Arena negotiation discussion. UPD: Flames release their proposal

[Makarov]

Originally Posted by topfiverecords

It's absolutely astonishing how arrogantly CSEC assumes the City's new arena would be so amazing that other private development would almost immediately build out the district and fund this CRL. Just like the how the Saddledome hasn't ever done anything for Victoria Park or the east end of 17th avenue in the last 35 years.

Sorry boys (CSEC), a new arena wouldn't induce a single shovel turning on any of the surrounding land.

Once the green line station is open, Beltline and East Village land becomes scarce, and the economy recovers the neighbourhood will fill in over time with condo development, arena or no arena.

In fact an arena has a chance to be a huge impediment to condo sales. Using the land for an arena reduces the number of residents living in the neighbourhood by the thousands, which limits local service businesses ability to be profitable and remain open. Commercial development will focus on servicing game and concert crowds and not the day to day needs of residents. I'd guess a majority of condo purchasers/ renters that have choice don't want to live in an area where there are crowds and traffic jams on the streets twice an evening multiple times a year. Some that are season ticket holders will like the proximity, but that's a small percentage.

Even if it magically did spur development that wouldn't have EVER occurred, there isn't enough remaining property in that area that isn't Stampede land to recoup 225M from a CRL.

Even if it does spur development around the arena, the vast majority of that development will simply have been cannibalized from the East Village, Beltline, and other urban neighbourhoods. Yes, if a new arena cannibalizes greenfield development from the suburbs, that has tangible and intangible value to the City. But I haven't seen anything to suggest that value is remotely close to the $600 million the Flames are asking the City to contribute.

[Frequitude]

Soooo, the Flames offer is to put up nothing except the NPV difference between up front rent and spreading rent out over 35 years which works out to $128M at 4% (a fair discount rate in line with the cost of debt).

[Flash Walken]

Remember, they had a week to massage this proposal to make it look as good as possible to the public before releasing it.

This is the CSEC hearts and minds proposal. In their opinion, this is supposed to help their public facing position.

This entire process has been so tone deaf. Who is advising these guys? I'm assuming there will be a job opening shortly?

[Ice_Weasel]

Originally Posted by topfiverecords

It's absolutely astonishing how arrogantly CSEC assumes the City's new arena would be so amazing that other private development would almost immediately build out the district and fund this CRL. Just like the how the Saddledome hasn't ever done anything for Victoria Park or the east end of 17th avenue in the last 35 years.

Sorry boys (CSEC), a new arena wouldn't induce a single shovel turning on any of the surrounding land.

Once the green line station is open, Beltline and East Village land becomes scarce, and the economy recovers the neighbourhood will fill in over time with condo development, arena or no arena.

In fact an arena has a chance to be a huge impediment to condo sales. Using the land for an arena reduces the number of residents living in the neighbourhood by the thousands, which limits local service businesses ability to be profitable and remain open. Commercial development will focus on servicing game and concert crowds and not the day to day needs of residents. I'd guess a majority of condo purchasers/ renters that have choice don't want to live in an area where there are crowds and traffic jams on the streets twice an evening multiple times a year. Some that are season ticket holders will like the proximity, but that's a small percentage.

Even if it magically did spur development that wouldn't have EVER occurred, there isn't enough remaining property in that area that isn't Stampede land to recoup 225M from a CRL.

Well to be fair, its the City that wants the Arena in the East Village, not the Flames. I don't think its unreasonable to assume that there is a reason the City wants it their either (i.e. they believe its in their best long term interest).

[Mazrim]

Did anyone get the actual Economic impact report they were supposed to link to? The website just links to a PDF, which refers to itself when it says to go to a link for the full report.

[Table 5]

Originally Posted by Senator Clay Davis

So basically the Flames are praying for Bill Smith to become mayor is their plan. Best of luck.

Bill Smith, an apparent fiscal conservative who's railing against reckless spending and increased property taxes is going to be the guy to champion the Flames getting hundreds of millions worth of public capital and land?

Either the Flames are delusional, or the guy is a massive hypocrite. Or both.

[Flash Walken]

The Flames DID want the arena in the east village as little as 6 years ago.

This has come down to getting the edmonton arena deal for CalgaryNEXT. This isn't about ANYTHING other than the Flames getting the arena development lands for free to build around.

Anything short of that is not worth negotiating for in their opinion.

[NiklasSundblad]

Originally Posted by Makarov

So the Flames proposal essentially amounts to this: you build us a house (which we will have exclusive possession, use of and revenue from). In exchange, we will pay you a rent that covers none of your capital investment and does not even cover the cost of your annual property taxes. Of course, we have generally offered to pay you this incredibly subsidize and insufficient rent up front.

The problem with this analogy is that houses generally hold their value and you can sell them. If that were the case with stadiums and arenas the city could just sell the Saddledome and use the sales revenue to fund a new arena, instead of paying an additional 25 million dollars to make it go away.



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[topfiverecords]

Originally Posted by New Era

tldr;

You're forgetting the most important thing here. The Flames are the ones that want and need the arena. The City does not.

[Senator Clay Davis]

Originally Posted by Table 5

Bill Smith, an apparent fiscal conservative who's railing against reckless spending and property taxes is going to be the guy to champion the Flames getting hundreds of millions worth of public capital and land?

Either the Flames are delusional, or the guy is a massive hypocrite. Or both.

His refusal to release his donor list and his non-stance on the recent arena developments says it all. When he's forced to release the list in five months, we will see Flames ownership as donors, absolutely no doubt about it.

[Table 5]

Originally Posted by Senator Clay Davis

His refusal to release his donor list and his non-stance on the recent arena developments says it all. When he's forced to release the list in five months, we will see Flames ownership as donors, absolutely no doubt about it.

That's the feeling I get too. I'm assuming his line of thinking will pretty much be: Couple mill for art and bike paths = reckless spending. Couple hundred mill for Flames = civic pride and supporting local business.

[Ice_Weasel]

Originally Posted by topfiverecords

You're forgetting the most important thing here. The Flames are the ones that want and need the arena. The City does not.

If that is true, why does this thread exist? If it really was that simple, there would be no debate here at all.

Both parties want an Arena, and both parties want the other to contribute as little as possible (shocking). How is this achieved? Through negotiating, a process that inherently involves spin doctoring and half-truths. None of this should be surprising. The unfortunate part is the process got dragged into the public domain which has seemingly entrenched the two sides further.

[kukkudo]

Wonder if Edwards made the call to Katz and asked him every detail on how he got a hell of a deal.

[Frequitude]

My favorite part of the Flames proposal is that for the Flames a ticket tax equals Flames contribution, but for Edmonton it equals a user contribution.

Can a reporter please call them out on that?!?

[Makarov]

Originally Posted by NiklasSundblad

The problem with this analogy is that houses generally hold their value and you can sell them. If that were the case with stadiums and arenas the city could just sell the Saddledome and use the sales revenue to fund a new arena, instead of paying an additional 25 million dollars to make it go away.



Sent from my EVA-L09 using Tapatalk

A few observations:

(1) the Flames don't own the Saddledome;
(2) most people don't use their homes to generate hundreds of millions of dollars of revenue each year.

I mean, ultimately, the issue for the Flames is simple. Investing $500 million into building and owning a new arena will likely generate enough extra revenue to justify the investment. If not, then building a new $600 million arena is not a good idea and it's time to explore other options was expensive arena or no arena).

If the Flames can't find a way to make the franchise viable in Calgary, then they will have to sell it or attempt to move it. So be it. However, for all of the reasons that ave been discussed ad nauseum in this thread, not being able to make it work in Calgary, one of the stronger NHL markets in North America, would not speak highly of the ownership group's business acumen and/or commitment to the City. Again, so be it.

[You Need a Thneed]

I have been crunching some numbers here based on the Flames’ claim that it makes more sense to stay in the saddledome versus the city’s plan.

Some assumptions:

1. 2,000,000 people go through the saddledome/new arena every year.
2. 4% interest earning potential on costs if they were used elsewhere (I.e. if the Flames put in $275 million, they don’t have $275 million to Invest elsewhere - getting a 4% ROI. If someone smarter than me can give me a better percentage to use, I can change my spreadsheet)

I’m looking at 3 different options vs the current model (playing in the Saddledome) - The Flames’ proposal, the City’s proposal assuming the ticket tax isn’t a Flames ownership cost, and the city’s proposal assuming that the ticket tax IS a Flames ownership cost.

Ok, here we go:

Option 1 (City Proposal, Ticket Tax isn’t an ownership cost)

The Flames ownership puts in $185 million. The lost investment potential at 4% is $7.4 million per year. According to Nenshi’s conference, they city could offer a negotiated property tax of $5 million per year.

$7.4 + $5 = $12.4 million per year

Divide by 2,000,000 people through the doors every year to get the additional revenue required to break even =

$6.20 per person through the doors



Option 2 (City Proposal, Ticket Tax is part of the owner’s contribution)

The Flames owners put in $370 million. The lost investment potential at 4% is $14.8 million per year. Again, the property tax per year would be negotiated at $5 million.

$14.8 + $5 = $19.8 Million per year.

Divide by 2,000,000 =

$9.90 per person through the doors.



Option 3 - Flames’ Proposal

The Flames ownership puts in $275 million. The lost investment potential at 4% is $11 million per year. In the Flames’ proposal, they do not pay rent or property tax.

$11 million

Divide by 2,000,000 people through the doors every year =

$5.50 per person through the doors.


In Summary, the additional revenue required (averaged across every person who comes through the doors) is:

Flames proposal: $5.50
City Proposal Ticket Tax not counted as owner contribution: $6.20
City Proposal - Ticket Tax is counted as owner contribution: $9.90

As has been discussed, even if ticket tax is counted, it does get offset by that revenue coming back not getting counted as HRR, which means they don’t have to give 50% to the players.

Also, This is assuming that a new arena can’t bring any new events.

The worst case scenario is a difference of $4.40 per attendee of revenue between the Flames proposal and the worst case scenario presented by the city.

But also, apparently (since the Flames publicly said that staying in the Saddledome is better for them), The Flames don’t think they can charge even $10 more per ticket in a new arena than they do now. We all know that the intention would be to jump up ticket prices by an average of more than $10 - even before the ticket tax. And that’s assuming that they can’t get more money out of connections, naming rights, luxury boxes, other sponsorships, etc.

Final Summary - The Flames’ claim that they are better off in the Saddledome than under the City’s proposal is patently false, and completely absurd.

[Since1984]

Originally Posted by kukkudo

Wonder if Edwards made the call to Katz and asked him every detail on how he got a hell of a deal.

He replied "We play in Edmonton, did you see the downtown core before we got the deal done "

[Locke]

Originally Posted by Cali Panthers Fan

Ok, so that is from the CSEC. I need more explanation than just putting a big "X" through the city's proposal and then saying "100% Flames!!! OMG, can you believe how ridiculous that is???!!!" Like some petulant teenager.

This cannot be reiterated enough. What were they thinking there?

The only thing they could top that off with would be a petulant child actually using crayons to cross it out.

On top of which, the first thing that popped into my head was their timeline which apparently began in 2007 but never saw the light of day until 2014? And they're complaining about the City dragging their heels?

[Barnes]

The Flames' position can be essentially boiled down to, 'We worked really hard on CalgaryNEXT and you all laughed at it so you owe us an arena or we are leaving.'

[topfiverecords]

Originally Posted by Ice_Weasel

Well to be fair, its the City that wants the Arena in the East Village, not the Flames. I don't think its unreasonable to assume that there is a reason the City wants it their either (i.e. they believe its in their best long term interest).

If the Flames are absolutely going to build an arena they want it there because:

• CSEC doesn't own any land themselves

• The City already owns the scale of land required there and neither party will require accumulating property elsewhere

• The City wouldn't have to spend a billion dollars on land cleanup, infrastructure and rerouting Bow/9th Ave on the other inner city land (West Village) the city owns that could work

• The patrons of the arena will have easy access to all train lines which will alleviate congestion with great dispersion. The shortest walk to the new green N/S station, a slightly longer walk to City Hall station for access to the W/NE line, and still access to the NW/S line, via 2 stations.

• The City does not need the arena in the area and would probably prefer it stay on Stampede land, utilizing this land for other development but are being reasonable offering it to CSEC to help come to a deal since CSEC wants off Stampede lands

• The City has other master plans for the West Village.

Semantics, but the city wants it in Beltline not the East Village.