Flames release their arena funding proposal (and the City responds)

The Calgary Flames, in the form of an advertisement bought in both major daily newspapers and a 5 a.m. MT press release, finally released their funding model for the Victoria Park Arena on Thursday morning.

According to the release, the Flames were willing to contribute $275 million up-front – it’s unclear from the release where that money would come from – while the City of Calgary would contribute $225 million from a Community Revitalization Levy. Again, it’s unclear from the release whether that would be a brand new CRL or the existing Rivers District CRL. Given that it’s really unlikely that the province would give the green light to a second CRL for the same geographical area, it’s probably the existing one. (The $275 million figure is the team’s estimate for pre-payment of $275 million of rent; presumably they would pay zero property tax during that period.)

The Flames provide a curious rationale for justifying the City’s contribution, noting (a) they provide $481 million in annual economic impact and (b) the new building would generate $243 million incremental property tax impacts. The economic impact figure comes from a study they commissioned regarding the CalgaryNEXT proposal, while it’s unclear where the $243 million figure comes from on the property tax impact.

The presentation also includes a weirdly granular look at the Edmonton arena deal, noting the sources of the various Rogers Place revenues without really getting into where the Flames will get their money. Its placement seems to suggest we compare the two “upfront” contributions: only $20 million from the Oilers, while the Flames are offering $275 million. (Of course, the Oilers ended up shelling out $258 million through various means, so without knowing where the Flames would be getting their contributions it’s very difficult to compare the two.)

And then there’s the problem of the CRL. The entire point of a CRL is to cover the underlying, indirect costs of development in order to entice developers. It’s not meant to cover capital costs of development. Remember the big City presentation last week? The $150 million for various indirect costs, plus the indirect costs they haven’t costed out yet, would be covered by the Rivers District CRL. Not only is paying for a new arena precisely what CRL funding isn’t meant for, but it’d also potentially cannibalize the remaining CRL funding and prevent the City from covering the indirect costs for any subsequent development in the area. (It’s also really weird that the Flames glossed over where their money would come from, but got weirdly specific about where the City would get theirs.)

The entire proposal adds up to $500 million, $50 million less than the City’s proposal. It’s unclear specifically why that is, though the City included $30 million for the value of the land the building would be on as well as $25 million for the demolition of the Saddledome. Presumably those costs are excluded here.

UPDATE: The City put out a Q&A in response to the Flames’ release.

Of note? There’s roughly $150 million left in the Rivers District CRL, not enough to fund the arena (even if that was what it’s for), and $150 million of the Flames contribution would be via a ticket tax – which the City would finance. Even if you presume that the “Flames unknown” chunk would be figured out by ownership (and they’d pay $125 million of the $555 million that the City says the arena will cost, they’re covering 22.5% of the costs of the building based on the City’s accounting).

Long story short: both sides seem to have fundamental disagreements with what the other side’s proposal contains. It shouldn’t be shocking to learn that they’re this far apart in coming to an agreement if they can’t agree on what they’re discussing.