Budget discrepancy stops work on city's $550M arena project
Work on Calgary's new arena is on pause to try to resolve a budget “difference,” according to the Calgary Municipal Land Corp.
CMLC president Kate Thompson said in a statement Wednesday that due to a “difference in the current budget estimate and the program requirements for the facility,” there's a joint agreement to put the project team on hold to resolve the issues.
City council approved the deal for a $550-million event centre in 2019, just eight days after the proposal was made public. The Calgary Flames owners and the city are set to split the capital costs equally, but the city is also responsible for the cost of demolishing the decades-old Saddledome.
Detailed agreements between the city and the Calgary Sports and Entertainment Corp. were signed in late 2019 and made public shortly after, laying out a process for dealing with insurance, possible cost overruns and the fate of the Saddledome.
The CMLC, a wholly owned subsidiary of the City of Calgary, is managing the building's development. They announced last summer that global design firm HOK and local company Dialog would design the replacement for the Saddledome in East Victoria Park.
City council's event centre assessment committee was shut down in 2020, since the arena deal was done and the process of building was getting underway.
Coun. Jeff Davison, the former chair of the committee, didn't immediately respond to a request for comment Wednesday.
CMLC was expected to reveal the event centre design this spring, with construction starting later this year on a facility that will seat up to 19,000 people.
It's unclear how the pause might affect that timeline.
“The decision to take this pause is the responsible and prudent approach to ensure we find the best solutions to move the project forward successfully, without incurring any additional costs on the project while these discussions progress,” Thompson said.
“The team is working collaboratively to find a suitable path forward.”
CSEC referred a request for comment back to CMLC.
In a statement, Mayor Naheed Nenshi said it's “not uncommon” for major capital projects to be in this position.
“Far better to have these issues sorted out at this stage than to have unexpected cost overruns after construction has begun.”
Concordia University economist Moshe Lander said he isn't surprised to hear about questions around the cost of Calgary's new arena.
“The pause is probably more pandemic than anything because the city is in dire financial straits, but this is the problem when you use public money to finance stadiums and arenas,” he said.
“This is not a problem that's going to go away six months from now when we reach critical vaccination levels, that things can start to return to normal. The city budget is going to be broken for a long time. Now the issue starts becoming, `who's going to come up with that money?'”
The event centre is intended to be a major piece of the city's plans for a culture and entertainment district, alongside a revamped BMO Centre and expanded Arts Commons.
CITY COUNCIL DISCUSSION
This week's arena news follows a “capital projects update” council received behind closed doors Tuesday evening.
When the meeting resumed in public, council voted 9-5 to adopt three confidential recommendations and not to disclose the discussions.
Councillors Druh Farrell, George Chahal, Evan Woolley, Jeromy Farkas and Jyoti Gondek were opposed.
Farkas said at the time that the discussion was “the most stunning thing I've seen in my entire time as a councillor.”
Nenshi said that statement was “rather dramatic,” but he wasn't able to give any details about what council talked about.
“If there were ever a decision that required council to, for example, spend money or enter into any kind of agreements, that has to be a public debate,” he said.
On Wednesday, Farkas said he doesn't want additional public money going toward the event centre.
“If we don't have a good grasp on costs, we absolutely have to pause the project,” he said.
“It would make no sense to proceed with this project if it's not in
a transparent way … The deal was sold to Calgarians on certain terms and, like it or not, council approved the deal.”
Coun. Jyoti Gondek said she can't speak about the reasons she voted no because the recommendations were kept confidential.
“All we know right now is it's pens down while things are sorted out,” she said.
“Anything I say right now absent of the information, and absent of the ability to share it publicly, would be purely speculation. The one thing I don't need to speculate on is I think we have a good deal in place, and it is still in place.”
Both Farkas and Gondek are running for mayor in the upcoming municipal election, set to take place Oct. 18.
The city is in dire financial straits, but this is the problem when you use public money to finance stadiums and arenas.