[News Roundup] CSEC/City arena deal UPDATED: Third Party Facilitator

[TheoFleury]

I think she got played and she's a rookie mayor. I don't know. I think it was going to unravel no matter what but she stumbled hard trying to get ahead of it and win the PR game. She learned some lessons there but I think Edwards wanted out so all that was left was to posture, manage the situation and to not appear at fault

[Gemnoble]

https://www.cbc.ca/amp/1.6406164

[GordonBlue]

Originally Posted by Gemnoble

https://www.cbc.ca/amp/1.6406164

posted a few days ago already.

[Roughneck]

Originally Posted by Mr.Coffee

I agree the Flames got cold feet and look idiotic as well but there should have been compromise on escalating costs- full stop. And frankly if the Flames said $0 to increases above a threshold and that was their position you should still take it as the city since you are not going to get a better deal than this, obviously.

There was a compromise on increasing costs.



The city gave up their project manager so that CSEC could get theirs, they'd split the increase in costs known at the time, and in exchange CSEC agreed to take on future cost overruns.



The city might as well pay for the whole thing if every stage CSEC wants to they can just say 'we're walking away unless you pay this now and you better take it because it's the best deal you're gonna get' and people suggest they take it.

Obvious to anyone with half a business brain that the Gondek call shoulda been you know what Murray fine, we will pay the full $27mm extra it’s a rounding error.

That's a Peace Bridge. That's five full cycle track networks. That's over 57 blue rings.



If it's just a rounding error, the billionaire could pay for it. But they don't want to, because they have half a business brain.

[Freeway]

The bigger issue is that (a) the final construction budget wouldn't have been available until this June and (b) there's nooooooo way the number was coming in below $750 million, with CSEC contractually on the hook for anything north of the City's $287.5 million commitment.

[You Need a Thneed]

Originally Posted by Freeway

The bigger issue is that (a) the final construction budget wouldn't have been available until this June and (b) there's nooooooo way the number was coming in below $750 million, with CSEC contractually on the hook for anything north of the City's $287.5 million commitment.

If anyone thinks that the “pause” was caused by anything other than massively increasing construction costs, give your head a shake.

The mutually agreed deal had the city capped below $300 million, and it was probably looking like C-SECTION was going to have to put in an additional $100-$150 million themselves over what was budgeted for.

[topfiverecords]

Originally Posted by You Need a Thneed

If anyone thinks that the “pause” was caused by anything other than massively increasing construction costs, give your head a shake.

The mutually agreed deal had the city capped below $300 million, and it was probably looking like C-SECTION was going to have to put in an additional $100-$150 million themselves over what was budgeted for.

You mean it wasn’t for spite because the Mayor tweeted?

[Jordan!]

Here are some of my opinions:

1) Murray Edwards doesn't really care about Calgary
2) If the Flames win the Cup value will be high, Edwards will look to sell
2) The Saddledome is the new Kingdome, iconic and loved but will have serious issues this decade
4) Construction costs are only going to rise the next 5-10 years, CSEC should've eaten additional costs entirely and ground should be broken by now
5) The Arizona Coyotes will be playing in their new Arena in Tempe years before Calgary breaks ground or moves to Houston.

[Moneyhands23]

Originally Posted by Jordan!

Here are some of my opinions:

1) Murray Edwards doesn't really care about Calgary
2) If the Flames win the Cup value will be high, Edwards will look to sell
2) The Saddledome is the new Kingdome, iconic and loved but will have serious issues this decade
4) Construction costs are only going to rise the next 5-10 years, CSEC should've eaten additional costs entirely and ground should be broken by now
5) The Arizona Coyotes will be playing in their new Arena in Tempe years before Calgary breaks ground or moves to Houston.

No way in hell they let the Flames move...I guess it could be a temporary move if the saddledom roof caves in...

The Canadian teams generate way to much money for the league. Also the Canadian TV deal would take s big hit.

[powderjunkie]

Originally Posted by Freeway

The bigger issue is that (a) the final construction budget wouldn't have been available until this June and (b) there's nooooooo way the number was coming in below $750 million, with CSEC contractually on the hook for anything north of the City's $287.5 million commitment.

Originally Posted by You Need a Thneed

If anyone thinks that the “pause” was caused by anything other than massively increasing construction costs, give your head a shake.

The mutually agreed deal had the city capped below $300 million, and it was probably looking like C-SECTION was going to have to put in an additional $100-$150 million themselves over what was budgeted for.

Just need to correct the bolded...if you dig beyond the infographic, the city's contribution was actually:

323M (incl. things like Saddledome demolition)
+ land value (confidential)
+ share of operating costs
+ insurance
+ liability for major structural repairs
+ some other less tangible costs and opportunity costs (e.g. bus barns land option)

It's funny how numbers get massaged to suit narratives. Not sure where Mr. Coffee's $27M came from? The final dispute was generally reported as $16.7M (though I've also seen $19M):

6.4M for roads - the city agreed to take this on (I think this is included in the $323M above), leaving:
5.7M for sidewalks.
3.8M for "photovoltaic film upon which solar panels will be installed"
2.4M in climate costs that were actually $100k in operating costs annually from 2035 and beyond (2.4M being the NPV).

Even these numbers don't quite square with 16.7/19M, but they're at least close (I think there were some other minor costs related to street-level retail that might square everything?).

We should also remember that green-energy investments typically generate a positive ROI over the lifespan of a project, but obviously we'd need to dive deeper into exactly how utility costs will be paid, projections on energy costs, etc.

So to be pedantic, IMO CSEC can only really claim a $5.7M red herring.

[CaptainYooh]

Originally Posted by Jordan!

Here are some of my opinions:

1) Murray Edwards doesn't really care about Calgary
2) If the Flames win the Cup value will be high, Edwards will look to sell
2) The Saddledome is the new Kingdome, iconic and loved but will have serious issues this decade
4) Construction costs are only going to rise the next 5-10 years, CSEC should've eaten additional costs entirely and ground should be broken by now
....

You are entitled to your opinions, of course. But they suggest that you are likely misinformed.

1) People confuse Edwards switching tax jurisdictions for personal gains with his love for Calgary and for the game. Murray Edwards loves Calgary and loves Calgary Flames. This has been proven. We, the plebs, are not privy to private conversations of the rich, but there was significant and serious evidence of Edwards sticking with the club during toughest economic times, when leaving the city would have been easily accomplished and well-understood. He didn't. There is further evidence of the promise to keep the team in Calgary made to Harley Hotchkiss. I have heard about it from Ken King, whom I knew well. Ken was instrumental in helping Harley assemble the new ownership group when the team was in financial trouble. I have seen Edwards watching the games a few times, when I was fortunate to be invited to the owners' box. You can't fake it like this. He truly loves this team.

2) If the Flames do win the Cup, it would be much easier for the municipal politicians to approve extra spending on the new arena. That's it. Selling an NHL team into a different jurisdiction/market is a very complicated affair (and btw, it is different from moving a team to a different market).

3) Saddledome is a fine arena. I don't care much about it being iconic and beloved. It is a fine building. Well-designed and well-maintained. I am a civil engineer and I know what I'm talking about. The crap about poor acoustics and roof issues are all noise intended to generate the urgency with the politicians and the public. The problem with Saddledome is that it is no longer modern and it cannot be renovated to add a larger number of suites, which generate enormous amount of revenue. One club level box generates approx. $400,000 of rent each season plus huge food and beverage revenue. There are about 20 Club level boxes at the Saddledome. This number could be tripled in a new facility.

4) CSEC does not and will not own the new new building. There is a finite revenue to be made in the expected life of a new building assuming that the team stays in Calgary. Expecting CSEC to put a disproportionate amount of funding into it is unreasonable. They will fund an amount, which they can finance with a conventional lender based on the reasonably expected cashflows. City has access to better financing sources and will own the building regardless of CSEC being there or not. A new arena building is still a valuable asset even if a professional NHL team is no longer playing there. The City has lesser degree of risk than CSEC, which should be and will be reflected in the modified funding formula.

[8sPOT]

I'm curious if players look at this stuff when thinking long-term plans for their careers. In other words, do Johnny and Tkachuk view this as a potential reason to leave? I'm not saying it would be THE reason, but certainly on a Pro's and Con's list this has to be there somewhere, right?

[corporatejay]

Originally Posted by 8sPOT

I'm curious if players look at this stuff when thinking long-term plans for their careers. In other words, do Johnny and Tkachuk view this as a potential reason to leave? I'm not saying it would be THE reason, but certainly on a Pro's and Con's list this has to be there somewhere, right?

Probably in the same way Any average consider the building an employer is in. Definitely a factor, but one of many.

[IamNotKenKing]

Originally Posted by Jordan!

Here are some of my opinions:

1) Murray Edwards doesn't really care about Calgary

No. Murray was instrumental in the internal discussion in building the new arena, and how important it would be to the City and team.

2) If the Flames win the Cup value will be high, Edwards will look to sell

Doubt it.

2) The Saddledome is the new Kingdome, iconic and loved but will have serious issues this decade

Yup.

4) Construction costs are only going to rise the next 5-10 years, CSEC should've eaten additional costs entirely and ground should be broken by now

Yes on the first part, but no to the second. Additional costs would have been continued to be assigned to the Flames by the City had they simply agreed to eat this first one.

5) The Arizona Coyotes will be playing in their new Arena in Tempe years before Calgary breaks ground or moves to Houston.

Doubt it. And the latter ain't happening.

Opinions interspersed in the above.

[BeltlineFan]

Originally Posted by Jordan!

5) The Arizona Coyotes will be playing in their new Arena in Houston years before Calgary breaks ground.

Fixed it.

[powderjunkie]

Originally Posted by IamNotKenKing

Yes on the first part, but no to the second. Additional costs would have been continued to be assigned to the Flames by the City had they simply agreed to eat this first one.

The reverse is also true.

We could also really unpack the term 'additional costs' - IMO 'previously ill-defined costs' is more accurate...the city wasn't pulling these costs out of their rear end, and there's not reason to believe there would be any 'new' costs (though other ill-defined costs would be likely in a project of this scope).

The city agreed to take on 53% of the road/sidewalk costs. Sounds like a good-faith partner to me.

We'd really need to drill into the details of the climate mitigation costs - ie. who would receive the future cost savings.

[Parallex]

Originally Posted by CaptainYooh

A new arena building is still a valuable asset

YMMV but folk don't generally play hot potato "you own it, no you own it, no you own it..." with valuable assets like the two of them did.

Who owns it is really an ancillary issue... I think it was pretty clear that the City wanted to be made whole on it's investment (and they were willing to take a liberal interpretation of "made whole" at that) I don't imagine the current council feels any different so all the Flames (or anyone else) have to do is offer up a % of revenue streams that accomplishes that.

[Mr.Coffee]

Originally Posted by Roughneck

There was a compromise on increasing costs.



The city gave up their project manager so that CSEC could get theirs, they'd split the increase in costs known at the time, and in exchange CSEC agreed to take on future cost overruns.

That's true but context here matters, doesn't it? That really isn't much of a fair trade given the extremely high cost inflationary environment, IMO anyway- doesn't seem like the city is being very reasonable in this regard.

Originally Posted by Roughneck

The city might as well pay for the whole thing if every stage CSEC wants to they can just say 'we're walking away unless you pay this now and you better take it because it's the best deal you're gonna get' and people suggest they take it.

I agree it's poor form and negotiating in bad faith by employing this tactic by CSEC. City may end up paying 100% of it in the end anyway so still seems to me like a massive strategic blunder.

Originally Posted by Roughneck

That's a Peace Bridge. That's five full cycle track networks. That's over 57 blue rings.

If it's just a rounding error, the billionaire could pay for it. But they don't want to, because they have half a business brain.

Just my opinion of course but the value of a new stadium for the Flames very easily eclipses the value of all those things multiple times over. Like, I just can't see myself watching live action shots of 57 blue rings for the next 50 years on my TV multiple nights every winter. Also, this point is getting beyond the basic scope of what I was getting at, which is a pretty basic failure of leadership (both public and private) to get an otherwise nominal amount of cost bridged. Pretty straightforward but understand and appreciate and respect there are some that didn't want the City involved in the first place.

[Parallex]

Originally Posted by Mr.Coffee

That's true but context here matters, doesn't it? That really isn't much of a fair trade given the extremely high cost inflationary environment

Fair is immaterial, they agreed to it... they didn't have to but they did.

Frankly I think that was bad faith bargaining by CSEC from the get go. The fact that it didn't survive the 1st additional cost overrun is proof enough of that. I think they just saw an opportunity to get something (project control) for "free" so they made commitments they never intended to honor... If additional costs happen renege on the deal and don't pay, if they don't happen then you got project control in exchange for nothing.

Ultimately I think they just didn't like the projected price tag so they pulled the plug. The City wants to be made whole and without re-opening the revenue split that wasn't going to happen with cost escalations so they got the ceiling on their costs, CSEC then discovered that the top end risk on their costs was now uncomfortably high.

[Geeoff]

Originally Posted by BeltlineFan

Fixed it.

Bettman would let the Coyotes play out of his basement before he relocated them.