These documents reveal who pays for cost overruns and more in Calgary's controversial arena deal with Flames
From cost overruns to taxes, documents dive into finer points of $550M agreement
The City of Calgary has released all of the agreements it signed with the owners of the Flames hockey team for the arena deal approved last July.
Included in the documents are details about cost overruns, flood mitigation costs, who would pay for a community rink attached to the arena and timelines for construction.
The $550-million arena, expected to break ground in July 2021, will see the city and Calgary Sports and Entertainment Corporation — the owners of the Flames — split the costs of the building 50/50.
The city will retain ownership of the arena, which will have a maximum of 19,000 seats, but CSEC will operate it and have exclusive use of it for the vast majority of the time.
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The agreement spans 35 years and has been controversial. The deal was rushed through council during the summer with only days for consideration and public feedback.
There are additional costs considered in the documents made public on Monday night.
CSEC will pay the full cost of insurance on the building, but only the portion it would pay if the building was not on a floodplain. The city will pay the remainder.
That's something that concerns Coun. Jeromy Farkas, who voted against the arena deal last summer.
"There are significant risks and I think one of the biggest blank cheques that taxpayers have written in this deal is on the flood file," he said.
"When it comes to the flood insurance, we still don't know what that difference in premiums is going to be, or even if the city may have to self-insure the building."
The city is also responsible for major structural repairs, while CSEC covers day-to-day fixes. The city also has the ability to terminate the agreement if structural repairs exceed $55 million and it doesn't receive council approval to fund the work.
Both parties will pay the Calgary Municipal Land Corporation an ongoing fee, totalling $8 million over five years. CMLC is a city-owned corporation that will act as the project manager during construction and is responsible for redevelopment in the area.
It will recommend an architect within 120 days of the signing of the agreement and conduct an environmental assessment of the site.
If project goes over budget
If the project goes over budget, the city and CSEC will first try to find savings before considering putting more money into its construction. If there is no agreement on a way forward, work on the project would continue "to the extent [it's] commercially reasonable to do so."
There is the option for one of the parties to provide up to $25 million for cost overruns, which would force the other party to contribute half that amount in return. The city portion would be subject to council approval.
"In any multiparty agreement, in any contract, you're going to have to look at what's the reality of any type of contingency you have to look at," said Coun. Jeff Davison, one of the biggest boosters of the deal and chair of the committee that shepherded it through council.
"While no party here expects or wants any type of increased cost to happen, you have to be prepared that you have something in place if something were to happen."
The cost of a secondary rink within the arena would also be split 50/50 unless the costs took the city's contribution over the agreed limit of $275 million. In that case, CSEC would be responsible for the additional costs.
CSEC will also pay an ongoing fee to the city in lieu of property taxes, but the amount of the payment has been redacted in the city documents. The corporation will have to pay taxes on the retail component of the finished project and any other portions of the facility occupied by a third party.
Mayor Naheed Nenshi said the specifics of the deal were carefully evaluated by senior city staff and he believes the terms are fair for the city.
"If anyone had ever met our former city manager, Glenda Cole, who is retired now, you would know that the very last thing Glenda Cole would ever do is sign a blank cheque," he said. "So I actually am very, very confident that the agreements that have been signed reflect exactly what city council approved."
On Olympics and demolition
Once the arena is up and running, the city reserves the right to use it for international events like the Olympics and will take over management of the facility for those events and receive all of the revenue.
There's also details on what will become of the Saddledome, which will be torn down "as soon as is reasonably practicable" afer the new arena is complete.
CSEC has agreed to pay 10 per cent of the demolition costs of the old building up to a maximum of $1.5 million, with the city covering the remainder.
The city has also agreed not to host programming at the Saddledome that competes with CSEC while the building still stands.
Farkas, despite having concerns over the deal and the implications for the city, said at least the documents were released.
"So there is some silver lining that the details are out there despite how this was rammed through in the summer in basically a five- or six-day debate," he said.
"I think now that it's out there, some of these key terms will leave Calgarians asking for even more information. At the end of the day, I think it begs more questions than answers."
With files from Scott Dippel