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Flames and City debate merit, contents of City’s latest arena offer

Mayor Naheed Nenshi and several members of City Council were on hand at City Hall as the municipal government’s latest offer to the Calgary Flames was unveiled. The deal was largely consistent with what was previously reported – a three-way split between the City, the Flames and a ticket tax – but some of the mechanics were slightly different than previously reported (or not as cemented as some may have liked).

Later in the day, the Flames responded with a press conference of their own.

The big pieces of the deal are largely what we previously discussed, with the total cost of the building – including property and demolishing the Saddledome – at $555 million.

  • $185 million from the City, but not as a loan
  • $185 million from the Flames
  • $185 million from a ticket tax, though they were negotiating which entity would front the money for that (the City can borrow money at a much better rate than the Flames can, but their proposal had the Flames fronting the money)

(The City also included some indirect costs, which were included with the rationale that they would have to be incurred for any development of this type to happen in the area – because the Flames get there first.)

Per Nenshi, it’s yet to be determined where the $185 million would come from. The thought process from the City’s standpoint was that the Flames would own the building and get all the revenue, but the City would recoup some of their investment via an unspecified mechanism (possibly via property taxes). Nenshi noted that the Municipal Government Act has an exemption in property tax regulation, so the amount of property tax would be negotiable – he floated out a $5 million figure as “reasonable.”

During his opening remarks, Nenshi mentioned that the City engaged sports economists to get an idea of how much more revenue the Flames could generate with a new building. When asked about the extra revenue generation capacity that a new Flames building could have, Nenshi declined to comment citing a confidentiality agreement – but threw out the hypothetical $5 million figure for property taxes and said the additional revenue generation capacity would easily cover it.

Speaking later in the day at the Scotiabank Saddledome, Flames President Ken King disputed some of the details from the City’s proposal. Specifically, he noted that the ticket tax was Flames revenue and paying back the City for their contribution would also come from Flames revenue, so from their perspective they’re still being asked to pay for the building entirely. (The inclusion of the indirect costs in the City’s proposal was also criticized.) King also mentioned, when asked about development around the new arena compared to the Saddledome, that they wanted to be sure that the new arena wasn’t just another situation surrounded by parking lots.

In their two media availabilities, Nenshi and King were both asked fundamentally the same question (in different ways): what is the City getting for contributing to what’s basically a building housing a private business?

“There’s two things,” said Nenshi. “Number one is the city’s getting a team in downtown Calgary and Calgarians have told us there’s some value to that. But the more important thing is what I talked about on Monday. We’ve seen that the Saddledome has not achieved anything in terms of development around it, in terms of developing Victoria Park … To get this right, the arena can work as a centerpiece for new development but it has to be very thoughtfully.”

“Why don’t we all agree on what public benefit is?” said King, responding to whether the Flames required public funds to make the building feasible. “Why don’t we all agree on what payback is? Is it social? Is it cultural? Is it financial? … The payback is massive. It is called a Community Revitalization Levy for a reason. You invest money, you build things, the taxes that come from those things pay the city back more and more and more and forever. And we are the catalyst for that, unless you don’t think we are.”

Nenshi emphasized that the City is still at the table.