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How the new Calgary event centre deal plans to handle cost overruns, naming rights, long-term lease

Click to play video: 'Arena and entertainment district deal updated, criticized by some'
Arena and entertainment district deal updated, criticized by some
WATCH: As Calgarians get an update on the status of the city’s proposed new arena and entertainment district deal, critics say taxpayers are giving up too much for too little. Tomasia DaSilva reports – Jun 5, 2023

More details on the deal to replace the aging Saddledome in Calgary came to light in a Monday meeting of the city’s event centre committee.

Cost overruns will be evenly split between the city and Calgary Sports and Entertainment Corporation (CSEC).

The Flames owners will have a 35-year lease on the new $800-million building, with payments that start at $17 million per year and increase by one per cent per year from there — payments that would include all city-eligible revenue from the arena.

And City of Calgary GM of infrastructure Michael Thompson said the city received a commitment from the Flames ownership group that they will be staying in the city for the life of the lease, as part of the agreement.

Negotiations between the city and CSEC continue, with the aim of having a final agreement in place by the end of summer.

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Click to play video: 'Calgary Sports and Entertainment retains exclusive rights to revenue from new event centre'
Calgary Sports and Entertainment retains exclusive rights to revenue from new event centre

A ‘springboard’ to development

Thompson said the new arena and area improvements – including improvements to roads and an underpass, public realm improvements, and outdoor community plazas and gathering places funded largely by the province – have the goal to attract larger events previously unavailable to the city and “springboarding Calgary forward.”

The total investment in the area is expected to cost $1.22 billion.

“Our focus is on developing those sites that we can add to the vibrancy of the area and the expansion of the area… getting more people living in the downtown and more places for people to go and enjoy downtown when they’re living down there,” Thompson said.

“If you go down there (to Victoria Park) right now, it’s really just a lot of empty parking lots. And so this will help to open it up with wider sidewalks to support walking and wheeling and making exiting out of events afterwards easier as you think about all the events that will be happening in the area.”

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Click to play video: 'What’s next for Calgary’s Victoria Park following new event centre announcement'
What’s next for Calgary’s Victoria Park following new event centre announcement

Being a city-owned 10-acre parcel and building, the new event centre will not add to the city’s tax base. But Thompson said the four redevelopment sites will help generate tax revenue, sites CSEC will have first right of refusal to.

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“The other part to the project is the retail facing along the street… that generates tax revenue which will come back to the city.”

Naming rights and ticket surcharges

The previous deal that was spiked at the end of 2021 had options for the city to get naming rights. And the deal in Edmonton that eventually saw Rogers Place included a ticket surcharge.

Neither of those are part of Calgary’s new deal in principle. Instead, those revenue streams for the city are folded into the annual lease fee from CSEC.

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“In the end of the day, they would all total together to be the same dollar value. And so that’s why we focused on the one revenue stream coming back to the city, which is the $17 million on year one,” the city’s GM of infrastructure said.

Click to play video: 'Calgary’s new event centre sparks mixed opinions as details remain unclear'
Calgary’s new event centre sparks mixed opinions as details remain unclear

Ward 10 Coun. Andre Chabot said “all of the revenue opportunities” around naming rights belong to CSEC.

“There are some exceptions during certain events at certain times of year. But again, these are details that haven’t been finalized yet and have not been made public,” the Ward 10 councillor said.

Long-term lease

Thompson said the city will use its “working capital” to make that long-term lease of $316 million available to the Flames ownership group, a five-per cent discount on the net present value.

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“You can almost think about that as the city is getting a 5-per cent return on our investment through working capital. And so that’s why we’ve calculated as a lease,” Thompson said.

A/CFO Les Tocher said that working capital was “well within” the city’s capabilities given the state of its reserve funds.

Click to play video: 'Calgary, Flames ownership, province agree on $1.22B arena, area redevelopment deal'
Calgary, Flames ownership, province agree on $1.22B arena, area redevelopment deal

The city estimates it will receive $708.3 million over the life of the lease.

CSEC will be responsible for maintenance on the building, with the city having to take care of any “major” work on the building.

The city will be putting out a request for proposals (RFP) for a development manager for the block on Tuesday, Thompson said.

No new taxes to support event centre

Ward 1 Coun. Sonya Sharp, who also chairs the event centre committee, repeated her late April message that with all of the funds for the new event centre and surroundings coming from existing reserves, businesses and homeowners won’t see an increase on their tax bills.

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“There is no increase of property taxes for this event centre,” she told reporters. “The City of Calgary is not incurring more debt to do this.”

Another facility that’s part of the deal is the practice arena, whose construction cost is being split between the city and province. Thompson said the community arena would be available after 4:30 p.m. and on weekends.

“As we talked with our team in recreation, they said really what the community needs is for ice time in the downtown on weekday evenings and on weekends,” he said.

Sharp said the operating logistics for the practice arena are yet to be confirmed.

Thompson and Sharp said the current deal is not comparable from the past deal, with the councillor pointing to the street level improvements that are getting funded by the province.

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“So there was $300 million missing that the city (would have) to pay for it anyways. So what we’ve done is the whole package, the whole scope is very different than the last deal,” Sharp said. “And yes, I do think this is a great deal.

“The city isn’t in the business of making a profit on any city-owned building.

“This is a public building — it is owned by the city — and we have private investment supporting it.”

Chabot said the event centre, paired with the expansion of the BMO Centre, its accompanying hotel, and other developments in the Rivers District in Victoria Park will help “accelerate” further development in the area.

“And this is one of the key components that will help to accelerate that redevelopment.”

Chabot was hesitant to declare a winner in what’s still an ongoing negotiation process.

“I don’t know that either party got a better deal than the last time,” he said. “I’d say there’s a lot more certainty in this agreement for the city of Calgary than there was in the previous agreement.”

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