[News] Calgary, Alberta, & CSEC agree in principle to $1.223bn Event Centre + infrastructure

[Bend it like Bourgeois]

Originally Posted by Frequitude

Maybe it was covered earlier, but an important note is that CSEC's $356M contribution is a discounted number which actually totals to about $750M gross. So they aren't paying $40M up front then the remaining $316M over 35 years. They're paying $40M up front then the remaining $710M over 35 years.

https://www.calgary.ca/content/dam/w...tre-Update.pdf


I know that still won't please CSEC detractors, myself included, but CSEC does deserve the benefit of seeing it through this lens.

And I'm actually shocked that CSEC isn't boasting the $750M number front and centre. That's what they did last time (advertised the undiscounted contribution) and its usually what team owners try to do in these arena deals.

That link is gold for anyone who wants to really understand this. Many thanks.

I didn't see anything on who is responsible for what on revenues and operations. Do you know if that's kicking around somewhere?

[cam_wmh]

Originally Posted by BrownDrake

The city did just fine with this negotiation, if you don't want a team here then no amount of tax payer dollars would make it pass the smell test. The city has no leverage in this situation, there are plenty of cities that are in better shape an larger markets that can make a better offer. It was important for the city to make this more than just about an arena and they did that which will make some of the initial detractors happy.


We will have a new facility which is required to maintain Calgary in the NHL, I'm happy for that. Hopefully this development will pay off over the long term monetarily but there is also a community component that is often overlooked, parks and libraries are not investments either. Taxes will go up and not everyone will be happy welcome to life.

Name them.

[Demzy84]

At the end of the day, I’m sure 1/2 the people complaining about this deal are going to be buying tickets to go watch the Flames in the new arena one day enjoying those $18 popcorns and $20 beers.

[hah]

When is the announcement for an NHL team to go with the new building?


I"ll see my self out.

[cheevers]

Don't love the amount, it's ridiculous that Edward's gets a better deal after throwing his hissy fit. Seems like a bad deal for the city. Oh well, will use my vote in the next municipal election to voice my displeasure.

Very excited for the new rink and glad it secures the team for the long term. Looking forward to bringing my kid when he's old enough.

My major gripe is, why is the c train station not being directly connected to the arena? I know it's a block away but just put it right to the arena. Stupid train doesn't actually go anywhere, just near places.

[BrownDrake]

Originally Posted by cam_wmh

Name them.

Houston

[sketchyt]

Murray Edwards this week:

[liamenator]

Originally Posted by powderjunkie

Just curious why you think the bolded? It's a pretty standard business arrangement to sell shares in a corporation in exchange for investment. It would only be a paper transaction unless/until the club is ever sold, and would make a ton of sense for the city for the next time the extortion game comes around.

I just mean that, legally, no outside entity, public or private, can make a claim to a privately owned corporation's market value.

Sure, it would be great for the city if it were able to negotiate an ownership stake in exchange for building the rink. But that's pie in the sky. They don't have any leverage, and there are no precedents for this in any of the major pro sports leagues over the last 30 years.

[GirlySports]

Originally Posted by edslunch

The Mayor said on the radio this morning that revenue sharing and overrun responsibilities are still being negotiated. These are kind of big deals. It sure feels like this announcement was rushed so the UCP can claim victory. Smith is already calling it an election issue.

It was rushed because costs were getting more expensive, the players voiced displeasure last week and it got into the press, and Gondak actually needed to invest more and get the province to invest more to save face. Why would Gondak help Smith unless she had no choice to?

[powderjunkie]

Originally Posted by Lanny_McDonald

Important social and programmatic issues come through actual legislation and proper appropriation. This is money earmarked for infrastructure and would not be spent on "programmatic" issues.

This is such a weak excuse to justify bad spending. There are good reasons for having rigid controls on the budget process, but painting yourself into a corner isn't one of them.

I know you love to argue that all that needs to happen for the Flames to move is the NHL BOG to vote for it (which is kinda sorta true but ignores a lot of realistic context). City council can also simply vote to reappropriate funds...of course it's also a little more complex than that, but it is absolutely possible (see below for two small examples).


https://calgaryherald.com/news/local...t-to-doap-team

https://www.cbc.ca/news/canada/calga...ally-1.5168803

[RoadGame]

Originally Posted by Frequitude

https://www.calgary.ca/content/dam/w...tre-Update.pdf

Thinking through this out loud a bit in case other people who look at capital investments in particular have some related thoughts.

This table initially struck me as a bit odd, mixing Lease payment value with cash outlays as it does. For instance when a company builds an asset for an oil company, and the oil company pays a lease on it for ~30 years (a cogeneration plant for instance) generally the people putting up the cash for construction would expect the lease payments to provide for both a return of and return on capital over the life of the lease. Now in this case the value created by the event center doesn't accrue entirely to CSEC (majority definitely, but not 100%) so I would expect that the lease wouldn't necessarily provide for a return of let alone return on all the capital.

Even then, just think about the construction bills on the core assets (first two rows) for a second. 26.8+13.2+28.7+26.4+295+207.1+13.2 = 610.4M. Are the assets in those first two rows going to cost $610.4M to build? seems low. The present value of the lease is $316M, so if $610M were the construction cost, in effect CSEC through it's lease is ultimately paying for about half (again, ignoring the need for and utility of the enabling assets)?

Or... is the value of the lease being presented at a 5% discount rate really a proxy for the debt capital the asset owner (CoC) will be able to raise as a part of the capital stack to pay for the whole thing, which does make more sense I guess from the perspective of them putting all these values in the same table despite big differences in timing of cashflows. That seems a more likely explanation.

Hmm.

Not that Murray would monetize it in the near term, but what do we figure the value of the franchise will increase by once they're in the new building? Weighing that against the present value of the financial commitments they're making, relative to say capital investments in the oil patch, would be fascinating.

[Fuzz]

Originally Posted by Frequitude

I did. There's been almost 1000 posts in 18 hours...

I see "$750M over 35 years" simply as a positive relative to "$356M over 35 years", not as "OMG we totally got a good deal from CSEC" (hence the disclaimer that I'm still a detractor.

The 1%/yr increase is a red herring. Would it make you happier if it was $10M/yr increasing by 4.7% per year, simply because the 4.7 is a bigger number than 1.0? Because they have the exact same present value at a 5% discount rate...

All that really matters is to me is:
-total up front from CSEC
-total gross over 35 years
-discount rate (i.e. implied interest rate) to calculate the present value of their contribution

In this case, CSEC is getting an absurdly smoking deal that I don't like. They're basically only putting $40M into a $1.2B project.

The remaining $17M/yr should just be viewed as rent because they won't own the building so should be paying rent like anyone else who lives somewhere they don't own. And they'll make way more than an extra $17M/yr anyway.

We got bent over by a billionaire. But we were always going to. Everyone does.

Sorry, not in finances so I didn't really grasp the discount rate.

[Cowboy89]

I don't understand the issue people have with this. The city can either make this deal now with some contribution from CSEC and keep the Calgary Flames in Calgary or they can pay for the whole thing in 3-5 years after the Flames have moved. It's not like there's a viable option to not build a new arena in the next few years.

The Saddledome structure is at the end of it's life and would be a money pit to fix just to keep it running with over $100MM needed in urgent repairs plus more ongoing. There is no other North American city sized 1.5-2.0 million people with an arena as outdated as Calgary. Build it and move on.

[CroFlames]

Billionaires have been exploiting municipalities for stadiums and arenas for a long time. Our billionaire wasn't going to be the first one to be pious and righteous and build a rink of his own money (that he earned from OUR oil, but I digress). So I've accepted the fact that public money will go towards this project. If done right, the public can recoup their investment.

What I simply CAN'T wrap my head around is the massive cost. 1.2 billion for an ARENA. Not even a stadium. Earlier in this thread I posted about Juventus stadium in Turin built in 2011 for $310 million in today's CAD. It's state of the art, with all the bells and whistles, 42,000 seats and a roof. How is our new arena (likely 18,000 seats) going to cost four-####ing-times as much?! I'm not even arguing the split of public vs private money here, but the sheer overall cost is staggering and I don't understand it. Italy is a G7 country too, and Northern Italy is very affluent and developed, not unlike us.

Hell, the new Totteham Hotspur stadium in ####ing LONDON with a capacity of 63,000 and a roof cost a billion pound, but that included the demolition of their old stadium, and development of surrounding area. Is Calgary really more expensive than London?

The posts about "stop your bitching" seem crazy to me if we can burn a cool billion and not ask questions.

[Muta]

Would've been nice to have proceeded with the Olympic bid; on top of getting many facilities in Calgary and the surrounding area built / renovated / upgraded in a badly needed way, the arena would have likely been part of that discussion too... complete with federal, IOC and private contributions. For every $1 the City invested, we would have seen $6 returned in value. Wish that was communicated better at the time.

[IamNotKenKing]

Originally Posted by Strange Brew

There is some truth to what you are saying. This is an investment that generates some stimulus for the local economy, IMO that's undeniable.

But you have to admit that some of the money spent on Flames would still get spent locally. There is no way that 100% of that money either never gets spent, or all of it gets spent outside of Calgary or Alberta. That's a huge exaggeration.

And then spending it on the Flames certainly does not return it all to the local economy. The players and owners certainly don't spend most of their money locally. And once this deal is inked, the Flames franchise value will increase by several hundred million $'s. When Edwards eventually cashes out, absolutely none of that money stays here.

So if you believe this is a good economic choice for these levels of government, you have to believe this represents a better return that investing or stimulating other businesses.

I absolutely agree not all money which would have been spent on the Flames but is not if they were not here goes elsewhere. (Restating due to double negatives as: I agree if the Flames left, lots of the Flames' allocated disposable income would still be spent here.)

I also agree not all money spent at Flames' games stays here.

I also believe if the Flames left, the City would be poorer from a reputational and personal excitement/"good feelings" level.

I also believe lots of people would be out of work, and some would not simply transfer to another job.

I also believe the offshoot industries, namely restaurants, hotels, taxis, etc., would go down in spending if the Flames (and associated concerts) were not here, and there is a loss of jobs with that.

I also believe there will be "good paying jobs" (yes, I understand how politician-like that sounds) during the construction phase. I don't think we can simply say those jobs would exist even without this construction, thus this is a benefit.

I also believe the added infrastructure is good for the City and its citizens.

The final question is the interesting one:
Is this a "good economic choice" for these levels of government, or can the same or better return occur by spurring on other industries?

That is very difficult, if not impossible, to nail down a firm answer to. How much did the respective governments allocate to other industries, such as oil & gas, tech, movies, etc.? There are absolutely spinoff benefits from those, just as there are from this.

What amount of "free advertising" did the region get from the Last of Us? I would suggest a lot.
What benefits are there from the Platform Innovation Centre? I would suggest a lot.
What amount of "free advertising" does the region get from Flames games and other concerts? I would suggest a lot.

I don't think this can be pinpointed as a pure accounting exercise, as there are non-accounting factors to be taken into account as well.

As known, I bleed red, and want them here. I also think there are benefits to the City and Province of them being here. Would I rather CSEC have 100% built their own arena? Sure. But that ain't happening, so I am OK with this.

[Slava]

Originally Posted by Cowboy89

I don't understand the issue people have with this. The city can either make this deal now with some contribution from CSEC and keep the Calgary Flames in Calgary or they can pay for the whole thing in 3-5 years after the Flames have moved. It's not like there's a viable option to not build a new arena in the next few years.

The Saddledome structure is at the end of it's life and would be a money pit to fix just to keep it running with over $100MM needed in urgent repairs plus more ongoing. There is no other North American city sized 1.5-2.0 million people with an arena as outdated as Calgary. Build it and move on.

Yeah, and you're not wrong. But the thing is while the city needs an arena, the Flames/CSEC also need an arena. So you would hope that the deal would be pretty even when you look it from that side of things. Obviously, given the outcome, the Flames walked away from the last deal and the city begged them to come back to the table.

[TrentCrimmIndependent]

1.2 is asinine. That's two arenas by fairly recent standards.

That should be a McMahon replacement and Saddledome replacement on the same plot of land.

A 1000 seat community rink doesn't explain the extra 5-600 million on this price tag.

Must be some state of the art plaza and parking facility..

[Nufy]

Change arena to "Multi-purpose Arts and Culture Centre" with state of the art acoustics and lighting that will bring world class entertainment to the city...

Make a difference now ?

[Fire]

Originally Posted by Oil Stain

Can't say I'm thrilled about $300 million dollars of provincial public money going to a facility that the majority of people won't be able to afford to enter.

If it's anything like other new arenas it will have 15 new types of luxury seating that are completely unaffordable for 99% of Flames fans, and the upper bowl tickets prices will rise ~30% to allow ownership to "only" charge $10-15k per seat, per season for the new upper echelon seating.

How many people can't afford Hitmen tickets? It's not just the Flames using it. A lot of affordable options.