Feel good about your information and become a local news champion today

More questions than answers in Calgary’s collapsed arena deal

Calgary’s mayor slammed the door shut on the arena deal and locked it before consulting with council, said one Calgary city councillor.

Earlier this week, Mayor Jyoti Gondek said they weren’t in any type of a negotiating process after a previously revised deal.

The estimated $650 million Event Centre deal fell through as it approached a final construction sign off Dec. 31. The Calgary Sports and Entertainment Corporation (CSEC), parent company of the NHL’s Calgary Flames, walked away from the deal just before Christmas.

Ward 10 Coun. Andre Chabot said his understanding of the situation was CSEC majority owner Murray Edwards approached Mayor Jyoti Gondek, concerned with city-mandated “scope creep” on the project.

Chabot said the deal collapsed because the mayor wouldn’t flex on the deal.

“(The mayor) had no interest in providing any other measures of support or even interested in discussing it,” he said.  

“She unilaterally made a decision to slam that door shut and lock it without consulting council.”

Roughly $19 million in additional costs were tacked on after the project went to the Calgary Planning Commission for approval. It involved the addition of rooftop photovoltaic cells and work on roads right of ways around the proposed building.  

The city was prepared to cover $6.4 million of that and assist in securing outside funding for the cells. That left about $10 million for CSEC.

Previously, Mayor Gondek said that they did insist on some of the changes.

“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.”

No ‘unilateral decisions’

During a COVID-19 briefing early this week, Mayor Gondek was asked about the arena deal. She disputed claims that a decision was made unilaterally.

“Neither former mayor Nenshi nor I have the ability to single-handedly direct any type of negotiation,” Mayor Gondek said.

The revised deal was completed in July, the mayor said.

“We are currently not in any type of a negotiation process,” she said.

The revised deal required the city to cough up an additional $12.5 million after a cost overrun clause was triggered in the prior deal. They also included $10 million in event management costs. At that time, it was generally agreed that CSEC would cover additional cost overruns.

CSEC president and CEO John Bean said the estimated cost had jumped from $608 million to $634 million since July. The $19 million hadn’t yet been included.

Those costs came late in the day, 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,” he said in a media conference after the deal tanked.

According to the July agreement (Section 3.2), an extension of the construction phase commencement date could have been sought.

Chabot said with the number of new council members, many unfamiliar with the agreement specifics, it would have been worthwhile to have a special meeting.

“We tried to get the mayor to call a special meeting and she refused to allow that prior to the deadline expiring,” Chabot said.

“There just didn’t seem to be an appetite from the mayor’s office to do that. And I honestly don’t understand why.”

Contract and ‘City Additional Costs’

In the revised July 2021 deal, there are a handful of areas to look at with regard to extra costs. While it’s generally understood CSEC is on the hook for cost overruns, the contract dictates something slightly different.

According to the contract, CSEC is to pay 100 per cent of “Eligible Costs” over the initial $575 million. They also must pay 100 per cent of “CSERELP (Calgary Sports and Entertainment Real Estate Limited Partnership) Additional Costs.”

These terms are outlined in Article 5 of the agreement.

That section of the agreement also shows that the city shall contribute “100% of all City Additional Costs incurred in connection with the project.”

Some of these include excess flood mitigation, site remediation, sole cost items, ineligible costs, and anything related to Section 4.2.  Section 4.2 dictates the Post-Event Traffic Discharge Time (PETDT). In that section, it once again reiterates the city would cover 100 per cent of those capital costs.

Sole Cost items (Section 6.5) covers additions that are proposed by one party or the other, but not necessarily agreed to by the other side.  The proposing party can have it included in the construction phase design plan without the other side’s approval, as long as they pay the entire cost. (Note: There is supposed to be a dispute resolution process for these items.)

Where the additional $19 million in costs fall appears to be the friction point and needs further clarity from the city.

When asked about these costs, the city provided a brief statement.

City Administration will report on the Event Centre status through an update to Council on Tuesday, Jan. 11,” the emailed statement read.

It’s believed some of these questions will be asked at city council on Tuesday. There’s a public update on the agenda, along with a closed session. It’s unclear what questions or information will be available in each part of the meeting.

Revisiting the Rivers District

Mayor Gondek said the collapsed deal provides an opportunity to have another look at the Entertainment and Culture District that would have been built around the new Event Centre.

It’s a part of the Rivers District Master Plan being executed by the Calgary Municipal Land Corporation (CMLC). The CMLC was removed as the project manager for the Event Centre when the revised agreement was approved.

“Now is the time to look very holistically at the district itself rather than trying to build a district around a single project,” she said.

Chabot said he thought those comments almost read like the city doesn’t need the Calgary Flames.

“I’m not sure what that even means, honestly,” Chabot said.

He said outsiders looking to invest in or move to the city often look at a major sports franchise as a quality-of-life measure.

Chabot also questioned the notion of finding another partner on the project. This has been in the works for 15 years.

LiveWire Calgary reached out to the CMLC for information on how the Event Centre dissolution will impact the area redevelopment. CMLC acknowledged the request and said the situation is under review. They haven’t yet provided comment.

The mayor said that it’s an opportunity to re-examine different models of how this agreement and the district should work.

“There is tremendous opportunity to get this district right with the proper Events Center as well as other components,” the mayor said.

“But it seems that it needs to be unshackled from the limitations of the deal that was struck in July 2021.”

CSEC said the Calgary Flames will continue to play at the Scotiabank Saddledome. They still have 11 years left on their current lease.