City still on hook for around $11M in terminated arena deal

Posted Jan 12, 2022 4:51 pm.

The event centre deal is officially dead between the City of Calgary and the ownership group of the Calgary Flames, and during a council meeting on Wednesday, councillors heard a bit more about how we got to this point.

The agreement was terminated at the start of the year, as the two sides failed to find common ground on some cost overruns for the replacement of the Saddledome.

CSEC pulling out of Events Centre deal: Calgary Mayor

Two main points of contention centred around the cost of road and sidewalk construction in the area around the proposed arena, as well as the cost of climate resiliency measures such as installing solar panels.

Overall, the cost of road-related construction totalled more than $12 million, with the city proposing that it split the cost with the Calgary Sports and Entertainment Corporation (CSEC). This actually was against the original terms of the deal, as the sides had agreed in 2021 that CSEC would be on the hook for additional overruns that came up above the original cost of over $550 million.

The city also said it would seek government grants to help pay for climate resiliency measures.

These developments came about in December, with the city engaging directly with CSEC on Dec. 20 and then Mayor Jyoti Gondek speaking to Flames co-owner Murray Edwards the following day.

There were no further discussions and the deal ended up being terminated ahead of midnight on New Year’s Eve.

Even though the deal is dead and the future of an event centre is up in the air, the city remains on the hook for about $11 million at this point because of what they have spent on the various early stages of the deal. CSEC will also have to pay about the same amount. It will take a few more months to finalize some of these costs.

When it came to why seemingly small costs like the construction of sidewalks ended up being the straw that broke the camel’s back, General Manager of Planning Stuart Dalgleish responded to a question from Ward 6 Councillor Richard Pootmans.

“CSEC had identified that this was an important issue for them. They believed this should have been in the budget earlier, it wasn’t, so they raised it as an issue. We acted as a partner, we agreed to work towards a resolution,” Dalgleish said.

Pushback also came in response to some rumours the deal fell apart either because the city recently declared a climate emergency, and administration made it clear at several points during the two-hour discussion that this wasn’t true because the emergency was discussed before the development permit for the arena was eventually approved as well.

Before councillors went into a confidential meeting to discuss other facts surrounding the deal, Ward 14’s Peter Demong asked Mayor Jyoti Gondek directly about other rumours, including that she did not follow up with councillors about the discussion she had with Edwards.

On that subject, frustration had just been expressed by Ward 4 Councillor Sean Chu who was upset to hear about the faltering deal on social media.

“After your conversation with Mr. Edwards, did you reach out to council members to describe the conversation or explain the situation?” Demong asked.

“I did in fact reach out,” Gondek responded. “I reached out, my Chief of Staff reached out, we went public with the information after clarifying with Mr. Edwards that both parties should go public. A message was sent, phone calls were made to all of council.”

Another suggestion that was made by many people following the collapse of the deal was that Gondek played a direct role in the deal being cancelled and somehow made a unilateral decision.

Gondek directed the question toward the city’s legal counsel.

“I can confirm there was no decision to be made on this stage-gate,” said City Solicitor Lynn Davies. “If one party did not want to move through, then we could not move through this stage-gate.”

“I think that’s about as clear as it can get,” Demong reacted.

A related question raised earlier concerned if there was the possibility for a dispute resolution process to be carried out, with administration clarifying that at any point during the process of the deal that either party could choose whether or not to move through a stage — which in this case would be the stage to progress with construction.

“It was not subject to the dispute resolution process,” said Dalgleish.

Members of administration also attempted to show how committed the city was towards making this deal work, apparently indicating that it was more a failure on the part of CSEC to reach a compromise and keep it all afloat.

Ward 13 Councillor Dan McLean was direct in his questioning, accusing staff of just going out on holidays.

“Very disappointed in how this file has been handled. I think we have confirmed there has been a lack of transparency with our partners and with our council,” McLean said. “Am I right to understand … that as of the 23rd (of December) the administration and everybody else involved in this deal basically went on holidays. Sounds like we just shut her down and nobody reached out, we just went on holidays and let the deal die.”

Dalgleish responded to say he was working and ready to be talking with CSEC about what to do next. He added there was certainly a possibility for an extension to the timelines at the deal.

“We were at the ready,” he said.

Following the question, City Manager David Duckworth jumped in to respond as well, saying he felt obligated to respond to that question.

“I say this with all due respect, but for the last two years, I witnessed a team that has worked incredibly hard. There are people on this team that gave up their holidays throughout the last two years. They worked weekends, they worked tirelessly. And I know even up until Dec. 31, the team willing and ready to jump back into action,” he said.

“There is absolutely no way that our staff just simply went on holidays and walked away from this incredibly important file.”

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