Arena deal: 10 key questions on the proposed $1.2B arena and entertainment district
Transparency on the megaproject hard to come by at this stage of the deal
Calgary does love/hate its arena deals. It's practically an industry.
But one thing is clear after this week's announcement by the City of Calgary, the Calgary Sports and Entertainment Corporation and the Government of Alberta about an agreement in principle for funding an $800-million arena and $400 million in related improvements in the entertainment district around it.
The public knows less at this stage than what had been revealed at a similar stage with the last arena deal.
When a funding deal was announced in July 2019 on a new arena, the final wording wasn't actually released until December 2019. And there were actually nine agreements in the whole package.
So don't expect details before the provincial election is held. It will likely be a few months.
For now, let's look at what we know and don't know about this new deal.
1. The City of Calgary is putting up big money on this project. Does it get a return?
In short, we don't know yet.
Officials say this matter remains under negotiation. Under the last arena deal, the city touted the money that would be coming back in return, fronting half of the costs of a new arena.
The city would get money via a charge on every ticket sold for events in the new building. There's no sign of that with this deal. That makes it hard to measure the idea of "public money for public good."
It's going to be a city building that is operated by CSEC, which owns the Calgary Flames and several other local sports teams.
Will CSEC be paying the city rent under the terms of a lease agreement? Again, officials say this remains under negotiation.
No one even knows when construction might start or when the new building will open.
WATCH | Officials announce the new arena project deal on Tuesday:
2. Who gets money for selling the naming rights for the new arena?
Again, we don't know.
This isn't addressed in the information released this week on the agreement in principle. City officials say it's still under negotiation.
Don't expect this to be the motherlode as Calgary is smaller than places like Toronto, Vancouver, Los Angeles or Chicago. But there will be a few million dollars a year potentially for naming rights.
There's no word on who gets that money or who decides what name goes on this publicly-owned building.
3. Who is responsible for any potential cost overruns?
For this deal, the City of Calgary and CSEC are going to be splitting any potential budget overruns.
The city wasn't willing to talk about this initially, but after CSEC posted information stating that the two parties will equally share any cost overruns, the city amended its website.
What isn't known is whether there is any maximum on acceptable additional costs.
LISTEN | Mayor Jyoti Gondek explains why she thinks this is the right deal for Calgarians:
After costs started escalating on the last arena deal, CSEC leveraged more money out of the city by voluntarily agreeing to shoulder 100 per cent of any additional costs on its own.
This week, Mayor Jyoti Gondek revealed on the Calgary Eyeopener that this was actually what resulted in CSEC walking away from the amended arena deal in December 2021.
"It became untenable for one partner to take on all those cost overruns. So we have learned from that, and we will be managing risk mitigation in a different manner on this one," said Gondek.
As for how the city will pay for any potential overruns, it's proposing to use money from future land sales and investment income from its major projects reserve fund.
4. Does the outcome of the May provincial election affect the province's $330-million contribution?
Maybe?
UCP Leader Danielle Smith said if her party wins the election, the money will be there. NDP Leader Rachel Notley wants more details on the provincial commitment.
No one is saying what happens to the arena deal itself if the provincial money for the surrounding amenities disappears. We don't even know when the province entered the negotiations.
For months, the city called it a two-party negotiation — between the city and CSEC. The city said it was briefing the province on what was going on, even requiring provincial officials to sign a non-disclosure agreement to keep everything hush-hush.
Only now has the city confirmed that, yes, provincial officials were in the room where it happened.
5. What are the infrastructure improvements in the entertainment district that the province is going to pay for?
No precise details yet.
The big-ticket item for the provincial cash is an underpass that will be on Sixth Street S.E. between Ninth Avenue and 11th Avenue S.E., providing another link between East Village and the district. Years ago, it was slated to cost $50-$80 million, but the final price tag isn't known.
The other provincial cash is for roads and sidewalks around the new arena as well as a mysterious LRT connection (to the Green Line? Red Line? Both?).
Environmental remediation is another mystery item. Past studies on the arena site found no serious contamination as those current parking lots were paved over a former residential area.
There is one heritage building that will either be torn down or taken apart and moved. That would be the Stephenson and Co. building, which has been at the corner of Fifth Street S.E. and 13th Avenue S.E. since 1911. No one is saying who will decide or pay for that.
6. A few years ago, this was a $550-million arena. Now it's estimated at $800 million. What happened?
Like most projects on this planet right now, inflation and higher costs for construction materials are the bad guys. But there's another factor at play.
This isn't the same building that was envisioned in 2019. The arena's footprint is increasing from seven acres to 10 acres.
Not included in the $800-million price tag is that second ice sheet, a new community arena, which will cost another $52.8 million.
7. Is there going to be a whole new design? Does that mean a new development permit and more delays before construction can begin?
Maybe.
Coun. Kourtney Penner summed up the feelings of many detractors about the November 2021 approved design for the new Calgary event centre. She called it a "hideous box." Uninspired or plain were commonly used words for what's supposed to be a signature building.
Getting a development permit approved is a process. It can take a year or more.
City officials aren't committing to whether a new permit is needed or if a sufficient amount of the already approved elements for this building would be kept. That could negate the need for a new development permit.
8. If the City of Calgary is putting up approximately $500 million for the arena and CSEC's opening payment is $40 million, how exactly do you start building an $800-million project?
If the city has a plan, it isn't talking.
After consulting with various city officials, it seems there are a couple of options.
The city could borrow the additional money and use the annual payments from CSEC to pay off that debt. It could also use other cash on hand to cover some or all of the construction costs.
Presumably the city has a plan. It has a good credit rating, so it gets favourable borrowing rates. The city has been paying down its debt in recent years, and it is said to have good fiscal capacity.
9. Is the city again offering CSEC special deals on land?
Yes.
CSEC is getting the options to acquire four pieces of land in the entertainment district as well as the right of first offer on potential development opportunities on the city's land that is currently home to the Victoria Park bus barn.
Under the previous arena deal, there were two parcels of land where CSEC was given option of making a first offer to buy them if it chose to do so.
Even though land prices were soft, there was no interest from CSEC to exercise those options. It has no land developments, and its future plans on opening new potential revenue streams are not known.
10. Will there be a public consultation on this $1.2-billion project (arena and entertainment district)?
No.
Whether anyone likes the way the process was run or not, the city says public consultation was done previously for the last event centre deal and also for the Rivers District Master Plan, which contemplated an entertainment district in Victoria Park.
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