Arena negotiation discussion. UPD: Flames release their proposal

[longsuffering]

Originally Posted by New Era

You got that out of reading that proposal? Here's what I got out of that proposal.

* The Flames are putting up $275M for the construction of the arena.
* The City will front the rest and the recover their money through the CRL.
* The building will be City of Calgary owned, meaning the Flames will not have to pay property tax.
* The Flames up front contribution is also their long term rent obligation, over 35 years ($7.85M per year).
* The Flames argument against the City's proposal was that the Flames would pay $185M, be the revenue source for $185M via the ticket levy, and then still have to pay property taxes, on a building they don't want to own, meaning they are paying the full boat.



Why shouldn't they bring it up? It is the most applicable comparison. It establishes precedent in the province. Like it or not, Calgary and Edmonton are joined through a long ugly umbilical chord and what happens in one directly affects the other. The Edmonton deal is a very relevant deal and should be discussed. The Flames proposal is based on a similar model, but is so much better for the city in comparison, it is hard to fathom that anyone would not look at this and say, yeah, this is a fair deal too.

What the Flames have done is put up their rent, up front, for construction purposes. They are making a commitment to the city of $7.85M of rent, and assuming all operations costs, for use of, and revenues from, the new arena. The Oilers put up $26.5M up front (including the exhibition hall space) and are paying $3.5M a year for all use and all revenues. They also got development rights around the building. So this is a substantially better deal for the City of Calgary, and I think a much better proposal than the City's rule of thirds proposal. I can understand why people could have a beef with it, because there is no property be generated by the building (it shouldn't, as it is a City owned property being rented). I get that, but the rent on the building is fronted for construction, meaning the city doesn't have to front those monies themselves, which is a great value to them.

One thing that is missing from this presentation that fans should like, is no ticket tax. The money is recovered from a CRL rather than a ticket tax. For all the people that were concerned about being priced out of their seats because of a ticket levy, that is not there.

The Flames have placed the onus on the City to generate the revenue through the CRL, meaning if the City does want that money back, they have to make a commitment to getting the entertainment district around the arena built out as quickly as possible. I think this is smart, as the City has a history of being slow in delivery of the back end of deals. It would suck to have a new arena built, then the city drag their ass on getting the amenities and infrastructure around the building completed.

The sad thing about this is it doesn't matter what was proposed. It wouldn't have mattered what the Flames presented, the vast majority of the minds here are already made up. The Flames are the bad guys and the City are the good guys. The issue here is not finding a solution that meets all needs, its about there being a winner and a loser in this ridiculous fight. I think this proposal is a winner. I think it addresses everyone's wants and desires, and is fair to both the hockey team and the City. It also places the onus on the City to deliver the infrastructure and services to support the entertainment district the City claims they are so hell bent on providing Calgarians. I would like to know what specifically this does not address and where it is a bad deal for the citizens of Calgary, and I mean more than Ken King was involved in it?

I'd like to understand why you've gone from being on record as being comfortable with a $150 million City contribution and now you're saying it's a fair deal for the City to fund roughly twice that?

Sent from my Pixel XL using Tapatalk

[SebC]

Originally Posted by New Era

The Flames have placed the onus on the City to generate the revenue through the CRL, meaning if the City does want that money back, they have to make a commitment to getting the entertainment district around the arena built out as quickly as possible. I think this is smart, as the City has a history of being slow in delivery of the back end of deals. It would suck to have a new arena built, then the city drag their ass on getting the amenities and infrastructure around the building completed.

This is exactly why it makes no sense for the city. If it was the Flames saying "as part of our proposal, these developments will be built by these partners", then the CRL might actually function properly - i.e. the funding increases the tax base. The arena is supposed to be what generates the revenue. (Spoiler alert: it won't.)

[ComixZone]

Originally Posted by Cappy

People need to stop saying this. There is no evidence of this at all.

The market is the evidence. Look around North America, find a city in comparable population/functional infrastructure, and then find an entirely privately funded arena that made financial sense for the people who funded it.

Regardless of the evidence, we have a privately owned organization not willing to privately fund the arena. We have a city who isn't willing to invest to the level required, so we have no deal. Full stop.

[DiracSpike]

That five minute call-in KK had to the Boomer morning show was ####ing embarrassing.

HOW, HOW, HOW does this guy still have a job. You've had ten years to come up with a plan and it's crap. You know nothing about hockey and yet have your fingers in all hockey operations, almost chasing away one of the best GM's this team has ever had. Our jerseys suck, and have for ten years, when all you have to do is go to a retro design that already exists for an order of magnitude improvement. Every part of this negotiation from your side is hamfisted, literally all you had to do to get me excited about CalgaryNEXT as a 25 year old sports fan is to come up with some decent architectural renderings that any firm could do for peanuts. Instead you gave us a graphic that looked like Homer Simpsons bubble car crossed with George Jetson's house that was designed by a SAIT freshman. Conduct a press conference with tough questions about a complicated negotiation? You can't even do a five minute puff interview with your radio affiliate without sounding like a jackass.

I normally don't clamor for people to be fired, but this guy needs to go. You can't even say "oh he's a nice guy" because KK isn't, serving the dude at Calgary Golf and Country Club for two years made that abundantly clear to me. GTF away from my team Ken.

[DJones]

Originally Posted by ComixZone

The market is the evidence. Look around North America, find a city in comparable population/functional infrastructure, and then find an entirely privately funded arena that made financial sense for the people who funded it.

Regardless of the evidence, we have a privately owned organization not willing to privately fund the arena. We have a city who isn't willing to invest to the level required, so we have no deal. Full stop.

And I think the problem with an arena, is that there is cultural and economic benefits to it that don't go to the owners.

Bars, property values, "Pride", ect. You can argue all day over what they are worth but to the owners it's $0.

[EldrickOnIce]

Originally Posted by DJones

If they are willing to walk away I wouldn't say they are in denial. They are just saying this deal works for us, now it's the cities decision to accept the offer or not.

Whether the city can afford to pay that amount doesn't change the owners break even point.

Agreed. Continuing to negotiate would suggest denial. Concluding negotiations shows understanding that there is no where to go here. The city has their line, the Flames their own. And they are no where near one another.
Also also explains the feeble plea to vote for change, if this isn't the direction you want.

[rage2]

Originally Posted by Olsy

Does anyone know when the current Saddledome lease expires?

Originally Posted by calgarygeologist

Assuming this (https://law.marquette.edu/assets/spo...ary-flames.pdf) is valid the lease expires in 2033.

Multiple contracts in play.

City of Calgary has an agreement with the Flames Foundation that ends in 2033.

Flames Foundation has a lease agreement with the Calgary Flames that was renewed in 2014. Nobody knows how long this was extended for, but with arena talks already going on at the time, it's most likely a status quo extension with exit clauses (new arena, team sold, demolition of saddledome, etc).

The way things are structured, it makes this impossible:

Originally Posted by Tiger

So... The city should start charging them property tax now then in the saddledome

[pepper24]

I don't mind the Flames proposal and now up to the city to see how much they can counter. I don't use the new library or haven't been on the 3/4 ring road yet but more than happy using my tax dollars to fund these. Same with the arena. To be a world class city we need a better arena. The Dome is a dump and let's quit kidding ourselves. Let's cut out the politics and get this deal done.

[Backlunds_socks]

How are so many people proving that this is the only economic scenario that works for the Flames? Do people truly believe they are being transparent?

If their hockey economic model does not work then they need to look into their CBA and take away from their employees not their communities.

[pepper24]

P.S. If the arena is more than $500M (which it will be) do the Flames, city or both cover this? Didn't see that and could have missed.

[SebC]

Originally Posted by ComixZone

Where this gets interesting is if the City does decide they need/want an arena, because then it's on them to find investors/corporate interest...if that day never comes, then there's a natural course of events that will take place one day in the future (no time soon).

Over time, the economics of the private funding may also change. For example, the Saddledome may become truly obsolete to the point that it's actually costing the team a lot of money, and then the difference between it and a new arena would justify the investment. Alternatively, the tide could completely turn against sports subsidies forcing the NHL to lower player salaries. Or maybe the city re-establishes negotiations if there comes a time when staying put in the Saddledome is no longer the best option. As it stands the Saddledome seems to be more detrimental to a new arena than favorable (i.e. it's too good so the gap isn't big enough), so staying put for now if pretty ideal IMO.

[Backlunds_socks]

Originally Posted by DJones

As poorly as the Flames have handled this, they are right. It's simply not economical to fund an arena privately in Calgary.

I just can't see them offering any more.

Originally Posted by DJones

If they are willing to walk away I wouldn't say they are in denial. They are just saying this deal works for us, now it's the cities decision to accept the offer or not.

Whether the city can afford to pay that amount doesn't change the owners break even point.

What leads you to believe that the case presented by CSEC is indeed their only viable way? Do you know CSEC's internal hurdle rates ?

I don't believe it one minute, and even if it is the case not my problem.

[Bunk]

I think actually if the Flames had come out in 2012 instead of 2015 with CalgaryNEXT and the discussion had evolved in the same way away from West Village you'd have had a deal (on the basis of CRL) by 2013 or 14 when the economy was still hot. Council might have bought the idea of being able to recoup that much through a CRL.

In a sense from a public point of view if we had done that deal - when the economy crashed the way it did, that might have been big trouble in terms of that debt obligation.

Proposing in the midst of such a significant downturn and real estate vacancy, it's tough to get the concept off the ground.

I'm interested to see what happens next.

[DJones]

Originally Posted by Backlunds_socks

What leads you to believe that the case presented by CSEC is indeed their only viable way? Do you know CSEC's internal hurdle rates ?

I don't believe it one minute, and even if it is the case not my problem.

Obviously I don't have internal numbers and I'm sure they've built in a last resort buffer but I just don't believe the Calgary market can support a 600M arena funded privately.

There's been plenty of failed arena experiments that I'm sure they've looked at to scare them away. Would you want to buy in as a shareholder? Personally I don't think the return would be worth the risk.

[Backlunds_socks]

Originally Posted by DJones

Obviously I don't have internal numbers and I'm sure they've built in a last resort buffer but I just don't believe the Calgary market can support a 600M arena funded privately.

There's been plenty of failed arena experiments that I'm sure they've looked at to scare them away. Would you want to buy in as a shareholder? Personally I don't think the return would be worth the risk.

All based on absolutely nothing.

However, lets assume you are right in which case the system is broken and the NHL is not a viable business and should be liquidating.

[iggy_oi]

Originally Posted by DJones

If they are willing to walk away I wouldn't say they are in denial. They are just saying this deal works for us, now it's the cities decision to accept the offer or not.

Whether the city can afford to pay that amount doesn't change the owners break even point.

Originally Posted by ComixZone

This is just it.

The Flames have made the offer that they can make, if the City doesn't like it - then it doesn't happen. End of story. There's no grounds for a deal that makes sense to Flames as an organization, so things will stay as-is for the foreseeable future.

Where this gets interesting is if the City does decide they need/want an arena, because then it's on them to find investors/corporate interest...if that day never comes, then there's a natural course of events that will take place one day in the future (no time soon).

Originally Posted by EldrickOnIce

Agreed. Continuing to negotiate would suggest denial. Concluding negotiations shows understanding that there is no where to go here. The city has their line, the Flames their own. And they are no where near one another.
Also also explains the feeble plea to vote for change, if this isn't the direction you want.

I'm sorry if this comes off as harsh, but if any of you actually believe that the flames' current proposal is their breaking point and final offer, then the flames aren't the only ones in denial here. I'll be happy to admit I'm wrong if this offer as is ends up being the deal the city agrees to but I can't see it being the case. If the flames' offer was in fact their breaking point why would they have even waited to hear the city's counter before walking away from negotiations?

[Cappy]

Originally Posted by ComixZone

The market is the evidence. Look around North America, find a city in comparable population/functional infrastructure, and then find an entirely privately funded arena that made financial sense for the people who funded it.

Regardless of the evidence, we have a privately owned organization not willing to privately fund the arena. We have a city who isn't willing to invest to the level required, so we have no deal. Full stop.

Just Because other teams have wrangled subsidies out of cities doesn't mean that they cannot privately finance an arena/stadium.

Also, i don't think that small amount of new stadiums/arena's over the past few decades can provide an adequate accounting for what the "market" would be. NFL/MLB/NBA/NHL are effectively monopolies that operate in less than 50 NA cities.

[Makarov]

Honestly, why does this arena have to cost $550 million? Would a $350 million arena not do the trick? This question seems especially relevant considering how disposable these facilities have become.

[pylon]

Originally Posted by CliffFletcher

People realize Nenshi isn't exactly the one crunching numbers and putting together proposals for the City, right? He's just the public face of the City when it comes to negotiation. Bureaucrats put together costs and viability, the entire council votes on the proposals, and Nenshi addresses them in the media.

The only way Nenshi factors in the negotiations is that he's secure enough in his popularity that the City's case can be presented without fretting about public opinion.

Most people do realise that. But Nenshi came across as a smug little twerp from day one. Regardless of how utterly awesome Nenshi thinks he is (just ask him and I'm sure he'll tell you), he's the face of the city in a negotiation with people that pay more tax in a year, than Nenshi makes in a term. I don't know if it's typical small man syndrome, but Nenshi seems to like to antagonise people and companies that are far more successful, and frankly way above his 'pay grade' of success. Wenzel, UBER, The Flames, and I'm sure I'm missing others.

Again, this mans legacy is now going to be one the likes Peter Pocklington. A hero at first, but the ultimate villain in the end. I don't agree with the Flames proposal, but Nenshi's ego and horrible tact from day one is why we are here. You think a guy like Murray Edwards is going to let Nenshi push him around and berate his corporation in public?

[Tron_fdc]

If the Flames offer is their breaking point they can enjoy their move to Seattle.

I LOVE the game of hockey, but not enough to have an NHL franchise bend me over as a taxpayer.