Dec 21, 2021
Calgary mayor says Flames will 'pull the plug' on arena deal
Just weeks before construction was set to begin on a new 18,000 seat arena for the NHL’s Flames, the $600 million deal has collapsed, Calgary Mayor Jyoti Gondek wrote on Twitter Tuesday night. Salim Valji has more from Calgary.
By Salim Valji
During a seven-day stretch of bad news that included a COVID-19 team outbreak and reduced capacity at games in the Scotiabank Saddledome, Calgary Flames fans received perhaps their biggest blow on Tuesday evening.
Just weeks before shovels were supposed to be in the ground on an events centre that would have included a new 18,000 seat arena for the National Hockey League’s Flames, the deal has fallen through, Calgary Mayor Jyoti Gondek wrote on Twitter Tuesday night.
The event centre, which would have been situated in the same location as the Saddledome in the city’s Victoria Park district, was estimated to have cost $608.5 million and taken three years to construct.
If everything were to have gone to plan, the Flames would have taken the ice in their new home at the start of the 2024-25 NHL season.
According to the most recent project agreement from July 30, 2021, the city of Calgary was set to pay a maximum of $287.5 million, or roughly 47 per cent of the total cost. The Calgary Sports and Entertainment Corporation (CSEC), the Flames’ ownership group, had agreed to cover the remainder of the costs. The city and CSEC would then have been responsible for different cost overruns. The cost overruns for CSEC are estimated to hit $9.7 million to cover expenses related to sidewalks, transportation, climate risk, and photovoltaic capacity.
CSEC wanted the city to share in part of that $9.7 million, which is 1.6 per cent of the complex’s estimated cost.
“According to that contract, the city can’t come back with additional funding,” Gondek told reporters on Tuesday.
“We have, however, tried to ensure that any roadwork that is the responsibility of the city would be funded by the city.”
On Tuesday, CSEC’s primary shareholder, Murray Edwards, informed Gondek that the Flames were unable to assume those extra costs.
“[Edwards] has tried his best to get his partners to keep moving forward with the events centre deal,” she told reporters at city hall.
“There was additional funding that had to be taken on by Calgary Sports and Entertainment Corporation. It appears that they are unable to make that financial commitment…it would appear that they are ending the deal.”
Gondek attributed the cost overruns to inflation and supply chain challenges. She also said that the Calgary Municipal Land Corporation’s removal as the project manager could have played a role how things unfolded. While the CMLC was set to manage the project when the arena was initially agreed to in July of 2019, they were removed in the July 2021 agreement at CSEC's request.
“To have a development manager like that who has run major projects in the city on time and on budget would have been a benefit to the Calgary Sports and Entertainment Corporation,” she said.
“In my opinion, they had the expertise to understand that there would have been further costs required around improvements. They probably would have indicated that you need to be aware of climate-related costs, and I think this may have been stewarded differently.”
Gondek was asked if, during her call with him today, Edwards threatened to relocate the Flames, to which she simply replied that it was a “straightforward conversation.”
According to Forbes, Edwards’ net worth is $2 billion (US).
Early Wednesday morning, CSEC responded in a statement saying "there is is no viable path to complete the Event Centre Project."
"While CSEC was prepared to move forward in the face of escalating construction costs and assume the unknown future cost risks, 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," CSEC said in the statement.
"The failure of the City and CSEC to find a viable path forward was not based upon simply the "the last dollar" on the table; but rather was based upon the accumulated increase in CSEC's share of the costs, including the infrastructure and climate costs, the overall risk factors related to the Project and the inability of CSEC and the City to find a path forward that would work for both parties."
According to CSEC, the most recent cost estimates have the total cost of the Event Centre at $634 million, meaning CSEC would be responsible for an additional $25.5 million of cost.
"The resulting cost sharing would have been $346.5 million for CSEC and $287.5 million for the City and, CSEC would continue to be responsible for further cost increases related to the construction of the Event Centre," the statement said. "Unfortunately, there are now $19 million of new cost items related to infrastructure and climate being insisted upon by the City for which they are seeking an additional $10 million in funding from CSEC."
The Saddledome opened in 1983 and is the NHL’s second-oldest arena.
Like many Flames fans who envisioned a new era for the team in a world-class facility, Gondek herself was surprised by the turn in events.
“What happens next will unfold over the next few days,” she said.
“The weight of this has been heavy for Calgarians and we are just trying to process what happens next.”