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Public funds could cover half of new arena, exceeding current trends

According to a report from LiveWire Calgary, the public contribution to the proposed new Calgary Flames arena could be in the vicinity of $300 million. This would be roughly half of the estimated cost of the facility.

But it’s important to put both the dollar figure and the proportion of total costs in proper context. Is covering half of a new barn (or spending that amount of public funds on one) out of the ordinary?

In looking at the five buildings constructed for NHL clubs, the short answer is yes.

Belmont Park Arena

  • Future home of the New York Islanders
  • Opening in 2021
  • Owned by New York Arena Partners (the Islanders, Oak View Group and Sterling Equities)
  • $1 billion estimated construction cost, including adjacent development (all funded privately)
  • Public funds covering 0% of direct costs – though some indirect costs may be contributed from government (such as land)

The Islanders and their development partners won a Request For Proposals competition held by the state government to develop a plot of land beside the Belmont Park race track. There’s some whispers that the arena is behind schedule, but they’re expected to break ground this spring and be ready for the 2021-22 season.

Seattle Center Arena

  • Future home of the Unnamed Seattle NHL Team
  • Opening in 2021
  • Owned by the City of Seattle, leased to Oak View Group
  • $800 million estimated renovation cost ($3.5 million public funds, $796.5 million private funds from Oak View Group and their partners)
  • Public funds covering ~0.4% of direct costs

It’s worth noting that Seattle got a really good deal for the redevelopment of the centrally-located (but old) Key Arena:

Under the deal, ArenaCo will be required to pay the city about $5 million per year, which the city says is about how much it currently makes from KeyArena. Revenues beyond that $5 million will be split between the city and ArenaCo, with 75 percent going to ArenaCo for the first decade and 50 percent after that.

While ArenaCo will cover the costs of the project, including possible overruns, the company will also receive some public benefits. The city will pay ArenaCo about $350,000 a year for the first 10 years of the deal to cover the sales tax ArenaCo will pay during construction. The city will also pay ArenaCo any admissions taxes collected on tickets for events at the new arena beyond the amount the city currently collects from admissions taxes on events at KeyArena. The group has applied for $70 million in federal tax credits.

Little Caesars Arena

  • Home of the Detroit Red Wings
  • Opened in 2017
  • Owned by the Downtown Development Authority, leased to Olympia Entertainment
  • $862.9 million construction cost, including adjacent development ($324.1 million in public bonds and tax capture, $538.8 million from Olympia Entertainment)
  • Public funds covered 37.6% of direct costs

Faced with a shrinking tax base due to residents moving to the suburbs and juggling actual bankruptcy, the Detroit leveraged some tax capture – similar to a Community Revitalization Levy – and fairly complicated public bonds to partner with the Red Wings’ ownership on a fancy downtown development in an effort to revitalize their downtown.

Rogers Place

  • Home of the Edmonton Oilers
  • Opened in 2016
  • Owned by the City of Edmonton, leased to Oilers Entertainment Group
  • $480 million construction cost ($337.81 million from various government sources – a CRL, lease funding, reallocated subsidies from Rexall Place and other funds – plus $125 million from a ticket tax and $17.19 million from the Oilers)
  • Public sources covered 70.4% of direct costs

Seeking to revitalize their downtown area, the Edmonton leveraged a bunch of different funding mechanisms to foot the majority of the bill for the new Oilers arena. The local government also gave Oilers ownership equity in the surrounding development.

In the modern era, this is the sweetheart deal that all other sweetheart deals are judged against.

T-Mobile Arena

  • Home of the Vegas Golden Knights
  • Opened in 2016
  • Jointly owned by MGM Resorts and Anschutz Entertainment Group
  • $375 million construction cost (all funded privately)
  • Public sources covered 0% of the direct costs

Seeking to make more money from their concert and events business – and potentially lure an NHL team to the area – MGM and AEG pooled their money and built an arena on land that MGM already owned.

  • Bottsy777

    While I appreciate the article – I do however find it is a slight oversimplification of the situation. 4 of the projects mentioned (which support more ownership participation) are all in the US. All of these areas are considerably larger in population, etc.. and more importantly play by extremely different legal protections to the risk and taxation. I am not a lawyer or accountant – but I did stay at a Holiday Inn Express once – but I am aware enough that this is a MAJOR difference that needs to be accounted for when evaluating this sort of thing. The closest in size to Calgary is Las Vegas (only about double the size of population in the greater area) – and I don’t think anyone here would argue that LV is completely different than YYC. While LV has an approximate population of 2M, based on the tourist nature of the Strip – it makes decision like an entity 5 times that size…

    Based on these major differences – there really is only 1 project that you can compare it to – and that is our “friends” to the North. So if the participation rates are closer to 50/50, rather than the roughly 70/30 up North, it seems like a fairly good and even deal…

    That’s my $0.02…

    PS – I also don’t fault Pike – I’m pretty sure he isn’t a lawyer or accountant either. I just don’t think that enough research has gone in to it to truly evaluate the project… Infrastructure type projects are done very differently in the US. There are many different options available. Comparing a Canadian Project to a US project is like comparing apples to oranges in some senses…

    • Flames fan since 83

      I appreciate Ryan’s arena updates. So thank you Ryan.
      I have seen many hostile comments against these arena articles stating FN fans do NOT care about this because it is not hockey related enough. I disagree.
      In fact I get much more accurate information from Pike than most other media outlets.
      So I get why Pike keeps it simple, but informative.
      My take is that the larger US markets are just that, MUCH larger. And hitting up the Tax Payers would be simpler because the cost per household would be smaller due to the population base.
      I also believe Toronto Arena was paid by private money, Ryan do you know for sure?
      My 2 cents.

      • Appreciate the kind words! There’s a lot of noise in most of the discourse about the project(s), so we try to keep things as tidy as we can.
        In terms of Toronto’s barn, MLSE paid for the direct costs themselves.

        • Oil consuming Flames

          MLSE also owns Scotia Bank Arena. The Flames will not own their new arena, the City of Calgary will. Shouldn’t the city pay for a building they will own?

          • Flames fan since 83

            The Saddledome is owned by the City of Calgary. Scotia Bank is Title Sponsor only.
            The Flames currently don’t pay rent or property tax. They don’t want to own the arena. They don’t really have any value (ever try to sell an arena? not easy to get your money back).
            City should build and own. And charge a rent that will pay out in 35 years. Simple.
            The Flames would never agree to this. They would end up paying the entire 600 million over 35 years. They would have been much better off taking the initial City Offer last year. Where they put up 225 million, and not pay rent or tax. (and not own)

          • Flames fan since 83

            OCF, I get what you are saying now.
            Scotia Bank Arena is in TO. (not the Saddledome) and owned and payed for by MLSE.
            Calgary would LOVE the Flames to buy and own their own building. BUT the Flames don’t want to own. Then they will have to pay property tax, and pay for construction!
            Currently, they don’t own the building, don’t pay rent, and don’t pay property tax. Plus, they took away operations from the Calgary Stampede board so they can also make revenues on all events including concerts and concessions.

  • The GREAT WW

    You have to love the irony;
    The owner of the Flames moves to Britain to avoid paying high taxes……..then asks the tax payers to pay for his new arena……

    Good times!

    WW

  • The GREAT WW

    Perfect;
    I don’t pay Calgary taxes….
    Provincial funds will be paid half by Oiler fans…..
    Federal taxes would otherwise be wasted by those idiots on charge anyway…..

    Spend away!!!!!

    WW

  • RealMcHockeyReturns

    I realize this article is brief and maybe not 100% perfect, but with the other 3 projects kept in mind, Calgary needs the temporary jobs (but could take 5 years to build all these projects) and permanent jobs that come from the 4 projects including BMO expansion(500 permanent here) field house, and arena. Just unsure what 4th project is, but generally in favour.

  • MDG1600

    Sorry, but you can’t compare public funding for a New York City or Vegas arena with a Calgary Arena. You can make good dollars on an arena in NYC or Vegas probably 300 (or more) nights a year so the economics are just more favourable without public funding. Seattle is better too and will probably end up with an NBA team again to help the economics. Last time I checked womens hockey and lacrosse weren’t exactly selling out the Saddledome. And good music acts don’t even bother with Calgary because the Saddledome is so crappy so a new building will make Calgary a better place to live for people other than hockey fans. I have no problem with some public funding and would argue it should be more in line with the Edmonton deal.

    • Flames fan since 83

      This is true MDG. The NBA team makes it a apple and oranges comparison. Huge revenues from Basketball.
      I’m in the middle. I think the Edmonton deal is too sweatheart of a deal. And the US deals are not attainable either.
      The goldilocks deal. Not too much, not to little. Just right.
      Please get it done Calgary.

  • BringtheFire 2.0

    Thank you Mr. Pike. Question:

    You mentioned in an article a long time ago that the Flames needed new ice making machinery and whatnot. Is it a part of the new deal?

  • Derzie

    Given that the US taxation system is much less onerous than the Canadian one, it’s probably not fair to compare Calgary to it (unless you correct for tax rates). Although, zero is zero in both countries. That’s a fair comparison.
    Given the importance to the city, up to 50% is palatable if a field house and the land are part of that 50%.

  • reidja

    Calgary needs whatever money from any source to build anything we can get.

    Time to stop stopping things here.

    I don’t think people realize how precarious Calgary’s economic situation is… we are a few bad decades away from a Detroit situation here, maybe sooner.

    Take the money, build the damn arena, retain the hockey club, help to maintain and enhance tourism, diversify the economy and continue to take every GD cent of money you can extract from higher levels of government. We need it.

    Plus, the Saddledome is officially a dump. Thank God this isn’t going to plebiscite.

  • Appreciate the discourse, everybody! As details emerge about the actual deal (and details about the building itself), we’re definitely going to be drilling down into things and it’ll be easier to make more apples-to-apples comparisons with other municipalities.

  • Purple Hazze

    Ryan, I think you’ve under-estimated how bad the Edmonton arena deal is for the city.

    Per wikipedia:
    $279 million – fronted by the city and recovered from the Community Revitalization Levy (CRL) and other incremental revenues
    $125 million from ticket surcharge on all events in the new arena -front by the city and recovered by the ticket tax over time
    $23.68 million in cash from Edmonton Arena Corporation – This is the Oiler’s only actual contribution
    $137.81 million from lease revenue for the Arena – Fronted by the city and recovered through lease payments by the oilers
    $25 million from other government sources – free money

    The way it breaks down is the city actually borrowing over 90% of the upfront capital required to construct the arena, while the team put up less than 5%. Not to mention the team earn’s 100% of the revenue generated by the arena while paying no property tax on the arena itself. Katz got a sweat-heart deal.

    • Oil consuming Flames

      So,
      $23.68M
      +$125M
      +$137.81M
      =$286.49M. Was the team’s contribution even though it was loaned to them in the beginning? Teams try and get the city to front the money through a loan because the city has access to better interest rates than corporations and private citizens. When we’re talking about hundreds of millions of dollars that just makes logical sense.

    • Harley Hotchkiss’s Ghost

      Everyone hates Nenshi for the sake of hating Nenshi (whereas David Bronconnier was as crooked as they come and gave away all of the prime land to his wife and friends in the city for nothing), but he’s worked fairly hard to not get hosed by the Flames, he deserves some credit. Oh and Calgary also gets the X Games for three years, not to shabby. I’m fine with 50/50, let’s get it done.

      • jupiter

        Everyone hates Nenshi for the sake of hating Nenshi ?? Wrong ,the reasons are many and understandable and they have absolutely nothing to do with Bronconnier.

  • Harley Hotchkiss’s Ghost

    I must say, I really like the new design purposed of the Calgary Event Centre. It has a classic timeless appearance, especially when compared to the metallic, cold Rodgers Arena in Edmonton and the sloppy unfinished renderings for the Calgary Next that we’re released a few years ago. The wood /glass facade is a good modern look.