FARKAS: Politicians and CSEC take taxpayers to the cleaners in new arena deal

Jeromy Farkas is a former City Councillor, serving from 2017 to 2021 during the previous Council’s arena negotiations. I’ll never forget my grandmother’s advice for buying my first car.“Pop the hood, kick the tires, and ask questions. Take it for a spin. Know what you can afford, and stick to it. And never show the salesman that you’re in a hurry. You’re doing them a favour — not the other way around.”Despite the glitz and glam of the new hockey arena, you can’t blame Calgarians for wanting a look under the hood. To understand the 2024 model, we need to first look at the 2021 edition.In terms of cost, ‘2021’ saw Calgary Sports and Entertainment working together with the City of Calgary as roughly equal partners in a cash deal towards an overall $580M project cost. Both parties shared in the costs equally, contributing about $290M each. Crucially, CSEC was responsible for construction overruns; in exchange, we took on several other responsibilities such as providing the land and demolishing the Saddledome.Revenue favoured CSEC, but not ridiculously so. The Flames’ owners would avoid paying property taxes, and would retain all revenue from the operations of the building. City taxpayers would earn back more than half of our initial investment ($180M) through a cut of the ticket fees and naming rights, and a further $75M investment for amateur sports groups. Despite CSEC receiving most of the proceeds, this was arguably fair; on a net basis, taxpayers would be on the hook for less than 20% of the project cost.Fast forward to 2024. The overall project budget has more than doubled to approximately $1.2B. And despite this increase, the new design actually delivers a thousand fewer seats than today’s Saddledome — and several thousand seats fewer than Edmonton’s Rogers Place.CSEC’s up-front investment is now only $40M, less than 4% of the upfront cost, and a small fraction of what they were prepared to contribute just a few years earlier. Taxpayers are forced to make up the difference; between the City and the Government of Alberta, we collectively cover more than 96% of the upfront costs.The province now contributes about $330M for enabling infrastructure for the district, or about 26% of the overall cost. And city taxpayers now contribute about $850M in upfront costs through a combined $537M towards the building, and over $300M fronted as a loan to the Flames. The city contribution is effectively triple what was agreed to a few years ago, representing an astounding 70% of the upfront costs. CSEC will make annual payments to the City over 35 years, totalling about $316M in present value, or 30% of the overall long-term cost. While these payments have been touted as a “revenue stream” for the city, it’s crucial to recognize that this is not a return on taxpayers’ principal; it’s to repay the loan we’re giving to CSEC. CSEC will receive all revenue streams, including concessions sales and ticket fees. The city receives no revenue to offset our $537M in principal funding. Under the old deal, taxpayers got most of our money back. Under the new deal, taxpayers will still be in the hole for about $900M, or 70% of the overall cost. A few final uncomfortable questions remain.Why did our mayor and council pay nearly $1M to hire a negotiatior that flaunts its record of getting the best results… for SPORTS TEAM OWNERS?Given colossal cost overruns on the Green Line LRT project, what is city hall’s plan to control costs for this project, now that the Flames aren’t solely responsible for overages? What’s city hall’s plan to address basic infrastructure needs, such as clean drinking water? With Calgarians shouldering nearly 10% year-over-year property tax increases, how exactly are we supposed to afford tickets?And how much money, exactly, did our mayor and council leave on the table by negotiating away the naming rights to the building that we — the taxpayer — theoretically own? (Hint: Scotiabank paid $800M for the naming rights to Toronto’s rink as part of a 20-year deal. While Calgary’s hockey market is smaller, it’s almost certain that if we had kept the naming rights, that alone would have completely repaid the city’s investment over the course of the 35-year building. Instead, this money goes straight into the pockets of the Flames.) To be clear, I’m not suggesting that we tear up a contract that’s been signed and sealed: a handshake should still mean something in this town. I don’t blame the Flames for fighting hard to get the best possible deal for their owners; that’s their job. I just wish that our mayor and council were willing to put in a fraction of that energy for us, the people who are forced to cough up the money so that they can look good on opening day.Those Calgarians lucky enough to afford it are likely to enjoy the new rink once it’s built, and the sausage-making will soon be in the rearview. But after all’s said and done, the debate’s been finally settled: Calgary hasn’t gotten this badly hosed since Doug Gilmour went to Toronto.Jeromy Farkas is a former City Councillor, serving from 2017 to 2021 during the previous Council’s arena negotiations.