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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.

  • Deadmonton Exile

    Wait, the cities third WASN’T a loan?! Man, that is totally reasonable as far as all parties go. I guess the flames really wanted to dodge the property tax by not being the owners, which the city was pushing.

  • DMac

    There has to be more to it than this. . . And why is it that the Saddledome would have to be demolished? I thought that it might serve as a ‘replacement’ to the Corral and could be re-configured to handle trade show and convention space.

    • deantheraven

      I’d like to think they could come up with something to do with it as a venue for all levels of minor, especially junior hockey and Olympic Teams, figure skating.. If they knock down the Corral and The Big 4 like we know they’ll do, the ‘Dome could be the home of all this and a few Stampede acts as well. The Vic Park venue would house the Flames and be the venue for Big Acts when the Flames aren’t playing.

    • Backburner

      I think the original deal was giving the Flames the land north of the Saddledome to build the new arena, but would have to give the land back to Stampede Park. They have plans to redevelop the whole park.

      • McRib

        It would be cool to keep it around long enough to try and host a Memorial Cup or another World Jr Championship, but outside of that its a major cost and the most substantial point I doubt the Stampede wants it collecting dust on their property. If the Stampede really wanted the Flames to stay they would have offered up more land, but they seem to be avoiding that at all costs. I like Victoria Park more anyway.

  • Aadvarkian Abakeneezer

    The city’s proposal seems eminently reasonable to me. Makes the fact that King, Bettman et al. are tampering in politics and using their fans as pawns for profit that much more insulting.

    • Al Rain

      I think there is a fair bit of nuance on all sides of this (costs, profit, benefit). I do think that the negotiations being made public is a nice change, though. And yeah, I wouldn’t put much past King and Bettman.

      • McRib

        It’s weird how rational both sides are acting now. I wonder if the Flames didn’t get the response they were looking for from the public or the other two candidates, Andre Chabot opposed the crap out of public funding showing to be less favourable than Nenshi and Bill Smith was dragging his feet and didn’t seem to be overwhelmingly positive about using tax payer money either.

        Which is what I said all along, public sentiment has really changed in recent years. To the Flames credit I think they have finally realized this and I wonder if they did this all along to see how the public would react to doing this.

  • Al Rain

    Is there any contradiction in King saying that 1) the Flames no longer going to pursue arena in Calgary and 2) the team will release its offer for a new arena next week?

    It seems to me that Tuesday’s “bombshell” was the blatant negotiating tactic that it appeared to be.

    • Rocky Mountain Blues

      They are going to reveal the last offer they made before their last meeting, which was rejected by the city. So releasing it isn’t a contradiction but on the other hand, if there was a sign of movement from the city I don’t think there is any doubt the Flames would be back at the table.

  • deantheraven

    Let’s not overlook the 100% of all revenues bit. They’ll make back their investment and pay off the City ‘loan’ in what, five-8 years? The 27 years after that are all gravy. This rich bastards can live off the revenue and pay the interest without breaking a sweat. They’re ridin’ the train already! Nasty timing on their part for making this play an election thing. They ain’t leavin’ ’cause they’d never live it down. I hope it doesn’t sk(r)ew the election, but either way they won’t get a better deal than this.

    • McRib

      Plus if they went to a market like Seattle they would never get anywhere close to 100% considering the building would be build by a private group. Like I have said if they want 100% of profits, no more than 25% of city allocated resources should be used. If they want more taxpayers dollars, than they’ll have to share some of the profits. It’s as easy as that.

  • buts

    There’s a deal to be made here. I believe with the stampede board involvement, (which has been shockingly silent) they can be the catalyst as a new arena would enhance the grounds and increase there revenue while reducing the flames and cities investment. Also with a corporate partner getting involved, that can do the same. Finally, I believe it would be great to think big and add a combination field house stadium to a Victoria park arena with the above groups. Calgarians deserve it and its needed. Are we a major league city? I think so.

    • McRib

      “stampede board involvement, which has been shockingly silent”

      This silence has been so creepy, when major institutions are this silent on matters it makes you wonder, what backdeals they’re brokering. It sounds like the Stampede is of almost untouchable/mythical status with the city.

      I always expected the Stampede ro step up and say, well give you more land (or we won’t), but they have just remained erily silent. They must not want anything to do with a new rink, like many have said they must have different redevelopment plans for the grounds.

  • BringtheFire 2.0

    Wow. I just had a stunning thought: this is one of the few true public debates I have seen. Nenshi released council minutes and council’s full proposal. Now the Flames are going to release their full proposal, and we can judge for ourselves.

    This is a rare thing in politics and both sides should be commended for transparency.

    • Aadvarkian Abakeneezer

      Land, infrastructure upgrades and a third of the risk with a huge loan in difficult financial times? A loan, I might add, which would be paid back through a property tax that profitable businesses should definitely be paying anyway.

  • Rocky Mountain Blues

    Part of the problem with all this is trying to figure out the truth. I am certain that each side is selectively presenting the facts of their offers in a very nuanced way and also how they each describe the other’s proposal. Rumor having the Flames offering to pay 48% and asking the city to pay 52% and then Nenshi in today’s conference said that the Flames were wanting the city to pay it all and the Flames to pay nothing and yet take all the revenue and pay no taxes????? Again, the rumors that the City was providing a loan and now the city denies that and the insinuation from the Flames that the City is getting paid back???? It would be nice to have some neutral 3rd party that can cut through the b.s. from both sides and give us a clear picture of reality.

    • Chucky

      If you look at the proposal the split is 23.4% city and 76.6% Flames. The city will contribute $130 Million in cash that is a legitimate contribution.
      They claim they are going to contribute the land but retain ownership, if they own the land how are they contributing it, also the Flames will have to pay property taxes on the building that they erect on someone else’s land.
      The city thinks that they are contributing to a new facility by tearing down the Saddledome, a building that they own. So if I take down my garden shed somehow I am helping my neighbour build his house?
      The best one is that the Flames are supposed to borrow $185 Million and use ticket revenue to pay off the debt. Because the city considers the part of the Flames revenue used to pay off the loan a surcharge somehow the Flames aren’t paying it themselves. So when I buy a ticket for $230 and there is an additional $20 added on somehow that is my contribution. Of course when I go to Vancouver and pay $250 for a ticket I don’t get the opportunity to contribute. It would make me feel so much better to help out.
      The fact that the city could put out this nonsense and have anyone believe it is unbelievable. But then explain a Notley government.

      • dontcryWOLF88

        Not having to worry about what happens to the old arena once the team moves to the next is a big part of the reason sports teams dont want to own the building.

        Thats exactly the dilemma that our friends to the North are in with the old Oilers rink (Northlands Colosseum).

  • Fan the Flames

    It is difficult to evaluate either proposal based on the limited information . The chart by the city has the Flames paying 66% and I don’t know what the 130 million not from taxes means is this the portion the Flames are thinking must be repaid . The other concern I heard from KK on the Victoria Park location is will they be happy with the development around them . I do agree that the Flames would be better off investing their 400 million in something else vs an arena it would lead to a much higher ROI .

  • PrairieStew

    How about this – let’s buy the Flames from the current owners. I’ll need 20 000 fans to give me $50 000 each for $1billion. We pay Murray and the guys $600 million for the team ( last year’s Forbes evaluation was $410 m US ), then offer up the $400 to the City to get the building built as per this model.
    Forbes suggests that the Flames had $121 m in revenue and $18 m in profit for 15-16. One would assume these numbers would be better in the new building; so lets say eventually $30 m US profits – which currently is about $37 million C$. Slightly less than 4% return on equity. Assume that other events and concessions would profit enough to pay the property tax and boost the bottom line to say $50 million. I’d pay half of the profits in a dividend and set the other half aside for future development. Who’s in ?

    • WilliPlett25

      I’m in. Can you or Nenshi give me 66% of the $50G that I owe you and let me keep all the profits? I think this is fair … and it’s a brilliant proposal on my behalf. And if you don’t like it, there are plenty other cities that would love to have me.

    • Rocky Mountain Blues

      The only problem is giving a politician $400 million, they will use a little bit for this little project their friend wants done and a little bit on that project that one of his supporters wants and before you know it they won’t have the money. Not to mention that a government can’t build anything and stay on budget 🙂

  • moore_tweets

    Ok….firstly, can we not update the dome (a very iconic and historically important building in Cowtown), to modern standards?

    Secondly, can we not build more around it? Get rid of those empty parking lots and revitalize the area? Increase bars, show, etc.?

    Thirdly, if the Flames leave town, I’ll be mad AF!

  • Parallex

    In the words of Luke Cage… Sweet Christmas! The Flames have gone completely insane WRT arena demands…

    https://beta.theglobeandmail.com/news/alberta/calgary-reveals-offer-to-the-flames-for-a-new-555-million-arena/article36276378/

    … “The Calgary Flames, in negotiations with local politicians over a new $555-million arena, demanded the city pick up the tab for extra police needed at games and let people ride transit to the facility for free when the team is playing”

    “The Flames’ owners, according to one source, also wanted the city to pay for most of the arena’s construction. Further, the ownership group demanded an exemption from property taxes and rent, the source said.”

  • Stu Cazz

    Nenshi is an embarrassment and I hope he pays at the polls for making Calgary a stale city. On sports facilitates alone McMahon, Saddledome, Foothills baseball field, and NO amateur fieldhouse are because of his poor leadership! As a Mayor of a major city he has chosen to not Champion the development of new facilities. Other Mayors of Canadian cities got it done!

  • Just.Visiting

    The city’s proposal looks much more reasonable than what was being presented as being the case before this. There will be a surcharge on tickets to help pay for the facility, so I think the real question is who covers the associated capital cost against which the surcharge will be applied over time.

    If the Flames were smart, they would keep Bettman out of the city and ask him not to offer any comments on the discussions. Those comments apply equally to Brian Burke if he can’t stay out of angry mode.

    A shame that Harley Hotchkiss isn’t still with us to be the face of the Flames in this discussion.

    I think there’s a deal to be had once both sides come to grips with the facts that, firstly, they need to make a deal and, secondly, it’s always a lot easier to make a deal when you start looking at how you can make a deal, rather than why you won’t. Negotiations 101