CalgaryNEXT Discussion pt. 2

[RM14]

Originally Posted by The Ditch

There are better ways to use the land than letting the Flames increase their profits and valuation of the team, if you subscribe to the theory that it has to be cleaned up, put something there that's beneficial to the city, and more beneficial to the citizens of Calgary, it's ridiculous to go, welp ya gotta clean it up anyways better spend all this money for a private company

As a Calgarian, I don't really wan't that space to become another million dollar high rise neighbourhood that doesn't really benefit average Calgarians. Alot more potential there for even park space. Beauty up the river bank.

[Parallex]

Originally Posted by Bingo

You are 100% correct if the decision is to do Calgary Next or just leave everything the way it is.

No, I'm just correct.

If/when some other redevelopment option comes up the city should again include the cost of all the externalities in any analysis. Because just like with CS&E's proposal they'll be part of the actual cost. It's not disingenuous at all.

[Lanny_McDonald]

Originally Posted by Frequitude

There is a very big difference between scope uncertainty and estimate uncertainty. Scope is what your going to build. The estimate is how much it will cost to build that thing.

Estimate uncertainty is the +/- cost & schedule estimate range on a fixed scope. i.e. you know what you're building but you haven't spent tons of detailed engineering on it so you're probably wrong on the cost estimate.

Scope uncertainty is not even having a complete grasp on what you're building.

Estimate uncertainty is completely acceptable and expected at this stage. Scope uncertainty is a big sin in the early stage of a project because it creates a compounding effect on the estimate uncertainty (you might have to build more, and that increased scope might cost more than estimated).

The Calgary Flames thought they only had to look at a portion of the scope. Basically, their facility which can be considered a black box. They did not consider how to plug that black box in. That was naïve and a poor way to develop an asset. It is critical to understand, study and outline the entire scope required for the success of your asset. Even the pieces you may not be responsible for.

The Flames failed to do that. They should be scolded for that. The city picked up the slack. They should be commended for that.

The Flames did properly scope out the project. They estimated how much it would cost to build the "black box" as you put it. The City went and tied in every ancillary cost they could think of and tied it to the scoping of the new building. That is disingenuous. As Bingo has pointed out, all of these ancillary projects are required regardless of the project being developed on that space. Hell, those projects likely have to happen without development of the land, so they shouldn't be lumped in the scope of the project. The city should have these costs enumerated, but to include these in the scope of this project is not kosher.

[Torture]

Originally Posted by New Era

The Flames did properly scope out the project. They estimated how much it would cost to build the "black box" as you put it. The City went and tied in every ancillary cost they could think of and tied it to the scoping of the new building. That is disingenuous. As Bingo has pointed out, all of these ancillary projects are required regardless of the project being developed on that space. Hell, those projects likely have to happen without development of the land, so they shouldn't be lumped in the scope of the project. The city should have these costs enumerated, but to include these in the scope of this project is not kosher.

Right, but the Flames are asking the City to move their plans up.
The city probably wouldn't be developing West Village for another 20 years without CalgaryNext.

[getbak]

Keep in mind with these numbers, the city report assumes that the numbers supplied by CSEC are accurate with regards to the construction of CalgaryNext. They are not saying that Ken King lied or exaggerated the numbers. The numbers King gave are only for the construction of the building (and that's all he ever claimed they were). The report neither analyzes or verifies the CalgaryNext construction cost estimates.


The $1.8 billion number is derived by taking the CalgaryNext numbers for construction and adding all the additional costs that will be required to get the site ready for construction, including the creosote clean-up; transportation and utilities upgrades; and land costs.

Most of this additional money will have to be spent regardless of what is ultimately built in the West Village. In fact, some of those costs will potentially be cheaper if CalgaryNext is built on the land rather than the current West Village redevelopment plan.

• The remediation of the land will be $85-140 million (the cheaper option will take at least a decade to complete).
  
• The land value is $80 million (I don't know if this is additional cost to the city or just potential lost value that the city could get from selling it to developers).
  
• Total infrastructure improvements come out to $327 million.
  
• The financing costs are another $370-390 million.

That's a half a billion dollars before interest, regardless of what's built in the West Village.

[saillias]

What kind of development can be placed there without cleanup and land remediation? Another creosote plant that's what. It's clearly the most economical option for WV.

[Bingo]

Originally Posted by Parallex

No, I'm just correct.

If/when some other redevelopment option comes up the city should again include the cost of all the externalities in any analysis. Because just like with CS&E's proposal they'll be part of the actual cost. It's not disingenuous at all.

You're just correct?

Neat ability to just mark yourself as "right" in discussions.

I completely disagree, but won't call myself correct. It's not practical or logical for a city to leave that land as is for perpetuity, so the comparison of what this plan costs compared to what another plan costs is the number that matters.

I'd agree 100% if it was the development of Fish Creek Park into a sports stadium and the other option was to leave it as an amazing wildlife filled park.

[Bingo]

Originally Posted by Torture

Right, but the Flames are asking the City to move their plans up.
The city probably wouldn't be developing West Village for another 20 years without CalgaryNext.

I'd look at that development link again ... the pictures didn't have flying cars.

[ToraToraTora]

Just build it already, regardless of cost.

(I'm from Lethbridge, so...)

[Frequitude]

Originally Posted by New Era

The Flames did properly scope out the project. They estimated how much it would cost to build the "black box" as you put it. The City went and tied in every ancillary cost they could think of and tied it to the scoping of the new building. That is disingenuous.

No. That is not disingenuous. That is exactly what should be done when scoping out a new asset.

Originally Posted by New Era

As Bingo has pointed out, all of these ancillary projects are required regardless of the project being developed on that space. Hell, those projects likely have to happen without development of the land, so they shouldn't be lumped in the scope of the project. The city should have these costs enumerated, but to include these in the scope of this project is not kosher.

Yes. They should. Every single alternative should be scoped out and estimated considering every "externality". Because all those "externalities" will be different for every alternative. They will also have very different time profiles which matters unless you don't believe in time value of money. And I put "externality" in quotations because they aren't externalities. They are scope.

[Parallex]

Originally Posted by Bingo

It's not practical or logical for a city to leave that land as is for perpetuity, so the comparison of what this plan costs compared to what another plan costs is the number that matters.

I disagree. There isn't another plan on the table right now that I know of so what was the city going to compare it to? Some hypothetical dream proposal?

While you're right that it's not logical for a city to leave that land as it is inperpetuity nobody's is saying that... frankly, what it sounds like you're saying is that something needs to be done with it "Right Now" which isn't the case. It's not disingenuous for the city to include all the externalities is the project cost estimate for CalgaryNext, I think it would be more disingenuous (in the sense that dis-ingenuousness is commonly regarded as deceit) to leave it out and mislead the citizens (who they actually serve) to the full actual cost of the project.

[Frequitude]

Originally Posted by getbak

Most of this additional money will have to be spent regardless of what is ultimately built in the West Village. In fact, some of those costs will potentially be cheaper if CalgaryNext is built on the land rather than the current West Village redevelopment plan.

• The remediation of the land will be $85-140 million (the cheaper option will take at least a decade to complete).
• The land value is $80 million (I don't know if this is additional cost to the city or just potential lost value that the city could get from selling it to developers).
• Total infrastructure improvements come out to $327 million.
• The financing costs are another $370-390 million.

It is, however, disingenuous for the city to include this in the "cost" of the project. The bolded part should have been stripped out of the cost and made a standalone alternative against which CalgaryNEXT would be compared.

Yes, the economic comparison between the two would consider the lost opportunity value. But it is misleading for the city to bury it in the cost estimate. Cost estimates should be a measure of dollars out the door to build the asset.

[You Need a Thneed]

Originally Posted by getbak

Keep in mind with these numbers, the city report assumes that the numbers supplied by CSEC are accurate with regards to the construction of CalgaryNext. They are not saying that Ken King lied or exaggerated the numbers. The numbers King gave are only for the construction of the building (and that's all he ever claimed they were). The report neither analyzes or verifies the CalgaryNext construction cost estimates.


The $1.8 billion number is derived by taking the CalgaryNext numbers for construction and adding all the additional costs that will be required to get the site ready for construction, including the creosote clean-up; transportation and utilities upgrades; and land costs.

Most of this additional money will have to be spent regardless of what is ultimately built in the West Village. In fact, some of those costs will potentially be cheaper if CalgaryNext is built on the land rather than the current West Village redevelopment plan.

• The remediation of the land will be $85-140 million (the cheaper option will take at least a decade to complete).
  
• The land value is $80 million (I don't know if this is additional cost to the city or just potential lost value that the city could get from selling it to developers).
  
• Total infrastructure improvements come out to $327 million.
  
• The financing costs are another $370-390 million.

That's a half a billion dollars before interest, regardless of what's built in the West Village.

Looking at the list, the $80 for land purchase is the land that would be required for the city to buy to complete the Calgary Next Project. Theoretically, the city would have to buy some, but liekly not all of this land to build WV without CalgaryNEXT.

Financing costs could be a lot less without CalgaryNEXT, since the payoff of loans could be faster, with more money being raised by property tax paying properties.


Yes, there is some of this cost that is listed by the city that is costs connected to the west Village, no matter what goes there. That isn't really the issue. The city is just putting on the table what it would cost to build CalgaryNEXT right now, under the proposed agreement.

The problem comes in with the amount of money that the CRL is able to pay for. Taking the prime chunk of land that would be in the CRL, and making it a non tax paying entity, is a big strike against making a CRL work.

Yes, lots of the same money will be required no matter what is built in WV, but without CalgaryNEXT, the CRL is likely actually capable of providing the money required.

I'll also agree with others on KK coming across fairly well this morning on the radio. He still has a lot of hope for a project and funding model that has Zero chance of happening at this point, which is a problem.

I think the only way to change the funding structure to potentially make the funding work for the proposed CalgaryNEXT, is either for the CSEC to provide a whole lot more money, AND eliminate the requirement for a CRL to provide some funding, OR to have the CSEC buy all of the land required, and pay property tax, which might make the CRL work.

Other than that, Alternative sites will nearly certainly have to be used.

[You Need a Thneed]

Originally Posted by Frequitude

It is, however, disingenuous for the city to include this in the "cost" of the project. The bolded part should have been stripped out of the cost and made a standalone alternative against which CalgaryNEXT would be compared.

Yes, the economic comparison between the two would consider the lost opportunity value. But it is misleading for the city to bury it in the cost estimate. Cost estimates should be a measure of dollars out the door to build the asset.

This reading is incorrect. The $80 million dollars is the land not currently owned by the city, that the city would be required by the city to purchase in order to own all of the land required to build CalgaryNEXT on. It is not the land value of the land that the city currently owns.

Under alternate WV scenarios, the city liekly doesn't have to buy all of this land (maybe some of it, or can work out a land swap if roads need to be moved)

[Lanny_McDonald]

Originally Posted by Frequitude

No. That is not disingenuous. That is exactly what should be done when scoping out a new asset.


Yes. They should. Every single alternative should be scoped out and estimated considering every "externality". Because all those "externalities" will be different for every alternative. They will also have very different time profiles which matters unless you don't believe in time value of money. And I put "externality" in quotations because they aren't externalities. They are scope.

Except these problems exist and need to be addressed regardless of the development plan being discussed. Hence, out of scope for the construction project in question. You may identify them as potential assumptions, but to say they are part of the scope to build this project is bull####. It would be like someone buying North Hill Mall and wanting to redevelop that space then telling the group they are responsible for improvement costs to 16th avenue, something that has been an issue for decades and a well known problem for the City. That isn't how things are done. That is how you guarantee projects don't get kicked off.

[Benched]

Plan B please.

Typed out a big thing, but it's the same banter as the last 71 pages+.


Just.....Plan B. Plan B.

[Frequitude]

Originally Posted by New Era

Except these problems exist and need to be addressed regardless of the development plan being discussed. Hence, out of scope for the construction project in question. You may identify them as potential assumptions, but to say they are part of the scope to build this project is bull####. It would be like someone buying North Hill Mall and wanting to redevelop that space then telling the group they are responsible for improvement costs to 16th avenue, something that has been an issue for decades and a well known problem for the City. That isn't how things are done. That is how you guarantee projects don't get kicked off.

They are not out of scope at all. Yes, the scope itself is somewhat non-differentiating, but the timing of that scope is drastically different for CalgaryNEXT vs future development. Surely you get that. Therefore it absolutely needs to be considered (I mean, unless you believe the time value of money is zero and have access to a couple billion dollar line of credit at 0%). The ancillary projects are absolutely in scope.

Hell, even if they were identical you still come up with a complete scope basis which includes all tie-ins. On that there is no debate. That's good asset development. Then debate who pays for which part, but to say that only paying attention to scope inside your own perceived boundary limits is good asset development practice is 100% unequivocally incorrect.

On the North Hill example, ya if someone bought it and wanted to accelerate the city's plans to fix the surrounding infrastructure by a decade or two you're damn right that should be considered when evaluating the merits of the plan. And heck, at least in that case the developer is paying for the land and would own it.

[getbak]

Originally Posted by You Need a Thneed

This reading is incorrect. The $80 million dollars is the land not currently owned by the city, that the city would be required by the city to purchase in order to own all of the land required to build CalgaryNEXT on. It is not the land value of the land that the city currently owns.

Under alternate WV scenarios, the city liekly doesn't have to buy all of this land (maybe some of it, or can work out a land swap if roads need to be moved)

I find the way it's written to be confusing...

2.1 Land Ownership

The City of Calgary owns 79% of the land in the West Village proposed for the site of CalgaryNEXT. The remaining land would have to be acquired. The City currently leases the land it owns in the West Village to tenants including Greyhound Canada, General Supplies Co. Ltd., and Renfrew Chrysler.

The value of the land that CSEC anticipates The City contributing to the project must be included in evaluating the costs of the proposal. For the purposes of evaluating the financial proposal, Administration is estimating the value of the land at $80 million, based on the book value of our current land holdings and an allowance for acquiring the remainder.

It should also be noted that The City of Calgary does not own the land in the Sunalta community CSEC proposed in a CRL boundary as described in Attachment 8. Without acquiring land ownership, The City will not have the ability to manage the redevelopment that a successful CRL would rely on to realize its revenue goals.

I read that as the $80 million includes the total value of the land the city would be contributing to the project, both what needs to be acquired and what is already owned.

[Frequitude]

I read it the same as getbak, meaning the true cost that should be applied (in my opinion) is the cash that would have to go out the door to buy up the rest of the land. I'll assume that is about $16M (21% x $80M). Then add on the Sunalta land that apparently the city would have to buy to make the Flames' CRL proposal work.

[You Need a Thneed]

Originally Posted by getbak

I find the way it's written to be confusing...



I read that as the $80 million includes the total value of the land the city would be contributing to the project, both what needs to be acquired and what is already owned.

I'm quite certain I read in another section of the documents that laid it out more clearly. I don't have time to look for it now though.

You could be right.

If that is the case, though, in a non CalgaryNEXT WV, the city sells the land back to developers.