CSEC, Gondek point fingers as Flames ownership group prepares to walk away from new arena agreement

John Bean, Calgary Sport and Entertainment Corporation's president and CEO, said Wednesday that there "wasn't a path forward" for the new event centre project after the city introduced an additional $19 million in right-of-way — sidewalks and roads — and climate costs for the project.

City officials, including Mayor Jyoti Gondek, say the cost for the project that would have been the new home for the Calgary Flames should have come as little surprise.

Bean said the newest expenses followed July's agreement that saw CSEC, the corporation that owns the Flames as well as the Stampeders, Roughnecks and Hitmen, agree to pay more than the original even split as the city couldn't contribute the additional funds for overages. He says the July deal had CSEC contributing $346.5 million compared to the city's $247.5 million.

"The decision is a culmination of a number of data points," explained Bean. "No one makes a decision this large on one particular data point, it's a culmination of issues. Cost increase was one. We accepted future risk and anyone out there who's looking at supply chain, it's actually hard for anyone to grab a crystal ball and say 'we know exactly what your cost of steel is going to be, we know exactly when it's going to land in your yard.'

"We were prepared for the cost escalation we faced."

Bean adds that the CSEC was "awfully close" and there was a deal to be had, but they couldn't get it "across the line."

"We were prepared to proceed. This wasn't us looking for a way out," said Bean. "At the end of the day everyone's disappointed."

He adds that CSEC will remain custodians of the Scotiabank Saddledome and will continue to provide great fan experiences while working closely with the city.

MAYOR, COUNCILLORS RESPOND

Immediately following Bean's comments, Mayor Jyoti Gondek, as well as councillors Raj Dhaliwal and Terry Wong, addressed CSEC's claims as the corporation prepared to begin the formal process of ending the arrangement.

"At the November Calgary Planning Commission Meeting, where the development permit came forward, there were 'prior-to-release' conditions that (were) included in the development permit that very clearly outlined expectations of the development authority, which is the Calgary Planning Commission," said Gondek. "There are always expectations outlined in the 'prior to release' conditions and this was no exception.

"Climate is something that is considered. Roadways, public realm improvements are considered."

Gondek adds that the climate resilience expectations of the project — the renewable and low carbon energy study requirement — were laid out in December 2020, months before the arrival of the current council in October. She says the CSEC knew of this requirement, as well as the need for roads and sidewalks, and there were several conversations in the year that followed centred on the energy efficiency and climate resiliency of the project.

"It was well known to Calgary Sports and Entertainment Corporation what the climate mitigation expectations were on this project," said Gondek. "We are insisting on things like sidewalks because you need them for a good public realm experience."

The mayor had initially announced on social media Tuesday evening that Calgary Flames co-owner Murray Edwards planned to pull the plug on the arena deal over a $9.7 million gap stemming from recently identified $16 million in overages above-and-beyond the original $650 million price tag. Gondek said the city had agreed to pay roughly $6.4 million of the $16 million to address roadways and climate mitigation.

The CSEC responded to Gondek's claims late Tuesday night by declaring an impasse with the city regarding the escalating costs, stating "there is no viable path to complete the event centre project."

FRUSTRATED SEASON TICKET HOLDERS

Several Calgary Flames season ticket holders have expressed deep frustration online regarding the breakdown in negotiations for arena deal.

Peter Mirosevic has had season tickets for more than 20 years at the Saddledome. He says he voted for Gondek, but regrets doing so after how she handled negotiations publicly.

“This should have been handled behind closed door with your counsel,” said Mirosevic

The city of Calgary is a laughing stock when you look at other deals around the league specifically Long Island New York. You have in excess of 30 per cent (office) vacancies in the city right now and allowing the Flames to walk for a reported $10,000,000 is mind-blowing.”

Mirosevic adds there would be extreme detriment to Calgary if Flames ownership were to leave.

“So many people in our city rely on the Flames for employment, the parking attendants, hotels, restaurants to name a few and we would have been able to have an anchor tenant for decades to come with this deal.”

Other die-hard Flames fans like Kaylee Nowosiad feel like CSEC should have stepped up and covered the remaining costs of the project.

“It’s embarrassing, it’s seriously so embarrassing that we’ve gone this far and now the Flames are backing out over 1.5 per cent of the total cost they already promised,” she said.

“The city I feel has done everything they can in their position to push this thing forward so as a fan it’s just embarrassing that the organization has backed out over a future cost, they knew they were going to come into anyways.”

Noah Adler also regularly attends multiple games each season. He just hopes both sides can come to an agreement sooner than later.

“It’s obviously very disappointing because we wanted to have something built for the community and something that was going to revitalize the Victoria Park area so you just hope that the team won’t leave and they can get a deal done in the future.”

BALLOONING PRICE TAG

Concordia University sports economist Moshe Lander is a Calgary resident himself and a die-hard Flames fan, but he says the COVID-19 pandemic has made this deal extremely difficult for the NHL club.

“It seems a little bit weird that a month out from shovels in the ground, the Flames are trying to pull some ‘power play’ move, no pun intended,” Lander said.

“But I think the more realistic story here is that a $550 million arena has now ballooned to $640 million and the Flames haven’t done particularly well financially over the last two years beyond just the elements of COVID.”

Lander notes that the Flames had an incredible regular season before COVID finishing first in the Western Conference only to lose in the first round of the NHL playoffs, missing out on big time gate revenues.

He says the other issue is the possibility of major cost-over runs for the event centre project which could be seen as a major risk and be anywhere from $10 million to $100 million more.

“Even a regular home contractor is going to have a hard time keeping a kitchen reno within one and a half to three per cent cost overruns, so I don't think that that's the deal breaker,” Lander said.

“It sounds like the Flames have realized that over the next 18 to 24 months of construction, they might not have a stable revenue source coming, and ESPN or TNT TV deal money is not going to be enough to help them put in that financing.”

Another aspect of the ongoing negotiations involves the potential threat of the Flames leaving Calgary, but Lander doesn’t believe that will happen.

He notes that the only two viable options for Calgary to relocate to would be Houston or Quebec City.

“Quebec City has a ready-made arena, but that arena is now closing in on 10 years old and certainly by the time the flames move, it will be 10 years old so if we're talking about the Saddledome being ancient and decrepit at 40, you only have 30 more years left in this Quebec arena,” Lander said.

“There's just no way NHL Commissioner Gary Bettman is going to take one of the last seven remaining Canadian franchises and let it move to the southern US. I just don't see that there's any viability there.”

CHAMBER WEIGHS IN

In a statement issued Wednesday afternoon, Calgary Chamber of Commerce President and CEO Deborah Yedlin urged both parties to find a way to reach a deal.

"Yesterday’s disappointing news regarding Calgary’s future event centre represents more than the potential loss of a new sports venue for Calgary.  Abandoning this project would compromise critical investments in community vibrancy, talent attraction and economic recovery - all of which are more important than ever before. 

"The event centre represents an investment that comes with immediate and long-term benefits. From job creation and the positive impact on property tax generation, to community engagement programming, support for local sports organizations and the ability to hold concerts and other cultural events, this venue represents a critical economic and social stimulus needed to reinforce Calgary’s position as a world-class city.  

"At this critical stage of the development process - and given the resources already invested - the business community encourages shareholders and stakeholders to demonstrate flexibility and finalize this agreement for the benefit of Calgarians today and tomorrow."