Calgary could shoulder most cost overruns if $1.2-billion arena deal goes over budget

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Calgary taxpayers will be on the hook for cost overruns should the revived effort to build a new arena complex near the city’s downtown blow through its proposed $1.2-billion budget, according to details disclosed Wednesday.

The city, in a statement, said it would cover unanticipated expenses with cash from future land sales and investment income. Calgary Sports and Entertainment Corp., the group of wealthy owners of the Flames hockey team, will shoulder some potential overruns, but its obligations are limited to select components of the plan, the city said. Alberta, the third partner in the arena deal, placed a ceiling on the majority of its financial participation in the deal.

Calgary, Alberta and CSEC earlier this week announced a preliminary agreement to develop a new event centre, including a new arena to replace the Scotiabank Saddledome, practice rink, enclosed plaza, public realm, parking facility and supporting infrastructure such as transit improvements. But the proposal is short on crucial details, such as who holds beneficial development rights, design sketches, timelines and how the partners will divvy up surprise costs. New Democratic Party Leader Rachel Notley on Wednesday called on Alberta Premier Danielle Smith to reveal the terms of the deal, so voters in next month’s provincial election can assess whether they want to support the United Conservative Party’s promise to spend $330-million in provincial cash on the project.

Ms. Smith, when asked how the partners will address cost overruns, said the government’s contribution tied to infrastructure – including transportation elements, the public realm and demolition – is capped at $300-million.

“Cost overruns is something that will have to be worked out between the Flames and the city of Calgary,” Ms. Smith told reporters on Wednesday. “They know what our maximum investment is.”

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The province also earmarked $30-million to pay for 50 per cent of a new practice rink. Ms. Smith said details related to excess costs on this facility still have to be worked out. Calgary and CSEC are each responsible for 25 per cent of this element.

Calgary, according to the proposal, agreed to pay $537.3-million to build the arena, parking facility, enclosed plaza and practice rink. CSEC, under the preliminary terms, will pay $40-million upfront, then $17-million (increasing at 1 per cent per year) for 35 years to “offset” costs tied to the arena, parking, enclosed plaza and practice rink.

Ryan Murray, a spokesman for Calgary, said the city and CSEC will share cost overruns. However, CSEC is only required to chip in extra for the arena, practice rink and parkade, limiting its exposure to a surprise bill.

“Additional funds for the city’s share of potential cost overruns are proposed to be set aside from revenues from future land sales and future anticipated investment income from the major capital projects reserve,” he said in a statement. More details about overruns, he said, will be “considered part of the next phase of work” included in the definitive agreements.

When asked who holds the development rights, which can generate billions of dollars worth of business, Mr. Murray said: “These are all details that will come out in the definitive agreement discussions.” The next step, he said, is to “nail down the formal agreements that will set the fulsome course” for the project’s design and construction.

CSEC did not return messages seeking comment.

Jeromy Farkas, a former councillor and failed mayoral candidate who painted himself as a fiscal conservative, is baffled by the new deal’s ballooning price tag and the amount of taxpayer money now earmarked for the project. CSEC abandoned negotiations in December, 2021, when the project’s cost hit $634-million, with the private corporation scheduled to pay $346.5-million and the city covering the remainder. Alberta did not get involved until Ms. Smith injected the government into negotiations last year.

“This is brazen electioneering,” Mr. Farkas said. However, he questioned the UCP’s political calculus. While strategists are often wary of being on the wrong side of a local sports team, he noted Calgarians rewarded former mayor Naheed Nenshi with a third term after he stood up to CSEC in 2017. Further, Mr. Farkas said when he ran for mayor in 2021, internal polls showed the majority of Calgarians opposed spending any public money on a new arena. Roughly 25 per cent were comfortable with the city chipping in if the Flames shared costs equally, he said.

“I don’t think the public is on side with the UCP,” he said. However, in order to capitalize on the perceived misstep, he said the NDP must outright denounce the government handout. “The NDP is just so weak at this point and unwilling or unable to challenge it.”

With files from Alanna Smith