CalgaryNEXT Discussion pt. 2

[Zarley]

Originally Posted by Bunk

Thoughtful post.

The question is, does an Arena/Stadium better enable redevelopment or potentially hamper it by virtue of a) additional money ($240m) required from a CRL to pay for the stadium AND remediation and other infrastructure costs, and b) taking up a significant amount of the land that's necessary to have high tax yields to pay back that debt?

Back of envelope, I can't see how the pro-forma adds up.

From what was presented, it wasn't entirely clear as to whether the CRL would be used to finance the arena/stadium itself or the costs of remediation and bringing infrastructure in the WV up to par to allow for development. If the CRL funds are solely allocated to infrastructure improvement, then I think there's a better chance that the numbers will work. If be are using CRL funds to construct a realty tax exempt asset, then I agree that we will run into problems.

The assumption made is that a well executed district plan can attract increased retail, hotel, and possibly limited office investment to the WV. This would help offset the development land lost to stadium. I'd also hope to see the entertainment complex moved as close to the CP line as possible, freeing up riverfront lands for development.

These are all questions that are yet to be answered as we simply do not have the information yet. I'd be happy to draw up a pro forma, but there are too many wildcards at the moment. All I'm saying is that it's far too early to write off the concept.

[Cappy]

Originally Posted by Zarley

From what was presented, it wasn't entirely clear as to whether the CRL would be used to finance the arena/stadium itself or the costs of remediation and bringing infrastructure in the WV up to par to allow for development. If the CRL funds are solely allocated to infrastructure improvement, then I think there's a better chance that the numbers will work. If be are using CRL funds to construct a realty tax exempt asset, then I agree that we will run into problems.

The assumption made is that a well executed district plan can attract increased retail, hotel, and possibly limited office investment to the WV. This would help offset the development land lost to stadium. I'd also hope to see the entertainment complex moved as close to the CP line as possible, freeing up riverfront lands for development.

These are all questions that are yet to be answered as we simply do not have the information yet. I'd be happy to draw up a pro forma, but there are too many wildcards at the moment. All I'm saying is that it's far too early to write off the concept.

Ken King stated in his presser that it was up to the powers that be to decide who pays for the cleanup. The proposal didnt mention any infrastructure changes and the plan appears to keep all roads etc. the same.

Judging by the financing plan on the Calgary next website http://calgarynext.com/financing-plan.php the CRL is used for construction of the building (as it notes there is already ample parking and public transit). Any infrastructure changes would require a larger CRL.

Again, all this is based on the website and King's comments. things could change but it appears the City would need to kick in more for any improvements to the lands.

The "increased development in the area" argument is a red herring.

[Bunk]

Originally Posted by Zarley

From what was presented, it wasn't entirely clear as to whether the CRL would be used to finance the arena/stadium itself or the costs of remediation and bringing infrastructure in the WV up to par to allow for development. If the CRL funds are solely allocated to infrastructure improvement, then I think there's a better chance that the numbers will work. If be are using CRL funds to construct a realty tax exempt asset, then I agree that we will run into problems.

The assumption made is that a well executed district plan can attract increased retail, hotel, and possibly limited office investment to the WV. This would help offset the development land lost to stadium. I'd also hope to see the entertainment complex moved as close to the CP line as possible, freeing up riverfront lands for development.

These are all questions that are yet to be answered as we simply do not have the information yet. I'd be happy to draw up a pro forma, but there are too many wildcards at the moment. All I'm saying is that it's far too early to write off the concept.

It seems very clear the $240 million CRL was proposed to be allocated to the facility itself. Infrastructure/remediation is aside from that.

http://calgarynext.com/financing-plan.php

The facility is listed at a cost of $890 million, the breakdown of which is:
$200 million Owners contribution
$250 million Ticket tax
$200 million Direct City contribution
$240 million CRL

[Bend it like Bourgeois]

Originally Posted by Cappy

Judging by the financing plan on the Calgary next website http://calgarynext.com/financing-plan.php the CRL is used for construction of the building (as it notes there is already ample parking and public transit). Any infrastructure changes would require a larger CRL.

Things like transit, roads, site development are going to be part of the CRL no matter what gets built and the final use. There's no reason to assume it's whatever the city was going to spend anyway PLUS $240m.

It's been said before but the right way (IMO) to think of the CRL is what is the city going to do anyway, and how does that net differently with the arena and stadium.

If the net cost to taxpayers is the same either way, then I don't care how the breakdown changes. If it's more with a stadium and arena, how much more? That's the only number anyone should care about. No one knows that yet. Even then, there won't be one 'true' answer, but just the one based on the assumptions used. Have to start somewhere though.

[Zarley]

Originally Posted by Cappy

Ken King stated in his presser that it was up to the powers that be to decide who pays for the cleanup. The proposal didnt mention any infrastructure changes and the plan appears to keep all roads etc. the same.

Judging by the financing plan on the Calgary next website http://calgarynext.com/financing-plan.php the CRL is used for construction of the building (as it notes there is already ample parking and public transit). Any infrastructure changes would require a larger CRL.

Again, all this is based on the website and King's comments. things could change but it appears the City would need to kick in more for any improvements to the lands.

The "increased development in the area" argument is a red herring.

Not sure what you are looking at, but the existing plan includes various infrastructure changes including a traffic circle at 14th Street, new roads to provide access to development areas, and the implied public realm upgrades to make development palatable. The only road remaining the same is the Bow Trail alignment, which I'd argue needs to be be fixed regardless of what happens to the WV lands. According to the CalgaryNext website, the development of remaining lands in the WV is included as part of the overall project, which to me implies that the costs of this are included in the quoted figures.

How exactly is the argument a red herring? Given the inclusion of a CRL, the private development of remaining lands seems to be an integral component of the CalgaryNext plan.

[Zarley]

Originally Posted by Bunk

It seems very clear the $240 million CRL was proposed to be allocated to the facility itself. Infrastructure/remediation is aside from that.

http://calgarynext.com/financing-plan.php

The facility is listed at a cost of $890 million, the breakdown of which is:
$200 million Owners contribution
$250 million Ticket tax
$200 million Direct City contribution
$240 million CRL

This is something that needs to be clarified, however what I've read suggests the costs of development are part of the plan. From the FAQ:

CalgaryNEXT project is an integrated facility that includes an arena event center, fieldhouse, and football stadium with commercial and residential development

From the CRL page:

A CalgaryNEXT CRL would be based on a $240 million commitment that would help to initiate the development of the CalgaryNEXT project and redevelopment of Calgary’s West Village over the next two decades

Obviously, remediation costs are a wildcard until further study is completed. If you guys have any quotes from King in the media suggesting that district development costs are not included, please share them. I haven't been able to find anything suggesting they are not part of the quoted project cost. This confusion is yet another problem stemming from the poor communication of this proposal we've seen thus far.

[Cappy]

Originally Posted by Zarley

Not sure what you are looking at, but the existing plan includes various infrastructure changes including a traffic circle at 14th Street, new roads to provide access to development areas, and the implied public realm upgrades to make development palatable. The only road remaining the same is the Bow Trail alignment, which I'd argue needs to be be fixed regardless of what happens to the WV lands. According to the CalgaryNext website, the development of remaining lands in the WV is included as part of the overall project, which to me implies that the costs of this are included in the quoted figures.

How exactly is the argument a red herring? Given the inclusion of a CRL, the private development of remaining lands seems to be an integral component of the CalgaryNext plan.

The Flames have only proposed the arena/stadium. The other developments are a rendering to imply future development in the area. Like I said, facts can change, but looking at the funding model, there is no indication that any money is going towards the new roads suggested in the rendering (why would the Flames pay for something the city/residential developer should bear?)

Like i said above, the plan calls for "future development" but the Flames don't suggest they are the ones to do it. It's all a "look what can be built around it" and I doubt they want to put a rendering out with the sites around looking like what they do now.

The increased development arguments is a red herring in that it adds no value to the proposal itself. It has been discussed before that new development in the area just saps development for other areas of the city. It provides no benefit to the tax base, and would actually take away from the city coffers because the new development would be under a CRL as opposed to a new development in the beltline etc.

While city growth isn't a zero sum game, it's hard to support the idea that the proposal will create more growth and revenue that wouldn't have been coming to the city in the first place. No one is moving to this city or opening a restaurant in the city because the Flames have a new rink.

While the argument could be made that the rink would allow for growth in an area of the city that is blighted, the West Village hardly falls under that camp. It simply doesn't need a catalyst as it is a desirable area of land once the city decides its time to develop.

EDIT:

After seeing your above post I can see where some confusion lies. I, however, still think the vast majority of the 240 will be spent on the building and not surrounding improvements.

[Bunk]

A bit of math:

Assuming $240 milllion for CalgaryNext and say roughly half of the say $300 million in additional costs - assuming say the remediation part is picked up by the Provincial Government.

A total ~$400 million CRL at the minimum (not including borrowing costs).

Under the most optimistic of optimistic scenarios, the best I could come up with for revenue from a CRL was $257 million for a 20 year CRL period.

A few of my assumptions (based on roughly half the maximum development yield the West Village ARP anticipated):

- Up to 3000 residential units with a starting market value of $450,000 absorbing at about 200 units per year starting in year five up to full absorption by year 20. Average market value increase of 3% a year. Revenue neutral mill rate increase of .01 annually. The revenue yield assumes the Province would agree to forego their portion of the education property tax.

- Up to 2,000,000 million square feet commercial (including office, retail etc) of a starting blended value of $350 a foot increasing over time. 500,000 sq ft starting in year five and absorbing an additional 250,000 sq ft a year to full build out by year 11. Revenue neutral mill rate increase of .01 annually.

It would take to about year 28 to reach $400 million in revenue. You would of course need more to cover interest costs of borrowing. Again, this is the most optimistic scenario that seemed within the realm of reason.

[Cappy]

Originally Posted by Bunk

It would take to about year 28 to reach $400 million in revenue. You would of course need more to cover interest costs of borrowing. Again, this is the most optimistic scenario that seemed within the realm of reason.

By that time, the Flames would be in a new arena...

[Frequitude]

Thanks Bunk. And that's at zero interest!

Assuming 2% interest (probably very low), $400M turns into $696M after 28 years. Now of course that assumes no chipping away at principle throughout, but the point still stands that it would take many many decades to pay back.

[Zarley]

Originally Posted by Cappy

EDIT:

After seeing your above post I can see where some confusion lies. I, however, still think the vast majority of the 240 will be spent on the building and not surrounding improvements.

I see, so this is just an assumption you are making then. Is it based on anything? The information released thus far suggests the opposite, particularly the quote regarding the project's similarity to Edmonton's Ice District with an added field-house/stadium component.

[Bunk]

Originally Posted by Zarley

I see, so this is just an assumption you are making then. Is it based on anything? The information released thus far suggests the opposite, particularly the quote regarding the project's similarity to Edmonton's Ice District with an added field-house/stadium component.

I think the equivalent here is the public use of the fieldhouse. Ice District is located in a place that required little-to-no onsite infrastructure upgrades. No new parks, streets, riverwalk, realigned roads, environmental clean up, etc. perhaps CalgaryNEXT did include the pedestrian bridge connecting to Sunalta Station. Do you see any way they could build an new arena and covered multi-use football stadium for less than $840 as the funding section states?

That would be the advantage of a site like Stampede or Remington. It's ready to go, like Ice District. Just plug in the building and surrounding private projects on the books and boom.

[Cappy]

Originally Posted by Zarley

I see, so this is just an assumption you are making then. Is it based on anything? The information released thus far suggests the opposite, particularly the quote regarding the project's similarity to Edmonton's Ice District with an added field-house/stadium component.

It says there will be commercial development but does not commit to actually building anything. The reason I think the assumption works is because if I am selling something as a benefit to the buyer, I would make sure I repeatedly stated the benefit to them.

http://calgary.ctvnews.ca/video?clipId=683224 20 minute mark, he suggests development is a by-product of building a stadium. that's it.

We have heard there is a commercial component but that is all we heard. The FAQs say the development will act as a "catalyst" to commercial development, but again, no information on the source of the development.

Katz Group made it very clear that this stuff was included, because it was argued as a benefit to the proposal (which makes you think why a sports franchise would rather own the surrounding com/res components rather than the arena? perhaps rinks are crappy investments...)

I would consider any omission from the initial presentation to be telling that it is not in the current proposal.


So yes, while I am assuming the 240 doesnt include upgrades to roads and infrastructure (outside of connections to the building itself), I think it's a fair assumption given there really hasn't been any comment from the Flames that anything else is included.

[Fighting Banana Slug]

Originally Posted by Cappy

The Flames have only proposed the arena/stadium. The other developments are a rendering to imply future development in the area. Like I said, facts can change, but looking at the funding model, there is no indication that any money is going towards the new roads suggested in the rendering (why would the Flames pay for something the city/residential developer should bear?)

Like i said above, the plan calls for "future development" but the Flames don't suggest they are the ones to do it. It's all a "look what can be built around it" and I doubt they want to put a rendering out with the sites around looking like what they do now.

The increased development arguments is a red herring in that it adds no value to the proposal itself. It has been discussed before that new development in the area just saps development for other areas of the city. It provides no benefit to the tax base, and would actually take away from the city coffers because the new development would be under a CRL as opposed to a new development in the beltline etc.

While city growth isn't a zero sum game, it's hard to support the idea that the proposal will create more growth and revenue that wouldn't have been coming to the city in the first place. No one is moving to this city or opening a restaurant in the city because the Flames have a new rink.

While the argument could be made that the rink would allow for growth in an area of the city that is blighted, the West Village hardly falls under that camp. It simply doesn't need a catalyst as it is a desirable area of land once the city decides its time to develop.

EDIT:

After seeing your above post I can see where some confusion lies. I, however, still think the vast majority of the 240 will be spent on the building and not surrounding improvements.

Agreed that the $240mm is likely for the building only, given the preliminary numbers. I believe CalgaryNEXT did not include money for Bow realignment or environmental remediation, as it isn't required for the arena/fieldhouse, given the initial plan, and for the latter, should be the responsibility of the city or province, given how that liability was assumed in the first place.

I do take issue with the "blight" of WV. Serious contamination of a site that would prevent any development of the site, except maintaining the current car dealerships and bus station, is pretty awful for a location with such an otherwise prime location.

Hopefully come April, the city can properly assess the environmental cleanup cost, the math surrounding the CRL and determine whether they even see it feasible to place this sort of project in WV. Have all of the costs factored in, and then see how much the Flames are willing/required to contribute.

[powderjunkie]

Originally Posted by Zarley

I see, so this is just an assumption you are making then. Is it based on anything? The information released thus far suggests the opposite, particularly the quote regarding the project's similarity to Edmonton's Ice District with an added field-house/stadium component.

Either assumption is equally fallible, which is at the heart of the issue with this 1/8th baked proposal.

[powderjunkie]

Another thought that has come to my mind recently is the scarcity of professional hockey franchises, and that it really is a privilege to own & operate one (especially in a good market). There are more uber-rich people that would love to own good franchises than franchises available to own. IMO if the current owners don't feel like they can fund a new development themselves, then they have two options: continue raking in very good money for as long as possible in the Dome, or sell the franchise to someone who will develop themselves. Admittedly, the list of people capable and interested in buying a franchise and funding a new development is short, but I am unconcerned by any threat of relocation (Seattle didn't want a brand new shiny franchise, let alone the polished turd from Edmonton).

FWIW I do think the Flames are excellent corporate citizens (despite many detractions of many of the owners and their other operations themselves)

Kind of random musings, but it's further supports my notion that private enterprise should not receive public money unless the public benefits are concrete and legitimate (which to me means a lot more than "will spur further development")

[#-3]

Originally Posted by Cappy

I thought I followed the thread pretty consistently, and I do not remember any of that stuff getting leaked or know on the board before the announcement.

I wish I had time to find a source this weekend, but I clearly remember stories for season ticket holder meetings including Ken King saying something like [we are talking about a billion dollar project here]

The thing about the football stadium/field house was leaked by a stamps exec. at least 9 months in advance of the presentation. I could be remembering it wrong, but I think it was something to do with a paper doing a write up on the rink, and he was asked if the stamps would look at a new building too, and he said [there will be the field house with that rink]

I guess knew was a strong word, but I think about 3 months before we had some information about the city looking into remediation of the land for redevelopment, and at the very least it would have been completely shocking to see them propose a different location, as insiders had been completely dismissive of the other options kicked around.

Everyone went into this proposal with all kinds of positivity. I don't think anyone can honestly say they thought any of the things brought forward were surprising. So sitting around talking about how bad of a concept it is and that it will never/work never happen just seems disingenuous, and I don't believe most people are trying to be disingenuous.

So I think they are just piling on.

What the proposal was was disappointing, we told ourselves we weren't Edmonton and things wouldn't go the same way, the owners made us wait but it would be worth it, because they would give us a coherent plan with a realistic funding model, and it would just happen quickly and easily when it happened. They wouldn't drag us through all of that crap.

People left feeling kind of bad about it for these reasons, and then when the realized other people felt kind of bad about it too they started to pile on.

It's right now the same thing we have been talking about for 5 years, a somewhat vague concept that is disappointingly taking far too long to come together.

[Muta]

There will be commercial components to this project. Residential as well.


Posted from Calgarypuck.com App for Android

[BACKCHECK!!!]

Originally Posted by #-3

. I don't think anyone can honestly say they thought any of the things brought forward were surprising. So sitting around talking about how bad of a concept it is and that it will never/work never happen just seems disingenuous.

There were a lot of huge surprises for me.

Parking? No parking. For a 100,000 person venue. That's just plain stupid.

Infrastructure changes? No infrastructure changes. For one of the biggest sports facilities in the nation, built in the middle of downtown in a major city.

A funding proposal that includes the actual costs of the project? No, it conveniently leaves out a number of things, including the site clean up which will likely be the 2nd biggest line item in the entire project.

The biggest surprise by far is that this business came forward, cap in hand, asking for huge amounts of public funding, and then handed over a plan that looks like a student project where two of the people did all the work on the last weekend before it was due.

In my mind not being able to come up with a clear plan, or a coherent funding model, or a realistic timeline, are all perfectly valid reasons to not want to hand over hundreds of millions of dollars of taxpayer money to a highly profitable private corporation.

If this is honestly and actually the best they could come up with after 10 years of planning, then they are not competent enough to complete this project.

If this is not the best they can come up with, then they are just playing games, and so "No, I do not support the current version of CalgaryNEXT", because it is a bad proposal.

[Ducay]

Originally Posted by Muta

There will be commercial components to this project. Residential as well.


Posted from Calgarypuck.com App for Android

Totally unrelated to the project though. Those are already part of the BRZ for the WV. The Flames like to sell that as an added bonus, but really, CalgaryNext would just likely speed up the development of those. God knows we've got enough vacancies right now....(both residential and commercial).