Glen Hodgson is senior vice-president and chief economist of the Conference Board of Canada; Bruce Leslie is executive director, Western Canada, of the Conference Board of Canada.
The price tag for the ambitious arena and stadium redevelopment project proposed for Calgary's downtown west end is high, at almost $900-million. But the price itself, or even the merits of the proposed public and private sources of funding, should not be the sole measure of what is being called CalgaryNEXT. A project of this scale will influence Calgary's urban footprint and development, not to mention its brand and image, for the next 50 years.
There are some essential conditions to satisfy before we even consider the details of CalgaryNEXT. First, the proposed site is contaminated. If Calgary is ever to get commercial and social value from the site, environmental remediation is essential and inevitable, which means that there is a financial role for the federal and provincial governments in the cleanup effort.
Beyond the clear public benefit of removing a long-term environmental hazard, the economics of CalgaryNEXT become less absolute but no less viable. In general, economic research indicates that new professional sports facilities per se do not create a positive net benefit to the local economy. However, pro sports facilities can be seen, at least in part, as "public goods," assets that serve the broader public interest.
Without some public money, the project will not proceed, at least not on this scale. The existing pro sports facilities in Calgary – the Saddledome for hockey and McMahon Stadium for football – are now among the oldest in their respective leagues. To make any stadium or arena redevelopment viable, a mix of private and public financing will eventually be required. The economics of the Canadian Football League, for example, demand public investment if we want a domed stadium. Dialogue about this project should highlight not only the costs, but also the potential benefits to the wider Calgary economy and community. These could include:
• The addition of construction activity and jobs at a time when Calgary's economy is struggling. Such a major construction project could serve as a welcome form of local stimulus, much as Calgary benefited from pre-Olympic construction during another rough period in 1986-88.
• Ongoing economic activity from the facility's operations and increased property tax revenues from local businesses and organizations. Winnipeg and Ottawa have seen evidence of that and Edmonton appears to be experiencing a downtown renaissance thanks to its own arena project. Opportunities would be created to redevelop other properties, such as the McMahon Stadium and Saddledome sites, in ways that strengthen the city's economy and community.
• Community access to and use of the facilities. Including a multisport field house in the proposal, long a part of Calgary's ambitions, would benefit more Calgarians.
The $900-million project would be the largest sports facility contemplated in Canada outside a multisport games (Olympics or Pan Am Games).
The CalgaryNEXT proposal divides $890-million in funding four ways. It would see $200-million from the Calgary Sports and Entertainment Corporation (CSE), which owns the Flames, Stampeders, Hitmen and Roughnecks. A ticket tax (or user fee) on events at the facility would generate $250-million. There would be $200-million from the City of Calgary that would be directed toward the field house and community-access facilities.
Finally, the proposed Community Revitalization Levy would provide $240-million. This component requires further analysis and discussion to answer questions such as: Who fronts the money? How long will it take to pay back? Will it be redirecting tax funds from other more worthy projects?
One thing not in debate is that financing the project at today's low interest rates would make it more affordable over the life of the repayment period.
The job of local and provincial leaders should be to maximize the overall project benefits to all Calgarians by ensuring that the project is well designed at a reasonable cost, and that the financing impacts and risks are being shared appropriately.
The project's successful design and implementation will require figuring out how to maximize the overall long-term socio-economic benefits to the community, as well as estimating the benefits to the franchise owners and to the Calgary sports fan base.
That's how to make Calgary's rink and field of dreams a reality.
Glen Hodgson