CalgaryNEXT Discussion pt. 2

[Senator Clay Davis]

Well Edmonton has likely set the lowest level people can expect for a ticket increase at 20%. And as I said when I saw it, that was for a perennially awful team, in a city with less big corporate money than Calgary. If the Flames are Cup contenders by the time they move into a new arena, 30% or more will absolutely be in play. Remember moving into a new building is not about improving fan experience, it's about increasing revenue. I'm sure there will be a lot of complaining when it happens, but people should know it's coming I hope.

[Erick Estrada]

Originally Posted by Senator Clay Davis

I'm sure there will be a lot of complaining when it happens, but people should know it's coming I hope.

Well that's CalgaryNEXT in a nutshell. A lot of people are complaining but it's coming in one form or another.

[Senator Clay Davis]

But I think what you'll find is people like me and Flash who are against this are partially against it because we know there are big ticket increases coming. For taxpayers to contribute to this, one of the big criteria for me is the benefit to the average fan. And the average fan almost always loses by having less access through higher ticket prices. The average fan becomes more of the TV fan, while the wealthy fan is just fine. So it's a handout to benefit wealthy owners, while cutting out average fan, so that the wealthy fan can wait 10 fewer minutes in line for $11 beers and the bathrooms. If the Flames wanna finance that 100% by themselves, awesome. But public money should not result in a facility that fewer people can afford, and that's always what happens with these situations.

[Rhettzky]

Maybe I missed it, but did the Flames counter address the $1.8 Billion dollar estimate that the City came up with earlier in the year?

[Robbob]

Originally Posted by Rhettzky

Maybe I missed it, but did the Flames counter address the $1.8 Billion dollar estimate that the City came up with earlier in the year?

I don't recall if they officially did or not. I know at a couple STH meeting they spoke to some of the numbers

[Rhettzky]

I found the report back to Council.Here

Cost Source	City Report	CSEC Value
Buildings	$890		$890
Infrastructure	$327		$112
Land		$80		$80
Remediation	$140		$50
Subtotal	$1,437		$1,132
Financing	$391		$214
Total Cost	$1,828		$1,346

Basically saying it's half a billion less.

[The Voice of Reason]

Originally Posted by Senator Clay Davis

But I think what you'll find is people like me and Flash who are against this are partially against it because we know there are big ticket increases coming. For taxpayers to contribute to this, one of the big criteria for me is the benefit to the average fan. And the average fan almost always loses by having less access through higher ticket prices. The average fan becomes more of the TV fan, while the wealthy fan is just fine. So it's a handout to benefit wealthy owners, while cutting out average fan, so that the wealthy fan can wait 10 fewer minutes in line for $11 beers and the bathrooms. If the Flames wanna finance that 100% by themselves, awesome. But public money should not result in a facility that fewer people can afford, and that's always what happens with these situations.

Maybe I'm misinterpreting your comment, but are you implying that we should use public tax money to finance any new arena in order to lower costs for season ticket holders?

[Senator Clay Davis]

Originally Posted by The Voice of Reason

Maybe I'm misinterpreting your comment, but are you implying that we should use public tax money to finance any new arena in order to lower costs for season ticket holders?

Oh goodness no. I'm saying the cost for tickets should not go up exponentially when it's public money involved, because the general public as a whole does not benefit from that. But as we see in Edmonton, it looks like 20% will be the baseline for an increase. That undoubtedly will drive some "average fans" to not be able to afford tickets anymore. But while the wealthy fan won't like it, they can afford it so they'll live with it. If the Flames wanna build it all by themselves and jack prices up 40%, go for it. But if public money gets involved, it shouldn't hurt the majority of the public. And big ticket increases do that. But that's why the Flames want a new arena, to make more money. So it's one of the big issues with public money for me, nevermind that the economic benefits have been proven false. The average fan loses with ticket price increases, and that's a problem to me.

[Frequitude]

Originally Posted by Bunk

This is the thing. I would venture to guess that close to 100% of us would love to see a new arena - but a few caveats. It needs to be financed correctly - including so that prices for fans aren't astronomically higher (I think we can expect a ticket tax would be a component), and that there isn't too much burden on the taxpayer either. Also, it needs to be in the right location that can leverage the maximum benefit to the community through spin off uses and be accessible for people walking, or taking transit or driving also. CalgaryNEXT is not that.

Exactly.

I would love a new arena, a new stadium and a field house. Absolutely love it and want them badly. I would even pay higher ticket prices to attend events at these venues.

However it must be properly financed (yes, including some public $) and properly integrated into the city so as to provide the greatest benefit to this city and community as possible. That includes the right location, the right transit connection and the right timing with this city's development plans. And it must consider the all in lifecycle costs and benefits. None of this hocus pocus "ignore the infrastructure or contamination because it needs to be done anyways" dribble. That is not how you evaluate a capital investment.

The most important thing to me is the city of Calgary, not the venues in which its sports teams' play. I love this city and I want it to be a great city.

CalgaryNEXT is not that. That is what I have been arguing for 44 pages.

[Enoch Root]

Originally Posted by Kavvy

I don't get why people keep saying this.

The Calgary Flames have made it clear they will not pay any portion of the contamination clean up - they will not be a partner.

An "Anchor" tenant doesn't make the clean up any cheaper. Also, I don't think the CRL discussed by the Flames doesn't account for clean up costs.

If the contamination was cleaned up, and Bow Trail was realigned (all independent costs from the Flames CalgaryNEXT proposal), the area nearly becomes Class A in desirability for future development. CalgaryNEXT doesn't change this, or help it, it simply leeches a CRL which could go to infrastructure upgrades in the WV.

Their stance is that the contamination cleanup is so expensive, that it is too easy to keep putting it off (and has been put off for decades), whereas a major project like this would/could be the catalyst to garner provincial and/or federal funds to get it done.

And that would benefit the city immensely because, as you said, once it is cleaned up, that property becomes substantially more valuable, and tax revenues will rise as a result.

[Flash Walken]

Originally Posted by Senator Clay Davis

But I think what you'll find is people like me and Flash who are against this are partially against it because we know there are big ticket increases coming. For taxpayers to contribute to this, one of the big criteria for me is the benefit to the average fan. And the average fan almost always loses by having less access through higher ticket prices. The average fan becomes more of the TV fan, while the wealthy fan is just fine. So it's a handout to benefit wealthy owners, while cutting out average fan, so that the wealthy fan can wait 10 fewer minutes in line for $11 beers and the bathrooms. If the Flames wanna finance that 100% by themselves, awesome. But public money should not result in a facility that fewer people can afford, and that's always what happens with these situations.

Sorry Clay, don't agree.

Flames are entitled to charge whatever they want for tickets and concession, if the market will tolerate 11 dollar beers therer will be 11 dollar beers at the dome.

I just want this same standard applied in reverse. The Flames obviously feel that they need a new building to increase revenue, and as such, they should raise their own revenue for their own private business. They can collect cans to raise funds for all I care, but the Flames are not a library or a park or a bridge, they're a privately owned entertainment company.

If they don't think they'll make their money back on a 800 million dollar stadium complex then they should scale down their desires, not go looking for a handout from the city.

If the Flames want to cut the city of Calgary in for an equity stake in the team, by all means, have the city put some money up, you know, like a regular business transaction.

Having the city give hundreds of millions of dollars to the flames in order to save season ticket holders a couple thousand dollars is probably the worst case scenario. I'd rather the city just gave a couple grand to the season ticket holders directly.

[Erick Estrada]

Originally Posted by Enoch Root

Their stance is that the contamination cleanup is so expensive, that it is too easy to keep putting it off (and has been put off for decades), whereas a major project like this would/could be the catalyst to garner provincial and/or federal funds to get it done.

And that would benefit the city immensely because, as you said, once it is cleaned up, that property becomes substantially more valuable, and tax revenues will rise as a result.

If a large scale project like CalgaryNEXT can't kickstart the cleanup it's likely not going to happen in some of our lifetimes. Does anyone foresee a condo project kickstarting it?

[Senator Clay Davis]

Originally Posted by Flash Walken

Sorry Clay, don't agree.

Flames are entitled to charge whatever they want for tickets and concession, if the market will tolerate 11 dollar beers therer will be 11 dollar beers at the dome.

I just want this same standard applied in reverse. The Flames obviously feel that they need a new building to increase revenue, and as such, they should raise their own revenue for their own private business. They can collect cans to raise funds for all I care, but the Flames are not a library or a park or a bridge, they're a privately owned entertainment company.

If they don't think they'll make their money back on a 800 million dollar stadium complex then they should scale down their desires, not go looking for a handout from the city.

If the Flames want to cut the city of Calgary in for an equity stake in the team, by all means, have the city put some money up, you know, like a regular business transaction.

Having the city give hundreds of millions of dollars to the flames in order to save season ticket holders a couple thousand dollars is probably the worst case scenario. I'd rather the city just gave a couple grand to the season ticket holders directly.

But I'm not talking about saving season ticket holders money. If they wanna increase tickets 5% or 10% on a new building with public money, fine. It's a new arena and you have to expect some kind of increase. But the likely 20% or more increase is ridiculous with public money involved. Taking public money to essentially shut out more of the public from the venue is awful. But it's not even season ticket holders I'm talking about, the average fan doesn't have season tickets. Season ticket holders will hate the increase but most will be able to afford it. The average fan who wants to go to 3 or 4 games a season might now only be able to afford to go to 1 or 2 games a season. For them this new venue means less live hockey.

If they build it 100% themselves, they can raise prices 99% for all I care. They put up the money, if they wanna earn it back that way go for it. But if the public is helping pay for the arena, and then will get ticket increases that shuts more of the public out, that's a problem for me.

[Rhettzky]

Originally Posted by Erick Estrada

If a large scale project like CalgaryNEXT can't kickstart the cleanup it's likely not going to happen in some of our lifetimes. Does anyone foresee a condo project kickstarting it?

Who paid for the east village cleanup?

Was it the City or shared by the developments?

[Fighting Banana Slug]

Originally Posted by Rhettzky

Who paid for the east village cleanup?

Was it the City or shared by the developments?

Was there a cleanup? There is a CRL in place for infrastructure improvements.

[Rhettzky]

Originally Posted by Fighting Banana Slug

Was there a cleanup? There is a CRL in place for infrastructure improvements.

I believe it was around 200 million in cleanup costs. But can't find the source.

[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.

[GGG]

Originally Posted by Erick Estrada

If a large scale project like CalgaryNEXT can't kickstart the cleanup it's likely not going to happen in some of our lifetimes. Does anyone foresee a condo project kickstarting it?

The problem is the Arena/Stadium itself generates no taxes, The CRL (which is the net tax increase for the remaining land) is being used to finance the construction.

So essentially the city pays for the clean up and associated infrastructure and gets nothing out of it tax wise.

Or alternatively,

You use the CRL to fund the clean up and infrastructure for the entire area and the city gets development funded of the increase in taxes.

The purpose of the CRL is to use future revenue increases to pay for the infrastructure required for the development. In the CalgaryNext case the CRL is being proposed to pay for the arena while the city picks up the tab for the infrastructure.

So yes Condo's when the area is prime for development post east village will pay for the clean up. CalgaryNext explicitly DOESNT pay for the clean up.

[CaptainYooh]

Originally Posted by Bingo

Then walk away for sure.

However I'm not sure I even agree with your summary.

Diane Colley-Urquhart mentioned in an interview that the committee that kicked off the East Village was already approaching the city on kicking off the West Village as well. The city published a plan to do that. So not sure they see doing both at the same time as a no go as you do.

The CN project has a field house, so I guess if the word "dedicated" is a hang up it can be a deal killer, but that can certainly be negotiated or discussed.

The City has a contamination issue that would certainly be helped by an anchor tenant and a partner to help clean it up.

So no I don't agree that it does nothing for the city. That's not to say they should just say yes and go with it. But nothing is a big stretch in my mind. If the city has a better plan that doesn't include an arena etc they are more than welcome to pursue it though, and I certainly don't have a problem with that.

Literally nothing in Tinordi's post you had addressed was accurate, so I am not commenting on his post but wanted to add a few points to yours only.

In his presentation last night King said the following:

1. The total project cost is estimated at $890M including cleanup, not $1.3B. This perception is the most frustrating issue they (Flames organization) is faced with. The total cost number is being exaggerated a lot by various sources (according to Ken);
2. $200M is already committed by the City for the fieldhouse; this is "money in the bank regardless of there it's going to be built". A fellow from the Fieldhouse Society (?) was in the audience and he confirmed that.
3. Domtar confirmed unofficially that they would contribute to the cleanup costs. Federal and Provincial governments indicated that they would likely contribute as well. Only the City of Calgary does not want to contribute so far.
4. Flames ownership will contribute $350M of their own cash, if the project goes ahead.
5. The community levy (user fees) will have to fund the rest of the costs. Very complicated mechanism, he said.
6. Edmonton deal for the Rogers arena was much heavier on the taxpayers than what CalgaryNEXT would be if approved as proposed. Said that the ownership group would sign the Edmonton deal today for CalgaryNEXT on the same terms with no further negotiations and start developing tomorrow.
7. New arena development will take 5 years from approval to completion.
8. If the new arena is not built within a reasonable timeframe, chances are high that the team would not be able to survive and compete in Calgary (he specifically said that this is not a "gun to the head threat, but a sad reality of today's sports entertainment market".
9. Winter Olympic bid win should not be prerequisite to the new arena. It should be the other way around - the new arena construction should be one of the factors that would make Calgary bid chances more successful just like construction of the Saddledome was.
10. Answering a question about their "Plan B" he said that if CalgaryNEXT doesn't happen, the new arena will most likely be built on the Stampede grounds north of the Saddledome; in which case the new fieldhouse will be built somewhere on the UofC grounds and McMahon would be given a facelift.

Just wanted to address comment about East Village. It has nothing to do with CalgaryNEXT from the competition perspective, zero. East Village is practically done and is just being completed/constructed. Most, if not all, of the developed sites within East Village have been either sold or conditionally sold to third parties. CMLC is looking for a new big job and had proposed to handle West Village development as a municipally-owned developer in the similar fashion East Village was developed. At the moment, CMLC was only asked to look at the environmental remediation plan.

[GGG]

One issue with that report is that it intentionally leaves out 200 million in "Optional enhancements" but these enhancements are required to develop a community to pay the CRL which is required for the project.

If the city doesn't invest the 200 million you don't get the mixed use community you are pitching.

As an aside this is the type of report that should have been presented as part of their proposal in the first place.