn’t pertinent to the discussion. The City of Calgary likes the idea of a fieldhouse and has looked at building one in the past, but hasn’t figured out a way to fund it yet. 

Here’s how the hypothetical conversation between the team and the city would go on this topic:

Flames: “Hey, wouldn’t it be great to have a fieldhouse?”

City: “Yup, we’ve wanted one for awhile. We figure it will cost about $200 million to build. We aren’t sure how to justify the cost budget-wise right now though.”

Flames: “How about you just roll the $200 million cost into the arena district we’re planning in the West Village? Then the Stamps can play there too.”

City: “What? That doesn’t change the problem of funding it.”

Flames: “Can you imagine all the things the city can do with a fieldhouse? Did you know Calgary is the only City in…”

City: “You’re not answering the question.”

Unless the Flames come along and say “we’ll help pay for the fieldhouse”, or bring something new to the concept of the fieldhouse, any discussions of a fieldhouse aren’t useful. It would be like a neighbour telling you to buy a hot tub for your backyard so he can use it once in awhile. And when you tell them you’d like a hot tub but can’t afford it, he starts regaling you with the benefits of a hot tub. 

“CalgaryNext addresses needs in an economically sensible way. By developing a multi-sport athletic complex, we’re able to take advantage of shared space and efficient design that will provide a substantial savings when compared to building separate facilities. It represents a savings of approximately $330 million.”

These claims of big savings are on the CalgaryNEXT website and it seems to be one of the pillars of the Flames’ pitch, but I have yet to really see these numbers meaningfully backed up anywhere.

I can only determine that the CalgaryNEXT pitch is rolling in a bonus “event centre” into the proceedings. It’s rather unclear what they mean by this, but from what I can tell the club considers their vision of a combined fieldhouse + arena as a stand-in for another, separate “event centre” (not that they are actually building a third thing which they’ll call an event centre in CalgaryNEXT). 

Of course, even if the $330 “savings” are real, they will likely be dwarfed by the creosote remediation and infrastructure spending that would have to go into West Village for this project to happen anyways. 

“Over 50% of the project’s funding will be coming from Calgary Sport Entertainment Corporation contributions.” 

Not really. $200 million of the proposed $890 million comes directly from the Flames ownership / CSEC. The other $250 million they are suggesting comes from the Flames will actually be from a user fee, meaning Flames fans will pay for it. Of course, the initial bulk payment will have to be fronted by the city and then repaid over time with a ticket tax.

While it’s true the public at large aren’t technically on the hook for that amount, it still represents up front risk. Particularly since we don’t know the details of the repayment schedule – often times teams will seek to drag repayment out over years or even decades so as to limit the impact on ticket prices. Which means tax payers help service the debt required to one degree or another. 

A ticket tax also means that the CSEC isn’t actually contributing anything more than the proposed $200M. User pay funding will simply be layered on top of regular ticket prices.  

“Our proposed use of the Community Revitalization Levy, or CRL, will help develop infrastructure required to set the stage for CalgaryNEXT. It’s also going to go towards the revitalization of the West Village arena.”

We’ve discussed the complex bets that are CRL’s in this space previously. Here’s the takeaway conclusion from that article:

One final note in all this: if the city of Calgary wanted to use a CRL to redevelop the West Village, they don’t really need to have the Flames organization involved. In fact, with the arena district soaking up so much real estate and development dollars (without the attendant benefit of property taxes) it’s fair to argue the city would be better off pursuing a West Village project absent the Flames’ involvement altogether.  

Like the fieldhouse, the Flames are presenting a West Village CRL as an easy win and the CalgaryNEXT project as an integral aspect of the concept. Neither is true. 

Of course, having the filedhouse built (for the Stampeders) and using a CRL to help pay for the Flames arena project would be greatly beneficial to the Flames ownership group, but they don’t really want you thinking about that. That’s why they’ve reframed the discussion to obscure these facts, positioning everything as a huge benefit for the city instead. 

King finishes the video by handwaving away the very real concerns about parking, access and egress from the proposed facilities, as if the team has the answers in hand. More likely they have this marked down as “city will have to figure out later”. 

Conclusion

King’s video is merely an echoing of talking points, not a presentation of any new facts. 

We still haven’t even seen a true design for the area, nor has there been a presentation of remediation or infrastructure costs. We don’t know who would be responsible for arena upkeep, if there would be a split of arena revenues between the city and team or what happens 30 years down the road when the proposed CalgaryNEXT facilities need to be upgraded or replaced. And that’s just to start. 

There will no doubt be an economic impact study done soon as well as the price to clean up the creosote contamination. Until then, there’s little else for us to consider. 

More articles on CalgaryNEXT

How to Think Critically about CalgaryNEXT

The FlamesNation CalgaryNEXT primer

Thinking Critically about CalgaryNEXT: What’s a CRL?

Random Thoughts: CalgaryNEXT edition

CalgaryNEXT, Ticket Prices and Scarcity Economics

  • MontanaMan

    Look at every other arena project in Canada and tell me how many of those were paid exclusively by ownership. It is completely naive to suggest that the Flames pay more than other franchises have across the country, including the Oilers. I just read your federal budget – sweet mother – there’s a lot more waste in that budget than any arena proposal!!!

    • Colin.S

      Vancouvers Stadium was financed privately, Toronoto’s was as well. I even think Winnipeg’s arena was privately financed. It’s an entirely doable concept. The problem becomes that there are gullible people like yourself that buy the garbage that Ken King puts out there.

      • Newbietwo

        Each circumstance is different.. Let’s look at Toronto and Maple Leafs Sports and Entertainment .. They actually turn a profit have millions more fans and look who owns them!!

        Now look at Calgary Sports and Entertainment.. Barely if ever turns a profit.. Now you say they are owned by billionaires.. Sure their net worth might be that of their Oil Companies but their individual wealth very well isn’t and most likely is Asset based on cash rich based.. Now with the markets more than ever!

        So your asking individual ownership a who yes are rich by Essenes if the companies they created and made to personally fund this!? Makes no sense

        That’s the problem here.. Everyone has an opinion but few know what they need to know or real business.. If that elks I am sorry..

        Realize the situation and come to the table.. A large portion of the funding is deferred based lending when rates are lowest ever in a market where you don’t even get interest if your money sits in a savings account..

  • BlueMoonNigel

    Can’t wait for CS&E to issue the ultimate ultimatum: approve our project by such-and-such a date or else the Flames will be relocated to Tacoma or Cleveland, the Stamps will be sold to the Horn Chen Jr., the Hitmen are relocated and reborn as the latest incarnation of the Winnipeg Monarchs, and the Riggers become the Dallas Tornadoes. As for Calgary, it becomes a sports wasteland. Watching drunks take a round out of each other at C-Train stations becomes the number one spectator sport in the barren city.

    KK is good at hardball. The entire reason he has kept his job for as long as he has is that he is the one the Flames want spearheading the charge for new digs. KK plays hard and he plays dirty. Screw the effort and having fun. KK plays to win as evidenced by his tattoo which reads, “Win or die trying.”

  • Edwards moving to London for tax purposes via the Calgary Hearld.

    How long before the “If the City doesn’t pony up we’ll move threats begin next”
    Oh but we won’t do that KK says. “We won’t ride in on our horse like a bunch of bare handed bandits”
    Whatever KK says is a lie. I don’t know why anyone listens to him.
    And the shameless plugging from Eric Francis and co. is shameful they should all be called out on it.

  • King Quong

    Might as well let Alberta and Calgary pay the whole thing Trudeau is making the entire country 30 bill In debt with no plan to get out why not follow suit!