The sticking point on the collapsed Calgary arena deal comes down to “reasonable” cost increases and who should be on the hook for them, said Calgary Sports and Entertainment Corporation CEO, John Bean.
Bean met with the media just prior to Calgary Mayor Jyoti Gondek Wednesday afternoon, to provide more insight into the CSEC’s rationale.
It was later in the press conference that he succinctly highlighted the breaking point.
Bean said they’d met with the mayor a couple of times and she’d expressed a desire to get the Event Centre built.
“Everyone had a mutual alignment here. We’d love to get an event center built,” Bean said.
“Where the rubber hits the road is who’s going to pay for what and that’s where I guess we get a bit of a misalignment.”
At stake is a roughly $19 million gap. The revised July agreement had the cost pegged at $608.5 million. Bean said that due to cost escalation, that number had risen to $634 million. They were prepared to take on that amount.
“Unfortunately, there are now $19 million of new cost items related to infrastructure and climate being insisted upon by the city for which they’re seeking an additional 10 million in funding from CSEC,” he said.
“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,” Bean said.
Yes, the city did insist, Mayor Gondek said
Calgary Mayor Jyoti Gondek said CSEC knew of the climate resilience commitments a year ago, but that the city did insist on new public realm upgrades around a proposed new arena.
Mayor Gondek met with media again Wednesday afternoon, less than 24 hours after dropping bombshell news Tuesday that the Calgary Flames parent organization was backing out of the $634 million Event Centre project.
Gondek said CSEC knew in December 2020 an environmental report would be required. They’d also had additional talks over climate resilience and energy efficiency. A low carbon feasibility study was delivered to the parties Oct. 15.
She said the new council wasn’t elected until Oct. 18.
“It has been asked whether the city is insisting on some of these improvements that come attached with costs. Absolutely,” she said.
“We are insisting on things like sidewalks because you need them for good public realm experience.”
Bean said they’d agreed to a Silver LEED building and were prepared to deliver it. It was the addition of photovoltaic (solar) panels and the commitment to being net zero by 2035 (the city’s commitment is 2050), that brought on the additional cost. Those items aren’t required to achieve a silver LEED, he said.
He said they presumed it was tied to the city’s climate declaration, one they support.
“While we’re supportive of those, what we struggled with is being asked to fund those additional requirements,” he said.”
The environment-related costs are roughly $4 million.
The roads and rights of way for all four sides of the building required an estimated $14 million, Bean said.
Dispute over each party’s contributions
Bean said that with the cost and contributions outlined today, they believe the city was on the hook for $287.5 million, and CSEC would shoulder $346.5 million. Plus, the money required for the additional $19 million in items.
Mayor Gondek said, however, that the city’s initial contribution in 2019 was $297.4 million, plus land. When it came back in July 2021, that was bumped up by $12.5 million, plus a commitment to spend $10 million in event and transportation management costs. She said that brought the city’s costs to $307.4 million plus the land costs.
At the time of the deal, the Calgary Flames agreed to pay for any cost overruns.
“The expectation of the development permit, and its accompanying prior-to-release conditions have added cost to the project, which should not have been unexpected to anyone,” the mayor said.
Bean said those costs came in “late in the day” as the project was at planning commission.
While it boils down to the final added costs, Bean said it’s just part of a bigger picture that included inflationary increases, supply chain issues and general market uncertainty.
“There’s a number of factors that go in, but at the end of the day, you added them all up and you try and make your best educated, informed decision,” Bean said.
Is the deal really dead?
Bean said they didn’t want to negotiate in public. He said they are where they are right now and there’s a formal withdrawal process they have to go through.
He said the organization is disappointed. It was an important piece of infrastructure for the city.
“It’s frustrating, it’s hollow, it’s disappointing. But we’ll move on,” Bean said.
“You know what, we do have to be focused on where we are and what we’ve got to do.”
Bean said this turn of events is still raw and they haven’t really considered what potential renovations to the Scotiabank Saddledome might look like.
The mayor also expressed disappointment. She said council was also disappointed as are Calgarians.
“It’s an unreal sense of loss, right?” Mayor Gondek said.
“If there is a desire to come forward with those funds, on behalf of Calgary Sports and Entertainment Corporation, we’re happy to listen. But the deal is that those cost overruns are taken on by that organization. So, we have not closed the door. We’re simply waiting for them to come back and say that they found the money.”