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Project management, cost overruns part of revised Calgary arena deal

Two primary changes expected in Calgary’s Events Centre agreement include a change in project management and the triggering of a cost overruns clause in the contract, LiveWire Calgary has learned.

Councillors were in an hours-long closed-door meeting Tuesday to discuss the $550-million deal and emerged with a series of confidential recommendations. The mayor did say at the meeting that Calgarians would see the proposed changes when the updated agreement came to council, likely on July 5.

One of the items was a reconsideration motion on a non-monetary matter. It’s understood the item that was reconsidered was the appointment of the Calgary Municipal Land Corporation as the project manager.

Clare LePan, the CMLC’s vice-president of marketing and communication said Thursday that there wasn’t much to share. She said she couldn’t comment on discussions between the two contributing parties.

“As it currently stands, the project’s still on hold. We’re still supporting those discussions,” LePan said.

The project to replace the aging Saddledome has been suspended since April, when there were budgetary differences.

According to the Project Framework Agreement, clause 5.4(v), this is the prescription until sides mutually agree on what is called an “Eligible Cost Overrun.”

In that clause, it states that if strategies can’t be developed within 20 days to mitigate the cost overruns, then more funding can be requested. This additional funding must be approved by council. According to the contract it would be a 50/50 split between the city and Calgary Sports and Entertainment Corporation (CSEC).

If that funding is insufficient to cover the eligible cost overruns, it could trigger part (iv) of this clause. That would mean that a maximum aggregate amount of $25 million could be approved, with each party covering an additional $12.5 million.

It does appear the clause also includes a potential repayment of the cost overruns through the Facility Fee Agreement.

The mayor has stated previously that building material costs could impact Calgary’s major infrastructure projects. Though, at the time, he wasn’t as concerned about arena costs.

It was estimated previously that cost overruns could reach $70 million. Lumber prices have cooled recently, likely reducing the overall impact.

Questions on the approval process

Under the CMLC, the project was expected to provide an overall area that could be used by Calgarians year-round – without having to participate in a game or concert. The notion of placemaking played a large role in the overall concept.

At Tuesday’s meeting, Coun. Evan Woolley asked if this project would still be subject to the rigours of the city’s land use and development process.

“If and when we build the arena, will it go through a rigorous land use application process, as any other development process will go through? Is there any special consideration that the Calgary Flames would get as a part of that process?” Coun. Woolley asked.

Mayor Naheed Nenshi and the city’s GM of Planning and Development Stuart Dalgleish assured Woolley that it would.

Late Wednesday, councillor and mayoral candidate Jeromy Farkas issued a statement on the closed-door meetings and potential cost overruns.

“In this town, a deal is a deal and a handshake means something. Spending even more taxpayer money to bail out the project is not an option. Calgarians deserve transparency with their money. Calgarians are owed what they were promised at the original price tag,” Farkas said in the release.

“Regardless of where they stood on the arena deal, Calgarians on all sides deserve to know what’s going on. Those who supported the deal want to know that it will get built, and those who opposed it are demanding that Council be accountable with the spending of public money.”

The delays have jeopardized a potential August 2021 groundbreaking.