Advertisement 1

City has yet to receive written notice that arena deal is finished: source

A senior city official said Thursday that while no written confirmation has been received from the Flames, conversations have already begun about possible alternatives

Article content

While speculation remains rampant about the reasons behind the sudden collapse of Calgary’s arena deal, city officials have yet to receive written notice from the owners of the Calgary Flames that the deal is off, Postmedia has learned.

News broke Tuesday evening that Calgary Sports and Entertainment Corp. (CSEC) is walking away from the multimillion-dollar plan to replace the aging Saddledome.

Advertisement 2
Story continues below
Article content

But a senior city official said Thursday that while no written confirmation that the deal is finished has been received from the Flames, conversations have already begun about possible alternatives: “We do need to have an event centre. The question is, who will be our partner?” a source close to the mayor said.

Article content

A request to CSEC for comment went unanswered Thursday, but CEO John Bean previously told media: “It’s clear that there wasn’t a path forward.”

CSEC has said it was the city’s insistence that the owners of the Flames cover about $10 million in costs related to infrastructure and climate change mitigation that led to the demise of the deal. Mayor Jyoti Gondek has disputed that, suggesting the climate mitigations were previously negotiated and that the infrastructure requirements, such as sidewalks, are CSEC’s responsibility.

The city and CSEC first signed an agreement in 2019 to split the $550-million price tag for a new arena in East Victoria Park. Public money was also set aside to demolish the Saddledome.

The agreement was overhauled last July after budget adjustments pushed the total cost to $608.5 million. The city and CSEC both committed an additional $12.5 million and the Flames ownership group agreed to shoulder any further cost overruns.

Article content
Advertisement 3
Story continues below
Article content

But since the summer, cost escalations have continued to push the project’s price tag higher. The most recent estimate pegs the project at $634 million, according to CSEC.

And following news of the deal’s collapse, industry experts and economists have speculated that cost escalations associated with material price increases, supply chain disruptions and rising inflation may have contributed to some cold feet on the part of the Flames and a desire to delay.

The news shocked some members of Calgary’s construction industry, who were hoping to see an estimated 4,750 jobs created during the project’s construction phase.

“Projects like this rarely fall of a cliff this far in,” said Calgary Construction Association president Bill Black, noting that a groundbreaking had been expected early in the new year.

“It certainly wasn’t visible to us that this was boiling under the surface. So it was somewhat of a surprise and obviously a disappointment.”

The location of the proposed Calgary Event Centre, with the Saddledome in the background.
The location of the proposed Calgary Event Centre, with the Saddledome in the background. Photo by Azin Ghaffari/Postmedia

Black said the amount of instability in material pricing and availability is “at a level that we haven’t seen,” and so he was surprised the Flames cited climate mitigation and infrastructure costs as key problems.

Advertisement 4
Story continues below
Article content

“My first thought was, they’re not wiling to take on the escalation risk that nobody can give them assurances around,” Black said. “But then when I find out it’s the climate, the sidewalks and such that seems to be getting precedence over that — I was even more surprised, to be honest.”

Black said the city could help get things back on track by providing assurances to CSEC that “they won’t implement any more scope creep — if that’s what they were doing,” he said. “There seems to be different opinions as to whether or not the climate (mitigation costs) were known about in advance or not.”

It may also be that the CSEC is suffering from the revenue losses that have hammered professional sports leagues during the COVID-19 pandemic.

Every NHL team has suffered financially over the past two years, says Concordia University sports economist Moshe Lander. “It’s just every NHL team is not looking to build an arena in the middle of a pandemic.”

Lander said the Flames succeeded in wresting administrative control of the project from the city last summer when they rejected the project management of the city-owned Calgary Municipal Land Corp. (CMLC), but also wound up agreeing to cover any cost overruns.

“I think there’s now the realization that they got what they bargained for and then some,” Lander said. “So they’re realizing that maybe now isn’t the greatest time to stick some shovels in the ground.”

— With files from Madeline Smith

mpotkins@postemdia.com
Twitter: @mpotkins

Article content
Comments
You must be logged in to join the discussion or read more comments.
Join the Conversation

Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.

Latest National Stories
    This Week in Flyers