Breakenridge: The Case Against CalgaryNEXT
Thanks to both Mayor Naheed Nenshi and Calgary Sports and Entertainment Corporation (owners of the Calgary Flames) CEO Ken King, the debate around the CalgaryNEXT proposal is once again front and centre.
My colleagues Danielle Smith and Dave Rowe have both made arguments in support of CalgaryNEXT and the Flames’ enthusiasm for the project.
I would like to present the other side of that argument. This is not intended to be a case against any public funding for a new arena (although that case can certainly be made), but rather why CalgaryNEXT is the wrong solution.
And make no mistake, city council – including the mayor – has not closed the door on the idea of public funding for a new arena. Rather, it’s a case of what makes the most sense. Which is exactly as it should be.
The problems with CalgaryNEXT boil down to two things: time and money; both of which, I think most would agree, are in short supply. For example, supporters of CalgaryNEXT, including the Flames and the NHL commissioner, have talked about the urgency to the situation and how Calgary is quickly falling behind cities like Edmonton.
It does beg the question of why the Flames waited as long as they did to propose a new arena, but sooner-the-better has clearly become part of the narrative.
But if there’s a need to get a new arena built quickly, then how on earth does CalgaryNEXT make sense? As the city’s report found, it would take up to ten years just to clean up that land in the West Village:
The argument in support of CalgaryNEXT and the argument that time is of the essence are simply not reconcilable. Either CalgaryNEXT supporters should start making the argument that we can be patient and wait another decade or so for a new arena, or start making the case that we should look elsewhere.
The bigger issue, though, is cost. Governments are not exactly awash in cash at the moment. That means prioritizing and being prudent with every dollar spent (ideally).
When it comes to a new arena, there’s not an endless pit of money that the city can draw upon. In this case, as the mayor has often said, public money needs to bestow public benefits.
To get a better sense of where the Flames stand, listen to this interview Danielle Smith did this week with Ken King:
Some of the points I’m going to raise here are in response to, or in reference to, some of what King says in that interview.
First of all, surely even the most ardent supporters of CalgaryNEXT would concede that some upper limit exists for how much the city can reasonably contribute. It also seems to be the case, however, that CalgaryNEXT supporters rarely talk about the price tag of the project.
As the city’s report found, the cost is considerable:
That’s a total cost of $1.8 billion, with up to $1.3 billion of public investment. That is a huge amount of money.
In his interview with Danielle Smith, Ken King made several arguments in support of public financing. He cited the Edmonton deal (a deal they said “would take in a minute”) and also cited public financing arrangements in Ottawa and Winnipeg, among others.
Well, Ottawa’s arena received a total of $6 million in public support (from the federal government), and Winnipeg’s arena received a combined total of $40 million from all three levels of government. When we’re talking about over $1 billion in public funding for CalgaryNEXT, we’re in a totally different ballpark (no pun intended).
Even Edmonton’s new arena, financed under a deal that the Flames seem so fond of, involved considerably less in the way in the way of public funding:
As you can see, Edmonton’s arena was paid for, in part, through a CRL (community revitalization levy – which was also used in Calgary’s East Village although that project was fortunate enough to include the Bow Tower). That’s also been proposed as a way of paying for CalgaryNEXT.
Supporters of this approach tend to see this as free money: basically that CalgaryNEXT will generate all of this new development – development that would otherwise not have existed – and the property taxes from this development will go to the CRL.
But with CalgaryNEXT, there are some obvious problems. Is there room for such development and is there demand for it? CalgaryNEXT would be an enormous facility and it would not pay any property taxes (the proposal would have the city own the building and the Flames would operate it).
That would limit the space available for new developments that would pay property taxes, something the city apparently warned the Flames about years ago:
The city’s report on CalgaryNEXT also found shortcomings in the proposed CRL model. It’s certainly fair to wonder whether the city’s own proposal for the West Village (which predates the CalgaryNEXT proposal) makes more sense and has a better chance of success.
It’s possible that the challenges of cleaning up the land are greater than anyone has realized and maybe the area is a lost cause for any development proposal.
Here’s a good overview of how a CRL works and what the risks are. It’s a mistake to assume this is all new money or that the development wouldn’t otherwise exist.
Basically, if an office tower, condo tower, or some other business is built within the CRL zone, that’s likely something that would otherwise exist elsewhere. It’s moving money around in many cases, rather than generating new money.
Given the rising office vacancy rates in the downtown core, does it make sense to expect that an abundance of new capacity will, or should arise, to help foot the bill of CalgaryNEXT?
In the meantime, with the city moving ahead on redeveloping Victoria Park, and the possibility that a new arena could fit into that plan, it makes ample sense to consider that option.
The city seems more than willing to contribute to an arena project there and the cost would undoubtedly be considerably less. Additionally, this new arena would be open and hosting games and events long before CalgaryNEXT would.
If CalgaryNEXT isn’t “dead”, as the mayor suggested, it clearly should be. If we care about time and money, it’s time to move on to Plan B.