The proposed arena deal isn’t perfect, but it’s not awful either

In an ideal scenario for the city, the Calgary Flames would pay for their entire new building on their own. Given the state of the franchise and economy, that probably wasn’t in the cards. The worst-case scenario was the city paying for everything.

The tentative arena deal struck a balance in the middle, but some of the little details might sweeten the pot a little bit for the city.

Building the building

Direct building costs are estimated at $550 million, split evenly between the Flames and the city at $275 million apiece. The design of the arena is obviously still a work in progress, but their aim is to produce an “up to 19,000 seat facility” as well as a secondary (practice) arena – the size of the main building and potential for the smaller area are dependent being able to bring them in on budget. The city’s funding will come from their capital reserves, anticipated interest revenue, leftover funds from previous projects, and a few other bits and pieces.

There’s a land swap involved, as the city will grab the two block parcel of land from the Stampede in exchange for the land the Saddledome is currently on (plus Weadickville in Stampede Park). Other land in the immediate area will be available for the Flames to purchase, including the old Enoch House property and the land where the Victoria Park bus barns are currently located.

The Flames will cover 10% of the costs for the Saddledome’s demolition, to a total of $1.5 million. The city’s estimates are the demolition will cost just under $14 million, with the Flames contributing $1.4 million. The land and transactional costs to the city will be $3 million.

Based on the city’s estimates, the costs for demolishing the ‘Dome and building the new arena would be roughly $290.4 million to the city and $276.4 million to the Flames.

Once the building’s open

There are a few components that are interesting here.

First is the “facility fee.” We’ll call it a ticket tax, because that’s what it is. The city will levy a fee and receive 2% of all ticket revenue for all events at the event center. Over the 35 year lease, the city’s estimates – conservative estimates based on a probabilistic model of a number of events according to mayor Naheed Nenshi – add up to $155.1 million of revenue to the city, which would somewhat off-set the costs of the initial contribution.

The second part is the lease itself. Once the building opens, the Flames will be locked into a 35 year lease. The city will own the building and receive no rent, but the Flames will commit to contributing $75 million over 35 years to local community sports charities – similar to the level of financial commitment they currently have under their existing lease. The team will also be on the hook for the costs for operating and maintaining the new arena. (The $75 million isn’t really a new expense for the Flames, as they basically pay this much under their existing lease.)

The third part is the naming rights: the Flames will pay the city $2.5 million over 10 years from the revenue from the naming rights.

We’re obviously simplifying things and ignoring the future or present value of money. But combining the simplified cash-flows to both sides, the Flames would be paying $275 million and the city’s contribution would be reduced to around $132.8 million (over 35 years). When you account for the future/present value of things, the cost is a bit more but the bottom line is there is a bit of recapture involved here for the city.

Other details

A few tidbits from the city’s report:

  • “Design to commence immediately with planned construction to commence in 2020.” The Calgary Municipal Land Corporation (CMLC) – who oversaw construction of the Central Library and the development of the East Village – will oversee design and construction.
  • The Stampede gets arena access for 17 days a year, with the city getting another five days for non-commercial events. If a secondary arena is built, the city will get 20 days access to that arena.
  • CMLC will build a shared community space adjacent to the arena which will be jointly operated by the Flames, the city and the Stampede.
  • Once the Flames take occupancy of the new arena, the Saddledome parkade will transfer to the Stampede. The Stampede will operate all the parking in Stampede Park, but they’ll “share in parking revenues generated from CSEC events.” (It’s not clear what the split would be.)

The rundown

Is it a perfect deal for either side? No.

Both sides probably wish they put in less up-front cash. But an important part for the city was that they would need to share in the benefits of the arena if they were sharing in the risk. They’re 50/50 partners in the up-front risk, but they have their initial investment recouped somewhat over time (just as the Flames do from their revenue from operating the building).

The arena deal isn’t as risk-free for the city as we’ve seen in Vegas, Seattle or Long Island – where the governmental bodies have been committed to fairly low capital costs. It’s not quite as good as Detroit’s deal, where up-front funds covered just over a third of costs. But it’s also not Edmonton bad, where public funds covered around 70% of costs. A 50% stake with a recapture mechanism is a pretty reasonable place for this saga to end up.

If all the trumpeted economic development fails to materialize and all this buys is an arena – like what happened when three levels of government bought a shiny new Saddledome in the ’80s – if the arena part of things works out the city at least will get a decent amount of its initial investment paid back in a nominal sense and a fairly substantial investment that they won’t get back in terms of net present value. It’d be like setting well over $60 million ablaze in today’s dollars if the expected investment isn’t attracted to the area – the exact figure isn’t yet available. But in exchange for torching that money, the city would get a shiny piece of new infrastructure, the Flames owners get a renewed ability to generate revenues, while hockey fans get a guarantee that the Flames will be in Calgary until roughly 2058. (If the anticipated investment in the district does materialize, it’d be like burning significantly less money right now – around $47 million.)

It’s not a perfect deal by any stretch of the imagination. But given the alternatives, it’s not a horrible deal, either.

Council will vote on the tentative deal at their July 29 meeting.

  • BlueMoonNigel

    Who pays for the inevitable cost overrun?

    Councillor Farrell and Mayor Neshi have both stated that neither will support the deal unless Calgary’s infamous public art policy, which is currently under review, is applied to the arena in its current wording.

  • MDG1600

    The definition of a fair deal is one where neither side gets exactly what they want.

    Just get on with it and build the damn arena. It will be good for the city.

    • The Iggy complex

      The arenas will bring in tons of people from outside of Calgary. Who will bring in money they made outside of Calgary. And alleged it on the businesses inside Calgary. This helping to simulate the economy. Much more Benifits then the expensive library or this stupid public art thing Nenshi wants

      • Dirty Pots

        How many fans do the flames have outside of Calgary? 200k? Even that seems to be on the high side. This arena is for Calgarians, by Calgary. Its not a tourist draw until the Stanley Cup shows up, and then the Saddledome would be an equally large draw.

        • MDG1600

          Never been to a concert? Or Cirque du Soleil? The project isn’t just for hockey fans. Most people don’t enjoy driving to Edmonton to see Ed Sheeran or Garth Brooks. Acts like that stopped coming to Calgary years ago on account of the Saddledome.

          • Albertabeef

            What Garth Brooks doesn’t come to the Thorncliff/Greenview community center anymore? Also I though Cirque de Soleil was a reason to go to Vegas to warm up in winter time? And who in the blue blazes is Ed Sheeran? However most big acts don’t come to Calgary because McMahon does not permit concerts due to community noise restrictions. They should build a convertible stadium that does both sports with a retractable field with room for 30k seats for football and 40k seats for hockey. But that’s just my opinion.

          • HOCKEY83

            McMahon and the community noise bylaw has nothing to do with the big acts not coming here. Its the shape of the saddle dome roof that stops them from coming.

          • Albertabeef

            @Hockey83 Bands like Genesis and Pink Floyd played at commonwealth stadium not Northlands. These people want to play in from of 35,000+ people not 19,000 or less.

          • Albertabeef

            And for those who don’t know yes Garth Brooks once did a show in July of 1991 at the Thorncliff Greenview community center on center street just north of Mcknight Blvd(think it’s 54th ave). Something like two weeks later “Friends in low places” was playing everywhere and he turned into a mega star.

          • TheWheeze

            The Dome, while being an iconic Calgary identifying landmark, is a relic. Last time I was there last season it struck me just how much it looked like a Greyhound bus station. Drab.

          • Albertabeef

            I here ya Wheeze. The old grandstands need replacing too. I’m wondering if we could build a multi purpose football/rodeo/chuckwagon race stadium in it’s place?

      • Pancakes

        The arena and surrounding complex will only bring in more people from outside Calgary if the public art policy is in place. People don’t come to see a new arena unless it’s designed beautifully like the new library and surrounding east village, river walk, etc.

        • mrroonie

          Nobody’s coming to see a new arena, they’re coming to see an event inside the arena. Whether or not there’s a bunch of overpriced art around the arena is not going to be a deciding factor in attending the event.

          • Burnward

            Calgary will always be a world class city. Geography, quality of life, economy will ensure this.

            This isn’t Edmonton where they sell a need to revitalize, this just makes Calgary even more attractive.

            And world class cities need world class amenities.

            Costs less than half of that tunnel to nowhere by the airport FFS.

            Get it done.

          • Albertabeef

            Hey Burn is Stephen avenue mall still a grave yard after 6pm weekdays and on weekends? Let’s no get to high on our selves, Calgary downtown area has had it’s issues over the years. I once seen a street person take a crap in front of the church next to Rocky Mountain Plaza on seventh and 2nd while on the train paused at the station lol. Couldn’t believe my eyes in the middle of day lol. Mind you I was living over “Crack Mac’s” at the time too lol. I’m sure its cleaned up in the 8 years I’ve been gone.

          • Albertabeef

            My bad I guess that’s the stuff we sweep under the rug and don’t talk about lol. Like I said it’s been 8 years since I left town, it is possible that stuff doesn’t happen anymore. The street thugs here in Vic think they are all tough but my buddy(he’s from Red Deer) and I laugh thinking “you want a test bud go see some guys on the streets back in Alberta lol”. And just for the record 15 years ago the Mac’s store on the corner of 7th ave and 8th street was nick named “Crack Mac’s”. I don’t make this stuff up lol.

          • Albertabeef

            World class cities have world class problems, take Victoria for example. One of western Canada’s oldest cities with a population of 85k with 360k in the area. Victoria has over 1500 people living in transitional housing, basically homeless with more than another 500 on the streets every night. 2k of 85k is an extremely high number and depressing to think of a city like that in Canada. No wonder drug use is on the rise.

            But then the city just finally agreed to finally build a sewage treatment plant. Wow!

            Oh they just built a bridge here and it took forever because they sent the wrong steel from China. Oops turn the boat around lol.

            I suppose all cities have their issues.

        • The Iggy complex

          Most people are gonna plan on staying in the surrounding hotels etc regardless of there are overpriced “art” pieces or not. People were doing that even before this “art” fad was a thing

          • Zalapski

            The way you refer to public “art” hilarious. It’s not just paintings and statues and blue rings. It’s arts based entertainment as well, music, events yadda yadda. If there’s nothing else happening in or around the space it’s useless. Look at the dome and the stampede grounds when there’s nothing going on there, it’s a concrete hell hole.

          • Albertabeef

            @ZZ that concrete hellhole has over a century of personality and a crap load of memories. Horse races, wrestling, concerts, curling, casinos, Flames/Hitmen/Ruffnecks, agriculture events/auctions, motor shows, world petroleum convention and the list goes on. That’s not even counting Stampede week. I myself personally have been in pretty much every area of the grounds at some point in my life.

          • Albertabeef

            @Iggy “Most people are gonna plan on staying in the surrounding hotels etc”
            I have worked in hotels and tourism in Calgary for 25 years and I can say there are basically 3 different type of planners. People who like to stay close to the event, ones who like to stay close to their exit from the city, ones who like to stay in between the event and other attractions(like shopping at chinook) and the exit. Thing is everyone is different and there’s many different variables to planning a trip.

          • LannyMac

            I know off topic I read all the propaganda posts from the ostriches on this site. Then I turn on TSN 1260 and listen to all the delusional comments about how Tre got hosed by Holland. Listen both players would be extremely lucky to get a PTO if they were FA this year. There two useless plugs as it stands right now. The only thing the trade did was create a lot of interest from the fans which is great. I am done posting on the subject. Looking forward to Oct and beyond to see if one of the GMs will look smarter than the other

          • Zeb Zadock

            iiiiiiii don’t knoooooooww little iggy Lol By the looks of all your comments on here today you look more than rattled 🙂 It’s ok Iggy your welcome at ON anytime. You’re the man!

    • Garth

      Obviously all city projects are public money. The majority if not all generate revenue. This one does. Not everything in this world needs to be bottom line focused! Bring on the concerts! Bring on the world class events! We are now able to do that!

    • Justthateasy

      It sure is money much better spent than that white elephant Library. I’d like to see the attendance difference between the 2 facilities over a few years. I suppose we’re going to demolish the 25 existing libraries in the city.
      Lots of $$$ available for Country music museum…
      A fair deal at roughly half and half and it sure is better than no deal.

  • buts

    It will be nice to go to a game and not have to wait in line to go to the bathroom, have a concourse that you can actually walk thru without bumping into lineups, then after not have to walk in the cold a mile to find a watering hole because Dutton’s is too full.

    • slapshot444

      Oh you mean a concourse that I don’t have to wait 20 minutes to clear out before I walk my elderly father in law through. Oh and an escalator so he can get to seats I can afford. Ya that would be cool.

    • Arthur-Leigh Adekunle Tig Junior Elvis

      Best NHL Arena I have ever been to is the United Centre in Chicago. They have extremely wide full concourses on all three levels, it’s incredible if you ever get the chance to go 23,000+ fans is a good time as well.

      I really hope the Flames don’t use the same architect as the Oilers did (I don’t think we’re). Edmonton’s new arena is such trash. The worse part isn’t even the lack of leg room or bathrooms, it’s essentially that every single fan has to go in the same entrance through the grand hall up a small set of escalators. I went for the Ivan Hlinka last year and despite the arena being barely half full it was unbearable. The washrooms are ridiculous as well with soooo much wasted space don’t get me wrong.

  • Alberta Bound Edmonton

    You guys have to get this done. It’s a better deal than we have in Edmonton and now most of us think tax payers money was well spent. We need 35 more years of the “Battle of Alberta”. Good Luck.

  • FLT

    If the city wanted some input into the process to support their Victoria Park revitalization efforts, they needed to contribute some amount of money to the build. $130 million (way more in present value) is a lot of money though, especially considering the state of the economy and the property tax pain Calgarians are going through right now. Hopefully it’s worth it.

  • Off the wall

    Exciting news for sure!
    It’s no wonder Scotiabank has secured the naming rights for some NHL teams in Canada .

    Every time I go to see a movie, Scotia tells me “I’m richer than I think “

    I think they are richer than I think!

    • Garth

      ScotiaBank are obviously richer that you think. They secure the rights at various venues by simply being the highest bidder. It’s a business and money talks. I’m good with that.

      • Off the wall

        I think what concerns me about the “naming rights” isn’t the Corporate name attached, because let’s face it, it cost a fortune, but the lack of creativity in the name. How many boring names do we need in Canada?

        At least ours had some character, Scotiabank Saddledome, you know at least it represented the shape of the damn thing!

        There’s Rogers Place although I still call it GM Place (Vancouver) Rogers Arena (Edmonton)
        Scotiabank Arena ( Toronto)
        Canadian Tire Centre, do I take my vehicle there for an oil change ( Ottawa)
        Bell MTS Place, do I exchange my cell phone there? ( Winnipeg)
        Bell Centre ( Montreal)

        What a bunch of crappy names!
        It’s either Place or Centre. Ever get confused? I do.

        I just want to see some imagination in a name? I’m sure all those Corporate sponsors can do better than that. It’s not like we’re going to forget the name if it’s better than the current dull?!

      • Jobu

        Never quite understood the power of a name on a building. Has anyone ever got a Scotiabank account purely on the fact that the Saddledome was named after it?

        Not consciously, Jobu supposes.

        • Off the wall

          I did some research on this a while back Jobu.
          Surprisingly, Scotiabank’s revenue has improved drastically since recently adding the Toronto Maple Leafs building to their portfolio. $800M for the naming rights! Wow!!

          It’s the younger generation that’s investing heavily in Scotiabank. Advertising and Corporate sales are way up as well as the generational swing in investment portfolio’s. So yes, it’s apparently working…

        • QueenB

          I believe its also because they get to put in their own ATMs in the arena which charge user fees for every use, as well as having stands on the concourse to try and get people to sign up for the credit cards, etc.

  • Derzie

    Public funding is related to how many big ticket attractions a city has. Comparing Calgary to funding scenarios in Vegas, Toronto or LA is silly. A city, like Cagary, where the only top attractions are up for renewal, 50% should be and is the target for funding. Details aside, the optices are great and this will help the project move forward. It’s a nuclear option but if the Flames left the city, the city would take a massive hit. 50/50 is a solid proposition.

  • Neilio

    On the arena designer question, I believe that there are only two companies in North America that do it. Both in St. Louis and they are across the street from one another. You’ve got a 50/50 shot at getting the same designer as Edmonton’s. I could be wrong, but I met the girl who designed the Winter Garden for the Edmonton arena, while I was on vacation in Mexico, and that’s what she told me.

    As far as the risk side goes, yes there is some risk. But I also don’t think that Canadian markets carry the same risk as US markets. There are a number of cautionary tales down there. In a number of places they were building new arenas, stadiums or ballparks while they still had perfectly serviceable ones already. The SaddleDome has had every last dime squeezed out of it, and now its like an old car, where it is going to cost more to keep it running, with diminishing returns.

    Also, the attendance rate here is sky high, until the downturn, just about everything sold out and even now its still right up there. And we get charged an arm and a leg too. In most US markets tickets are cheap. I went to a baseball game in Miami and we got a block of seats behind first base for less than $30 each, bought on the same day. They pretty much give the hockey tickets away down there. During the Edmonton-Anaheim series a few years ago, you could fly to Anaheim and get tickets to the game cheaper and easier than buying them in Edmonton.

    The risk, I think, is that if the economy doesn’t recover here, if the Government keeps hammering Alberta, we won’t have the money to spend on events. But an Arena deal has to look at the long game, decades in the future. We’ll be fine.