[Frequitude]

Originally Posted by Rhettzky

I found the report back to Council.Here

Wow, how did I miss this. Just gave it a read and am very pleased with the owners' response. It appears well thought out, properly partitioned between "inside battery limits" scope and "outside battery limits" scope that is appropriate to apply to CalgaryNEXT. It seems as though the City was equally as guilty of overburdening their rebuttal ($1.8B) as the CSEC was at underburdening it ($890M). Both are guilty.

Here's my breakdown.


First Principles

We want to start by highlighting the many points that both the City of Calgary and CSEC agree on which include but are not limited to:

-Calgary needs a new event centre;
-Calgary needs a public fieldhouse;
-McMahon Stadium does not fulfill a long term commitment to the CFL or local fans
-The contamination in the West Village needs to be cleaned up and will be;
-The West Village will be developed;
-Calgary needs to create legacy projects to continue to enhance our international presence and economic growth strategy;
-All projects involving public funding must ensure clear public benefit;
-City projects must be fiscally responsible.

I am glad to see that the City and CSEC agree on these principles. That is encouraging. I don't disagree with any of them.


Building Cost Bridge

The cost of the buildings remains at $890 million and has been verified by three independent contractors who work in Alberta and is agreed upon by both the City and CSEC.

Good to see they agree. My gut feel of capital investments says $890M is in the right ballpark anyways.


Infrastructure Cost Bridge

While the Report allocated the cost of both mandatory and optional infrastructure for the entire West Village of $327 million to CalgaryNEXT, CSEC would argue that the base case infrastructure investment required to create the conditions for West Village development is $112 million, not $327 million.

West Village Infrastructure: $112,000,000
Underpass on 18th Street: $80,000,000 (optional and unrelated)
Bow River Pedestrian Bridge: $30,000,000 (optional and unrelated)
Other West Village Development: $105,000,000 (optional and unrelated)
Total Infrastructure per City Report: $327,000,000

Don't disagree with saying the pedestrian bridge, 18th St underpass, and other general West Village development costs aren't directly associated with CalgaryNEXT. $112M out of $327M feels about right for the Infrastructure share CalgaryNEXT should burden.


Land Cost Bridge

The Report noted the cost of land to be $80 million and again, allocated the entire amount to the CalgaryNEXT project. However, as noted above, the footprint of the CalgaryNEXT project is 11% of the West Village and as such, at a maximum, that 11% or $9 million of the land costs could be allocated to CalgaryNEXT.

If this is true and the City's report referred to the total West Village land value then that's BS. In the absence of more information I don't disagree with CSEC's split.


Remediation Cost Bridge

The Report estimated that if the entire West Village was remediated upfront, the cost would be between $85 million and $140 million. Whether we proceed with CalgaryNEXT or not, remediation costs will be incurred if the City plans to develop West Village. The allocation of all remediation costs to CalgaryNEXT is in contrast to, and would actually undermine, the City’s position for a “polluter pays” approach to brownfield clean-up. According to the work that has been completed by our environmental consulting team and using data provided by the City’s environmental studies, we believe the cost to remediate the site is approximately $50million. None of the remediation costs should be included in the cost of CalgaryNEXT but rather borne by the polluters or others (i.e. the Provincial Government) as outlined in the City Report.

I've read the City's remediation report and I'm inclined to go with CSEC here. The City's cost range of $85M-$140M involved cleaning the dirty soil and putting the clean soil back. That second part is largely unnecessary because CalgaryNEXT needs a hole to start from. No sense putting back clean soil just to dig it back up.


Financing Cost Bridge

We believe the financing costs will likely be approximately $214 million, not the $371 million to $391 million outlined in the Report. We assert this budget line should not be included in the CalgaryNEXT project cost estimates. Alternatively, if we were to assign financing costs, we assert the CalgaryNEXT project should not bear the burden of the future interest payments that will be incurred over the next 20 years related to:

• interest associated with the construction fieldhouse. The City is going to build a fieldhouse irrespective of CalgaryNEXT and will need to fund the construction;
• interest associated with the remediation of West Village for the reasons outlined above; and;
• interest associated with infrastructure investments for the reasons outlined above.

Logically sound reasoning for me. Willing to give CSEC the benefit of the doubt here.


Bridge Summary



Moral of the story
This report is the closest thing we have to the truth yet, and on a gut check level I endorse it. $1.3B feels right for this project scope. Now the real question comes down to financing model. As is right now CSEC = $450M, City of Calgary = $896M. I disagree with this financing model.