Rising uncertainty over escalating Calgary arena costs has pushed the Calgary Flames ownership group away from the $654 million Event Centre project.
The Calgary Sports and Entertainment Corporation (CSEC) confirmed the news late Tuesday evening.
The mayor told media Tuesday evening that it was a “surprise” to her that this happened.
Just after 5:30 p.m., Calgary Mayor Jyoti Gondek said that she’d spoken with Murray Edwards, the primary shareholder of the Calgary Sports and Entertainment Corporation (CSEC).
In that conversation, Edwards said they wouldn’t be continuing with the deal, according to Mayor Gondek.
The original deal was slated to be $550 million. There was a breakdown and a pause between the two parties before a revised agreement was hashed out in July. In that deal, both sides agreed to add $12.5 million, plus the city said they would include up to $10 million in project management costs.
In that deal, the city stipulated they would not be on the hook for any cost overruns.
Last month, the development permit had been issued for the project. There were some concerns brought forward, particularly around climate mitigation and the public realm.
“CSEC informed me they are walking away from our deal,” the mayor tweeted.
“On a project worth over $650 million, to have one party walk away for 1.5% of the value of the deal is staggering.”
CSEC said it was clear that they and the city weren’t able to resolve several issues resulting in escalating costs on the project.
“Accordingly, as the City and CSEC have been unable to resolve these issues, CSEC has determined there’s no viable path to complete the Event Centre project,” a statement from the organization read.
Additional costs mounted
CSEC said the most recent estimates put the cost of the building at $634 million. They would be on the hook for $25.5 million of additional cost. They said new costs “being insisted” by the city total $19 million. CSEC said the city wants an additional $10 million from them.
“While CSEC was prepared to move forward in the face of escalating construction costs and assume the unknown future cost risks, CSEC was not prepared to fund the infrastructure and climate costs that were introduced by the City following our July agreement and were not included in the $608.5 million and are not included in the current cost estimate of $634 million,” the statement read.
The mayor said that since she was elected mayor, they’ve been working with CSEC on climate issues. The cost was pegged at $4 million, she said. There were additional sidewalk and right-of-way roads issues costing $12.1 million.
According to the mayor, the city was prepared to provide $6.4 million of the $16.1 million in overages. That left $9.7 million for the CSEC to cover.
In section 4.2 of the Events Centre agreement, it refers to the Post-Event Traffic Discharge Time (PETDT). They want to achieve a 30-minute target time for the discharge of patrons. In that clause, it states the city would be solely responsible for the costs associated with reaching that goal.
It’s not immediately clear if the right-of-way road costs included in the impasse were tied to the PETDT.
Not a blame game, said Mayor Gondek
In her 6:30 p.m. press conference, the Mayor said her conversation with Edwards was a straightforward one.
“There was additional funding that had to be taken on by Calgary Sports and Entertainment Corporation. It appears that they’re unable to make that financial commitment following the approval of their development permit. So it would appear that they are ending the deal,” she said.
The mayor reiterated the road right-of-ways, sidewalk improvements and the facility’s photovoltaic system as a climate mitigation measure.
“Factors like that drove the cost up from what was known before the development permit approval,” the mayor said.
CSEC said the introduction of these costs, continued escalation and high level of risk associated with supply chain and COVID, led to their decision.
When asked what might happen next, the mayor was unsure. She said Edwards indicated he tried to work through this deal with the other Calgary Flames partners. They were unable to come to an agreement, she said.
“I think there’s a variety of factors at any given time that influence deals,” the mayor said.
“We have seen cost overruns based on inflation and supply chain. I’m not exactly sure what is driving their position but I can tell you that we have done our best to be accommodating and unfortunately, they’re unable to proceed at this time.”
Mayor Gondek said if there are more conversations to be had, she’s willing to engage.
“I’m absolutely available to discuss this matter further as needed,” she said.
The Flames parent organization said while it’s not ideal, they intend to stay in the Scotiabank Saddledome.