Calgary events centre: City and CSEC to each cover $12.5M in cost overruns, CMLC out

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Calgary events centre: City and CSEC to each cover $12.5M in cost overruns, CMLC out
New confidential details about the Calgary events centre have been released following months of negotiations between the City of Calgary and the Flames’ ownership group. Adam MacVicar reports. – Jul 26, 2021

After months of closed door negotiations, new details about the Calgary events centre project have been released ahead of a public discussion on the issue.

The project has been on pause since April due to concerns of cost overruns — that have been estimated to be between $50 million and $60 million — and other issues regarding the initial agreement between the City of Calgary and the Calgary Sports and Entertainment Corp.

Confidential documents that outlined the proposed revised negotiations between the city and Flames ownership were publicly released on Monday afternoon.

According to the documents, in January, both sides of the deal learned the projected cost of the project had ballooned to $620 million, $70 million more than the original projection of $550 million when the deal between the city and CSEC was signed in 2019.

That deal had both sides splitting the costs evenly.

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After negotiations, the cost has been reduced down to $608.5 million.

Some of the design concerns, according to Calgary’s mayor, were a lack of women’s bathrooms, too many luxury box suites and not enough regular seating.

The mayor said increased construction costs across North America also played into the overruns.

“That led to a real big increase to the cost that the city had not contemplated, and frankly, I didn’t think the city should pay,” Naheed Nenshi said.

“The sides have been working really hard to both reduce that budget cost while still making a facility we can be proud of, but to also figure out how to fund and finance the gap.”

Click to play video: 'Deal finalized for new Calgary event centre'
Deal finalized for new Calgary event centre

To address cost overruns, Nenshi said both the City of Calgary and CSEC would each be putting forward an additional $12.5 million. The clause was part of the original deal signed in 2019 and has already been approved by council.

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The city’s injection of funds will be capped at $287.5 million.

However, Nenshi said that part of the new agreement would see CSEC take on the risk of all additional cost overruns moving forward and during construction.

According to the newly released documents, it’s estimated that CSEC will be forking up a total of $321 million to build the project.

As part of the original agreement, the city will cover the $12.4 million to demolish the Saddledome and an additional $3 million for land transaction costs.

Another $10 million will also be covered by the city for “city additional costs,” the document reads. Nenshi said the money would be directed to flood mitigation and remediation work that would have gone ahead anyway.

The documents have the city’s estimated total cost at $312.9 million.

As part of the new deal between the city and CSEC, the Calgary Municipal Land Corp., will be removed as project manager and replaced with an organization of CSEC’s choosing.

“If the Flames are taking on the risk of cost overruns, they want the ability to appoint a project manager,” Nenshi said.

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However, Nenshi said CMLC would remain involved with the area around the events centre in east Victoria Park, like the BMO Expansion project as well as the Victoria Park Stampede LRT Station redesign at 17 Avenue S.E. at Macleod Trail.

According to the documents, an organization called CSE Development Management Corp., will take over the role of development manager.

The documents said decisions on project budget, schedule and construction will be made by CSEC while joint decisions will be made for things like material design changes, building structure and “other elements important to city vision and policy.”

CMLC president and CEO Kate Thompson released a statement on Monday that said the transition to a new project manager came after extensive discussions.

“We suggested many options and are supportive of where we landed with this new governance structure that provides a good solution for cost accountability and project delivery while ensuring the best possible facility for Calgarians,” the statement reads. “In our experience, this is the best approach for a project of this magnitude.

“Ultimately, our interest is in seeing a great event centre delivered for Calgary and successfully delivering on our larger role leading the overall master plan vision, which remains our focus moving forward”.

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Ward 11 councillor Jeromy Farkas said he is not in favour of CMLC’s removal from the project.

“By not having CMLC in control of that project management, I don’t think we’re going to get anywhere near where we need to be to make sure this is not just a new rink but instead something that can be a catalyst for this neighbourhood and the city’s future,” he said.

Click to play video: 'Work underway to complete upgrades at Victoria Park Stampede LRT station'
Work underway to complete upgrades at Victoria Park Stampede LRT station

Although construction on the project was set to begin this year, Nenshi said he believes shovels could be in the ground as soon as early 2022.

CSEC did not respond to Global News’ requests for comment on Monday.

“If you didn’t like this deal in the first place, you’re not going to like the new version,” Nenshi said.

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“But if you believe the city did a really good job balancing public funding and public value, I think you’ll be very pleased to see what we end up with.”

Calgary city council is expected to discuss the deal in detail during a public debate during this week’s lengthy council meeting.

That debate is expected to take place late Tuesday or Wednesday morning.

-With files from Global News’ Adam Toy.

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