Timing is a funny thing. One day a deal can look great on paper and the next it could have the worst optics imaginable.
That’s surely the case with the news that the City of Calgary and the Calgary Flames have come to a tentative agreement on a new arena for the team worth $550 million.
It’s a landmark moment for the two sides who have been embroiled in a nasty public negotiation that has stretched back four years.
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There was the doomed Calgary NEXT project, NHL commissioner Gary Bettman lobbying for government funding, president and CEO of the Flames Ken King stating that the project was dead, and the voted down 2026 Olympic bid.
The fact that the two parties were finally able to come to terms on a deal to replace one of the oldest arenas in the NHL is frankly surprising given all the animosity.
Building an arena, cutting jobs
But, in the same week as the announcement, the City of Calgary approved plans to cut $60 million in public services including the Calgary Police Service, Calgary Fire Department, and Calgary Transit just to name a few.
The City of Calgary is laying off 115 employees #yyccc
— Tara Overholt (@CityTara) July 24, 2019
It’s a bad look no doubt.
As much as a new arena will be a benefit not just for hockey fans, but for concert goers and those accessing shops and stores in the surrounding areas, seeing tens of millions of dollars in cuts to essential services days later doesn’t necessarily bode well for the city.
For those who have lost jobs, seen salaries cut, or are losing benefits this likely seems like a slap in the face and they’d be justified in thinking that way.
Calgary and Alberta’s economic struggles over the last number of years have been well documented, which is another reason why this arena debate is stretching into the summer of 2019.
But, the City of Calgary had said for years that they were waiting for a fair deal from the Calgary Sports and Entertainment Corporation and they finally feel they got that.
Breaking down the costs
After years of talks that featured elaborate cost-sharing proposals, this week’s proposed deal breaks down fairly simply.
Both the City of Calgary and CSEC will pony up $275 million to make the project possible, with the arena and the land being owned by the city.
— Calgary Flames (@NHLFlames) July 23, 2019
The Flames however will earn most of the revenue generated from sporting and concert events inside the new space.
Some of that deficit for the city will be made up through a ‘facility fee’ on ticket revenue that is expected to total roughly $155 million over the course of the lease.
That lease will keep the Flames as the primary tenant in Calgary over a 35-year span, essentially taking the prospect of relocation off the table from CSEC.
Similarly to Rogers Place up the road in Edmonton, the city has hopes to turn the land around the now vacant parking lot in Victoria Park into retail and street festival opportunities.
That will include a chance to implement municipal property taxes for any businesses involved in the event centre, though the arena is not subject to taxes as it will be city owned.
Smaller avenues of revenue for the city include getting a cut of the naming rights and $1.5 million in annual community contributions from CSEC.
Make no mistake, this deal benefits the Flames organization far more than the City of Calgary. But, in a growing metropolis like Calgary it’s a deal that eventually had to be made.
Saddledome had reached its lifespan
Entering the 2019-20 NHL season, the Flames currently possess the third-oldest rink in the entire league trailing only New York’s Madison Square Garden and Nassau Coliseum, both of which have undergone extensive renovations to the tune of tens of millions of dollars.
The lone member on the current Calgary Flames to even be alive when the Saddledome opened in October 1983 was captain Mark Giordano, who was less than two weeks old.
Like it or not, the Saddledome has reached the end of its life span and is no longer a viable option for drawing big name musical acts to the city like Paul McCartney, Taylor Swift, and Justin Timberlake.
More than anything, this deal keeps alive the relationship between the CSEC and the local government, who need each other to make sizeable deals of this magnitude.
Both sides had to compromise to make this deal possible.
While proposing the Calgary NEXT arena and field house project in 2015, CSEC was hoping to pay just a third of the proposed $1.8 billion complex with the city and taxpayers making up the remaining two-thirds.
Meanwhile, the city and Mayor Naheed Nenshi had always pushed back on the idea of contributing significant public funds to an arena that would benefit a private organization first and foremost.
This is not a “magic beans” approach to city building, where we expect untold economic benefit from the construction of an event centre.
This deal makes sense on its own merits.
Calgarians will have a new, exciting gathering place where memories will be made for generations. pic.twitter.com/qx5HEwzfWY
— Naheed Nenshi (@nenshi) July 23, 2019
Since the turn of the millennium however, virtually all arena and stadium projects in Canada have been at least partially funded by the tax base including Rogers Place, Mosaic Stadium in Regina, Investors Group Field in Winnipeg, and TD Place in Ottawa just to name a few.
Whether or not this precedent is sustainable is an entirely different conversation, but ultimately the precedent is there.
In the end, the City of Calgary decided to spend hundreds of millions of taxpayer dollars on a new arena. Something they had pushed back against for close to half a decade.
There are plenty of valid reasons to believe that this project isn’t the right step forward for the city, that it’s a waste of taxpayer money that could be better spent on other vital resources.
But, the city is touting the project as an events centre that will benefit the community far beyond the standard Johnny Gaudreau jersey-wearing Flames fan.
And that’s the only way this project will flourish at the $550 million amount, if there’s something every Calgarian can buy into and take pride in.