Lots Of Promises, Little Foresight

I don't know either of Jyoti Gondek, Mayor of Calgary, nor Danielle Smith, Premier of Alberta, but it seems the two of them may leave a legacy in Alberta's southern metropolis that's hard to stomach when all is said and done. As you're likely aware, there were lots of promises of public money that were made by Smith for a new arena and entertainment district in Calgary during her provincial election campaign while Gondek basically gave the Calgary Sports and Entertainment Corporation whatever they wanted for money to build their new home. With the update that came out today, it seems like the CSEC got everything it wanted when it comes to building the new arena and entertainment distict it will call home.

As per the update today, "the $1.22 billion deal includes a new event centre, a community rink, attached parking, an enclosed plaza, improvements to the public realm around the event centre in the Rivers District, and general improvements to area transportation and infrastructure." Of course, the new event centre will replace the Scotiabank Saddledome where Calgary Flames game and other events currently take place, but the structure of this deal makes it hard to swallow considering all the other problems facing Calgary right now.

If you were wondering how this is being financed, "[t]he city is contributing 44 per cent, or $537.3 million, and 56 per cent is being contributed by both the province ($330 million) and CSEC ($356 million)." Or, more succinctly, the province of Alberta will contribute 27% while the CSEC will contribute 29%. It's pretty amazing that the guys benefitting from this new development the most are contributing only 29% of the total cost while being able to charge whatever they like for events held at the new district.

For the record, Danielle Smith re-iterated that "the province will contribute $330 million toward the project — $300 million for infrastructure-related improvements and road connections to the future entertainment district, and $30 million toward the construction of a community rink to be built adjacent to the main arena." Again, to state this clearly, the province is spending $300 million on roads and infrastructure on one extravagant project despite a 2022 report that states Alberta's smaller airports are in disrepair and Calgary having a laundry list of street repairs.

It seems campaign promises are being delivered, though, so people shouldn't complain, right? After all, who needs working streets or airports in southern Alberta?

"At this critical moment when we are seeing explosive population growth and increasing private sector investment and interest in our city, the confirmation that the event centre project is proceeding to design and construction phases will generate strong investor confidence in our Culture and Entertainment District," Mayor Gondek said at the press conference today.

I find it rather impressive that she's linking population growth and private sector investment to an event centre when there wasn't even a guarantee of an events centre prior to today. Someone should explain to Mayor Gondek that causation doesn't equal correlation on this one because there's zero evidence an events centre will generate any future investor confidence whatsoever.

In fact, according to The Conference Board of Canada, "The Conference Board of Canada's Index of Business Confidence fell 2.9 points," and "[i]t has now been two years since the Index's last increase, which occurred in the second quarter of 2021." The Board also found that "[f]inancial expectations are all over the spectrum. Our survey reveals that 37.5 per cent of respondents believe their firm’s financial position will remain the same over the next six months, whereas 31.7 per cent believe it will improve and 30.8 per cent believe it will worsen," so I have no idea from where Gondek is getting her information.

You may be asking where the $537.3 million that the city is putting up is coming from, and Michael Thompson, Calgary's general manager of infrastructure services, stated that "[t]he city's portion of funding for the project will be coming from its reserves and from a $17-million, 35-year lease that escalates at one per cent annually". The financial portion of this is basically all tax money that the city was holding onto for a rainy day or an emergency, and the interest will result in a $212.7 million surplus off that $537.3 million investment over 35 years... or just over $6 million per year in surplus for the life of the term. That amount won't even cover the snow removal costs from the new district annually, but kudos for Calgary for pushing for that return-on-investment!

With the likelihood of inflation eroding that annually-averaged $6 million payment into something less, this deal just keeps getting worse for Calgary taxpayers because you're not having the $537.3 million in the reserve fund restored, you're hardly seeing any return on the investment you made, and you'll be stuck with a 35 year-old arena at the end of the deal... which will probably be needing to be replaced once more. Menawhile, CSEC has been making money each and every day, and will make out like thieves in the night once this lease deal is up. So again, why are they not contributing more than just 29% of the project's costs?

"This revitalization project builds on a momentum that's steadily picking up steam," Premier Smith re-asserted. "Energy and excitement are growing as Calgarians anticipate everything the renewed Rivers District and the new arena will bring to the city."

I wonder if she was referring to the homeless encampments just to the west of the Rivers District? Just because a new entertainment district is being setup doesn't mean the homeless in Calgary will set up cap elsewhere. This was a problem in Edmonton in 2017, and it seems no one in Calgary either learned from that article nor remembered it when patting themselves on the back today.

Despite my numerous calls for sensible and rationale spending from the two levels of government in Alberta, there's no denying that Calgary is getting their shiny new arena with construction slated to start in 2024. I can't deny that the Saddledome likely needs to be upgraded, but not at the costs that the city and province are passing off as "amazing things" that are happening. Frankly, if the Flames had put up 56% of the costs and the city and province split 44% of the costs, I may feel differently about who is paying for what in this deal.

The reality is that the city is spending a lot of money that had been earmarked as reserves for when major expenditures were required while the province is spending a big chunk of public money that was collected from people not living in the city of Calgary. With no plan to replenish the reserves nor any sort of plan to recoup costs, this project is going to turn out to be far more expensive than just the price tags seen on the construction costs. If there are overruns or price increases, that too seems to be a forgotten piece of the puzzle. But as long as Gondek and Smith get their photo opportunities, all's well in southern Alberta, right?

Don't say you weren't warned about this deal. The writing's been on the wall since the first time the Calgary Flames approached the city, and it seems that the current municipal and provincial leaders are either ignorant to the problems with this deal or completely illiterate when it comes to how the deal is structured.

Enjoy your new rink, Calgary!

Until next time, keep your sticks on the ice!